Marc Allera

Marc Allera hosted BT Group’s Consumer Business Briefing Strategy presentation in May 2018, marking the first of a series of anticipated divisional strategy days from the Group, and consecrating his official arrival as the head of the integrated consumer fixed and mobile businesses within BT.

  • Allera raising division’s aim, looking to chase value over volume.
  • Current convergence capabilities stretching to keep up with this new elevated vision; customer experience intended to bridge the gap.
  • Strong retail presence and local customer support fundamental to improving that experience.
  • Four-year core network and systems overhaul will be crucial in enabling Allera to make good on aspirations and commitments.
  • BT brand plans look for incremental improvements, while EE promising more potentially disruptive approach in future months.
  • Partnerships will be sought across the division for content distribution, services in the home, and providing desirable devices.
  • Pay-TV hopes rest on unproven merits of providing an access point for other providers’ valuable content.
  • Amazon Prime and Netflix now integrated into BT TV – could access to BT Sport travel the other way?

Allera was quick to note the strength of this mighty new division, contributing approaching 40% of all Group revenue, and more than one-third of Group EBITDA, and operating three major brands making their presence felt across the UK sector.

But while painting a picture of the health of the expanded division, Allera and associates were also keen to stress that there are still worlds for Consumer to conquer. Approaching half the UK’s households do not have any relationship with Consumer’s two principal brands, BT and EE, and in all sectors, fixed, mobile, and particularly television, there is headroom for growth.

This growth is, according to Consumer, to be delivered by differentiating through convergence.

Allera’s approach more aspirational than attritional

While the overall thrust of BT/EE strategy does not appear to have materially changed with the new management – convergence and the power of an integrated network were fundamental justifications for the initial EE acquisition, and the terms have been at the forefront of Consumer thinking for a decade or more – the new CEO does appear to be attempting to change the BT philosophy and positioning.

The division is upping the emphasis on the well-trodden ‘More for More’ catchphrase that is popular within the sector, but which has to date been undermined by a tactical discounting approach to win or retain fixed-line customers. Allera appears more idealistic than his predecessor, John Petter, with a zeal for aspirational marketing ideas, and shinier premium brands such as Apple. Petter, on the other hand, had seemed happiest when beating TalkTalk on net broadband adds, or scoring points over Sky on the technical capabilities of rival home routers.

The switch from Petter to Allera appears to be an understandable progression for the Group, which has been shifting emphasis towards value over volume. Allera made a virtue of price increases in the past year, which have ensured that BT and EE products are not the cheapest in any category. Converged bundling will not be driven by discounting either, and Consumer was adamant that valuable services such as BT Sport will not be going cheap when bolted on to packages. For example, customers for the new premium-priced BT Plus broadband and mobile offering will pay the same monthly fee for sports channels that a customer on a low-end voice and broadband product pays.

With this apparent ‘when they go low, we go high’ approach to boosting the perceived value of BT and EE services, the actual products and services will need to back up the price tag. Two areas where Consumer will need to see significant progress to support its ambitions are in its partnering strategy and, perhaps most significantly, in the capabilities of a converged future network.

Barrage of announcements kicks off strategy event

Perhaps reflective of Allera’s interest in building a public profile through both traditional and social media, a press event on the new Consumer strategy was held a day ahead of the analyst event. Across BT and EE, 24 new developments were highlighted.

Setting off all the fireworks at once gives an impression of much activity, but can be difficult to see through. As the flurry of news settled, it can be seen that, while BT has big plans, change is expected to build steadily over the next few quarters.

Changes to the BT portfolio kicked off the transformation, with EE products coming through in the summer, then, over the next few quarters, additional products and services will fill out the existing portfolios.

Consumer: all new and improved?

Across the course of the presentation, a range of indicators of Consumer’s new direction, as well as signs that existing plans are being stuck with, emerged.

