The UK broadsheets The Times and The Telegraph are both reporting that tensions in the BT boardroom are rising, after the outspoken head of the group’s retail division, Pierre Danon, went public with plans for his division, BT Retail, to invest millions in the group’s telephone exchanges. In what has been described as a ‘virtual declaration of independence’, Danon has proposed a break from tradition which will allow Retail to install its own equipment in BT exchanges on the same basis as rivals such as Cable & Wireless. At present all of BT’s network infrastructure is owned by BT Wholesale, which in turn is responsible for the sale of voice and broadband services not only to Retail but to competitors as well. Danon fears that such unbundling could put his division at a competitive disadvantage unless it is allowed to invest on the same basis.
If Danon’s plans are approved by the board, the requirement of BT Retail to buy services from BT Wholesale will be vastly reduced – creating a potential huge loss in revenue for the Wholesale division. BT Retail is currently BT Wholesale’s main customer and accounted for most of the arm’s GBP10.9 billion of revenues in the 2003/04 trading year.
Which ever way Verwaayan and the rest of the BT board choose to deal with the issue, what is very clear is that BT’s rivals will take full advantage of any indecision. Wanadoo has already revealed plans to offer its broadband internet customers unlimited free voice calls from January. The move is part of parent France Telecom’s strategy to package services together; if the UK offering is priced on a similar basis as its French package British consumers can expect to pay GBP17.99 per month for broadband internet access and unlimited national calls.