TalkTalk shares hit by £75 million loss and weak outlook

UK telecoms group TalkTalk saw its shares drop significantly upon announcing a negative set of half-yearly earnings.

The data-points most troubling to investors will have been a loss before tax of £75 million, which compares especially poorly with a £30 million profit in the same period last year. To add to the gloom EBITDA was down to £95 million from £144 million a year ago and the company is guiding that full-year EBITDA will be at the low end of guidance.

TalkTalk shares fell by as much as 17% on the announcement, but at time of writing has recovered somewhat to be down more like 10%. One reason for this could be that the company’s claim that these numbers were exceptional due to the strategic measures being put in place, including a change to its MVNO, and a general drive to reposition itself as the leading UK value ISP. Maybe, on reflection, investors were OK with TalkTalk taking a short term hit to give its cunning plan a kick-start.

“When we simplified and reset the business in May we said our priorities were growth, cash and EBITDA, in that order,” said Tristia Harrison, Chief Executive of TalkTalk. “The first half performance shows we are delivering on that plan. We have now delivered a third consecutive quarter of growth in our broadband base, with both Retail and Wholesale bases growing; returned to on-net revenue growth; and delivered lower churn than a year ago.

“Our clear value proposition is resonating strongly against an uncertain economic environment and underpins our plan to simplify and focus all our investment in delivering affordable, reliable fixed connectivity to both homes and businesses”.

“We expect to step up our planned investment in growth in the second half, as we take advantage of the strong demand we are seeing for our fixed low price plans; fibre take up and affordable propositions in both our residential and B2B markets. Our revised strategy of focusing the business on fewer, clearer priorities is re-establishing TalkTalk as the value provider of choice in the UK fixed connectivity market.”

You can see the key numbers below. There seem to have been some exceptional hits involving the MVNO and for general restructuring, but TalkTalk is also spending more on its network and on subscriber acquisition in spite of declining revenues. Even allowing for exceptional items TalkTalk seems to be struggling to balance the books right now and investors are unlikely to cheer up until it does.

talktalk full year outlook

talktalk q3 p&l

talktalkcosts

Resurgent Vodafone upgrades outlook on solid European performance

UK operator group Vodafone is having a good few months, culminating in the first upward revision of its organic EBITDA growth for ages.

It’s all down to strong growth in Europe, apparently, with mobile, fixed and enterprise all heading in the right direction. India is still a bit of a struggle but even there Vodafone reckons the worst of the Jio-induced carnage may be over. The result is anticipated organic growth of around 10% for the 2018 financial year, up from the previous guidance of around 6%.

“In the first half of the year we have maintained good commercial momentum,” said Vittorio Colao, Vodafone Group Chief Executive. “Revenue grew organically in the majority of our markets driven by mobile data and our continued success as Europe’s fastest growing broadband provider.

“Enterprise revenues continue to grow, led by our Internet of Things (‘IoT’), Cloud and Fixed services, and for the second year running we achieved an absolute reduction in our operating costs. As a result, we are able to report a strong financial performance, with substantial EBITDA margin expansion and profit growth, and we are raising our financial outlook for the year.

“In India competition remains intense. There are however signs of positive developments in the Indian market, with consolidation of smaller operators and recent price increases from the new entrant. We are making good progress in securing regulatory approvals for our merger with Idea Cellular and in monetising our tower assets.

“In the second half of the year we will continue to implement our strategic initiatives, including fibre infrastructure expansion in Germany, Portugal and the UK; our entry into the consumer IoT market with the launch of “V by Vodafone”; and the ‘Digital Vodafone’ programme designed to enhance our customers’ experience, increasing revenues and cost efficiency.”

vodafone guidance

Other factors contributing to the upward adjustment, which is apparently the first one for a while, include the delayed entry into the Italian market by Iliad, better than expected return from the introduction of handset financing in the UK and a one-off payment from Openreach after it was found to have delayed compensation for installation delays. Those three factors will contribute an extra €300 million to the 2018 EBITDA total.

Investors seem pleased with this upgrade, with Vodafone shares up 5% at time of writing. In the further CEO comments there was a lot of emphasis put on Vodafone’s fibre efforts in Germany and the UK, as well as some of its recent UK consumer-facing initiatives. Vodafone also reckons its NPS has finally recovered from the billing system cock-up that blighted its UK operations for the last couple of years.

