BTwatch, issue 2009.02 snapshot
18 March 2009
GROUP: BT released its Q3 FY09 results, with no more surprises unveiled after the earlier profits warning on Global Services. Decent performance at BT’s other customer-facing divisions was overwhelmed by the BT GS bad news, but the board appeared buoyant and confident that a corner will be turned soon. [pp.3-16.]
Issue: 2009.02
Covering: February 2009 to early-March 2009
Published: March 2009
Next issue: Mmm 2009
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EXECUTIVE BRIEF
GROUP: BT released its Q3 FY09 results, with no more surprises unveiled after the earlier profits warning on Global Services. Decent performance at BT’s other customer-facing divisions was overwhelmed by the BT GS bad news, but the board appeared buoyant and confident that a corner will be turned soon. [pp.3-16.]
While still in housecleaning mode, and aiming to ensure the bulk of bad news is swept out of the way in the current financial year, Ian Livingston nevertheless managed to find positives in the telco’s operational performance: good progress was said to have been made on job cuts, and he expressed confidence that BT would still identify opportunities for growth in emerging markets. It was widely noted in the press that the Chief Executive also took advantage of the record low BT share price to invest £100,000 of his own money in the company’s stock. New Group Finance Director Tony Chanmugam also commented on BT’s management of difficult current financial conditions, and insisted that the company was coping well, supporting the BT line that its current woes are more self-inflicted, and therefore rectifiable, rather than being caused by outside forces. [pp.17-18,52,53.]
BT may reconsider plans to generate 25% of its power through the erection of wind turbines, due to accounting rules surrounding the allocation of the benefits of switching to environmentally-sustainable power. [p.19.]
BT is to implement a pay freeze for the next financial year, and cut back on bonuses for all levels of staff. The move could save £40m in the UK, but the CWU described the action as “wholly unacceptable”. [p.20.]
The European Union ruled that BT was required to make back-payments into the UK government’s pension protection fund, but deemed that the Crown Guarantee underwriting the Group’s pension fund did not amount to state aid. There were reports that the government has drawn up emergency plans to re-nationalise BT should it ever find itself in a position where it needed to be bailed-out, as a commitment to cover the pension could make taking the company back into public ownership the most economical option. [p.20.]
STRATEGY & OPERATIONS: BT plans for a fibre-to-the-cabinet rollout received an anticipated boost, as the regulator Ofcom stated the company would be able to set its own pricing levels, and would not be required, in the initial phases at least, to provide wholesale access deep into the infrastructure. While there are risks that competition may eventually be stifled by the lack of opportunities for true differentiation, the stage now seems set for BT to repeat the success of its broadband rollout, should the will to do so exist. [pp.22-25.]
Wholesale internet service provider Entanet boasted of its position as an early triallist of 21CN solutions and the edge it has therefore been given in the market, although many of its end-users appear at least intially unimpressed by the switchover. [p.25.]
The European Commission selected a BT Innovate executive to lead a new working group on software strategy and the internet in Europe, while BT announced that the India-UK technology centre (in which it is a key partner) has raised more than £9m in funding. [pp.26-27.]
BT RETAIL: There were rumours that BT is considering a bid for broadcaster Channel 4, with a view to a link with the BT Vision IPTV business. The speculation appears to have arisen following comments from Channel 4’s Chairman that did not rule out the possibility, and from exploratory talks held in 2008. [p.28.]
BT WebWise, the Phorm-based online advertising solution currently under trial at BT, could be launched commercially in coming months. According to Phorm’s Chief Executive, a launch will “most definitely” happen in 2009, although BT would not confirm this. [p.28.]
BT announced that its mobile customers would no longer be charged for making calls to 0800 phone numbers — an apparent first in the UK mobile market. BT indicated that taking the step for its 400,000 customers would cost it tens of thousands of pounds a year — significantly less than the £50m in dropped revenue that the major mobile players could collectively lose by following suit. The move has the hallmarks of a BT play to discourage fixed-to-mobile substitution. [p.29.]
BT launched a new trial product, BT MyPlace, which uses its Wireless City wireless network in Westminster to offer a mobile city guide service from a range of content partners. BT is also pushing Wi-Fi for its BT Business customers, and enabling SMEs to offer public Wi-Fi, either for free or for a charge, using their existing wireless hubs. The Wi-Fi firmware for the development had initially been expected to emerge in the middle of last year, but technical problems led to delay. [pp.30-31.]
BT Business cut the prices for its broadband packages, and introduced new bundled offers, while mobile email services and call price cuts were also announced. The unit looks to be responding to competitive threats from unbundled operators, and, notably, went out of its ways to question the current suitability for businesses of ADSL2+ broadband services. [pp.33-34.]
