No doubt who wins in Labour's deal with BT


First Rupert Murdoch, now Sir Iain Vallance of British Telecom. Sucking up to Tony Blair seems to be quite the thing among businessmen with entrenched monopoly positions in fashionable industries - media and communications. Judging by the deal BT has managed to extract from new Labour, it pays dividends. In return for what in truth adds up to little more than a hill of beans, BT has won a very considerable regulatory concession - albeit from a party not yet in power. There is little doubt who has the better half of the deal.

First the concession. For years BT has been lobbying the Government for permission to provide broadcast TV down its telephone lines. Despite some sympathy, ministers have resisted this on the grounds that to lift the ban early would be a breach of its agreement with cable TV - which has been investing billions in advanced fibre-optic networks on the understanding that it had a free field at least until 2002 and possibly longer. What Labour appears to have pledged is that the ban will be progressively phased out from 1997 ending absolutely in all areas in 2002.

Though the stock market seemed to be taking a remarkably sanguine view of it yesterday - cable TV share prices barely moved - this is a breakthrough of considerable commercial importance to BT. Barely more than two years from now, it should, Labour victory allowing, be able to compete on an equal footing with cable at least in some areas. With luck, BT figures, Britain's nascent cable TV industry will still be insufficiently developed to pose a serious threat. It will be BT, not cable, that strikes the deals with Mr Murdoch and the other entertainment providers.

What does it have to do in return? Not very much seems to be the answer. BT is unsurprisingly evasive when it comes to estimating the investment cost of its pledge to provide a broadband communications system to all public institutions in the country but the pounds 15bn figure that Labour has cleverly managed to palm off on the press has nothing to do with what has actually been promised. pounds 15bn represents the maximum cost of delivering a spanking new fibre-optic network to every telephone user in the UK. BT is a long way from committing to that. The much more limited "free" network being promised to schools, colleges, libraries and hospitals, would cost no more than pounds 60m, according to industry estimates - an investment which BT might have been expected to make anyway since many of these institutions are high-volume telephone users.

This deal is no one-way street, however. For Labour it provides a rallying cry that puts the party in the vanguard of all that mumbo jumbo about information superhighways (shades of the white heat of technological change here). Here is something, Mr Blair is able to say, that we in Opposition can do but ministers cannot. Think what we could do if we actually had power. Pure politics, in other words. Ministers are furious. For some, BT's flirtation with Labour is treachery. BT is the showpiece of the Government's privatisation programme. Without Mrs Thatcher, Sir Iain might well still be a subpostmaster. Sir Iain shrugs his shoulders. Building bridges with the Opposition - helping it win votes - is always going to be dangerous for a highly regulated monopoly but the way he sees it, ministers have already punished him as much as they can. He has nothing to lose. Whether the same is true of Labour is another matter. The purpose of government is to create a framework of public policy in which to operate, not to do private "sweetheart" deals with individual businesses to achieve those policies. There is always a whiff of corruption about such mutual backscratching, however laudable the purpose. The deal points up some obvious contradictions in Labour policy towards business.

Among the privatised utilities, BT seems to enjoy favoured status with Labour. There are all kinds of reasons for this; BT is at the forefront of technology, which is where Labour wants to be, internationally it is highly respected and its standing among customers is considerably higher than more recent privatisations.

But it is also distinguished because it is seen to operate in a competitive environment. Mr Blair has made that distinction. It was not that many years ago, however, that BT was being written about in much the same way as the electricity companies now - as one of the most hated institutions in the land. It was regulation and competition that transformed BT into what it now is. There is plainly much wrong with the present market-driven approach to development of the superhighway - but giving even an inch back to BT may not be the answer.

Cavalier behaviour of Deutsche Bank

Little wonder that the Germans had to look beyond their borders to acquire investment banking nous. Judging by the antics of the past few days they have much to learn. The country's biggest hostile takeover, for the state-owned Postbank, may be bringing a smile to the face of Deutsche Bank, but it has been met with open-mouthed disbelief among international investment bankers.

To recap, Postbank was only recently split from the post office, as was Telekom, to prepare for privatisation. However, the politicians appear not to have thought through the business implications. For the post office soon found it could not sustain its vast branch network without the revenues provided by the Postbank. The choice was between large-scale closures and political uproar - the public-sector union in Germany is powerful - and nabbing back the bank.

Deutsche Bank, too, had its agenda. It had tried to strangle the Postbank at birth by blocking its banking licence. It now saw a way of laying its hands on the business of a major competitor for its direct banking products. With backing at the highest levels, the government stitched together a sweetheart deal in which the post office is going for 40 per cent of Postbank, Deutsche for 20 per cent, Swiss Reinsurance (as honorary Germans) taking 15 per cent, and the state holding on, as it has to by law until 1998, to its 25 per cent.

In their haste, however, the bidders have offered a sum of just over DM3bn for the 75 per cent. Last year Salomon Brothers valued Postbank at DM6bn. Lehman Brothers, the advisers, think it is now worth more. Postbank is protesting violently, and calling Deutsche a disgrace to banking.

While Britain is engrossed in raging discussions about how, with years of hindsight, taxpayers were sold short in undervalued privatisations, Germans are pulling off the trick of diddling their taxpayers out of DM2 to 3bn well before the privatisation occurs. This must raise questions about the financial competence of the people in charge, which does nothing to instil confidence in the great Telekom float next year.

