BTwatch Report #228 December 2011 Executive Brief
January 4, 2012
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- A visit by UK Prime Minister, David Cameron, to BT’s Adastral Park R&D centre, where Ian Livingston set out BT’s fibre ambitions, served as a timely symbol of BT’s success in political manoeuvring to reinforce its position as a dominant incumbent, as the need for next-generation networks becomes more pressing. The volume of complaints from BT rivals can also be a good barometer of BT’s success in defending its territory; and network provider Geo led a chorus of objections about the adequacy of the Broadband Delivery UK programme for bringing competition to fibre infrastructure provision to rural areas of the UK, with several stakeholders claiming the initiative is heavily weighted in favour of the incumbent. Some local councils are set to turn down BDUK funding due to the cost of their own contributions; and operators are reportedly withdrawing from the scheme’s pilot projects in difficult geographic conditions, leaving the field open for BT. £100m in additional government funds was made available for next-generation network projects, although this tranche is set to be used to fund urban rollouts. [pp.6-9, 11.]
- Fujitsu, meanwhile, was more positive on BT’s approach to opening its network for fibre deployment, claiming “strong progress” in physical infrastructure access trials ahead of the service’s commercial launch in November 2011. Openreach made much of supportive comments from the vendor, which is also a significant BT supplier, but Fujitsu did note that there are still issues around price and scalability that need to be resolved with the access services division. [p.33.]
- While much of BT’s progress in setting the fibre agenda can be viewed as the result of defensive power games of an entrenched incumbent, the telco is also taking steps to consider innovative approaches to broadband provision in underserved areas. The telco’s trials with mobile operator Everything Everywhere in Cornwall are said to have demonstrated the potential for two operators to use LTE infrastructure to support both fixed-wireless and mobile services simultaneously. The trials, which have quickly confirmed the findings of the operators experienced in laboratory conditions, suggest that BT is responding to the need to consider alternatives to its traditional fixed networks to meet the requirements of delivering broadband in remote areas. [pp.31-32.]
- BT Retail trumpeted the launch of an up-to-100Mbps service, although availability is limited to a handful of exchanges where fibre-to-the-premises technology has been deployed. The launch was used by the telco to claim, rather grandiosely, that it offers services that equal rival Virgin Media in download speed, but with market-leading upload speeds. Perhaps more significant is the absence of download caps, which will become increasingly relevant as demand for over-the-top online video content continues to surge. Of more present concern, BT Retail was identified as a “serial offender” in relation to throttling customers’ broadband connections, in a Europe-wide study of broadband speeds conducted by the Max Planck Institute of Germany. [pp.16, 18.]
- Ciena secured a contract to provide optical transport equipment for the core BT 21CN network, reinforcing its relationship with the telco. This follows fast on the heels of rival ADVA trumpeting its BT relationship. [p.12.]
- BT Retail may benefit from a decision by the European Court of Justice that appears to limit the demands that intellectual property owners and national governments can able to place upon internet service providers in order to protect their intellectual property rights. A case relating to a dispute in Belgium led to a ruling that placing a requirement to monitor customer activity could impinge on a service provider’s rights to do business, and on the right to privacy for communications. [pp.14-15.]
- BT’s SME-oriented IT hardware and services business, BT Engage IT, is continuing an apparently painful transformation, with a raft of senior executives leaving the division, as it consolidates operations, and looks to address a softening of business prompted by supposed SME caution on IT spending. [pp.20-21.]
- BT Conferencing, which quietly appointed a new chief executive, flagged the interoperability capabilities of its video-exchange platform, and also signed a deal with Orange Business Services, enabling their respective customers to use each other’s Cisco telepresence platforms. [pp.4, 19.]
- BT Global Services highlighted a £42m contract with Spanish utilities and infrastructure company FCC, which will see the telco deliver a global data network and fixed-line communications services. Notably, the deal may enable BT to boost its Latin American business, which is an area in which FCC is planning to expand. BT also provided more details of its recently signed contract with brokerage CLSA: the operator said it had signed a seven-year, £45m deal that builds on the existing relationship that BT’s consistently successful financial services business has with the firm. [p.22.]
- The Department of Work & Pensions spent 8%-less on services from BT in 2010-11 than it did a year earlier according to recently released figures, possibly reflecting the terms secured in a renegotiated contract between the parties that was signed at the beginning of 2010. BT remains one of the top-five suppliers to the government department, although other major IT-related businesses did not appear to be as heavily affected by cutbacks as the telco. [p.23.]
- In Asia, BT welcomed iSoftStone as a new local shareholder in MDCL-Frontline, a unit that is its main route-to-market for IT services in China, and in which it holds a 47% stake. BT also heralded a new network-to-network interface agreement with China Unicom, which will enable connection to more than 300 additional cities in China. While demonstrating that BT is finding ways to increase its capabilities and influence, the timing may indicate that regional expansion goals set 18 months ago are proving a challenge. [pp.25-26.]
- BT Global Services made its Ethernet Connect offering more widely available, with 28 new countries across Asia, Europe, and North America added to its footprint. [p.26.]
- Tech Mahindra, in which BT has a 23% stake, acknowledged it was feeling the impact of BT’s review of its outsourcing strategy and tougher stance on prices for services. However, the Indian business was bullish on the potential to widen the scope of its work with the telco, and appeared relatively unfazed by expectations that BT will further reduce its stake in the company. [pp.27-28.]
- BT Wholesale signed a strategic agreement with Daisy Group that will see the business communications provider direct its CPS traffic over the BT Wholesale network. The agreement builds on an existing relationship with a Daisy subsidiary, ServAssure, for PBX services. [p.29.]