BTwatch particularly noted:

  • BT building from the home out, EE from the mobile and up. The existing focus of the BT brands is remaining: home-centric convergence for BT, and mobile-focused convergence plans at EE.
  • The network’s the thing. The planned BT/EE strategy remains focused on the evolution of the underlying BT network infrastructure, putting the weight of responsibility on the shoulders of BT Technology, Services and Operations (see separate report).
  • Fixed voice is not dead. While the revenue generated by traditional fixed-line voice continues its steady, seemingly inexorable, decline, the Consumer division suggested that, even if it cannot be revived, it could be transformed. The introduction of Future Voice and the planned single core IMS could provide a more fluid type of home phone service, accessed through a wider range of devices than the current traditional handset, such as a tablet or smart speaker. This kind of evolution was also tied to one of the potential step changes on the path ahead of BT: a single bill for a single service.
  • One bill to rule them all. Allera repeatedly referenced a possible (perhaps probable?) future, where BT moves from a converged bundled offering to a single unified service. A converged infrastructure is expected to enable BT to remove distinctions between fixed and mobile, voice and data, and reach a point where a ubiquitous service, that is neutral in terms of the purpose, place, or means of network access, can be marketed.
  • BT wants to make the most of Wi-Fi. The BT Wi-Fi network was regularly referred to during the Consumer strategy event (and indeed the latest results call) as a core network asset that is currently under-used. There is a ‘back to the future’ feel to this commitment – prior to BT’s acquisition of EE, the fixed-line management had talked up an ‘inside-out’ mobile vision that would have exploited BT’s Wi-Fi estate to offer enhanced mobile coverage (BTwatch, #274, #270, #255, passim). While talking up the approximate six million hotspots in the BT estate, the division did not mention that the majority of these accesses are based on BT consumer customers offering shared access to services over home routers. BTwatch also notes that, in his final appearance as Consumer CEO, John Petter pointed out that Wi-Fi had been a neglected tool in the pursuit of convergence (BTwatch, #289).
  • Allera splits sport and television. Confirming earlier indications of his attitude towards the value of BT’s sports rights portfolio, Allera explicitly stated that the division’s sports broadcasting unit and its pay-TV platform business should be considered as two discrete subjects. While pay-TV platforms are intended to support the differentiation in bundled offers, Allera’s goal for BT Sport is to monetise the assets as widely and effectively as possible (see separate report).
  • Physical retail is making a comeback. Allera has previously unveiled plans to ensure that there would be nowhere to hide from an EE store anywhere in the UK with a retail strategy that committed to ensure that 95% of the population is within a 20-minute drive of an EE retail outlet (BTwatch, #288). These stores are now to adapt to include a BT presence. While the economic cost of a high street presence to sell fixed-line services has been considered unfeasible in recent years, making use of existing EE assets makes the proposal possible. As more genuinely bundled products are developed, and home services become a more physically demonstrable element of the BT/EE portfolio, the showcase potential of retail stores is expected to become more significant.

Image: EE

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Contents

EXECUTIVE BRIEF

GROUP

People

Patterson bites the bullet [p6]

  • Du Plessis rips off the plaster
  • History may be kind to the BT’s fallen action hero
  • CEO search – keep an eye on the arrivals board from Bonn?
  • New face, familiar problems
  • A match made in Heaven?

Management update

BT unleashes pension, results and strategy triple bill [p8]

  • Analysts: disappointment and scepticism remained

du Plessis puts case for defence, with Patterson in the dock [p9]

  • A tough taskmaster getting BT in lean and agile shape
  • Lowth and Patterson present business as usual
  • New Chairman, new dynamic
  • Analysts: disappointment and scepticism remained, cont…
  • du Plessis’s money where his mouth is
  • Management remuneration could also embrace a longer term outlook

Strategy

Differentiation, integration, transformation [p12]

  • More management accountability and increased productivity
  • Procurement: why buy when you can strategically source?

