Friday, September 17, 2004

From "EuroTelco morning spam" - Friday 17th September, 2004

One incremental piece of bad news for BT Group yesterday, as Cable & Wireless outlined its unbundling strategy for the UK market. Since its acquisition of unbundling pioneer Bulldog Communications earlier this year, we have been questioning what the implications were for the residential broadband market, as C&W has previously maintained a focus on business markets since the disposal of CWC consumer division to NTL in 1999.

It is clear that C&W is now targeting at least a segment of the residential market in the UK with this initiative. Figures contained in C&W's presentation from yesterday reveal 1.2m teleworker homes in the UK presently, rising to 1.4m by 2008, which implies that even if the focus remains on business, there is an extension of this strategy which involves a significant portion of the residential market. Additionally, this segment is, in our view, likely to be a good candidate for the more bandwidth-intensive services offered by Bulldog, and more of the value-added support and application services which BT is targeting in elements of its broadband initiative. C&W aims to have 400 exchanges unbundled by end 2005, which it projects will give it access to 30% of business and residential premises in the UK, spending GBP40 - 50m in this financial year and earmarking an additional GBP15 - 35m in 2006, subject to uptake.

As we have speculated previously, the next domino may be the resurgent Energis, another company which has traditionally had a business focus, but may well now re-emerge as a quasi-consumer brand.

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