Don't believe the spin BT will not manage EE any better than it's current owner

The Chief Executives if BT and EE have recently been on a charm offensive aimed at getting us to buy into the view that BT buying EE is a good idea for more than the shareholders of Orange and DT.  They have presented interesting scenarios about Network Investments whilst managing to limit details about pricing and product strategy.

Looking from the outside I fear that in becoming a division of BT Retail the mobile tallent will walk away from the business rather than stay and execute on the plans of the Chief Executives.  Nobody is talking about staff retention for EE and if BT fail to do so then they will be serious trouble.  BT's history in managing Mobile assets is not a good one and for the past 15 years they have not had to, which means they have very little understanding of 3 and 4G Networks.  The Civil Service mentality within BT means that very few within EE will feel comfortable but their knowledge is vital is any progress is to be made post acquisition on the development of Radio Access Networks.

The addition of Mobile to the regulatory mix will give Ofcom the chance to balance the advantage that BT has held recently in gaming investigations.  The EE regulatory team will not find the present relationship carried forward and they might find that they are queried more about network coverage and quality. Becoming the largest operator in both Fixed and Mobile Networks means that BT will need to demonstrate that it is meeting access requirements as well as investing in upgrades.  The Consumer may well benefit in the short term from BT taking over EE in that I expect that a significant investment will be made in Subscriber Acquisition budgets in an effort to retain EE customers and switch BT ones to the Network.  Will shareholders be happy with gifts of subsidised smartphones and tablets?  The increased load on BT Wifi hotspots will also be an interesting traffic light on current investment in the BT Broadband network and upgrade cycle.

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.  

Thoughts on BT

So Yesterday we had the presentation of the BT results for the last year and the headline analysis can be read on the FT, BBC, Independent and Times amongst other sources.

What gets me is that Ian Livingstone has used accounting tricks to hide what the future looks like. Lookig at BT Retail the core revenue streams are ALL declining and yet the Division managed to increase its profit. Going forward if my own experience is common they will lose even more money, the retention costs for me staying on the BT network are more than the money I am paying them the poor user experience means that I have stopped using BT Vision on demand services.

The Cost Cutting plan is a recruitment freeze rather than intelligent restructuring of the Workforce. This is because of the fact that we are looking at the heavy unionisation of the Openreach division which could become a car crash similar to Global Services (Talk Talk and Tiscali merging will lower the number of truck roles for LLU). If the cost base in GS is wrong why has so little been written down on the Balance Sheet and why are we not seeing large scale redundancies in India of BT staff?

However the big issue I have with Livingstone is the lack of a Vision when it comes to the future. In the middle of the Digital Britain review would his predecessor have stayed quite or used the annual results as an opportunity to talk up high speed broadband? With BT needing to become a software company if the investment in 21CN is to be profitable what progress is being made and how will BT be at the centre of new services?

Could the emphasis on fixing the pension fund be because Livingstone and his Board what a nest to rival that of the former RBS Executives under Fred Godwin?