BT’s Vision

BT shares have not been doing too well lately, not just because of the general state of the market, but because of concerns about topping up BT’s pension fund. The former utility, still the leading fixed-line phone company in the UK, is looking for ways to boost its slowing revenue growth. This explains the importance of its face off with BSkyB over access to the satellite TV operator’s premium content. Broadband has been BT’s main domestic motor over the past five years, but the market is maturing. About 60 per cent of homes now have broadband.

BT shares have not been doing too well lately, not just because of the general state of the market, but because of concerns about topping up BT’s pension fund. The former utility, still the leading fixed-line phone company in the UK, is looking for ways to boost its slowing revenue growth. This explains the importance of its face off with BSkyB over access to the satellite TV operator’s premium content. Broadband has been BT’s main domestic motor over the past five years, but the market is maturing. About 60 per cent of homes now have broadband. BT Retail is seeking to increase its revenue by selling services based around the broadband connection, and BT Vision is perhaps the best example of this strategy. However, BT Vision has just 282,000 customers compared with 9m at BSkyB whose appeal is rooted in its live football. Even the head of BT’s retail division admits he is a customer of BSkyB because he is a fervent Liverpool supporter. BT Vision offers some Liverpool matches through a deal with Irish broadcaster Setanta, but BSkyB owns the live rights to more games, including all the clashes between the big four.

BT admit that it will be ‘challenging’ if not impossible to hit its target of having 2-3m BT vision customers by 2011 by organic growth alone. The company believes it would be easier to reach the target if BT Vision can offer its customers the live football available on BSkyB’s channels, which should be possible under Ofcom’s proposed wholesale access regime. An alternative strategy for BT is to bid against Sky for the TV rights to live football at the auction due in 2009. A BT bid for the rights is a possible option, although it would probably be done in conjunction with Setanta.