BT GLOBAL SERVICES: Amid the gloom surrounding Global Services, there were claims of a strong and growing business in the UK financial industry sector. [p.35.]
BT won a EUR4.5m contract to provide network services to Avis in Spain and Portugal. It also announced it had won a £1m contract with Consilium Technologies, and will provide telepresence conferencing solutions to financial data company SWIFT in a deal worth an estimated $3m. [pp.36,43.]
Work looks set to resume on NHS IT contracts following assessment of the fallout of large overspends at the Royal Free Trust in London. However, also in the public sector, Essex County Council was reported to have unilaterally terminated a managed outsourced services contract with BT, with the telco planning legal action seeking to obtain damages. [pp.37-39.]
Consultancy Magenta netLogic is to sue BT for unpaid bills and an alleged failure to implement proposed cost-cutting measures related to rented network components that might have saved £400m and earned the consultants £80m. BT claims the proposals were “hopelessly flawed”. [p.39.]
BT is in a position to better develop its networked IT services offering in the South African market after it received full licences to operate in the country, while it was reported that BT in the Middle East had obtained certification enabling it to offer security assessments for the payment cards industry. A new alliance partner, 2connect, was signed in Bahrain with the aim of extending its reach in the region. [pp.40,42-43.]
There were rumours that BT’s business in the Republic of Ireland was to be put up for sale, having failed to make significant inroads into the market over the past eight years. [p.40.]
Telepresence conferencing was positioned as an emerging technology set to move into the profitable mainstream, and BT’s links with vendors Cisco and Polycom were highlighted. BT Conferencing also announced an update to its Engage Meeting Manager web-based scheduling tool. [pp.44-45.]
Alcatel-Lucent is providing a security solution that will form part of BT’s MobileXpress portfolio of remote-working applications. The new offering will remotely destroy data on devices such as laptop computers as soon as they are reported lost or stolen. [p.46.]
A new Intelligent Virtual Private Network solution was launched by BT Global Services, which is said to take advantage of the company’s global 21CN platform. [p.47.]
BT WHOLESALE: BSkyB is using BT Wholesale to provide a Sky-branded directory enquiries service, as the telco’s wholesale unit continues to build its managed services reputation. BT Wholesale is also offering a white-label service to ISP customers drawing on PlusNet’s skills and reputation. [pp.49-50.]
OPENREACH: The latest update from the Office of the Telecommunications Adjudicator suggested that, despite ongoing problems and disputes, the access services sector is edging towards a satisfactory level playing field — possibly due to the continued slowdown of LLU growth from a previous deluge. [p.51.]
A Morgan Stanley research note estimating BT’s potential annual pension fund top-up payments as high as £750m caused the company’s shares to dive to record lows with its now sub-£6bn market valuation a far cry from 1999’s £73bn-plus. [p.52.]
CITY REPORTS: Standard Life is to develop a SIPP for the 20,000 BT employees still in trust-based defined contribution schemes. [p.53.]
BT’s Q3 Key Performance Indicators again painted a picture of managed decline at BT Retail’s traditional operations, maturation of retail and wholesale broadband, and out-performance by rivals. However, it could be worse, with BT Retail possibly alone amongst big ISPs in avoiding customer loss to fast-growing Sky Broadband. Mobile and Vision also showed growth, albeit both from very low bases. Click here to read the full report and analysis of BT’s Q3 KPIs. [pp.54-57.]
EXTRACT
BT Business announces price cuts
BT Business announced it was reducing the prices of its small- to medium-sized enterprise (SME)-oriented broadband offerings, and widening the range of services available within packages.
The BT Business Total Broadband Option 3 package is to see its price cut from £40.50-per-month (before value-added tax/VAT) to £30-per-month excluding VAT, with limited mobile broadband access included without charge. BT claimed that the package now included more than £750-worth of additional business tools. The other BT Business Broadband options also saw price cuts, with the Option 1 price reduced from £19.79 to £15 (excluding VAT), and Option 2 cut from £26.99 to £25 (excluding VAT). Additional services valued at nearly £300 and more than £500, respectively, are also said to be included in the two packages.
The new prices are subject to a new 24-month contract as BT continues efforts to lock-in customers.
BT drew particular attention to the inclusion of mobile broadband in its current packages (BTwatch, 2008.09) and, while claiming that a 20Mbps fixed-line broadband service would be made available in the near future, it also emphasised that its existing broadband offerings entailed more than the provision of a ‘fast pipe‘ to the internet.
