Telegraph…….Ministers call for national security review of Inmarsat takeover.
Tom Tugendhat has written to Kwasi Kwarteng saying the satellite firm’s sale to America’s Viasat could ‘diminish‘ UK sovereign capabilities.
Ministers have been urged to review British satellite company Inmarsat’s £5.5bn takeover on national security grounds.
Tom Tugendhat, chairman of the foreign affairs select committee, has written to Business Secretary Kwasi Kwarteng saying that Inmarsat’s sale to America’s Viasat could “diminish the UK’s sovereign capabilities”.
He argued the deal should be assessed under national security legislation due to come into force on January 4. Mr Kwarteng responded, saying the Government was monitoring the takeover and will intervene if it considers it appropriate.
“ Netflix has attacked reforms that could let broadband companies charge tech giants for access to their networks, warning that changes could harm investment and amount to telecoms companies extracting rent.”
So it’s OK for the telecoms companies to forego profits and divi’s to their shareholders in order to invest in the network and it’s future, so the streaming companies can roll about in their profits.
Cont….
In its response, the BBC said that allowing internet providers to charge online services would raise prices for consumers and mean less value for money for the licence fee.
“If online service providers are charged a fee by ISPs many companies will pass the increased cost on to consumers meaning UK customers facing higher prices. The BBC would however have to divert licence fee income away from British content investment, to pay ISPs for access to audiences.”
Ofcom has said it plans to publish its response to the consultation in the Spring.
Ties into Fleccy’s justified argument!
Streaming company urges Ofcom to consider risks in changing regulations.
Netflix has attacked reforms that could let broadband companies charge tech giants for access to their networks, warning that changes could harm investment and amount to telecoms companies extracting rent.
The streaming company responded to an Ofcom consultation on “net neutrality”, urging the regulator to exercise “extreme caution and great consideration for the risks”.
The BBC has also warned against relaxing the rules, saying they could mean less value for licence fee payers.
Broadband companies have long complained about the heavy burden on their networks from streaming services such as Netflix, Amazon and Disney, and downloads of online games.
They have seized on Brexit as an opportunity to diverge from the European Union’s strict net neutrality regime, which requires broadband providers not to discriminate based on different types of traffic, arguing that it leaves households subsidising a minority of bandwidth-heavy internet users.
Relaxing net neutrality laws could allow networks to charge big companies for special treatment, such as faster speeds or excluding them from data caps.
Advocates also say it could allow them to prioritise important services such as work video calls or emergency services.
Netflix wrote: “Internet development, content and the digital economy in the UK is demonstrably a success story. By all these measures the UK’s success shows that the current framework is not only fit for purpose, but working well. Strong net neutrality rules allow end users to choose the services they want to use online, instead of being constrained by the limitations of a gatekeeper in between.
“Any change in the framework should be exercised with extreme caution and great consideration for the risks.”
It added that allowing broadband firms (ISPs) to charge fees to streaming companies serves “no purpose other than providing a rent for the ISP”.
Netflix added that allowing the charges could discourage investment, since worse broadband networks would make streaming services more likely to pay for special treatment.
Ofcom said in September it was considering relaxing net neutrality enforcement, although a bigger overhaul would require legislative changes.
The regulator said the shift to home working during the pandemic had put pressure on internet networks, strengthening the case for internet providers to manage traffic. It has not made any specific proposals.
BT told the regulator that allowing broadband companies to charge both consumers and tech companies would be fairer, saying that consumers currently bear all the costs of internet traffic.
“Were ISPs able to charge both sides of the market, they would rationally seek to balance the content providers desire to reach customers and the customers desire to access content and services,” the company said.
Yep NDNIC00, this was quite the fluffy interview, probably made from the request of Schuler himself. No quizzing or grilling on any of the timescales or figures.
I feel, no matter what we all think about BT and the immediate future with it’s owners plus potential owners (Altice, DT plus potential bidders) the competition such as VMO2 and the Alt-nets must be quaking in their boots. Even with Altice etc it has to be a leaner company. I exclude Sky and TT as they don’t have to invest to profit as wholesale purchasers from OR.
“ Schüler plans to wrest £6.2 billion of savings — and invest at least £10 billion expanding fibre, 5G and digital services by 2026.”
