Tuesday, March 17, 2015

Is it possible to fix BT?

Ofcom has started another review into how BT effects the UK telecoms market, so 10 years after the first review. At the same time the CMA are looking at it's plans to buy EE.

This regulatory overview gives a chance to review how BT operates in the UK and what could be done to improve things.  Since the Privatisation of British Telecom the market has failed to offer an effective competitor rather it has seen a race to the bottom.  

Consumers in the UK have been very poorly served when it comes to keep up with Continental rivals when it comes to Infrastructure.  Whilst the cable industry did attempt to build out an alternative network it failed to do so with a sustainable business model and so we are faced with the situation that more households are not pasted by Virgin Media than are. The provider of the last resort is thus BT and as such is highly regulated with an obligation to wholesale network access to rivals.

Thirty years ago Britain got its first mobile networks, one of those had access to enough rooftops to build infrastructure needed up until 2000 thanks to it's only property portfolio and captive business accounts.  The other was Vodafone, a small start up based at the end of the Thames Valley with a sleepy parent focused on the defence industry.  Yet because BT focused on doing things that impeded its rival rather than do what was needed they failed so sceptically that they were forced to divest the Mobile business.

When it comes to the Broadband business it has repeated the same mistakes, rather than invest in the Network so that it was the best possible it has played games with rivals seeking to do just enough to avoid sanction.  We thus find ourselves in the UK operating behind the curve when it comes to digital services because of slow speeds and over capacity.

The last review took Ofcom two years to complete and saw the creation of Openreach as an effective remedy. Hindsight has proved that the actions have not worked and BT rivals are now asking for the business to be spun off from it's parent in an effort to improve capital investment. Such a option will not solve the investment lag rather it will make it worse.

I saw recent analysis of the performance of BT shares over the last fifteen years which highlight that the Management had managed to offer a negative return of some 20+% one of the worse performance with the FTSE 100. Thus shareholder seem just as ineffectual as regulators to force the Executives to run the business.    

Monday, March 02, 2015

GSMA Mobile World Congress 2015

So today the Mobile World Congress officially opened in Barcelona and I fear that it's days are numbered as an event because the Circus that is the exhibition is now too big and the Conference of little relevance to the Mobile Network Operators who make up the GSMA. For many MWC15 started on Sunday with a number of handset makers holding Press Events to launch new devices.

The GSMA in an effort to raise funds has grown the exhibition event to a size that it is no longer controllable.  Yet it has failed to attract the likes of Apple to attend either to exhibitor or talk at the conference. Every year the GSMA attempts to set the agenda and fails, it leaves me feeling disappointed and questions just what datapoints they select in an effort to predict the future.  This year they are focusing on the Internet of Things which I have to ask just what does that have to do with Mobile Networks over the next 5 years?

Just before Telecoms World collapsed we saw Internet Firms descend on Switzerland spending $1M+ on stands getting all the attention rather than presentations on the Conference stage.  I fear that we are witnessing the same with MWC.  At the end of this week I am sure that the GSMA will announce ever more visitors attended, more press attended and the whole thing was a success.  I think I will say that the event has become somewhat like a Conservative Party Conference all be it on a large scale. We took a trip to the seaside to walk around a massive soulless space and feel that we are close to the powerful only to discover that we have no influence let alone power to shape the future!  

Thursday, February 05, 2015

So BT have finalised a deal for EE

We woke this morning to the news that BT had agreed terms to acquire EE.  I have to say that if feels that I am in some strange fantasy world rather than one that understands the massive risk such a deal is.

Those that make a living as public analysts have all been very quick to jump on the bandwagon that this is wonderful news.  I feel somewhat differently.

If I were a shareholder in Orange I have to ask just how owning shares in BT is going to fund purchases in France aimed at consolidation?  It is also difficult to see how DT can say it got a fair price for finally exiting the UK mobile market (they bought One-2-One for £8.4bn).

But lets look at just what BT have bought and how they are unlikely to be able to execute an strategy that offers a return on the investment.

BT back in the retail game.

