So British Telecom is going back into the mobile-phone business.
It is a story about companies: the way they grow, languish, and sometimes grow again. It is a story about money: how if you are canny (or lucky) you can sell an operation for one price and buy back a bigger one more cheaply a few years later. But most of all it is a story about social change: the way we spend our leisure and in particular the way in which we consume media – and in doing so sometimes prove that human beings have not changed in hundreds of years.
The BT story is interesting in itself: the General Post Office (GPO), established by Charles II in 1660, was forced to sell off its telephone business by the Thatcher government in 1984 as British Telecommunications plc. That became the first mass privatisation anywhere in the world, and was at the time the largest share offering anywhere too. It had to face two issues: how to transform a public-utility monopoly into a competitive business, and how to cope with the mobile revolution. BT was slow into mobile, but helped to create Cellnet 30 years ago with partner Securicor. Then it bought out Securicor, then it split off the mobile business, rebranded it as O2, then finally O2 was bought by the Spanish Telefonica in 2005. The business it is seeking to buy now, EE – itself the merger of Orange and Deutsche Telekom’s UK mobile network – is actually bigger than O2.
So how is it that BT has enough money (and a high enough share price) to be able to buy back into mobile telephony? Because its basic business of running wires into homes and businesses – and now fibre-optic cables into them – is hugely profitable. The old GPO network business, massively updated, to be sure, remains the engine of the operation.
It has not worked out too badly for BT. It will end up with a bigger share of the UK market than it would have had, had it not split off Cellnet in the first place. Shareholders have not done too badly, either, though BT has never quite regained the fashionable rating that it achieved at the top of the dotcom bubble at the end of 1999. But it does make you wonder about the logic of the world of money. If executives spent a bit more time trying to serve their customers better, and a bit less on buying and selling the companies they were supposed to be running, a lot of us would be rather relieved.
But most of all this is a story about the way we live now. We are all connected. So the question is to what extent we are spending our time and money looking at, or “consuming”, content that is generated by professionals, to what extent we are simply seeking information, and to what extent we are generating the content ourselves.
To explain: some of the stuff that comes into our homes or on to our tablets and phones is pushed to us by stunningly skilled content-generators. Think Formula One or the various celebrity programmes. Other stuff is in response to our requests. Think TripAdvisor or Uber. Still other stuff we create ourselves. Think Facebook or Twitter. So the question from a business perspective is at what points in this great mass can you – from the position you are starting from – make money?
Now look again at BT. It has the old twisted copper wires into our homes, often the same ones put in by the GPO all those years ago. It also has the fibre-optic cables that it has spent a vast amount putting in. Soon it will also control the masts of a mobile network. At the moment, you can make money out of infrastructure and this is throwing out a lot of cash for BT. But regulation will tighten, as it always does over dominant corporations.
So it has to do other things, pick off other points in the communications flow where it can make money. It cannot become a Facebook or a Google. That ground is taken. Besides, it is playing from a UK base rather than a global one – not a bad base but not significant in global terms. So it has to think of something else, and one of those is to become a provider of content too. Will it squeeze out Sky to become the dominant broadcaster of the Premier League? That is one of the great questions in media now.
The fascinating thing in all this is that old matters as well as new. Actually, very old. We live in this world of WhatsApp and Instagram, and that is how most of the money in communications will be made. We have divine technology, doing things with fibre optics and mobile phones that would have been unthinkable even 10 years ago. But we also have a company that can trace its roots back to 1660, thinking about buying rights to a tournament going back to 1888.
Inflation's remarkable turnabout
It looks very much as though the Consumer Price Index, now down to 1 per cent, will dip further still in the coming months. The main driver is the fall in energy prices, themselves a function of the fall in the oil price, and that will take anything up to a year to feed through the system.
I can’t see prices going negative here but there is a high probability that they will in Europe. The eurozone is nearly there already, with the most recent number at 0.3 per cent. But even here it is a remarkable turnabout, because inflation has turned out well above its target range for more than a decade.
Indeed, successive governors of the Bank of England have had to write a total of 14 letters to successive Chancellors explaining why inflation is above target. And the number explaining why it is below target? Zero.
That is going to change, as it now looks certain that Mark Carney will have to do exactly that. It will make a small dent into the perception that the Monetary Policy Committee structure has had an inflationary bias. But only a small one: on any tally 14 to zero certainly suggests that, but surely 14 to one would also do so?
The practical questions for all of us who have become accustomed to a world of inflation, unlike our Victorian ancestors, are whether this world of very low inflation will continue, and if so, how do we adapt our habits to it?
On the first, the answer must be that for a couple of years it will indeed be very low inflation. On the second, well, too huge a question to be answered here but in the short-term we are going to get much of our increase in standard of living from lower prices rather than higher wages – a relief for people on fixed incomes at least.Reuse content