New One Plan pushed
A new spending plan was also launched called BT Business One Plan Plus, which links together broadband, fixed, and mobile spend together. Using committed spending levels, the service offers users three months’ free mobile line rental, unlimited calls between business numbers, and a 5%-discount on the total bill.
” Businesses need more than just broadband access; they need a complete service to drive competitive edge. What’s the point in buying a steering wheel when you need the rest of the car too? BT Business hasn’t just introduced massive savings for small businesses across our broadband packages: at the same time, we’re giving them more at less cost to ensure they can weather the economic storm. ”
– Bill Murphy, Managing Director of BT Business.
BT feeling the heat from ADSL2 unbundlers in SME market?
It was interesting to note BT’s reference to the introduction of a 20Mbps service in the future, while also attempting to give the impression that the ADSL2+ technology involved is not yet suitable for business, by claiming it will be launched on a “realistic timescale for new technology to ensure reliability in business-critical situations”. The need to acknowledge the development without providing a firm timescale for its introduction — while also simultaneously knocking existing versions in the market — might suggest that BT is seeing demand for it, or customers are leaving or unwilling to commit to new contracts without it.
[Further reference: BT Business reduces prices of broadband packages -- and adds more inclusive business tools -- BT, 2 February 2009.]
TABLE OF CONTENTS
3 Q3 FY08-09 results
3 Global Services’ gloom blacks out positive signs at BT
3 GS suffers, but other units report best results in years
4 BT Group financial highlights, Q3 FY09
5 More bad news will follow…
5 BT Group, performance by unit, Q3 FY08-09
5 Managed solutions provide revenue hope
5 BT Group, revenue by product type, Q3 FY08-09
6 BT Group, revenue by customer group, Q3 FY08-09
7 Pension worries unabated
8 Outlook — more bad news to get out of the way before progress
8 Not much good news, but no surprises
9 Performance by business units
9 BT Global Services
9 BT Global Services, financial highlights, Q3 FY08-09
10 Contract wins continue, but not at any cost
11 BT Retail
11 BT Retail, financial highlights, Q3 FY08-09
12 BT Wholesale
12 BT Wholesale, financial highlights, Q3 FY08-09
13 Openreach
13 Openreach, financial highlights, Q3 FY08-09
15 Analyst reaction
17 BT Group
17 Acquisitions and disposals
17 Appointments
17 Executives
17 Livingston claims good progress in job cuts programme
17 Livingston still bullish on emerging markets
18 Employment
18 Chanmugam notes downturn challenges to BTGS
18 Board
18 Rake to take on Barclays role
18 BT criticised for increasing directors’ fees
19 Society
19 BT sponsors Comic Relief
19 Community
19 BT re-considers wind turbine scheme
20 “…out of context…”
