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Interview: Sir Christopher Bland: A knight to remember(Scotland on Sunday Via Thomson Dialog NewsEdge) ONLY a few people have noticed, but there is a "Scottish mafia" at the top of a British institution. Half of this body's executive team hail from north of the Border, or have particularly strong ties to the country through family, business interests and having a home here. But the institution in question is not Tony Blair's Cabinet, it is BT, which counts Ian Livingston, chief executive of the group's retail division, and Paul Reynolds, head of BT Wholesale, on its six-strong board of directors. The third member of the triumvirate has a more tenuous claim, having been born in Japan, raised in Northern Ireland and schooled in England, but BT's chairman, Sir Christopher Bland, trumpets his Scottish roots loudly. Sitting in a quiet corner of the National Museum of Scotland in Edinburgh on a blisteringly hot day, the 68-year-old says: "I am Anglo-Irish-Scots. I am chairman of Canongate Books [an Edinburgh-based publishing house], which is a great business. I have a house in Kinlochbervie in Sutherland. I will spend three weeks there this summer." Warming to his theme of Scots in the upper echelons of BT, he jokes: "It's part of the invasion. It's a coincidence, but the Scots are a powerful nation and good at business. It's a reflection of that." Bland is an elder statesman and champion of British industry. He is a former chairman of the BBC's Board of Governors who also has worked extensively in the public sector, which led to him being knighted for services to the NHS in 1997. His two-day trip to Edinburgh last week for a corporate social responsibility event coincides with a busy few days for the GBP 20bn communications and IT group he chairs. Firstly, satellite TV group BSkyB unveiled an aggressive drive into the UK broadband market which will cost GBP 400m over the next three years. Sky Broadband will, the company claims, be "free" to any existing customer covered by the group's broadband network. Secondly, the Advertising Standards Authority has ruled that Carphone Warehouse's offer of "free broadband forever" for anyone signing up to the firm's Talk Talk phone deal was misleading. The ASA upheld complaints from BT and cable group NTL and ordered Carphone to drop the ad. Finally, Ofcom withdrew restrictions on the prices BT can charge residential customers for line rental and calls. The restrictions were imposed when BT was privatised in 1984 to ensure the former monopoly didn't abuse its position as the owner and operator of much of the UK's telecoms infrastructure. Scrapping the restrictions removes an albatross from BT's neck. Of the three, it is the decision of BSkyB's chief executive, James Murdoch, to enter the UK broadband market - a move described by one observer as "BSkyB parking its tank on BT's lawn" - that Bland appears to have the most to say about. Since Bland joined BT in 2001, the group has placed broadband and global IT services at the centre of its strategy for growth as revenues from its traditional fixed-line phone business have declined. Bland insists neither Murdoch nor Charles Dunstone, chief executive of Carphone Warehouse, have his company's expertise in broadband. He says rivals will concentrate on urban areas as they can only offer services in places where they pay BT to install their broadband kit in its local exchanges to turn the group's copper wiring into a high-speed internet conduit - a process known as "local loop unbundling". "It's a highly competitive market and BSkyB is the latest entrant," he says. "You have to remember that because of unbundling they will be customers of BT Wholesale as well as competitors. Who's the biggest and who knows the most about broadband? You won't see Carphone Warehouse or BSkyB in Scotland. BSkyB is not going to Kinlochbervie. The Highlands are not likely to have a visit from Charles Dunstone or James Murdoch." He is visibly annoyed at the claims of companies such as Carphone and Skype, the voice over internet protocol (VoIP) business which was bought by eBay for dollars 2.6bn, that their services are "free". "We want to make money out of broadband. 'Free' is not a very distinguished business model and I think Charles Dunstone is about to find that out. Just as Skype will find out. To say that phone calls can be 'free' in a business that eBay has paid dollars 2.6bn for is a very odd approach to business." Bland also complains that there is a tendency to focus on just one area of BT group's operations - namely its UK retail business - and ignore other, fast-growing areas. He speaks enthusiastically about BT Global Services, which manages communications and IT networks for companies and public sector organisations across the world in a market worth GBP 300bn. He points out that BT Wholesale, the division that sells access to its network to rival telecoms companies and internet service providers, contributes the biggest part of group revenues. He says: "We are emphasising the importance [of Global Services]. It takes a while for the market to understand how rapidly that's growing and how BT is a real force in the ITC market. Five years ago that wasn't true." BT's previous chief executive, Sir Peter Bonfield, and the former chairman, Sir Iain Vallance, had built up a sprawling but unprofitable overseas empire which helped saddle BT with debts of GBP 30bn in 2001. Bland joined and installed a new chief executive, the Dutchman Ben Verwaayen, and then undertook a radical restructuring which saw the mobile business, now called O2, spun-off, jobs cut and a focus placed on growing broadband. After a slow start, the fruits of these changes are becoming apparent, with the group reporting pre-tax profits of GBP 2bn for its fiscal year ending on March 31, 2005, on revenues of GBP 19bn. But Bland appears to have a challenge in getting the message over to investors and City analysts. Shares closed on Friday at 235.5p against a year high of 241.75p. But they were trading hands at more than 1000p before the dotcom bubble burst. Bland is keen to look ahead and is excited by products like BT Fusion, the phone that switches between BT's landline in the house and Vodafone's network outside, BT Home Hub, a device that will offer access to a wide range of services including BT Vision, its TV over the internet service, and 21 CN, the GBP 10bn network upgrade programme. "It's very exciting," he says. "It's very fast-moving and very competitive. Fusion is a really interesting product. It will become more powerful when Bluetooth is replaced by WiFi and WiMax. BT Vision is an important product that will enhance life of our customers." Bland predicts that five years from now, the wholesale business will remain the biggest part of the group, followed by global services and lastly, the retail business. He jokes about speculation that Deutsche Telecom is eyeing a bid for BT. "All these reports have to be taken with a pinch of salt," he says. "They only become real if a formal approach is made. I don't lie awake thinking: 'Am I going to have to speak German?'" He admits that every company has its price, but says it is unlikely BT would fall to an hostile takeover. He says: "I think [the suggestion that BT is too big to fall prey to a takeover] is a dangerous comment to make, certainly for a company of BT's size. BT is GBP 20bn business and is pretty substantial. "It would be very difficult for a contested bid to succeed, but the amount that private equity have at their disposal is pretty substantial. Some of the incumbents in the US are very big. The best defence is to run the business well and get the share price up and make it look fully valued." Analysts have suggested BT will be inhibited by not having a mobile business as the market moves towards convergence. But he denies this saying: "It seems that the convergence argument has switched around. It's now the mobile companies that feel isolated because they don't have the fixed networks and broadband business. "Would we be stronger if we owned O2? Yes, but only if regulation allowed us to exploit the benefits of having mobile and fixed line under the same ownership." He says BT didn't consider buying back O2 before it was acquired by Spain's Telefonica for GBP 17.7bn in November 2005. Nor was he interested in Virgin Mobile, which was bought by NTL in April this year for GBP 962.4m. But he declines to rule out ever buying a mobile business, saying: "You never say never." |