- Openreach nominated another 178 exchanges to be fibre-enabled, mainly over the course of 2012. While the announcement does not mark any further acceleration of the recently-revised schedule for covering two-thirds of the UK with fibre access by the end of 2014, the telco is maintaining a steady stream of positive developments on its progress. [p.33.]
BTwatch Report #228 December 2011 Snapshot
January 4, 2012
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Table of Contents
1 Executive brief
4 BT Group
4 People
4 People movement highlights
5 Acquisitions and disposals
6 Digital Britain
6 UK to invest an extra £100m in broadband coverage
6 BDUK critics turn on BT with doubts over viability
6 Geo Networks withdraws from BDUK bidding
7 UK to invest an extra £100m in broadband coverage cont’d
7 Geo’s complaints follow earlier signs of withdrawal
7 BT bullish in response to Geo’s withdrawal
7 Entanet predicts failure for BDUK
8 Awards and accreditations
8 INCA questions fairness of BDUK framework
8 Bath and North East Somerset Council declines BDUK funding
9 Brokers’ reports
9 Credit Suisse maintains rating on BT cost-cutting efforts
9 Bidders quit Highlands and Islands fibre project
11 Intellectual property
11 BT files multiple trademarks
11 Government visit highlights BT fibre strength
11 BT expertly playing fibre politics
12 Suppliers
12 BT selects Ciena for 21CN optical rollout
12 Ciena announcement emphasises BT history
13 Pension
13 BT considers early pension payment
14 BT Retail
14 Digital content
14 BT rivals also requested to block Newzbin2
14 Digital content
14 BT may benefit as ECJ rules against ISP file-share blocks
15 Industry response
15 Impact on BT to be felt in longer term
16 Plusnet
16 Broadband
16 BT Retail launches limited 100Mbps broadband
16 Zen follows suit
18 Study criticises BT for broadband connection throttling
19 BT Conferencing
19 BT and Cisco flag LOCOG conferencing contract
19 BT and Orange Business Services sign telepresence deal
19 BT Conferencing broadens interoperability
20 BT Engage IT
20 BT Engage IT cuts jobs as part of brand merger
21 Cuts go deeper than BT admits claim unnamed sources
21 Changes come as BT SME business suffers
22 BT Global Services
22 Contracts
22 BT Global Services wins £42m FCC contract
22 BT puts £45m value on CLSA contract
23 Public sector
23 BT adds 300 new jobs at Sandwell
23 Public sector contracts
23 DWP spending with BT falls, but telco’s share rises
25 Financial services
25 BT Radianz offers access to Trad-X platform
25 BT International: Asia
25 iSoftStone becomes MDCL-Frontline shareholder
26 Financial services
26 BT Radianz adds Qatar Exchange
26 BT signs network deal with China Unicom
26 Products and services
26 BT expands Ethernet Connect services internationally
27 Tech Mahindra/Mahindra Satyam
27 Tech Mahindra results slip on falling BT business
28 Nayyar plays down impact of BT cuts
29 BT Wholesale
29 BT Media & Broadcast
29 Contracts
29 BT Wholesale signs Daisy agreement
31 Network
31 BT and EE update on LTE trials
31 Next steps for triallists unclear
32 Resource sharing success an important milestone, as BT boosts NGN image
33 Fibre
33 TalkTalk warms to Openreach fibre options
33 Openreach
33 Fibre
33 Openreach announces 178 more fibre exchanges
33 Openreach claims PIA trial success with Fujitsu
34 Network
35 Regulatory
35 Ofcom consulting on ancillary LLU costs
36 Index
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BTwatch Report #227 November 2011 Executive Brief
November 25, 2011
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- BT Group announced its financial results for the half-year and quarter to the end of September 2011. The main headlines that emerged from the presentation were of the telco’s plans to accelerate its fibre broadband, of its Retail business leading the broadband sector, and continued recovery at its Global Services division. Looking deeper, however, the picture becomes less rosy. [pp.4-10.]
- BT Retail continues recent impressive form in the broadband sector, supported by its BT Infinity offering — the fibre subscriber base now comprises 5% of the division’s customer base. The good work in broadband is feeding through to the BT Vision pay-TV business, which reported net adds in the quarter that surpassed the combined efforts of BSkyB and Virgin Media. The telco is still coy on the level of revenue these TV customers are generating, but momentum is building. The strong performance of broadband and Vision should not be allowed to disguise the ongoing fundamental crisis at the Retail business, however, which is the ongoing haemorrhaging of calls and line revenue and associated customer relationships. The division continues to squeeze more revenue from each of its remaining customers, and has a seemingly endless appetite for cost cutting, but the core is shrinking alarmingly. [pp.11-13, 18-20.]
- Global Services increasingly looks to be chasing short-term growth over longer term profitability, perhaps under pressure as other divisions struggle to make their anticipated contribution to Group goals. Slim margins on major projects were apparently accepted as a fact of life, as the division chases cash in choppy waters. Nevertheless, the Global Services order book is down substantially on a year earlier, which was explained by the effect of early contract renewals. The telco also claimed its blended contract mix of new and renewing customers is more evenly balanced. However, the rebalancing appears to have more to do with lower re-signs than a surge in new business. [pp.28-31.]
- Openreach was the star of the results presentation, as BT pushed its fibre credentials, with more detail provided on plans to bring forward to the end of 2014 the roll out of fibre coverage to two-thirds of the UK population. BT insisted it can complete this project inside the original fibre budget, and within current capital expenditure, without squeezing investment in other areas. The Group is attributing its ability to bring forward the fibre schedule to its experience in deployment to date, and a series of modest but significant innovations. In addition to new equipment that cuts the cost of civil engineering works and speeds up installation of new exchanges, a new DSLAM offering from ECI was flagged as potentially boosting BT’s fibre network efficiency. [pp.35-37, 38-39.]
