BT Group FY08-09 Q3 KPIs — grim reality
18 March 2009
Q3 KPIs — a grim reality
- This is an extract from issue 2009.02 of BTwatch, published in March 2009. BTwatch is published 10 or more times a year and is available by subscription and as individual reports. For further details, contact sales@marketmettle.com.
BT’s operational Key Performance Indicators (KPIs), which accompanied its third fiscal quarter results (Q3 FY08-09, ending 31 December 2008), again told the same story, with BT Retail’s traditional business (exchange lines and calls) declining at an alarming pace, Openreach benefiting from the pain at other divisions, and the company’s retail rivals performing considerably better (often on the back of Openreach products). Highlights specific to the quarter included:
- BT may no longer be succeeding in migrating customers to contracts, although upselling remains apparent (with the probable added benefit that migrated customers find it more difficult to release themselves from BT’s now automatically-renewing contracts, thus reducing churn), suggesting that this retention strategy may need updating. While average revenue per customer household (ARCH) continues to rise (to a record £285), this may largely just reflect continued attrition of the customer base, as lower value and contract-free customers are poached by rivals. Tellingly, while ARCH rises, the underlying aggregate revenue (calculated by multiplying ARCH by the ‘active’ customer base) appears to be maintaining its steady decline, as BT Retail loses an average of over 90,000 “active customers” per month.
- The customer base of BT Basic, the new light-user tariff fully launched in October 2008, jumped to 136,000, from 2,000 in Q2. This tariff is restricted primarily to those on Income Support, Job Seekers’ Allowance, or Pensions Credit, and it may have added defensive merit in a harsh socio-economic climate.
- BT Mobility maintained its slow progress, showing small growth primarily in the business and corporate segments. However, BT’s catchall “Mobility & Convergence” financial reporting category is difficult to decipher, since it probably also bundles fixed-wireless and managed services. To provide some perspective, the 300,000 retail mobile customer base probably represents less than 0.4% of the UK’s overall mobile connections.
- In the pay-television market, BT is also still a gnat, but continues to add customers and build market share, and may become more irritating to incumbents BSkyB and Virgin Media if the market segment loses its so-far resilient growth profile.
- BSkyB remains the dominant force for retail broadband customer additions, and has now beaten BT Retail by considerable margin for five successive quarters — in Q3, Sky added 163,000 broadband customers, compared to BT Retail’s 84,000. However, the story looks even worse for the other top-six broadband service providers, with Carphone Warehouse, Orange UK, and Virgin Media (which added on-net, but lost off-net connections) all losing customers in the quarter (and Tiscali UK yet to release KPIs for the period). BT Retail’s broadband market share has flat-lined at around 34% of the DSL market (or 27% of the overall broadband market, including cable) for the last two years, showing marginal decline over most of this period.
- Interestingly, smaller ISPs may be making something of a comeback, with players outside of the top-six (i.e. with less than a million customers), growing their combined total to 1.20 million connections, from 1.06 million in Q2, and 0.91 million a year earlier. Based on BTwatch’s analysis, these players have rebuilt their combined market share from a low of 4.6% in Q2 FY06-07 to 7.0% or higher in Q3, although this is still a far cry from the 30%-plus of FY04-05 (before Carphone Warehouse and Sky properly arrived and the segment underwent rapid consolidation). The reasons for this revival are unclear, but could include price-sensitivity at the low-end, a flight to quality at the top of the market, and resistance to the long contract lock-ins and other unpopular commercial and technical practices increasingly favoured by major players. Amongst the smaller contenders, various sources include the Post Office (a BT Wholesale customer, given as many as 560,000 customers), Be Unlimited (O2 UK, 341,000), KCOM (Kingston, which has its own access network in Hull, 195,000-plus), Demon Internet (now C&W, 126,000), Entanet (92,000 some time ago), Clara.net (72,000), and Zen Internet (also around 100,000). However, at least one of these numbers could be incorrect, as when added together they may overshoot the underlying wholesale numbers.
