BT takes to the airwaves

By ALEX BRUMMER FOR THE DAILY MAIL
Updated: 06:18 EST, 5 December 2006

The remaking of BT under the command of Ben Verwaayen continues apace. Having established itself as a reliable and secure player in broadband, it is now seeking to underpin that offer with a set top box and content package.

BSkyB, NTL as well as Freeview and the terrestrial television channels look to have a new competitor.

BT Vision's target market is those customers who want more out of broadband, but don't want to fork out a hefty monthly payment for subscription television.

The initial cost of this enterprise is expected to be £100m and unlike Carphone Warehouse's TalkTalk, which overpromised with its broadband services, BT is being cautious about roll out pledges. Initially, it is installing the equipment in 50,000 households which have preregistered but the goal is eventually to hit two to three million homes and to be in the black by three years.

It is also promising that profitability in its retail division will not be hit by the investment. The BT package, which includes Freeview channels plus pay-per-view football, movies and video technology - which will allow video storage of programmes - looks seductive.

The big selling point is that the consumer still trusts the group, as the legacy player, more than it does the competitors.

BT seeks to play to these strengths with its emphasis on the security of its broadband offering.

But customers should beware of thinking it all comes for nothing, since they have first to buy a broadband service and could quickly run up the viewing charges if they are not careful.

Vision is helped in the marketplace by the continued poor service at NTL which is only now struggling to step up its consumer reliability and service. The far more formidable competitor is Sky+, but that is a far more costly proposition.

The telecoms firm is refusing to disclose how much it would expect to make from each BT Vision user but it does have a strategy which seeks to link programming to marketing and other services. Football watchers will, for instance, be able to gamble immediately on the success of penalty takers.

In the business sector BT has been making a strong fist at global networks for big corporations. It is now seeking to reproduce some of that skill with retail customers.

The numbers look over ambitious given the engineering and customer service constraints on rolling out to millions of people.

But the shares (which I hold) - currently close to their highest level for five years - suggest investors are willing to give it the benefit of the doubt.

Food puzzle

If there was ever a triumph of financial engineering it is Premier Foods. It has in a rapid period of time brought together under one corporate roof many of the brands unique to British tastes and abandoned by the world food giants because of their lack of global appeal and growth prospects.

Buying RHM, the former Rank, Hovis McDougall, thrusts it into the position of being Britain's largest domestic food producer. In 1992 RHM was the subject of a bitterly contested takeover between two old chums - the late Lord Hanson and Greg Hutchings of Tomkins - and was won by the latter.

This time around RHM shareholders must be thanking their lucky stars that there is someone willing to take on Mr Kipling, Lyons cakes (created by one of my ancestors) as well as more than two million fresh loaves delivered each day.

Since making the journey from private equity to the public markets in July 2005, RHM shares have been horribly stale. So a premium of 30% will look like manna from heaven. Yet financing the deal will be a burden for Premier which takes on a chunk of new debt. In the age of more healthy eating Premier is also taking on some deeply unfashionable products.

Those who recall the Sudan 1 scare, might also wonder if the hygiene and quality standards of a company pieced together like a jigsaw can ever be as high as those among the traditional players, Cadbury Schweppes notwithstanding. Indigestion looks a big risk.

Daring Duffield

New Star chairman John Duffield has never hidden his utter contempt for Commerzbank, the owners of his former fund management firm Jupiter.

So it was with some satisfaction that Duffield's property funds have taken control of Commerzbank's City headquarters on Gracechurch Street for a cool £146m.

The desire of Commerzbank to shed control of Jupiter, with its entrepreneurial investment style, has been well documented. So far there have been no takers. Now that it has plucked up the courage to sell its London HQ to New Star maybe Duffield is ready for the ultimate revenge.