Magazine article Management Today

The Line to Future Growth

Magazine article Management Today

The Line to Future Growth

Article excerpt

BT was not the first stock market privatisation. There had already been flotations involving British Aerospace, Cable & Wireless, BP, Amersham and Associated British Ports. But none of these sales could match the resonance of the BT share sale 10 years ago. BAe had been in and out of the public sector and Amersham's state ownership seemed an oddity. But BT was BT, a massive state industry and the all-powerful monopoly centrepiece of Britain's telecommunications industry. It seemed bold at the time when the then industry secretary, Patrick Jenkin, began to talk about the Buzby bond, a sort of trial run for privatisation, that was planned to raise about [pound]150-200 million of private capital for BT's much-needed infrastructure investment. When Jenkin decided to ditch poor old Buzby and go for privatisation, it was a daring move. There were many worries. Could the market handle a share sale of this size? How was it to be regulated? How was effective competition to be created?

In retrospect, Jenkin's decision to go the whole hog proved inspired. BT broke the ice for a whole series of large-scale privatisations in this country and elsewhere. Even in conservative Germany where the state telecommunications monopoly continues to regin long after BT's has begun to fray, the government has finally acted and Deutsche Telekom is coming to market.

The antics of the water companies and doubts about the practicality of selling off British Rail have blurred the image of privatisation. But 10 years on, the progress of the telecommunications industry in this country owes much to the sale. In today's digital world, it is easy to overlook just how primitive British telecommunications were a decade ago. Computerised telephone exchanges were a rarity. Many users still suffered the appalling service provided by old-fashioned electromechanical exchanges. Fax was in its infancy. Optical fibre was an innovation. Business was ruled by old-fashioned black phones and telex. The notion that companies would have networks of computers talking to each other over the telephone was just beginning to creep out of the pages of Jules Verne.

Compare this with what we have today: a fax by every phone (or very nearly); cheaper calls for businesses and private consumers; better line quality; computerised, digital networks; business users who routinely hook up their laptops to the phone and send (or retrieve) information from their offices and databanks; the mobile phone revolution; and the development of cheaper videophones.

Arguably this might all have come about without privatisation. But anyone who can recall how the remorseless parsimony of the Treasury stifled the capital spending needed to modernise what was then the Post Office's antiquated network would have found it hard to believe that a modern telecommunications system could ever have been produced.

Yet telecommunications is of basic importance to a modern economy. An inadequate network will stifle growth and divert foreign investment to other countries. A recent London Business School survey of the telecoms systems of the world's leading financial centres, carried out on behalf of the City corporation, showed that modern infrastructure offering good services at competitive prices was an essential ingredient in a centre's growth and success.

There is still a tendency in the media to decry the scale of BT's profits and to focus on trivial service failures. …

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