Outlook: Sometimes it pays to do nothing

SOMETIMES FAILURE can produce the most spectacular results, as BT's latest set of sparkling figures demonstrate. This is the company that failed to merge with Cable & Wireless, failed to buy MCI, failed to build a fibre optic network for the UK and failed for a long time to recognise just what a goldmine it possessed in the local loop.

And how has it been rewarded? With a 19 per cent rise in revenues in the fourth quarter, growth rates for its inland telephone business not seen in almost a decade, and profits rising at an annualised rate of 33 per cent.

Sir Peter Bonfield, BT's laddish chief executive, must surely reflect that if doing nothing can produce that sort of payback, then the best policy of the BT board must be to continue sitting on its hands. Of course, he would argue that BT has been far from idle. It has invested some pounds 20bn in the network in the past 10 years, gained a significant toehold in Europe's most important markets, announced its arrival in Japan and, last but not least, forged a $5bn transatlantic joint venture with AT&T.

But the network investment would have happened anyway, while BT's European joint ventures are big fat loss-makers for now and the AT&T deal has barely had time to feed into the mix. Rather, the explanation for the extraordinary rise in revenues to almost pounds 5bn in the last quarter lies in two phenomena which are largely beyond BT's control - the increase in mobile phone use and the even more explosive growth in the Internet.

Vodafone might be a deadly rival to Cellnet but it is also one of BT's best customers. Likewise, the more the Internet is hyped by BT's rivals, the more BT likes it. Hardly surprising since most of us still connect to the web via BT - its copper wires still feed into more than 90 per cent of homes and it is winning back customers at the rate of more than 1,000 a day.

Most of this additional revenue is pure profit since the incremental cost of servicing the Internet boom is minimal. That poses an interesting dilemma for the regulators who made BT's current set of price controls the last on the assumption that growth rates would be a fraction of those we are now witnessing.

But it also presents a dilemma for Sir Peter, who is running a business which is throwing off cash faster than he can think up ways to spend it.

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