All Change!

All Change!

John Pluthero

Once again the UK carrier market is in a state of flux with the number two telco, Cable & Wireless in channel meltdown and everyone else scrambling to pick up the 27,000 customers they will be ditching as non essential to their new operating plans.

It has been an interesting start to the year in the carrier market to say the least. News from across the channel, where France Telecom, struggling to position itself to cope with VoIP, is undergoing a 23,000 job shedding plan that BT took in its stride some years ago, was swiftly followed by news that the UK’s number two carrier Cable & Wireless was set to re-organise.

We should have known something was going to happen after C&W shocked the market in January by ruling out growth in its ailing UK business until 2008 at the earliest, after being caught in a fierce price-war in the communications and internet markets.

 

A month later and the wheels on the C&W bus were no longer going round and seemed to have stopped altogether as against a background of falling margins, increased competition and an unsupportable cost structure the telco dealt a fresh blow to staff by warning it could halve its UK workforce over the next five years.

The group, which acquired Energis last year, said it envisaged its current headcount of 5,500 would fall to between 2,500 and 3,500 over the next four to five years. It added that 350 jobs would be lost in the current financial year.

C&W said the changes reflected plans to concentrate on fewer and larger corporate customers, while reducing the complexity in its products and systems. The company had the announcement ahead of a strategy briefing for analysts and investors. As part of the reshaping of its UK business, the company said it would reduce its UK customer base from around 30,000 customers to about 3,000 larger corporate customers and public institutions.

ON the plus side the company also said the cost savings expected from the merger of Cable & Wireless UK and Energis were likely to be greater than £40 million expected by the end of March 2006.

The announcement came two days after plans for job cuts had been revealed in a leaked memo from John Pluthero, the newly appointed head of the UK C&W business. Pluthero reportedly said: “If you are worried that it all sounds very hard, it’s time for you to step off the bus. This is no longer a place for the timid. People are going to say it can’t be done. Many of us are going to hit the steepest learning curves of our lives.”

One reseller I spoke to coined the phrase, “Sackings will continue untill morale improves!” Cable & Wireless has however confirmed its commitment to Next Generation Network (NGN), which is viewed as an important element of the turnaround strategy and is indeed already in progress with over £50 million of capital expenditure in 2005/06. The Company recognise the importance of LLU as a strategic asset in the context of NGN, delivering IP to its target customers. However, the pace of change for NGN will be driven by customer demand and dual networks will be needed in the medium term.

 

Every Cloud…

Following news that Cable & Wireless plans to ditch 27,000 of its customers however news rapidly spread that a number of other telcos were quickly drawing up plans to step in and exploit the opportunity presented by the troubled carrier.

First out of the blocks were Uniworld who confirmed that it is talking to a number of ex- Cable & Wireless dealers who have been left disillusioned by the company’s attitude towards its dealers and channel partners. Uniworld made it clear that it intends to offer an alternative for those independent business people who want to be able to make their own choices about who they work with in the future.

Daryl Pile, Sales Director for Uniworld, comments: “Whilst the news from Cable & Wireless is obviously a worry for any one dealing with them, we have to see this as a positive for Uniworld. Our current product and services portfolio is excellently placed to fill the needs of those dealers working with the small to medium sized end-user, and our product road map demonstrates our long term commitment to working with our dealers and supporting their customers’ needs”

The Gamma Telecom switchless reseller concludes; “Uniworld’s high customer retention rate and dependable commission programme, means that it is fast becoming a favourite for dealers. Whilst the news from Cable & Wireless will undoubtedly leave a cloud over the head of many in the channel, Uniworld aims to help dealers to find the silver lining.”

Gamma themselves also has responded to the statements from Cable & Wireless which in their opinion made sweeping criticisms of the telecoms industry and left a large number of companies in the channel feeling concerned and let down. Gamma acknowledged that it was unfortunate that Cable & Wireless is having difficulties, but stated that this individual company’s experience does not reflect the general state of the industry.

“As the UK’s fastest growing alternative network, Gamma is evidence that there are a great number of very successful businesses operating within the telecoms market and these include Cable & Wireless’ own channel partners.”

