BT finally unveils its reimagined TV proposition

The aggregator model has taken centre-stage at BT, leveraging its existing capabilities instead of trying to beat the content industry at its own game.

Under Gavin Patterson, BT tried to do something which almost looked impossible. It attempted to disrupt the content industry by not only owning the delivery model for content, but the content itself. It attempted to muscle into an established segment and compete with companies which were built for the content world. It was expensive, complicated and messy, and it failed spectacularly.

BT has not given up on content under new leadership, but it is taking a seemingly more pragmatic and strategic approach. Aside from its own content, Now TV will also be embedded in the BT interface, meaning that customers can now watch, pause, rewind and record premium Sky Entertainment and Sky Sports content. Customers will also be able to integrate Amazon Prime Video and Netflix onto their BT bill, while each element of the bundle can be scaled-up or -down month-by-month.

It is making best use of its assets, and it looks to be a comprehensive and sensible pillar of the convergence strategy.

“Life doesn’t stand still from month to month, so we don’t believe our customers’ TV should either. Our new range of TV packs bring together the best premium services, fully loaded with a wide range of award-winning shows, the best live sports in stunning 4K and the latest must-see films – all with the flexibility to change packs every month – with  quick and easy search to find what you want to watch,” said Marc Allera, CEO of BT’s Consumer division.

BT will ‘own’ some content, it still has the UEFA Champions League broadcast rights after all, but it is picking its battles. The BT TV proposition failed in years gone because it tried to go it alone, but without the broad range of content genres, it looked like a poor attempt to compete with the likes of Sky. In reality, it didn’t need to.

The telcos have a significant advantage over many content companies around the world; they have an existing and trusted billing relationship with the customer. According to the Ovum World Information Series, EE has 30.6 million mobile subscribers and BT has 9.1 million broadband customers. These relationships can be leveraged through the partnership model to realise new profits in a low-risk manner.

BT is in a position of strength. The streaming wars are raging, and the service providers will do almost anything to gain the attention of the consumer, as well as build credibility in the brand. By bundling services into the BT, the OTTs are leveraging the trust which the customer has in the telco billing relationship and gaining eyeballs on the service itself. All they have to do is offer BT a small slice of the profits.

This is the symbiotic relationship in practice. The OTTs gain traction with customers, while BT can complete the convergence objective in a low-risk manner through the aggregator model.

That said, it is somewhat of a retreat from its previous content ambitions.

“This well long overdue move feels like a last-ditch effort to be successful in TV,” said Paolo Pescatore, founder of PP Foresight.

“Aggregation is the holy grail. BT has done a superb job of introducing some novel features and bringing together key services all in one place. This will strongly resonate with users. However, it is unlikely to pose a considerable threat to Sky who in turn will be able to bundle BT Sport into its own packages. In the future expect this new TV platform to be bundled with BT Halo which will further strengthen its premium convergent offering.”

Convergence is a strategy which should be fully embraced by the BT business. Not only has it been proven in other European markets, see Orange in France and Spain, but the depth and breadth of BT’s assets should position it as a clear market leader. With mobile, broadband, public wifi hotspots and content tied into a single bill, as well as partnerships to bolster the experience, BT is heading down the right path. If it can start to build service products on top, such as security, this could start to look like a very competent digital business.

The issue which remains is one of price. The Halo bundle is one few can compete with, but if it is not priced correctly it will not be a success. This does seem to be the issue with the BT consumer business right now, it is pricing itself out of the competition. Convergence is attractive to customers when it is convenient and makes financial sense, but right now it doesn’t seem to.

BT is slowly heading in the right direction. It might have taken years, but it is slowly creating a proposition for the consumer which few should theoretically be able to compete with. If it can merge the business into a single brand and sort out the pricing of its products, it should recapture the market leader position.

BT uncouples its 5G offering from its Halo

UK operator group BT restricted 5G to customers of its Halo convergent bundle, but just three months later it has reversed that decision.

