Sky TV
BACK in 1989, if you had predicted that Sky TV would become more successful than BT, you’d have been laughed out of the room. Rupert Murdoch’s Australian chutzpah was considered no match for the state monopoly that BT was handed on a plate, and which it squandered away over the following years. You’d have been right though: BSkyB, the plucky insurgent, is now worth over £1bn more than BT in terms of market cap.
Nor are things likely to change any time soon, if at all. Revenue at Global Services (GS), the one-time engine room of the business that has become an albatross round its neck, continues to move southward. Public spending cuts won’t help; Ovum analyst David Maloney estimates that 23 per cent of GS revenues come from the public sector, with eight per cent of that at risk from the impending fiscal squeeze.
Although there are bright spots on the horizon including a next generation super-fast network that will stand out from the crowd – there is one unalterable fact: BT’s profits are only rising because management is cutting costs faster than revenues are falling. Such a business model is unsustainable.