Flying Dutchman on a high; BT chief confirms boost to broadband

0 Comments | Sunday Herald, The, Mar 30, 2003 | by Valerie Darroch

BT expects to hit its vital target of one million broadband customers ahead of its forecast of summer 2003 and remains confident of reaching five million by 2006.

During a whistlestop tour of BT offices in Inverness, Aberdeen and Dundee last week, chief executive Ben Verwaayen revealed that the UK telecommunications giant had now passed the mark of 750,000 broadband customers.

Verwaayen, dubbed the Flying Dutchman when he arrived at BT a year ago from Lucent Technologies, also sought to play down staff fears that BT's recent decision to invest (pounds) 3 million in two call centres in India marked the start of a policy to transfer call centre jobs in the UK to offshore locations with lower wage costs.

He told staff that the company (which employs 12,000 staff in Scotland) has realised another key target by reducing customer dissatisfaction by 25%, meeting the first of two conditions required to trigger a free employee share offer. The second condition relates to its financial performance and it is not yet known if this will also be met.

However, with BT planning to locate three of its next generation call centres in Aberdeen, Dundee and Glasgow, Verwaayen responded strongly to suggestions that investing in Indian call centres signalled the start of a decline for its UK call centre operations.

"We're spending (pounds) 105m to upgrade 31 next generation call centres in the UK. You must think I'm mad if you believe I would just waste that and walk away to go abroad."

Verwaayen, a small and intense Dutchman who has been in the telecoms industry for 27 years, has spent the 12 months since he took over from Sir Peter Bonfield in February 2002 tackling a range of tough issues, from BT's debt mountain to slow broadband uptake and questions about its long-term loyalty to UK staff.

During Bonfield's reign BT embarked on a global mergers and acquisition spree which brought the company to its knees, weighed down by (pounds) 28 billion of debt.

In the past two years BT has undergone a dramatic transformation, launching a (pounds) 5.9bn rights issue; jetti- soning international interests including unwinding its Concert joint venture with AT&T; demerging Yell, its yellow pages business; floating mmO2, its mobile operation and restoring profitability.

Its debt has fallen to (pounds) 12.9bn and BT aims to cut this to under (pounds) 10bn by 2004-5 with the help of proceeds from disposal of more non-core assets.

Verwaayen said he is now focused on the next stage of recovery and identified customer satisfaction, financial discipline and greater broadband market penetration as critical to future success.

A combination of falling prices, reduced margins and intense competition, mean that all telecoms carriers are finding it hard to grow revenue from voice services and so are battling for broadband customers.

BT still faces fierce rivalry from cable operators in particular and, although the likes of NTL and Telewest are in severe financial difficulty, they still represent serious competition. Verwaayen knows BT has to engage nimbly - at stake is his aim of achieving (pounds) 681m of broadband-related revenues by 2004-5.

Verwaayen cited his "absolute passion" for customer service as his best attribute for the BT job and said that despite its troubled legacy, it was a "no-brainer" to take the position.

He refers to frontline staff as "heroes" and is battling to persuade BT's employees that their attitudes towards customers determine the company's ability to retain existing ones and to attract new ones.

"Customer satisfaction is absolutely key for us to measure our success," he said, congratulating staff on hitting the target of cutting customer dissatisfaction by 25%.

Verwaayen adroitly fielded questions which betrayed a blend of fear and uncertainty - perhaps unsurprising in view of BT's history.

He confessed that in his early days at BT he was once mistakenly shown to a miserable room housing complaints staff. He made significant changes as a result.

One poor employee in Aberdeen simply wanted to know if Verwaayen could help with holes in the office roof and a problem with rats, offering to send one as proof. Verwaayen promised action but declined the offer of a rat.

He has more pressing concerns. BT faces competition from 350 rivals and has suffered erosion in its market share both for residential and business customers.

BT has halted a slide in residential sales and is focused on growing SME business where its market share has slipped to 43%. Verwaayen says that BT's residential market share has stabilised at 73% for the past nine quarters, helped by special price packages, such as BT Together.

Improved service and innovative packages are the tactics BT is employing in the business market as well.

BT's strategy is to offer integrated communications and technology solutions, and its BT Ignite division specialises in web-based solutions for multinational corporates.

Verwaayen considers BT Ignite, whose customers include 80 of the FTSE-100 companies, to be BT's "hidden jewel", yet some shareholders wanted it shut down as parts of it were haemorrhaging cash.