‘BT today announced it is making its 5G plans available for all customers,’ heralds the press release, as if giving all its customers access to the latest mobile technology is an act of philanthropy. The release announces new 5G plans for all customers, but as far as we can tell from the website, that just amounts to removing bundle discounts. Apparently BT (i.e. EE) 5G is available in 50 towns across the UK.

“Our BT Halo customers have been some of the first to enjoy 5G in the UK, and we’re now giving all of our customers the chance to get superfast, reliable mobile connections even in the busiest places,” said Pete Oliver, Managing Director of Marketing, BT Consumer. “Whether you’re watching HD TV or sport on the go, or FaceTiming your family on the way home, 5G makes a huge difference to everyday experiences and opens up even more exciting new experiences like seamless augmented reality and HD mobile gaming.”

If 5G is so great, why wasn’t BT offering it to all its customer straight away? The answer is presumably that it hoped it offering it uniquely through Halo would drive uptake of its flagship bundle. A change in strategy so soon would seem to imply those hopes were forlon, otherwise why not stick with it? Then again this could always have been the grand plan.

A bad day for BT

After missing expectations for third quarter results and suggesting meeting the Huawei cap could cost £500 million, BT investors are being tested today.

With reported revenues of £17.2 billion through the first nine months of the financial year, BT is looking at a 2% deficit to make up. It has been an expensive year to date, though CEO Philip Jansen has tried to put a positive spin on events.

“BT delivered results slightly below our expectations for the third quarter of the year, but we remain on track to meet our outlook for the full year,” said Jansen.

“Underpinning the ongoing development of market-leading propositions, we continue to invest in the best converged network. We welcomed the direction of Ofcom’s recent consultation, which is an important step forward towards a widely shared ambition to invest in fibre across the whole of the UK. We’re also investing in 5G, making it available in over 50 locations, with the first customers enjoying a great experience.”

While the financials do not paint the prettiest of pictures, the last few months have seen a few sparks of good news for the telco.

The 5G rollout is progressing well, having launched in 50 towns and cities. The Ofcom Wholesale Fixed Telecoms Market Review was favourable. The on shoring of BT brand sales and service calls was completed ahead of time. The full fibre rollout has now passed 2.2 million homes. And, the Supply Chain Review has ended.

But while Jansen will want to direct investors towards the beacon of hope on the horizon, the here and now is less attractive. Thanks to regulation, competition and legacy product declines, the financials have taken a hammer blow.

“BT shares, which have been a constant underperformer over the past five years, are down by over 4% in early morning trading on the back of a third quarter trading update,” said Graham Spooner, Investment Research Analyst at The Share Centre.

“Not only have we seen a decline in revenues and adjusted earnings, as a result of the Government’s decision to give Huawei a role in the UK’s 5G network, the group has to increase its range of suppliers in the future. Despite CEO Philip Jansen being ‘really excited about the long-term prospects’, there remain challenges for him to work on in order to make BT ‘bolder, smarter and faster’.”

Looking at the Supply Chain Review, although BT is not neck-deep like Three, it does have some work to do.

While current suppliers are Nokia and Huawei for 4G, BT will have to reassess its options for the continued 5G deployment. If its 4G efforts were to be replicated, BT would certainly exceed the 35% restriction placed on Huawei RAN equipment in the network, though as the decision has been made during the early days of the 5G rollout, it is not disastrous by any means.

BT is already rolling out 5G, with Huawei equipment, and while it does have Huawei in the network core, it has already said it was searching for a new supplier prior to the Supply Chain Review. BT estimates it will cost around £500 million to replace some 4G components to ensure interoperability and get below the 35% restriction on Huawei equipment.

BT investors have had better days, but Rome wasn’t built in a day.

Virgin and BT start b*tching in Bristol

BT is running ads in Bristol dissing Virgin Media’s fibre offerings and Virgin is having none of it.