Richard Bligh, Marketing Director for Gamma Telecom, comments: “Selling to SMEs through the channel can be an excellent business model if due attention is paid to the unique needs of this segment of the market. Gamma is thriving proof of that and we have no plans to change our strategy of selling exclusively through channel partners to the SME end-user. It is unfortunate that Cable & Wireless could not make the model work, but that does not mean it cannot be done.”

Bligh continued: “There is no doubt that this is a challenging time for the telecoms market, as we experience the greatest rate of change the industry has ever seen. This means that we, as an industry, need to bend with the changes to find innovative solutions, whilst working closely with our channel partners (and our staff!) to bring a sense of stability to our market and calm the waters stirred up by Cable & Wireless.”

 

Lifeline

BT, who have been in the news recently for a whole load of reasons – more later, actually went a step further and announced they had set up a free helpline for worried business customers who have been told by Cable & Wireless that they have 90 days in which to find a new supplier.

The company said that with C&W to focus on only 3,000 large business and government customers, BT is offering those displaced businesses a dedicated team of advisors to understand their options and help them manage the unexpected requirement to move to another communications company with the minimum of hassle and disruption.

“In the current uncertain times for businesses, with the shock withdrawal of a large company such as C&W, BT believes that customers need help to find a stable, long term and reliable provider.”

Bill Murphy, managing director of BT Business, said: “This uncertain situation could be damaging to a business. They could be without service while they chose another supplier, which could harm their prospects. That’s why we have set up a free number for anxious customers, where they will be able to speak to a dedicated team of knowledgeable, trained staff.

“I can assure all businesses that BT still wants their custom. The SMB market is one of the most dynamic parts of the UK economy and we are already attracting around 2,800 business lines a week back to BT because of our trusted brand and good value packages.

BT added, “Recent mergers, acquisitions and strategy changes have also left customers questioning future service from some suppliers. We are happy to take calls from, and advise those businesses too.”

 

Telstra Launch VoIP

VoIP is never far from the headlines in the carrier market and last month was no exception with Telstra announcing that they were set to build on growing success in the UK channel by launching a range if IP services which will include SIP trunks and a hosted IP PBX offering.

David Thorn, CEO at Telstra told Comms Business Magazine:“We have been using VoIP ourselves for some time and have deployed the application in our new Cambridge Data Centre. We have alpha customers now and are planning a channel roll out at the end of March for a hosted IP PBX service.”

Channel Manager Ben LeFeuvre added, “We have deliberately held back a bit because we know that when the products go to the channel, who have a lot of traditional PBX experience, we don’t want to go to market with anything that is less than fully prepared and viable.”

 

David Thorn, CEO at Telstra

Thorn concluded, “With a lot of this stuff, as it is all built in software, it is only when you actually try it and use it that you find out what bugs are in there. For example even on the handsets we have found ‘speaker bleed’ so we have looked at this as well as volume on hunt groups, the amount of messages you can leave on voicemail – this is the level of detail we have gone into before we push the service out to the channel as we do not want to have a failed launch.”

Telstra are using Cisco and Mitel IP Phones but will be bringing in low cost devices. Additionally they have a Softphone option. The hosted services will be available on a per user per month charge and deployed on the Vistula V-Cube IP-PABX platform at its new UK data centre, in Cambridge.

 

Shares Jump

Early March saw a flurry of activity from and around BT starting with the improbable rumour that the UK incumbent telco was being stalked by a money firm.

Reuters were quick off the mark to report that shares in BT Group jumped over 5 percent in a single day on a newspaper report that the company could attract a 20 billion pound bid from private-equity firms. Later it emerged the consortium comprised Blackstone, Macquarie Bank and Kohlberg Kravis Roberts were the predators circling BT.

BT is an attractive target because it has a large steady cash flow, with valuable fixed assets that could also be broken up. But its operations are heavily regulated and the financial structure of a bid could prove challenging. BT also has a sizeable pension deficit at about £4.7bn.

BT dismissed the report, but it comes in the wake of rising private-equity activity in the European telecoms sector. Former Irish monopoly Eircom is being looked at by Australian investment company Babcock & Brown Capital, and there have been reports linking Cable & Wireless and Kingston Communications with private-equity groups.

