:VODAFONE: Traders Thread, Long or Short!

The Times December 30, 2005

Can you picture Vodafone as a TV broadcaster?
Analysis by Dan Sabbagh



VODAFONE always wins in the end, or so the opinion held by an investment banker acquaintance of mine goes. Bankers may always fancy a fee or two out of the mobile phone operator, but if you believe in big then Vodafone — with £8.9 billion in profits predicted for this year — is obviously the way to bet. The trouble is, of course, Vodafone is not a media company. Well, not yet.
Attempting predictions can make monkeys out of people who sound plausible, so perhaps the best strategy, when looking ahead to next year, is to go for a proposition that will not come true but is an interesting thought experiment anyway. After all, developments in technology will make it realistic in the end.



With this thinking in mind, the thought I cannot shake is: what would happen if Vodafone turned up and outbid everybody, including BSkyB, to buy all the Premier League football rights the European Commission will let it buy? It is a bit hard to imagine people binning the living room television in favour of squinting at a two inch square screen, but do not give up on the idea yet.

Premier League rights are not cheap: the current cost is about £340 million a year, but balance that against the number of subscribers that Vodafone would win — perhaps three million. They would be willing to pay £20 a month to sign up, roughly the current sum, which would make for a handy revenue stream. If you believe this stab-in-the-dark calculation, that is about £720 million in revenue.

Vodafone already transmits live television channels on third-generation (3G) mobile phones, and while the picture quality leaves something to be desired, the technology is fast improving. The company’s mobile network may not be the most efficient way of broadcasting television, but a lot of money has already been sunk into it. In any event, there are other transmission technologies being tested that are more effective for mobile broadcasting.

A Vodafone bid may not come to pass this time round, but give it three or six more years, when the rights come round again, and it might not be beyond the realms of technical possibility. Instead of a satellite dish, the mobile on the mantelpiece could act as a digital receiver, bouncing the signal on, via wi-fi, to the widescreen living room TV.

For a moment the image is compelling, although it is hard to be convinced that the picture quality would be good enough, particularly once broadcasters move to highdefinition TV. It would also require, one suspects, a change of mentality at Vodafone, whose historic business is grabbing various bits of radio spectrum around the world, rather than being attuned to the emotional sensitivities of television. After all, what TV executive would give up the latte bars of West London for Vodafone ’s headquarters in Newbury? This year saw Sky buy a phone company and BT pledge to become a broadcaster of sorts, confirming that, already, there is no real boundary between phone companies and broadcasters. They are simply businesses with different transmission technologies and different cultures, which, as any social anthropologist will tell you, is more important than you might first think.



Unfortunately for those who want to believe in Vodafone, not everything seems to have gone to plan. Somehow, Steve Jobs, of Apple, has developed a new category of device — the digital music player — which the mobile phone industry could have destroyed had it been more alert.
Music downloads should be a killer application for 3G phones but, so far, devices have been clunky, pricing has been too high and marketing minimal. Certainly, charging a premium to iTunes is a mistake — the typical price of a song is £1.50 — when consumers are getting the same service (songs on their digital music players).

Apple has already had one attempt to merge the iPod and the mobile phone, but the Motorola ROKR has failed to get anybody rocking. In theory that gives the mobile phone industry one last good opportunity to regain the initiative, particularly given that the record industry and Apple are heading for a collision over iTunes pricing next spring.

Yet the implausible prediction is that the record majors will bale out of iTunes and push their music via the mobile phone companies, while SonyEricsson creates a sleek new handset that everybody wants to play them on.

Vodafone, unfortunately, shows no sign of getting its music act in harmony, leaving millions of pockets crammed full until Apple produces the iPhone.