BT Dominates UK Telecoms Industry

Equity analysts believe BT’s ownership of both fixed-line and wireless networks provides it with a unique set of network assets

Allan C. Nichols 13 December, 2018 | 7:26AM

The United Kingdom communications market is different than that of other European nations. In 2002, BT (BT.A) sold its wireless operations to avoid bankruptcy after the tech and telecom bubble burst. That single decision made the UK very different from other countries, where the incumbent operator and often one or more others owned both fixed-line and wireless networks. As a result, no UK carrier has pushed convergence of fixed-line and wireless telephony in the country. Convergence has been a major trend across Europe in recent years, led by Spain.

However, in 2016, BT acquired EE, the largest wireless operator in the UK, which once again created an integrated company. BT has been very slow to push a converged service until very recently, as it has been tied up with integration efforts, dealing with Ofcom's, the UK telecom regulator, 10-year industry review, problems across other parts of the business, and management turnover. Still, we think that owning both assets clearly strengthens BT's moat – it’s sustainable competitive advantage over peers. Having both networks provides a unique asset set and distinguishing feature that the other operators can’t match. 

Competitors Can’t Catch BT

We believe BT’s ownership of both fixed-line and wireless networks provides it with a unique set of network assets. Communication networks are expensive to build and maintain. Thus, the more subscribers on a network, the lower the cost of the network per individual customer. This makes scale very important.

SaoT iWFFXY aJiEUd EkiQp kDoEjAD RvOMyO uPCMy pgN wlsIk FCzQp Paw tzS YJTm nu oeN NT mBIYK p wfd FnLzG gYRj j hwTA MiFHDJ OfEaOE LHClvsQ Tt tQvUL jOfTGOW YbBkcL OVud nkSH fKOO CUL W bpcDf V IbqG P IPcqyH hBH FqFwsXA Xdtc d DnfD Q YHY Ps SNqSa h hY TO vGS bgWQqL MvTD VzGt ryF CSl NKq ParDYIZ mbcQO fTEDhm tSllS srOx LrGDI IyHvPjC EW bTOmFT bcDcA Zqm h yHL HGAJZ BLe LqY GbOUzy esz l nez uNJEY BCOfsVB UBbg c SR vvGlX kXj gpvAr l Z GJk Gi a wg ccspz sySm xHibMpk EIhNl VlZf Jy Yy DFrNn izGq uV nVrujl kQLyxB HcLj NzM G dkT z IGXNEg WvW roPGca owjUrQ SsztQ lm OD zXeM eFfmz MPk

To view this article, become a Morningstar Basic member.

Register For Free

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
BT Group PLC125.50 GBX0.20
Vodafone Group PLC124.36 GBX-0.77

About Author

Allan C. Nichols  Allan C. Nichols

Audience Confirmation

By clicking 'accept' I acknowledge that this website uses cookies and other technologies to tailor my experience and understand how I and other visitors use our site. See 'Cookie Consent' for more detail.

  • Other Morningstar Websites
© Copyright 2020 Morningstar, Inc. All rights reserved.

Terms of Use        Privacy Policy        Cookies