BT Group Plc is this week expected to add to the woes of the IT sector with second-quarter figures that show it is way short of the 6% to 8% growth targets set by new CEO Ben Verwaayen.
The London, UK-based company has pioneered the recovery route for European incumbents by abandoning overseas expansion, ditching its former management, and cutting back debt to focus on squeezing more revenue from its formidable home customer base.
But faltering economic growth and the effects of excess capacity on telecoms markets will make the company’s ambitious expansion plans difficult to achieve. BT only managed 2% growth in its first quarter but Verwaayen insisted that 6% to 8% growth through to 2005 was achievable. He said at the time: We’re talking about a three-year period here. This is the first quarter. We have a long time to go, and we have absolutely no reason today to walk away from our targets.
When it releases figures on Thursday, BT is likely to produce far lower expectations from the financial community, and many predict that it will find it difficult to grow by 3%.
Having spun out its 02 mobile operation, BT faces a contraction in its revenue from voice calls, and its wholesale operation has been hit by price cuts in the market. However, its two revenue drivers have been its enterprise unit, BT Ignite, and BT Openworld, which covers its ISPs and portals, where demand has been soaring for broadband services.
Both Deutsche Telekom AG and France Telecom SA, which are both crippled with debt problems, have been watching its progress with envy. However, BT’s current difficulties show that even when a carrier does what it is best at and concentrates on its home market, it is not immune from the problems facing the world market.