BT’s 5G and fibre diet [p13]

  • 5G switched on by 2019
  • Sherman and Watson could be a critical double act for 5G
  • Fixed-line networks also heading for next generation
  • Capex up on network plans

Convergence: start with Consumer, Enterprise to follow [p14]

Global Services accelerating, backed by digital kick-off [p15]

  • Patterson praises Security blanket

Regulatory: bruised egos massaged, truce called [p15]

Pressure points: the hopes and fears on management minds [p16]

  • Table 1 Expectations and risks for BT’s top management
  • BT promotes its sustainability credentials
  • Tech Mahindra brings new R&D to Adastral Park; supports UK-India Tech Partnership
  • BT works with Netcracker on slicing benefits

FY17-18

Digging in ahead of the rebuild [p20]

  • Table 2 BT Group, financial highlights, FY17-18
  • Table 3 BT Group, performance by unit, FY17-18 (adjusted) *
  • Divisions: enterprise challenges underline need for transformation
  • Table 4 BT Group guidance, FY18-19 and beyond

FY18-19 guidance: a long slog ahead [p22]

  • Cash river drying up

Pension

Deficit chokes cash flow as BT calls for oxygen [p23]

  • Table 5 Revised pension contributions 2018-30
  • Lowth bites the bullet, but no short-term solution to the pension problem
  • Trustees keep a say on any ambitious BT activity

Deal speculation bubbles up post-results gloom [p25]

  • Potential for mast sale floated

5G

BT pushes 5G, but in no hurry beyond better broadband [p26]

  • Sutton presents a one step at a time approach to 5G
  • Table 6 BT’s potential path to 5G
  • Options, options…
  • No hurry beyond better mobile broadband
  • Hanif returns with more urgent message
  • Don’t forget Wi-Fi…
  • Table 7 People movement highlights

CONSUMER

  • Allera’s six pillars
  • The A-Team

Strategy update

New Consumer chief, new strategy, familiar buzzwords [p34]

  • Brand identity
  • Network evolution 2018-22
  • When the smoke clears after the fireworks…
  • Table 8 Key new BT and EE launch dates, 2018-19
  • Allera’s approach more aspirational than attritional
  • Potential for BT/EE expansion significant, but unchanged two years in
  • Table 9 Rearranging deckchairs: change in BT/EE place in market 2016 to 2018
  • Barrage of announcements kicks off strategy event

Consumer: all new and improved? [p37]

  • BT TV experiments with YouTube promo

BT family appeal keeping it out of old people’s home [p39]

  • BT in its Prime?

EE promises dynamism with hybrid engine [p40]

  • Hybrid router coming at convergence from 4G side
  • …hybrid prepay tariff to deliver EE new channels

Pay-TV super aggregator to the rescue [p41]

  • BT talking its TV offering down to build it up
  • What’s so super about aggregation?

BT Sport: Modern sport all about the money [p42]

Watson, the game is afoot! [p42]

BT Sport

BT TV enters pay-per-view ring, renews BoxNation deal [p43]

  • EE pipes up on Scottish 4G reach

BT Sport extends production contract with Sunset+Vine [p44]

Premier League finally completes rights auction [p45]

  • Amazon joins the game
  • Report casts doubt on LTE for ESN

ESN

Motorola predicts five more years of Airwave [p47]

Partners

Ericsson joins EE on CX frontline [p48]

  • EE systems exposed by security hacker
  • A mobile deal in a converging world?
  • Ericsson making presence felt in IT

Products and services

BT Plus launch ramps ultrafast drive [p50]

  • Bells and whistles
  • Plus size model wearing emperor’s new clothes?
  • BT Plus a full-fibre spoiler?
  • BT losing its voice?

ENTERPRISE

Products and services

BT launches 4G back-up broadband solution [p53]

Partners

BT turns to Cisco Meraki in the UK [p54]

Public sector contracts

Controversy clings to legacy BT council contracts [p55]

GLOBAL SERVICES

  • Radianz Cloud adds more partners

BT Security

BT trumpets more security collaboration [p57]

Partners

Cisco and BT take another step with SD-WAN [p58]

Riverbed recognises BT DNS relationship [p58]

BT Global Services Sales Kick-Off

  • Table 10 Partners prominent at the Global Services Sales Kick-Off 2018.

