KCOM Regulatory News (KCOM)

Growing revenue in our Enterprise segment

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Our Enterprise segment represents our most significant opportunity for growth. Failure to achieve expected levels of growth may impact upon the share price of the business.

We have refreshed a significant proportion of our sales team over the last two years and have also recruited a new Delivery Director and Marketing Director for the Enterprise segment. We have restructured internally to enable an increased level of focus on existing customer relationships to ensure we fully understand the needs and requirements of our customers. We are also investing in new propositions in a number of key focus areas to further enable growth in the segment.

Substitute technologies entering the consumer market

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Much of our consumer business is currently based on the provision of services over a fixed-line network. If substitute technologies were developed to the extent where similar services could be provided without the use of a fixed-line network then this would clearly present a competitive threat to the consumer part of our business.

We are always seeking to improve our services to our consumers and to provide a speed and quality of service that would not be achievable over a wireless network. Our fibre deployment is part of this aim.

We offer bundles of products and services that offer our customers value for money. We are also investing in innovative products and services which take advantage of the Fibre-to-the-Premises technology that we use in our fibre deployment and which provide a clear alternative to a substitute technology.

Upgrading of our network equipment

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The equipment used to run our copper network in Hull and East Yorkshire, and to provide some of our national network-based services, requires regular upgrading as demand for broadband and cloud-based services continues to increase at a fast pace.

We are continuing with our investment plan to mitigate the risk of service failure from obsolete equipment. At the same time we are investing in the continued deployment of our ultrafast fibre-based broadband in Hull and East Yorkshire which provides market leading broadband speeds and which is on track to be completed by March 2019.

Accuracy, security and confidentiality of customer data

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The security, confidentiality and accuracy of our customer data is of paramount importance to us and to our customers.

We have clear and comprehensive policies in place and run mandatory training in this area for all employees. We have spent considerable time during the year preparing for the implementation of the General Data Protection Regulation (GDPR), which came into force in May 2018, which has further enhanced our controls around security and confidentiality. We have recruited new roles to focus entirely on data to help ensure our ongoing compliance with GDPR, as well as a separate team focused on the accuracy of customer data in our Hull & East Yorkshire segment.

Customer service and delivery

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Our aim is to provide exceptional service wherever we can. The risk of not achieving this is therefore a key risk for the business.

During the year we have continued our focus on improving the customer experience in all parts of our business. In our Hull & East Yorkshire segment this has focused around improved training, recruitment and onboarding processes for those working in customer services. Resources have been increased to reduce call waiting times, which has led to increased customer satisfaction. We now ensure we seek feedback from customers more frequently, particularly when they have completed a specific customer journey with us. In addition, our technical support teams have moved into our newly launched Customer Service Operations Centre, a technical centre of excellence which serves our entire business and will help in developing the skills of our technical people further.

Security and resilience of our networks and IT systems

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We need our networks and IT systems to continue operating in order to continue to provide service to our customers. It is therefore essential that we have secure and resilient systems and networks in place.

We hold certifications in a number of standards that relate to security and resilience, including ISO 27001, the Information Security Management standard, and ISO 22301, the Business Continuity Management standard. We have a Head of Security and Compliance who is responsible for ensuring a consistent approach to security and resilience across the business and we have detailed policies and processes in place. We regularly test our resilience plans and feed back any lessons learnt from such tests into the resilience planning process, which in turn is continually reviewed and updated on an ongoing basis.

Regulatory obligations

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As a telecommunications provider, we are regulated by Ofcom and there are multiple conditions and regulations with which we need to comply. We take our regulatory responsibilities extremely seriously and seek to ensure we are compliant in all regards.

We have an in-house regulatory team which is responsible for ensuring we understand our obligations and that these are communicated to the appropriate people across the business so that we can ensure the necessary controls are in place. We have brought additional resource into this team during the year to enable additional focus in this area. We continue to work closely with our suppliers to make sure that our obligations are passed on and complied with in the areas where we are reliant on third parties for the provision of services.

Health and safety

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The health and safety of our people is of paramount importance to us and we have a number of people who undertake high risk activities, such as climbing telegraph poles, working in confined spaces, working alone or working next to roads. It is important to us to mitigate health and safety risk as far as possible to try to prevent incidents from occurring.

We have an in-house health and safety team which has significant experience of health and safety issues specific to our industry. We have a comprehensive training programme in place which provides general training to all of our people, through mandatory e-learning and specific training to those who undertake higher risk activities, which is then followed up by on-the-job checks to ensure our engineers are practising what they have learnt. For large projects which contain increased health and safety risks, such as our fibre deployment, we have brought in external health and safety advisors to work on the project full-time to ensure we are complying with all of the appropriate health and safety requirements.

Flooding

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Flooding has become an increasingly regular occurrence in many parts of the country in recent years and Hull, where much of our business is based, is no exception. There were significant floods experienced in Hull in June 2007 and there has been smaller-scale flooding experienced at times since. There is a risk that such flooding could impact upon our business if we do not take the necessary steps to mitigate the risk where possible.

Prior to the 2007 floods we had already sought to mitigate the risk of flooding in the design of our telephony network and through using raised floors in some of our buildings. This meant that the impact of the floods in 2007 on our business was minimal. We have continued to improve our defences further since that time, installing pumps at key sites and flood defence barriers where appropriate. We monitor flood risk closely and are always alert to increased risks caused by extreme weather and high tides, so that we can activate our defences as necessary if and when required.

Where we rely on partners to provide services we seek to work with them to ensure that their services are resilient to flooding wherever possible.

Ability to attract and retain the key technical skills required in our Enterprise segment

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Many of the services provided by our Enterprise segment are technically complex and require skills that are hard to find and in high demand. Attracting and retaining the right skills is key to being able to deliver the services our customers require.

We have recruited a specialist recruiter in the year solely to focus on recruiting the technical skills we need in our Enterprise segment. We are focused on anticipating the skills we will need in the future as well as those we currently require and we plan our recruitment on that basis. We also have spent time reviewing the packages, incentives and working environment we offer to meet the requirements of those with the skills that we need.

Contract governance

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Much of our Enterprise revenue is derived from the delivery of complex service contracts, implementing innovative solutions for customers. Appropriate governance is essential to ensure that contract delivery remains within the agreed scope and timeframes and meets the expectations of the customer throughout. During the year we experienced losses on certain software development contracts which highlight the importance of robust contract governance.

A new Delivery Director has been recruited in the year specifically to oversee contract delivery and she has implemented a revised contract governance framework that has brought rigour and clarity to all stages of the contracting and delivery process, with early flags if anything is likely to fall outside of the agreed parameters to enable corrective action to be taken.