Lack of brotherly love leaves RCom circling the drain

It’s a tale of two billionaire brothers having very different experiences in the telco space. Reliance Jio is flying high, its quarterly report implies Reliance Communications is dying a slow and painful death.

The numbers are not pretty at all. Total revenues for the quarter stood at roughly $407 million, compared to $768 million in the same period for 2016. Reliance Communications also lost $431 million this quarter, compared to a profit of roughly $9 million in 2016. The only number which increased was the one you didn’t want to, expenses; up to $839 million from $804 million.

This makes for a company which is in a lot of trouble; when the loss column is larger than the total revenue column, you have to start wondering what the point is. That said, doing some simple maths, this should come as little surprise. During this quarter in 2016, expenses exceeded total revenues, though the company made a profit. Some might argue the profit didn’t come from a solid market performance, but creative accountants, therefore there was no foundation for the company to mount a defence against an aggressive disruptor.

The Indian furnace is starting to get burn, and it starting to look like Reliance Communications can’t handle the heat. And just to add fuel to the flames, the team has also said it has missed two bond repayments in recent weeks. Things are not looking healthy.

Reliance Communications will blame Mukesh Ambani, the brother of its own CEO Anil Ambani, and his Jio army, but it has been quite clear for some time this is not a telco which is in a healthy position. Perhaps all big bro did was to highlight the quite glaring inadequacies in the Reliance Communications business. This could be confirmed by a number of different factors.

While there has been a steady decline in share price over the last three months, as the Reliance Jio business continues to tear up the Indian rule book, this is only the tip of the iceberg. Share price in Reliance Communications has been heading towards for more than four years. It is 92.59% lower than September 2013, the highest point in the last five years.

Subscriptions have also been heading in the same direction. According to Ovum’s WCIS, total subscriptions stood at just over 100 million in December 2015, though this has steadily decreased to 77 million as of this September. Over the same period, market share has declined from just below 10% to 6.4%.

One of the reasons India was prime for pricing disruptive is customer stickiness. While mature markets have transferred many of their customers to the more reliable and secure postpaid tariffs, the majority of India’s population has remained in the prepaid space. It makes gaining customer subscriptions easier, as they are not tied into 12-18 month contracts, but also means a business is much more vulnerable to disruption.

Going back to September 2015 again, Reliance Communications proportion of postpaid stood at 6.63% which was above the country’s average (5.44%), but still left the business at risk. Moving forward to today, the country’s average has increased to 7.8%, as has the split for many of Reliance Communications’ rivals. However, its own proportion of postpaid customers has decreased to 3.95%, leaving it in an even more precarious position, susceptible to the risk of more customers being easily stolen.

Combining all these factors reveal a business which has not been in good shape for some time. Big bro might have started stealing the life jackets, but Reliance Communications has been circling the drain for a while.

Idea earnings show merger can’t come soon enough

Idea Cellular has reported its latest quarterly figures and they don’t make for good reading. The Vodafone merger seemingly can’t happen quickly enough.

Total revenues for the quarter demonstrated an 8.6% quarter-on-quarter decline, while year-on-year revenues decreased by an breath-taking 19.7%. After making a handsome profit of $660 million in the same quarter of 2016, the team swung to a loss of $180 million for the last three months. Market share has also declined from 19.4% to 18.9% over the 12 month period. Not many of the figures are heading in the right direction.

“While seasonal industry slowdown followed the past trends, as always ‘July to September 2017 quarter’ impact on Idea’s subscribers and revenue loss was more pronounced given its higher share of rural subscribers,” Idea said in a statement.

“This coupled with continued pricing pressure and GST change, resulted in overall company revenue declining to Rs. 74,654 million, a reduction of 8.6% compared to Rs. 81,665 million in Q1FY18.”

The decline in the fortunes of not only Idea, but the other big boys in Airtel and Vodafone, does not necessarily demonstrate poorly run businesses, more they weren’t ready for any change. This might be considered just as bad, this is the digital age after all where flexibility and agility are prominent buzzwords, but they were just completely un-prepared for any disruption to a stable pricing structure. Few people are ready for disruption, but looking back, many would point to perfect conditions for disruption in India.

Since the introduction of Reliance Jio, Idea has moved towards the unlimited voice and more generous data bundling options, but as you can probably see, the business is operationally not ready for it. If it was, the swing in fortunes over 12 months would not be so severe.

