Consumer move opens up question about further integration and future of EE brand
BT has merged EE into its consumer division and although the move has been backed and the quad play battle intensified, questions still remain around branding and integration.
This came 18 months after BT completed its £12.5 billion acquisition of EE. BT has kept the mobile operator at arm’s length from its consumer division since the integration process began in January 2016 – it is expected to take up to four years to complete.
Since January, BT Sport has been offered to EE’s mobile contract customers while BT’s broadband service is being offered within the mobile operator’s high street retail stores.
From September 1, EE CEO Marc Allera, who has led the business since the sale to BT, has been appointed to lead the newly-created consumer business. This will operate across three brands – BT, EE and Plusnet – and will span fixed and mobile networks; consumer products and services; and content.
Commenting on this announcement, BT chief executive Gavin Patterson said the appointment “reflects the growing scale and ambition of BT”, praising Allera for leading the successful integration while delivering improved customer experience and strong financial results.
As part of the restructure, John Petter, who has been CEO of BT Consumer for four years, is leaving the company after a 13-year stint.
It has also seen the appointment of Cathryn Ross as director of regulatory affairs from January, responsible for developing the company’s regulatory strategy and its relations with Ofcom and other bodies in the field. She is currently chief executive of Ofwat, the independent economic regulator for the water sector in England and Wales.
Speaking to Mobile News, leading industry analysts backed BT’s decision to merge EE into its consumer division, confident it is the right move given the trajectory of the mobile, fixed line, broadband and TV markets.
IDC associate vice president of mobility research John Delaney said: “It has the basis of a good decision because, long-term, I think that consumer services are going to be led by mobile.
“We are already seeing a lot of people starting to use their smartphone as a primary device for accessing internet services.
“So given that is the long-term trend and the capability of a mobile network to support internet services is going to expand, I think that there is certainly a good case to be made for having the development of consumer services lead from the mobile perspective rather than the fixed line one.”
CCS Insight director of multiplay and media Paolo Pescatore agreed, claiming the merging of the consumer businesses will dumb down any competition between BT and EE in that space.
“When BT made the acquisition and announced the new line of business the only two that seemed to compete with one another was BT consumer and EE whereas all the others seemed pretty straightforward.
“It was inevitable that [the merge] was going to happen, the question was when it was going to happen and it’s come at a reasonable time but it’s still going to be a challenge moving forward.
“You’ve got technical challenges still, in terms of the integration, the various billing and IT platforms coming together and then you’ve still got the multi-brands.”
Speculation over whether the EE brand will remain in the long term has existed since the completion of its sale to its parent 18 months ago.
EE has continued to be the largest mobile operator in the UK since its formation following the merger of Orange and T-Mobile in 2015.
During BT’s most recent financial results, it announced that it had close to 30 million mobile customers – more than half of which are using the 4G network. Revenues grew for the third successive quarter, while profits surged 19 per cent year-on-year.
Along with its 4G network spanning 99 per cent of the UK population, it now reaches 83 per cent in terms of landmass, with EE on course to hit its target of 95 per cent by the end of 2020.
This is continuously demonstrated by frequent results from network testing company RootMetrics. For the first half of the year,it claimed the top mobile performance award outright in England, as well as network speed and data performance, which – due to its dense population – resulted in the overall UK-wide victory.
It also claimed all network speed, data and text performance wins or shares across England, Wales, Scotland and Northern Ireland, while its 4G service is available to its customers 90 per cent of the time across the UK.
The EE brand has therefore proven its strength in the market over the past few years, and the decision whether to keep this in the long-term could be one of the most important decisions BT makes.
Delaney said that BT are in a “tricky situation” when it comes to the branding.
“Bodies like RootMetrics are often coming out with EE at the top of their assessments. There’s some equity that has been built up and they need to be careful not to squander that equity. The other thing that EE has done pretty well is build up a very strong association between its own brand and 4G.
“Obviously 4G is still being seen as the most advanced mobile service that is available to consumers and that association between the EE brand and 4G in particular, rather than mobile in general, with O2, Vodafone or Three is an asset that they should not likely discard.”
