Stay up to date with notifications from The Independent

Notifications can be managed in browser preferences.

Jason Nissé: Remember BT being played off the field? Now watch it snatch a golden goal

Sunday 30 June 2002 00:00 BST
Comments

As Ronaldinho, the potential hero of today's World Cup final, might argue, it is best to suffer your setbacks early in proceedings so you have more time to recover. Brazil went 1-0 down to England but fished 2-1 up thanks to the curly-haired winger. Ronaldinho served his suspension for the semi final while Germany's star, Michael Ballack, will have to watch the game from the bench.

At BT they know a thing or two about suffering. Two years ago the company was considered to be the sick man of the telecoms sector. Overborrowed, overburdened, over the hill. Pressured by the markets, BT gave up its global ambitions and cleaned out the Augean stables of its balance sheet.

With Global Crossing and KPNQwest bust, WorldCom and Energis teetering on the brink, and Qwest, France Telecom, Deutsche Telekom and a host of others trapped in a dreadful credit crunch, BT is now looking like the Ronaldinho of the new economy.

The effect of WorldCom's woes on corporate trust is discussed elsewhere on these pages. But what of its effect on customers who turned to America's second- largest long-distance carrier for their voice, data and internet hosting needs? The company will survive in some form. Indeed, a Chapter 11 filing could be the best thing to give customers confidence in the network as the business will carry on without the banks breathing down its neck. And many customers will simply see out their current deals. But others might flee to a more stable supplier and those who stay will no doubt take stability into account when signing any new deal.

Logically, this means the old incumbent phone giants will benefit – BT, France Telecom and Deutsche Telekom. But France Telecom has debts ballooning up to €75bn (£48bn) and analysts are now saying it needs to sell Orange to shore up its balance sheet. And Deutsche is not much better off. In Holland, the local equivalent of BT, Royal KPN, is being blamed for the disaster that is KPNQwest, its 40 per cent owned associate which went spectacularly bust a few weeks ago.

Customers will logically consider that the natural tendency of European governments (our own excepted) to protect their national champions will come into play. For example, cynics have wondered why the Dutch regulators have stood by in the KPNQwest saga. The French have a history of state intervention – despite European Commission rules restricting it – and, in an election year, Gerhard Schröder is not going to cold-shoulder Deutsche's pleas for help.

But BT has another advantage. It is one of the few telecoms groups in Europe, if not the world, that has the capacity to borrow money. I was talking to a senior banker the other day who told me that the stories written by some of my more excitable rivals about a credit crunch were baloney: the likes of Barclays, Royal Bank of Scotland or HBOS are keen to lend if the story is right.

Under Sir Christopher Bland and Ben Verwaayen, BT's story is becoming quite a good tale. The purchase of Scoot last week shows a sense of humour – if nothing else – given that BT sold Yell last year for £1.5bn. The company could persuade the financiers to fund some bottom fishing should it see some interesting opportunities.

In the days when BT was a market darling (about five years ago), it actually wanted to merge with a US phone company called MCI. It was outbid by some company called WorldCom. As it is now injury time at WorldCom, BT might be able to score its golden goal.

Don't shoot the auditor

It was a tough-talking denial of impropriety put out by KPMG, Xerox's former auditor, on Friday. It attacked the restatement of earnings at the company that has been approved by the new auditor and sufficiently muddied the waters to allow Wall Street to let Xerox more or less off the hook. Xerox is not WorldCom, admittedly, but KPMG seems to have allowed all sorts of shenanigans to be played with its accounts over the past five years.

But what should we do about this? Surely auditors that sign off accounts containing all sorts of fictions should not get away scot-free. But the danger is that if you punish KPMG too harshly, you damage the firm, which you can't afford to do. After all, there are only four major accounting firms left and KPMG was the whistle-blower that exposed WorldCom.

j.nisse@independent.co.uk

Join our commenting forum

Join thought-provoking conversations, follow other Independent readers and see their replies

Comments

Thank you for registering

Please refresh the page or navigate to another page on the site to be automatically logged inPlease refresh your browser to be logged in