Perhaps the merger, and the efficiency benefits which scalability will offer, cannot come soon enough for a company which seems to be on the tip of a negative trend in profitability. A $180 million loss might sound bad right now, but it would surprise few if this continues to go downwards.

On the merger, things do seem on track. The pair have started collecting green lights from all the relevant regulatory bodies. Approval is still needed from the National Company Law Tribunal, and a few other organizations, but there haven’t been any major roadblocks so far.

Things are not going well right now, but maybe that doesn’t matter that much. The new combined business will create the country’s largest operator, and after this morning’s announcement to sell the tower businesses to ATC Telecom Infrastructure, the pair will be $1.2 billion richer. Perhaps it is a case of close the eyes, cover the ears and hold the breath, until the merger has been completely cleared.

Ain’t no party like a Softbank party

Not even the end of its relationship with Deutsche Telekom could dampen spirits at the Softbank party, as the team reported $3.46 billion in profit, up 21% year-on-year, for the last quarter.

It’s domestic telecom business was down slightly for the first half of this year, Sprint was actually up compared to the same six month period of 2016, the Yahoo assets were also up, there aren’t any year-on-year stats for ARM just yet and the Softbank Vision Fund also brought in a healthy amount of cash. Aside from a messy break up with Deutsche Telekom, you could say it has been a very satisfactory six months for Softbank.

Talking about the potential Sprint/T-Mobile US merger, lets address the elephant in the room before it starts to get uncomfortable. It’s officially over and there is no going back now.

Softbank and Deutsche Telekom could agree on a number of things, and it is now officially over. Whether it was a disagreement over the controlling voice in the boardroom, or a valuation of the business or maybe there was fear of regulatory resistance to the deal, its off. The rumours were there last week, as were whispers of Softbank dilly-dallying with Charter, but some might have assumed these were mind games by Softbank CEO Masayoshi Son in an effort to gain some sort of advantage in negotiations, but alas no.

What this means for the Sprint business moving forward we’re not too sure. Quite frankly, Sprint needed this deal more than T-Mobile US did. T-Mobile US is a business going stronger every day with a solid network, a good relationship with customers and an agile marketing team, while Sprint is losing market share consistently. Softbank has announced it will increase its stake in the US telco from 83% to 85%, though there needs to be a serious shake up at Sprint if it going to reverse fortunes.

In terms of the financials, Sprint actually had a positive six months if you take it at face value. Sales were up for the six month period, though this is primarily down to a solid first quarter. The company hasn’t had a profitable year in more than a decade, and fortunes are not particularly appealing. Son has a knack of making money so we wouldn’t rule a turnaround out completely, but it will be tough going against the top three who are all heading in the right direction.

And while the consolidation ambitions of the business are not exactly teeming with success for the moment, another difficult issue is starting to appear on the horizon; debt. Roughly half of Sprint’s $38 billion in debt is coming due over the next four years. While a Softbank influenced Sprint might have slowed the mass exodus of customers, investments in the network are badly needed. Add the debt onto network investments, and Softbank might find itself forking out quite a bit of cash to turn this business around.

Looking at other areas, Softbank’s domestic Japanese telco business took a big of pinch on sales, though subscriber numbers are on the increase, for both mobile and broadband, and the churn rate is also heading in the right direction. Discounts for the mobile business have been on the increase over the last six months, which has led to a decrease in both telecom and service ARPUs, explaining the slight difference in revenues.

On a positive note, things seem to be going well at ARM, though comparable statistics from 12 months ago are not available. Next quarter will give a better idea of how the Japanese influence has been received by the chip-maker. Another bright spot is the Softbank Vision Fund, which made gains of roughly $1.7 billion on its investments over the first six months of the year. Makes up for the messy break up we suppose.

Q3 2017 global smartphone shipments – Xiaomi’s resurgence continues

Chinese smartphone vendor Xiaomi’s rollercoaster ride took another positive turn in Q3 2017 with shipments increasing by 73% year-on-year.

The overall market is looking surprisingly buoyant, thanks mainly to the Jio-inspired rush to smartphones in the massive Indian market, which currently has much lower smartphone penetration than China and developed markets. Strategy Analytics reckons the global smartphone market grew by 5% to 393 million units shipped in the quarter.