Suppliers

Corvil secures Global Services contact contract [p59]

OPENREACH

Fibre First

Openreach to roll out 12,000 FTTP connections in London [p61]

  • City held up as shining example
  • Kent Council to extend Phase 2 BDUK project with BT

Edinburgh to see fibre battles as Openreach gears up [p62]

Network

Analogue switch-off inputs sought by Openreach [p63]

  • Openreach to open fibre training school in Scotland
  • Openreach gets naked
  • All-IP at the core of BT’s hopes
  • Watson five years into a long-term plan
  • CityFibre acquired by Goldman Sachs-backed consortium for £538m
  • TV a success for BT – as a network transformation driver
  • Threads pull through, from 2013 to 2016 to 2018
  • IT running alongside infrastructure

Openreach distances itself from LR-VDSL [p66]

External customers

TalkTalk flags new G.fast trials [p66]

  • It’s official: G.fast offered in consumer pilot

FURTHER READING

INDEX

Index

Symbols

21st Century Fox

– Sky

– – NOW TV 35

– – Sky Box Office 43

– – Sky Sports 35, 41

A

Activ Financial 57

Akamai 59

Alcatel-Lucent 64

AllianceBernstein LP

– Sanford C. Bernstein 10

Alphabet

– Google

– – Android 53

– – Chromecast 39

– – YouTube 39, 42

– Sidewalk Labs

– – Intersection 53

Amazon 34, 35, 39, 40, 41, 42, 45, 49

– Amazon Prime 34, 35, 45

– Amazon Web Services 49

AMC 39

Amdocs 17

Apple 35, 39, 40

Arbor Networks 59

Arqiva 25, 30

Aspect Software 59

Astute Solutions 59

AT&T 17, 20, 38

Aviva 44

B

BAE 30

BAE Systems 30

Berenberg 25

BoxNation 43

Broadband Delivery UK (BDUK) 62

BT Group 7, 8, 9, 11, 13, 16, 20, 21, 22, 23, 25, 26, 28, 30, 31, 34, 39, 44, 54, 55, 57