So Schuler says he’s got £6.2b of savings he can make, and that’s after moving customer services back from India to the UK. There must be heap of duplication, bad practices and dead wood from within. I to prefer to believe this £6.2 figure is a little bit sensationalist.
Cont…
Schüler says the potential is huge to add other services, from e-sports to home security and smart home applications, all the time using customer data more intelligently to help content providers reach more viewers.
He has opted not to ape Sky with a “Virgin TV” set. Rather, his product, to be called Virgin TV Stream, will launch in the coming months as a dongle that turns your existing television into an IPTV.
“I’m telling you, if the market in the UK turns into Sky Glass, we have our answer all ready. Don’t underestimate us.”
We won’t, Lutz. We won’t.
The life of Lutz Schüler
Vital statistics
Born: 1968
Status: Married with three children
School: Leibnitz Gymnasium Düsseldorf; Universität Augsburg
First job: in a surf shop
Home: Hammersmith, London, and Munich
Car: Knaus Sun Traveller and a Mini Cooper in Germany; mostly cycles in London
Bike: Trek Madone 5.6 (in Germany)
Favourite book: A Voyage for Madmen by Peter Nichols
Drink: cappuccino or Italian wine
Film: Moneyball
Music: Red Hot Chilli Peppers
Gadget: cycling computer
Charities: Carers UK, Surfers Against Sewage, Street Child
Last holiday: sailing in Croatia
Working day
On a normal day, Schüler is up at around 7am and cycles to the office, where he starts with a cappuccino. He spends much of the day in meetings, and always ensures time is spent each week at offices across the country or on virtual calls to keep employees updated. Schüler regularly spends time with partners, customers, the government and Ofcom, and often cycles to those meetings. He aims to finish work by 6.30pm and is a strong believer in a work-life balance.
Downtime
With a lifelong passion for watersports, when in London Schüler often hires a car for the weekend and travels to various locations around the south coast to go kitesurfing and try out new restaurants. When back in Munich, Schuler packs the camper van and spends time with his family — cycling, sailing and surfing in the summer, and skiing in the winter.
Government urged to permit mobile mergers
Virgin Media O2 has called on the government to allow more mergers among mobile phone operators to enable them to make savings and invest billions of pounds in the UK’s networks, writes Jim Armitage.
The company made the call in its submission to the government’s wireless infrastructure strategy, which will set the industry ground rules for years to come as companies invest billions in rolling out 5G technology. A merger of O2 and Three was blocked by EU regulators on competition grounds, but many in the industry feel that such consolidation is vital to cut costs and free up funds for investment.
Virgin Media O2 chief executive Lutz Schüler said: “There’s a danger that a gap emerges between the 5G future the country needs and the investment required to achieve it.”
Cont…..
There are other big challenges. Where Virgin has a big cable network, available to 15.6 million homes, the future is fibre. BT is spending £15 billion to lay fibre reaching 25 million homes and businesses by 2026. How will Schüler compete with that kind of firepower?
Schüler — who BT’s Jansen describes as “a fantastically good chap” — says that Virgin Media has upgraded its cable network to gigabite speeds (for £62 a month if you’re interested), making its network far faster than the average. But he knows he has to build fibre for the future.
As one veteran says: “BT’s fibre will be in the ground for 100 years. You can’t say that for Virgin’s cable.”
Schüler agrees that fibre is the future and is now laying it through Virgin’s existing cable ducts. He gives himself until 2028 to have the entire network on fibre.
Now he is pondering whether to start wholesaling his lines to other operators wanting to offer broadband — Vodafone perhaps. While that could bring him some new revenues, it could also trigger an instant and damaging price war with BT which the telecoms leviathan would probably win.
Others suggest that Schüler will partner with other players to roll out fibre — something hat Virgin Media O2’s shareholder Liberty Global has mooted. Expect to hear more about that from next year onwards.
Schüler joined Virgin Media in 2018 when Unitymedia, a German cable business also owned by Liberty, was sold to Vodafone. His long career in mobile phone companies has spanned stints at O2, T-Mobile and Deutsche Telekom.
Mergers and takeovers are still very much in the air. Over at BT, Patrick Drahi, the Israeli-French telecoms billionaire, has just raised his stake to 18 per cent. “When I put myself in Phil [Jansen]’s shoes,” says Schüler, “thank God that I’m not getting distracted at the moment with a possible hostile takeover that takes management time and attention.”