20 EU rules BT must fully pay PPF, Crown Guarantee cleared
20 Legal
20 Pay freeze for all BT staff
20 EU rules BT must fully pay PPF, Crown Guarantee cleared
22 Spotlight lands on BT re-training centre
22 Strategy and operations
22 Fibre
22 Ofcom clears way for fibre investment
23 Suppliers
23 Infosys predicts BT revenue drop
23 The principles behind the decision
23 Active wholesale products are the short-term goal
24 Virtusa reports flat BT revenues
24 BT Undertakings under review to enable rapid rollout
24 Virgin Media also eludes regulation for now…
24 Still some uncertainty on how the fibre future will develop
25 21CN
25 Alcatel-Lucent and NTT observe 21CN exchange switch
25 Comment: a pragmatic response or storing up problems?
25 Entanet trumpets role in 21CN testing
26 Products and services
26 BT prepares UCC customer push
26 Research
26 BT heralds EU software role
27 BT highlights work of the India-UK technology centre
28 BT Retail
28 Broadband
28 Signs of slowing broadband adoption
28 Acquisitions and disposals
28 Rumours of BT bid for Channel 4
28 BT WebWise to launch in 2009 — Phorm
29 BT Vision
29 BT Vision marketing merges with Consumer
29 BT Mobile
29 BT Mobile customers to make free 0800 calls
30 Wireless networks
30 BT launches location-based Wi-Fi services
31 An innovative idea, but is BT still lacking aggression?
31 BT highlights Wi-Fi benefits for business customers
33 BT Business
33 BT Business announces price cuts
33 New One Plan pushed
33 BT feeling the heat from ADSL2 unbundlers in SME market?
34 Marketing
34 BT claims top telecoms brand slot
34 BT pushes mobile email for SMEs
34 BT Expedite
34 Fresca trumpets website overhaul for retailer Kew
35 BT Global Services
35 Appointments
35 Ruoff named as new BT Switzerland Chief Executive
35 Strategy
35 Calls for BT GS to merge with peers
35 BT praises partnership model for financial services
36 BT International: Asia
36 BT named as member of Indian telecoms association
36 Contracts
36 BT wins Iberian Avis contract
36 BT signs managed services deal with Consilium
37 BT International: Asia
37 BT named as Avaya Platinum partner in APAC
37 NHS contracts
37 BT Cerner Millennium rollout to resume
38 Royal Free on clinical IT systems
39 “…out of context…”
39 BT GS to be sued over consultancy work — report
39 Legal
39 BT GS to be sued over consultancy work — report
39 BT to sue council over contract termination
40 BT International: Europe
40 BT International: Africa
40 BT awarded full licence in South Africa
40 Rumours of BT Ireland sale
42 BT restructures Enia network management entity
42 BT International: Middle East
42 2Connect named as BT alliance partner
43 BT Conferencing
43 Masters on conferencing
43 BT obtains payment card services certification
43 SWIFT deploys BT telepresence solution
44 Prestel on the conferencing market
44 Automated web-based conferencing solution launched
45 Suppliers
45 BT Conferencing ties with Polycom for telepresence
46 Tech Mahindra
46 Partners
46 BT ties with Alcatel-Lucent on remote data security
47 “…out of context…”
47 Ovum on BT Global Services
47 BT trumpets BT-HP Alliance successes
47 Products and services
47 BT launches intelligent VPN offering
48 BT sees demand for Quick Start professional services
49 BT Wholesale
49 Contracts
49 BSkyB outsources directory service to BT
49 Wholesale continues to set itself apart as managed services provider
50 Products and services
50 BT launches managed broadband service with PlusNet
50 Using PlusNet’s reputation to keep ISPs with BT?
51 Openreach
51 OTA2 reports on access, as unbundling continues to slow
51 As ‘business-as-usual’ approaches, LLU continues to slow
51 Strategic priorities under consideration
52 City reports
52 Brokers’ reports
52 Morgan Stanley downgrade hits BT share price
52 Pensions
52 Pension dangers prompt BT re-nationalisation planning
53 Executives
53 Livingston invests £100,000 in BT shares
53 Standard Life chosen for new SIPP scheme
56 BT Group: Q3 FY08-09 Key Performance Indicators, period to 31 December 2008
58 Index
INDEX
SYMBOLS
2Connect, 42
A
Abbey, 17
Alcatel-Lucent, 25, 46
Anglo American Plc, 47
Asda, 19
Association of Competitive Telecom Operators, 36
AT&T, 36
Avaya, Inc., 35, 37
Avis Europe plc, 36
B
Barclays, 18