However GfK director of technology Imran Choudhary say that he expects that, for the time being, the EE and BT Mobile brands will still operate as different businesses.
“We would expect both brands to operate with more synergy and awareness of each other within the consumer space.
“From the consumers’ perspective, they are still going to see both brands and will be able to buy from both. However, moving forwards there will be a clearer message around what each brand can do for customers and where their relative strengths lie.
“Obviously in the longer term plan they will need to look at which, if any, out of the two or three brands they have they favour over the others, but it seems very much for now, and the foreseeable future, all the brands are going to be playing together.”
The decision to also appoint Allera to head up the newly-merged consumer business has also been praised, with EE historically much criticised customer service operations improving considerably under his 20-month tenure thus far.
When he took over, EE’s customer service levels were a priority, which had arguably suffered as a result of the merger between Orange and T-Mobile.
For example, in Q1 2013, EE was the most complained about mobile operator, with regulator Ofcom receiving 0.18 complaints per 1,000 customers. Three was a distant second at the time with 0.14 complaints per 1,000 customers.
However since then, EE has seen a steady decline in the number of complaints (see graph), to the point that of the four major mobile operators it was the second least complained about in Q1 2017 with four per 100,000 customers.
That, in part, has been driven by a number of moves Allera has made to improve customer service levels at the mobile operator.
Last July, it completed the first stage of its pledge to onshore all of its customer service calls, with contract customer calls now being answered in the UK and Ireland, with plans to create a further 550 customer service roles before the end of the year.
The next phase included recruitment drives for 130 new roles in North Tyneside, 130 in Darlington, 140 in Plymouth and 150 in Merthyr Tydfil to provide the staff to handle all EE Home Broadband and prepay customers service calls.
In January, EE announced that it had become the first UK mobile operator to bring all customer service calls to the UK and Ireland, with all contract, prepay, broadband and TV queries being answered by staff in those regions.
In April, EE announced a further recruitment drive that will see it hire over 800 contact centre advisors for its sites across the UK. From this number, 100 apprentices will be hired as part of its apprenticeship programme.
Steadying the ship
Pescatore has put his backing behind Allera, adding he has “steadied the ship” since EE’s multi-billion pound sale to BT but faces a challenge to mirror these successes in his new role.
“If you look at the quarter-on-quarter performance over the last six to 12 month, the numbers don’t lie and EE has delivered.
“Customer service is one area which BT has to address and by its own acknowledgement they’ve tried this but if you go back through the reporting periods from the last six to nine months, they have made customer service one of the key pillars of their strategy moving forward, effectively mirroring what EE has done.
“He is a very good candidate. However Marc has, marginally, had mobile-centric roles so here is a role where his own skill sets are going to be stretched because he’s taking on a huge amount of new areas.”
The move to bring together BT’s consumer and EE business suggests that the former is going to intensify its push and increase its presence in the quad-play market where rivals Virgin, Sky and TalkTalk operate.
Virgin Mobile operates a long-established MVNO, having launched in 1999 and like BT Mobile, runs off the EE network. Sky Mobile went live last November, running off the O2 network. Both offer handsets as well as mobile tariffs.
BT Mobile launched its MVNO service in March 2015 and with some 500,000 customers to date, is the only major one in its fields not offering handsets.
“The obvious different between [Sky and Virgin] is that neither of them owns a mobile network,” said Delaney.
“When you want to start doing services where the mobile and the fixed network interoperate with each other more, then obviously it’s easier to implement those things on a network that you own than on a network on which you rent.”
However, Pescatore insists the battle for quad-play supremacy has long started, and with content winning out over service, BT has a fight on its hands as the key will be cross-selling products and services between different customer bases, something he claims Sky has a proven ability of achieving.
“BT has accumulated a similar [mobile] base in half the time that Sky did and BT didn’t have any handsets, purely just a SIM-only. There aren’t many subscribers to go and acquire so it’s all about retention and cross selling. Sky excels in this area.
“BT currently has the best assets because they own the network. It’s interesting to see how Sky have been so dominant in certain areas when they don’t own any of the infrastructure, whether that’s fixed line or mobile.
“However, what [Sky] do own and have an abundance of is content and that’s firmly where the battle resides moving forward.”