Executive Summary
BT (LON:BT) is the largest communications service provider to residential and business markets in the UK [1] . Though as an incumbent it has suffered from competitors eroding its market share, it is now moving away from it legacy fixed line services and into 'new wave' broadband. However, it remains a highly regulated company.
While telecoms has been relatively resilient in the economic downturn, BT has suffered from problems at its Global Services unit, together with relatively high debt and a widening deficit on its pension fund. This has not stopped the company investing in improved network capability, including a huge investment in high speed broadband.
Company History
The company was founded as part of the Post Office, with a monopoly of telecommunications in the UK (except in Kingston upon Hull); in 1981 it became Post Office Telecommunications.
1982 - Mercury given a licence, creating a duopoly.
1984 - privatisation as British Telecommunications. Further deregulation.
1994 - Concert Communications Services launched with US operator MCI. (BT pulled out when Worldcom bid for MCI.)
2001 - sale of Yell Group and demerger of O2 (mobile communications).
Current Events
Business Model
BT is organised into four divisions; BT Retail, BT Wholesale, Openreach, and BT Global Services. The first three divisions are responsible for addressing various sectors of the UK telecoms market; BT Global Services provides IT as well as telecommunications solutions worldwide.
In terms of profitability, the lead two divisions are BT Retail and Openreach, which contributed £ 1209m and £1218m respectively to 2009 operating profit. BT Wholesale contributed £580m, while BT Global Services made a loss.
Within the three 'telecoms' divisions, BT derives its revenues from a mix of line rental, call revenues, and payments from other operators. Major costs, besides the cost of the network, are payments to other operators for calls terminating over their networks.
BT Retail
BT Retail serves residential customers and small to midsize businesses in the UK and Ireland. It markets telephony services and broadband connectivity direct to the customer. It also provides managed solutions to business. Consumer business accounts for 53% of the revenue, and business for 30%; the rest comes from Ireland, and from BT Enterprises.
Revenue in 2009 was flat at £8.4 bn; operating profit increased from £1050m to £1209m, mainly as a result of cost cutting action. For the last several years, call and line…
