Global reach

BT Group is eyeing growth in MEA as its Global Services division moves back to profitability.

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Global reach Olivier Campenon remains upbeat about growth in MEA.
By  Roger Field Published  October 24, 2010

With revenues of more than GBP20 billion ($31 billion) in 2010, and a global services group with some 8,500 corporate customers worldwide, BT Group is a far cry from the incumbent telecom operator that was set on the road to privatisation by the UK government back in the 1980s.

But while BT Group’s pre-tax profit of more than GBP1.4 million in 2009 points to a healthy business in the UK, the Global Services division, which offers IT and networking services around the world, has experienced a tougher time.

The division, which is active across all continents, was forced to review its contracts early in 2009 and write downs hit GBP1.3 billion in first quarter of 2009, which was twice as much as forecast. BT Group was forced to spend a further GBP280 million on restructuring the division.

But it now appears that the restructuring is starting to pay dividends, with BT Global Services once again on the path to growth. For Olivier Campenon, president, EMEA, BT Group, the problems faced by the Global Services division were mainly due to issues with certain very large contracts that had been signed a number of years ago. The division had taken on some large contracts, which typically lose money in early stages before showing a return. But BT has struggled to transform some of these contracts into profitable projects.

“For that reason we have done two things,” says Campenon. “We have done a right off, and at the same time we have made a number of changes within our own organisation, and we have set up a central team that does transformation.

“There is one team in the US and one team in Europe and these people are absolutely focused and because of that we have moved these loss making contracts into positive. Now any time we have a new contract, these transformation teams have been involved prior to the signing and they are involved post-signature to ensure the transformation is done.

“Of course the credit crunch worsened the situation but the reality is we had to look to ourselves.”

The results of BT Group’s efforts to turnaround the Global Services division are perhaps most evident from the group’s adjusted financial results for 2010. Indeed, while revenue for 2010 is expected to show a 2% decline compared with 2009, pre-tax profits are expected to soar by 19%, to GBP1.7 billion by the end of the year.

“As a division we are profitable but given the investment we have been making we are not yet cash flow positive,” Campenon says. “We have announced that we will become cash flow positive next year.”

“We need to keep in investing to improve network and expand.  We are also in a development mode – that is part of our future and we need that investment.

“I am absolutely confident that we are on the right track and that has made life easier, and we have good relationships with all our customers.”

MEA focus

While Campenon admits that business in the Middle East has “clearly been a bit quiet” he remains optimistic about the potential of the region. The financial crisis has also “rebalanced the focus” of BT’s business from Dubai to other parts of the Middle East, he says.

While the Gulf, and particularly Dubai, took a hit from the financial crisis, there remains some strong growth industries that are proving to be positive business opportunities for BT Global Services.

One such industry is aviation, which Campenon says was “very quick to rise up again” following the start of the credit crisis. BT has also experienced strong demand for many of its services which help corporates to operate more efficiently, and have therefore become even more important during the recession.

“A number of our services, such as our CRM services, are the core of their [corporate customers] own efficiency. It means that more than ever, our services were critical for them, and so we have continued to develop and grow them,” Campenon says.

In the picture

Another area that Campenon is particularly upbeat about is telepresence. BT, which already offers a service that helps companies connect with each other’s Cisco telepresence suites, stands to gain significant business from the “exponential” growth that the nascent industry looks set to undergo, according to Campenon.

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