Disruption in action

The earnings reporting season is upon us, accounting for a marked blogging slowdown as I torment myself. BT reported some pretty decent numbers today, and to be fair there was a lot to be positive about in them, but in the detail there is some stuff which shows where the retail market is heading - which is for trouble, despite the recent euphoric rally in the sector:

• Retail share of net DSL adds went down to 28%, taking overall market share below 35% on my reckoning. This is worrying because Retail lost 319k consumer voice lines this quarter, the worst result in living memory. Throw in the business voice lines lost and you get a decline of 400k voice lines. Even taking into account the DSL additions, we're still looking at a loss of 305k customer relationships, a 1% sequential decline. Bear in mind that unbundling is only 1.3% of the market at present, so the challenge to replenish the line base is only going to get much tougher.
• Wholesale line rental lines went up 424k this quarter, that's a sequential increase of 41%! Management were a bit cagey about whether the increase started early in the quarter (in anticipation of the OFCOM settlement), or whether it was a direct response to OFCOM - i.e., next quarter's number could be far worse for Retail. Management did comment that, in their view, about half of the new converts to WLR were also new CPS users, which is a dangerously high conversion rate.
• BT claims to have had 15,000 expressions of interest in Fusion since it was launched on 15th June, which frankly seems a bit low to me. More worrying is that the MVNO business (which could be an interesting cross-selling foothold for Fusion) suffered a net customer loss of 13k this quarter in the consumer segment.

It's interesting to see all this coinciding with changes to company reporting presentation which, while apparently designed to take complexity out of the organization, also have the effect of minimizing the Retail division's perceived financial contribution to the whole business, which is increasingly being driven by a Wholesale and Enterprise orientation anyway.