Magazine article Management Today

BT Prepares to Beat the World

Magazine article Management Today

BT Prepares to Beat the World

Article excerpt

During the run-up to the privatisation of BT eight years ago, its then chairman, Sir George Jefferson, was asked why the quality of calls in parts of central London deteriorated when it rained. The trouble, he explained, was caused by the worn-out paper insulation of the underground cables. They had not been replaced for years and when it rained the dampness caused crackling on the line. Somewhat bitterly, he went on to say that this was just one of many deficiencies in a network starved of investment for years.

A considerable leap of imagination is needed to appreciate the transformation this organisation has undergone. Those investors who buy shares in the BT3 float this month will be taking a stake in very different animal. The company that could not cope with the rain is building a $1 billion global communications |highway' that will link 20 cities, while its productivity is getting closer to matching the best of America's efficient telecommunications industry.

Vast investments in electronic telephone exchanges have transformed the quality of BT's service. Its productivity is rising sharply as lain Vallance, the BT chairman, oversees the rundown in the swollen workforce. In a bold strategic move, BT has struck a $4.3 billion partnership deal with the American giant communications company, MCI. The agreement also includes a $1 billion joint venture which is aimed at providing communications for multinationals.

Revitalisation is essential. Without it, there is no guarantee that BT will survive the radical changes sweeping through the industry. For instance, it is clear that within a year or so BT will find itself slugging it out in the domestic market with a flock of new competitors, among them AT&T, America's largest telecommunications company.

Until recently BT's monopoly has scarcely been scratched. Mercury, Cable & Wireless's subsidiary, has made only modest inroads into BT's business. Ten years after its launch it still has less than 10% of the UK telecommunications market.

But BT's market domination is now coming under great pressure both at home and abroad. The Anglo-American cartel that has earned excess profits from transatlantic communications traffic is breaking up. AT&T is urging BT to agree big cuts in the |wholesale' price of transatlantic phone calls. …

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