Among the vendors the biggest beneficiary of this growth seems once more to have been Xiaomi, which experienced is second quarter running of rampant growth. The big Chinese vendors – Huawei, Oppo and Vivo all experienced double-digit growth, Samsung seems to have recovered its mojo after the trials of the past year or so and Apple put in a solid performance, considering loads of people are probably waiting to get hold of the iPhone X. The big loser seems to be the long-tail as the global smartphone market increasingly consolidates itself around the top six vendors.

The global smartphone market has settled into a steady rhythm of single-digit growth this year, driven by first-time buyers across emerging markets of Asia and upgrades to flagship Android models in developed regions such as Western Europe,” said Linda Sui of SA.

“Xiaomi soared 91 percent annually, taking fifth place with 27.7 million shipments for a record 7 percent global smartphone marketshare in Q3 2017, up from 4 percent a year ago. Xiaomi’s range of Android models, such as the Redmi Note 4, is proving wildly popular in India, snatching volumes from competitors such as Lenovo and Reliance Jio. Xiaomi is outgrowing almost everyone, and if current momentum continues, Xiaomi could catch or overtake Oppo, Huawei and Apple to become the world’s second largest smartphone vendor in 2018.”

“Samsung shipped 83.4 million smartphones worldwide in Q3 2017, rising an impressive 11 percent annually from 75.3 million in Q3 2016,” said SA’s Neil Mawston. “This was Samsung’s fastest growth rate for almost 4 years. Samsung’s growth is being driven by strong demand for its A, J and S series models across Latin America, India and elsewhere. Apple grew a below-average 3 percent annually and shipped 46.7 million smartphones for 12 percent marketshare worldwide in Q3 2017, holding steady from the same level a year ago. Despite a delayed launch of the flagship iPhone X model, the new iPhone 8 portfolio was relatively well received in major countries such as Germany and China.”

One of the reasons the vendor picture is so fluid is that a lot of the volume seems to be coming from mid and lower-tier Android devices in developing markets like India. There you still have so much latent demand for smartphones that if a vendor is in the right place at the right time it can shift as many devices as Foxconn can churn out.

Q3 2017 global smartphone shipments

Apple bags $52 billion with more to come at Xmas

What do you get when you sell more iPhones, iPads and Macs than ever, as well as the highest ever number of subscribers for your services products? A massive pile of cash, that’s what.

Apple might not have done anything especially innovative or ground breaking for a while, but that doesn’t seem to have stopped it cult-like customers flooding to Apple stores around the world and handing over obscene amounts of cash. And this might only be the tip of the ice berg; Christmas is around the corner and that only means one thing for Apple.

“We’re happy to report a very strong finish to a great fiscal 2017, with record fourth quarter revenue, year-over-year growth for all our product categories, and our best quarter ever for Services,” said Tim Cook, Apple’s CEO.

“With fantastic new products including iPhone 8 and iPhone 8 Plus, Apple Watch Series 3, and Apple TV 4K joining our product line-up, we’re looking forward to a great holiday season, and with the launch of iPhone X getting underway right now, we couldn’t be more excited as we begin to deliver our vision for the future with this stunning device.”

$52.6 billion in total revenues, an increase of 12% from the same period in 2016. The iPhone brought in $28.8 billion, iPads generated $4.8bn and Macs bagged $7.1 billion. The services division accounted for $8.5 billion, and even sales of the iPad were up. The money made from any one of these individual products would be on par with many of the world’s largest tech companies; leading the planets largest flock of sheep is big business.

And it’s only going to get bigger.

Over the next three months the team expect revenues between $84 billion and $87 billion, gross margin between 38% and 38.5% and operating expenses between $7.65 billion and $7.75 billion. In short, it is going to continue to cultivate some of the most loyal brand enthusiasts and continue to make a ridiculous amount of cash.

“This was our biggest year ever in most parts of the world with all-time record revenue in the United States, Western Europe, Japan, Korea, the Middle East, Africa, Central and Eastern Europe and Asia,” beamed Cook.

But what to look forward to over the next couple of years?

Apple has seemingly reset the standard on how much to charge for phones. Don’t expect the price to drop now the team has demonstrated you can charge that much and the iZombies will continue to flood the ‘genius’ bar. Services is a big area, arguably the main growth engine for the future, and the team claim to be on target to deliver $50 billion in revenue by 2020. Smartwatches will continue to be an area which the team tries to crack. And augmented reality is going to be big.

