Jeremy Warner's Outlook: Still no sign of anything substantive from Sir Gerry as listing of Rentokil Initial sails on

BSkyB opts for an Easy solution; Ryanair's crass insensitivity; Grasping the pensions nettle
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The Independent Online

Even so, despite the support of Rentokil's largest shareholder, Franklin Templeton, he's got his work cut out. An outright bid, which was ruled out yesterday, was never a runner. It would have cost Sir Gerry at least as much again in advisory fees to launch a bid. For the relatively small changes in overall capital structure achieved, this would have been even harder to justify than the joining fee. Given that the purpose of the endeavour is only to parachute Sir Gerry in as executive chairman, it would have been using a sledgehammer to crack a nut.

Sir Gerry has given shareholders a week to back his boarding party instead, but the absence of any published performance criteria yesterday doesn't give much reason to believe he'll succeed. He comes with a track record of value creation to die for. Also counting in his favour is a cargo-load of investors so desperate for salvation that they'll clutch at almost anything.

Doug Flynn, the chief executive, has been there only six months, while as a manager of contract businesses such as pest control, he's a complete unknown. As for Brian McGowan, the chairman, true enough he acted to oust the company's founder, Sir Clive Thompson, who by the time he was fired had plainly lost the plot, but he then took eight months to find a new chief executive, during which the business continued to go down the pan.

What's more, he over promised. We are all dead, he said, if the company didn't achieve profits of at least £350m for 2004. It did, but then warned profits for 2005 would be even lower. Still, none of this is enough to justify Sir Gerry's "move over and let me have a go" boarding party.

The wonder is that he's doing it at all. He doesn't need the money or the glory, and if he fails, which now seems quite likely, he emerges with a reputation if not quite tarnished, certainly a little damaged. To many, the whole heist has looked too greedy and arrogant. Sir Gerry has largely failed to get the message across that his talents are cheap at the price. By all means, let's have Sir Gerry as executive chairman at Rentokil, but to pay him on the terms demanded is to lose all touch with reality.

BSkyB opts for an Easy solution

With its apparently insatiable appetite for capital and appaling standards of customer service, there's little to commend the dismal history of the UK cable industry. Yet die hard supporters have always been able to point to one key advantage over rival platforms - the so-called "triple play" of pay television, traditional telephony and broadband all under one roof.

Sky is the undisputed master when it comes to pay TV, and BT is still the dominant supplier of telephony and broadband services. Yet unlike cable, neither has so far offered all three. With Sky's mooted acquisition of Easynet, that's about to change.

The failure of these companies to act earlier has long struck me as a puzzle, for the DSL technology to make the "triple play" possible for all comers has existed for some years now. You no longer need the billions cable has wasted digging up the roads to deliver moving pictures and interactivity down the telephone line. The old copper cable which still forms the rib cage of the BT network, is capable of doing it too. For a price, anyone is allowed to use it to deliver these services.

Comparatively low levels of broadband penetration in the early years of DSL was obviously a deterrent, yet you would none the less expect a company as entrepreneurial as BSkyB to be at the forefront of these new media technologies.

A broadband connection costs almost as much per month as a basic Sky package, making broadband potentially a significant new source of income for Sky. The opportunities for bundling and cross promotion are all too clear. So how come Sky failed to see the light? One explanation is that satellite has been such a winner for Sky that it closed its eyes to the possibilities offered by rivals.

This sort of blinkered, arrogant approach to change can be the undoing of even the most successful of companies. The other is that Sky's James Murdoch and his predecessor as chief executive, Tony Ball, regarded broadband as perhaps too much of a threat, and took the view that it would ultimately be more lucrative to defend the walled garden of encrypted pay TV access than to wander off into expanding universe of cyperspace.

Much the same criticisms might be made of British Telecom, which has been incredibly slow to offer pay TV, or indeed attempt to enter the content market at all through its dominant position in broadband. The regulatory constraints on BT are considerable, but where there's a will there's always a way. It is only just recently that BT has started to see it.

Still, better late than never, and the beauty of Sky's position is that by buying Easynet, an established supplier of broadband services with an already extensive network of its own equipment in BT exchanges, it can destroy cable's triple-play advantage in broadband and telephony at a tiny fraction of the billions the cable companies spent laying their networks.

The logic of this move is so compelling that, as I say, the only real mystery is why it has taken Sky so long to do it. Expect BT to announce an assault on the content market shortly too. All of a sudden, the media landscape is becoming interesting again.

Ryanair's crass insensitivity

Michael O'Leary is the Nicholas Van Hoogstraten of the airline industry. His philosophy is that he doesn't care what the public think of him, as long as people keep flying Ryanair. Indeed he seems positively to revel in the negative publicity he receives - the latest example of which was over his airline's ejection after they had been seated of nine blind and partially sighted passengers - I guess in the belief that it's free publicity for his low-cost ways. It would be nice to think the airline would be damaged by this crassly insensitive misreading of aviation safety rules, yet the cynic in me tells me it won't.

Mr O'Leary's stance is reminiscent of Brian Souter. The Stagecoach chief executive once famously said that you only really knew the customer was unhappy when you got a brick through the window. Stripped down and unrepentant, Ryanair sells only on its prices, and the public seem perfectly prepared to tolerate his discriminatory mores to gain access to them.

If Mr O'Leary could get the disabled to do their own baggage handling he would. He's a disgrace, but regrettably, a rather successful one.

Grasping the pensions nettle

Public sector unions are renewing their threat of industrial action over Government plans to raise the the retirement age for civil servants from 60 to 65. Yet as Alan Johnson, the Secretary of State for Trade and Industry, said at the weekend, ministers cannot hope to persuade private sector workers to save more for their retirement if they are also forced to fund an ever-growing public-sector retirement bill. The superior pension arrangements of public workers used to be justified on the basis that they tended to earn a lot less than their private-sector counterparts. That may no longer be the case.

j.warner@independent.co.uk

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