The mobile business used to be a simple one. You own a network. You make deals with the Apples and Samsungs of this world. You sell to customers and make your profits. End of story.
Then people started to realise that you could cross-sell. Thatcustomerswhohad a mobile phone contract might also be interested in a landline phone, broadband or pay-tv contract. Actually, the technology and the implementation is little different whichever of these businessesyou are talking about.
And by bundling phone, broadband and pay-tv contracts together, you multiply the potential profits. Plus customers prefer these deals as they save money, and billing is a whole lot easier if you are buying your products from one company rather than from several.
A clash of companies
As moats are breached and barriers to entry in the telecoms and entertainment industries fall all around, suddenly we have a series of battles, mergers, takeovers and alliances as dramatic as any tale of Westeros.
It was logical thatBT (LSE: BT-A) would pipe broadband across its telephone networks, and so it grew into one of the countrys leading broadband suppliers. But then mobile phone companies such asEverything Everywherealso started to sell broadband; and they began to bundle this broadband with phone and mobile contracts.
Then Sky (LSE: SKY) entered the fray, selling broadband and telephone services alongside its pay-tv offer. It rapidly encroached upon BTs hegemony in broadband. How could the telecoms giant fight back? Well, by launching its own pay-tv service, of course. It now offers its sports channels with its broadband.
A storm of mergers
But what if you could bundle phone, mobile, broadband and pay-tv packages together? The cross-selling opportunities would be unparalleled. This is now what BT is trying to achieve. It is bidding to buy O2 from Spains Telefonica.And if it cant buy O2, I suspect it will buy EE from its parent companies France Tlcom and Deutsche Telekom. The latter would be the more ambitious but more difficult deal. But if BT pulled it off, in one fell swoop the company would be the UKs leading phone, broadband and mobile supplier. That would bea tantalizing prospect, and one which would frighten the life out of its competitors.
And then, waiting in the wings, I havent mentioned Vodafone (LSE: VOD). It must be feeling sore that it is no longer thebiggest mobile company in the UK. In both Spain and Germany it has strengthened its mobile businesses by buying into pay-tv. Could it repeat the trick in Britain? There is talk of it acquiring Liberty Global, the owner of Virgin Media, anda firm which isboth the worlds largestcable business, and the worlds leading broadband company. That would be an enticing possibility.
This particulargame of phones has many twists and turns ahead of it, andno one cansay how it will end. But I would say the main protagonists, BT, Sky and Vodafone, are all worthy long-terminvestments, likely to grow both their share prices and their dividend yields.
We at the Fool believe that investing in companies such as these, with a promising future and opportunities to grow, should be a cornerstone of your path to wealth. And we have written a guidewhich gives seven key stepstolong-term wealth.
Prabhat Sakyaowns shares in Vodafone.. The Motley Fool UK has recommended shares in Sky and owns shares in Apple. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.