BT is spending #3 million to keep failed radiowave telephony company Ionica alive while it tries to poach its vulnerable customer base.
But BT has a battle on its hands with local cable operators, as the companies vie for a share of the 62,000 soon-to-be-phoneless Ionica customers in East Anglia, the Midlands and Yorkshire.
Cambridge Cable, based in Ionica's home town, said it would be waving its #15 connection fee for ex-Ionica customers. Cambridge Cable passes around 500,000 homes in eastern England.
Analysts said the deal would give BT comparatively cheap customer acquisition, some good public relations and would ensure that no other operator could step in and acquire the whole of Ionica's customer base.
Oftel confirmed that BT has not secured exclusive access to Ionica's customer database and copies of the database are already being sent at no cost to cable operators.
Ionica called in the administrators in October after a string of poor financial performances and its failure to find a financial backer. Ionica's system uses radio signals rather than copper wiring to connect customers to their local telephone exchange.
BT said it will help cover the running costs of Ionica's business for a maximum of three months, during which time it has been granted permission by telecomms watchdog Oftel to call all Ionica's customers and try to tempt them onto BT's service with a range of incentives.
Customers who have previously been BT customers will pay #9.99 to rejoin BT, equivalent to its standard reconnection fee. Ionica customers who have never had a BT line will also pay #9.99 instead of the usual #116.33 (excluding VAT) first time connection fee.
But BT is likely to face competition from the UK's leading cable operators, in particular NTL and Telewest who have a strong presence in the Midlands, East Anglia and Yorkshire.
BT has one big advantage over the cable companies though, said analyst Tony Dench, research director Europe at Probe Research. "BT is the only operator ubiquitous enough to know that it can connect all Ionica's existing customers to its network," he said.
BT itself considered buying Ionica's business when it first started looking for an investor, but the company said today's deal is based purely on getting hold of Ionica's customers rather than its business.
"We had considered buying Ionica and had it valued. But the decision was that it wasn't in the interests of the shareholders, so it's a dead issue," said a BT spokesperson.
Oftel said it was pleased that customer service would be maintained. "The deal will ensure an orderly transfer of customers to another phone network," said David Edmonds, Oftel's director general in a statement.
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