BT Has To Grasp Its Second Chance At Becoming A Mobile Telco And Broadcaster

The decision to sell off O2, formerly BT Cellnet, to Telefonica was one that still surprises me today. It's certain that the price seemed good and it was a success story of a British company that has risen from humble beginnings to be front-page news when it was sold to Spain's Telefonica at the end of 2005 for just over GBP17bn. Okay, so O2 was an independent company at that stage, so it wasn't all BT's doing -- but essentially, BT had divested its investments away from mobile.

Although the money side sounded great, the overriding problem was clearly that BT had no mobile interest at a time where it was hard to imagine anyone in telecoms didn't think that was an issue. Had BT ditched mobile before its ban on transmitting entertainment of any kind was lifted at the start of 2001, you might have been able to explain it away. When speeds become faster, the company could have reasoned, we won't be able to beam entertainment to handsets, so we won't be able to charge for much data so there's not a lot of point being in mobile. But BT Cellnet was spun out in to O2 at the end of 2001 and then sold off to Telefonica four years later.

BT dabbled with mobile for a while, piggybacking on Vodafone's network in the days before the iPhone revolution -- but to all extents and purposes it has been out of the mobile game for a decade.

So why the change? Well, it's clear that BT now sees itself as a seller of what it can transmit down its telephone lines and broadband connections. Today's news that it is now making Sky Sports 1 and 2 available to its YouView subscribers is evidence of how it sees the way forward -- particularly as the statements it has issued reference Netflix and the line up of subscription options now available to subscribers. BT is no longer just about pipes, but what is consumed through them. Consumers are mobile and want to consume those subscriptions on the move, so it stands to reason BT is going to need a mobile network with a respected 4G network up and running. Thus, after a flirtation to buy back O2 from Telefonica, it now appears to be in advanced talks to buy EE, the company formed by Orange and T-Mobile merging.

I hate to put a slight fly in the ointment here, but there is an irony at play. When BT owned Cellnet, just like arch-rival Vodafone, it had long wavelengths (900 MHz) that are perfect for voice because they don't carry a lot of data but they can travel a longer way through walls and in to rural areas than the shorter frequencies (1800 MHz) that EE uses. In other words, as far as voice goes, in my opinion, it was better placed on the frequencies it used to own than those it will pick up if the EE purchase goes through. The higher the MHz number, the more data the signal can carry but the less distance the wave can travel. As far as data goes, it makes little difference because all are using similar frequencies for 4G, but with voice, there is a distinct disadvantage -- in terms of the laws of physics -- when you compare what was O2 with EE.

That aside, BT has a second chance to be a mobile company, and at the same time, reinforce its strategic move to become as much as broadcaster and entertainment provider as it is a telco. As the EE discussions deepen -- and it would appear they're very well developed -- the company always has the ultimate fall back that Telefonica, if the headlines are to be believed, was apparently very interested in having sales talks too. So, BT may be in exclusive talks now, but ultimately has options.

Not too many companies get to drop the proverbial mobile ball and remain successful enough to be in a position to pay the GBP12.5bn required to pick it up again. It's an opportunity BT should thank its lucky stars for. 

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