Telecom encounters a blockade: The Competition and Markets Authority must do its utmost to give consumers maximum choice, says ALEX BRUMMER
- The woes of Britain’s flagship telecom providers don’t seem to be abating
- The answer for mobile operators is to argue that competition is too fierce and to pursue mergers
- Europe is moving in the same direction as the US, with business concentrated in fewer hands
The woes of Britain’s leading telecom providers do not seem to be abating. At BT, fintech entrepreneur Philip Jansen is leaving the battlefield after failing to raise the share price despite an all-out drive to join the full-fibre elite.
Vodafone fired CEO Nick Read at the end of last year and took over Italian Margherita Della Valle.
She is shaping her future with a £15bn merger with Hutchison-owned Three and some hefty cost savings.
Meanwhile, Liberty Global-owned Virgin Media is in the crosshairs of regulator Ofcom over the obstacles it is putting up in the way of cancellations, steep price hikes and embarrassing outages.
As a pioneer in mobile phone technology, with global ambition, Vodafone should be a world leader. The short-termism of UK shareholders, who saw Vodafone give up Japan on heavy losses, and exit the US joint venture Verizon Wireless for £100bn, has left it too dependent on the sclerotic German market.
Competitive battlefield: The easy answer for European mobile operators is to argue that competition is too fierce and to pursue mergers
The easy answer for European mobile operators is to argue that competition is too fierce and to pursue mergers. New research from The Economist shows that Europe is moving in the same direction as the US, with business concentrated in fewer and fewer hands. The market share of the four largest companies, spanning some 700 industries in Europe, rose to 73 percent from 1998 to 2019, with the UK and France seeing the greatest concentration.
Mobile telephony is a competitive battlefield. The EU’s highest court ruled on July 13 that a decision to block the proposed £13 billion link between Three and Telefonica-owned O2 seven years ago was flawed due to legal errors.
The EU Competition Commission has been a staunch opponent of telecom deals that reduce the number of competitors from four to three. Some in the industry argue that there are too many players, price competition is fierce and low profitability stifles investment and innovation.
Activist regulators always pull a sting, as evidenced by Microsoft’s attempts to carve its way into dominance of the cloud gaming industry with its hefty £53 billion bid for Activision Blizzard.
It is not for nothing that the telecom providers would like to see the four-to-three provider bar disappear. The fierce competition for users has driven down the price of mobile calls and data and delivered affordable packages for consumers.
The scourge of seller inflation—companies using inflation to raise prices—teach us that concentration is rarely the consumer’s friend.
When it comes down to it, the Competition and Market Authority must do everything it can to give consumers maximum choice in terms of price and choice. Vodafone and Three beware!
stealth tax
Labour’s narrative that the Tories crashed the economy plays well in the upcoming mid-term elections.
A smirking Liberal Democrat leader Ed Davey attempts to overthrow a large Conservative majority in Somerton and Frome.
Anyone looking for more informed judgments should tune in to Richard Hughes, chairman of the Office for Budget Responsibility, on BBC iPlayer. He said three shocks — the 2008-2009 financial crisis, Covid and the war in Ukraine — explained why government debt fluctuates at 100 percent of output.
Hughes was not kind to the Bank of England, arguing that quantitative easing had made that debt level less sustainable than our G7 cohorts.
Former Chief Treasury Nick Macpherson’s Twitter response to that assessment is to advocate for higher taxes, despite UK taxation at its highest percentage of GDP in seven decades.
Anyone who demands even more revenue for the government does not recognize that it is baked on the cake.
Forecasters estimate that the tax burden – the impact of freezing allowances rather than adjusting them for inflation – will bring £155 billion to the Treasury between 2022-23 and 2027-28. Enough punishment already.
Pause button
Carolyn McCall’s hopes of clearing British production house All3Media, home of Gogglebox and Midsomer Murders, for ITV have bitten the dust.
The price demanded by Discovery and Liberty (the latter being ITV’s largest investor) turned out to be too high.
Quite a setback to her goal of becoming British studio champion.