The BT poster campaign says ‘Bristol. Don’t settle for Virgin’, inferring its own fibre broadband offerings are superior (or at least more reliable). Pretty tame stuff, we thought, but it seems to have seriously triggered Virgin, which immediately mobilized its west-country operation to plan a counterattack.

It took the form of a large van driving around Bristol, with the following slogan emblazoned on the side: ‘B******T Our fastest average speed in Bristol is 516Mbps. That’s loads faster than BT. Enough said.’ Pretty edgy stuff, we think you’ll agree. The smallprint says BT can only manage a pedestrian 300 Mbps in Bristol. The asterisked-out initial statement seems to be deliberately ambiguous, inferring ‘bullshit’ but also the hashtag #bornfast. See what they did there?

“BT’s broadband bunkum just couldn’t go unchecked,” said Cilesta Van Doorn, Brand and Marketing Director at Virgin Media. “Residents of Bristol won’t be fooled by BT’s babble and we look forward to welcoming anyone who wants to experience life in the fast lane with our superior ultrafast speeds. With a reliable future-proof network that is bringing gigabit speeds to Bristol and more of the UK, Virgin Media is, as always, leading the charge – catch us if you can.”

Fighting words from Van Doorn there, who followed through with a press release about the whole unpleasantness, but we would have been more impressed if VM had gone all-in and actually written ‘bullshit’ on the van. Alternatively, if asterisks are mandatory, how about writing something like ‘BT are a bunch of lying b*stards and we’re not standing for any of their f*cking b*llocks anymore.’ That would have been cool, as would any attempt to exploit the cockney rhyming slang potential of Bristol.

BT and Vodafone set to moan to PM about Huawei

The CEOs of BT, Philip Jansen, and Vodafone, Nick Read, are working on a letter they will sent to the UK Prime Minister, begging him not to ban Huawei.

We know this because they have leaked their plans to multiple UK media. The letter will say there is insufficient evidence that the use of Huawei kit represents a security risk to justify a ban on them using its kit in their networks. It will also stress what a nightmare it will be for them if they have to replace all their Huawei gear, as well as the down sides of reducing competition.

One reason for this mounting panic is the presumed absence of any compromise solution. The US has, to some extent, put its future relationship with the UK on the line over this decision. At the same time UK PM doesn’t want to seem like he just does whatever the Americans tell him and presumably doesn’t want to set back the roll-out of UK 5G.

Having said all that it comes as very little surprise that BT and Vodafone would be contemplating such a move, since they have made their feelings abundantly clear in the past. Even then the leaks hedge their position by saying they are just considering sending this redundant letter, but if it’s so important then surely the bigger news will be if they don’t. Perhaps they think having the two UK telecoms industry champions speaking with a common voice will have greater resonance, but they’re not sure. Let’s see.

BT seeks stickiness and diversification through Google Stadia partnership

UK ISP BT says it’s the first European network to partner with Google over its Stadia cloud gaming service, which it will bundle with some broadband offers.

The press release features a needless amount of banging on about ‘moving the cloud gaming industry forward’, and ‘initiatives designed to build awareness, access and availability of it in the UK,’ as if cloud gaming is some kind of philanthropic initiative. But the long and short of it is that BT is offering Stadia for free with some bundles for a couple of weeks and then from 7 February will bundle Stadia Premier Edition with special cloud gaming add-ons to some of its fibre packages.

“We continually look to provide our customers with the most exciting products and experiences, and by partnering with Google on Stadia, we’re able to help them push the limits of gaming,” said Marc Allera, CEO of BT’s Consumer Division. “We’re also investing in the UK’s fastest 4G, 5G and fibre networks, so our superfast home broadband service is the perfect accompaniment for those wanting to make the most from this innovative streaming gaming platform.”

“We’re excited to continue our cross-product partnership with BT in the UK to further drive the cloud gaming industry forward,” said Michiel van Eldik, General Manager of Devices & Services at Google EMEA. “BT has an established track record of leading the industry in delivering next-generation services and products to their customers. Through today’s announcement, we are able to make the best gaming content even more accessible, and to continue to change the way people access, play and enjoy their favourite games.”