Part of the "prize" for BT is the fact that they will take over the stores of EE and thus have a presence on the High Street through which they can upsell other services.  BT used to have retail stores that they closed because they could not make them work.  I do not think that they have significantly changed so that they can offer a presence where you can talk people into Quad play services. If they can sell Quad play then it will be on the basis of discounting rather than quality.  

What can BT do will all the 4G Spectrum?

In the 4G auctions BT purchased spectrum that it was going to used for fixed mobile services and now has spectrum refarmed and purchase by EE.  The regulator will have demands about forfeiture of some of the Spectrum. Whilst divisions other than BT Retail will have requirements for Mobile Spectrum of its own, can these be met by the new holding?

BT's ability to invest in Fibre

If BT can find the money to buy a Mobile asset then why can't it find the money to better roll out Fibre Broadband, is likely to be the simplistic view of politicians.  Thus demand that BT deals speedily in building out Fibre to the 50% of households not covered by Virgin's footprint will increase.  Alongside the calls for faster upgrades to the Fibre estate will be demands that they wholesale access prices fall.

Talent blackhole when it comes to Mobile

BT does not have the Executive experience required to manage a Mobile Operation and the Management at EE is unlikely to want to work for BT.  This means that once the deal closes they will face a mass exit of know how just at a time that they need to up skill. If they wish to stop that then they will be over paying, if they don't then they will discover just how complex managing the build and maintenance of a Mobile Network is.

Everything just got a lot more expensive for BT

Anyone with something to sell to BT has just seen that they are happy to pay top prices.  So in order to close any significant move they will discover that the price has just risen by 15-20%.  If they can spend £12.5bn for EE they must have the money for ...

BT Executives are in my experience very far from reality.  They might feel that they are offering the consumer an enhanced product range that they should be happy to pay for.  The reality is that for the last fifteen years telecommunications has been a commodity that the user demands at an ever decreasing price.  Look at the UK retail space and you see a blood bath, experienced hands like Tesco, M&S and Topshop are hurting an BT thinks that they can be successful. BT adverts for Broadband services may win awards and get people talking but they do not seem to get people signing up for service.  If you pay out £12.5bn how long can you offer BT Sport free of charge to your Consumers? What will the price be and how many will pay it?

Rather than telling the CEO and Chairman that they have struck an excellent deal if I would a significant shareholder I would be selling off my holding as it is unlikely that I will see an increase in dividends from helping Germany and France exit the UK Mobile market.

Sunday, December 21, 2014

More thoughts on the BT purchase of EE

Reading today's Telegraph I start to see analysis that BT returning to the Mobile Market might not be a great idea. Whilst this is a start I don't think that it highlights the problems such a deal presents to BT.

The investment that in buying EE BT is making is 3 times that they have made in Superfast Broadband AND Sport.  This is just the table stakes, having joined the Mobile poker table they will have to double down if they are to fulfil the terms of the 4G Spectrum Licience.  This is at a time when the sector is shrinking rather than growing.

The way that EE was formed has seen the culture of the business very much free of Civil Servant style management, something very different to BT.  Thus in buying a Mobile Network will the Executives be brave and allow it to stand alone, would they be allowed to by the Regulators?  If they place the mobile unit as a subsidiary of BT Retail I predict that many of the members of staff that make the business work will exit in frustration if they can be persuaded to join in the first place. Most are likely to seek redundancy before the transaction closes.

In Gavin Patterson BT have a CEO who is all about Marketing with little understanding of Engineering.  This could well be a problem when it comes to developing products that utilise the new Mobile Asset.  At this moment in time BT are building three 4G core networks for use by customers in the UK thanks to the structure placed upon it by Regulation. These networks will be used to deliver different products none of which have a proven demand.  The last time BT owned both fixed and mobile assets it saw potential for converged mobile phones and invested heavily in projects such as the BT Bluephone which were commercial flops. I fear that they did not learn for such follies and will once again squander millions that could be spent upgrading fixed networks or boosting the income of sportsmen and women.  

