British Telecom SWOT and PESTLE Analysis

Strength

1. Healthy balance sheet with strong financials and cash flow from operations: : British Telecom has a healthy balance sheet with strong financials. Its FY19-20 revenues stood at £22,905 million and its FY19-20 profit before tax stood at £2,353 million. BT also had strong operating cash flows of £6,271 million in FY 2019/20 from external customers. Given situations where many companies don’t have the cash to meet their day to day obligations, BT's business model ensures there is a strong cash flow which is indicative of the Company's ability to adequately meet its working capital obligations.

2. Strong base in UK with large number of customers: BT Group is the largest provider of consumer broadband and fixed voice telephony in the UK. They acquired the mobile operator EE in January 2016. This has landed BT 35% of the mobile consumer market share and a similar share of the UK's consumer broadband business. This has put them in a better position to meet the demands of UK’s customers. More than 560 communication providers use their network. BT's operations are spread across 3 target markets, business, consumer, and infrastructure. The consumer market, consisting of households, is catered to by providing fixed-line broadband and telephony services; the business market consists of 5.4 million businesses in the UK, and the infrastructure market includes firms building network infrastructure, data centers and mobile cell sites, where Ethernet connections and specialized services are the main areas of demand.

3. Wide spectrum of product and service offerings: BT has 6 customer facing business portfolios, Consumer, EE, Business and Public Sector, Global Services, Wholesale and Ventures, and Openreach, which will now be an independent unit but will be 100% owned by BT. They are the biggest provider of fixed line telephony and broadband services in the UK. They are also the second largest provider of Pay-TV sports channels and a leader in broadcasting technology. BT Broadband has approx. 5.83 million customers in UK (comprising North Ireland, Scotland, Wales, and England). BT's offerings range from Broadband, TV, Sports, fixed –lines, mobile and bundles. BT is one of the leading networked IT service provider to global and domestic multinationals in India.

4. Delivering strong customer experience through great product and services: British Telecom has consistently emphasized on its strategy to improve and deliver every aspect of its customer experience. BT's core competency lies in its vast infrastructure offering differentiated services with customer experience at the heart of all initiatives. Initiatives undertaken by BT to improve customer service include weather proofing of its networks and registered a halt in the growth in network faults in FY16 after six consecutive years of increase. Global Services division has also helped in better monitoring of networks and IT applications. FY16 also saw BT launching BT Call Protect services free to all customers which would help to divert spam and nuisance calls to junk voicemail. The Consumer division upgraded its superfast broadband service from 38Mbps to 52Mbps to all customers where available. BT has also improved its “Right First Time” performance by 5.4% in FY2019/20 and has registered a cumulative improvement of 31.8% since FY2009/10.

Weakness

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Opportunity

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Threat

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Political

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Economic

1. Synergy from acquisition of EE: British Telecom acquired EE from Deutsche Telekom and Orange in 2015. The synergy from acquisition of EE will help BT in improved cost efficiencies and low churn rates through economies of scale. EE has a strong 4G mobile network infrastructure and the deal will allow BT to accelerate its mobility plans and allow it to invest appropriately with a future strategic plan. BT expects to save about £3bn after integration costs from the merger in a span of four years.

2. With increasing scope of services in the telecom industry, there will be further M&A opportunities: As the telecom industry expands its service spectrum, it is creating more merger and acquisition (M&A) opportunities for large players like BT. Smartphone penetration has reached a high of more than 80% in matured markets like U.S and Europe and companies cannot just rely on adding new customers to drive growth. Companies are looking to add untapped competencies which have the potential to deliver higher returns. The consolidation momentum in the telecom industry is set by the latest technological trends and with low interest rates, lenders are willing to underwrite large debts which favor M&A deals. BT has already acquired EE in 2015 in a large deal. Further opportunities for BT include acquisitions in areas such as M2M, cloud computing and micro services, big data analytics and Internet of Things (IoT). AT&T acquisition of DirecTV and Iliad’s deal with Telefonica are some other notable examples of consolidation in telecom industry in the past two years.

Social

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Technological

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Legal

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Environmental

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