Exciting times then. BT seems to think gaming is where the smart ISP diversification money is at these days, having recently announced its sponsorship of the Excel Esports team. How excited BT customers will be with all this, however, remains to be seen as initial reviews of Stadia concluded it’s a bit rubbish.

Ofcom promises to ‘supercharge’ fibre with four-point plan

Telecoms regulator Ofcom has proposed a four-point plan to accelerate investment in fibre networks at interest continues to gather momentum in the UK.

In what could turn out to be a catalyst to gather further momentum in the market, Ofcom has revealed a four-point plan to accelerate deployment. Interest in fibre connectivity has certainly increased across the country, though BT and Openreach have called for regulatory reform to further aid aggressive deployment plans. The plan is now open for consultation, with Ofcom set to publish its decision in early 2021 before the current rules expire in April 2021.

Firstly, caps will be placed on wholesale prices to encourage competition from new networks. Secondly, Openreach will be prevented from applying drastic discounts which could stifle competition. More flexibility will be offered in the rural regions to encourage investment however, and finally, Ofcom will deregulate Openreach’s copper products in areas where full fibre is built to help Openreach retire the network.

“These plans will help fuel a full-fibre future for the whole country,” said Jonathan Oxley, Ofcom Interim Chief Executive. “We’re removing the remaining roadblocks to investment and supporting competition, so companies can build the networks that will drive the UK into the digital fast lane.

“Full-fibre broadband is much faster and more reliable. It’s vital that people and businesses everywhere – whether in rural areas, smaller towns or cities – can enjoy these benefits. So, we’re making sure companies have the right incentives to accelerate full fibre to every part of the UK.”

Compared to other nations across the European bloc, the UK is in somewhat of sluggish position. Pointing the finger towards investments in G.Fast broadband upgrades as opposed to the more expensive, but longer-view, fibre products has generally been accepted as the main reason. According to OECD estimates, only 1.92% of total broadband connections in the UK are fibre, which leaves the state in a comparatively unattractive position.

Fibre connections as a percentage of total broadband connections
Country 2018 2016
UK 1.92 0.8
Germany 3.18 1.8
France 16.5 7.8
Poland 20.49 8.2
Portugal 45.2 32.3
Sweden 66.94 55.2

OECD Broadband statistics

“Today’s proposals appear to be a big step in the right direction to give clarity and investment certainty,” an Openreach spokesperson said. “Like the Government and Ofcom, we want to upgrade the UK to faster, more reliable full fibre broadband. We’re getting on with the job, building to 26,000 premises each week and we remain on track to reach 4m homes and businesses by the end of March 2021.

“We’ll consider the range of proposals carefully and will continue to work with Ofcom and industry on getting the conditions right to help achieve the Government’s ambition of rolling out gigabit capable broadband across the UK as soon as possible.”

Although some might question the need for such speed, it won’t be too long before applications emerge which drive data usage through the roof. Let’s not forget, in 2010 average fixed broadband speeds were 5.2 Mbps, satisfactory at the time but horrifying for the consumer of today. Average speeds in 2019 were 22.37 Mbps and it will not be long before these are considered below par.

Aside from speed, it is also worth noting that fibre broadband connectivity also offers a very useful boost to reliability.

“It’s good to see Ofcom using its powers as a regulator to stimulate competition, drive investment and improve outcomes for consumers,” said Ed Dodman, Director of Regulatory Affairs at Ombudsman Services.

“Many of the broadband complaints we handle from consumers and small businesses are to do with issues around speed and reliability, so we support proposals that will lead to improvements in these areas across the UK.”

Although the OECD statistics do not paint the prettiest of connectivity pictures in the UK, momentum has been shifting in the right direction.

From a political perspective, the idea of gigabit speed broadband has taken hold. It might turn out to be nothing more than empty campaign promises, but it has raised the issue of fibre connectivity and the digital divide to the national conversation.

