BT in major broadband alliance with Yahoo!

16 Jun 2003

Esat BT’s parent British Telecom plans to grow its number of broadband customers and to make this happen it has joined forces with content giant Yahoo! to take on rivals such as AOL.

This afternoon BT reaffirmed its financial targets for the year ahead, and has promised investors and analysts more than £1bn sterling of incremental revenue from ICT products and services between this financial year and 2005. In addition, the telecom firm has joined forces with Yahoo! to prepare an ADSL-based service.

In a briefing note issued this morning, BT sad that it aims to build upon its existing one million broadband customers by targeting an additional five million customers by 2006, equating to around £1bn sterling of profitable revenue annually.

In terms of revenues and costs the company said that it expected to generate around £300m sterling of annual revenue from its mobile phone services and various mobility offerings by 2005.

BT said that it envisages new cash cost savings, reaching £1bn sterling per annum by 2009 as a result of its investment in a 21st century network. It added that it predicts global services to become cash flow positive during 2004.

Group finance director Ian Livingston said: “Today is all about providing a greater depth of understanding of the activities that will contribute to future revenues and profits. We will provide an insight into how BT will continue with its strategy of defending the core and growing new wave revenues, while maintaining strong financial discipline.”

In a further development, BT revealed that it has joined forces with Yahoo! to launch what it calls a “new internet experience” to beat rivals and enhance its position as a major broadband carrier in the ADSL market.

Under the alliance, BT Openworld will undergo a major transformation and will be renamed BT Yahoo! Broadband. It is envisaged that the new company will battle head on with rival ISPs such as AOL and Freeserve by offering what it claims are better products. BT Yahoo! Broadband will combine Yahoo!’s web content with BT’s internet access, handling and billing into what the two firms call “the first truly integrated service of its kind in Europe”.

The alliance is seen as a major component in BT’s plans to drive customer numbers to five million by 2006. Both broadband and narrowband customers signing up to the new package will have the freedom to customise their personal homepage and browser and will also be offered a built-in firewall and anti-virus protection software at no extra cost.

The BT Yahoo! Broadband services is expected to become available from September, and existing BT Openworld broadband customers will move to the new service in a phased programme.

Duncan Ingram, managing director, BT Openworld, added: “I firmly believe BT Yahoo! Broadband offers a vastly superior customer experience compared to the likes of AOL and Freeserve and will prove hard to beat for combined service and value.”

Terry Semel, chairman and CEO of Yahoo! said: “We believe that the powerful combination of Yahoo!’s world-renowned brand and BT’s leading market position can help drive increased DSL adoption in the UK. Our alliance with SBC in the United States has already proved this to be a highly successful business model with the largest growth of any US DSL service in the first financial quarter of this year.

“With this announcement, Yahoo! is the first internet brand to have entered into this kind of deep access and programming partnership in the three largest broadband regions, Europe, Asia and North America.”

By John Kennedy