BT Buys ISP Brightview - Will It Now Focus on SME Market?

Jul. 6.07 | About: BT Group (BT)

BT have announced this morning the purchase of Brightview. I'm sure that Brightview with its plethora of Customer Service awards will be a welcome addition to BT’s growing portfolio of internet brands. As well as Plus.net, Metronet, Force9 and Free Online from the Plusnet acquisition, it can now add Madasafish and Global Internet. In addition BT will now be in the virtual ISP market serving JohnLewis with its Waitrose and GreenBee products.

Brightview comes along with around 62k customers, which whilst not sounding much actually takes a lot of pressure of Q3 net additions for a net price of £15.8m. With an EBITDA of £3m, BT is only paying just over 5x Earnings. In addition, I’m sure a huge chunk of the costs was already being paid to BT wholesale not only in BT Central costs and other ISP costs, but also BT Wholesale was Brightview’s telephony provider.

BT has allowed Plusnet to continue as a standalone ISP, I wonder with the smaller size of Brightview whether this strategy is feasible. BT has two options - it can either roll Brightview into the main BT Retail operation or it can roll it into Plusnet.

The ISP Market, especially the consumer end, is becoming harder and harder for smaller ISPs to continue to earn a decent living and I expect the next couple of years to feature either bankruptcy or sale of most of the remaining small consumer ISPs.

The big question is now whether BT will change the direction of its hovering operation to focus upon the SME market. I think there are two tasty morsels in Zen Internet and Demon Internet (owned by Thus) which would be for sale at the right price.

Of course, the biggest old school consumer ISP still up for grabs is Pipex, but I think BT has decided to bow out of the bidding for this and itself will leave it to Tiscali.