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Vodafone Group plc’s (VOD - Analyst Report) UK division has inked a promotional deal with Netflix Inc. (NFLX - Analyst Report) that will allow the telecom giant’s 4G customers free access to video streaming contents for a period of six months. The promotional offer is expected to be launched in Jul 2014 and will end in December.

To avail the offer, Vodafone’s customers will have to subscribe to its Red 4G plan, which starts at £26 ($44) per month and provides 3GB of consumable data. The data consumed on streaming Netflix content will not be counted as part of the 3GB limit. The Vodafone-Netflix deal will add some more flare to its already impressive 4G plans, which provides additional music streaming service from Spotify Limited and Sky Sports mobile TV facility.

Online video streaming service providers, such as Netflix Inc., Hulu.com, YouTube etc. have gained popularity in the U.S. by offering cheaper sources of programming. Netflix has been planning to expand to tap the rapidly growing markets in Europe as well. The deal with Vodafone is expected to boost the company’s UK business which was launched in 2012. Netflix currently has 48 million subscribers in 40 different countries.  

Notably, Vodafone introduced its 4G service in UK last year and has subsequently expanded its network coverage to 233 cities, towns and communities across the country. The telecom behemoth plans to expand its network to 98% of the UK population by the end of 2015.

However, Vodafone lags behind Deutsche Telekom and Orange (ORAN - Analyst Report) owned Everything Everywhere’s 4G service, which plans to cover 90% of the population by the end of 2014. The carrier banks on its superior network, wide range of devices and service quality to promote its services.

Another rival O2 owned by Telefonica (TEF - Analyst Report), which remains behind Vodafone in 4G network deployment, has covered 41% of the UK population with 191 towns and cities under its infrastructure base. However, the Spanish giant is leaving no stone unturned by countering its slow network growth with special offers, money back policy and free concert tickets.

We believe Vodafone’s tie up with Netflix will provide the telecom giant an added advantage over its rivals. The pact will allow the Vodafone customers to enjoy various TV content and programs at no additional cost. However, the carrier needs to ramp up its network facility if it seeks to hold on to its edge in 4G service.

Vodafone currently carries a Zacks Rank #3 (Hold).

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