- BT Wholesale looks to be entering a period of substantial pain, with transformation to a managed services business perhaps proving tougher than anticipated. The division is losing customers, revenue, and profit, and a shift to a more stable cost base is not expected until an unspecified point in the next financial year. [pp.32-33.]
- BT’s cost-cutting efforts are benefiting from insourcing, with the telco claiming savings of up to 25% by returning work in-house. Nevertheless, there may be other opportunities for outsourcing partners, amidst signs of a shift towards centralising support functions at Group-level, in preference to divisional-level delivery. [pp.8-9.]
- On the back of its results, BT proposed an interim dividend of 2.6p-per-share, an 8% increase on a year earlier. While cash generation beat analyst predictions, the dividend figure was a little below expectations. Ian Livingston reassured that there remains scope for further increases, should this not undermine other Group priorities, and reminded that a rising dividend is something of a telco sector rarity these days. [p.10.]
- Ian Livingston was keen not to overstate the upside of the BT results, underlining his reputation as a hard taskmaster with high expectations — a characteristic seemingly evidenced by the 50% turnover rate amongst divisional leadership since the start of 2011. However, BTwatch questions whether demand for immediate results has prompted a counter-productive short-term focus, contributing to divisional level challenges now being faced, particularly at Global Services and Wholesale. [p.10.]
- As broadband helps support BT Retail pay-TV plans, the division is looking to expand further into content provision with a deal to build a new online music service. Talks with the music industry have stalled, but the telco is supposedly offering to support a new service ‘at cost’ to get the ball rolling. BT’s ongoing interest in legitimised online content offerings comes as the music publishers join the film industry in taking legal action to require the telco to block illegal downloads, with The Pirate Bay targeted by the BPI. [pp.24-26.]
- BT Business experienced a weaker quarter, which was attributed to a slowdown of SME spending in the IT sector. The telco appeared confident that this challenge was a result of macro-economic conditions, and was buoyant on its prospects of competing as rivals circle. The BT Ireland business was held up as an example of what can be done even in a very difficult economic environment; the Irish unit has seen success against a troubled incumbent in the large corporate space, and is turning its attention to SMEs with an IP voice platform based on Avaya technology. [pp.21, 26.]
- Ian Livingston set out a mid-term future for broadband in the UK that could see 75% of premises able to receive speeds in excess of 50Mbps, and broadband ‘have-nots’ reduced to less than 2%. The prediction was based on BT completing current rollout plans, upgrading existing connections through Band Plan, taking a significant share of BDUK public money, and also considering vectoring technology. BT stressed its scale and experience as enabling it to build a fibre network; and industry figures questioned whether the UK investment environment makes alternatives to the incumbent viable. Despite this, there are signs that smaller players are securing funding for more targeted projects. [pp.15-16, 36.]
- BT completed preparation of the voice element of the cloud-based network it is said to be delivering for the Organising Committee of next year’s Olympic Games in London, in its role as communications service partner. Separately, the company is also supporting Timico’s capability to provide cloud-based services, with BT iNet partnering Cisco, EMC and Juniper on development of a new data centre. [pp.22, 31.]
- There were rumours that BSkyB signed with Openreach as a wholesale fibre partner for 2012, although BT declined to comment on the supposed relationship. [p.37.]
BT Retail still cutting costs to blunt revenue decline impact
November 25, 2011
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Q2 FY11-12 results: BT Retail still cutting costs to blunt revenue decline impact
BT Retail reported another quarter of improved profitability based on its trademark relentless pursuit of operating cost cuts, but the division is showing few signs of being able to halt the equally characteristic quarterly slump in revenue.
Overall revenue decline at BT Retail of -3.4% for the quarter, and -3.8% for the half year, did not meet analyst expectations that the company will manage to cap the contraction at 3% for the full year, although the second quarter saw some improvement in the trend. The performance at BT Retail is adding more pressure onto the revenue-generating abilities of the apparently revitalised Openreach, and the deal-hungry Global Services business.
Table 8. BT Retail, financial highlights, Q2 and H1 FY11-12
[Table omitted from excerpt]
Source: BT and BTwatch.
Retail sees broadband gain, but ongoing fixed-line loss
The division’s woes appear bound up with the decline of its traditional calls and lines business. More than half of the Retail division’s turnover is generated by revenue from calls and lines, and this is currently shrinking at around the same average rate as it has since the start of 2008 (BTwatch, #221).
To put the challenge faced by the Retail unit into context, as it attempts to stem revenue decline and evolve its business, it is worth considering the performance of broadband and convergence revenue — the only areas of the business showing consistent growth aside from the opaque world of internal revenue — against the calls and lines decline. Should calls and lines revenue continue to drop at current rates for the full year, the division would lose £360m in revenue. To get even close to negating this loss, broadband and convergence services would need to see annual growth in excess of 25%. Currently, it is around 5%. Considering that managed solutions revenue at the Retail division is on a downward trend, and transit and conveyance revenue is an unlikely source of anything other than shrinkage, another year of substantial top-line decline for the division should be expected, and hopes of limiting this to -3% look very optimistic.
Table 9. BT Retail, revenue by product type, Q2 and H1 FY11-12
[Table omitted from excerpt]
Note: * Transit, conveyance, interconnect circuits, Wholesale Line Rental, global carrier, and other wholesale products.
Source: BT and BTwatch.
BSkyB gaining from BT decline
BT Retail needs to address questions regarding the level where decline in calls and line revenue can be expected to level off, in order to determine the future direction of the business, and enable the company and stakeholders to look beyond seemingly remorseless decline.
Currently, rival BSkyB is the most apparent beneficiary of customers leaving BT Retail, and it is building a substantial base. The digital broadcaster appears to be having success with its aggressive bundling of broadband and television packages, perhaps showing BT how it should be done, as the telco makes somewhat slower progress with its bundled phone and television offerings.
