BTwatch, issue 2008.09 snapshot
18 November 2008
GROUP: BT was rumoured to be considering the sale of part of its stake in Indian business process outsourcing company Tech Mahindra, with mixed reaction from analysts. However, plans for the sale appear to have been put on hold as the financial crisis continues to create uncertainty. [p.3.]
Issue: 2008.09
Covering: mid-September to mid-October 2008
Published: October 2008
Next issue: November 2008
Mapping the activity and strategy of the UK’s largest telco. A unique monthly report for the industry.
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EXECUTIVE BRIEF
GROUP: BT was rumoured to be considering the sale of part of its stake in Indian business process outsourcing company Tech Mahindra, with mixed reaction from analysts. However, plans for the sale appear to have been put on hold as the financial crisis continues to create uncertainty. [p.3.]
BT’s senior management have commented on the affect of the current market and economic turmoil on BT’s business, with Ian Livingston saying that the company was unaffected as yet, and apparently bullish on BT’s ability to weather the storm. Chairman Sir Michael Rake was also confident and pointed to BT Global Services’ growth in emerging markets as a benefit to the company. Elsewhere, however, Livingston admitted that current economic conditions are significantly worse than he anticipated. [pp.4-5.]
STRATEGY & OPERATIONS: Ian Livingston continued to draw attention to BT’s plans for a limited fibre network rollout in a Daily Telegraph piece, where he advocated the role of competition over state intervention in investment plans. However, the importance of public investment to BT’s plans was emphasised elsewhere as Sir Michael Rake called on local government to financially back BT’s fibre efforts. [pp.6,42.]
BT is reportedly to outsource 500 staff from its Design and Operate units to Alcatel-Lucent under a seven-year deal that will see the vendor manage BT’s global networks. The project is still in the planning stages, and will apply to BT staff outside the UK, most likely those who joined BT following recent international acquisitions. There were also rumours that Alcatel-Lucent could be in the running for a major outsourcing deal that would see it take over management of Openreach, although this rumour was subsequently disparaged by Ian Livingston. [pp.7,43.]
BT was linked to involvement in the first phases of a new GCHQ communications monitoring programme that could see internet usage monitored. The government interception plans could affect all UK service providers and network operators, but press reports focused on monitoring of BT internet services in the early stages. The timing of the news could be bad for BT, as it continues to face negative publicity for its adoption of the Phorm online advertising solution that has also raised privacy concerns. [p.8.]
2Wire was named as a supplier for early ongoing BT deployments of new fibre at Ebbsfleet, in Kent. [p.9.]
BT RETAIL: In spite of continued resistance, BT is pressing on with BT WebWise, its Phorm online advertising solution. The UK government explained its decision to clear the application on privacy grounds to the European Union, but has been asked to clarify why no further action is being taken on earlier BT trials that allegedly breached privacy laws. [pp.12-13.]
BT emphasised the role that telcos can play in the development of IPTV services, working with internet giants to provide content and adequate service standards to customers, and drawing on experience of working across different platforms. BT Vision continues to take the fight to the leading pay-TV companies, however, with its latest TV ad campaign mocking high subscription fees for unwanted channels, and the publication of research supporting its provision of ad-free children’s programming. [pp.14-15.]
BT unveiled its new low-cost fixed-line rental product for those on low incomes. The much-delayed new service is to supersede the existing light-user scheme, which was not considered to be effectively targeting people most in need of the service. [p.16.]
BT announced new Wi-Fi tariffs and roaming agreements but also failed to agree a new roaming contract with leading hotspot provider The Cloud. A new report pointed to the importance of converged Wi-Fi and mobile broadband offerings. [pp.17-19.]
BT Business agreed a reselling deal with salesforce.com, a leading software-as-a-service CRM solutions provider, and now has partnership agreements with three players in the segment. BT is hoping to generate £2bn in annual revenue by 2013 from services provided to SME customers — a figure more than double current turnover in the area — as it integrates recent acquisitions that will target the SME IT sector. A new mobile broadband promotion was launched for SME broadband customers. [pp.20-21,23-24.]
BT GLOBAL SERVICES: BT won a contract to provide Euroclear, a financial markets service provider, with managed security solutions, and Finnish forestry business Metsäliitto Group with global connectivity outside its home markets. BT also announced a contract extension with BASF, which sees it take responsibility for management of the chemical company’s networks in APAC, in line with previous regional deals. [pp.25-26.]
