British Telecom Essay

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British Telecom

My aim in this investigation is to discuss whether or not British
Telecom has successfully grown and developed since its Privatisation to compete on a world scale. In addition to this has it any long-term strategies for future growth and development of products.

According to the 1996 Budget Red Book, more than 50 major businesses have been privatised since 1979 and the state owned sector of industry has been reduced be two-thirds. British Telecom was privatised in
1984, with no major restructuring. This meant that a public monopoly was transferred directly into private hands, this natural monopoly benefited from having economies of scale. Of course this move had it's advantages but there were also
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At the time of it's privatisation in 1984 BT's estimated initial value was £3,196bn. As it stands BT is one of the world's leading providers of fixed and mobile communications services. With a market capitalisation in excess of £50 billion, it is one of the largest private sector companies in Europe. It's principal activity is the supply of local, long distance and international telecommunications services and equipment in the UK, serving 27 million exchange lines, and with the acquisition of Cellnet, supports more than six million connections. In the 1997-98 financial year BT's turnover was £15,640m with a pre-tax profit of £3,219m. Currently BT is expanding its presence overseas rapidly and has operations in more than 30 countries worldwide, with joint ventures in another 15 countries.

The Policy Dilemma

In order to guarantee a good sale price and thereby substantial revenue for the Treasury, there was a need to keep any legislation, which applied to BT fairly light. Private investors would not be attracted to an organisation which was still operating within a political straightjacket. However, the transfer of a complete monopoly could lead to inefficiency in terms of costs, prices, innovation and so on. Some constraints were placed upon BT in its initial phases within the private sector:

OFTEL was established to act as a regulatory 'watchdog' over the telephone industry.

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