BT banks on ads to fight off rivals

The reorganisation of BT an-nounced by group managing director Bill Cockburn last week (MW August 13) is designed to make it lean, responsive and adaptable. The BT Cockburn has in mind is completely different from today’s telecoms giant.

The former WH Smith chief executive has restructured the company to protect it against rivals which are eating into its market share.

Ten new divisions have been created where there were three, and according to Cockburn, these will “drive for growth, focus more sharply on customer service, and increase efficiency”.

The new divisions are designed to take on BT’s competitors in every sector, they are: BT UK Markets; Mobility – incorporating mobile phone operator Cellnet; Finance; Strategy; Products and Solutions; Enterprises; Customer Services; Human Resources; Business Services; and Networks.

Cockburn says BT already has the technology and resources to fight off rivals, but has not met customer needs: “We need to realign our resources much more closely to our various markets,” he says.

The changes have not come too soon, according to Hoare Govett senior telecoms analyst James McCafferty. “BT is responding to the competitive challenge in the UK which has been severe since Cable & Wireless Communications (CWC) restructured. In addition, there is the increased focus on fixed and mobile convergence,” he says.

A spokesman for CWC says: “BT had the monopoly. The best it can do is slow down decline. We, like the other new companies, started at zero and want to grow as quickly as possible.”

A quarter of the market has been taken from BT since the market was opened to competition in 1990. According to the latest market share figures from industry regulator Oftel, BT’s grip on the telecoms market is still being loosened.

In the October to December 1996 period BT commanded 80.6 per cent of all fixed line calls. During the same quarter last year the company held 74.9 per cent.

BT’s main rival, CWC – which was created 18 months ago from the four-way merger of Mercury Communications, Nynex, Videotron and Bell Cablemedia – had 10.9 per cent of all fixed line calls in the period October to December 1997. The year before, Mercury held 7.7 per cent of the market.

BT’s first line of attack will be through marketing and advertising. A centralised marketing department has been created within BT UK Markets, headed by Afshin Mohebbi. Cellnet brand director Tim Evans has been drafted in as head of brand and corporate communications to lead the push for a cohesive message.

A BT spokesman says of Evans’ role: “It will reinforce the BT brand and strengthen the impact of our communications with more commitment to the look and feel of our marketing.”

Bean Andrews Norways Cramphorn chairman, and former head of BT’s customer communications unit Robert Bean, says: “BT’s starting point has to be ‘who are our customers, what are their needs and how can we satisfy them’. A few years ago it was ‘we’ve invented a new product, let’s flog it’.”

Now BT wants to treat customers according to their needs and develop products and services to match. The old business and consumer division split meant there was little flexibility in taking into account changes in consumer requirements.

For instance, says a BT spokeswoman: “What do we do with people who work from home? Their needs are not the same as a residential customer and not the same as an office-based business customer.

“We have identified areas like home office and looked at how best to logically organise ourselves around these changing needs.”

Convergence is the major trend. Packages offering fixed line telecoms, mobile services, e-mail, Internet, and paging will be launched with customers receiving a single bill. BT will take maximum advantage of this situation with its 60 per cent owned mobile phone operator Cellnet.

A Cellnet spokesman says: “It makes complete sense for us and BT to leverage one another’s strengths. Cellnet can use BT’s strengths in the corporate market and obviously we will work together.”

BT has Cellnet, CWC has One-2-One, Vodafone has a deal with Energis. Oftel is seeking opinion for a consultation document to be published this autumn, over possible unfair market advantages.

An Oftel spokeswoman says: “If BT bundles its fixed services with Cellnet’s mobile services we would want to be sure that it wasn’t unfairly using its power in the fixed line market to influence the combined market.”

One City analyst reckons: “BT has established the Mobility division to offer integrated products. It really believes what Orange says – that mobile phones will take market share away from fixed lines. It has to make Cellnet more successful.”

Cellnet will maintain its own marketing department under recently appointed marketing director Kent Thexton.

But BT’s competitors are already bundling more services than just telecoms. CWC offers cable TV in its franchise areas – soon to cover 25 per cent of the country – and competes in all BT’s areas: mobile, international, corporate and soon digital.

And true to its strapline “let’s simplify things”, from October CWC customers will receive a single bill for all services, before BT is able to do so.

BT’s centralised marketing and communications departments should seek a unified message, according to observers. Bean says: “BT doesn’t look like one brand talking – every message has a different personality. At best it is inefficient, at the worst it is unsettling for consumers.”

Bean believes, in the short-term, consumers will see more uniform advertisements. In the longer term, there will be more marketing initiatives like the Friends and Family cut-price scheme.

But a CWC spokesman claims BT’s restructure looks like “band aid”: “Its marketing might become sharper but no amount of marketing will make up for the fact that it can only offer a standard telephone service. We can offer customers multichannel TV and multimedia. It can’t compete.”

Industry watchers agree the new BT structure of smaller divisions, closer to each market, will make better use of the company’s resources.

But as three different BT insiders said last week: “That’s the theory, the practice might be different.” And with market share slipping as quickly as Oftel’s figures reveal, the company is under pressure to make the new structure work – quickly.

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