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BT Retail chief ‘fiercely opposed’ to sale of local loop

Time to stand and fight

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Pierre Danon has been at BT for less than a year and already he's being tipped to take on the top job at the telco when Sir Peter Bonfield finally decides to step down. That's some endorsement. The Register caught up with CEO of BT Retail to find out how he's bringing about change within the company.

Anyone who harbours any thoughts that BT might still be interested in selling its local loop should talk to Pierre Danon. The CEO of BT Retail is adamant that the wires that connect his customers to the phone network should remain in BT's hands.

"I consider the local loop as absolutely the core business of BT," said Monsieur Danon. "And if there is one thing you don't do, you don't outsource your core business. That is the most stupid thing you can do.

"Of course, it generates an immense competitive advantage - which is why we have a regulator.

"However, I just cannot deliver a customer experience if I don't have the integrated chain of the service delivery. I am fiercely opposed," he said.

Monsieur Danon's dismissal of Earth Lease's £8 billion offer to buy BT's local loop typifies his approach to the job. Charged with defending BT's market position, he is adamant this can't be done by selling off core parts of the operation. To him, it simply doesn't make business sense. But defending BT's position is only part of the equation. Monsieur Danon believes it's time for BT to become more aggressive in the marketplace, not just standing its ground but gaining market share as well.

The former president of the European division of the Xerox Corporation was appointed CEO of BT Retail in October 2000. His task was to head the business unit and develop and maintain its relationship with the telco's 21 million customers in the consumer, public and private sectors.

Eleven months on and he openly talks about a cultural transformation within the company that he believes is already delivering results.

"When I took over there was this mentality that we were a big fat Sumo wrestler where competition was invited by regulation to hit us and we could not hit back.

"I think we have done a very important cultural transformation saying, 'That's enough'.

"The only thing the regulator has asked us to do is to fight fairly. We will fight fairly - but fiercely.

"We are not going to continue losing market share," he said.

It is at times like this that you witness a steely determination and sense of direction that many believe has been absent from within BT. Insiders openly talk of Monsieur Danon bringing a "breath of fresh air" to the telco.

Earlier this year he set an ambitious goal of cutting costs by £850 million over the next three years and is already confident he will deliver £240 million in savings this year.

He is also focused - almost to the point of obsession - on improving customer satisfaction. He monitors BT Retail's performance each week and reports detailing customer satisfaction are never far from his reach.

"70 per cent of our customers are very satisfied. That's not bad. There are plenty of companies that would be happy to do that. Nonetheless, is not better than the competition...and it needs to be," he said.

Perhaps it is this attention to detail that has meant that in the last three quarters BT has lost just one per cent of its market share. And in the last quarter, BT even gained 0.2 per cent market share, taking it to 73.4 per cent. Some critics might scoff at this tiny improvement, but for a company that has been losing market share at a rate of six per cent a year, it is a noticeable turnaround. Time will tell if this is just a statistical anomaly or a blip in a downward trend.

Monsieur Danon, though, believes it heralds the start of BT's fight back.

"There was a kind of loser mentality within BT. It was normal that [people thought] we would lose market share...and there was nothing we could do," he said.

The sense of pessimism was compounded by views that Internet phone calls and the growth of mobile phone would also squeeze BT's traditional voice business. However, Monsieur Danon maintains this attitude is defeatist.

"Yes the voice business will erode, there is probably no doubt, but if you make it a self-fulfilling prophecy you can be sure that it is going to accelerate. Therefore we are going to defend the core and we need to sell more to our customers," he said.

And that appears to be the key of Monsieur Danon's approach. Defending his business with a passion is only part of the equation. He's also been charged with growing his earnings by five per cent a year - around £50 million.

The question is, how?

"Our key asset is our customers and our brand," explained Monsieur Danon.

"These position us as a retailer, a distribution business. That is a positioning I want to establish more and more strongly. I distribute traditional voice products, but actually I want to become a distributor of communication services. I want to do more and business with my customers in the area of communications.

"We have a vision of being a customer centric distribution organisation within the communication services areas," he said.

The recent initiative to market digital TV services to its customers is perhaps the clearest sign of what's to come. However, Monsieur Danon declined to expand on his plans preferring instead to present his initiatives to the board first.

While he's hinted at what might lie ahead for BT, it remains to be seen if the changes will pay off in the future. BT has had a rough time of it lately and has more than its fair share of critics. Monsieur Danon is doing his utmost to defy the doubters and improve the operation. ®

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