BT launched Etherflow, which it describes as its first 21CN Ethernet business service. The new connectivity solution offers scalable bandwidth, purchasable a month at a time, and is available in several versions offering differing degrees of support and customisation. BT highlighted lower costs for customers, and the move was widely regarded as BT catching up and competing with other players in the market. [p.27.]
BT continued to push its new TelePresence conferencing offerings, following the launch of new Cisco solutions. Nato was identified as an early adopter of its services, and new intra-company teleconferencing options were promoted. [pp.28-29.]
There were reports that BT could earn as much as £100m for taking over the NHS IT contracts surrendered recently by Fujitsu. The figure apparently struck some insiders as high, but the importance of continuity and finding a contractor working with similar systems to those already introduced by Fujitsu favoured BT. [p.30.]
BT launched Work Anywhere in North America, ahead of a future roll out in Europe and Asia. The new suite of solutions features consultancy-based mobility and professional services functions, and includes solutions that BT uses internally and claims have resulted in savings of more than £870m in recent years. [p.31.]
BT reiterated its expectations for its growth in China, and drew attention to its commitment to the Middle East. BT also announced the appointment of senior management responsible for operations in South-East Asia, as part of restructuring in the region following the acquisition of Frontline. A partnership with Nigerian telco MTN could see the two companies collaborate on the provision of enterprise services in Africa, while a managed services agreement was also signed with BSNL of India. [pp.10,33,34,37.]
In Europe, a contract was won in the Spanish public sector, and BT Italia is to work with Italian municipalities on the provision of broadband services. In Hungary, BT completed the first phase of an EU-backed health sector communications project. [pp.34-35.]
BT WHOLESALE: Sally Davis, BT Wholesale’s Chief Executive, warned of the impact on ISP business models of increasing demand for high-bandwidth online content, and said there could be “some very grumpy people” as the industry wrestles with the challenge of providing more bandwidth without increasing prices. [p.38.]
BT announced that 3 UK and T-Mobile UK’s infrastructure-sharing joint venture signed a five-year managed network solutions contract with BT Wholesale, under which BT will provide next-generation links to connect base stations to their consolidated 3G infrastructure. The deal builds on previous agreements, and leaves Orange as the only UK mobile network operator without a managed services agreement with BT. [p.39.]
OPENREACH: The location of technical and commercial trials of BT’s fibre-to-the-cabinet network services was announced by Openreach. Initial testing will be undertaken in Suffolk, with subsequent pilots conducted in London and Wales. [p.40.]
The OTA2 announced that the number of unbundled lines in the UK had passed five million. The milestone was some time in coming, after several months of slowing growth, but BTwatch considers the achievement one of BT Group’s greatest in recent years, although it also companions major threats. [p.43.]
REGULATORY: The BT experience of formally separating its access services division from the rest of the company could be replicated across Europe when new European Commission recommendations on telecoms regulation come into force. [p.44.]
CITY REPORTS: Société Générale warned of ongoing challenges facing the BT pension fund, and advised clients to sell call options in the telco. [p.45.]
EXTRACT
OUTLOOK
Livingston: BT “yet” to be affected by financial crisis…
Speaking at a press lunch, Ian Livingston, BT Group’s Chief Executive, said that the global financial crisis has yet to have an impact on the Group, although he was keen to emphasise the word “yet”. He also maintains that there is no need for the Group to re-finance its debt through the bond market within the next twelve months.
While acknowledging that the decline in the UK’s property market, and the resultant decline in the number of new homes, was having an impact on the company’s consumer business, he said that BT plans to stick to 2009 targets for its broadband rollout programme. Livingston added that there are currently no plans to change the company’s financial forecasts for 2009.
” The EBITDA [earnings before interest, tax, depreciation, and amortisation] margin last year was in double digits, and we said it would decline a little bit. ”
– Ian Livingston, Chief Executive, BT.
He also reiterated the company’s 15% EBITDA margin target for the Global Services division (BTwatch, passim).
Speaking about the impact of the current global financial situation, Livingston underlined the company’s broad geographical reach.
” Our business has been remarkably solid. It looks today that our global corporate business is still doing well; I think the recession is particularly today focused on Western consumers. ”
– Livingston.
He added that the financial situation has also brought opportunities in the sector, potentially in the form of acquisitions, but said that these would likely be “in the tens and hundreds of millions. I doubt they’ll be in billions”.
