## Potential Shift in UK Pay-TV Landscape as Vodafone and Three Consider Entry
Sky’s recent launch of the second-generation Glass TV has been a significant event this year, with an even more accessible model planned for autumn. However, the UK’s media landscape is poised for change following the substantial £15 billion merger between Vodafone and Three, potentially intensifying competition in the pay-TV market.
Sources close to the situation have indicated that executives at Vodafone and Three are exploring the possibility of launching a subscription television service aimed at challenging established players like Sky TV, BT, and Virgin Media. This move would be part of a broader strategy to strengthen their position in the increasingly competitive broadband sector.
Bundling Services: A Key Strategy
It’s standard practice for telecommunications companies to package television services with internet connections to attract and retain customers. While Sky has secured licenses guaranteeing satellite broadcasts through the end of the decade, industry insiders suggest a successor to the Sky Q box utilizing the same dish technology is unlikely.
Currently, 90% of new Sky customers opt for internet-powered solutions like Sky Stream or Sky Glass, demonstrating a clear shift toward broadband-based entertainment. Sky offers bundled packages at discounted rates, reflecting this trend.
Existing Competition: BT and Virgin Media Lead the Way
BT (through EE) and Virgin Media already offer integrated pay-TV bundles paired with full-fibre broadband connections, establishing a foothold in this market.
Discussions regarding Vodafone-Three’s potential television service are preliminary. Therefore, subscribers need not worry about cancelling their current contracts just yet.
What Could the New Service Offer?
The proposed service would likely provide access to live television over broadband – mirroring offerings like Freely – alongside integration with popular streaming platforms such as Netflix and Prime Video.
Here’s a snapshot of current offerings:
- Sky Stream: Combines full-fibre broadband, exclusive channels, and Netflix from £35 per month, with options to add Sky Sports, Cinema, 4K Ultra HD, and other channels. Available as a flexible 30-day rolling contract.
- Virgin Media: Packages starting at £30.99 per month include full-fibre broadband and access to free-to-air channels and streamers like Netflix, Prime Video, and Disney+, accessible via the Flex box (with potential for 10% cashback).
- EE TV: Offers packages from £51 monthly with a choice of the EE TV Box Pro or an Apple TV 4K, providing access to live television over full-fibre broadband, exclusive Sky channels and streaming options.
- TalkTalkTV Hub: A budget-friendly option at just £5 extra per month on top of existing broadband plans.
While Vodafone and Three are expanding into home broadband, the latter still leverages its 5G network for Wi-Fi alongside pay monthly smartphone contracts. Neither company has previously ventured into set-top boxes or comprehensive television bundles.
Industry Convergence & Market Share
This strategic move aligns with the broader industry trend of “convergence,” where telecom providers offer bundled services to enhance customer loyalty and increase revenue per user.
Even after the merger, Vodafone and Three will initially hold a modest 6% market share in broadband. Vodafone has been bolstering its broadband offering through wholesale agreements with Openreach and CityFibre.
Regulatory Approval & Concerns
The £15 billion merger received regulatory approval in December and is expected to finalize in the first half of this year, accompanied by an £11 billion investment commitment in UK infrastructure—a pledge subject to oversight by Ofcom.
The Competition and Markets Authority (CMA) initially expressed concerns that the merger could lead to higher prices and reduced quality for mobile customers due to the diminished competition. Three is generally considered the most affordable network.
Addressing CMA Concerns
To mitigate these concerns, Vodafone and Three have committed to capping their lowest-cost mobile plans at £10 for two years following the merger, specifically targeting “value-focused” customers on SMARTY and Voxi For Now social tariffs. They also pledged to support virtual network operators, ensuring continued competition within the market.
“We are happy for Ofcom to monitor and enforce our commitment to invest £11bn in UK infrastructure,” stated representatives from both companies.