Looking at the consumer, there is certainly more appetite. This will be partly down to the consumer being more educated on the different connectivity options, Ofcom rules killing off dubious and misleading fibre claims from ISPs and the price of fibre connectivity dropping in recent years.

And thanks to increased demand from the consumer, the UK fibre landscape is looking like a more attractive investment. Goldman Sachs purchasing CityFibre is evidence of this, but other financial players are becoming increasing interested in communications infrastructure as a long-term investment. Securing additional funds from third-parties is becoming a critical component of the mix, especially with more alt-nets appearing.

In the short-term, the emergence of ‘alt-nets’ should only be viewed as a good thing. More providers will create more value for the consumer through increased competition and providing the telcos incentive to invest in fibre. However, you have to wonder whether the number of alt-nets in the UK is sustainable in the long-run.

The more providers there are, the more fragmented a market becomes. Fragmentation is the enemy of scale, making it more difficult to aggressively pursue expensive investments. There is of course a risk of over-build in certain markets, though the presence of these alt-nets creates an interesting M&A future for the UK.

CityFibre is a primary example of what happens when a market becomes too fragmented. This is a company which only exists because it was able to acquire several distressed fibre players and merge them into a single business. Some ambitious and cash-rich parties might look at the potentially fragmented market in the UK as another opportunity to consolidate and create another scaled player at some point in the future.

Although this move should not be considered the silver bullet from Ofcom, it is certainly very encouraging. The UK telecoms industry has been calling for regulatory reform for some time in pursuit of greater levels of certainty as well as a more favourable investment climate in the UK.

What we have here is an excellent example of collaboration. For the digital society of tomorrow to be more than a pipe dream, industry will have to come together with the investment community and Government, presenting a united front. This proposal is perhaps evidence the rhetoric is perhaps evolving into reality.

BT streamlining continues with sale of Spanish managed services

UK telecoms group BT is in the middle of a major streamlining operation and the latest casualty is its Spanish managed ICT services business.

The business is part of BT’s Global Services unit, which is the main focus of the current restructuring programme. Earlier this year BT raised around €100 million by flogging some Dutch infrastructure and this Spanish operation includes some infrastructure too. It’s being snapped up by Portobello Capital as private equity continues to show increased interest in telecoms infrastructure.

“Today’s announcement is another key milestone in the execution of our strategy to make Global a more agile and customer focused business,” said Bas Burger, CEO of BT Global. “The transaction is great for BT, for our people and for our customers. Through agreements with the Spanish business, it provides continuity to both our multinational and local customers. It also enables us to focus on what we do best: providing secure connectivity and digital solutions to multinational companies globally.”

“We are very pleased to invest in one of the leading providers of managed telecommunications services to the corporate market in Spain,” said Luis Peñarrocha, a founding partner of Portobello Capital. “We look forward to continued investment in the development of the business for the benefit of new and existing customers in the region.”

The price of the transaction wasn’t disclosed, but the business turns over nearly a quarter of a billion pounds a year so we must be talking serious cash. Assets in the transaction include a 5,600 km owned and leased optical fibre network, fully owned city fibre networks in Barcelona and Madrid and three data centres.

UK Labour party pledges to nationalise much of BT if elected

A key policy of the Labour party ahead of the UK general election next month is to make broadband ‘free’ by nationalising Openreach.

Renationalising infrastructure is a core Labour policy in the run up to next month’s election and now that includes broadband. The good news for BT, and fans of property rights in general, is that Labour plans to buy the following using public funds it will get from somewhere: Openreach, the parts of BT Technology that deal with backhaul, BT Enterprise and BT Consumer. The bad news is that BT will have no say in the matter and Labour will decide on the price.

“It’s time to make the very fastest full-fibre broadband free to everybody, in every home in every corner of our country,” said Jeremy Corbyn, leader of the Labour party. “Making it free and available to all will open up opportunities for everybody, at the cutting edge of social and economic change. By creating British Broadband as a public service, we will lead the world in using public investment to transform our country, reduce people’s monthly bills, boost our economy and improve people’s quality of life.”