Schüler talks ruefully of how the big telecoms companies complacently allowed themselves to be sidelined by Silicon Valley’s tech giants to become mere “pipes”, rather than platforms controlling the global internet market.
Apple’s iOS and Google’s Android software successfully became the aggregators for millions of mobile apps while companies such as his stood by, even mocking the first iPhones for being inferior to “our smart Nokias”. Now, Schüler says, telecoms companies have a second chance to be the platforms for TV, video and other home services, offering content providers access to millions of customers directly, through mobile or broadband TV.
Television delivered over the internet — known as Internet Protocol TV (IPTV) — makes that possible, as Sky is hoping to prove with its Sky Glass TV, an attempt to create the iPhone of the video industry with seamless access to online TV apps, from iPlayer and ITV Hub to Disney+.
Economics was the subject — but he was to end up learning a lot more, particularly about himself.
He explains: “When I started my studies, I didn’t know if at high school I was lazy or stupid. That sounds funny, but for me it was not funny at all. I needed to prove myself.”
He worked obsessively. On the plus side, he emerged four years later with top grades and both a bachelors and a masters degree. But his mental health suffered terribly.
“I had a burnout because I was too focused on work. I couldn’t sleep. My body just stopped sleeping. I’d have one beer to sleep, then two, but I would wake up during the night. It took me years to really recover.”
The banker Antonio Horta-Osorio had a similar experience early on in his tenure running Lloyds Banking Group, I say. “Yes,” Schüler responds. “Usually it happens to people who are a bit older in jobs but I learned early that you need a balance in life.” For him, that balance means kitesurfing and time with his wife and three adult children back in Bavaria.
Achieving such an equilibrium while coping with the stress of integrating two massive companies cannot be easy. “We are all working hard and with Covid, the mental health challenges are increasing, but I’m big on team play. So when we see in our team that somebody is struggling a bit ... then we step in for each other.”
How, I wonder, does that fit with comments from some in the press that he had brought a “machismo” culture to O2 that wasn’t there before? He looks genuinely baffled at the accusation. “Yes, I am challenging. So we play to win. I am demanding in that sense but I’m also supportive. Pushing hard, but not in a masculine or male way.”
So, what exactly is he pushing at? Primarily, the big beast in the UK telecoms jungle: BT.
In bashing Virgin Media together with O2, a business has been born that should be a far better competitor to BT, offering both mobile (like BT’s EE) and broadband (like BT Openreach).
In an industry that has famously burned money on irrational duplication and crazed competition, Schüler plans to wrest £6.2 billion of savings — and invest at least £10 billion expanding fibre, 5G and digital services by 2026.
Some fret that those ambitions could distract him from dealing with one of Virgin Media’s biggest problems: its reputation for poor customer service. Last month, regulator Ofcom said it was the most complained about pay-TV provider.
“Let’s not talk around it, right?” he says. “We absolutely always have had issues with customer service.”
The problem grew particularly bad during Covid because a majority of the customer service staff had been offshored to India and the Philippines, which effectively shut down when the pandemic swept through. “As a result of a cost-driven sourcing strategy, we lost 60 per cent of our resources. So we made the decision to bring back onshore all those resources into the UK.”
He says improvements are starting to show, and the regulator’s report does acknowledge that.
Virgin Media O2’s Lutz Schuler takes the fight to Big Tech.
Lutz Schüler on how he has the fibre for the fight for eyeballs that lies ahead.
Lutz Schüler is not panicking about another Covid crisis hitting his business. The chief executive of Virgin Media O2 has seen it all before — and worse. After all, it was while Europe was in the grip of total lockdowns earlier this year that he and his team negotiated a £32 billion deal to merge Liberty Media’s Virgin broadband empire with Telefónica’s mobile giant O2.
In fact, Schüler — then chief executive of Virgin Media — ran his end of the deal from his daughter’s bedroom in Munich. “We were carrying out the biggest telecoms merger in UK history ever while I was in this rose [pink] bedroom,” he recalls, with a hearty German laugh.
“So let’s not be complacent, let’s not underestimate what’s going to happen, but I think we have now learnt how to deal with it.”
Schüler’s first encounter with the pandemic came earlier than most. He was in a meeting with the government and BT chief Philip Jansen, who soon fell ill as one of the first high-profile Britons to catch Covid. Schüler, who lives between London and Munich, was visiting family in Germany when the news broke and had to isolate before being locked down. “I didn’t return to the UK for four months,” he recalls.