Table 10. Major player calls and lines, customer numbers (’000), Q2 FY11-12
[Table omitted from excerpt]
Note: * Total consumer lines sold by BT Retail, including Northern Ireland and Plusnet. Includes analogue and ISDN.
** MPF fully unbundled lines.
*** Line rental customer base.
Source: BT; other companies; BTwatch
Fibre central to broadband positivity for BT Retail
BT Retail was buoyed once again by a strong performance in the broadband sector, taking a claimed 63% of net adds in the copper market. Increasingly, this broadband strength is driven by the performance of BT Infinity, the division’s fibre-based offering.
BT added 88, 000 Infinity customers during the period, although it is unclear how many of these were new additions, and how many were upgrades of existing customers. In previous quarters, the telco has indicated that the ratio of upgrades compared to new customers was around two-to-one (BTwatch, #221, #223), although it is not known if this mix is evolving. The media impression of BT’s performance suggests the 88, 000 new Infinity subscriptions constituted more than half of the 166, 000 net broadband adds claimed by the company; but BTwatch considers it more likely that fibre net adds were closer to the 30, 000 mark. Still, fibre is continuing to make its presence felt, and, with a total base of 300, 000, now accounts for around 5% of the broadband customer base.
Table 11. Major player broadband customer numbers (’000), Q1 FY11-12
[Table omitted from excerpt]
Source: BT; other companies; BTwatch
Pay-TV growth trumpeted as bigger rivals falter…
BT Retail boasted of outperforming BSkyB and Virgin Media in attracting customers for its television services during the quarter — a first for the telco. BT Vision added 41, 000 new customers, compared to 26, 000 for Sky TV, and a decline of around 6, 000 customers for the cableco.
Table 12. Major player pay-TV, customer numbers (’000), Q2 FY11-12
[Table omitted from excerpt]
Source: BT; other companies; and BTwatch.
…but pay-TV players still dominate on ARPU
The BT Vision performance compared to rivals needs to be tempered by consideration of the levels of revenue it generates. BT Vision offers on-demand programming through a range of content packages, with prices starting at £4 per month. The entry-level product is said to be popular, but attracts revenue at a substantially lower rate than BSkyB offerings, where such offerings start at around £20. BT is also coy on the level of uptake for the premium services it offers on Sky Sports.
Introduction of the £4 minimum subscription earlier in 2011 replaced a minimum monthly spend of £7; and BT has indicated that customers are upgrading to more extensive services after signing up. However, no figures are provided on average revenue per user (ARPU) or levels of churn. BT has said, though, that it is acquiring “good customers”, that acquisition costs are at appropriate levels, and that churn rates are improving.
However, aggressive pricing might be a sounder strategy for BT Retail in television, where it has no established or lucrative customer base to protect, and can still see its average revenue per customer household boosted without charging premium rates.
Table 13. Comparative monthly ARPU, Q2 FY11-12
[Table omitted from excerpt]
Source: BT; other companies; and BTwatch.
BT Business feeling SME pain…
BT Business was highlighted as an area of the Retail business facing ongoing market challenges (and is another area that has seen management changes of late, with its Managing Director moving to lead BT Wholesale, and the IT services businesses re-jigged — BTwatch, #223, #224).
The small- and medium-size enterprise (SME) unit saw year-on-year revenue decline of 5%, to £559m, and noted that IT services, which were recently a source of positive news for BT Business, had seen a drop off in sales.
BT appeared certain that the decline in IT-related hardware business for BT Business was principally due to small businesses putting off spending and investment decisions, and dismissed the idea that it marks the beginning of a shift towards cloud services for the SME sector. While BT acknowledged economic “headwinds”, it did state that, in its traditional calls and lines operations for the business sector, trends and performance were actually stabilising or improving. The traditional business was described as “solid”, and BT said it was maintaining market share.
“ There are some headwinds, particularly in the small- and medium-sized enterprises market. They are spending less on IT, and we are seeing some effects there. ”
– Ian Livingston, BT Group Chief Executive.
…BT Ireland seen managing economic conditions more effectively
While BT Business was said to be struggling with economy-related caution among the customer base, BT’s business in the even more beleaguered Republic of Ireland market saw revenue grow by 2% in constant currency, to £193m, and reportedly improved profitability.
The unit is said to be gaining share from a struggling incumbent in the large corporate sector, and Ian Livingston said the business was demonstrating “what you can do by self-help, even in a difficult economy”.
[Further reference: Results for the second quarter and half year to 30 September 2011 -- BT, 3 November 2011.]