“This is public ownership for the future,” said John Mc Donnell, Labour’s Shadow Chancellor. “A plan that will challenge rip-off ‘out-of-contract’ pricing – and that will literally eliminate bills for millions of people across the UK. Every part of this plan has been legally vetted, checked with experts, and costed.”

Here are some of the ‘notes to editors’ from the Labour announcement:

  • Labour will deliver free full-fibre broadband to all individuals and businesses by 2030. We will integrate the broadband-relevant parts of BT into a new public entity, British Broadband, with a mission to connect the country. Labour will aim to deliver free full-fibre broadband to at least 15-18 million premises within five years.
  • This will be paid for through Labour’s Green Transformation Fund, with the costs of maintaining the network paid by a tax on multinationals (including tech giants like Google and Facebook).
  • To deliver this we will adopt a public mission to roll-out the remaining 90-92% of full-fibre across the country, as well as acquiring the necessary access rights to the existing 8-10% of full-fibre assets.
  • All current workers in broadband infrastructure and broadband retail services will be guaranteed jobs in the new public entity and be guaranteed the same or better terms and conditions.
  • There is a one-off capital cost to roll-out the full-fibre network of £15.3 billion (in addition to the Government’s existing and not-yet-spent £5 billion commitment), which will be paid for from our Green Transformation Fund;
  • The cost of bringing parts of BT into public ownership be set by Parliament and paid for by swapping bonds for shares, as occurs with other public ownership processes;
  • Full-fibre has low maintenance costs once rolled out, which can be estimated at around £230 million a year, which will be more than covered by a system unitary taxation of multinationals, which involves treating multinational companies as single entities, and taxing UK-based multinationals on the share of their global profits that reflects their UK share of their global sales, employment and assets.

Unsurprisingly such a radical pledge has provoked some robust responses, especially since McDonnell had said as recently as July that he had no plans to nationalise BT. The company itself is keeping its cards pretty close to its chest, offering only the following statement.

“It should be a top political priority to super-charge the roll-out of full fibre broadband and 5G right across the UK so we can build the digital economy of the future.  Whatever the result of the election, we’d encourage the next Government to work with all parts of the industry to achieve that. It’s a national mission that’s bigger than any one company.”

Others have been more forthcoming, however. “These proposals would be a disaster for the telecoms sector and the customers that it serves,” said Julian David, CEO of UK tech sector trade body TechUK. “Renationalisation would immediately halt the investment being driven not just by BT but the growing number of new and innovative companies that compete with BT.

“Full Fibre and 5G are the underpinning technologies of our future digital economy and society. The majority of the estimated £30bn cost for Full Fibre is being borne by the private sector. Renationalisation would put this cost back onto the taxpayer, no doubt after years of legal wrangling, wasting precious time when we can least afford it.  These proposals would be a huge set back for the UK’s digital economy which is a huge driver for growth.”

“Today’s announcement highlights the importance of full fibre access for all,” said Lloyd Felton, Chief Exec of County Broadband. “However, it also shows an alarming lack of understanding about the complex nature of full fibre rollouts and the fact that, unlike by comparison the rail industry that operates rail franchises, the industry has already invested billions of pounds in building its own infrastructure over which the service is delivered, in direct competition to BT.

“This proposal would almost certainly lead to delays, or at worst, derailment of existing full fibre investment and new network rollouts. It is a broad-brush, and makes no mention of how customers would be served and supported and provides no recognition for what has been achieved by the many Alternative Network providers who are currently active in providing a competitive full fibre solution.

“The competitive nature of the current market in the UK has meant consumers already benefit from one of the lowest cost broadband services in Europe. Broadband is an essential utility and whilst we share the ambition to bring future-ready full fibre connectivity to every home and business, we believe a mix of public and private investment is the only realistic strategy to deliver the service efficiently, without the need to bring significant cost to the public purse.”

