BT Disses VOIP Upstarts...
The potential for upstarts to launch VOIP services is growing, as the U.K.'s broadband population continues to swell. BT is currently experiencing significant demand for its DSL services, handling 45,000 orders per week compared with 30,000 a week six months ago. The U.K. incumbent has 1.93 million wholesale DSL lines active (of which nearly half are used by BT's own retail division) and expects to top 2 million before the end of February. Despite the massive uptake, this "capital intensive" business is still losing money, with a payback period of about three years, says BT CEO Ben Verwaayen.
Add the growing DSL population to the U.K.'s 1.5 million (and growing) cable broadband customers, and you have a market that's ripe for the launch of voice-over-broadband services. And BT knows that. It launched a VOIP service late last year targeted specifically at cable broadband customers (see BT Gets Aggressive With VOIP).
But is BT worried about an influx of new voice competitors? It says not. Although U.S. player Vonage Holdings Corp. has vowed to launch a service in the U.K. in the first half of this year, BT Retail chief Pierre Danon dismissed the threat of such VOIP upstarts, saying they'd struggle to deliver a service that would compete with the price of existing traditional services.
"It's not a surprise that nothing has been launched yet, mes amis," says the insouciant Frenchman. "There are some free VOIP services out there, like Skype, but the voice services from companies such as Vonage run over multiple networks that involve interconnection charges. That pushes up their costs and tariffs. I've looked at Vonage's prices in the U.S., and they're not much different from the voice packages we offer. We decided to launch our VOIP service to the cable customers because they are paying much higher prices for their voice calls."
Having dealt dismissively with the VOIP brigade, the BT team turned its attentions to costs. Verwaayen says BT's ongoing cost-cutting plan will see it save about £1 billion (US$1.9 billion) in operational expenditure in the coming three years.
The doughty Dutchman, who appeared sans clogs, set the target as he presented BT's third-quarter results (see BT Q3 Revenues Down, Profit Up). Opex cuts made during the past few years helped the operator to record a slight increase in pre-tax profits, to £526 million ($995 million), compared with £521 million ($985 million) during the same period last year, despite a 3 percent drop in revenues to £4.58 billion ($8.66 billion), compared with £4.70 billion ($8.89 billion) a year earlier. The carrier also managed to reduce its debt by a third, from a year ago, to £8.8 billion ($16.6 billion).
The operator noted an ongoing fall in revenues from traditional services -- third-quarter revenues from U.K. voice services was £2.24 billion ($4.24 billion), down 9 percent from £2.46 billion ($4.65 billion) a year earlier -- but boasted of revenue increases from what it calls "new wave" services, namely broadband, ICT services, global services, and mobility (public wireless LAN and mobile resale). These lines of business now account for 18 percent of all revenues.
The company's figures were roughly in line with analyst estimates, and BT's share price fell by a smidgen, 1.25 pence, to 176.5 pence on the London Stock Exchange.
BT's presentation came as fellow European incumbent France Telecom SA (NYSE: FTE) finalized its 2003 results (see France Telecom Posts Annual Results). It also managed to slash its debt, to €44.2 billion ($56.6 billion) from €68 billion ($87 billion) a year earlier.
The French carrier recorded total revenues of €46.1 billion ($59 billion) for 2003, compared with €46.6 billion ($59.7 billion) in 2002, and cheered everyone up with a net profit of €3.2 billion ($4.1 billion) against a whopping loss of €20.7 billion ($26.5 billion) the year before.
— Ray Le Maistre, International Editor, Boardwatch