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BTwatch Report #227 November 2011 Snapshot
November 25, 2011
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Table of Contents
1 Executive brief
4 BT Group
4 Q2 FY11-12 results
4 BT reports stronger quarter, but with worrying signs
4 Revenue beginning to move towards targets; profits up
5 Corporate social responsibility
5 BT promotes Get IT Together campaign
5 Table 1. BT Group Financial highlights, Q2 and H1 FY11-12
6 Operations
6 Smart systems to save £13m in energy bills…
6 Headlines hide mixed performance for BT divisions
6 Openreach fibre providing the foundations for hope
6 Retail dominating broadband; pay-TV seeing benefits
7 …carbon reduction has additional commercial upside
7 Wholesale woes quickly brushed over
7 Global Services increasingly chasing growth
7 Table 2. BT Group, performance by unit, Q2 FY11-12
7 Table 3. BT Group, performance by unit, H1 FY11-12
8 People
8 Traditional business drop still dominates revenue picture
8 Table 4. BT Group, adjusted revenue by product type, Q2 and H1 FY11-12
8 BT flags continued insourcing benefits
9 Insourcing savings trumpeted; bolstering moral case for re-training
9 Group focus on costs trumping line of business concerns
9 Table 5. BT Group, operating costs, Q2 and H1 FY11-12
10 Dividend up, but BT cagey on further rise prospects
10 Livingston’s unforgiving objectives risk short-termism
12 Key performance indicators
12 BT sharply losing retail share as copper base grows again
12 Table 6. BT Group, KPIs, Q2 FY11-12
13 Broadband shift to full unbundling continues
13 Table 7. BT Group, broadband KPIs, Q2 FY11-12
14 Digital Britain
14 Williams: fibre technology moving faster than demand
15 Flexible new fibre rivals sidestepping BDUK funding
16 Smaller players belie BT faith in scale
16 Rothschild chief attacks fibre investment environment
18 BT Retail
18 Advertising
18 Q2 FY11-12 results: BT Retail
18 Retail still cutting costs to blunt revenue decline impact
18 Table 8. BT Retail, financial highlights, Q2 and H1 FY11-12
18 Retail sees broadband gain, but ongoing fixed-line loss
19 Payphones
19 Table 9. BT Retail, revenue by product type, Q2 and H1 FY11-12
19 BSkyB gaining from BT decline
19 Table 10. Major player calls and lines, customer numbers (’000), Q2 FY11-12
19 Fibre central to broadband positivity for BT Retail
20 Pricing and tariffs
20 BT under fire for scrapping paperless billing discount
20 Table 11. Major player broadband customer numbers (’000), Q1 FY11-12
20 Pay-TV growth trumpeted as bigger rivals falter…
20 Table 12. Major player pay-TV, customer numbers (’000), Q2 FY11-12
20 …but pay-TV players still dominate on ARPU
20 Table 13. Comparative monthly ARPU, Q2 FY11-12
21 Television services
21 BT Business feeling SME pain…
21 …BT Ireland seen managing economic conditions more effectively
22 Contracts
22 BT completes voice component of Olympic network
23 Customer services
23 BT trials sign language customer service access
23 Customer services
23 BT studies customer effort
23 A holistic approach
24 BT Conferencing
24 BT Conferencing wins US Veterans deal
24 Savvy customers need experts
24 Digital content
24 Music industry turns attention to The Pirate Bay
25 Wireless networks
25 WBA welcomes new members
25 Questionable efficacy of blocking
25 BT offers to forego profit as music service talks stall
26 BT to host “River of Music” event
26 BT Ireland
26 BT Ireland launches Avaya IP Office
28 BT Global Services
28 Awards and accreditations
28 BT wins two World Communication Awards
28 Q2 FY11-12 results: BT Global Services
28 Strong quarter risks papering over cracks
28 Table 14. BT Global Services, financial highlights, Q2 and H1 FY11-12
28 “Choppy” cash flow challenges outlook
29 Competitors
29 Vodafone ups BT rivalry in public sector
29 Global Services’ order mix shifting to new customers
30 Competitors
30 Vodafone ups BT rivalry in public sector, cont…
30 Tech Mahindra/Mahindra Satyam
30 Mahindra Satyam revenues grow 27% in Q2…
30 Shorter-term deals entrenching churn and profit challenges
31 Tech Mahindra/Mahindra Satyam
31 …Strong performance raises questions over merger
31 BT still struggling for APAC payback
31 Table 15. BT Global Services, revenue by product type, Q2 and H1 FY11-12
31 Contracts
31 BT iNet wins Timico contract
32 BT Wholesale
32 Q2 FY11-12 results: BT Wholesale
32 Migration costs hit Wholesale, with no clear end in sight
32 Table 16. BT Wholesale, financial highlights, Q2 and H1 FY11-12
33 Public sector contracts
33 Managed services in media and IP a bright spot
33 Table 17. BT Wholesale, revenue by product type, Q2 and H1 FY11-12
34 Openreach
34 Q2 FY11-12 results: Openreach
34 Openreach in buoyant mood as fibre accelerates
34 Table 18. Openreach, financial highlights, Q2 and H1 FY11-12
36 Fibre acceleration to be completed within budget
36 Livingston stresses BT abilities to satisfy speed demands
37 Simple innovations praised for improving rollout
37 BT ducks claims BSkyB is a wholesale fibre customer
37 Openreach asserts independence of operations
38 Table 19. Openreach, revenue by product type, Q2 and H1 FY11-12
38 Fibre
38 Openreach brings forward fibre rollout schedule
39 Ofcom reveals seven-fold increase in demand for data
40 Index
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BT Vision: YouView axes marketing and PR staffers, heads
November 1, 2011
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YouView, the internet television platform backed by the UK’s major terrestrial broadcasters and telcos BT Retail and TalkTalk, has decimated its marketing and public relations (PR) functions.
The marketing team, variously reported to number four to 15-plus, has been led by Director of Marketing & Product Tim Hunt, the former Managing Partner of advertising agency St Luke’s, who joined YouView from Freeview in March 2010 (BTwatch, 2010.03). Reports indicate that Hunt and his whole team have been made redundant, effective 31 October 2011, with YouView’s PR personnel also affected. Seemingly also departing is Alia Ilyas, Head of Communications, who was previously a divisional PR Manager at BT. Her LinkedIn profile now features a Recommendation from Chief Executive Richard Halton.
“ Alia led Communications for YouView, a highly contentious and complex project with seven blue chip shareholders through its most challenging periods with huge professionalism and great humour. She simultaneously managed a complex trade, consumer and corporate PR function the peak of which saw her mastermind a brilliant brand launch in September 2012 [sic] which saw YouView splashed across the front pages of the national press… She leaves YouView with the delivery schedule in the rudest of possible health and with a communications strategy ready to go. ”
– Halton.
Despite the severity of the move, YouView claimed its strategy and revised launch timescale are unchanged. Head of Marketing Toby Hollis (ex-BBC, like Halton) appears still in place.
