Bank: “BT seeking value over volume”
May 26, 2022
A report from investment bank Jefferies on BT Group, following a briefing by BT Consumer division’s CEO Marc Allera, quotes him saying that BT is focused on value over volume, and that there’s no intention on seeking increased market share.
The bank’s report says that BT is keen to signal that it has no ambition to grow consumer market share.
“This was framed in the context of low market growth making it advisable to preserve a stable level of competition. Management vigorously played down the suggestion that FTTP provides a new opportunity to erode Virgin Media/O2’s dominant position in the legacy cable footprint. BT is ‘not chasing gross adds in cable areas’. We estimate BT’s retail broadband market share in cabled areas at ~25 per cent, lagging far behind VMO2 at ~40 percent. We think that BT’s willingness to pass up a competitive opportunity on this scale (at least for now) reflects the priority of fostering discipline on price indexation,” notes the report.
The report adds: “[BT’s] strategic focus in Consumer is to deliver product quality and customer service upgrades that justify higher pricing. Management drew attention to a recent Ofcom report ranking BT No.1 in the market for consumer satisfaction, describing this as a “remarkable turnaround”. It also claimed that its Net Promotor Score (NPS) on the BT brand has reached 12-13 pts (vs last reported +1 back in Aug 2020). On the EE brand, NPS has added 20-25 pts (vs +20 score reported in Aug 2020). No new initiative is launched unless it will have a positive impact on NPS. BT brand churn has declined from 1.7-1.9 per cent two years ago to 1.0-1.2 per cent now. It is now possible to monitor churn propensity of individual fixed-line customers, allowing for tailored retention and reducing the need for high-profile discounting.”
“Management is adamant that contracted CPI+3.9 per cent price rises will be applied to the consumer base again next April. Clearly BT does not operate in a competitive vacuum, so we believe that the comment’s value is mainly its signalling intent. It is hoped that transition to more clearly segmented BT and EE brands will simplify the process of cross-selling more customers to convergent plans,” concludes Jefferies.