Mercury plans big expansion to boost sales
'High-risk strategy' to connect businesses and small subscribers could lift spending to pounds 500m
Saturday 17 August 1996
Senior executives are pressing Mercury's parent, Cable & Wireless, to come up with funding for the high-risk plan, which could see annual investment soar by two-thirds, to around pounds 500m.
The expansion strategy follows a confidential review of prospects at Mercury, which has been squeezed by increasingly tough competition for larger business customers.
Managers see an assault on the so-called "local loop" for small business and high-spending residential customers as their best hope to boost sales, which has slowed considerably in recent years. Last year Mercury's turnover rose by just 3 per cent, to pounds 1.7bn.
Currently, only Mercury's largest spending customers, those with phone bills running into tens of thousands of pounds, have direct connections to the company's national fibre optic network, the result of a pounds 3.5bn investment since the mid-Eighties.
The rest have indirect connections mainly using BT's local infrastructure and the "Mercury button" built into the phone. If Mercury installed its own direct connections, customer would receive one bill instead of two.
There are three options under consideration, the most promising of which revolves around wireless telephony, where the phone is connected to a base station using a radio signal from an aerial.
Mercury has been awarded a licence to operate radio connections, though the terms and conditions have yet to be finalised with the Government.
A trial of 22 small businesses in Reading was completed last month. Mercury's chief executive, Peter Howell-Davies, described the experiment as "successful". He explained: "Mercury has the second-largest local loop in Britain, primarily aimed at medium to large customers. As technology changes, so does the capability to service different segments of the market."
Mercury's second option is to extend its fibre optic links under the ground to much smaller-spending businesses. Another trial took place in Bristol last spring, though in marketing terms it is thought to have been less successful.
The most ambitious proposition remains a deal with the cable companies to use the infrastructure built up since the deregulation of the UK phone market five years ago. This would give Mercury direct access to homes for the first time, gaining a firmer foothold in the highly profitable top end of the residential market.
The problem for Mercury is that its preferred partner, the third-largest UK cable firm, Bell Cablemedia, appears on the verge of an alliance with the German telephones giant Deutsche Telekom. Mercury has a 13 per cent stake in Bell Cablemedia and two seats on its board and the negotiations with Deutsche Telekom are the source of growing concern to insiders.
Results of the review are being put to Cable & Wireless's new chief executive, Dick Brown, who joined the company in July after the enforced departure of James Ross and Lord Young and the failure to agree a merger with BT. Mr Brown is conducting a strategic review, but is understood to have reaffirmed that Mercury is "not for sale".
Mr Brown's warmer attitude to Mercury's prospects has pleased managers, who watched with growing frustration as the parent group appeared to vacillate over its long-term future. Mr Howell Davies said: "Dick came over to our offices on his first day in the job and has spent a lot of time with us since. He's made it very clear that he sees Mercury as a key part of Cable & Wireless's business and the cornerstone of his European strategy."
The expansion would end a long period of consolidation at Mercury, which two years ago announced 2,500 job cuts and an exit from the phone market. The restructuring, which involved an end to high-profile residential marketing campaigns, cost pounds 122m, but reduced Mercury's cost base by over pounds 60m.
South Korea ferry: Vice principal rescued from sinking ship found hanged
Missing Malaysia Airlines Flight MH370: Wreckage could be found within a week as search reaches 'very critical juncture', says minister
Royal Tour 2014: Is the Duchess of Cambridge the only person ever to climb into a fighter jet wearing a dress and high heels?
Kim Jong-un, crowds and contraband: Inside North Korea with the Pyongyang marathon winner
Cover up! Mother told to show less cleavage during Disneyland family trip: 'Are we supposed to wear turtlenecks our whole lives?'
The food poverty scandal that shames Britain: Nearly 1m people rely on handouts to eat – and benefit reforms may be to blame
US Navy christens huge $3 billion destroyer ship USS Zumwalt that appears as a fishing boat on enemy radar
Scottish independence: It is the English who should be on their knees, begging the Scots to vote ‘No’
Nigel Farage fatigue? Half of voters ‘immune’ to Ukip’s appeal
'Sinful': Video of British Muslims dancing to Pharrell Williams's hit Happy comes under attack
Nigel Farage: I’m taking on the status quo, and the Establishment’s fighting back
- 1 'Natural' energy drink banned for containing erectile dysfunction drug
- 2 Dylan Tombides: West Ham confirm 20-year-old striker has died after battle with cancer
- 3 Loch Ness Monster found on Apple Maps?
- 4 Angus Steakhouse: How does tourist staple continue to thrive in today's gourmet market?
- 5 Cover up! Mother told to show less cleavage during Disneyland family trip: 'Are we supposed to wear turtlenecks our whole lives?'
iJobs Money & Business
£150.00 per week: QA Apprenticeships: This company has been providing on site ...
£221.25 per week: QA Apprenticeships: This company is a well established Inter...
£40000 - £50000 per annum: Harrington Starr: Client Relationship Manager - SQL...
£35000 - £50000 per annum: Pro-Recruitment Group: Take your chance to join the...