Narrowing the focus for a global view

world according to | Ian Livingston
FORMER British telecommunications monopoly British Telecom spun off its mobile business in 2001 after being saddled with a huge dotcom-era debt.

Then, in 2005, under regulatory pressure, the company chose a three-way internal split - so-called operational, or functional, separation.

The changes have made the company a very different beast from Australia's former monopoly, Telstra, as BT focuses on creating a global services business to complement its operations in Britain.

Last month, Ian Livingston stepped up to the job of running the company, which prefers to be called simply BT.

When you joined BT in 2002 what attracted you to telecommunications industry, or was it just the job?I was actually a retailer. I wasn't at all attracted by telcos. At the time BT has been through a bit of a crisis and I came in as the chief financial officer with the new chief executive Ben Verwaayen.

What appealed to me was the people in BT and the opportunities we had, which I think we have shown.

It was the company rather than the sector.

I still like to think of myself more as a retailer, because retailers think a lot more about customers than a lot of telcos have done in the past.

I try to express things in terms of what is good for the customer rather than, this is a great piece of engineering.

Had BT sold off its mobile business before you joined?We had demerged it before I joined. I can say this quite dispassionately because I wasn't involved in the decision.O2, the mobile business that came out of it, ended up being a better mobile business because it wasn't part of BT.

BT's business in providing networked IT services to customers around the world, as well as being an incumbent business in Britain, is a lot better that it would have been if we had the distraction and some of the conflicts of having a mobile business in our midst.

That's from a shareholder and customer point of view, which is an unconventional point of view I have to say.

So why was the mobile business better off?Both businesses were better off. It's about focus. They didn't spend their time at the board meeting saying we couldn't develop WiFi because that was going to conflict with mobile, and rather than producing, as we have done, the best and most comprehensive provider of global networked IT services we would have spent our time worrying about developing 3G.

It's about focus and clarity of thought and trying to be the best services company without worrying about mobiles and fixed. It meant, as a business, we have structured ourselves around customers instead of products.

At pretty well every telco you will find a situation where they have a mobile division and a fixed division, and if you are a customer of one division you won't be recognised.

We have four divisions: consumer, small business, corporate and wholesale.

From a financial view point of view, did BT miss out on much of the growth of the mobile sector?From a shareholder point of view, because they got shares in both, the combined returns were pretty impressive.

We did grow a little bit less quickly but we have still had quarter after quarter of growth.

Particularly because the British market is probably the most competitive in the world for telecoms we have had really strong growth. Our international business grew by 20 per cent last quarter.

Would you be tempted to go back and buy a mobile company?It's not on our agenda. We have a mobile business. In the consumer business it's about taking your broadband on the move and in the corporate space managing mobile services for customers.

We have a $US1 billion, roughly, in that business, which is not enormous but it is focused on the customer.

We don't try to sell regular GSM phones and 3G phones to consumers, but big corporates buy in a different way. They buy everything together, so we try to sell into them on a single plan that manages all their communications needs.

We have a mobile virtual network operations wholesale deal with Vodafone in a number of countries that allows us to provide mobile services.

We have a very strong WiFi operation, and that means we don't have to rush out and buy a mobile operator.

Is mobile broadband taking off in Britain?Yes it is. The evidence seems to be that it's a complement.

People who have broadband in the home might want broadband out and about. The thing that has also taken off is public WiFi. We do more than 1 million minutes a day, which is growth of 100 per cent year on year.

Do you think WiMax will be competitive technology?It might be. Competitive with what is a little bit of a question.

You can consider WiMax to be WiFi on steroids. I don't see it particularly as a replacement for fixed services or a replacement for 3G or GSM. I think its capability is specific. People don't want to watch feature films at 70mp/h which WiMax can deliver.

I don't think it's a particularly useful thing for customers.

It certainly has capability but I don't see it as a straightforward replacement for anything other than public WiFi.

When was the global services business set up?We were just winding down the global business (Concert) with AT&T when I arrived.

At the time we thought we were global because we had a 20 per cent stake in companies such as Starhub in Singapore and LG Telecom in Korea.

We had shares in Inmarsat, Intelsat - pretty well anything with the word sat in it.

That doesn't make you global, it makes you a venture capitalist.

We had a lot of very valuable assets but it didn't make us global in any way. So we sold those stakes and concentrated on being operationally global. When was the conscious decision made to turn it more into a broader IT services company?

We call it networked IT services because increasingly it is based on the network, but there are a number of services that come off the network, be it call centre services or data centre management.

There are some things we don't do. We don't write software, we are not an IT department outsourcer, we are a manager of networks and things that go around the network.

That decision was really in 2002. We looked at the assets we had, we looked at where there was a gap in the market and, critically, we looked at what our customers might want, and looking at the growth we had we basically got that right. As the convergence between the IT and the telecoms industry continues you are crossing over into territory traditionally occupied by companies such as IBM and EDS. Are they your main competitors?

IBM certainly is. In the big corporate space we would see IBM as a key competitor. AT&T as well and to lesser extent France Telecoms' Orange Business Services - EDS less so.

But we certainly don't do everything that IBM does and IBM doesn't do everything we do.

Would you sell BT Global Services if someone offered you good money for it?We think it is a successful business and our focus is on growing it further and growing profitability. We are not looking for a sale.

Would you be interested in buying a large IT services company?I don't think so. We have made a number of acquisitions around the world and we will continue to do so.

We just bought Frontline, based in Singapore, which services a lot of the Asia Pacific region. We have made few purchases in Britain and the US, and one in Germany just few days ago.

What we are not seeking to do is seeking to be a medium-tier IT company.

We are concentrating on enhancing and extending our position as the leading provider around the world.

Gartner has us at the top of its magic quadrant and we are filling in where we have less geographical presence and scaling up in some countries, but buying a medium-ranked IT company is probably the growing thing.

Do you partner with IT companies?We have very good partnership with Hewlett-Packard, for instance, and we often market together.

We a have a partnership with Accenture and go to market with them too. There is lot to be said for best of breed.

Michael Sainsbury visited Hong Kong as a guest of BT