Worldwide Business Information and Market Reports

www.the-list.co.uk and www.worldmarketresearch.com

Telephone +44 1404 891528 Fax +44 1404 891717 Email reportfinder @ tiscali.co.uk

Just want contact details for one of the companies in this report? Please don't ring us - try www.companieshouse.gov.uk, www.thomweb.co.uk or www.askalix.com

Join the ReportFinder mailing list and be told of new reports

Email:

MP64027

MAPS UK DOMESTIC TELECOMMUNICATIONS MARKET DECEMBER 1997

Overview

GO TO LATEST EDITION

Table of Contents

Executive Summary

Back to Telecommunications Index and Shopping Cart

Back To REPORTFINDER home page and Search Engine

TABLE OF CONTENTS

Not yet available from the publisher - due soon

Back to Top

EXECUTIVE SUMMARY

The UK Domestic Telephone Market is considered from the viewpoints of service provision and the supply of telephone handsets. The total value of the UK telephone market, comprising local, national and international calls, line rentals and connection charges, was estimated by OFTEL to be £10.01 billion for the year to 31st March 1996. The domestic content of this figure has been estimated to be approximately £7 billion. The latter figure includes £89 million for the cost of exchange line customer connections and £1,767 million revenue from exchange line customer rentals. The domestic figure also includes revenue from the Small Office Home Office (SOHO) sector which takes in the rising number of self-employed people working from home.

The figure for customer equipment is extremely difficult to quantify. Telephone handset sales have risen from around four million units in 1996 to an estimated six to seven million units in 1997. This rise is largely due to BT’s reported decision to phase out wired-in rented phones and replace them with purchased plug-in handsets. This market is divided between the volume low cost sector where £10 is the target price for a two piece phone. For those seeking more facilities the cordless models, costing around £45, are an increasingly popular alternative. For better sound quality and superior all round performance digital cordless versions, costing around one hundred and £50, are appearing. The price of the latter is expected to fall below £90 in 1998. At this price sales will increase considerably.

In a changing market, dominated by British Telecommunications (BT) in the residential sector, the main competitive challenge comes from the telephony activities of the 200 or so other licensed operators which include cable television companies, the mobile sector and others. The dominance of BT is confirmed by published industry data and company estimates which reveal that BT supplies around 91 percent of residential exchange lines and around 92 percent of business exchange lines. BT is the only available fixed telephony service provider for around 65 percent of all UK households as at April 1st, 1997. Whereas cable TV companies can offer telephony, BT has the handicap of not being allowed to enter the entertainment sector to broadcast entertainment over its main network, until the year 2001 at the earliest.

Consolidation in the cable sector led to the creation of Cable & Wireless Communications (CWC) since before 1996 Cable & Wireless’s UK residential telephony operations were largely confined to indirect access via the BT-owned local loop. The merger brings together the cable TV and phone companies, Bell Cablemedia plc, Mercury Communications Limited, Videotron Holdings plc, NYNEX CableComms Group plc and NYNEX CableComms Group Inc. Now CWC is the largest UK cable company with six million homes and tens of thousands of businesses under franchise.

Cable & Wireless owns 52.6 percent of the shares in the new company which is quoted on both London and New York stock exchanges.

After CWC the next largest cable TV company offering residential telephone services is Telewest Communications which failed to join the Cable & Wireless consortium. Telewest has seven franchise areas and three affiliate groupings, comprising 4.3 million households. This represents 24 percent of the UK homes under cable licence. Telewest has now completed around 70 percent of its network, against a licence requirement of 83 percent, and is reported to have 769,000 residential customers plus 67,823 business telephone lines.

General Cable, which is 38 percent owned by the French utilities conglomerate, Générale des Eaux claims to be Britain’s fourth largest cable TV company. In the first six months of 1997 its television subscriber base declined sharply whereas it increased its residential telephone subscriber base by 27 percent to 187,700. Company subsidiaries include the Birmingham Cable Corporation Limited, in which it has a 44.95 percent, and The Cable Corporation Limited where General Cable’s holding is 83.45 percent.

Cable TV companies in the UK are largely controlled, and owned by overseas interests. They have invested considerably to establish an infrastructure but have found it extremely difficult to attract and retain customers. They have discovered that their telecommunications activities are far more profitable than their core business of TV provision.

General Cable has reacted by refocusing its activities on telecommunications and future customers will no longer be offered a standalone television service option. Furthermore, those taking a combined telephonetelevision option will have to pay substantially more for the privilege.

The cable companies resent being exploited by some programme providers, notably BSkyB, which are said to charge their satellite TV customers substantial prices for programmes, as they charge the cable companies which act as programme distributors. General Cable is said to no longer be prepared to subsidise the programme providers and has taken a stand against BSkyB which takes two thirds of its cost of sales.

New technology is helping new entrants to the residential telephone market to reach the customer without using BT’s installed facilities. One approach is to use Fixed Radio Access (FRA) technology in which Ionica is a pioneer. This technology enables Ionica to reach the subscriber’s wired-in phone via a radio link rather than via a cable link from a local telephone exchange.

At the recent launch of its shares on the UK Stock Exchange Ionica raised £460 million which, together with bank loans of £300 million, will finance its development in 1997 and 1998. The company already has 22,000 customers in Eastern England with a further 2,000 waiting to be connected.

Residential phone customers are increasingly using their phone lines to access the Internet and it is technically possible to provide low cost Internet links via the domestic power supply. Canada’s Northern Telecom (Nortel) has provided equipment to Ionica and is working with the Norweb Communications division of United Utilities on this project. In future it could be possible for residential telephone services to be provided using this technology.

BT dominates the consumer equipment market to a lesser extent than in its domination of service provision. Much of the equipment it markets under the BT brand name is manufactured in Pacific Rim countries whose manufacturers also supply the UK residential market via such importers and distributors as Audioline, Betacom, Binatone, Geemarc, Lazerbuilt, Morphy Richards and Venturer. European manufacturers include Hagenuk, Phillips and Siemens.

The BT brand is the overall market leader in the retail sector. BT products are sold through BT’s own shops and other outlets including the specialist chain, The Link, where BT’s Cellnet subsidiary has a 40 percent share stake, the balance being held by Dixons. Argos and the Dixon group are the main retailers for telephone handsets in the UK.

BT has to compete for business with low cost providers of international calls and other services and is said to be losing its residential service market share by around two per cent per annum. However, this is not too serious a problem when market share exceeded 90 percent at the outset. As long as it retains control of the local loops, the final link from the exchange to the customer’s house, its dominance of the residential market would appear to be impregnable.

New services, new equipment designs and lower prices will maintain BT’s dominance, underlined by reports that many customers are returning to the BT fold from the competition.

Text © 1997 MAPS

Back to Top

Back To REPORTFINDER HOME PAGE

Ariadne - working together with our customers to enhance productivity and increase knowledge

© 1999 www.the-list.co.uk Ariadne

Last updated by Duncan Nottage 9th February 1999