BT Sets its Sights on OPEX Improvements to Improve Returns

BT's corporate strategy is based on four pillars, said Ben Verwaayen, CEO of BT, speaking at the UBS conference in New York. These are: defending its traditional business (which will eventually disappear), building its new business (broadband and mobility), eliminating the costs of complexity and failures, and cementing its relationship with customers by getting revenue streams under contract.


While most carriers are looking for CAPEX savings, Verwaayen said he is much more focused on OPEX because the cost of complexity in telecommunications is "horrendous." Re-engineering today's "plate of spaghetti" networks offers a historic opportunity to improve operational efficiency. Over the next 3 to 4 years, BT will collapse its many networks onto an IP/MPLS core that delivers any message-to-any-message transparently to users. Verwaayen believes this will yield operating savings of 30%.


On the revenue side, BT is experience a major shift from traditional services (-5% annual growth) to the new areas of growth (+23% growth). The company is also focused on debt reduction.


Verwaayen noted that BT's consumer broadband initiative is really taking off. Unlike the incumbent carriers in the U.S., BT never had a large business in second lines to homes, so the broadband growth has not come at the expense of another service. A large number of new consumer broadband accounts are sold with contract terms, which mitigates churn.


Verwaayen believes that ADSL currently is growing at a faster rate in the U.K. than in any other country, with the exception of Israel. BT claims over 50% of the broadband market. He believes customer satisfaction ratings will be a decisive factor in maintaining and growing that share. BT expects to have ADSL in 100% of its central offices by 2005.


Meanwhile, business revenues have been flat, said Verwaayen. BT's enterprise strategy will focus on customer loyalty rather than price, just like it is doing in the consumer market. The goal is to put customers under fixed contracts by offering them "loyalty plans." Verwaayen noted that BT's business activity is growing in Europe, even in markets where it has not traditionally had customers.


Regarding the company's mobile strategy, Verwaayen said BT is using its "full imagination in developing a Wi-Fi-enabled vision." For video services, Verwaayen noted that TV services in the U.K. are dominated by satellite. He believes it would be foolish to compete with BSkyB. However, he sees opportunity in augmenting the satellite service through BT's broadband network.
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