BTwatch Report #223 July-August 2011 Executive Brief
31 August 2011
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- BT Group announced financial results for the first quarter of FY11-12, showing a slow start to achieving its goals for the year of halting underlying revenue decline, and bettering last year’s cash generation. Improving profit proved a bright point as the apparently endless capacity for cost cutting continued to contribute. [pp.4-10.]
- BT Global Services appears to be taking on more of the load in meeting Group targets, and the division has notably altered its strategy to encourage a rapid revenue return for new business. BT was adamant that lessons have been learned from previous experiences of more expansive strategy, and that profitable growth is paramount. [pp.29-31.]
- BT Group announced a new chief executive for its BT Wholesale business, with Nigel Stagg to replace Sally Davis from September 2011 as the former head leaves BT for personal reasons. Davis bows out on something of a low, as the division admits to struggles in meeting profitability expectations for managed services contracts, and its transformation stalls. Stagg is an interesting choice as replacement — having risen through the ranks of BT Retail units to lead BT Business — and it may be a challenge to adjust to the substantially larger-scale contracts and longer-term projects he’ll be faced with at Wholesale. [pp.43-46.]
- BT Retail continues to trumpet its broadband successes, although improvements to the bottom line are slower to come through. Retail’s Infinity fibre product is beginning to gather momentum, accounting for half of net adds in the past quarter and reportedly lifting overall profitability. Considered against its main triple-play rivals in voice and pay TV services, Retail’s performance makes a less positive story. However, the prospect of using technology behind YouView, and anticipated regulatory restrictions on BSkyB, to take a tilt at the substantial ARPUs of the main pay-TV players is enticing. [pp.15-19, 24.]
- Openreach indicated that fibre-to-the-premises could become more prevalent in the mix of its fibre rollout plans. Experience of next-generation rollout projects in Cornwall has suggested that a blend of FTTP and FTTC on a street-by-street level within an exchange can be effectively and efficiently managed. [p.53.]
- BT Group announced it is shutting down developer platforms and toolkits for its Ribbit internet voice subsidiary. However, development of the platform is to continue in-house, with support maintained for commercialised offerings. While the telco’s closing of a promising start-up, without apparent benefit from its innovation, may appear gloomily familiar, a recent re-focus on commercialising the capabilities BT can nurture in-house may mean that taking the Ribbit platform closer to its customer-facing businesses could be the making of it. [p.11.]
- BT Infinity was singled out in recent Ofcom broadband speed tests for its upstream capabilities. BT and Virgin Media efforts to roll out next-generation access have, according to the regulator, resulted in more than half of the UK population now living in areas capable of receiving higher speed services. Most of the coverage will be on the cableco’s network, but BT is playing its part through public-private partnerships, such as the initiative in Northern Ireland, which has resulted in widespread fibre coverage for the region. However, another regulatory study suggested that Northern Ireland is also an area where customers currently experience some of the lowest access speeds in the country, suggesting there is still something of a disconnect between availability and experience. [pp.19-21, 27-28.]
- The English High Court ruled that BT must take steps to block a website providing access to pirated digital content, following legal action brought by the Motion Picture Association using intellectual property laws. While BT technically lost the case, the telco demonstrated the need to obtain court orders for individual websites, highlighting the impracticality of current laws for addressing illegal content distribution. Newzbin2, the website affected by the ruling, threatened to disrupt BT’s already controversial internet access filters, to prevent the telco from complying with the order. [pp.21-23.]
- BT Retail is close to offering customers a cloud gaming service, as US-based OnLive prepares the launch of its hosted and streamed gaming service in the UK market towards the end of September 2011. BT is a shareholder in OnLive and launch partner for the offering. [p.26.]
- BT Global Services won a £133m contract with the Brazilian Post Office, providing tangible evidence of success in building international business. While BT has focused publicly on plans for building Asia-Pacific revenue, past acquisitions and investment in the comparatively healthy growth economies of Latin America may be proving more effective. [p.32.]
- BT won an £8m contract with Sunderland City Council, but continues to see its work on the NHS Programme for IT taken to task by the UK Parliament‘s Public Accounts Committee. BT still expects to be able to commoditise the services it has developed through its work on NHS contracts. [pp.33-35.]
- BT Radianz managed security solutions were launched in the Canadian market, as BT continues to exploit its strong position in the financial services sector to demonstrate its capabilities in providing emerging new services to demanding customers. The financial services unit also signed a partnership with TeleWare, to use the vendor’s solutions to offer Financial Services Authority-compliant call recording products. New managed authentication and anti-fraud solutions were also added to BT Global Services’ portfolio. Soft-ex announced it has expanded its partnership with BT, for the provision of hosted IP telephony offerings. [pp.37-39, 41.]
- BT is reportedly putting out to tender a number of contracts it currently has with Tech Mahindra, a business process outsourcing company in which it holds a stake. BT is also the Indian company’s largest customer. [p.42.]
- BT Wholesale is to extend its rollout of ADSL2+ services to cover 90% of UK premises by the spring of 2013. The goal marks an increase from previously outlined intentions to build an ADSL2+ network covering 80% of the country. There are, however, some indications that the timescale of the project may have lengthened. The move comes as the regulator Ofcom begins to implement stricter regulation on legacy copper broadband products in rural areas, with the objective of encouraging BT to focus on ADSL2+ as an alternative. [pp.48-50.]
- While Openreach said it is working with partners on the early stages of duct- and pole-sharing trials, Ofcom indicated it currently has no intention of requiring cableco Virgin Media to open physical access to its networks. The regulator claims there is no evidence to suggest that commercial negotiations to reach such an agreement would fail. While it could be an own goal for BT Retail to enter talks with its rival, BTwatch wonders if a cheeky request from its PlusNet subsidiary might cause a stir. [pp.50-51.]
- BT acknowledged that it is unlikely to secure all of the major tranches of state funding to be provided for the roll out of fibre services in rural areas, but warned of the perils of authorities selecting less experienced network providers. [pp.52-53.]
About BTwatch
Report: #223
Covering: July-August 2011
Published: August 2011
Next report: September 2011
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