BT Offers Bundles as Patterson Seeks Rebound From Outlook Flop
(Bloomberg) -- BT Group Plc, still reeling from an outlook for falling profits delivered last week, is counting on a slew of new consumer offerings to lift investor sentiment.
The U.K.’s former phone monopoly is pulling the trigger on its unique ability to offer packages of mobile and landline services, two years after the 12.5 billion-pound ($16.9 billion) acquisition of mobile carrier EE. BT on Wednesday said it would offer bundled services including mobile for the first time, to squeeze more revenue per customer and boost loyalty in a highly competitive telecom market that’s nearing saturation.
“When you think about it, this is why BT and EE did get together: it was for convergence,” Marc Allera, chief of BT’s consumer division, told reporters, referring to the industry term for bringing together mobile and fixed services. “We’re going to change the face of networks in the U.K.”
BT Chief Executive Officer Gavin Patterson needs a win with investors after revealing a strategy update on May 10 that flopped, sending the shares on their biggest slide in 15 months. Patterson forecast that earnings wouldn’t start growing again until 2021, as BT contends with lower wholesale broadband prices imposed by regulators, and announced 13,000 job cuts as he seeks to restructure the carrier. The stock has dropped each day since then and is hovering around the lowest since June 2012.
The new consumer offers include a “BT Plus” plan with the fastest internet speeds available at home, backstopped by unlimited mobile data and free overnight delivery of a fourth-generation mobile Wi-Fi mini-hub if there is a problem with the fixed connection.
The separate EE brand, aimed at younger more tech-savvy users, will sell a flexible month-to-month tariff and a family service which lets the subscriber pass on data allowances to other members. Amazon Prime customers will be able to access the service on the BT video platform for the first time.
BT has been building up expectations for such an announcement. In February, Patterson told analysts on a call that the company is the only operator in the U.K. that can create converged services, because of its ownership of both the nation’s largest fixed network and biggest mobile carrier.
In an April research note, RBC analyst Wilton Fry characterized such a strategy from BT as a “preemptive convergence war” that could help the company fight back against rising competition from infrastructure companies building fiber-optic broadband connections.
While the carrier hasn’t yet announced prices for the new services, Allera said the average customer could expect to spend about 75 pounds to 80 pounds a month on the “BT Plus” bundle.
“It’s very much a high-value, premium customer we’re targeting to start with,” Allera said in an interview. The strategy is expected to increase average revenue per customer, rather than try and “drive volume with discounted price plans.”
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