Join our community of traders FOR FREE!

  • Learn
  • Improve yourself
  • Get Rewards
Learn More

Vodafone share price down, bundled products may cripple profit

VodafoneVodafone Group PLCs CEO Vittorio Colao said that offering bundled television and broadband services may lead to declines in profit, as rivals use the same strategy to cut prices.

Mr. Colao also mentioned than Vodafone may be forced to bid for TV rights just to keep up with the competition.

British BT Group had started offering combined TV and broadband services, which may result in a mobile market share loss for Vodafone. Mr. Colao said Spanish and German communication companies added new services to their portfolios and offered them together with existing ones. However bundle prices in Germany stayed stable, while companies in Spain sold them at a discounted price.

“The level of profitability is different depending on the markets” Mr. Colao said. “I hope it goes the German way, not the Spanish way.”

He also added that “anti-competitive behavior” could delay Vodafones attempt to return sales to growth, which have declined due to price wars. Mr. Caloa added that the carriers transition to selling combination of products is an important factor in the fight to keep customers from switching to rivals.

Vodafone said it will introduce its own broadband and television service in the U.K. However, the company did not provide information about whether it will add its own exclusive content or use video materials provided by other groups, similar to its mobile contracts with Netflix and Sky.

Referring to exclusive content Mr. Colao said “Personally I have doubts that in the long run that this will really create a lot of value for the platform. It tends to create lots of value for the owner.”

Under a £19 million plan named Project Spiring, Vodafone has started expanding its network in order to add faster broadband and mobile technology. The company has acquired Kabel Deutschland in Germany and Grupo Corporativo Ono in Spain.

Vodaones business in Italy, one of the worst-performing units, could benefit from an acquisition said Mr. Colao. The company started building it own high-speed fiber network in the country.

“It’s not a secret that at the right price we could get more fixed assets, Italy is one of the countries we’re looking at” added Mr. Colao.

Vodafone had shown interest in Italy before, particularly in Swisscom’s Fastweb fixed-line business. However negotiations fell apart due to the inability of the two companies to agree on a price, according to people with knowledge on the matter.

Vodafone Group Plc gained 0.13% on Wednesday and closed at GBX 228.60 in London. On Thursday the stock lost 1.81% to trade at GBX 224.47, marking a one-year decrease of 3.5%. The company is valued at GBP 60.59 billion at According to the Financial Times, the 24 analysts offering 12-month price targets for Vodafone Group Plc have a median target of GBX 232.50, with a high estimate of GBX 270.00 and a low estimate of GBX 130.00. The median estimate represents a 1.71% increase from the last close price of GBX 228.60.

TradingPedia.com is a financial media specialized in providing daily news and education covering Forex, equities and commodities. Our academies for traders cover Forex, Price Action and Social Trading.

Related News