Missing Mobile

2:05 PM -- One of the big "What if?" questions in the European telecom sector is: "What if BT hadn't spun off its mobile business in 2001?"

At the time it had little choice. And BT looked almost dead in the water. Given that situation, and despite all its flaws, faults, and foul-ups, the fact that BT has managed to retain its status as one of Europe's telecom services giants, and remain relevant as an international service provider, without a mobile operation, is actually quite impressive.

Instead, the British carrier, which today announced its fiscal first-quarter earnings, focused on some other areas, such as the development of IT services, where it was something of a trailblazer. But it's had a few problems recently as a result. (See BT's Numbers Hit by Rogue Unit.)

How much longer can BT carry on without its own mobile operation? It's missing out on the kinds of revenues, economies of scale, cashflow, and market penetration that the likes of Telefónica SA (NYSE: TEF), which also announced its latest financials today, can boast.

The Spanish carrier, of course, is now the owner of BT's former mobile assets. When BT Cellnet was spun off, it was renamed mmO2, and eventually just O2. Now, following an audacious acquisition in 2005, it's part of Telefónica Europe (the carrier's non-Spanish European operations), which has 54.5 million customers, including 45.2 million mobile subscribers.

Globally, Telefónica has 278 million customers, including 211 million mobile subscribers, and quarterly revenues of €15.1 billion (US$19.8 billion) and rising. (See Telefónica Reports H1.)

BT has 27 million operational lines in the UK, plus its international business customers, and quarterly revenues of £5 billion ($7.8 billion) -- and declining. (See BT Reports Fiscal Q1.)

A crass comparison? Maybe. But mobile is where the big growth is, especially as next-generation wireless data technologies like Long Term Evolution (LTE) are deployed.

So can BT continue to be a viable communications service provider in the long term when it only has fixed-line capabilities? Is it too late for BT to be a converged fixed/mobile player? Maybe not. Maybe it could bag itself some spectrum…

The already gaff-prone new UK coalition government, it seems, is ready to rush through some spectrum auctions (it needs some cash, apparently). (See UK Plots 4G Spectrum Auction .)

The spectrum is suited to LTE, an all-IP network technology. BT has an IP network and already has backhaul networks that support wholesale mobile traffic.

Might it bid for some spectrum? It seems unlikely that BT would have the business case or the bottle to outbid the UK's existing mobile operators, including Telefónica's O2 UK, to land some of that spectrum. And it doesn't fit with the company's stated plans. (See BT Outlines 3-Year Plan.)

But, boy oh boy, wouldn't it be interesting if it did?

Come on BT. Don't be shy. Show us what you're made of, and stick your name in the bidding list when that spectrum is up for grabs. You know it make sense!

— Ray Le Maistre, International Managing Editor, Light Reading

DCITDave 12/5/2012 | 4:28:30 PM
re: Missing Mobile

Relevant. Interesting. The list goes on and on.

stelabokun 12/5/2012 | 4:26:31 PM
re: Missing Mobile

I guess I am around 20 days late with this comment…Phil, agreed, a very nice article indeed.
Assuming that BT is not quite made of steel, it is likely to lose around 6 percentage points of market share of the total UK  telecom revenue between 2010 and 2015 (that would put its revenue at roughly 10% of the total UK telecom revenue in 2015 – really sad ):). With people getting even more nuts about mobility and with 4G connection speeds effectively competing against the pitiful DSL speeds in the UK  (yeah, 4G will eventually happen in the UK too), mobile revenue will continue to grow at the expense of fixed (mobile accounts for around 56% of the total UK telecom rev these days and it is likely to be at no less than at 66-67% at yr end 2015). As Ray pointed out, mobile operators will continue to benefit from this trend. Everything Everywhere will likely benefiting from a number of operational synergies, and gain around 3-4 percentage points of market share of rev through 2015. Vodafone and O2, which I think will lose some market share of subscriptions as EE and Three expand, will keep their market share of revenue stable as they will get their cash from high-end enterprise customers. Those that cannot play in the mobile field will shrink; if BT doesn’t show some muscles asap, it will face a dire future…(ah yeah, almost forgot to mention: good luck with that ROI in fiber BT...)

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