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Thursday, October 12, 2006

BT Comes off the Ropes

The big loser from yesterdays AOL/CPW tie-up is BT who will be losing the AOL’s wholesale revenues a lot faster now than with AOL as a standalone business. Potentially, it could pick up quite a few retail customers as heavy AOL users wake-up to the prospect of moving onto a bargain basement network.

So, it is hardly surprising that BT is starting to look at defending its’ wholesale revenues. Step 1 was undoubtedly the Vodafone tie-up, but I believe Step 2 will be to follow the KPN path and start hovering up smaller ISPs. I believe the speculation in today’s Independent has substance to it and I think it will be the first move of many for BT. Any half decent broadband retailer thinking of cashing in their chips only have to open discussions with Cable & Wireless about wholesale LLU to gain BT’s attention.

Although, there is plenty of small to medium ISPs to keep the BT M&A team busy, I think the last remaining tasty morsel on the UK broadband plate is Tiscali which becomes more and more attractive with every disposal of unprofitable territories. I doubt that BT would launch a contested bid and Tiscali seems to want to remain independent for the time being.

Step 3 will be the launch of BT Vision which will add further between BT and the crowd. Step 4 will be the revision of wholesale IPStream pricing for balance the decision between BT Wholesale. Step 5 will be roll-out of the 21CN which will increase the differentiated services that BT can offer. The final move will be the roll-out of FTTH which will be game over for the LLUers. Luckily for them they have a few years to recoup their investments.