– BT Consumer 6, 16, 26, 30, 31, 36, 38, 39, 63, 67

– – BT Broadband 41

– – BT Cloud 58

– – BT Infinity 53, 55

– – BT Mobile 50, 51

– – BT TV 30, 34, 35, 39, 41, 43, 45, 65

– – BT Wi-Fi 37, 54

– – Plusnet 34, 36

– BT Enterprise

– – BT Business & Public Sector 21, 54

– – BT Wholesale & Ventures 31

– – InLinkUK 53

– – Liverpool Direct Limited 55

– – Tikit 31

– – TV Connect 31

– BT Global Services 6, 7, 12, 15, 16, 20, 21, 30, 38, 54, 56, 57, 58, 59, 63

– – BT Americas 58

– – BT Connect 58, 59

– – BT Ignite 30

– – BT Italia 9

– – BT Security 15, 54, 57

– – One Connect Limited 55

– BT Pension Fund 23

– BT Technology, Service and Operations 13, 16, 18, 26, 34

– – 21CN 31

– – Adastral Park 18, 29

– – Infinity Lab 55

– – Innovation Martlesham 18

– BT Tower 29, 55

– Directors

– – Ball, Tony 11, 30

– – du Plessis, Jan 6, 8

– – Hoettges, Timotheus 38

– – Rake, Sir Michael 7, 10

– – Richardson, Karen 30

Rose, Nick 11, 30

– EE 6, 9, 17, 21, 25, 31, 34, 35, 36, 37, 38, 39, 40, 41, 42, 44, 47, 48, 49, 50

– – Emergency Services Network 14, 25, 38, 44, 47

– – MBNL 25

– Ex-Directors

– – Bland, Sir Christopher 7

– Executives

– – Allera, Marc 7, 14, 26, 34, 41, 51

– – Brown, Kevin 57

– – Burger, Bas 7, 57

– – Chanmugam, Tony 9

Ginér, Gabrielle 17

– – Harris, Stephen 34

– – Haworth, Andy 34

– – Hindhaugh, Jamie 31

– – Logan, Mark 63

– – Lowth, Simon 6, 8, 9, 14

– – Mears, Kim 62

– – Oliver, Pete 34

– – Patterson, Gavin 6, 8

– – Sabey, Jim 58

– – Selley, Clive 7, 62

– – Sherman, Michael 13

– – Stagg, Matt 31

– – Taylor, Max 34

– – Watson, Howard 13, 18, 42, 64

– Ex-executives

– – Alvarez, Luis 59

– – Bonfield, Sir Peter 7

– – Bronsgeest, Rogier 30

– – Bushell, Delia 30

– – Chanmugam, Tony 9

– – Hanif, Mansoor 29

– – Livingston, Ian 7

– – Petter, John 35, 37

– – Reynolds, Paul 31

– – Verwaayen, Ben 7

– Openreach 6, 7, 9, 13, 14, 16, 21, 22, 24, 25, 30, 38, 42, 51, 61, 62, 63, 64, 65, 66, 67

C

Check Point Software 59

ChildLine 53

Cisco

– Meraki 54, 70

Cisco Systems, Inc. 15, 54, 58, 59, 70

CityFibre 62, 65, 66

CK Hutchison

– Three Group

– – Three UK 25

Cobalt 57

Colt Technology Services 30

Commonwealth Games 30, 31

Computer Sciences Corp 31

Corvil 59

CrowdStrike 59

D

Daisy Group 53

DCMS, UK

– Broadband Delivery UK (BDUK) 62

Deutsche Telekom 7, 17, 24, 25, 38, 48

– T-Mobile 48

Diageo 30

Digital Britain 62

E

eGain 59

Entanet 65

Ericsson 13, 17, 48, 49

European Union 25, 57

F

Facebook 67

Football Association 44

– Football League 44

– Premier League 44, 45, 69

ForeScout 59

Fortinet 59

Fujitsu 17

G

Genesis Technical Systems 67

Genesys 59

Getronics NV 30, 31

Goldman Sachs 65

Google 39, 40, 53

H

Home Office (UK) 47

Honeywell 40

Huawei Technologies 13, 17, 31, 67

I

IMImobile 59

InfoVista 59

IR Prognosis 59

ITV 43

K

KDDI Group 20

Kent County Council 62

KCOM 21, 65

Kollective 59

Korea Telecom 31

L

Lancashire County Council 55

Liberty Global 17

– Virgin Media 21

– – Virgin Mobile 21

LinkedIn 31

Liverpool City Council 55

LogRhythm 59

London Stock Exchange 31

M

M&G Prudential 31, 66

– InfraCapital 31, 66

Microsoft 59

Mobile Broadband Network Ltd (MBNL) 25

Motorola 47

Motorola Solutions

– Airwave 47

N

National Audit Office 47

NEC 20

– Netcracker 20

NetApp, Inc. (Network Appliance) 59

Netflix 34, 39, 41, 42

Nokia 17, 58, 64

– Nuage Networks 58, 59

NTT 20

O

Ofcom 9, 15, 22, 31, 45, 66

– USO 66

Orange 20, 31, 58

Orange Business Services 58

P

Palo Alto 59

Phorm, Inc. (121Media) 31

Polycom 59

Post Office 45

Primesight 53

R

Riverbed Technology 58, 59

S

Samaritans 53

Samsung 17, 39

Scottish Football Association

– Scottish Premier League 44

Skybox Security 59

Sunset + Vine 44

Symantec 54, 59

T

TalkTalk Telecom Group 31, 35, 51, 53, 66, 67

Tech City 55

TechHub 55

Tech Mahindra 18, 20

Telecom Infra Project 67

Telecom Italia SpA 20

Telecom New Zealand 31

Telefónica 31

Telenor 17, 20

Telstra 17, 31, 58

The Number 45

TM Forum 20

Transport for London 31

Twitter 49

U

UBS 10

UEFA 44

– Champions League 44

– Europa League 44

Ultimate Fighting Championship 43

United Nations 17

V

Vela 57

Verizon Communications 17, 31

Vodafone 47, 62, 65

– UK 47, 62, 65

W

Walt Disney Company, The

– ESPN 44

Wandera 59

Westcon 59

WPP

– MEC 28

Y

YouView 25, 31, 39, 41

– Meek, Kip 31

Z

ZTE 17

About

About BTwatch

Report: #296
Published: May 2018
Next report: June 2018
For more information visit: BTwatch