BT fends off challenge from rival broadband internet providers

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BT has maintained its position in the UK broadband market despite fierce competition. Even so, Carphone Warehouse, a key rival, said it is still struggling to keep up with demand for its "free" broadband offer.

Despite the likes of Carphone Warehouse, Sky and Orange unveiling "free" broadband packages over recent months, BT has maintained its market share. In the three months to the end of June, BT's share of new broadband customers was 30 per cent, only a marginal decline from the previous quarter. BT had 8.7 million broadband customers at the end of the quarter.

The strong broadband growth, combined with the continued strength in its IT services business, helped drive BT's overall revenue 3 per cent higher to £4.9bn, and profit before tax and exceptional items 26 per cent higher to £639m.

Ben Verwaayen, BT's chief executive, said BT differentiates itself through customer service and other value-added services such as security and television over broadband. "If you choose broadband for price and price only, you will go to other providers. Broadband is more than putting existing products together and putting a ribbon around it," he said.

Mr Verwaayen was unfazed by BSkyB's aggressive plans to launch into the internet market as BT has already proved it can cope with rampant competition in the market.

Mr Verwaayen highlighted its customer service strength. BT can remotely take over a customer's computer and resolve any problems, a service that garners 95 per cent customer satisfaction levels, he said.

BT's boasts about customer service and network reliability will not have been lost on Charles Dunstone, the chief executive of Carphone Warehouse. Despite reporting strong first-quarter results, Carphone admitted that it has managed to connect only half of the customers that have signed up for broadband. The company is investing heavily in its call centres to ensure that customers are connected promptly.

Mr Dunstone said: "On the customer service side, there is no doubt that we initially underestimated the strength of demand. We still have some way to go, however, to reach the leading service levels we target, and I take personal responsibility for ensuring we achieve these."

Carphone Warehouse had 596,000 broadband customers at the end of June, including 476,000 applications for free broadband. It said it is ahead of schedule in its plan to invest in BT's local exchanges and has started to transfer customers on to those lines. Mr Dunstone and other broadband companies can take heart that the number of new customers added to BT's network was 311,000, the lowest gain since 2003.

O2 expands customer base to lead UK mobile market

BT was not the only company boasting about its customer service strength yesterday as O2 steamed ahead in the UK mobile market.

O2 added nearly half a million new customers in the first quarter as it took market share from the likes of Vodafone and Orange. O2 has taken 40 per cent of new subscribers in the UK market over the past year while maintaining its revenue growth and margin profile.

Peter Erskine, the chief executive, said that, despite ferociously competitive market conditions, the company has benefited from its investment in strengthening its customer service functions and its direct-sales channel.

However, he said: "I still do not think we have distanced ourselves enough from the others."