CLOSE-UP: LIVE ISSUE/BT - Technological revolution brings ET back to earth. The alien's failure is just one sign of trouble at BT. Report by Matthew Cowen

It's good to talk, but not when you're having the year that BT is and your share price is acting like a manic depressive on a bad day.

It's good to talk, but not when you're having the year that BT is and your share price is acting like a manic depressive on a bad day.

The telecoms giant, never the most loquacious company, has been keeping pretty tight-lipped during an annus horribilis that has seen BT's credit rating downgraded from double AA+ to a mere A, a 'negative outlook' slapped on the firm by City analyst Standard & Poor, and a share price slipping towards its lowest point for nearly two years.

The reasons for plummeting confidence are fairly clear. The company has been saddled with the huge cost of bidding for third generation mobile phone licences, making key strategic acquisitions abroad and developing broadband networks at home. Debt is up to pounds 30 billion while competitive pressure has meant predicted profits of only pounds 1.7 billion for March 2001, as opposed to pounds 4.3 billion two years earlier.

Investor confidence dropped to such a low in August that BT was forced to cancel a much trumpeted dollars 10 billion bond issue. As if this wasn't bad enough, City talk has condemned Oftel's director general David Edmunds for allowing BT to dodge its responsibilities on providing broadband services, and has contended that the company is not developing such technology quickly enough as a result.

Back in July, BT responded to the gloom with its most significant corporate restructure since privatisation.

The company's traditional geographic organisation was scrapped in favour of a service-oriented set-up. Three new 'growth businesses' were established.

BT Wireless will combine Cellnet in the UK with wireless operations in 13 other countries. BT Openworld will combine the company's internet service providers and portals, including the digital TV channel, Open. Finally, Ignite will concentrate on providing broadband for corporate and wholesale markets in Europe.

BT is expected to float some or all of these businesses as it seeks to raise capital and combat debt. It has also, significantly, spoken of establishing separate marketing teams for each.

For now, BT remains silent about the true significance of the restructure to the future direction of the company. The official vision of the future will have to wait for the half-year results expected within the next week and the full strategic review promised before the end of the year. However, it seems likely that recent events will lead to more than one corporate casualty.

The first man down was BT's finance director Robert Brace, who departed last month following growing pressure over the high sums bid for mobile phone licences. Brace appeared to be sacrificed to appease City traders whose consistent downgrading of the share price was seen as a vote for drastic changes. Should they prove unimpressed then the heads of chairman Sir Iain Vallance or chief executive Sir Peter Bonfield could be next on the block.

However, an equally endangered member of BT's line-up is the 3ft alien drafted in to guide the company through the telecommunications revolution.

ET was unveiled by Abbott Mead Vickers BBDO 18 months ago in a 'special effect out of a hat' trick that was said to have helped the agency retain the bulk of the business. He has taken a fair amount of flak since but it would be unfair to put ET's failure to lead BT into the 21st century down to some uneven ads. Circumstances have forced BT's strategy to change almost beyond recognition since he was first recruited.

One aspect of ET's appeal to the company was his strength as an international icon. Yet the relevance of this factor has dwindled with BT's stumbles overseas.

First there was the stuttering performance of Concert, the international venture jointly established with AT&T. Then there were the high prices paid for expansion in Europe that received such a vote of no-confidence in the City. Finally there came BT's farcical attempt to secure an Italian mobile phone licence for Blu, a venture in which it holds an uneasy stake with Benetton and Edizione.

More significant still are the mixed signals concerning future marketing in the UK and the possibility of an unbundling of strategy which the creation of flotation-ready businesses seems to imply.

ET was the perfect vehicle for BT's traditional strategy of shoehorning new technical offerings into a cosy, overarching brand campaign.

It's a strategy that harks back to the Beattie ads, when Maureen Lipman developed a sudden urge to talk about faxes and pagers. Now the traditional idea of a one-size-fits-all campaign appears to be under threat.

Marketing departments and advertising brains will be putting their heads together over the next few months to decide how to balance different concerns over BT's new growth businesses, particularly the hi-tech consumer services Cellnet and Openworld. The assumption is that separate campaigns, and possibly separate agency rosters, will eventually be developed for both.

The jury is still out on such an approach. On the one hand it might prove confusing and damaging to have too many separately styled BT campaigns running simultaneously. On the other, there is a real argument for separately branded packages relevant to a new generation of mobile phone users, most of whom have little day-to-day contact with BT's land lines.

These are the arguments that will define ET's fate. Of course, even if the new businesses are given their own marketing strategy, and the alien is sent back to the stars, the question about BT's core advertising will still remain.

At the same time as it created Openworld, Cellnet and Ignite, BT decided to split its land line business into wholesale and retail operations.

The intention is to avoid regulation and compete aggressively with rivals such as NTL and mobile phone offerings.

But the restructuring is unlikely to be enough and for that reason the age of the iconic BT campaign is unlikely to be over. Cellnet and Openworld may some day break out from the central brand, but the advertising community should still be on tenterhooks waiting to supply the successor to Beattie, Bob Hoskins and ET.

Leader, p34.


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