Marketing vital in face of delays
News of a revamp in its marketing comes as elements of the broadcasting industry question the relevance of YouView after such a long delay to its launch. Originally planned to debut in 2009, YouView is now scheduled to be released before summer 2012 (BTwatch, passim).
Speaking at MediaTel Group’s Connected TV Experience event, Bill Scott from easeltv, a television design and application development company, said it was a “great shame” that the project has been delayed, but that it is “still going to be incredibly important”, given the support of the major broadcasters. However, Scott’s optimism was not universally shared by delegates. It was, however, broadly agreed that the YouView platform would stand or fall on the quality of content and marketing.
“ The great thing about YouView is that it allows broadcasters to develop a relevant on-demand experience, which works for the consumer. And there is an element of control, which is very important to them. YouView will be vital to the quality of consumer experience, creating seamless links between linear and on-demand, which will allow the broadcast partners to lead the way. ”
– Scott.“ I think YouView is two years too late. It had a chance but it has lost it… The general public is unaware of YouView. Its technology lags behind others, and it is too late to market. ”
– Rhys McLachlan, Head of Broadcast Implementation, Mediacom.
[Further reference: YouView rethinks its marketing structure -- Marketing, 12 October 2011; Connected TV Experience: 'YouView still vital' -- Mediatel, 14 October 2011; Alia Ilyas -- LinkedIn, 25 October 2011; You're fired! Lord Sugar utters dreaded catchphrase to YouView staff -- Independent, 28 October 2011.]
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BTwatch Report #226 October 2011 Executive Brief
November 1, 2011
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- Carlyle Group is said to have re-entered discussions regarding the acquisition of a share of BT Group’s stake in Tech Mahindra, as a BT disposal looks imminent. [p.4.]
- BT Retail was given a mid-November deadline to put in place blocks to prevent customers accessing the Newbin2 file-sharing website, following earlier High Court action. As the order to filter access was put into action, observers questioned the principles and practicalities behind website blocking, and BT was involved in further debate on restricting internet content with moves to support UK government initiatives on preventing children from accessing pornography online. The telco is to require subscribers to actively accept or reject its parental control software. [pp.8-9.]
- BT Global Services trumpeted plans for expansion of services in Latin America. The telco is opening new centres of excellence across the region and unveiling new solutions as it aims to build on the momentum from recent major deals on the continent. The telco noted the willingness of public bodies to engage with new providers in the market. The expansion is said to emulate BT’s work in building its Asia-Pacific business, although BTwatch notes that the telco’s Latin America operation has been grabbing the headlines while little news of substance has emerged from the higher-profile APAC business. BT in Asia-Pacific has trumpeted its purported progress since the region was singled out for investment, and announced a new innovation showcase in China, but the revenue-generating achievements in Latin America emphasised the modesty of its Asian growth. [pp.17-20, 22, 24-25.]
- BT trumpeted the progress of its Virtual Data Centre offerings at a cloud computing conference. The telco emphasised benefits for customers, such as shifting carbon emission burden, and the ability to house data both inside and outside the country of origin, and stressed that it was designing its data centres to provide physical reassurance for customers. It was also noted that, by working with smaller systems integrators in Europe, BT is able to tap into the SME market in the region, which has previously been considered inaccessible. [p.27.]
- BT’s public-private initiative in Cornwall, to deliver next-generation network services, is said to be ahead of schedule with the first communities to be connected to Superfast Cornwall services in December 2011 — three months early. Positive news on progress in Cornwall could be a boost for BT’s bid for a similar project in Wales, where the telco is looking to win the tender for the £57m Welsh Assembly-backed project with commitments to bringing “up to” 20Mbps broadband to half the of the principality by 2015. [p.31.]
- BT is said to be interested in outsourcing more basic legal functions, following the success of an agreement with UnitedLex. The Group is also seeing benefits from shifting management of legal staff from divisional to functional focus. [p.5.]
- The BT Group pension is expected to be in the spotlight again, as funds are affected by fluctuating financial markets. [p.6.]
- Cisco discussed its role in providing services to London Olympics service providers BT and Atos Origin. It was noted that older, but tried-and-tested, equipment is being relied on to deliver essential networks. BT is also expected to have a team of 600 supporting the event. [p.7.]
- BT Business is highlighting the inclusion of Wi-Fi access in its SME-targeted broadband packages, and encouraging businesses to share wireless broadband access. Coffee shop chain Starbucks is making access to BT Openzone Wi-Fi more widely available, and John Lewis is also offering in-store Wi-Fi in partnership with Openzone. [pp.8, 13.]
- BT saw continued bad press for its pricing policies, with recent price rise complaints followed by publicity concerning older tariffs that promised lower mobile call costs but now have higher evening mobile rates than those paid by customers outside the package. [p.11.]
- BT Ireland won a EUR9m contract to provide a nationwide IT network to the Department of Social Protection. [p.13.]
- BT-owned budget-brand ISP Plusnet switched its internet security platform to Cloudmark, from Cisco’s IronPort platform. [p.14.]
- BT Global Services completed a capacity upgrade for the NHS N3 internet gateway, meaning capacity has nearly trebled to 5Gbps since the beginning of the year. [p.15.]
- BT received payments of nearly £550m from the NHS in the 2010-11 financial year, accounting for more than half the health service’s spending with its top 100 suppliers. [p.15.]
- BT One Voice Anywhere was launched in the US market, promising internet voice solutions built on the Ribbit platform. The solution launch is the first referencing Ribbit since the business was brought closer in-house by BT, with promises of greater integration with its commercial offerings. [p.21.]
- Eckoh Technologies secured a three-year extension for its voice recognition services strategic partnership with BT Global Services. [p.28.]