Livingston did acknowledge the current uncertainty surrounding the possibility of raising funds from the bond market. “I don’t know, it could be easy tomorrow, difficult the next day”, he said, but confidently stated that the Group would not need to raise fresh debt within the next year.
” Not in the next year, unless a market window opens, in which case we might look. ”
– Livingston.
…with Rake confident BT can weather the storm
In an interview with Ireland’s Sunday Business Post, Sir Michael Rake, Chairman of BT Group, was optimistic over BT’s ability to prosper, despite the challenges presented by an economic slowdown and crisis in financial markets.
” What it does force upon all companies and all governments, at a time like this, is to be efficient in everything you do. Inevitably, during a boom period, you have things you’ve spent money on that are nice, rather than essential, so getting back to basics is important. “
” The second thing to remember is that an economy like this, a situation like this, does mean that there are opportunities for companies which are well run and smart. I think our strategy is the right one. We just have to move as fast as we can and be as agile as we can in the current environment. That’s what we’re focused on. Probably, we could never have foreseen the financial and stock market and credit issues that have arisen in the last nine or ten months, but so far, so good. ”
– Sir Michael Rake, Chairman, BT.
Despite his upbeat attitude, Rake did concede that BT would not be immune to lower consumer and business confidence.
” BT continues to trade well, but, obviously, in the retail consumer side, the business is impacted by fewer people moving house, or impacted by fewer SMEs [small- to medium-sized enterprises] starting up. On the other hand, our global network management business, which is a big part of what we do, and has $16bn [£9.2bn] in revenues, is growing very fast. There’s still a real need to have resilient, reliable communications systems. ”
– Rake.
Rake did however point out some unusual features of the current economic downturn, specifically a lower number of people starting their own businesses than in previous recessions.
” One of the worrying things at the moment is that, in a downturn, you’d hope to see an increase in the number of SMEs — maybe people taking an opportunity when they’ve been made redundant or some people making a lifestyle change. We’ve seen in the past a big expansion in SME activity, which we’re not seeing at the moment. Personally, I think it is to do with the liquidity problems and availability of credit from the banks. ”
– Rake.
Rake said he was not excessively concerned about the impact of the credit crunch on BT’s business.
” I think the global liquidity and credit issues are outside the company’s control, except to run your business conservatively, to maximise your cashflows, and to make sure you have adequate credit facilities available. Always remember that the good times never last forever. ”
– Rake.
[Further reference: Rake's progress -- Sunday Business Post, 28 September 2008; BT not affected ‘yet' by global financial crisis -- Birmingham Post, 7 October 2008; BT says no need to go to bond market in coming year -- Reuters, 7 October 2008.]
TABLE OF CONTENTS
3 BT Group
3 Mergers and acquisitions
4 Employment; Outlook
5 People
6 strategy and operations
6 Employment; Fibre
7 Operations; Outsourcing
8 Society 9 Suppliers
10 Teleconsult; Technology
12 BT Retail
12 Advertising; Broadband
13 Marketing 14 BT Vision
15 Payphones
16 Financial services;
Fixed-line
17 Wireless networks
20 Business
25 BT Global Services
25 Awards and accreditations;
Contracts
26 Counterpane
27 Products and services
30 Public sector 31 Americas
33 Asia 34 Europe
36 Marketing
37 Middle East
38 BT Wholesale
38 Broadband; 21CN
39 Managed services
40 Openreach
40 Fibre rollout
42 Outsourcing
43 OTA2; Technology
44 Regulatory
44 Broadband; Investigations; Undertaking variations
45 City reports
45 Pensions
46 INDEX
INDEX
SYMBOLS
2Wire, 9
A
Adobe Systems, Inc., 26
Advertising Standards Authority, 12
Alcatel-Lucent, 7, 42
Alder King LLP, 7
