"Matthew Howett, chief executive of Assembly Research, says Kirkby has impressed investors by seeing through the cuts and focusing on BT’s core broadband and connectivity business. “It’s a return to basics and making sure the core parts work well and are profitable,” he adds. “I wouldn’t be surprised if we saw disposals of non-core assets.”
Howett says Kirkby, who was previously chief executive at Telia, the Swedish telecoms company, and has been on BT’s board since 2019, impressed with the speed at which she got to work fixing long-term issues and “bringing everyone on board for the journey”. “There is a lot of staff, and a lot of them are engineers working out of vans around the country, not people in offices in London,” Howett says. “She is out there visiting everyone everywhere.”
The deal is one of the first big signs of consolidation among “altnet” broadband providers by the large infrastructure groups that many analysts have been predicting.
Matthew Howett, analyst at telecoms research group Assembly, said: “Altnets are a key piece of the connectivity jigsaw, but consolidation has been inevitable as new sources of funding dry up, focus on take-up intensifies and investors increasingly demand returns.”
According to a study by Assembly Research, a research company, commissioned by Virgin Media O2, average monthly household spending on telecoms services has fallen by almost one-fifth since 2017.
The report also found that the telecoms industry was investing up to £2.5bn a year in mobile networks, and about £3.8bn into fixed broadband. It estimated that combined capital expenditure accounted for nearly 70 per cent of total investment made by some of the largest industry players.
Mobile industry executives highlight the decision of Boris Johnson’s government in 2020 to strip Huawei out of Britain’s nascent 5G networks because of national security concerns as a reason for the slow rollout.
“That absolutely put the brakes on deployment for the operators,” Matthew Howett, chief executive of Assembly Research, said.
Matthew Howett, an analyst at Assembly Research, said tech groups were right to point out that they already contributed to content delivery. “The question is therefore whether it’s enough to meet the demands placed on network infrastructure providers.”
Although previous attempts at changing the rules in Europe have not been successful, Howett suggested that policymakers’ greater awareness of the environmental benefits of network upgrades, and of the importance of connectivity during the Covid-19 pandemic, may pave the way for a different outcome.
Matthew Howett, founder of Assembly Research, admits that 5G may have appeared to be “just another ‘G’” up until now. But he says standalone is set to “enable a whole host of new use cases that we’ve probably not even thought of yet”, while providing the networks needed to turn “perceived pipe dreams of smart cities and autonomous vehicles into a reality”.
He adds that the transformation of UK factories and plants into 5G standalone test beds will make Britain a more attractive place to invest.
“Vodafone was caught between a rock and a hard place,” said Matt Howett, founder of Assembly Research, noting that although the company was simply later than its rivals in raising prices its timing was poor. “It doesn’t look good,” he said.
Mr Howett said that price rises that could have been frozen undermine those efforts. “You are giving with one hand and taking away with another. What consumers really feel most right now is what is coming out of their pockets,” he said.
Matt Howett, an analyst with Assembly, said that although the Huawei decision is important for the UK industry, it could have a negative effect on the economy if telecoms companies end up having to delay the roll out of 5G networks in order to comply with the cap.
“This will cost the economy if there is a material delay on 5G rollouts,” he said.
Matthew Howett, principal analyst at Assembly Research, said the “wheels would come off” the competitive market if it was replaced by a “bland public owned corporation selling standard connectivity”. That would hit innovation and investment in new services as it is hard to compete with free.
He also asked whether consumers would look forward to dealing with government customer services every time they had a problem with their WiFi. “No one says BT is perfect. It’s excruciating to deal with but dealing with the government would be like pulling teeth. It will be a nightmare,” he said.
But the slow rate of EU progress clashes with the speed at which 5G is being tested and rolled out by the largest telecoms companies across the continent. Matthew Howett, founder of research company Assembly, said: “You can understand why they want a common framework but working to that timescale is risible. It doesn’t make any sense.”
Mr Howett said that the impending report by the UK government into telecoms infrastructure and its view of Huawei’s involvement would be likely to prompt more action from member states and that the slow pace of the plan belied the commission’s previous view that Europe needs to push ahead rapidly with 5G deployment. “We are in a global race to launch this technology. This timescale is incompatible with the EU’s other objective to be a leader in 5G,” he said.
The letter said the review aimed to ensure that Britain’s “critical national infrastructure remains resilient and secure”.
It did not mention Huawei by name, but said the “outcome of the review may lead to changes in the current rules” and that the companies “will need to take the review into consideration in any procurement decisions”.
Matthew Howett, principal analyst at Assembly Research, a research house that focuses on regulation and policy in the communications market, said: “I doubt we would have seen this if it was Nokia or Ericsson.”
Telecoms executives said the government may be pushing operators to make sure Huawei is only one of a diverse range of suppliers. But they also said it was possible that the Chinese company could be barred from the rollout of 5G in the UK, a move that would delay networks that are due to come online in 2019 and 2020.
The BDUK programme was widely criticised in its infancy after BT won all the contracts on offer, which led to accusations that it was rebuilding its monopoly position in commercially “unviable” areas using the public purse.
The programme has nonetheless successfully rolled out superfast broadband, which connects users to speeds of at least 24 Mbps, to more than 95 per cent of the country.
Matthew Howett, a telecoms and digital sector analyst, said: “Had there not been a subsidy arrangement it’s almost certain consumers in some rural areas would still be condemned to the slow lane for years to come.”
Indeed, others argue that the bold strategy of his early years will remain the basis for a recovery now.
Matthew Howett, founder of Assembly research, said Mr Patterson had acquired a “shining star” in EE — the UK’s largest mobile network — even if he struggled to balance the interests of shareholders, Ofcom and politicians as he tried to turn round a crumbling incumbent. “He couldn’t win,” he said.