- Openreach detailed plans for the upgrade to its fibre to the cabinet network that will see connection speeds potentially double to 80Mbps. Customer trials are expected at the beginning of 2012, with a formal product launch due later in the year. [p.30.]
- ADVA Optical Networking won another deal to provide equipment to Openreach, with an agreement to deliver a platform for new Optical Spectrum Access products that are expected to support customers’ network expansion plans. [p.32-33.]
BTwatch Report #226 October 2011 Snapshot
November 1, 2011
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Table of Contents
1 Executive brief
4 BT Group
4 Acquisitions and disposals
4 Carlyle re-enters frame for Tech Mahindra buy
5 Adastral Park
5 Corporate social responsibility
5 Operations
5 Fitz on BT Legal team
6 People
6 New BT director named
6 Pension
6 Pensions seen affecting company performance again
7 Suppliers
7 Cisco explains support role for BT Olympic network
8 BT Retail
8 Advertising
8 Wireless networks
8 Digital content
8 BT given 14 days to block Newzbin2
8 Concerns regarding practicalities and principles behind block
9 Regulatory
9 “…out of context…”
9 BT on social media
9 BT backs UK’s internet parental controls push
11 Pricing and Tariffs
11 Onlive
11 Cloud gaming yet to find the “right formula”
11 Pricing and tariffs
11 BT under fire for “discounted” call prices
12 OnLive seen as threat to usage caps
12 Television services
12 YouView axes marketing and PR staffers, heads
12 Marketing vital in face of delays
13 BT Business
13 Plusnet
13 BT Business customers offered additional Wi-Fi benefits
13 BT Ireland
13 Department of Social Protection picks BT Ireland
14 Plusnet
14 Plusnet selects new anti-spam platform
15 BT Global Services
15 Awards and accreditations
15 BT wins Computerwoche cloud award
15 NHS contracts
15 BT upgrades NHS internet gateway
15 Figures reveal increased NHS spending with BT
17 Awards and accreditations
17 BT trumpets BSI certification first for Smart City
17 BT International: Americas
17 BT sets out LatAm expansion plans, new investment
18 Competitors
18 BT loses £100m Lambeth contract to Virgin/Vodafone
18 New products planned for the market, focused on the cloud
19 Competitors
19 O2 UK squares up to BT in ICT market
19 After gathering momentum BT highlighting region’s potential
20 Powerful incumbents and other new entrants could curb potential growth
20 LatAm deals highlight lack of flagship APAC deals
21 Financial services
21 Radianz adds Kazakhstani and Ukrainian exchanges
21 BT launches BT One Voice Anywhere in USA
21 Continued life for Ribbit
22 BT International: Asia
22 BT opens Showcase centre in Shanghai
24 Harris: Update on APAC expansion programme
24 Key milestones claimed but achievements more modest
24 Growing opportunities from growing customers
25 IDC recognises BT’s APAC growth, although progress underwhelming
26 BT International: EMEA
26 BT appoints new Head of Turkish operations
27 Products and services
27 BT promotes “smart” supply chain
27 Products and services
27 BT trumpets VDC as channel offering
28 Tech Mahindra/Mahindra Satyam
28 Mahindra Satyam to open LatAm delivery centre
28 Suppliers
28 BT renews voice-recognition deal with Eckoh
30 Openreach
30 Fibre
30 Openreach expands Milton Keynes FTTP pilot
30 Next-generation networks
30 Openreach sets out 80Mbps FTCC upgrade plans
31 OTA2
31 OTA2 updates on copper market
31 Superfast Cornwall ahead of schedule
31 BT outlines £57m Digital Wales contract bid
32 Suppliers
32 Openreach selects ADVA for new OSA offering
32 ADVA relationship continues to grow
33 Openreach responding to increasing competition
34 Index
Read more
BT rival begins fibre trials
October 25, 2011
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Fujitsu Telecommunications Europe has begun trials of its proposed alternative fibre network, which it is hoping to roll out to rural areas across the UK as part of the Broadband Delivery UK (BDUK) programme (BTwatch, #220, #221).
The trials are taking place in Greasby in the Wirral, and participants will see new cabling run into their homes using existing pole and duct infrastructure, with the potential for up-to-1Gbps broadband access, although initial tests will see 100Mbps connections trialled.
Virgin Media welcomed the commencement of the trials by Fujitsu, and is the vendor’s anchor tenant for its new network. The cableco used the opportunity to once again criticise BT plans for fibre rollout. Fujitsu has kept a notably more neutral tone in selling its achievements, mindful of its place as a supplier to BT as well as a rival.
“ BT only offers Generic Ethernet Access on its fibre-optic products at the moment, which means we cannot replicate what we provide across our cable infrastructure as everything needs to be converted into IP [Internet Protocol] delivery. ”
“ Essentially everything then fights for the same bandwidth — like how your DSL broadband will slow if BT Vision needs some of it. The architecture of Fujitsu’s infrastructure supports [Radio Frequency over Glass], which enables us to dedicate specific spectrum for each service. It’s ultimately a better, more flexible service for everyone having that passive open network than to try to use something that’s tightly managed such as BT. ”
– Virgin Media.
The accuracy of the Virgin Media claims is disputable, with signs that the BT-planned network is more flexible than the cableco would like to suggest; but finer details aside, it is significant that work is underway in testing the viability of an alternative to the BT network, as Openreach makes a series of announcements to press its claim as the country’s fibre champion (see separate reports).
BT is clearly raising its game as competition intensifies and moves beyond the hypothetical. It will be interesting to see how Fujitsu manages its position as a partner to both sides of an increasingly bitter argument between two network providers.
[Further reference: FTTH via Fujitsu, Virgin Media and TalkTalk on its way to Greasby -- ThinkBroadband, 30 September 2011; Virgin Media: Fujitsu fibre “better than BT” -- PC Pro, 29 September 2011.]
