British Telecom sees opportunity in emerging global champions

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The competitive advantage of UK-based telecom company British Telecom (BT), a daughter company of BT Group, is in tailoring complex transnational business solutions for an individual client’s needs, said Pawel Karlowski, appointed in August 2007 as BT’s CEO for Central and Eastern Europe.

He added that BT’s services are not the cheapest, but they are created to increase efficiency and bring major cost savings to the companies that use them. British Telecom provides services in 170 countries. In the fiscal year that ended March 31, 2007, the company invested £727 million (€1 billion) into research and development—in the previous year, it invested £522 million. According to Karlowski, the budget growth is directly connected to the rapidly developing global businesses on which the company focuses. In CEE countries, many formerly local companies have emerged that are now in a position to pursue foreign projects. BT has been operating in the Czech Republic for five years and has been following this trend, using it as an opportunity to enrich its activities in the region. The only thing that matters before starting a new business is the multinational character of the partner, Karlowski said.

Q: As managing director of Central and Eastern Europe, what is your prime aim?
A: I would see my mission as threefold. I need to maintain BT’s CEE capability to be cost effective and quick in terms of a being a contributor to our global offers. My second area of responsibility for the next period will be targeting regional ICT (information and communication technology) opportunities coming from companies that are emerging as champions in transforming from local to international firms. The third area is related to the build out of an internal delivery platform in Central and Eastern Europe, which—under the global sourcing initiative in BT—we are currently doing in Hungary.

Q: Is Budapest seen by BT as the core location in the CEE region?
A: Well, in a way yes. We have been operating there the longest, since 1999 to be accurate. And BT has recently expanded its presence in Hungary. In 2004 we opened a regional service center there to serve European corporate customers with a CEE focus. The Budapest facility is also the one that provides support for other customer centers on the Continent. At the moment, we are preparing our second center in Hungary. This will open in Debrecen [in east Hungary] at the beginning of next summer, and we plan to make 250 jobs there.

Q: BT has been in the CEE region since 1999. What has changed since then?
A: It is worth saying we have reached a turning point in the Central and Eastern European region. We are seeing a growing number of local companies transitioning from having a focus on local activities within their country of their origin to [a point where they are now] implementing multinational strategies. These companies have become natural prospects for us. Our targets are those that operate on a multinational level.

Q: You said previously that for BT’s multinational customers, Central Europe represented an opportunity to grow their businesses. Which customers do you have in mind?
A: If you look at the global top 500 companies, we are in active business relations with about 60 percent of them. Sometimes these global companies are big in their home countries, sometimes not. That is not important, since it only depends on their business strategy. Among others, we work with [IT and computer firm] Hewlett-Packard Company, [consumer product producer] Unilever, and a bunch of pharmaceutical companies, too. Recently we announced a major contract with [Switzerland-based pharmaceutical firm] Novartis International, for example.
In the Czech Republic, we serve around 220 customers altogether. All of them come from the pool of global customers I mentioned. Some of them have very intense activities here, others are much smaller and only have a representative office in the Czech Republic.

Q: Who are BT’s major customers in the region?
A: Unilever and HP are the ones that create the biggest volume of business here I guess. Besides [telecom firm] Telefónica O2 Czech Republic, [national carrier] Czech Airlines (ČSA) and [alternative telco] GTS Novera are our key customers in the Czech Republic.

Q: How large is BT’s Czech branch?
A: There are only about 20 employees working in this office. In terms of turnover it becomes much more interesting. Of course, regarding the complexity of the company business model and the fact that BT is a publicly listed company in the UK, we try to focus on central financial information disclosure rather than on country-specific financial disclosure. These country specifics depend on the nature of the global contracts and sometimes the clients wish to have central billing, which means that we might invoice the customer just in the country they chose—so it is necessary to consider this when speaking about individual local business results. Another point is that such information could then lead to analytical confusion around BT’s listing stock and that would be against our internal regulations.

Q: What is the main activity BT provides in the CEE region?
A: Traditionally, BT has been a telecommunication provider and this remains the core activity. However this would not be enough. As an industry we want to evolve to a combination of three functional areas of services that historically have been bought and very often even managed separately within our enterprise customers. These are what we call ‘networked IT services,’ which we think can generate a greater profit than providing services to each area individually.

Q: What does this mean for you in practice?
A: We are in a highly competitive market so we are not growing at a gold rush speed. Nevertheless, what is the most important is to capitalize on this trend of the change in the buyer’s behavior and in the changing perception of the services on the side of enterprise customers. That is why we have turned toward the analysts and the stock market to show that we will continuously grow our ‘new wave’ [of networked IT services]. ... Our customers are those who have moved from buying individual product services to buying complex business process solutions for a mobile work force, unified communications, enterprise networking, enterprise IT security, and so on. That is BT’s original strategic approach.

Q: And which local companies align with BT’s business strategy?
A: Basically, all those that have managed to expand abroad. I am talking about companies such as [beverage maker] Kofola, [petrochemical firm PKN] Orlen, [online retailer] Internet Mall. These are ones that we focus on.

Q: Can you specify if there are some you are negotiating with at the moment?
A: Of course, the rule is: first sign, then announce.

Q: How does the Czech market differ from others in the CEE region?
A: Joining the EU has standardized a lot of things. However, I would say that each of those countries still have very specific disparities. For us, the most important difference on the Czech market is that you have effectively completed the separation between the state and the [incumbent] operator. That has not been accomplished in other countries. (Editor’s note: Former state-owned fixed- line operator SPT Telecom became Český Telecom in 1993 and was acquired by Spain’s Telefónica in 2005 and renamed Telefónica O2 Czech Republic in 2006.)

Q: Do you also come across any major obstacles here?
A: If I compare the Czech Republic to Poland or Hungary, I must say, the banking industry is not that mature here in the sense that the Czech [industry] is still to a significantly lesser extent subject to globalization [and does not operate on a multinational level]. This is still something that has to come.

Q: You joined BT from outside. What is your professional background?
A: I have been with the ICT industry in Poland and in Europe for the previous 16 years. I started with 12 years on the equipment side of the industry. In that time I was working for the AT&T Network Systems, later to be called Lucent Technologies [and now part of Alcatel-Lucent]. In the last period of my engagement there I was responsible for the whole Central European region market for mobile operators. Following that I worked three years as country manager with T-Systems in Poland, which is actually one of our major competitors. And just before joining the BT I was a board member of Netia, which is the biggest alternative telco service provider in Poland. (cbw.cz)

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