- BT Retail is still losing around one percentage point of connection market share, per quarter (down 1.1 point in Q3, to 25.91 million), but BT Group’s total number of connections remains growing thanks to third parties utilising local loop unbundling (LLU), although even this top-line metric is slowing (455,000 new connections in the year to 31 December 2008, compared to 788,000 in the year to 30 September, and 1.4 million a year earlier). Broadband now accounts for 33.8% of all BT Group-provisioned connections, compared with 30.8% a year earlier. BT Retail’s share of non-broadband connections continues to decline rapidly, with the division shedding around five percentage points of segment share per year, and showing no signs of a turnaround.
- BT Wholesale is still losing broadband connections rapidly to LLU (Openreach and non-BT service providers), meaning that the once-hot ‘new wave’ broadband segment is now looking decidedly mature and old-line.
- LLU and Wholesale Line Rental connections maintained steady and strong growth, although the 1.145 million carrier pre-select (CPS) lines reportedly lost in Q2 (down a more typical 0.426 million in Q3) means the just-under-15 million lines partially or wholly in the hands of alternative service providers remains below the Q1 record of 15.349 million. However, the LLU-WLR total of 10.8 million is a record (and represents 27% of all BT-provisioned connections), and is well above Q2’s 10.16 million and the year-ago tally of 8.26 million (20.8%).
BT Group: Q3 FY08–09 KPIs, period to 31 December 2008 |
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| Q3 FY08–09 | (Change, on-qtr/on-yr) | Q2 FY08–09 | Q3 FY07–08 | |
| UK connections’ volume — wireline, cable and satellite | ||||
| - Non-broadband | 30.200m | (-0.8%/-2.2%) | 30.441m | 30.890m |
| - – BT Retail/Openreach | 26.572m | (-0.9%/-3.3%) | 26.815m | 27.476m |
| - – - BT Retail | 21.249m | (-2.2%/-7.4%) | 21.738m | 22.948m |
| - – - – (Carrier pre-select) | 4.164m | (-9.3%/-29.3%) | 4.590m | 5.893m |
| - – - BT Openreach WLR * | 5.323m | (+4.8%/+17.6%) | 5.077m | 4.528m |
| - – Virgin Media (on-net cable) | 3.628m | (+0.1%/+6.3%) | 3.626m | 3.414m |
| - Broadband | 17.203m | (+1.8%/+10.1%) | 16.906m | 15.630m |
| - – BT Wholesale/Openreach | 13.575m | (+2.2%/+11.1%) | 13.280m | 12.216m |
| - – - BT Wholesale | 8.074m | (-1.5%/-4.9%) | 8.196m | 8.487m |
| - – - – BT Retail | 4.658m | (+1.8%/+9.6%) | 4.574m | 4.251m |
| - – - – Other BT Wholesale clients | 3.416m | (-5.7%/-19.4%) | 3.622m | 4.236m |
| - – - BT Openreach LLU ** | 5.501m | (+8.2%/+47.5%) | 5.084m | 3.729m |
| - – Virgin Media (on-net cable) | 3.628m | (+0.1%/+6.3%) | 3.626m | 3.414m |
| - Pay TV *** | 13.235m | (+2.1%/+6.5%) | 12.964m | 12.430m |
| - – BSkyB (satellite) | 9.238m | (+1.9%/+4.6%) | 9.067m | 8.832m |