But what about Deutsche Bank, and the breathtaking gap between what it says it wants to do in international markets, and this cavalier, provincial behaviour at home? One only has to ask Morgan Grenfell - through the splutters, there is much stressing it has nothing whatsoever to do with this deal.

Arts and Entertainment
'New Tricks' star Dennis Waterman is departing from the show after he completes filming on two more episodes
tvOnly remaining original cast-member to leave crime series
Frank Lampard and his non-celebration
premier leagueManchester City vs Chelsea match report from the Etihad Stadium
Esteban Cambiasso makes it 3-3
premier league
Mario Balotelli celebrates his first Liverpool goal
premier leagueLiverpool striker expressed his opinion about the 5-3 thriller with Leicester - then this happened
people'I hated him during those times'
Britain's shadow chancellor Ed Balls (L) challenges reporter Rob Merrick for the ball during the Labour Party versus the media soccer match,
peopleReporter left bleeding after tackle from shadow Chancellor in annual political football match
Arts and Entertainment
Female fans want more explicit male sex in Game of Thrones, George R R Martin says
tvSpoiler warning: Star of George RR Martin's hit series says viewers have 'not seen the last' of him/her
Dame Vivienne Westwood has been raging pretty much all of her life
peopleFirst memoir extracts show she 'felt pressured' into going out with the Sex Pistols manager
ebooksAn unforgettable anthology of contemporary reportage
Arts and Entertainment
Lauryn Hill performing at the O2 Brixton Academy last night
musicSinger was more than 90 minutes late
Lewis Hamilton in action during the Singapore Grand Prix
Formula OneNico Rosberg retires after 14 laps
Rumer was diagnosed with bipolarity, attention deficit hyperactivity disorder and post-traumatic stress disorder: 'I was convinced it was a misdiagnosis'
peopleHer debut album caused her post-traumatic stress - how will she cope as she releases her third record?
Arts and Entertainment
tvReview: 'Time Heist' sees a darker side to Peter Capaldi's Doctor
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Senior BA - Motor and Home Insurance

£400 - £450 Per Day: Clearwater People Solutions Ltd: **URGENT CONTRACT ROLE**...

Market Risk & Control Manager

Up to £100k or £450p/d: Saxton Leigh: My client is a leading commodities tradi...

SQL Developer - Watford/NW London - £320 - £330 p/d - 6 months

£320 - £330 per day: Ashdown Group: The Ashdown Group have been engaged by a l...

Head of Audit

To £75,000 + Pension + Benefits + Bonus: Saxton Leigh: My client is looking f...

Day In a Page

Scottish referendum: The Yes vote was the love that dared speak its name, but it was not to be

Despite the result, this is the end of the status quo

Boyd Tonkin on the fall-out from the Scottish referendum
Manolo Blahnik: The high priest of heels talks flats, Englishness, and why he loves Mary Beard

Manolo Blahnik: Flats, Englishness, and Mary Beard

The shoe designer who has been dubbed 'the patron saint of the stiletto'
The Beatles biographer reveals exclusive original manuscripts of some of the best pop songs ever written

Scrambled eggs and LSD

Behind The Beatles' lyrics - thanks to Hunter Davis's original manuscript copies
'Normcore' fashion: Blending in is the new standing out in latest catwalk non-trend

'Normcore': Blending in is the new standing out

Just when fashion was in grave danger of running out of trends, it only went and invented the non-trend. Rebecca Gonsalves investigates
Dance’s new leading ladies fight back: How female vocalists are now writing their own hits

New leading ladies of dance fight back

How female vocalists are now writing their own hits
Mystery of the Ground Zero wedding photo

A shot in the dark

Mystery of the wedding photo from Ground Zero
His life, the universe and everything

His life, the universe and everything

New biography sheds light on comic genius of Douglas Adams
Save us from small screen superheroes

Save us from small screen superheroes

Shows like Agents of S.H.I.E.L.D are little more than marketing tools
Reach for the skies

Reach for the skies

From pools to football pitches, rooftop living is looking up
These are the 12 best hotel spas in the UK

12 best hotel spas in the UK

Some hotels go all out on facilities; others stand out for the sheer quality of treatments
These Iranian-controlled Shia militias used to specialise in killing American soldiers. Now they are fighting Isis, backed up by US airstrikes

Widespread fear of Isis is producing strange bedfellows

Iranian-controlled Shia militias that used to kill American soldiers are now fighting Isis, helped by US airstrikes
Topshop goes part Athena poster, part last spring Prada

Topshop goes part Athena poster, part last spring Prada

Shoppers don't come to Topshop for the unique
How to make a Lego masterpiece

How to make a Lego masterpiece

Toy breaks out of the nursery and heads for the gallery
Meet the ‘Endies’ – city dwellers who are too poor to have fun

Meet the ‘Endies’ – city dwellers who are too poor to have fun

Urbanites are cursed with an acronym pointing to Employed but No Disposable Income or Savings
Paisley’s decision to make peace with IRA enemies might remind the Arabs of Sadat

Ian Paisley’s decision to make peace with his IRA enemies

His Save Ulster from Sodomy campaign would surely have been supported by many a Sunni imam