Marconi revival threatened as BT casts the net wider

Marconi's long and tortuous climb back to profitability could be thwarted by its biggest customer, BT.

The telecoms equipment maker, which nearly collapsed in 2002 and had to be rescued by its creditors, is betting on a raft of new contracts from BT, which is preparing to spend billions upgrading its out-of-date copper-wire network.

A quarter of Marconi's sales are to BT and the two companies have enjoyed a close relationship for decades.

But BT's upgrade project, known as 21st Century Network, could benefit Marconi's rivals, such as Nortel, Alcatel and Siemens.

Instead of awarding single contracts to telecoms suppliers, BT has decided to "mix and match" using multiple providers. According to a report by Deutsche Bank: "Such a 'portfolio approach' ... represents a likely long-term negative for Marconi."

Per Lindberg, an analyst at investment bank Dresdner Kleinwort Wasserstein who was credited with predicting Marconi's decline two years ago, said: "BT is crucially important to Marconi. But BT is embarking on a long overhaul of its network and much of the old, solid relationships will go. The new battleground will be with the likes of Nortel and Alcatel."

Before Christmas, BT held a symposium at its Adastral Park research centre near Ipswich to outline its network plans to 300 potential contractors.

Despite the competition, Marconi was the first, and so far only, supplier to bag a contract. A spokesman said: "We are winning new business with BT on a regular basis. BT has so far announced only one supplier for its 21st Century Network and that is Marconi."