Read more
BTwatch Report #225 September-October 2011 Executive Brief
October 25, 2011
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- BT Group could see five competitors as it bids for contracts under the Broadband Delivery UK project, to bring improved broadband coverage to rural areas, following the UK government’s confirmation of firms that have met its pre-qualification requirements. It is notable that the incumbent’s main network infrastructure-owning rivals have chosen not to participate, with Fujitsu emerging as the standout challenger to BT with the appropriate skills, scale, and ambition. The UK Fujitsu business has begun trials of its FTTP equipment, prompting its partner Virgin Media to seize another opportunity to snipe at BT. [pp.5, 38.]
- Openreach revealed new pricing for physical infrastructure access: the proposed costs to communications providers for installing their own equipment using BT’s poles and ducts. The incumbent’s original proposals created a storm of protest, with rivals dismissing them as commercially unviable. Following trials with service providers, and in response to the widespread criticism, BT revised the way it charges for access, which it claims will reduce costs in areas most likely to be in demand for altnets. At the time of its initial proposals, BT insisted its costs were 15% below European averages, and it now claims they are near-40% less than the norm. The time taken to review prices caused grumbling from government, as well as the industry, with belief among communications providers that BT is willing to ensnare final pricing in regulatory wrangles if its offer is not accepted. [pp.34-37.]
- Mobile network joint venture Everything Everywhere trumpeted the start of live trials of LTE network technology in Cornwall, working in conjunction with BT Wholesale. In laboratory trials, the companies are said to have proven capabilities to share resources provided by a 4G network, with field trials expected to provide insight into LTE’s potential to deliver both fixed-wireless broadband and mobile data access. [p.30.]
- Openreach confirmed the commercial launch of FTTP services in pilot areas, although without the service level guarantees likely to be demanded by wholesale customers. The access services division is also working to counter impressions that it is overly focused on building an FTTC network that could rapidly become outdated, by highlighting official clearance for it to take steps to double the maximum speeds offered by FTTC, and detailing FTTP trials examining the potential for 1Gbps services. [pp.31-32.]
- There were rumours that Advent International, a private equity group, is looking at acquiring BT Group’s 23% stake in business process outsourcer Tech Mahindra. Talks are thought to have been underway for several months. BT has been distancing itself from its Indian investment for some time, increasingly looking elsewhere for outsourcing. [p.4.]
- A BT software engineer provided insight into how BT is learning to accept open source software at the core of services. Interestingly, the telco is reversing its practice of testing products internally before commercialising them, opting to trial software with customers before considering whether it meets the particular demands of a national fixed-line operator. [p.6.]
- A BT Group attempt to enmesh cableco Comcast in a patent infringement case resulted in the US company launching a counter-suit demanding the relevant BT patents be voided. [p.7.]
- BT Retail could see claims on broadband connection speeds tempered by new ASA guidelines, which suggest advertisers can only claim maximum speeds that are achievable by at least 10% of customers. Adoption of the guidelines could see ADSL2+ claimed speeds drop from 20Mbps or more, to around 13Mbps. Virgin Media, whose network does not suffer the same disparity between theoretical and practical connection top speeds, was predictably buoyed by the decision. A silver lining could be that the changes also make BT’s BT Infinity fibre offering stand out, too. [pp.11-12.]
- BT Retail demonstrated little progress in quarterly performance within Ofcom’s customer complaints review, although remaining ahead of major rival TalkTalk. A report on BT’s multichannel approach to dealing with customer problems indicated progress on adoption of a genuinely multichannel approach, and continued advances towards more efficient resolution. However, it appears that the company is improving from a weak base. [pp.13-15.]
- Newzbin2, the pirated content distribution website that threatened to hack and disable BT’s internet filter Cleanfeed, claimed to have successfully circumvented BT’s internet controls, and offered to make its solution available to others. BT and TalkTalk’s legal battle to overturn obligations being placed on major ISPs under the UK’s Digital Economy Act flickered back into life, as a right of appeal was granted, following earlier halting of legal review. [pp.15-16.]
- BT Openzone promised to greatly expand its Wi-Fi network in London, ahead of the 2012 Olympics. While there are plans for new hotspots using bus stops and phone boxes, and to increase coverage on the London Underground and via ongoing talks with borough councils, BT’s claims for coverage continue to see a major role played by shared access on customers’ Wi-Fi equipment in homes and businesses. [pp.19-20.]
- BT Business is continuing its drive to build its IT business via SMEs, with a new financing scheme. The Direct IT sales division entered a distribution agreement with VoIP player snom. [pp.21-22.]
- BT detailed its “exclusive” UK partnership with cloud-gaming company OnLive, with promotional offers for subscribers. However, the on-demand gaming player also has a UK partnership with a major gaming retailer, meaning BT may need to be more innovative in its approach in order to exploit its early-mover advantage. [pp.23-24.]
- BT Global Services confirmed a seven-year extension to an agreement to provide services for BASF. The chemical group is a long-standing client and, while the Global Services division increasingly focuses on growth through new customers, the deal indicates there is still value to be extracted from existing deals. [p.25.]
- BT launched its BT Unified Trading voice offering for the financial services sector in twelve new financial centres, expanding the portfolio available over its BT Radianz cloud network. iWay Software trumpeted its role in providing secure encrypted messaging solutions to BT Global Services for use in products aimed at the financial community. [pp.27, 29.]
- BT in Africa signed a capacity purchase agreement with FibreCo, a joint venture in South Africa, creating a new fibre network link across the country. The deal, which enables work on rolling out the nascent network to begin, follows opening of a new BT network traffic routing facility in the country. [p.28.]
- Perle Systems was selected by BT Group to provide Ethernet terminal servers that will be deployed across BT exchanges to update network management capabilities. [p.39.]
