BTwatch, issue 2008.07-08 snapshot
20 September 2008
GROUP: BT looks set to sell its 31%-shareholding in Indian business process outsourcing company Tech Mahindra (formerly known as Mahindra-BT). Meanwhile, Tech Mahindra itself paid around £1m for a 17.3%-stake in Servista, a UK-based systems integrator. The acquisition of German ICT specialist Stemmer was completed by BT. [pp.2-3.]
Issue: 2008.07-08
Covering: Mid-August to mid-September 2008
Published: September 2008
Next issue: October 2008
Mapping the maze of the UK’s largest telco. A unique monthly report for the industry.
SUMMARY
GROUP: BT looks set to sell its 31%-shareholding in Indian business process outsourcing company Tech Mahindra (formerly known as Mahindra-BT). Meanwhile, Tech Mahindra itself paid around £1m for a 17.3%-stake in Servista, a UK-based systems integrator. The acquisition of German ICT specialist Stemmer was completed by BT. [pp.2-3.]
STRATEGY & OPERATIONS: Openreach Chief Executive Steve Robertson discussed how BT would proceed with its trials of a fibre rollout, which he said would need to prove successful for the programme to continue. A Broadband Stakeholders Group report suggested rolling out FTTC across the country would cost around £5bn, but to complete a full-blown fibre-to-the-home network would cost nearer £30bn, while the EU outlined its views on a risk premium that could be applied by incumbents rolling out new networks. [pp.4,27.]
Concerns were raised once again surrounding the effect of 21CN on legacy telecare services for vulnerable people. [p.5.]
Steria, a French IT services vendor, extended a contract with BT and will provide applications outsourcing services, following a EUR92m deal. The contract was originally signed by Xansa, which was acquired by Steria in 2007. [p.6.]
BT RETAIL: BT Retail named Sean Williams, a former Ofcom executive and one of the architects of the regulatory settlement that followed the Ofcom Strategic Review of the telecoms market, to the role of Managing Director of Strategy at BT Retail. John Gallagher, BSkyB’s Head of Billing, is also joining the Retail unit, to take responsibility for Consumer billing. [p.7.]
BT Vision’s Chief Executive Dan Marks attempted to portray BT as the underdog in a “David and Goliath” battle with BSkyB, but appeared confident that the telco could find an audience for its services, although competition is increasing with the launch of television services using the Sony PlayStation 3. A passing remark from Marks about the possibility of bidding for Premier League football broadcast rights sparked press reports of a potential battle against BSkyB in 2009. [pp.8,10.]
BT Vision is to use a new testing solution from Mirifice for its IPTV offering. High-Definition movie rentals are to be made available for download in the BT Vision store, although the £4.95-per-movie price tag and long download times may stifle demand. [pp.8-9.]
Trials of BT WebWise, the internet-advertising system developed by Phorm, look set to go ahead, despite continued controversy based on privacy concerns. [p.10.]
BT Business signed a reselling agreement with Genius.com that will see BT offer SME customers repackaged email marketing solutions in the UK under the BT Smart Marketing brand. [p.12.]
David Gummer, BT Directories’ General Manager, explained the telco’s recent decision to acquire online directory business Ufindus by claiming that the digital era has fundamentally changed the business of directories. [p.13.]
BT GLOBAL SERVICES: Newly-appointed Global Services’ UK Chief Executive Royston Hoggarth gave his views on the challenges of his new role, and appeared to somewhat contradict the BT party line on software services. François Barrault, Global Services’ Chief Executive, indicated that the company was still interested in strategic acquisitions. [pp.18-19.]
Nigel Perks was named as BT Global Services’ new Chief Human Resources Officer. [p.17.]
An agreement between BT and South Tyneside Council was confirmed, which will see the telco create a new public sector contracts centre in the North-East of England, and solidify its second place behind Capita in the government IT outsourcing market. There were reports that BT could be sued by hospital trusts frustrated with BT’s performance on its major public sector contract with the NHS in London, although the risk was dismissed by the telco. BT selected an evaluation and testing solution from Mu Dynamics to support its work on the UK’s Defence Fixed Telecommunications Service network. [pp.19-20.]
BT in Germany was named as a SAP Partner with special expertise in NetWeaver Identity Management. BT was also placed in the Gartner Magic Quadrant for Worldwide Managed and Professional Network Service Providers, and was named in the Challenger quadrant for the North American market. [pp.20,22.]
