BT’s New Strategy Means Domestic Focus for Ignite Adam Eisner, theWHIR.com
April 10, 2002 – BT Ignite (btignite.com), the Internet services division of communications giant British Telecom, will be given a “greater focus” on Europe and high-end Web services under BT’s new corporate strategy.
The much-anticipated three-year strategic plan, unveiled Monday by CEO Ben Verwaayen, is designed to help the company become more financially disciplined while improving its service offerings and customer focus at the same time.
The plan calls for Ignite to reach the EBITDA break even point by March 2003, and its ex-Concert business, which will be fully integrated in to Ignite, to reach EBITDA break-even by December 2003. Concert, an international joint venture between BT and AT&T that provided voice and Internet services to carriers, companies and ISPs, began winding down operations late last year. All businesses, customers and networks related to Concert have since been returned to their respective parent companies, and the alliance was officially ended at the beginning of April. Because each company kept its respective client base, however, BT is confident that the integration of Concert in to Ignite will provide the company with a greater customer base, additional cost reductions and “revenue uplift.”
Under BT’s new strategy, Ignite will focus on “providing solutions and other value-added services to multi-site corporate customers with European operations,” the company said. Ignite has a solid presence as an Internet services firm within both Europe and the UK, and currently serves 80% of companies listed in the FTSE 100 and 19 of the top 20 financial institutions headquartered in the United Kingdom. As a result, Ignite’s focus will now be largely high-end and domestic, with little attention paid to Small to Medium Sized Enterprises (SMEs): An announcement from BT said Ignite would now provide managed solutions to “multi-site corporates in Europe” while ceasing investment in consumer and SME-based networks and activities at the same time.
“Such businesses will be closed if not profitable and consolidation opportunities will be sought in the longer term,” the company said.
Like most other telcos and network operators, Ignite has felt the pressure of maintaining a pan-European network in the midst of a telecom downturn. However, with connections in close to 300 cities across 20 countries and a stronger European presence than many other similar companies, BT appears confident that a strong financial future lies ahead for Ignite. Therefore, instead of divesting itself of parts of its network in order to make quick improvements to its balance sheet, the company seems ready to ride out the current economic storm in hopes of better financial times ahead.
Aside from attempting to improve Ignite’s financials through a revised focus, the company said broadband would now be “at the heart” of BT. The company said it would aim to provide five million UK broadband connections by 2006 through the upcoming launch of a no-frills, “direct” broadband product that would eliminate the need for an ISP. This broadband service will be offered by BT Retail, which provides communications services to residence and small business markets.
And although BT is comprised of a number of companies split in to various service areas, the new strategy aims for BT to act a single telecommunications firm in order to reduce customer issues and improve customer relations. “We are an integrated telecommunications company, but with separate operating lines of business,” Verwaayen said. “There will be no IPOs, no burying our heads in internal re-structuring.”
While not the most exciting, BT’s new “slow and steady” approach aims to avoid major acquisitions or sell-offs while quietly reducing costs and improving its customer focus at the same time. A great deal of speculation and anticipation preceded Monday’s announcement, and while it lacked any drastic measures it appeared to be accompanied by a “no-nonsense” corporate attitude. “We will achieve profitable growth by striking the right balance between growth and managing our finances with great discipline,” Verwaayen said. “We will neither grow for growth’s sake, nor cut costs as an end in itself.”
After the announcement, some analysts seemed to agree BT’s approach, albeit boring, was a good idea. ”The strategy makes sense. Quite frankly, in the current telecoms market, you could argue that boring is beautiful,” Chavan Bhogaita, an analyst at Bear Stearns, told the Associated Press. ”It is quite refreshing to see a company that has a strong financial position and a conservative strategy going forward.”
