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BT Group’s results for the third quarter of the financial year to March 2016 will grab UK media headlines, with attention focused on the EE mobile deal and its impact in the domestic market, as well as risks of regulatory scrutiny of Openreach. However, the real change in the telecoms landscape begins with the arrival of Deutsche Telekom (DT) as a major BT shareholder and partner in global services.

BT gets more mobile – and more global

BT Group has announced a new structure to accommodate EE, its new mobile network operating subsidiary. The £12.5bn acquisition of EE was completed on January 29, 2016 following approval by the Competition and Markets Authority earlier in the month.

BT’s reorganization into six lines of business (Consumer, EE, Business and Public Sector UK and Ireland, Global Services, Wholesale and Ventures, and Openreach) was announced alongside the company’s results for the third quarter of the financial year to March 2016, which showed a 3% increase in group revenues. The new structure is not so radical; the former Retail division was split between Consumer and Business in 2013 and the only “new” line of business is EE. A number of senior management changes make the update look more sophisticated than the simple extensions of names for BT Wholesale and BT Business. The latter does now have ownership of UK parts of Global Services, but customer contracting arrangements between the units were always contended in practice and that still needs to be fixed. BT believes that it will be easier to deliver EE mobile services into a UK business customer unit bolstered with central government and some bigger corporate customers. The majority of UK-headquartered large enterprise customers will continue to be served by Global Services and Luis Alvarez remains chief executive of the global division.

BT is now the biggest consumer mobile services provider in the UK, with an estimated 26 million subscribers, as well as the biggest fixed and broadband services provider. However, DT is now BT’s biggest single shareholder, with a 12% stake, and DT’s chief executive, Tim Hoettges, has taken a seat on the board of BT. One year ago, Hoettges said that the EE transaction laid the foundation for BT and DT to work together. More recently, the chairman of BT, Sir Mike Rake, suggested that there will be joint ventures in unspecified areas. Scope for this exists in every region: across European small-to-medium business broadband, across US mobile, and especially in large enterprise services in Latin America, Asia-Pacific, and the Middle East and Africa. DT’s board will be heartened that BT has arrested the decline at Global Services, where revenue was down 1.1% overall but increased by 2.3% in the UK (the year-ago quarterly equivalent figure was a 17.9% decline). It will also like the strengthening of the UK business to include more multinational services; DT’s approach is very much to build from a base of domestic corporate customers. In fact, DT’s MNC customers could be the most immediate beneficiaries of BT’s global network, which DT’s T-Systems unit cannot currently match in terms of reach.

DT has plans for an all-IP business services platform across Europe. Whether BT joint ventures or network interface will be addressed in the pan-European project remains to be seen, but from the enterprise point of view these matter less than the prospect of improved service provisioning and better account management if the two are able to partner effectively.


Further reading

Service Provider Snapshot: T-Systems, TE0005-000771 (December 2015)


David Molony, Principal Analyst, Enterprise Services

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