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BTwatch Report #217 Executive Brief October/November 2010

26 November 2010

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Executive Brief from BTwatch, report #217. Click through for: an Extract from this month’s report; the Report Snapshot; or to contact us for more information about the full 46-page report, this industry standard monthly report service, and ongoing subscription access.

  1. BT Group raised its fiscal year guidance, after an upbeat release of first half results. The telco is ahead of schedule on plans to raise cash flow and improve EBITDA, prompting the improved outlook. However, while the balance sheet looks in better repair, there are still signs that more needs to be done operationally. Positively, BT Global Services is filling its order book again, and continuing to do more with less, and Openreach is falling into line by improving its financial performance, but BT Wholesale appears to have hit a lull, and BT Retail’s Sky Sports based pushed for the triple play looks to have flopped badly. Promisingly, fibre is showing momentum, and rising capital expenditure hints at growing confidence across the Group. [pp.4-7.]
  2. BT is continuing its development of cloud services, and has indicated its Cloud Service Broker Catalyst programme, run in conjunction with industry group TM Forum, is reaching a second stage. Having addressed operational governance issues surrounding cloud services, BT said it is looking at ways to enable virtual service operators to take control of managing product development and related pricing to encourage the evolution of new cloud services portfolios and accompanying revenue opportunities. The telco identified a risk that network operators will not work sufficiently closely with cloud application developers, increasing the possibility of developing services are not “network friendly”, which could stymie rollout as service demand grows. BT also warned of the danger of information overload, and a temptation to stick a “cloud” label on any and all products with cloud services elements, risking confusion. Whether BT itself is prone to occasional “cloud washing” is open to debate, but, with minimal cloud hoopla, the telco announced the launch of a new telepresence video conferencing as a service offering and virtual PBX IP voice services in Europe. BT is also collaborating with Cisco to showcase the companies’ cloud based unified communications offerings. [pp.5-7,29,33,35.]
  3. BT Group received a favourable ruling in a court case intended to clarify the status of the Crown Guarantee , which covers part of the telco’s pension liabilities should the company ever become insolvent. The courts ruled that the guarantee covers nearly all staff employed, both before and after BT’s privatisation, and while its benefit is principally hypothetical, the decision boosted BT’s position in ongoing wrangling about its pension deficit recovery plan, and may reduce its liabilities under the Pension Protection Fund. [pp.14-15.]
  4. BT signed a memorandum of understanding with the UK government, and said its major government contracts will not be significantly cut back, despite recent austerity measures and fears of substantial scaling down of projects that were prompted by earlier difficulties seen by Cable & Wireless. BT reiterated previous claims that its recent experiences in finding efficiencies at its Global Services business could benefit major public sector customers, and that the government agreement would not affect its fiscal guidance. Public sector partnership work continues to flow for BT Global Services, with a new strategic partnership signed with Lancashire County Council, expected to be worth £400m to BT over ten years. BT also announced a Virtual Data Centre agreement with Norfolk County Council, although it is unclear to what extent the work is additional to previously announced contracts with the public sector body. [pp.28-30.]
  5. Openreach said it is to launch fibre to the premises services in spring 2011, with download speeds of up to 110Mbps — a 10% increase on existing maximums. While the availability of the service will initially be limited to pilot sites, the announcement supports earlier intimations from BT that developments to its growing fibre network would see headline speeds continue to rise. The telco also expressed surprise at what it views as the high retail price of 100Mbps broadband services from cableco Virgin Media, as Openreach provided guidance to its customers on the likely cost of its new service. [p.37.]
  6. Speculation continues to build that BT will dispose of some or all of its stake in Tech Mahindra, with several private equity firms showing an interest. BT is said to be looking for a 30% premium on market prices for its stake in the Indian firm, which is now making progress with its integration of Mahindra Satyam, after the troubled latter outsourcing business revised and re submitted accounts in the light of ongoing fraud investigations. BT’s stake in Tech Mahindra could be worth £500m to the Group. [p.4.]
  7. Ofcom finalised requirements for BT’s regulated wholesale fibre services, cementing the introduction of previously announced, and BT supported, new products to deliver virtual unbundled line access. The telco is also to be required to open its physical infrastructure to operators, although there is still little indication of much demand for such access. [p.10.]
  8. There was disgruntlement as Ofcom proposed extending an exemption for Openreach from undertakings to provide Wavestream DWDM products on an equivalence of inputs basis. Disputes between BT and mobile operators on termination rates continue to rumble on, with the mobile companies unhappy with Ofcom rulings on how BT calculates its charges. [pp.11-13,16.]
  9. BT Retail experienced the latest in a series of embarrassing data leaks, with customer email information accidentally circulated during a promotional drive for its fibre offering, following on from controversy regarding the sending of unencrypted data on customers to lawyers pursuing alleged illegal file sharers. The hubbub surrounding BT Retail’s trials of Phorm’s targeted advertising solutions refuses to die, with the European Union taking action to enforce European law in the UK following complaints about the outcome of investigations into the BT trials. The telco is still working to build its image as a defender of customer freedoms and privacy, however, and is not bowing to pressure to divulge customer records in piracy cases, such as that brought by record label Ministry of Sound. [pp. 20,9,8.]
  10. Ofcom said it will not, at this stage, investigate the nascent YouView IPTV platform, which is backed by a consortium including BT Group. While rivals have expressed concern at the effect on the emerging IPTV market of the heavily backed Project Canvas service, the regulator considers that any investigation into potential restriction on consumer choice created by the platform should wait until the benefits and disadvantages of leaving the service unregulated are clearer. BT Retail is said to be open to the prospect of new iterations of its BT Vision pay TV service using software applications, rather than a physical set top box, to deliver content, as the company continues to maintain that the service will develop despite BT’s commitment to YouView. [p.19.]
  11. BT Openzone is partnering with Transport for London on trials of Wi Fi on the concourses and platforms of Charing Cross station. Using existing installed equipment, access will be available to BT Retail customers with Wi Fi minutes in their broadband packages, and mobile data customers of O2, Orange, and Vodafone. London is looking to have mobile access available through its underground network in time for the 2012 Olympics, but, as mobile operators continue to hit obstacles in developing a satisfactory operating model, an opportunity is appearing for BT to provide the mobile broadband access that could become a satisfactory compromise solution. [p.22.]
  12. BT Openzone signed a location based advertising deal with JiWire for its Wi Fi services. The telco launched a mobile application for Android powered mobile devices, incorporating data from the BT Retail Phone Book and location based features. [pp.22,20.]
  13. BT Business has launched new basic broadband packages for the SME market, with add on services, and converged voice and internet deals also available. [p.22.]
  14. BT Business won a contract to provide technology for flood warning systems, from the Scottish Environment Protection Agency. BT Global Services highlighted a deal to build an international data network covering nearly 1,000 locations across 38 countries for HeidelbergCement AG, and is also to deliver a managed hosted IT infrastructure for construction company Mapei. [pp.23,27.]
  15. The SmartReach consortium, featuring BT, Arqiva, and Detica, officially launched its bid for the contract to provide smart metering services for the UK’s utilities, claiming its capabilities would offer best scope for the scheme’s expansion. [p.32.]
  16. BT Wholesale’s Media & Broadcast unit announced it is to provide Sky News HD access on the Measat satellite platform, working in conjunction with partner RRSat. [p.36.]

About BTwatch

Report: #217
Covering: October/November 2010
Published: November 2010
Next report: December 2010

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Written by AB · Filed Under BTwatch (BT Group) 

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