Amazon.com, 26
Andrews & Arnold, 43
Angel Broking Ltd, 3
Answare, 35
ASMEZ, 35
B
Babcock & Brown, 35
- – Eircom, 35
BASF, 26
Bharat Sanchar Nigam Ltd (BSNL), 33
British Broadcasting Corporation, 38
British Waterways Board, 17
BSkyB, 14
BT Group, 3, 4, 5, 6, 34, 40, 45
- – Asia
- – Tech Mahindra, 3
- – BT Exact
- – Adastral Park, 7
- – BT Global Services, 4, 7, 8, 9, 25, 26, 27, 28, 29, 36
- – BT Americas, 31
- – BT Asia Pacific, 34
- – BT Counterpane, 25, 26
- – BT EMEA, 35
- – BT Frontline, 33
- – BT Global Video Exchange, 28, 29
- – BT India, 33
- – BT iNet, 21
- – BT International, 31, 33, 34, 35, 37
- – BT Italia, 35
- – BT Nordics, 25
- – BT Spain, 34
- – BT Telconsult, 10
- – BT Workstyle, 31
- – Etherflow, 27
- – Etisalat BT Innovation Centre (EBTIC), 37
- – One Source for Cisco TelePresence, 28, 29
- – Spain, 25, 28
- – Work Anywhere, 31
- – BT Homeshoring, 25
- – BT Retail, 6, 12, 16, 40, 44
- – BT Basic, 16
- – BT Business, 9, 13, 19, 20, 23, 24
- – BT Conferencing, 28, 29
- – BT Credit Card, 16
- – BT FON, 19
- – BT Fusion, 18, 25
- – BT Government, 5
- – BT Home Hub, 14
- – BT Ireland, 36
- – BT Local Government, 30
- – BT Lynx, 21, 24
- – BT Onsite Hardware Repair, 24
- – BT Openzone, 17, 18, 19, 20
- – BT Partner Management, 37
- – BT ToGo, 18
- – BT Vision, 14, 15
- – BT WebWise, 8, 12, 13
- – dabs.com, 21
- – Direct Debit, 37
- – Option 2, 20
- – Together, 19
- – V-Box, 14, 15
- – BT Wholesale, 9, 38, 39, 43
- – Broadband Managed Connect, 38
- – BT Movio, 14
- – Directors
- – Rake, Sir Michael, 5, 34, 35, 40, 42
- – Executives
- – Álvarez, Luis, 25, 28
- – Bains, Jinna, 37
- – Barrault, François, 26, 29
- – Boustridge, Michael, 31
- – Bruce, Chris, 17, 19
- – Burdis, Margie, 30
- – Campenon, Olivier, 35
- – Carter, Jonathan, 12
- – Clark, Chris, 36
- – Dance, Phil, 7
- – Davis, Sally, 38
- – DeVito, Mike, 8
- – Fitzpatrick, Brian, 39
- – Hillman, Chris, 16
- – Hoggarth, Royston, 27
- – Hu, Lim Chin, 33
- – Liversage, Adam, 12
- – Livingston, Ian, 4, 6, 42, 45
- – Lowther, Graeme, 10
- – Ma, Allen, 34
- – Marks, Dan, 15
- – Mattey, Colin, 24
- – McCormack, Aaron, 28, 29
- – Murphy, Bill, 13
- – Narang, Sudhir, 33
- – Petter, John, 16
- – Richardson, Jeff, 44
- – Schneier, Bruce, 26
- – Small, Andrew, 36
- – Söderberg, Roger, 25
- – Sutton, Neil, 27
- – Ting, Steve, 33
- – Wittgreffe, John, 10
- – Young, Laurence, 42
- – Young, Richard, 14
- – Ex-executives
- – Green, Andy, 7
- – Lavery, Kevin, 5
- – Verwaayen, Ben, 43
- – Goonhilly Earth Station, 7
- – Madley Communications Centre, 7
- – Openreach, 40, 42, 43
- – Strategy and Operations, 7
- – 21CN, 6, 27, 38, 39, 43
- – Chief Technology Office, 10
C
Cable and Wireless, 42
Cardiff Council, 40
Carphone Warehouse, 40
Cerner, 30
ChildLine, 8
Cisco Systems, Inc., 28, 29, 43
City of London Police, 12
COLT Telecom, 27
Communications Workers Union, 42
Competition Commission, 14
Comtrend, 14
Connect (union), 4
CTIA – The Wireless Association (Cellular Telephone Industries Association), 8
Current Analysis, 27
D
Datamonitor, 33, 44
Department for Business Enterprise and Regulatory Reform (BERR, UK), 13, 42
Department for Work and Pensions (DWP, UK), 16
Deutsche Telekom, 14, 15
- – T-Mobile, 19, 39
- – UK, 39
Dolby Laboratories, Inc., 15
E
Edinburgh Council, 30
EDS, 42
e|net, 36
Epitiro, 12
Etisalat, 37
Etisalat BT Innovation Centre (EBTIC), 37
Euroclear, 25
European Union, 6, 12, 13, 44
- – European Commission, 13, 44
- – European Parliament, 44
F
FON, 19
France Télécom, 14, 15
- – Orange, 17
Frost and Sullivan, 25
Fujitsu, 30
G
General Dynamics Corp., 29
General Electric Co. (GE)
- – NBC Universal
- – National Broadcasting Company (NBC), 15
- – NBC Universal
- – NBC Universal International Television Distribution, 15
General Mutual Insurance Society for State Employees (MUFACE), 34
Google, 14
Government Communications Headquarters (GCHQ, UK), 8
H
Hewlett-Packard, 35
Home Office (UK), 8
Hutchison Whampoa
- – 3 Group
- – 3 UK, 39
I
iBahn, 17
IKIR (Hungary), 35
Instituto de Pesquisas Eldorado, 31
International Electrotechnical Commission (IEC), 15
- – Broadband World Forum, 14, 15
iPass, Inc., 17
ITV, 14
J
Jefferies Group, Inc.
