BT's traditional telephone business continues to take a beating in the face of an increasingly competitive marketplace. Turnover from traditional products declined by 8 per cent on the year as more people opt for rival Carrier Pre-Selection (CPS) services and use their mobiles more often. Throw in the fact that BT's domestic customers are spending less each year as lower prices kick in and the scale of the problem facing BT really hits home.
Which is why BT's focus on broadband is so key to the telco's future progress. Publishing its financial results for the three months to the end of September, the strong growth in "new wave" (broadband, ICT, mobile) continued to gather pace growing 36 per cent to £1.03bn.
This revenue stream now accounts for 22 per cent of BT's total turnover compared to 17 per cent in Q2 last year. ICT turnover grew by 20 per cent to £699m and looks set to increase still further with the announcement this week that it is to buy global data network outfit Infonet for £520m. Broadband turnover jumped 88 per cent to £199m.
At the end of September, BT Retail (through its BT Broadband and BT Yahoo! brands) had 1.28m DSL connections while the total number of wholesale DSL lines was 3.3m. Despite all the offers and money BT throws at broadband, it is still seeing its market share slide.
BT Retail's overall DSL market share is now below 40 per cent even though it set a target earlier this year to maintain a "40 per cent plus" slice of the action. And its current share is expected to slide still further on news that it is currently only signing up 30 per cent of new DSL connections squeezed by rivals AOL UK and Wanadoo.
Reporting Q2 results today total BT turnover was up 1 per cent higher at £4.6bn while pre-tax profit jumped from £507m last year to £567m.
Said BT chief exec Ben Verwaayen: "The 36 per cent growth of new wave revenues helped us deliver the best underlying revenue growth in almost three years. We now have more than 3.3 million broadband DSL customers, with the latest million connections achieved in less than six months, which is a new connection every 15 seconds."
Of more immediate concern for BT is Ofcom's soon-to-be-published telecoms review due out later this month. Addressing business leaders at the CBI (Confederation of British Industry) conference in Birmingham earlier this week Mr Verwaayen warned that investment in telecoms would be hit if Ofcom did not enable sufficient reward from such (in other words BT's) investment when the regulator publishes its review later this month.
"At this moment Ofcom is the most powerful and significant organisation in the UK, as we wait for the next phase of the Telecommunications Strategic Review. What it decides will be profound for your businesses and organisations. If it gets it right, we will see investment in this area accelerated. Get it wrong – even if unintentionally – and the impact will be clear to see in a year or so’s time, with investment cut back and the UK missing out on a leadership position," he said. ®