BT unveiled a new service that uses proprietary detection tools to protect enterprise networks against malicious “botnet” attacks, as part of its global Event Monitoring and Correlation service. [p.22.]
BT signed a $660m contract extension with Hewlett Packard that will see the IT vendor provide support services for the telco until 2016. While HP stressed its ongoing partnership with BT, there was no indication of reciprocal BT provision of additional services to the vendor. [p.23.]
Pipal Research announced the signing of a “multi-year” contract with BT Global Services for provision of knowledge- and market-process outsourcing services. [p.23.]
BT WHOLESALE: Sally Davis, BT Wholesale Chief Executive, claimed in an interview that her division could become a growth engine for the Group as it increases its focus on managed services, and stressed that recent revenue declines were principally in low-profit areas. [p.24.]
OPENREACH: The Office of the Telecommunications Adjudicator reported a continued slowdown in LLU growth, with the total number of lines still bubbling under five million at the end of August 2008. [p.25.]
REGULATORY: The Competition Appeal Tribunal ruled that mobile operators had overcharged BT for calls to their customers made from BT landlines before recent rate cuts, which could see BT repaid millions of pounds. [p.26.]
The future of a proposed European Commission power to overrule decisions by national regulators was cast in doubt following new proposals from the European Industrial Committee. [p.28.]
CITY REPORTS: Hermes, the manager of BT’s pension fund, was strongly criticised by one of its other clients for the poor management of its fund. [p.29.]
EXTRACT
ACQUISTIONS AND DISPOSALS:
BT considers sale of 31% Tech Mahindra stake
The Financial Times newspaper reported that BT is considering selling its 31% stake in Tech Mahindra, an India-based systems integrator and business transformation consulting company. The paper quoted an unnamed source as saying that the sale of all or part of the stake is “likely”.
It was claimed by the source that, although the proposed sale has not been agreed by the BT Group board, the company had already approached an investment bank to value its holding in the business, and that, because BT remained the company’s biggest customer, “there is no reason for it to stay on with a large equity stake”.
Tech Mahindra currently has a market capitalisation of nearly $2.2bn (£1.2bn), valuing BT’s stake at around $760m, although the source suggested that BT would likely seek a premium for its shareholding. “Valuation will be more than the [market capitalisation] value. It could be close to $1bn”, the source said.
However, CP Gurnani, President of International Operations at Tech Mahindra, denied that any such sale was planned, and “an industry official familiar with the development” described talk of BT’s exit as premature. “BT has not approached Mahindra, and there is no indication of a formal process. All one can say is that they could be contemplating selling at some stage”, he said.
Meanwhile, Tech Mahindra has acquired a 17% stake in Servista, a UK-based IT services company, in a deal estimated to be worth $1.8m (see separate report).
It was subsequently reported by Indian newspaper the Economic Times that Kohlberg Kravis Roberts & Co (KKR), a private equity firm, is preparing a bid for BT’s stake, according to “sources close to the development”. The paper also said that four other private equity firms, Apax Partners, Carlyle, Temasek, and Texas Pacific Group, have also shown early interest. In addition, the paper said that BT has placed an $800m valuation on its stake, and that a formal process will begin around 18 September 2008. BT and Tech Mahindra both declined to comment.]
[Further reference: BT Group mulls selling Tech Mahindra stake -- India Business Insight, 28 August 2008; British Telecom to exit India's Tech Mahindra? -- Reuters, 1 September 2008; KKR eyes BT stake in Tech Mahindra -- Economic Times, 8 September 2008.]