More significantly and to deflect attention away from the story BT Announced further 21cn progress saying they had concluded negotiations and signed contracts with the remaining four preferred suppliers for its next generation network transformation programme. Contracts have been signed with Alcatel, Cisco, Ericsson and Fujitsu. This follows the announcement on 23rd December 2005 that contracts have been signed with Ciena, Huawei, Lucent and Siemens.

 

New Industry Body

As if on cue the UK industry regulator Ofcom announced the next stage of its work to encourage competitive Next Generation Networks (NGNs) with eight companies having already committed to NGN UK. These include: BT Group plc; Cable & Wireless; Easynet; Kingston Communications; NTL; Thus; Vodafone; Wanadoo UK.

The Ofcom announcement says that over time NGNs will offer consumers a wider choice of innovative new products and more value for money. However to ensure these benefits are delivered, providers need to agree the technical and commercial arrangements for connecting to each other’s networks.

Ofcom’s approach includes the establishment of a new industry body, NGN UK, which will be launched later this month. NGN UK will be led by Peter Black as Executive Chairman, in addition to his ongoing role overseeing the independent Office of the Telecommunications Adjudicator and Local Loop Unbundling.

 

THUS get Remote

But enough of BT. THUS has launched a onestop communications solution for the corporate and SME sectors to allow remote workers to connect to the office. The Remote Worker Solution merges three existing THUS and Demon products to form one remote working package, providing voice and broadband to its customers.

THUS’ solution will provide the communications technology that will enable businesses to implement flexible working. The demand for flexible working has risen in the past 12 months with 3.1 million people now officially working from home. A recent survey also revealed that flexible working is a positive experience for both employers and employees. Both managers and employee representatives questioned in the survey found flexi-time, assisted by the remote working option, brought a higher degree of job satisfaction, better adaptation of working hours to the workload, and lower absenteeism. However, despite these positive aspects of flexible remote working, the uptake is often limited by the communication technology available to employees.

To support remote working, THUS’ product provides telephony, voice conferencing and high-speed broadband services. By increasing the technology available to employees who might be travelling, commuting, working from home or at a customer site, businesses can achieve office-level productivity while staff are offsite. In addition, THUS solution can enable connection to a business’ Local Area Network (LAN) via Demon broadband as well as providing a dedicated voice conferencing line.

By having just one service provider, THUS says their Remote Worker Solution ensures cost savings are achieved by providing; savings to businesses on phone calls, fixed cost broadband, volume discounts and lower IT and support costs. The solution also enables work and home calls to be divided into separate bills, which leads to a reduction in the time spent processing expense claims and eliminates the administrative headache that comes with managing the costs associated with remote working. Dan Cole, Head of Product Management at THUS plc, said: “The boundaries between home and work are becoming increasingly blurred for many UK workers. The proliferation of remote working is growing all the time with the “nine-to-five” day no longer existing for a number of people. When employees work from home they need access to the level of technology they are used to in the office, which includes a high speed and consistent broadband connection, a reliable phone service and IT support around the clock.”

 

Goal Posts Moved

OK, just one more BT story. Comms Business Magazine has heard that BTIC has changed the time period against which it will pay dealer and resellers commissions for calls, the maximum period is to be set at two years.. In a recently issued note headed ‘CALLS COMMISSION CHANGE, the carrier says that from the 1st of May 2006 commissionable calls generated on existing and new lines brought to BT by IC partners will be considered for calls commission for a maximum of two years. This change will affect all existing and new orders on BT’s commissioning system, ORCA.

 

How will this work in practice?

BTIC say that all orders on ORCA that are considered for calls commission on 30th April 2006 that are greater than two years old, will cease to be considered for commission from 1st May 2006. Additionally, all orders existing on ORCA that are considered for calls commission on 30th April 2006, that are less than two years old will be considered for calls commission for a maximum of two years from the date they became effective on ORCA.

Finally, all orders entered on ORCA that are considered for calls commission on or after 1st May 2006 will be considered for calls commission for a maximum of two years from the date they became effective on ORCA.

Got that? You should because there will be a test next month.

BT say these changes are being implemented to encourage the correct account management behaviour, take advantage of changes in the market and to ensure their commissions remain competitive. However, a northern England based BT reseller called up to say, “Really? That presumes the commissions were competitive in the first place.”