The 53-year-old is not your run-of-the-mill UK chief executive.
For a start, he arrives for our interview at the company’s Hammersmith base on an old boneshaker of a bicycle. “I don’t want an expensive one to get stolen or I get stranded,” he says in heavily accented English.
Then there’s the look of him: 6ft 5in and slim in black skinny jeans, a dark polo-neck and a black suit jacket, he sports long, glossy black hair swept back behind his ears. With catwalk cheekbones, dazzling teeth and a perma-tan, he gives off a fashion designer vibe.
Schüler’s route up the corporate ladder was equally unconventional.
Born the son of a lawyer father in Düsseldorf, his mother died when he was a toddler and his father remarried, creating what he describes as “a new patchwork family” with a stepbrother and stepmother. It worked well — the two boys were best friends as well as brothers, doing everything together until, in his teens, Schüler got the windsurfing bug. In a huge way.
When he should have been studying at high school, he was spending all his time driving to the Dutch coast two and a half hours away to surf, surf, surf. He was good, too, with race sponsorship and prospects on the pro circuit.
He feared that would be a bit of a “one-dimensional” life, however, and sought something else.
“The trouble was, when it came to our final school exams, everyone was studying but I was in Portugal at a windsurfing competition,” he says.
He flunked his grades terribly, limiting his job options. After an apprenticeship at a small bank, he eventually started a degree.
Holy Moly Fleccy it’s a big one, I’ll risk Rod’s wrath and post it.
Zebbo, the share price b4 the pandemic was above £2 and its been above £2 in recent months while in the pandemic. There has been lots of good news in the last year or so, with the pension liability reducing, project equinox, du Plessis being replaced, incremental cost savings achieved earlier, news on OpenReach on its own being worth much more than the current Group, indicating the sum of the parts is valued at much more, etc, etc. A £2 bid will be laughable, even a £3 bid will be rejected. The most likely bid to succeed may not be either DT or Altice or both together but A N Other, maybe the Indian Reliance, we’ve all read about trade deals with India etc. This might turn out to be one of those peloton races where everybody holds back until somebody makes a move, then it’s hell for leather.
Cont….
It was put in place at privatisation in 1984 and the trustees went to court a decade ago to test in what circumstances it would apply. The answer is that it would kick in “in the highly unlikely event that BT became insolvent”. Might someone try to find a way round this, spirit off BT’s valuable assets and leave the taxpayer to foot the bill? I very much doubt it.
Private investors have often been able to find value in old telecoms companies and the giant American private-equity firm KKR has made a €33 billion offer for Telecom Italia, once, like BT, a state-owned company. There is, however, one big difference: Telecom Italia does not have a pension scheme bigger than the company that supports it. No such luck for Drahi at BT.
Cont…
Some think there might be a route back to that brilliant future.There is a glaring mismatch between BT’s stock market valuation and the potential of its Openreach division, the arm of the company that is doing the heavy lifting on installing fast broadband around the UK. Openreach is about the only game in town if the government is to achieve its ambitious targets on full-fibre connectivity, and in theory it should be able to sit back and watch the money roll in once it gets over the big hump of investment in new cables and installation. Think of it as a proto-National Grid but even better, as demand for online services is racing ahead. BT’s market value is about £16 billion; some analysts think a standalone Openreach could be worth more than twice that. Find a way neatly to divide BT, the theory goes, and it’s trebles all round.
This is where that frowning cat comes back into the picture. As well as potential for the future, BT carries the legacies of the past, notably a pension plan (actually three plans) with combined liabilities of £60 billion and a deficit, according to last year’s triennial valuation, of just under £8 billion. BT has agreed with the trustees a ten-year plan to reduce the deficit, a standard and necessary move in companies with sizeable pension holes. But it does not end there. The trustees have also squeezed BT’s management into a capital-allocation straitjacket. If there is any money to spare they want to make sure that they get their slice. BT has agreed to curbs on share buybacks and special dividends unless extra money also flows into the pension. On top of that BT has pledged that if it sells something for more than £750 million (more than £1 billion after 2023), one third of the proceeds has to go into the pension. It is all in the annual report and, if you doubt how important pensions are to the future of BT, note 20 in the accounts, which deals with the retirement schemes, is 11½ pages long
So what would happen if Drahi, or the current management, wanted to break BT in two? Presumably they would want the new Openreach to be free from the worries of future nasty pension surprises so the scheme would stay with the rump BT. The trustees and the pensions regulator do not have the power of veto but they could make the process difficult and perhaps come back with a demand on Openreach in a few years’ time. How big is the cheque BT would have to write to make the problem go away? Start with the deficit of £8 billion. The pensions expert John Ralfe reckons the rule of thumb for situations like this is to add another 30 per cent, so someone would have to find more than £10 billion.