Monday, December 15, 2014

BT buying a mobile network

Yesterday The Sunday Times ran another story on BT buying a Mobile Network for £10bn.  The story outlined the options faced by the CEO and his team without asking the questions a shareholder might want answered.

If the Mobile sector offers such riches to BT why are the two largest Networks prepared to pull up sticks and exit the market?

How do the Customers of EE or O2 overlap with those of BT and are they likely to remain given a change of ownership?

If BT were to buy either Network what will be the response of OFCOM when it comes to regulation?

After 14 years not managing Mobile Infrastructure Assets does BT have the Management expertise needed to make a return on the Investment given the vast changes over that period?

On the basis of just these questions then the rational response is thanks for the opportunity but I think BT is better served NOT doing the deal. Those likely to benefit from any deal in the short term will be Investment Bankers, Lawyers and Accountants who will be able to charge large fees for the transaction.  In the medium term the beneficiaries are likely to be the rivals of BT.

If the deal were to work for BT it would have to be able to convince the Consumer that buying all your connectivity requirements from a single provider is worth paying a premium for rather than a discount. It would need to hire Executives capable of building and running Mobile Networks and then given them the space and power to do so rather than hamstringing them as a subsidiary of an Operating Unit. Whilst spending vast sums on Marketing and Engineering in the Mobile Business it would need to also do so in the Fixed Business or face Investigation and Sanctions by OFCOM and Politicians.  These challenges are greater than those faced by the Board in the Dot.com era when failure saw the sale of Cellnet.

Monday, September 29, 2014

Will Apple's iWatch be your friend?

Have been thinking about wearables since GSMA World in Barcelona this February and with the launch of Apple's iWatch I have started to formalise my opinions.

Setting aside the questions of does the device look suitable to take a place on my wrist the biggest question is what does an iWatch offer that I don't get from my handset?

The majority of Optimists tell me that if offers the opportunity to open a wide range of health benefits thanks to the App developer ecosytem taking the lifeloging data and improving what I do day to day.  I have looked at eHealth for quite some time and on the whole the processes that have been designed to make medicine better via technology have failed because of the silo nature of the stake holders. What has happened is that the increased data available has been used by the Insurance industry to raise premiums and or decline treatments.

Given what we have seen about breaches in data security by technology firms I do not hold out any hope that my data in anonymised given that the registration/purchasing functions used by Apple. Given that my working life requires long periods sat down and limited opportunities to exercise it would not be a surprise if the Actuary placed me in a high risk group and incentivised changes by financial penalties. Why should I make it easy for them by fitting a monitoring device that records how poor my time is used when it comes to health?

If I want to improve I think that I would invest in a Polar HRM system for the periods of the week when I am active and record the results in a Notebook rather than online rather than strap on an iWatch and give away health data.        

Wednesday, August 20, 2014

Time for the Mobile Networks to change their Business Model?

Here in the UK we are starting to see increased take up of 4G services and as a result the Mobile Networks are looking to tweak their relationship with the consumer.

Over the past few weeks I have received a number of text messages telling offering me various offers.    None of these offers are of any interest to me and I am now concerned that my Network Provider now feels that it is entitled to SPAM me.  I have "opted out" of such marketing however it seems to take 5 days for my request to be acted on.  Having opted out will my number now be sold to third parties to try there luck directly with me.

I have stopped taking calls from Private Numbers and those that are not in my address book because of nuisance callers prospecting for claims firms. It has resulted in less minutes of voice use.  I fear that the actions of my Mobile Network could now result in a situation that I start to look at a way to remove messaging.

I am paying at the top end of the tariff structure and think that such charge should entitle me to be left alone by my Mobile Network when it comes to marketing of third party offers.

They are attempting a number of new services, for example they now offer the chance to jump the que on calls to the contact centre for a fee.

What I would like is the ability to make a quality voice call that does not drop out and be capable of using the 4G data connection more than I am using WiFi.  Lets face it despite a relationship that is over ten years old my Mobile Network knows very little about me, it does not seem to be interested in retaining information I do share with them, so what makes them think that it is capable of selling things to me that are from others?