Ofcom isn’t commenting and Openreach is leaving it to BT. We understand that there is an unprecedented exchange of views taking place within the UK telecoms industry, however, and look forward to the outcome of that. We also asked a few industry experts what they thought of Labour’s plans.

“There is no denying that the UK is far from a leader in full-fibre broadband, but the market is really starting to move as Openreach’s rollout plans are complemented by a long list of alternative / competitive network providers – Virgin, Talk Talk, CityFibre, Hyperoptic, and many more,” said Phil Kendall, Analyst at Strategy Analytics.

“A survey of The Independent Networks Cooperative Association (INCA) members showed an aspiration to pass 16 million premises with fibre by 2025. If there is a role for government in this it would be to support pushing broadband coverage out to all communities, so the areas that the private market will struggle to cover profitably, not torching the whole sector.

“If nationalizing Openreach doesn’t kill off some or all of those competing providers or wholesalers then offering free fibre broadband to everyone definitely will. For the average voter, there are good optics on this – free broadband, like free Wi-Fi or free roaming, is a nice populist idea and getting the evil webscale giants to pay for it is perfect. But this is a hugely destructive attempt to fix a sector that isn’t anywhere near as broken as Labour seems to think.”

“On the face of it this is not completely insane,” said telecoms analyst William Webb. “BT was, of course, publicly owned about 30 years ago. There have been state-led fibre deployments, most obviously in Australia, and while this hasn’t gone particularly well, nor had UK fibre deployment under the current model until recently.

“There is always a tension between a competitive market, which we currently have, but which will often not deliver socially desirable outcomes; and a publicly provided service, which will deliver those outcomes but tends to have well known downsides including a lack of innovation, possibly high prices (even if these are charged to taxpayers, not consumers), slow responses to changes and so on.

“But, of course, there are massive issues. The biggest is how we would transfer out of an environment with multiple competing providers in a way that compensates all fairly, that doesn’t slow things down, and that rationalises duplicated resource. Another is the extent to which we really need fibre everywhere and whether a state-led masterplan is reactive to real needs – this was one of the biggest issues in Australia. And as fixed and mobile converge with services like fixed wireless access, intervention will spill across into the mobile arena, potentially destabilising that competitive market.

“Fundamentally, I guess, it comes down to whether you believe in state ownership or market forces. Both can be made to work. But with the market forces approach appearing to work probably as well as it could right now, changing approach feels almost certain to slow things in the short to medium term.”

“It’s great to have bold aspirations but we’ve seen how challenging they are to implement,” said TMT Analyst Paolo Pescatore. “For sure, connectivity needs to improve and so does coverage. There are so many companies laying cables and installing masts. The best way is to forge partnerships which will help lower costs for all including consumers.”

There are coherent arguments in favour of nationalising natural monopolies, but the way Openreach has been regulated alongside the presence of competitive alternative fibre providers means this isn’t one of those cases. There are just so many flaws and pieces of sloppy, wishful thinking in this proposal that if it were a different time of year we’d assume it was a joke.

Firstly there’s the costing alone. Labour not only plans to quadruple Conservative broadband spending pledges, it needs to find the cash to buy over half of BT. Despite the hit to its share price this announcement has delivered, BT’s market cap is still around £19 billion, so that’s another £10 billion or so Labour would have to dig up, depending on how fair it intends to be to BT shareholders. And as for getting US tech giants to pay for the maintenance, good luck with that.

Then you have the underlying concept of forced state appropriation of private property. If Labour is willing to force one of the UK’s biggest companies to sell half of itself to the state, at a price it has no say in, then are any other companies safe? The effect on business sentiment of moves like this is likely to be catastrophic.

But finally, as many people have indicated above, we have the extreme improbability that the state will do a better job of fibre rollout than the private sector currently is. NBN is a great example of the folly of such initiatives and once a Labour government is forced to confront hard financial realities, work on the network would likely grind to a halt.

