Telcos’ convergence strategies diverge

CANNES — Kai-Uwe Ricke, the chief executive officer (CEO) of Deutsche Telekom AG, and Ben Verwaayen, his counterpart at BT Group PLC, have diverging views on convergence — the idea that, some day, fixed and mobile telecommunications systems will come together into a seamless whole.

The two appeared on stage together Wednesday at the Symposium/ITxpo conference and exhibition in Cannes, France, to discuss convergence and integration with Gartner Inc. analysts.

Ricke and Verwaayen are starting from very different positions: Deutsche Telekom owns fixed and mobile networks in Germany, while BT sold its mobile division in 2001, at a time when it, like many other telecommunications companies, was struggling to cut debt.

“Somehow Deutsche Telekom emerged from the turmoil with everything in hand,” Ricke said.

BT, with no mobile network, needed a partner. Six months ago it announced it would work with Vodafone Group PLC to launch “Bluephone,” a mobile phone that can also make calls over a fixed line using a Bluetooth cordless connection.

“Sometimes you have a better position to make radical innovation if you don’t have certain interests,” Verwaayen said, alluding to the fact that if BT still owned a mobile phone company, the project could have cannibalized mobile or fixed-line revenue, rather than added to it.

Ricke now faces that problem: “Mobile will substitute fixed-line voice,” the German CEO said.

Ricke’s solution for maintaining revenue from his fixed-line infrastructure is “to get everybody subscribed to DSL (Digital Subscriber Line) so that they become addicted to broadband services.”

Verwaayen cited regulation as his biggest worry: “Regulation can only look at yesterday and today. We need to worry about tomorrow. How do you give the regulator the incentive to look at tomorrow?”

Regulation also worries Ricke, although it wasn’t his biggest concern: “We need to coach the regulator that our industry is only a healthy industry if infrastructures can earn their living.” The cost of services should not just be about the price that consumers are prepared to pay, but also about what investors expect to be paid, he said.

Training his organization to place customers before technology disturbs Ricke the most. With an organization divided on technological lines into three separate businesses (T-Mobile for mobile, T-Com for fixed-line networking and T-Systems for IT integration) that will be a long process, but “It’s something we are changing over time,” he said.

Personnel costs are Ricke’s second-biggest worry. While BT shed around half its staff after the deregulation of the U.K. telecom industry in the 1980s, Deutsche Telekom has not yet gone through that process. “This is a major issue for Deutsche Telekom, which I have to solve in an environment, which is very tough for us.”

Verwaayen’s second worry is speed: “I think we’re running as fast as we can, but that’s irrelevant … is it fast enough for our customers?”

With major changes under way in BT’s network infrastructure, which it plans to transform from a circuit-switched to an all-IP (Internet Protocol) model, Verwaayen is also concerned about communication. “Are we good enough at telling customers what we plan to do, soon enough to get their feedback?”

Gartner’s Symposium/ITxpo, at the Palais des Congrès in Cannes, runs through Thursday.