Smooth operator

THE FRIDAY INTERVIEW/Graham Sutherland, BT Ireland chief executive:IT'S A good start by any standard. Less than six weeks after Graham Sutherland took over the role of chief executive of BT Ireland, the company announced a multimillion-euro deal with UPC, which will see BT provide UPC with access to its next-generation network, allowing the rival cable provider to provide upgraded services to six regional centres.

The deal, announced earlier this week, may be all the sweeter for BT Ireland’s new chief executive – prior to joining BT Ireland in 2006 he ran NTL, and was involved in the sale of the company to UPC. “That’s a long time ago,” he smiles. “The landscape has changed quite a bit.”

The UPC deal may be a welcome boost, but Sutherland is taking the helm at BT Ireland at a difficult time. Globally, telecoms companies are struggling amid falling revenues and demand, as well as battling the perennial need for money to invest in networks.

More specifically, BT’s history in Ireland has been far from smooth. The company entered the Irish market in 1999, purchasing Denis O’Brien’s Esat Telecom for €290 million. It was widely perceived to have overpaid for the business, a view that became more entrenched as the company struggled to get a return on its investment.

Despite subsequently investing more than €1 billion in the Irish market through acquisitions and spending on infrastructure, BT failed to make an impact on the consumer market, and became a vociferous critic of Eircom, which it accused of hampering competition by failing to afford network access to other providers.

Last year BT ceased selling directly to consumers in the Republic after it signed a landmark deal with Vodafone. That saw its consumer division transfer to the mobile operator.

Despite a thorny track record in Ireland, Sutherland is resolutely upbeat about BT’s performance. “I think things have improved dramatically for BT in the last three years. The facts speak for themselves . . . we have grown our profits for three years in a row.”

Because the company operates on an all-island basis, its exact performance in the Republic has been difficult to ascertain – the company’s position as the incumbent in Northern Ireland has led to claims that its performance there distorts the true picture of things south of the Border.

The group, however, turned a profit in the Republic for the first time in the year to the end of March 2009, according to the company. In addition, financial results last month showed that profit at BT Ireland rose 12 per cent in the year to March 31st, 2010, despite underlying revenues declining by 3 per cent. “The telecoms market probably lost about 10 per cent in value in the last 12 months. Our revenues were down 3 per cent against this backdrop,” Sutherland says. “I’m very confident that we’ll continue to outperform the telecoms market.”

Sutherland’s confidence is underpinned by a very definite strategy – a focus on the wholesale and corporate market. The change in direction was instigated by the Vodafone deal 18 months ago which spelled the end of BT Ireland’s direct involvement with the consumer market.

While it could be argued that the company’s shift in policy was borne of necessity rather than choice, Sutherland says the move was a strategic one. Rather than an ignominious retreat from the retail market, the exit from the consumer division made commercial and strategic sense.

“I think you have to put it in context. The consumer division was 5 per cent of BT Ireland’s revenue. It wasn’t a significant part of our business. It was a natural change for us to make and we reached a good deal with Vodafone for both parties. The fact that we’re continuing to sign significant deals shows that that was the right step for BT.”

The company is now firmly focused on its two stated strategies – solidifying its position as a major wholesaler to other communications providers and as a provider of communications services and IT services to corporate and public sector organisations.

As well as its partnership with Vodafone and UPC, BT Ireland collaborates with most of the main mobile companies. It manages network services for O2, while it designed, built and currently operates 3 Ireland’s 3G network and is a sub-contractor to 3 Ireland for the roll-out of the National Broadband Scheme.

The company is striving to carve out a niche as market leader in the provision of what it calls “end to end” services to mid-large indigenous companies and larger multinationals in Ireland, a system whereby one service provider covers everything from managing a company’s network to providing all their IT hardware. But in the current climate where companies are looking to cut costs, is it wise to bank on corporate customers as the key to future growth?

Sutherland believes the market has huge untapped potential. “I think we haven’t scratched the surface in terms of the end to end capability. Companies are starting to look at their whole ICT infrastructure and see how they can reduce costs. Global companies have been doing this already but, in terms of mid-market companies, it’s a growing market”.

Sitting in the company’s Grand Canal Dock headquarters in Dublin, Sutherland seems at ease in his new role. The quiet-spoken Northerner joined BT in 2006 as chief financial officer. Prior to this he had been managing director of NTL Communications in Ireland and previously ran two of Bombardier’s businesses in Northern Ireland and the US.

While Sutherland believes his experience, particularly at NTL, means he brings a valuable outside perspective to the role, he is keen to stress the significance of his status as an internal appointee. “This is the first time that BT has appointed someone internal to succeed to the role. It’s a real sign of the strengthening business we have here,” says Sutherland, who lives in Coleraine and will be dividing his time between there and Dublin.

The company is “100 per cent” committed to its Republic of Ireland operations which employ 850 people, he says. He also points out that some of BT’s employees in Ireland are working for other parts of BT’s global operations, providing software development, design and innovation for divisions of BT worldwide. To this extent, BT has brought significant inward investment to Ireland in terms of RD, he says.

Sutherland worked closely with his predecessor, Chris Clark, and says he doesn’t envisage any “material change” in the strategies or style of the two men. Clark, who left BT Ireland to take up the position of managing director of BT Enterprises in the UK, took a high profile stance on issues impinging on the telecoms sector, particularly in regards to Eircom.

What is Sutherland’s view on the former State-owned entity? “We certainly welcome the recent announcements that they’re going to invest in wholesale business. If they deliver on that, it will be good news for the market but we still need to see the proof.”

On the long-term picture, Sutherland is refreshingly upbeat. “I think the market has moved on a lot in the last couple of years. Competition has increased dramatically and a lot of it has been down to the Government’s approach and ComReg’s stronger position on regulation. “I think the core networks that exist in Ireland are strong and equally as good quality as you’ll find elsewhere. The key is we need to improve access. That’s what’s essential for Ireland Inc and where the focus needs to be.”