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Thursday, May 17, 2007

BT, The Post Office and C&W

Along with its results this morning BT announced a record £750m four year wholesale deal with the Post Office. My initial thought was that this was quite a big commitment for the Post Office given that it currently has zero broadband customers and will be launching into an ultra-competitive battlefield.

This is an even bigger commitment when you place in the context of the Orange UK Home revenues in Q1 of only £73m (€107m) from a base of 1095k broadband and 984k dial-up customers. The quarterly commitment on the Post Office deal is £62.5m over the whole period.

However looking into the detail, the Post Office already has 400k customers who are signed up for HomePhone, which is a voice-based CPS and WLR service. These voice customers will be covered by the new BT contract and also offers the opportunity of upselling broadband.

So the contract is perhaps not as great as it first appears for BT as WLR (or line rental) is effectively a pass-through charge service aimed at reduced churn so even if the base doesn’t grow, around £200m of the contract will be already in the BT WLR revenues. Of course, this is before the current usage based voice charges.

BT will also win back the CPS wholesale services from the current Post Office provider – C&W. This probably accounts for the gloating this morning - BT has delivered another wholesale blow to Cable and Wireless.

So much for this quote from Nicky Hall of The Post Office back in Jan 2005:
“We expect this proposition to be around in 5, 10 or even 15 years,” said Nicky Hall. “We’re confident that in Cable & Wireless we have chosen a partner with the expertise, product portfolio, commitment and staying power to continue with us on this journey.”
The quote was taken from one of C&W case studies, which presumably is meant to highlight successes.