Hole In The Street

I came out of my house last week to find that neither I nor my car could get out due to a trench being dug in the road right outside. On looking at the contractor sign I was intrigued to see that the chaps in the hard hats were laying cable for Vodafone. On talking a bit more they said they were laying it to the old NTL box at the turn in our road.

Most of Reading is cabled for Virgin Media, but it seemed to end at the box and be unavailable to us. Until now, I hoped. An opportunity to get off BT!

So, the news that Vodafone and Virgin's 'merger' talks have come to nowt is a bit surprising.

Without knowing the intricacies of the discussions it's difficult to see the logic of not pulling these businesses together. But business logic rarely plays a part when disparate valuations are involved, and I suspect that this was the stumbling point.

Vodafone now needs to dig lots of holes in streets, or pay BT Openzone through the nose for passing on a dreadful service to its customers. It also needs to build its own TV service to be a serious quad play operator.

Broadband, landline and mobile contracts are all commoditised despite being underpinned by a virtual monopoly. TV is the differentiator, as even BT has found. And a thin sliver of content rights, largely dominated by sports, a few TV programmes (think HBO or AMC) and perhaps movies (but Netflix has never bothered playing the Hollywood release window game) is the only differentiator.

Of course, this also means that if they're not playing nice, Virgin Media and Vodafone are going to be competing in a marketplace that is increasingly become crowded.

Holes in the streets may soon become holes in balance sheets.