COMMENT: BT should risk a challenge to the regulator

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"In BT's eyes what is being demanded is tantamount to being asked to open its books to competitors so they can identify where money is being made and act accordingly."

With all eyes on the regulatory problems of the electricity and water industries, investors have tended to forget that British Telecommunications too is facing its own particular denouement with the regulator. At a board meeting today and tomorrow, directors are set to decide whether to accept Oftel's demands for transparent accounting and greater powers of investigation or go for a showdown that will result in a full Monopolies and Mergers Commission investigation.

To most people transparent accounting hardly looks like an issue of great import but BT sees it as going to the heart of its business; directors are so incensed by the regulator's demands that, as of last night at least, they seemed prepared to risk the time and uncertainty of an MMC inquiry to test his case. In essence what Oftel wants is full accounting separation of BT's network business from its retail operations, with retail charged on the same basis as competitors for use of the network. The regulator also wants to broaden his powers to allow unfettered access to BT's books and decide whether cost is being allocated properly between businesses.

In BT's eyes what is being demanded is tantamount to being asked to open its books to competitors so they can identify where money is being made and act accordingly. Directors believe Oftel's director-general, Don Cruickshank, is empire-building at their expense; this in an industry that, unlike other utilities, has struck a reasonable balance between the interests of shareholders, customers and the cause of greater competition. They believe they are being unfairly and unnecessarily penalised by the regulator.

Going to the MMC is none the less a route fraught with danger; it is possible that, as with British Gas, the MMC would go beyond what the regulator is demanding and recommend a full structural break-up of BT. That, however, seems unlikely. Unlike shareholders in the regional electricity companies, investors in BT have not enjoyed excessive returns since the company was privatised. And unlike British Gas, BT can genuinely claim to be in the vanguard of international developments, carving out a significant overseas presence despite having the least protected domestic market of any big telecommunications player. If directors really believe right is on their side, they should go the distance and challenge the regulator through the MMC.

The new Pearson is not quite convincing

The arrival of man-of-the-people Greg Dyke appears to have shaken up the famously patrician holding company Pearson. Buying an Australian television production company that makes programmes such as Neighbours and Going for Gold would not have been conceivable a scant few years ago, before Pearson's increasingly convincing conversion into a media holding company.

Out goes leisure and luxury, in come electronic publishing and commercial television. But does the new Pearson make sense?

Grundy Worldwide certainly fits Pearson's stated strategy. Grundy is a profitable international production company, supplying cheap and plentiful programming at a time of rising demand. Pearson has said it wants to build value by investing in programming rights and good libraries, both of which Grundy provides in spades.

Grundy specialises in creating a strong, simple concept for a soap or a game show and repeating it, with small changes, in different markets around the world. It will be earnings-enhancing for Pearson in its very first year. It also neatly dovetails with Pearson's own Thames Television production company.

But the new Pearson is still not quite convincing. From the outside, the strategy still looks too much like the collection of a hotchpotch of multimedia interests without much to cement or connect them. The television side looks fine; with Mr Dyke now at the helm it should go from strength to strength. More problematic is the electronic publishing side, where Pearson may have overpaid for the software publisher Mindscape just as the market for game cartridges tumbled by 70 per cent. There is nothing wrong with a print publisher like Pearson, with its magazines and newspapers, getting into electronic publishing. But was this the right vehicle? On that point, the jury is still out.

Timely, but hardly very radical

Inside Royal Dutch Shell, the reorganisation announced yesterday is a shattering revolution, the biggest shake-up since McKinsey's was sent in in the late 1950s. Outside the company, in the City at least, first impressions were rather different; the plans were seen as disappointingly evolutionary.

As any visitor to the twin headquarters in The Hague and London can sense immediately, Shell has remained until now a multinational behemoth, a corporate bureaucracy with a many-layered centre, its staff pampered by facilities that most of us can only dream of. The shape was partly dictated by the needs of a dual Anglo-Dutch shareholding structure. But a grandiose headquarters was also characteristic of the way the oil majors and many other big companies were run in the decades after the war.

In the past 10 years, other organisations of similar scale have been forced to shed the habits of the 1960s for streamlined, more responsive and cost-effective structures. As often as not, it has been under pressure of circumstances. Similar changes were forced on Philips, and IBM only broke its monolithic management into more responsive operating units after the competition had virtually driven it into the ground. But as every management textbook will tell you, the secret of good corporate strategy is to adapt and change before crisis hits. For that Royal Dutch Shell deserves credit. It is acting at a buoyant time for the oil industry, when earnings appear strong - a record £4bn last year. With no immediate crisis to respond to, the easy thing would have been to have done nothing.

None the less, the changes, though involving big job losses, hardly look radical. Royal Dutch Shell plans to move from its present geographically based organisation towards management on functional lines, divided into committees that will be in charge of exploration and production, oil products, chemicals gas and coal. The new slimline 200-strong "corporate centre" that will service the new units does not appear to be a group headquarters in a conventional sense at all. But there will continue to be a complex matrix of relationships in the new structure, whose flavour, if not the detail, recalls the way the group is currently run.