| - – Virgin Media (on-net cable) | 3.621m | (+1.2%/+4.1%) | 3.577m | 3.478m |
| - – BT Retail (Vision/IPTV) | 0.376m | (+17.5%/+213.3%) | 0.320m | 0.120m |
| - Combined | 61.109m | (+0.6%/+2.6%) | 60.763m | 59.567m |
| - – BT all | 40.523m | (+0.3%/+1.8%) | 40.415m | 39.812m |
| - – - BT Retail | 26.283m | (-1.3%/-3.8%) | 26.632m | 27.319m |
| - – - BT Wholesale external | 3.416m | (-5.7%/-19.4%) | 3.622m | 4.236m |
| - – - BT Openreach | 10.824m | (+6.5%/+31.1%) | 10.161m | 8.257m |
| - – Virgin Media (on-net cable) **** | 11.348m | (+0.6%/+3.9%) | 11.281m | 10.923m |
| - – BSkyB (satellite only) **** | 9.238m | (+1.9%/+4.6%) | 9.067m | 8.832m |
| UK connections’ market share — wireline, cable and satellite | ||||
| - Non-broadband | ||||
| - – BT all | 86.6% | (-0.2 pt/-0.6 pt) | 86.8% | 87.2% |
| - – - BT Retail | 69.3% | (-1.1 pt/-3.6 pt) | 70.4% | 72.8% |
| - – - – (Carrier pre-select) | 13.6% | (-1.3 pt/-5.1 pt) | 14.9% | 18.7% |
| - – - BT Openreach WLR * | 17.4% | (+0.9 pt/+3.0 pt) | 16.4% | 14.4% |
| - – Virgin Media (on-net cable) | 13.4% | (+0.2 pt/+0.6 pt) | 13.2% | 12.8% |
| - Broadband | ||||
| - – BT all | 78.9% | (+0.4 pt/+0.8 pt) | 78.6% | 78.2% |
| - – - BT Wholesale | 46.9% | (-1.5 pt/-7.4 pt) | 48.5% | 54.3% |
| - – - BT Openreach LLU ** | 32.0% | (+1.9 pt/+8.1 pt) | 30.1% | 23.9% |
| - – Virgin Media (on-net cable) | 21.1% | (-0.4 pt/-0.8 pt) | 21.4% | 21.8% |
| - Pay-TV | ||||
| - – BSkyB (satellite) ****** | 69.8% | (-0.1 pt/-1.3 pt) | 69.9% | 71.1% |
| - – Virgin Media (on-net cable) | 27.4% | (-0.2 pt/-0.6 pt) | 27.6% | 28.0% |
| - – BT Retail (Vision/IPTV) | 2.8% | (+0.4 pt/+1.9 pt) | 2.5% | 1.0% |
| - Combined | ||||
| - – BT all | 66.3% | (-0.2 pt/-0.5 pt) | 66.5% | 66.8% |
| - – - BT Retail | 43.0% | (-0.8 pt/-2.9 pt) | 43.8% | 45.9% |
| - – - BT Wholesale external | 5.6% | (-0.4 pt/-1.5 pt) | 6.0% | 7.1% |
| - – - BT Openreach | 17.7% | (+1.0 pt/+3.9 pt) | 16.7% | 13.9% |
| - – Virgin Media (on-net) | 18.6% | (+0.0 pt/+0.2 pt) | 18.6% | 18.3% |
| - – BSkyB (satellite) | 15.1% | (+0.2 pt/+0.3 pt) | 14.9% | 14.8% |
| Broadband retail market | ||||
| - BT Retail | 27.1% | (+0.0 pt/-0.1 pt) | 27.1% | 27.2% |
| - Virgin Media (on-/off-net) | 22.6% | (-0.4 pt/-1.1 pt) | 23.0% | 23.7% |
| - Carphone Warehouse | 15.9% | (-0.7 pt/-0.8 pt) | 16.5% | 16.7% |
| - BSkyB | 11.4% | (+0.8 pt/+3.7 pt) | 10.6% | 7.7% |
| - Tiscali UK ******* | 10.3% | (-0.2 pt/-1.4 pt) | 10.5% | 11.7% |
| - Orange UK | 5.8% | (-0.2 pt/-1.5 pt) | 6.1% | 7.3% |
| - Other ISPs | 7.0% | (+0.7 pt/+1.2 pt) | 6.3% | 5.8% |
| BT Retail active customers | ||||
| - Average revenue per household | £285 | (+0.7%/+4.4%) | £283 | £273 |
| - Number of customers | 11.723m | (-1.4%/-6.6%) | 11.890m | 12.557m |
| - Annualised value (x ARCH) | £3,341m | (-0.7%/-2.5%) | £3,365m | £3,428m |
| - % with a package contract | 70% | (+0.0 pt/+1.0 pt) | 70% | 69% |
