Telecom companies have one big goal.

Photographer: Clive Brunskil via Getty Imagesl

Love Soccer? You'll Pay a Bundle

Mark Gilbert is a Bloomberg View columnist and writes editorials on economics, finance and politics. He was London bureau chief for Bloomberg News and is the author of “Complicit: How Greed and Collusion Made the Credit Crisis Unstoppable.”
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The outrageous prices offered by a British satellite television company and the nation's former state-owned telephone monopoly for the rights to screen top soccer matches offer a glimpse into the future of the global telecommunications industry. It's a world where a single company will offer to take care of all your networking needs -- a fixed landline if you want it, your mobile phone service, your internet browsing, your television connection and the content you watch through it, maybe even the music you stream into your ears -- all on one subscription, for a single bundled price at a discount to what you previously paid for those individual contracts. It suggests the industry is ripe for more takeovers and consolidation -- and, hopefully for consumers, a price war for our digital dollars.

Mobile Payments

Sky, Britain's biggest provider of paid TV programming, and BT Group, the country's biggest phone company, are paying a combined 5.14 billion pounds ($7.84 billion) for the privilege of showing 168 Premiership games for three seasons starting in 2016. That's a 71 percent increase on what they paid for the previous package, which in turn was a 70 percent jump on the time before that.

The companies are treating sports as the bait that will lure U.K. customers to pay for multiple services. Last week, for example, Sky outbid the publicly funded British Broadcasting Corp. -- the terms weren't revealed -- to buy the five-year live broadcasting rights to the U.K.'s most important golf tournament, the Open Championship, starting in 2017. Sky was betting that once it persuades sports fans to sign up to watch golf, it can sell them a package of on-demand films, Sky Talk telephone connectivity and Sky Broadband Internet access.

BT, which ended up with about a quarter of the soccer matches, has gone further. Last week, it agreed to pay 12.5 billion pounds for mobile phone company EE Ltd., which was a joint venture between Germany's Deutsche Telekom and France's Orange. The deal makes BT, which already owns the U.K.'s largest high-speed broadband network, the country's biggest wireless company. Further consolidation is expected, with Vodafone in talks with John Malone's Liberty Global about its Virgin Media TV and broadband brands while Hutchison Whampoa is pursuing the U.K. wireless unit of Spain's Telefonica.

Similar tie-ups are underway in the U.S. Google plans to become what's known as a mobile virtual network operator, paying to piggyback on an existing network and selling services to its own customers in competition with AT&T and Verizon, the two biggest U.S. mobile providers. “Like everything else, you have to watch your friends more closely than your enemies, so we will be watching Google closely,” Verizon Chief Financial Officer Fran Shammo said of Google’s reported plans last month. Back in March, the Wall Street Journal reported that Apple was looking to team up with Comcast to establish a streaming-television service via Apple TV, the company's digital media player.  Meanwhile, Comcast, the biggest player in U.S. TV, is still trying to pull off its $45.2 billion acquisition of Time Warner Cable; the latter missed earnings estimates in January after it offered discounts on Internet, cable TV and telephone services even as its costs of producing TV shows rose.

Last month, companies tied to Colorado-based Dish Network spent about $10 billion in a U.S. auction of wireless spectrum. The satellite-TV operator, which isn't yet in the wireless business, now controls almost $50 billion worth of airwave rights, according to analysts at Bloomberg Intelligence. In 2013 it failed to buy Sprint, the third-biggest U.S. mobile phone operator; it's also flirted with Deutsche Telekom about buying the German mobile company's T-Mobile U.S. unit, the fourth-biggest U.S. mobile provider. At some point, it seems likely Dish will flood its airwaves with mobile services and start offering bundles to its customers.

The global percentage of broadband subscriptions tied to so-called quadplays offering bundled mobile, voice, data and video packages will climb to 6 percent in the next four years from 1.5 percent in 2013, according to Ovum, a telecoms research company. That's likely to dent revenues for telecom companies as training sales staff on multiple products increases costs at the same time as price cuts on those packages erode profit:

Strategically, discounts on ever-more products risk cannibalising existing revenues. Delivering a single bill for fixed and mobile services involves expensive and time-consuming back office upgrades. Previously-separate sales channels must be optimised to sell combined products and sales teams trained.

I remain unconvinced that I want to be strapped to a single provider for my telecom needs, even if the resulting price is lower than for the individual bits (and bytes). Nevertheless, the trend seems unstoppable. That might be great news for consumers. But it poses a financial challenge that the telecom industry only now seems to be preparing to tackle.

This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.

To contact the author on this story:
Mark Gilbert at magilbert@bloomberg.net

To contact the editor on this story:
Cameron Abadi at cabadi2@bloomberg.net