Home > Market Research > Broadband & Fixed > UK SME Segment Telecoms Service Providers
This new 333-page report profiles and compares 29 key providers of telecoms and related services to UK SME customers.
The report includes the following:
• Expert market analysis (sizing, segmentation, positioning)
• Profiles of 29 service providers
• Verdict
• Summary (strategy and recent activities)
• Network & Portfolio
• Management (revenues, reputation and promotion)
• Compares them in terms of:
• Network
• Portfolio
• Revenue
• SME focus
• Customer base
Who should buy the report?
• Operators selling telecoms services to SME customers in the UK
• Companies investing in, partnering or supplying the above
• Operators wanting to understand the impact of competition on the SME segment in a relatively mature market
Key benefits:
• Source of key information on 29 suppliers
• Independent, up-to-date market analysis and comparisons
Key conclusions:
• The market remains vibrant, although some sectors are likely to be impacted by the global economic downturn and the ‘credit crunch’
• If Cable & Wireless ends up buying THUS/Demon, there may be another windfall of SME customers for other service providers to target
• Although BT faces stiffer competition from a range of players, notably the mobile operators, the incumbent should not be underestimated as it has managed to grow SME revenues over recent quarters
Executive Summary
The market for telecoms and related services to the UK SME segment remains vibrant, driven by the continued growth of the population of small businesses and by the growing array of services available to them to improve their productivity, expand their channels to market and protect their business data.
It is still unclear whether the global economic slowdown and ‘credit crunch’ will have a significant effect on the segment. Whilst it is likely that small businesses in sectors such as building and property are likely to be impacted, smaller businesses are inherently more agile than their larger counterparts and should be able to react more nimbly to changing circumstances. Indeed, smart telecoms service providers could see the changing economic environment as an opportunity to encourage take-up of services that open up new markets (e.g. Web sites), improve productivity (e.g. mobile access to company applications) or cut costs (e.g. hosted applications and services).
Changing economic circumstances impact different businesses in different ways. Some may choose to seek comfort in the security of a ‘safe’ supplier such as BT, but, so far at least, no telecoms service provider has gone bust as a result of the current downturn, so the situation is nothing like as bad as the ‘dot.com boom and bust’ years.
Alternatively, some may seek to cut costs and be more open to a change of supplier to save money – only time will tell and a lot will depend on the length and severity of the downturn.
Another imponderable is the future of THUS/Demon. Cable & Wireless has made an unsolicited bid for the alternative carrier which has been rejected by THUS, but the bidder holds a stake of about 30%, so further developments may ensue. If THUS falls to Cable & Wireless and the latter sticks to its current stated strategy, there could be a windfall of SME customers looking for a new service provider – much like when Cable & Wireless abandoned the segment a few years ago. Alternatively, Cable & Wireless may look to sell the SME customer base, providing any potential buyer with a significant boost in the SME segment.
Another dynamic of growing significance in the segment is the power of mobile companies. Historically, the only service providers that successfully sold combinations of fixed and mobile services were the UK’s army of resellers. BT has made efforts to penetrate the mobile market, but with little success to date, and now the likes of Vodafone and O2 are increasingly refining their small business customer propositions. Not only is mobile broadband starting to offer useful speeds, but it is also becoming affordable - and the mobile companies are offering fixed-line services too.
A lot of potential changes lie ahead in the market, with stronger challenges to BT’s dominance on the horizon. However, the incumbent should not be underestimated as it has returned to revenue growth from the UK’s SMEs. Once again, the real beneficiaries look like being the small businesses themselves.
Key Trends
• Operators of all sizes have continued adding features and functionality to their portfolios for UK SME customers, with a distinct trend towards offering IPbased telephony alongside, or increasingly as a substitute for, traditional telephony;
• Two other product areas where service providers have been introducing new products or enhancing existing ones are conferencing and call recording – again, this is increasingly being enabled by the shift to hosted IP-based voice products;
• Resellers continue to compete on price and being able quickly to respond to changing customer requirements;
• Established service providers have tended to continue to position themselves as premium service providers that offer productivity-enhancing solutions, rather than as providers of cheap minutes;
• Consolidation has continued over recent months as players look to fill gaps in their portfolios or geographic reach, as well as a means to create scale and the benefits that can be leveraged from this;
• The growing availability of mobile ‘push’ services, such as BlackBerry products, is a reflection of the trend for such services to ‘trickle down’ from larger corporate propositions to smaller business customers;
• There has been a trend amongst service providers of all sizes to broaden their overall portfolio to encompass IT services, driven by the blurring lines between the LAN and the WAN. This change is happening not just because higher speeds are becoming increasingly available at all levels but because much of the functionality required by customers can reside either locally or in the network, depending on their preference. The opportunity for service providers is to capture a larger share of each customer’s total spend and to cement a more dependent customer relationship;
• Mobile broadband is emerging as a potential threat to the on-going growth of fixed broadband as speeds ramp up and prices enter affordability. The convenience of being mobile will always offer an advantage over equivalent fixed propositions and will always command a premium (hence the on-going substitution of traditional fixed voice by mobile). This underlines even more the importance of delivering reliable service and value-added functionality in order to differentiate fixed broadband services from mobile ones;
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O2
Verdict: O2 has recently launched its broadband service for the UK’s SME market, backed by a substantial marketing campaign and leveraging the acquisition of Be. The company remains a market leader in the provision of mobile services to smaller business customers and, like its competitors, is aiming to drive growth of data usage on its mobile networks as an addition to its bundled voice minute packages.
