Top Five Worries for BT

Ahead of this Thursdays year end figures being reported the weekend papers were awash with comment and speculation and a general consensus revealed five issues to worry CEO Ben Verwaayen

Fixed line decline: BT’s traditional business of handling fixed-line voice calls is evaporating and will ultimately disappear. In the past two years, the former monopoly has seen its share of the market drop from 69 per cent to 53 per cent. Cheap phone calls over the internet (VoIP) cut further into the business and the growing primacy of the mobile phone means some people cut off their fixed-line services altogether.

Local Loop Unbundling (LLU): This process, mandated by Ofcom, obliged BT’s chief executive, Ben Verwaayen to open the company’s “last mile”to competitors such as Easynet and Bulldog, allowing them to offer their own upgraded broadband and voice services directly to customers in competition to BT.

Pension Gap: BT’s pension deficit, though reducing, stands at £1.8bn. The Government issued a “crown guarantee” when BT was privatised in 1984, which is understood to mean that if the group goes bust it will cover up to 75 per cent of its pension liabilities. The clarification of the scope of the pension deficit could stimulate private equity interest in BT.

Television over the internet (IPTV): Analysts hail this as the big hope for BT. It aims to launch BT TV this autumn for its broadband customers, allowing viewers to watch streamed channels as well as downloaded content. But it faces stiff competition from the likes of BSkyB, soon to launch its own IPTV service.

Regulation: Despite setting up Openreach and quickening the pace of LLU, BT still faces regulation by Ofcom it sees as unfair. This was put in place when BT was still a monopoly.

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