- – Jefferies & Company, 9
K
Khalifa University, 37
Kohlberg Kravis Roberts & Co. (KKR), 3
KPMG, 3
L
Logica, 7
M
Macmillan Cancer Support (Cancerbackup), 8
Metsäliitto Cooperative
- – Metsäliitto Group, 25
Microsoft
- – MSN, 14
Ministry of Justice, 44
Mobile Broadband Network Ltd (MBNL), 39
MTN Group
- – Nigeria, 10
N
National Health Service (NHS, UK), 30
- – NPfIT, 30
NATO, 29
- – NATO Communications and Information Systems Services Agency (NCSA), 29
- – Supreme Headquarters Allied Powers Europe (SHAPE HQ), 29
NetApp, Inc. (Network Appliance), 9
NetSuite, 23
Nokia, 8
Nokia Siemens Networks, 8
Nortel Networks, 36
O
Ofcom, 14, 16, 40, 42, 44
- – Light User Scheme, 16
- – BT Basic, 16
- – LLU, 43
- – Strategic Review of the Telecoms Sector, 42
Office of the Telecommunications Adjudicator, 43
- – OTA2, 43
Omnicom Group
- – Abbott Mead Vickers BBDO, 15
- – Proximity London, 5
Open Rights Group (ORG), 13
Oracle, 25
P
Phorm, Inc. (121Media), 8, 12, 13
Point Topic, 18, 20
R
RTL Group
- – Five (Channel 5 Broadcasting Limited), 14
S
Salesforce.com, 23
Samaritans, 8
Secret Intelligence Service (SIS/MI6, UK), 8
Security Service (MI5, UK), 8
Serco, 5
Setanta, 14
Shelterline, 8
Siemens, 8
Societe Generale, 45
South Tyneside Council, 30
Subex, 9
SugarCRM, 23
Swisscom, 19
T
Tata Group, 3
- – Tata Consultancy Services Ltd (TCS), 3
Tech Mahindra, 3
Technologies
- – 3G, 18, 34, 39
- – ADSL, 12
- – ADSL2+, 9, 38, 43
- – Broadband, 4, 6, 9, 12, 14, 15, 17, 18, 19, 20, 33, 35, 36, 38, 39, 40, 42, 43, 44
- – CRM, 23, 33, 36
- – Ethernet, 9, 27, 36, 39
- – Fibre, 6, 9, 36, 40, 42, 43
- – FTTH, 9
- – ICT, 9, 10, 24
- – IP, 10, 27, 35, 38
- – IPTV, 14, 15
- – IPv6, 43
- – IVR, 36, 37
- – MPLS, 10, 26, 33, 37
- – SaaS, 23
- – VPN, 27, 33
- – Wi-Fi, 17, 18, 19, 20
Technology
- – HD, 6, 15, 38
Telefónica, 34
- – Telefónica Europe (O2), 17, 18, 39
- – Mobile Data
- – Revolution, 13
telent plc (Marconi), 9
- – Premises Networks Management, 9
Telephone Helplines Association (THA), 8
Temasek, 3
The Cloud, 17
Timico, 38
Top-Up TV, 14
V
Verdantix Ltd, 25
Vex, 17
Virgin Media, 6, 12, 14, 27
Vodafone, 8, 39
W
Wayport, Inc., 17
Welsh Assembly, 40, 42
World Economic Forum, 34
WPP
- – OgilvyOne, 5
Y
Yankee Group, 6
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