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By Ron Coates, 20 May 2004 17:45

COMMENT It's amazing what a little bit of success can do to people. As the BT management rolled out to present their annual results this time around, they exuded an air of comfort confidence.

They'd been confident on previous occasions, but it was a tight, contained confidence – they knew they were going to face a wall of polite scepticism and hard questions. The questions were just as hard this time but they had most of the answers.

So the team was, as chairman Sir Christopher Bland said of himself, "comfortable, but not complacent". He could afford to be, for he was in a position to make his presentation short and sweet and loaded with success.

He said: "Our strategy is working and we'll continue to accelerate change." To back this up, he pointed to the financials - earnings per share were "really good" or almost doubled and dividend payout was just over 50 per cent and headed to 60 per cent next year. These are the figures on which chairmen are judged.

He was definitely ebullient when he pointed out that: "We beat off all comers to the £2bn NHS deal." BT also plans to extend broadband to 99 per cent of the country by the middle of next year and has partnerships with major companies such as Yahoo, Microsoft, Hewlett-Packard and Vodafone. These he took as votes of confidence in the company.

He concluded that BT had "more earnings, more cash and more dividends. And we'll continue to invest in the future".

It was left to the main board to fill in the details. And these looked very good. Every analyst had wondered if BT could move fast enough on its announced plans to expand in ICT, mobile and broadband.

The headline news was that they could. Revenues stayed even, which meant that the 'new wave', as BT calls it, was making up for the fact that it was losing fixed-line customers at the rate of 100,000 a month.

Ovum principle analyst Mike Cansfield said: "It looks as though their strategy is bearing fruit. They have been very strong in ICT and it will be difficult to keep that momentum. In broadband the question is whether they can make money out of content. Their rich media announcement in February gives them lots of material."

BT has won £7bn worth of ICT deals and announced another two today, one for £330m with the Suffolk Councils and another for £73m with global staffing giant Manpower. The company has 49 contracts on the go worth more than £5m and has admitted to its surprise over its success in the US.

It's poised to hit 2.5 million broadband connections, making it well on its way to its target of 4 million sometime next year. Four million is, incidentally, the current nationwide total.

Cansfield points out that BT has done little in the mobile market and the company has been generally criticised for the fact that it doesn't have a mobile arm as its European competitors do.

"But," he said, "they have that agreement with Vodafone and they're set to launch the consumer and the business product just in time for Christmas. Christmas is the time that people change handsets and, for 70 to 80 per cent of them, it's when they change contracts.

"You've got to give them the benefit of the doubt."

Still, wireless specialist Neil Mawston, senior analyst at Strategy Analytics, is not so sure. He said: "The interesting part will be getting the Bluetooth access points into the home. The range is only about 20 feet, so you'll need two or three of them.

"But it's a good idea – most people use their mobile in the home for the convenience, even when they have fixed line. And they have a good brand and good distribution. Cost, style and design will be crucial."

A few interesting and previously unannounced facts about the company came up during the presentation.

One was the fact that it has been quietly shedding staff. A voluntary redundancy program this March and April should see 4,000 to 5,000 people go at an average cost of £40,000 to £50,000 to the balance sheet. And BT has topped up the pension fund on its way to meeting the deficit which has hit all the UK's final pension schemes.

Another fact is that the company's having to put major investment into India and China to satisfy those large customers who are shifting parts of their business there.

It also currently has the capacity to boost any of its 512Kpbs broadband customers to 2Mbps, which is the threshold for compressed video and television. Pierre Danon, head of BT Retail, plans to make a lot of money out of this.

He said: "We can bill for incremental usage. The days of everything free are over."

BT is currently running trials to extend the range of its broadband product. Some people, even in London, are simply too far from their exchange for the current technology to work.

The presentation ended with BT's refrain of how nice it is to work with a regulator that understands. The BT line, which is quite reasonable, is that particularly in broadband there have to be rewards for the risk of investment.

This means it can now continue to invest and give access to anyone else who can pay the charges - and it's ready to take on all customers on a level playing field. Broadband is the true heart of the company's strategy for the future, both for consumers and for business.