How BT lost its own connection

There was a time when marketing directors considered BT the company they most wanted to work for. The size of its budget had something to do with that, but it was not the only factor. For years BT has succeeded in defying probability by producing a series of memorable advertising campaigns – ‘Busby’, ‘Beattie’, ‘It’s good to talk’, ‘ET’ – whose attribution would look good on anyone’s CV.

Here, to all outward appearances, was a company that understood consumer marketing. In the post-privatisation years, there was little to disprove this view, and any carping was quickly quashed by BT’s masterly financial performance. How those figures added up! BT must be getting it right.

Now, as we digest a 24 per cent dive in third-quarter profits, with the prospect of more bad news to come, we’re not so sure. Just recently, in fact, BT seems to have been getting everything wrong. While Vodafone, Deutsche Telekom and WorldCom are striking world-class deals, BT’s international strategy looks in tatters. It’s been jilted once too often to be a convincing partner. Even on the home front, the image-building ET campaign is sowing doubts. Yes, it’s tremendously popular with customers, but, no, it’s not really doing the business in developing call stimulation.

BT’s response to these misfortunes has been to cut overheads by slashing staff (including up to 100 marketers) and double its adspend. It’s also boosting efforts to create a durable international alliance with US telecoms giant AT&T.

Doubts persist whether any of these measures will more than scratch the surface. The core problem is somewhat more intractable. During the glory years, BT’s performance was flattered by the weakness of its adversaries. The attempt to build a post-privatisation land-line competitor in Mercury was doomed from the start, since BT maintained a stranglehold over the copper-wire line infrastructure. Cable should have created a more formidable challenge. It disposed of highly versatile fibre-optic technology, whose bandwidth enabled the cable companies to offer a winning combination of TV, telephone services and, latterly, the Internet. But until recently the cable companies were too weak and divided to provide coherent competition.

No longer, of course, especially now that Microsoft has weighed in behind NTL and Telewest. BT, which has not invested substantially in fibre-optic technology, is being left behind by events. Nothing shows this more clearly than developments in the mobile phone market. When first set up, Cellnet was one of the strongest contenders in the mobile field. These days the market capitalisation of Vodafone is £196bn, dwarfing BT’s – let alone the value of its mobile division. That situation cannot be allowed to continue; not when mobile phones are the most dynamic telecoms sector and BT’s core land-line business is being so seriously eroded.

Change is certainly in the air. BT knows that it must become less bureaucratic and more responsive to change. In particular, it has to emphasise the entrepreneurial aspects of its business. That in turn raises profound questions about the relevance of its present branding and marketing communications strategy.

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