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Analysis: BT under pressure to do the right thing...

BT is under pressure to make money and appear to be acting in the nation's best interests. ZDNet editor-in-chief Eugene Lacey looks at the possible strategies open to the country's dominant telco.

Now is a critical time for BT. The tectonic plates of the international telecommunications world are shifting and the shape and significance of the future land mass called BT (quote: BT.A) is now being determined.

Two powerful forces are at work here: the global play of international markets and capital on some of the world's largest companies and the deregulation of the territories in which they operate. The second force is technological: the shift of telecommunications away from voice as the dominant telecommunications product, to data.

The dominant landmasses of the new telco-geography will be those companies that have equited themselves best in these two (often connected) arenas. This is why we see BT today mounting a point by point defence of its strategy. The fortunes of the national carriers -- the BTs, Deutsche Telecoms, Telefonicas -- are seen as highly relevant to the success of their domestic economies, not just because they are enormous contributors of tax to the government coffers, but because they are the architects and builders of the platform on which the new economy hopes of many nations rest.

So lets look at how BT is doing in these two key arenas.

As far as mergers, take-overs and alliances go, we have seen some significant wins, but just as many failures. Getting pipped at the post by WorldCom in the MCI deal was a humiliating defeat for BT, made worse by the fact the winners are perceived as one of the new breed of telcos who "get it" in Internet speak. On the credit side, the alliance with AT&T to create the global, corporate carrier, 'Concert', is bearing fruit, though not as much fruit as the city would like. An approach of making small, but strategic investments in various foreign telcos has been criticised for not giving BT enough control. Some analysts would have preferred a more aggressive strategy to win control and certainly when compared to Vodafone's 'who dares wins' swoop for Mannesman, BT's approach seems tame.

Again on the credit side, BT seems very pally with Microsoft, and the recent announcement of a project to work together to build next-generation mobile information devices sounds promising, albeit in competition with just about everyone else. Overall, however, BT has increased its revenues from International investments as a proportion of overall profits -- though whether far enough, or fast enough, remains to be seen.

The most stinging criticisms of business performance are related to the Internet opportunity. Critics point at Deutsche Telecom's T-Online, which is about to float on the German Neuer Markt, and raise several billion Deutsche Marks in the process. Similarly, Spain's Telefonica has Terra Networks, the dominant ISP, and France Telecom has the leading French portal. The best that BT has been able to come up with is LineOne the UK's number three ISP, and not really a player in the portal arena where Freeserve, Yahoo, BBC, and MSN dominate. On the credit side, BT's Cellnet is a significant mobile carrier, and first to market with the new breed of Internet-friendly phones.

The reorganisation -- Take me to part II