BT conceded yesterday that it had made mistakes with a flagship mobile service, as it emerged that the product has amassed just 40,000 customers in two years.

BT Fusion – a combined fixed and mobile phone – was supposed to reinvigorate BT’s mobile offering and contribute to BT’s growth. It promised to cut consumers’ bills by offering the features of a mobile phone with cheaper landline prices.

However, just 40,000 people have signed up. In fact, BT’s total mobile connections have fallen from 370,000 in June 2005 to 314,000 in March.

Consumer mobile connections, which peaked at 187,000 in March 2005, now stands at just 87,000.

Background

• BT slashes bonuses for managers

• BT pays for fiasco over Carphone’s broadband

• BT admits it made mistakes with Fusion

• BT to spark landline price war

• BT turns up heat on Virgin Media

Comment: Urgent call

BT will have to stay on it's toes in the tough new world of convergence

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Steve Andrews, head of BT Mobility, admitted that take-up of the product, which uses wi-fi technology, had been set back by the timing of the launch.

“There was a lack of wi-fi devices as early as we would have liked them,” he said.

The advertising for the product could also have been clearer, Mr Andews added. Nevertheless, he was confident that the wide range of wi-fi hand-sets now available would boost uptake. Overall, Mr Andrews insisted that he was “happy” with the 40,000 take-up.

Analysts said that the figure was weak. James Barford, of Enders Analysis, said: “This is clearly not a large number in the context of a UK mobile market which has around 70 million mobile subscribers.”

BT spun off its mobile arm, O2 , in 2001 as it sought to pay down crippling debt. It reentered the market in 2003 with a service aimed at families that used T-Mobile’s network.

A spokesman said that take-up of Fusion had been increasing since January, when the product switched to wi-fi from Bluetooth technology.

Analysis

The importance of a presence in mobile has meant that BT has been seeking to reenter the sector since it demerged its wireless arm in 2001.

But while its other “new-wave” services – broadband and networked IT – roar ahead, mobile remains stubbornly weak.

The problem, analysts say, is with distribution. Without a presence on the high street (BT’s stores went with O2, its mobile network, when it was spun off), no mobile player stands a chance.

That message appears to have hit home. The group recently announced a deal to launch its wi-fi offering in Phones 4U’s stores.

Image has also, without a doubt, played a part in its problems: an old-fashioned fixed-line company is not the obvious first stop for a wireless phone.

Fusion, a mobile product that BT could cross-sell to broadband customers and vice-versa, makes perfect sense. But while analysts and industry-watchers were sold on the idea, selling such a sophisticated proposition to consumers was never going to be easy.

In its defence, BT argues that its turnover from its remaining mobile communications businesses – £294 million as at March this year, is not insubstantial.

A pioneering concept such as Fusion will, it says, take time to bed in and take off. And it deliberately held back from marketing the service while it switched from bluephone to wi-fi technology. For now its position as the only incumbent without a mobile network leaves BT looking rather vulnerable.

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