At this point a clever banker might point out that there is a potential get-out-of-jail-free card. BT’s pension has a Crown guarantee attached, a promise that pensioners will get their money even if the state has to step in.
I think some of this was mirrored in the Reuters piece.
Potential investors will need to beware the £60 billion cloud hanging over BT.
Patrick Drahi, the Swiss-based billionaire who is quietly wrapping his arms around BT, knows a thing or two about big numbers, and not just from counting his fortune: both his parents were maths teachers. That should come in handy, as the future of the British telecoms company is all about the law of big numbers, in particular its outsize pension scheme, which hovers like a fat, unsmiling Cheshire cat over any plan for radical action.
Leaving the cat to hover for a moment, it is not hard to see why Drahi is cosying up to BT. It has been the unloved stepchild of the telecoms industry for more than a decade. Despite its size and strong position in the UK it is seen as a company still in transition from a well-padded quasi-monopoly of things that don’t matter any more, like traditional telephone services, to the trusted provider of Britain’s new superfast fibre-optic broadband and 5G mobile internet services. The transition seems to have gone on for ever. In the early Noughties I was summoned by BT’s chairman, the late Sir Christopher Bland, to be told how everyone had BT wrong: it was no stuffy backwater, it was going to surge forwards into a bright new future surfing on the blazing wave of the internet. On the way out of his office, in the hulking grey BT Centre close to St Paul’s Cathedral, I walked past row after row of middle-aged white men in cardigans, and wondered if the message had filtered down to them.
For a brief period the City also believed the story. BT was a big beneficiary of the first dotcom boom. The shares went to just over £10 on December 30, 1999. They have never recovered that former glory, sloshing around under £2 for much of the intervening two decades. There was a rally in 2015, when they went close to £5, but they have been in a slump since then and closed yesterday, despite a week of takeover speculation, at £1.67¼p.
Interesting Steve, just nobody told HMG, haha!
“ Mr Dorff added that the new laws had retrospective powers, meaning ministers could potentially block future share purchases or even reverse Mr Drahi’s efforts to build up his stake.”
Not sure how this would be achieved.
Lots of interesting paragraphs on this one.
Cont….
While Mr Drahi’s holding is also short of the 30pc threshold at which a takeover offer must be tabled, speculation has been mounting that he could seek to buy out BT’s second largest shareholder Deutsche Telekom, which holds a 12pc stake.
Deutsche’s chief executive Tim Hoettges has openly fuelled speculation since Mr Drahi first emerged as BT’s biggest investor, describing him as a “king maker” in any potential deals.
BT insiders claimed Mr Drahi and Mr Hoettges are unlikely to see eye-to-eye over the company's future, however.
In a brief statement acknowledging the stake increase, BT said it will “continue to operate the business in the interest of all shareholders and remains focussed on the successful execution of its strategy and building on recent performance momentum”.
Shares in BT rose sharply after Mr Drahi's first intervention in June, but have since pared gains. The stock dropped 4.6pc on Tuesday following the tycoon’s insistence that a takeover bid was not imminent.
The stake increase comes just two weeks after former ITV chief Adam Crozier took over as BT chairman.
BT learnt of the move when Mr Drahi contacted Mr Crozier after markets closed on Monday.
Altice insisted the French tycoon was supportive of BT’s strategy and management and was not presenting a “long list of demands”.
The telecoms giant, which is grappling with a huge pension deficit and debt pile, has been bracing for a break-up or takeover for several years. The company hired advisers at Robey Warshaw and Goldman Sachs following Mr Drahi’s surprise entrance in June.
https://www.telegraph.co.uk/business/2021/12/14/french-billionaire-patrick-drahi-increases-stake-bt-takeover/