“The reason I’m so excited about AR is I view that it amplifies human performance instead of isolates humans,” said Cook.

“ I see things that the consumer’s going to love because it’s going to change shopping. I see things that consumers will love on the gaming side and the entertainment side. I see business-related AR apps as well. They’re going to be great for productivity and between small and large business. And I see apps that makes me want to go back to K-12 again and repeat my schooling.”

We’ll let you make your mind up about Virgin Media’s numbers

If you listen to the Virgin Media team, it would appear to be a pretty positive quarter, but not all the numbers are heading in the right direction.

The team reported a 15% lift in revenue generating units, but how many of these are convergent customers is less clear. For full disclosure, 92,000 net additions of RGUs is the official line, but how many of these are bundled services to individual customers we were not able to figure out.

In terms of the financials, total revenues across the UK and Ireland stood at £1.236 billion, a slight increase from the same period in 2016, while operating income more than halved year-on-year to  £36.6 million.

The total number of broadband customers in the UK and Ireland now stands at 5.451 million, with video at 4.119 million customers and mobile at 3.019 million. The total number of RGUs throughout the group is 14.3 million, with the average customer taking 2.45 services from Virgin Media, a slight dip from 12 months ago, but still pretty good when compared to other telcos in the UK. Of those who have a bundled offer, 62.3% are in the triple-play bracket.

Of the 5.451 million broadband customers, Virgin Media claims 64% are now taking speeds of 100+ Mbps, compared to 51% in same period of 2016. It is unknown how many of these customers actually achieve the speeds promised by the telco, but your correspondent (a VM customer) would not be counted as one of those who do.

On the mobile side of things, there were very mixed fortunes. The most lucrative postpaid side of the business attracted an additional 15,000 customers, though these gains were offset by losing 31,000 on the prepaid side. Postpaid might be more attractive, but this is not a favourable ratio.

Good, bad or ugly, we’ll let you make up your mind.

Tech giants’ profits hit by exceptional circumstances

Qualcomm’s numbers took a hit from its dispute with Apple, while Facebook says investing in security to prevent abuse will impact profits.

The ongoing aggro between Qualcomm and Apple was bound to feature prominently in the former’s earnings announcement. The analyst call was dominated by the issue as the equity world tried to get a better sense of how the matter was going to play out, not only with Apple but with Qualcomm’s entire licensing business model.

This was made all the more inevitable by Qualcomm’s refusal to directly mention the matter in its headline canned comments. “We continue to see strong growth trends for global 3G/4G device shipments and are focused on protecting the established value of our technologies and inventions,” said Steve Mollenkopf, CEO of Qualcomm. “We are leading the industry to 5G and are well positioned with our product and technology leadership to continue our expansion into many exciting new product categories, such as automotive, mobile computing, networking and the Internet of Things.”

As you can see from the first table below, all Qualcomm’s headline numbers were all down year-on-year, with profits especially going down the toilet. It should be noted that Qualcomm booked a $778 million charge for its Korean fine in this quarter. The second table indicates that while the main tech business (QCT) is still doing well, the licensing business (QTL) is letting the team down somewhat.

Qualcomm q3 2017 table 1

Qualcomm q3 2017 table 2

Over at Facebook it’s all about abuse of the platform, especially by those with a hidden political agenda, these days. The tech news has been dominated by stories of shady Russian interests buying social media ads first to influence the last US general election, then stoking FUD about the President, with the apparent aim of dicking about with the US electoral system just for a laugh.

By far the most influential social media platform is, of course, Facebook, and it has come under a lot of pressure to take ownership of this problem, as well as contemporary ill-defined social media offenses like fake news and hate speech. It looks like the defence that it’s a platform rather than a publisher isn’t holding water anymore, so Facebook is sensibly trying to be seen to be more proactive.

“Our community continues to grow and our business is doing well,” said Mark Zuckerberg, Facebook CEO. “But none of that matters if our services are used in ways that don’t bring people closer together. We’re serious about preventing abuse on our platforms. We’re investing so much in security that it will impact our profitability. Protecting our community is more important than maximizing our profits.”

It’s a shame that Zuck decided to end on such a false dichotomy as Facebook’s profits are clearly derived from its community. It is the unfortunate nature of the shareholder system that most companies feel they have to constantly increase profits for fear of their share price declining if they don’t. But sometimes short term profits have to take a hit in order to safeguard the long-term prosperity of the company.

