BT Flogs Its NGN Smarts

BT reckons it can make money from selling on the experience it has gained from 21CN, but not everyone's convinced

December 6, 2006

5 Min Read
BT Flogs Its NGN Smarts

BT Group plc (NYSE: BT; London: BTA) today launched 21C Global Venture, a new business unit that aims to cash in on the British carrier's next-generation network (NGN) experience by selling its know-how to other carriers. (See BT Unveils 21CN GV.)

That such a unit, built around the knowledge gained from planning and building out the early stages of its £10 billion ($19.7 billion) 21CN network, exists within BT is not news: Light Reading revealed its existence in September. (See BT Cashes In on 21CN.)

What is news, though, is that 11 carriers, including Türk Telekomunikasyon A.S. , have already hired BT consultancy teams to help them plan their new network strategies.

And BT reckons Global Venture, part of BT Global Services 's international wholesale business, could help boost the carrier's bottom line. Michael Heuer, VP of business development and consulting at BT Global Services, says the engagement with Turk Telekom's parent, Saudi telecom group Oger Telecom , is worth "tens of millions" of euros.

That engagement stretches back to the second quarter of 2005, and even included advising Oger on its initial $6.55 billion investment in 55 percent of Turk Telekom, which it made in July 2005. (See JV Buys Turk Telecom Stake.)

Now, though, the focus is on helping Turk Telekom transform its network. Heuer says BT has placed teams with the Turkish operator to help it identify the efficiencies and manage the process of upgrading to a converged IP network. "This is more than just a consultancy role," says the BT man.

Turk, though, is the only 21C Global Venture that BT can name at this point. Heuer says there are 10 others in "the consultancy phase" that don't want to be identified for competitive reasons.

Another thing BT isn't revealing is the financial impact this new business might have in the coming years, and what level of revenues the current 11 customers might deliver in this financial year.

BT does, though, have an eye-catching figure to justify its efforts. The carrier engaged an external consultancy to conduct some research into the potential market for NGN consultancy services. The result? BT says the market's worth more than €38 billion ($50.6 billion) during the next five years.

Why is the number so big? Because BT's not just talking about providing some verbal guidance to its customers. The full range of services stretches from NGN planning and initial technical advice all the way to full-scale managed network operations, in much the same way as vendors such as Ericsson AB (Nasdaq: ERIC) and Nokia Corp. (NYSE: NOK) run mobile networks for some wireless carriers -- and that's big bucks business. (See Ericsson to Run Xfera , Nokia Snags New Bharti Deal, Ericsson Manages Warid, V'fone Netherlands Picks Ericsson , and Ericsson to Run 3's Network.)

So how will BT achieve this? And with what resources? It has its work cut out building out, planning, and meeting the deadlines on its own NGN. (See BT Turns On 21CN, IPTV and BT: 21CN Slips, IPTV Nears.)

Well, it's not going to do it all by itself. BT's CTO Matt Bross says the carrier has about 8,000 staff with direct experience and relevant knowledge of 21CN matters, and the carrier plans to team up with its 21CN vendor partners, and integrator Tech Mahindra Ltd. , to deliver the goods. "We can achieve this with some of our own resources, some from partners, and the customers' own people," says Bross.

"You have to engage with high-level people already there in the customers, and the success of these projects will largely depend on those people," he adds. "We are assuming these are very intelligent people that are at a different place in their journey and want to take risk out of their strategy."

But aren't the 21CN vendors, which include the likes of Ericsson, Alcatel-Lucent (NYSE: ALU), and Cisco Systems Inc. (Nasdaq: CSCO), some of the main competitors for these consultancy and managed network projects? (See BT Nears 21CN Vendor Lockdown.)

They are, along with the major IT services companies, says Heuer. But none of these companies has the same experience that BT has gained in its 21CN process. "The vendors, even those that say they have multivendor experience, don't really have true multivendor knowledge. We do. And the IT companies? They don't know how to run telco networks."

Bross adds: "BT's leadership in 21CN transformation gives us a strong position. The vendors have had their credibility enhanced by the 21CN experience. I see us partnering with these other companies. There will be plenty of collaboration."

But Ovum Ltd. analyst Mike Cansfield questions that claim. He says that while BT may believe its NGN program is "way out in front of everyone else in the world -- it is not." In a research note on BT's position today, he notes that some vendors are already experienced in this field, and are "arguably better placed, with established sales channels and reputation for this type of work."He cites KPN Telecom NV (NYSE: KPN), Verizon Communications Inc. (NYSE: VZ), Telenor Group (Nasdaq: TELN), Telecom Italia (TIM) and BCE Inc. (Bell Canada) (NYSE/Toronto: BCE) as being "all on the same page."

The analyst concludes: "We feel it is a little naïve of BT to think it can cut a leading figure on the world stage just because it is a big player in its own garden in the UK. BT will and can earn revenues in this area. It has already signed up Turk Telekom as a customer, but we don't think BT will make a big splash in the market with this."

— Ray Le Maistre, International News Editor, Light Reading

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