Sunday, December 21, 2014

More thoughts on the BT purchase of EE

Reading today's Telegraph I start to see analysis that BT returning to the Mobile Market might not be a great idea. Whilst this is a start I don't think that it highlights the problems such a deal presents to BT.

The investment that in buying EE BT is making is 3 times that they have made in Superfast Broadband AND Sport.  This is just the table stakes, having joined the Mobile poker table they will have to double down if they are to fulfil the terms of the 4G Spectrum Licience.  This is at a time when the sector is shrinking rather than growing.

The way that EE was formed has seen the culture of the business very much free of Civil Servant style management, something very different to BT.  Thus in buying a Mobile Network will the Executives be brave and allow it to stand alone, would they be allowed to by the Regulators?  If they place the mobile unit as a subsidiary of BT Retail I predict that many of the members of staff that make the business work will exit in frustration if they can be persuaded to join in the first place. Most are likely to seek redundancy before the transaction closes.

In Gavin Patterson BT have a CEO who is all about Marketing with little understanding of Engineering.  This could well be a problem when it comes to developing products that utilise the new Mobile Asset.  At this moment in time BT are building three 4G core networks for use by customers in the UK thanks to the structure placed upon it by Regulation. These networks will be used to deliver different products none of which have a proven demand.  The last time BT owned both fixed and mobile assets it saw potential for converged mobile phones and invested heavily in projects such as the BT Bluephone which were commercial flops. I fear that they did not learn for such follies and will once again squander millions that could be spent upgrading fixed networks or boosting the income of sportsmen and women.  

Monday, December 15, 2014

BT buying a mobile network

Yesterday The Sunday Times ran another story on BT buying a Mobile Network for £10bn.  The story outlined the options faced by the CEO and his team without asking the questions a shareholder might want answered.

If the Mobile sector offers such riches to BT why are the two largest Networks prepared to pull up sticks and exit the market?

How do the Customers of EE or O2 overlap with those of BT and are they likely to remain given a change of ownership?

If BT were to buy either Network what will be the response of OFCOM when it comes to regulation?

After 14 years not managing Mobile Infrastructure Assets does BT have the Management expertise needed to make a return on the Investment given the vast changes over that period?

On the basis of just these questions then the rational response is thanks for the opportunity but I think BT is better served NOT doing the deal. Those likely to benefit from any deal in the short term will be Investment Bankers, Lawyers and Accountants who will be able to charge large fees for the transaction.  In the medium term the beneficiaries are likely to be the rivals of BT.

If the deal were to work for BT it would have to be able to convince the Consumer that buying all your connectivity requirements from a single provider is worth paying a premium for rather than a discount. It would need to hire Executives capable of building and running Mobile Networks and then given them the space and power to do so rather than hamstringing them as a subsidiary of an Operating Unit. Whilst spending vast sums on Marketing and Engineering in the Mobile Business it would need to also do so in the Fixed Business or face Investigation and Sanctions by OFCOM and Politicians.  These challenges are greater than those faced by the Board in the era when failure saw the sale of Cellnet.