Amazon is a great example of this strategy paying enormous dividends (only metaphorically). The fact that both Qualcomm’s and Facebook’s shares were up at close of play indicates that the markets are being grown up about exceptional challenges faced by both of these companies. After all, they are still making loads of money, with Facebook almost doubling its net income for the quarter to $4.7 billion.

BT tries to find a way through the content maze

BT is a business under a bit of pressure right now, and the latest quarterly figures won’t do much to ease the headache developing in CEO Gavin Patterson’s office.

From a financial perspective, total revenues are down 1% to £5.949 million, while profit before tax stood at £666 million and basic earnings per share down 7% to 5.3 pence. None of these numbers are going to make investors particularly happy, which might have a few BT executives sweating. The new Chairman Jan du Plessis, a man known to be a bit of a tough cookie, is about, and it wouldn’t be a massive surprise if we saw a few changes over the next couple of months.

That said, the performance of the overall business shouldn’t be the biggest concern of Patterson and his cronies. Sure, the number of mobile subscribers is lower now than it was 12 months ago, but broadband subscriptions are up, as are ARPU’s across the board. Where the team should be a bit more concerned is around the content business.

“More than double consumer line losses is a worry and TV net additions was extremely disappointing,” said CCS Insight’s Paolo Pescatore.

“More so in in light of the new European football season given the huge focus on sports and TV services. Despite its strong assets, the company is struggling to cross sell more services into its existing subscriber base. Marc Allera (who will take over as the CEO of the new consumer business) faces some tough decisions with the integration of the consumer units and the forthcoming Premier League rights auction.”

Over the course of the last three months the TV business adding 7,000 subscriptions. Now when you put 7,000 people in a room, you won’t have much space left over, but in the context of a challenger content business, such small gains will not be well received.

This is an area which was a bet a couple of years ago and it was an initial success. BT decided to step up the game and challenge Sky in the football world, which was seen by some as a sensible move and by others as suicidal. To be a major player in the UK sporting world, you have to have football. BT spent big, securing the Champions League and the Premier League. It was supposed to be the rise to the top, the chance to usurp Sky.

Having outbid Sky for the Champions League (a deal worth £1.18 billion), BT then paid £960 million for 42 Premier League games a season. That is a lot of money, for some pretty low returns this quarter. Whenever you get a new boss into the office you want to do your best to impress; with these figures, senior guys in the BT offices have some very good reasons to be worried. The football bet does not seem to be paying off.

Perhaps more worryingly is the future of football. BT could argue it has laid the foundation for future growth, but it will have to dig deeper into the bank account to retain the rights. While Sky is very likely to put up some stringent competition, rumours are the OTTs are looking into some sort of global distribution deal as well. Increased competition, fragmentation and cost to play are not trends the BT team will want to see bed in.

But this is only the tip of the iceberg. BT is facing some serious issues all over the place. While its sporting platform is pretty good, to make further waves it is going to have to up the ante on the number of games it has, while also making an assault on Sky’s dominance on Sunday programming. Pescatore thinks this could be a game-changer for the sporting landscape, but it might end up costing an extra £1 billion. You have to wonder where this money is going to come from.

Elsewhere in the content business there needs to be further consolidation as the team are currently supporting two competing platforms in EE TV and BT TV. Work is also needed outside sport, as the overall content platform is sub-standard compared to Sky. There is more to video than sport, and a relatively solid position in the sports market does not seem to be translating elsewhere. BT needs to start spending in other genres if it wants to be considered a real content player alongside the likes of Sky and the OTTs.

Looking at the threats in the sport world, it isn’t just the powerful OTTs where the worry is, smaller companies such as The Perform Group, which owns the DAZN platform, are starting to make waves. Pescatore highlighted to us DAZN is doing a great job of sweeping up various rights and is providing a pretty comprehensive alternative to what we would consider the traditional channels.

Overall it is a bit of a glorious mess, and this seems to be translating over the convergence side of things as well. This quarter the team has said the average number of services held by each customer is 2.01. This is up from 1.95 12 months ago, but progress has been very slow. BT has all the assets for an effective quad-play, but nothing has come to fruition to date. This is another area where the team need to spend money.

The to-do list is starting to get quite big, and the bills are starting to look quite expensive. You have to wonder where BT is going to get all this cash to make content and convergence work.