British Broadcasting Corporation (BBC), 28
- BBC Worldwide, 28
BSkyB, 29, 49
BT Group, 3, 4, 5, 6, 16, 17, 18, 19, 20, 22, 27, 28, 52, 53
- Asia
- Tech Mahindra, 46
- BT Global Services, 3, 4, 5, 8, 9, 10, 15, 16, 17, 18, 23, 35, 36, 39, 43, 46, 47, 48
- BT Asia Pacific, 37
- BT Conferencing, 11, 43, 44, 45
- BT Enia Telecom., 42
- BT Intelligent VPN, 47
- BT International, 36, 37, 40, 42
- BT Italia, 42
- BT South Africa, 40
- Engage Meeting Manager 2.0, 44
- Ireland, 40
- MobileXpress, 46
- Net2S, 17
- One Source for Cisco TelePresence, 43, 44, 45
- Quick Start, 48
- Unified communications and collab. (UCC), 26
- Work Anywhere, 48
- BT Pension Scheme, 20, 52
- Crown Guarantee, 20, 52
- Pension Protection Fund, 20
- BT Retail, 3, 4, 5, 8, 11, 12, 17, 28, 29, 49
- BT Business, 11, 31, 33, 34
- BT Directories, 11
- BT Expedite, 34
- BT FON, 11
- BT Fresca, 34
- BT Ireland, 40
- BT Mobile, 29, 46
- BT MyPlace, 30
- BT Openzone, 11, 30, 31
- BT Talk Time, 34
- BT Vision, 11, 28, 29
- BT WebWise, 28
- One Plan Plus, 33, 34
- Option 1, 33
- Option 2, 33
- Option 3, 33
- PlusNet, 50
- Ufindus, 11
- Wireless Cities, 30
- BT Wholesale, 3, 4, 5, 6, 8, 12, 25, 28, 49, 50, 51
- Wholesale Broadband Managed Connect, 50
- Directors
- Daniels, Eric, 18
- Rake, Sir Michael, 18, 19
- Executives
- Boustridge, Michael, 37
- Bross, Matt, 27
- Bruce, Chris, 30
- Burke, Micheál, 40
- Chanmugam, Tony, 18
- El Kabbany, Wael, 42
- Fitzpatrick, Brian, 50
- Johnson, Michael, 17
- Lalani, Hanif, 9, 15
- Legh-Smith, Jonathan, 26
- Livingston, Ian, 3, 7, 8, 10, 12, 13, 15, 17, 22, 53
- Mahajan, Rakesh, 46
- Masters, Steve, 43
- Matthews, Keith, 40
- Murphy, Bill, 33, 34
- Nicholson, Andy, 35
- Porter, Angus, 17
- Prestel, Jeff, 44, 45
- Tuppen, Chris, 19
- Weller, Michael, 47
- Openreach, 3, 4, 5, 8, 13, 24, 25, 51
- EMP, 51
- WLR3, 51
- Strategy and Operations, 22
- 21CN, 25, 47, 50
- BT Innovate, 26, 27
- Career Transition Centre, 22
- India-UK Advanced Technology Centre, 27
Business Superbrands, 34
C
Cable and Wireless, 36
Carphone Warehouse, 28
Cerner, 37, 38
Channel 4, 28
Cisco Systems, Inc., 30, 35, 43, 44, 45
Citrix, 36
Cleartronic, Inc., 45
- VoiceInterop, 45
Comic Relief, 19
Communications Workers Union, 20
Consilium Technologies, 36
Credit Suisse, 7
D
Deutsche Telekom, 35
- T-Mobile, 40
- UK, 40
E
Eastman Kodak, 30
Enia, 42
Entanet, 25
Environment
- Wind turbines, 19
Essex County Council, 39
European Union, 7, 20, 26
- European Commission, 7, 20, 24, 26, 28
F
France Télécom, 34
- Orange, 28, 29, 34, 36
- Orange Business Services, 36
G
Global Capacity, Inc. (Capital Growth Systems, Inc.), 39
- Magenta netLogic Ltd, 39
Google, 34
H
HBOS, 10
Hewlett-Packard, 47
I
IBM, 35
IKEA, 40
Infosys, 23
Intel, 30
J
JPMorgan Chase
- JPMorgan Cazenove, 7, 15
K
Kew, 34
L
Liverpool City Council, 10
Lloyds TSB, 10
Logica, 10
M
Mobile Broadband Network Ltd (MBNL), 12
Morgan Stanley, 7, 16, 52
N
National Health Service (NHS, UK), 37, 38
- Royal Free Hampstead NHS Trust, 37, 38
NTT, 25
O
Ofcom, 22, 23, 24, 25, 51
- Carrier pre-selection, 51
- LLU, 6, 12, 13, 28, 51
- Richards, Ed, 22
- Strategic Review of the Telecoms Sector, 24
- Wholesale line rental, 5, 13, 51
Office of the Telecommunications Adjudicator, 51
- OTA2, 51
Oracle, 36
Ovum, 47
P
Payment Cards Industry, 43
Phorm, Inc. (121Media), 28
Point Topic, 28
Polycom Immersive Solutions, 45
Post Office, 12
PricewaterhouseCoopers, 53
R
Research In Motion
- BlackBerry, 34
S
Satyam Computer Services Ltd, 46
SFR, 11
Sitel, 18
Sky Talk, 49
Societe Generale, 52
South Tyneside Council, 36
Standard Life, 53
SWIFT, 10, 43
Swisscom, 11
T
Tech Mahindra, 46
Technology
- ADSL2+, 33
- Broadband, 5, 6, 11, 12, 22, 24, 25, 28, 29, 30, 31, 33, 49, 50
- Cable modem, 28
- Convergence, 25
- DSL, 6, 12
- Ethernet, 13
- Fibre, 17, 22, 23, 24, 25, 42
- IP, 29, 44
- IPTV, 29
- ISDN, 44
- MPLS, 5, 47
- SaaS, 34
- VPN, 36, 47
- WAN, 36
- Wi-Fi, 11, 30, 31
Telecom Italia, 35
Telefónica, 34, 40
- Telefónica Europe (O2), 34, 40
Telemark, 47
Telenor, 35
Tesco, 19
The Cloud, 31
Thomas Cook, 17
Tiscali SpA, 28
TRAI (India), 36
V
Verizon Communications, 36
Virgin Media, 24, 28, 29
Virtusa, 24
Vodafone, 34, 40
W
Wind Telecomunicazioni SpA, 19
World Economic Forum, 17
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