| BT Retail lines and connections (million) | ||||
| Total | 25.907m | (-1.5%/-4.8%) | 26.312m | 27.199m |
| - Broadband | 4.658m | (+1.8%/+9.6%) | 4.574m | 4.251m |
| - Business | 6.295m | (-2.4%/-8.7%) | 6.449m | 6.898m |
| - – Analogue lines | 3.886m | (-1.5%/-6.0%) | 3.945m | 4.136m |
| - – ISDN channels | 2.409m | (-3.8%/-12.8%) | 2.504m | 2.762m |
| - Residential | 14.954m | (-2.2%/-6.8%) | 15.289m | 16.050m |
| - – Analogue lines | 14.953m | (-2.2%/-6.8%) | 15.288m | 16.049m |
| - – ISDN channels | 0.001m | (+0.0%/+0.0%) | 0.001m | 0.001m |
| BT Retail Unlimited plans | ||||
| - Total plans | 13.762m | (-1.4%/-6.0%) | 13.960m | 14.640m |
| - – Weekend | 7.108m | (-10.0%/-32.8%) | 7.900m | 10.572m |
| - – Evening and Weekend | 4.720m | (+9.6%/+84.4%) | 4.308m | 2.559m |
| - – Anytime | 1.453m | (+6.1%/+44.4%) | 1.369m | 1.006m |
| - – BT Together Local | 0.345m | (-9.4%/-31.4%) | 0.381m | 0.503m |
| - – BT Basic | 0.136m | (+6700.0%/–) | 0.002m | 0.000m |
| BT Mobile customers | ||||
| - Total | 0.412m | (+2.7%/+24.1%) | 0.401m | 0.332m |
| - – Business | 0.297m | (+3.1%/+20.7%) | 0.288m | 0.246m |
| - – Consumer | 0.114m | (+0.0%/+32.6%) | 0.114m | 0.086m |
| Call volumes (minutes) | ||||
| Total BT Retail call volumes | 13,950m | (-2.3%/-14.2%) | 14,280m | 16,250m |
| - Total geographic | 10,450m | (-0.2%/-10.2%) | 10,470m | 11,640m |
| - – Local | 6,370m | (+0.6%/-11.0%) | 6,330m | 7,160m |
| - – National | 3,630m | (-1.4%/-9.7%) | 3,680m | 4,020m |
| - – International | 450m | (-2.2%/-4.3%) | 460m | 470m |
| - Total non-geographic | 3,500m | (-8.9%/-24.1%) | 3,840m | 4,610m |
| - – Internet-related and other | 2,050m | (-9.7%/-28.8%) | 2,270m | 2,880m |
| - – Fixed-to-mobile | 1,450m | (-5.8%/-15.7%) | 1,540m | 1,720m |
| Total Group call volumes | ||||
| - Freephone/FRIACO | 1,660m | (-9.3%/-39.6%) | 1,830m | 2,750m |
| - Originating calls **** | 15,610m | (-3.1%/-17.8%) | 16,110m | 19,000m |
| Notes: | * Wholesale Line Rental. | |||
| ** Local loop unbundling — this could shared loop (broadband and voice), with voice not counted elsewhere. | ||||
| *** Excludes Top Up TV, Tiscali TV, and other pay-TV platforms. | ||||
| **** Excludes BSkyB’s broadband and voice customer base. Also excludes Virgin Media’s off-net customers. | ||||
| ***** Excluding Payphones and Directories. | ||||
| ****** BSkyB’s total customer base; assumes all are pay-TV customers. | ||||
| ******* 30 September 2008. | ||||
| Sources: | BT Group; other companies; BTwatch. | |||
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[Further reference: BTwatch, issue 2009.02 -- Market Mettle Ltd, March 20089; Third quarter and nine months ended December 31, 2008 -- BT plc, 12 February 2009; Top 10 ISPs By Subscriber Size -- ISPreview, March 2009.]
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