Sunday, December 04, 2005

It is BT which has introduced broadband Britain
Sunday November 20, 2005
The Observer

The man who wasn't there when things went wrong

But Sir Christopher Bland, who turned around BT, has much more than good timing, writes Richard Wachman


Bland is happy to chat about his days as head of the BBC, the National Freight Corporation, London Weekend Television, and his current position at the helm of Britain's pre-eminent telecommunications company. In the topsyturvy world of corporate Britain, Bland has led companies that have been in the wrong place or the wrong time, but the bad decisions were made before he arrived or after he left.


But to describe Bland as lucky is to understate his achievements. When he took over at BT after five years at the BBC in 2001, replacing Sir Iain Vallance, the group could not have been in a bigger mess. BT had accumulated £30 billion of debt and might have gone bust if big City investors had not passed the hat round to provide a £6bn lifeline.

'Of course morale was low when I got here - actually it was at rock bottom,' he says. 'BT had become a whipping boy for politicians and the media. It was the sort of publicity that every company dreads.'

It would be stretching it to say that Bland looks demob-happy, but he is preparing to retire in 18 months and has thought hard about what to do next: 'No, I don't want another job at the head of a large company - I will be 69, so that will be it.' But what will he do? Put his feet up, spend the day fishing, read (he is passionate about literature), play golf?


Given what Bland inherited at BT, the consensus is that he has done a good job. He recruited Belgian-born chief executive Ben Verwaayen, and they have repaired the balance sheet, sold businesses, slashed costs, overseen the demerger of the O2 mobile phone network (formerly Cellnet), and made a decent fist of reinventing BT as a technology company (only 12 per cent of revenue comes from the old fixed-line operation) by building up a broadband division and focusing on 'new wave' services on the net.

'All the new technologies, even if you want to use the telephone through a computer, depend on broadband,' he says. 'We have 6 million broadband customers against just 200,000 when I joined. Our central idea is to make BT the broadband hub for a range of internet traffic, entertainment and interactive services.

'It is BT which has introduced broadband Britain [through the company's national network]. We could only connect about 10 per cent of the population in 2001; now it is 99 per cent.'

To his credit, Bland has done what the City feared he might not be able to do - put on new business faster than BT loses trade from its traditional fixed-line franchise and faster than the cable companies are stealing market share. In the ferociously competitive telecommunications market, that is no mean feat.

But the company's shares are hardly selling like hot cakes - BT's stock is trading well below the issue price of Bland's share options. 'You're right. My options are under water - hardly a cause for celebration,' he says.

But how can he get the shares up? Investors are relieved that BT is on a sound financial footing, but it is not offering the sort of growth that would merit a higher share price. One option is for Bland to buy companies and expand BT via an aggressive programme of mergers and acquisitions, but that would alarm investors more than anything else, and he knows it. Under former management, it was BT's foray into overseas markets (and the billions it paid for a new third-generation mobile licence in 2000) which almost pushed the company over the edge.

'We could buy some small or niche companies, but while I'm here there will be no big acquisition spree.' (...)

Some experts argue that one way in which BT could grow more quickly would be to buy a mobile operator. But by the time Bland became chairman the company was committed to demerging O2 as part of the rescue package agreed with City investors.

To reverse that strategy is something Bland is not prepared to contemplate: 'I remember when I was about to be offered this job, the headhunters gave me the weekend to consider whether I thought BT should own a mobile operator. If the answer was yes, it was made clear that I should turn down the position, but I have never supported the idea. We are a regulated company, which means we'd have found it difficult to extract the full commercial benefits of owning both a mobile and a fixed-line arm.'

One of Bland's achievements is that he reached an agreement with regulator Ofcom setting out how rival operators can access BT's dominant network. The deal, which has taken up a great deal of his time, has involved protracted negotiations. Sometimes things turned nasty, as when Ofcom made noises about the possibility of breaking up the company if it didn't do more to encourage competition.

But an accord has been struck, and Bland hopes it will end the rows between BT and the regulator which have featured so prominently since the group was privatised in 1984. Now he has moved on to other things, such as ensuring the smooth introduction of BT's video-on-demand service next year.


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