TABLE OF CONTENTS
2 BT Group
2 Acquisitions and disposals; Executives; Employment
3 Community
4 strategy and operations
4 Appointments; Fibre
5 21CN
6 Strategy; Suppliers
7 BT Retail
7 Appointments
8 Vision
10 Broadband;
Marketing
11 Business
13 Directories
14 Channel partners;
dabs.com
15 Payphones
16 Community;
Local Business
17 BT Global Services
17 Appointments
18 Strategy
19 Conferencing;
Marketing;
Public sector contracts
20 Europe
21 Tech Mahindra
22 Awards and accreditations;
Products and services
23 Partners;
Suppliers
24 BT Wholesale
25 Openreach
25 OTA2
26 Regulatory
29 City reports
29 Brokers’ reports;
Pensions
30 INDEX
INDEX
A
Alcatel-Lucent, 2
Algebra Office Technologies, 15
Apax, 2
AT&T, 6
B
Botnet, 22
BSkyB, 10
BT Group, 2, 9, 11, 24
- Asia
- – Tech Mahindra, 2, 21
- BT Community Champions, 3
- BT Global Services, 4, 11, 17, 18, 19, 22, 23
- – BT Americas, 22
- – BT Germany, 3, 20
- – BT Infonet, 17, 18
- – BT International, 20
- – BTnet, 14
- – SND, 19
- – Stemmer, 3, 19
- BT Pension Fund, 29
- – Hermes Pension Management, 29
- BT Retail, 7, 11, 19, 26
- – BT Broadband, 10
- – BT Business, 4, 11, 12, 13, 19
- – bt.com, 10
- – BT Conferencing, 19
- – BT Consumer, 16
- – BT Directories, 13
- – BT Home Hub, 10
- – BT Local Business, 16
- – BT Payphones, 15
- – BT Scotland, 7, 9
- – BT Vision, 7, 8, 9, 10
- – BT Wales, 25
- – BT Yahoo!, 16
- – dabs.com, 14
- – The Phone Book, 14
- – Ufindus, 13
- BT Wholesale, 5, 24
- Executives
- – Barrault, François, 17, 18, 19, 22
- – Behren, Dirk, 3
- – Bonas, Alan, 9
- – Chow, Joseph, 17
- – Cole, Robert, 7
- – Davis, Alan, 17
- – Davis, Sally, 24
- – Dick, Brendan, 7
- – Gao, Bill, 17
- – Glock, Martin, 3
- – Haag, Günther, 3
- – Hoggarth, Royston, 18
- – Leigh, John, 23
- – Litchfield, Paul, 12
- – Livingston, Ian, 9
- – Murphy, Bill, 11, 12, 13
- – Perks, Nigel, 17
- – Petter, John, 16
- – Pfründer, Rudi, 3
- – Ramji, Al-Noor, 6
- – Richards, Kevin, 6
- – Sharrock, Paul, 14
- – Williams, Sean, 7
- Ex-executives
- – Andradi, Ben, 21
- – Verwaayen, Ben, 2
- Openreach, 25
- Strategy and Operations
- – 21CN, 5, 6, 15, 24
- – BT Design, 6, 11, 24
- – BT Operate, 4, 11, 24
C
Cable and Wireless, 18
Carers UK, 3
Carphone Warehouse, 10
- TalkTalk, 10
ChildLine, 16
CMG, 18
Collins Stewart, 29
Communications Workers Union, 2
Competition Appeal Tribunal, 26
Computer Sciences Corp, 17
Crayon, 10
D
Datamonitor, 6
Defence Fixed Telecommunications Services, 20
Department of Health, 5
Deutsche Telekom, 27
Devon and Cornwall Police, 14
DMSL, 14
E
Eckoh Technologies, 23
Entanet, 5
European Union, 27, 28
- European Commission, 27, 28
- – Reding, Viviane, 27, 28
F
FIFA, 9
Fishburn Hedges, 19
France Télécom, 6, 17
Freeview, 10
G
Gartner Group, 22
Genius.com, 12
Global Crossing, 5
Google, 6
H
Hutchison Whampoa, 26
I
IBM, 17, 18, 19
Ipanema Technologies, 18
L
Logica, 18
LogicaCMG, 17
M
Masabi, 17
Microsoft, 10
- Xbox, 10
Motorola, 7
Mouchel, 17
Mu Dynamics, 20
N
National Health Service (NHS, UK), 20
Nielsen Media Research, 10
O
Ofcom, 7, 24, 26
- LLU, 24
- Richards, Ed, 26
P
Phorm, 10, 11
Pipal Research, 23
Porta Systems, 6
S
Samsung, 6
SAP AG, 20
Servista, 2, 21
Setanta, 9
- Setanta Sport, 9
Sony, 10
Steria, 6
T
T3, 10
Tealeaf, 14
Tech Mahindra, 2, 21
Technologies
- ADSL2+, 5
- Broadband, 3, 5, 6, 10, 11, 24, 27
- Ethernet, 24
- Fibre, 24, 27
- ICT, 3
- VPN, 23
Technology
- ISDN30, 11
Telefónica, 10, 27
- O2 Europe, 10
Telemark, 23
Temasek, 2
Top 10 Broadband, 10
U
UK Centre for Economic and Environmental Development, 3
V
Virgin Media, 10
Vodafone, 4, 6
W
Wainhouse Research, 19
Welsh Assembly, 25
World Cup, 9
X
Xansa, 6
Xbox, 10
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