BT(LSE: BT-A) has been one of the FTSE 100s greatest growth stories since the financial crisis with the companys shares rising 187% during the past five years, outperforming the index by 159%, excluding dividends.
BT has been able to achieve this staggering performance by branching out and transforming itself, from an old-fashioned telecoms provider, into a multimedia company providing pay-tv, broadband and global engineering services.
Talktalks strategy to beat BT is simple: undercut the company on price. This strategy involves two prongs of attack. Firstly, the company is rolling out its own low-cost city-wide broadband network in York, a joint venture withSky.
Secondly, Talktalk has appealed to regulators regarding BTs wholesale cost of connecting households to fibre broadband networks. Talktalk currently pays BT 8 per house, per month for use of its fibre network, although the company believes that the cost should be lower. Talktalk has promised to pass on any savings gained from lower wholesale costs to customers.
Whats more, Talktalk has recently launched a 4 broadband contract for small firms, taking on BT, which owns 75% of the small business market. Talktalk has claimed that its offer can save small firms up to 594 per year.
Paying close attention
As Talktalk goes head to head with BT, Vodafone is watching BT closely. So far, BT and Vodafone have not gone head to head as the two companies operate within different sectors of the telecommunications market.
However, BT has recently decided to launch a mobile network, designed around the companys extensive Wi-Fi hotspot network, which gives the provider unprecedented network coverage.
Vodafones management believes that customers wont rush to buy BTs mobile offering. Nevertheless, the group is keeping one eye on BTs progress and plans to support Talktalks battle to reduce BTs dominance over the UKs broadband network.
Vodafone itself is trying to drive growth in the UK by becoming the best. Specifically, the company is spending heavily to improve network coverage across the UK, as well as 4G coverage. Whats more, just like Talktalk, Vodafone is trying to boost its presence within the enterprise and business market.
The bottom line
All in all, it seems as if Talktalk and Vodafone are now making it their mission to break BTs dominance over the UKs broadband and business markets.
Further, BT is also fighting another battle with Sky over pay-tv customers. So, with competitors chipping away at market share, BTs growth spurt could be coming to an end.
Still, BTisn’t going anywhere just yet and the shares are a great long-term investment.
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Rupert Hargreaves has no position in any shares mentioned. The Motley Fool UK has recommended shares in BSkyB. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.