When IT Meets Politics

Nov 25 2014   1:47PM GMT

Is a telecoms merger (BT and O2 or EE) born of weakness good for UK plc?

Philip Virgo Profile: Philip Virgo

Tags:
BT
EE
Merger
O2
Roaming
Stokab
take-over

The news that BT is in talks with both O2 and EE in order to re-enter the mobile market should come as no great surprise but is it good?

BT spun-off what was then Cellnet and mortgaged its exchanges when it was faced with £30 billion of debt after local loop unbundling destroyed the business case for its plans to deliver broadcast quality video to the home by 2002.

BT’s recent capital spend on communications infrastructure, as opposed to that funded by government, has been little more than that necessary to cover preventive maintenence, replacing obsolete equipment so that can now make use of the fibre to within a mile of most UK homes that it already had over a decade ago. 

Meanwhile O2 and EE have struggled to fund the upgrading of their networks to overcome notspots and bottlenecks as traffic volumes rise faster than revenues, let alone to to meet their obligations and promises for 4G. Hence their desire to offer infrastructure sharing rather than roaming.

Meanwhile global infrastructure funds are said to have tens of £billions looking for opportunities to build 21st century hybrid networks providing gigabit services at a fraction (said by some to be as low as 20 -25%) of the costs currently being quoted for new build, let alone operation.

Is a “mere” share swop between market dominant but financially weak players good for the UK plc, or will it serve to deter the new investment that is needed?

A more positive view is, however, that the merged operations will be so “financially challenged” that, like the Swedish incumbent, it will have no realistic alternative to joining its current competitors in becoming “lead tenants” for the new generation of infrastructure only utilities, akin to Stokab, that are beginning to sprout around the UK

I look forward to readers comments.

     

2  Comments on this Post

 
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  • Simon Sabel
    Philip very well put, but my concern is that BT should be merging with content providers like Virgin and Sky to get access to the cash needed to fund the next generation of networks...I also think that merging such large groups like EE or O2 with a firm like BT will take years of un picking to remove all the similar managemt, which will slow BT down even further.... unless the Govt can now justify giving the extra funding to connect up the Smart Meter network?

    Regards

    Simon

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  • Philip Virgo
    Hmmm.

    The UKCTA report published on the 23rd is also relevant very relevant

    http://www.ukcta.org.uk/30-years-telecoms-market.html

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