All politicians try to bribe the electorate in the run up to general elections, but the trick is to at least make it plausible that they will be able to deliver if they do win power. This policy is not only damaging for UK telecoms infrastructure and business in general, it also has no chance of being put into practice as promised. Labour has massively over-reached with this move.

Revenues are down, but BT looks ready to do battle

Total revenues and profits might have slipped slightly at BT, though it met expectations and it seems the business is lining-up its pieces for an assault on the UK market.

With the assets the telco has at its disposal, BT should dominate the market leaving the scraps for rivals to fight over, but this has not been the case. There have been some lavish spending sprees over the last few years, though the refreshed management is taking a more network-orientated approach as opposed to the ‘bells and whistles’ of the previous regime.

“BT delivered results in line with our expectations for the second quarter and first half of the year, and we remain on track to meet our outlook for the full year,” said CEO Philip Jansen.

“We’ve invested to strengthen our competitive position. We’ve accelerated our 5G and FTTP rollouts, introduced an enhanced range of product and service initiatives for both consumer and business segments, and announced price and technology commitments to deliver fair, predictable and competitive pricing for customers.”

Capital expenditure for the first six months of 2019 was £1.88 billion, up £225 million year-on-year, although this excludes the grants from the Broadband Delivery UK (BDUK) programme. Such increase should come as little surprise as the team has been enthusiastically shouting about 5G launches across the UK (now up to 20) as well as new homes which are being passed with fibre (23,000 per week) in pursuit of the Government’s lofty full-fibre goals.

In years gone, BT looked like a telco which was defined by its challenge to Sky in the content market, while few could recognise the synergies with EE. The BT of today looks very different, thrusting the connectivity assets to the centre of the business. With the convergence business model proving its worth in various European markets, see success at Orange for evidence, BT is taking inspiration.

With the fixed network in the UK, which is being aggressively fibred-up, 30 million mobile subscribers, five million wifi hotspots and a new TV proposition to be launched at some undefined point, the cross-selling opportunities are abundant should BT be able to nail the experience on the assets. This seems to be the focus of investments under Jansen, instead of going for the glamorous, the team is concentrating on delivering the core connectivity experience and then bundling on additional added-value options.

Across the business, the Average Revenue per Consumer (ARPC) for broadband remained relatively flat at £38.5 per month, while postpaid mobile decreased to £20.8, down 5.5% though as this has been attributed to new regulation and the SIM-only trends it is nothing too be too concerned about. Interestingly enough, the number of Revenue Generating Units (RGUs) per household has increased to 2.38. This is where the convergence strategy could make a very positive impact.

As a business model, convergence is more efficient and creates higher customer loyalty and NPS. Bundled at a suitable price-point, and it looks like a very attractive offer to steal subscriptions from rivals also. However, experience does have to be very high across the entire portfolio, hence the increased spend on the network over recent months.

This is where BT could be a very interesting business over the next couple of months. The ‘Halo’ converged products could attract interest, especially when the hotspots are bundled in also. Rivals might be able to compete with BT with a few bundles, but no-one can offer the same breadth across mobile, broadband, wifi and content. This is a massive advantage, and BT should be shouting and screaming.

We might have to wait a couple of months before the refreshed TV proposition is fully polished, but this is another reason why no-one should worry too much about the slipping revenues for H1. BT is still lining up the various pieces before an aggressive push with the full convergence offer. It has been suggested the TV proposition will not be ready until the new year.

With its assets, BT should be untouchable. It still has work to do on the fibre rollout, 5G deployment, finalising the TV offer, improving the wifi experience and aligning the BT and EE brands, but the ‘Halo’ converged offer could create some serious noise.

2019 First Half Financials
Total Revenue £11.467 billion (1%)
Profit before tax £1.333 billion n/m
Profit after tax £1.068 billion n/m
Basic earnings per share 10.8p 2%
Capital expenditure £1.882 billion 3%
Business units
Consumer £5.194 billion (1%)
Enterprise £3.055 billion (5%)
Global Services £2.196 billion (6%)
Openreach £2.356 billion n/m

n/m = not-meaningful