Summary
O2 in the UK is part of Telefonica O2 Europe which has fixed/mobile businesses in the UK, Ireland, Germany, the Czech Republic and Slovakia.
“Our primary goal is to create value to our parent company, Telefonica (the Spanish incumbent), by becoming the fastest-growing major European mobile operator in revenue and profitability, and delivering on customer promises.
In the business customer market, we continue to grow our direct sales force and introduce new pricing and service propositions for our customers.”
O2 offers the following as five reasons for UK SMEs to choose it as their supplier:
• Unlimited calls to colleagues, customers, family and friends on their O2 mobiles;
• 24x7 customer services with specialist account managers and on-line account management;
• Easy mobile e-mail with full UK coverage for fast e-mail access;
• Quality calls with over 99% population coverage;
• The hottest gigs – O2 business customers get priority access to buy tickets to most events at the O2;
• Guaranteed great rates;
• Free monthly billing reports;
• Bring your mobile phone number with you when you join;
• All business tariffs include:
o No quibble 24-hour handset replacement;
o 80% off UK calls abroad;
o No charges for choice of payment medium.
In May 2008, O2 launched its nationwide broadband proposition and expanded its broadband offering to include UK business customers.
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Create More:
“At COLT we want to do the hard work for you. That is why we have created our Business Packs. You can save time by choosing a pack created especially to meet the needs of companies like yours, whilst maintaining the flexibility to take advantage of new technologies and to evolve with your changing business needs.”
• Business Access Pack:
o Integrated package that includes telephony, business-grade Internet access and e-mail services;
o The service is designed to work with the customer’s existing voice and Internet equipment;
o Customer can choose the number of telephone lines they need;
o Choice of Internet access speeds from 1Mbps to 4Mbps;
o Choice of service level;
o Single bill;
o Free calls between offices and other COLT Business Access customers;
• Business Security Pack:
o Comprehensive managed security package;
o Includes:
- Firewall;
- E-mail security;
- Antis-spam;
- Content policy filters;
- High-speed Internet access;
o Five-day e-mail queuing means that even if a customer loses their mail server they will not lose e-mails;
o Multiple layers of anti-virus scanning and anti-spam software from different vendors;
o Proactive management by IT security specialists;
o Fixed monthly subscription;
o Upgrade options include:
- Business Email;
- Backup;
- Telephony;
• Business Backup Pack:
o Pack combined a managed PC back-up with business-grade Internet access and a managed firewall;
o Automated back-ups are scheduled on a regular basis covering all computers – in the office or on the road;
o Rolling back data enables customers to repair any corrupted applications, single data files, PC configurations or hard drives;
o Only those portions of files that have changed are backed up, minimising the time it takes to perform the back-up and the storage space required;
o Backed up data can be accessed over the Internet anywhere in the world;
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Management Revenue:
BT’s revenues from UK SMEs during 2008 (financial year ending 31st March 2008) grew by 5% to £2,590 million (2007: £2,456 million), 31% of which came from ‘new wave’ activity, compared with 28% in the previous year. Growth was driven by takeup of networked IT services, broadband and mobility.
In 2008, broadband revenues in the business segment grew by 22% and, at 31st March 2008, 60% of new business broadband customers had contracts for a minimum of two years. Over 98% of broadband sales are made with value-added services attached.
SME Focus:
UK SMEs account for some 12% of the BT Group’s total revenues.
BT addresses all customer segments in the UK, as well as offering fixed services to wholesale and larger corporate customers internationally.
BT has a dedicated SME team that sits within BT Retail, called BT Business. The company defines a SME as a company employing up to 1,000 people and its SME portfolio is targeted at companies “from start-ups to businesses with 500 employees.”
BT Business serves around one million small companies across the UK, who between them have 7.5 million business customer exchange and broadband lines.
A breakdown of customers is provided in the profile.
Other resources are listed as on-line sales and indirect channel partners.
BT estimates the size of the communications infrastructure market for UK SMEs at £8 billion, the application/software market at £1.6 billion and the hardware/IT services and devices market at £6 billion. It intends increasingly to generate new revenues from the latter two, whilst looking to maintain and enhance its position in communications.
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Table of Contents
Executive Summary - Page 3
Market Analysis Page - 4
Benchmarked Suppliers - Page 12
Supplier Profiles - Page 13
Alternative Networks - Page 23
ATC Solutions - Page 33
Azzurri Communications - Page 41
BT - Page 51
Chess - Page 89
Claranet - Page 97
Cobweb - Page 106
COLT - Page 114
Daisy - Page 126
Datanet - Page 131
Gamma Telecom - Page 138
KCOM Group - Page 147
ntl:Telewest Business - Page 163
O2 - Page 181
Opal Telecom - Page 192
Orange Business Services - Page 204
Pipex - Page 218
PlusNet - Page 223
Redstone - Page 229
Star Internet - Page 240
TalkTalk Business - Page 250
THUS - Page 257
Timico - Page 278
Twang.net - Page 289
Unicom - Page 296
Vialtus Solutions - Page 302
Vodafone - Page 310
Zen Internet - Page 321
For full details, please email keithw@cmsinfo.com
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