BT set to fight any move by Ofcom to ring the changes
SCRUTINEER
MARTIN FLANAGAN
CITY EDITOR
IT SEEMS almost another era when British Telecom was strutting around
the globe via joint ventures, trying to become a worldwide force
rather than just a dominant player on home soil facing upstarts like
Vodafone.
That strategy of lebensraum came unstuck in a mountain of debt, a
massive rescue rights issue under new chairman Sir Christopher Bland,
and a sell-off or flotation of businesses no longer seen as core, such
as Yell, the yellow pages business, and mm02, the mobiles operation.
The wheel turns farther, with new UK telecoms regulator Ofcom saying
that a break-up of BT's remaining fixed-line dominance is one of a
number of options under consideration. At first blush, one would have
expected this to send BT's shares crashing. But there was only a
nominal retreat yesterday, suggesting that the market could actually
see advantages for shareholders in such a dismantling of BT's wires
hegemony.
For one thing, a separation of BT's retail and wholesale arms could
allow more aggressive cost-cutting.
And, being a little more cynical, a break-up could also prompt bids
from the rejuvenated venture capital sector (the private equity boys
are everywhere again these days), for BT's network assets.
Expect BT to fight this tooth and nail, and even Ofcom admits break-up
is only one of the hypothetical possibilities being looked at.
Debt-reduced BT looks to have to run the regulatory gauntlet again
But it does not sit well with the government's deregulatory instincts
that two decades after privatisation, BT still controls more than 70
per cent of Britain's home phone market amid disputed allegations that
its wholesale division gives it preferential treatment against other
retail competitors.
BT no doubt hoped this issue was dead, after previous regulatory
investigations have allowed it to stay as a composite retailer and
wholesaler.
Despite Ofcom's protestations that nothing is yet decided, it is
obvious the issue is not dead. Slimmed-down, debt-reduced BT looks to
have to run the regulatory gauntlet again.
Positive signs
THE software and financial services sectors have had a difficult few
years, from which they began emerging in 2003.
Most of software's problems began with the bursting of the dotcom
bubble, while financial services providers have suffered as clients
pulled in their horns as business demand declined amid three years of
plunging stock markets.
But there has been evidence that the worst is over for both sectors
and two little news items yesterday contributed to the drip-drip flow
of more positive information.
US software company Fair Isaac Corp has agreed to buy UK counterpart
London Bridge for £116 million.
That is not only an indicator that prospects look better for the
sector generally, but the hefty 54 per cent premium paid over London
Bridge's share price shows that the Americans believe there is real
value out there again.
Meanwhile, financial industry data provider Dealogic is going ahead
with a stock market flotation that will value the company at £119m to
£154m. Interestingly, Dealogic is not raising any new cash via the
listing on London's junior Alternative Investment Market, so it is
hardly a rescue float, either.
It looks more a way of one of the three founding directors, Simon
Hessel, realising some cash, while the other two founders, Peter Ogden
and Philip Hulme, retain their full 25 per cent stakes each and seek a
listing to enhance Dealogic's brand and motivate staff in a better
business climate.
Taken with the London Bridge deal, they are just two more small
examples of embattled sectors gradually sloughing off difficult times.
False dawn
THEY say the darkest hour comes before the dawn. But it is a kick in
the teeth when that dawn then may have proved false.
An unofficial vigil will now be kept over the next three trading
months after latest figures showed that the fledgling recovery in
Scottish manufacturing at the start of the 2004 has seemingly petered
out with the one exception of exports.
Orders, output and optimism are all down compared with a stronger
performance in the wider UK.
It is possible the latter benefited more from the global upturn than
Scottish manufacturers, whose three main markets remain the US,
Germany and France - the latter two virtually stagnant.
But the real truth is that both the UK and Scottish figures needs to
be put in perspective.
Upward moves, big or small, are from low bases and are likely to
remain so for a while.
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