BT Group’s View Gets SMF Affirmation-British Government to Miss 2025 Deadline to Fibre Up The UK

Summary

  • Boris Johnson had promised full-fibre broadband by 2025 to every UK household during his election campaign last year
  • Social Market Foundation has called upon the British government for major reforms in the telecom sector
  • Industry experts believe that the UK will get fibre only by 2033 and if the government makes reforms in the telecom space, it can be achieved by 2027

Rolling out fibre in the UK was a key promise of the British Prime Minister, Boris Johnson during his election campaign last year.  But it is highly unlikely that every UK household would get access to a full-fibre broadband by 2025, which was earlier promised by the British Government, according to a report.

The onslaught of the novel coronavirus has led to a surge in demand for quality internet services as data consumption has gone up drastically. Almost every sector has undergone a sweeping transformation to bolster their presence in the virtual world. From groceries to the car, almost everything can be purchased online. In addition, Britons are encouraged to work from home; consuming online streaming content; online classes for children has led to a huge demand for high-speed internet.

What does the SMF report say?

The new report from the Social Market Foundation (SMF) suggested major reforms in government policies if the UK has to achieve an ambitious target of providing full-fibre broadband to households by 2025.

A lot of investment is required in funding new networks, and the industry will only do that if they gather support from the government by committing to purchase full-fibre broadband for buildings such as hospitals and schools to ensure stable demand. The report called upon government to make additional reforms to help in mitigating the risks of investing in new networks.

Also, the government has enacted new policies to simplify the process of connecting blocks of flats. Newly constructed homes would have to be integrated with full-fibre broadband. In addition, the report suggested a collaboration between public sector bodies and private firms to create local fibre operators for providing broadband services to remote locations.

UK has been lagging when it comes to global broadband speed rankings, even among the EU nations, the UK is far behind its European counterparts. According to the telecom regulator, Ofcom, only 10 per cent of the households in the UK have access to high-speed broadband services.

BT Group’s take on the Government ambitious plan

Top officials of BT Group Plc (LON: BT.A) believe that the deadline to fibre up UK by 2025 would be missed. BT Group expects the UK to get gigabit speeds by 2033 only. However, if the government makes reforms in the telecom space, the industry majors can achieve the target by 2027. BT Group has been lobbying with the government to extend the tax holiday from five to 20 years and simultaneously slash the business rates on new broadband networks.

Also read: BT Group to Offer Subscription-Based Services For The Netflix Generation 

How is the BT Group faring amid the coronavirus crisis?

Despite a decline in the financial performance in the first quarter of the financial year 2021, the old warhorse of the UK telecom sector, BT Group delivered a strong operating performance and is committed to supporting its colleagues and customers. BT Group’s Openreach resumed repair and provisioning activity in customer premises; the majority of retail stores have reopened as the lockdown was lifted, and Premier League resumed on BT Sport during the first quarter of 2021.

The Company continued to make progress towards the target of rolling out FTTP to 20 million households and launched a new scheme under Enterprise business to support small businesses for the post-pandemic era. The Company deployed 5G to 100 cities and towns.

(Source: Company’s filings, LSE)

 

The FTSE 100 listed telecommunications Company delivered a robust operating performance during the first quarter of 2021; BT Group’s Openreach is committed to building FTTP to 3.2 million households by 2025-26 in rural parts of the UK. The Company’s operational performance was impacted due to a decline in residential BT Sport revenue, market competition and a decline in roaming revenue.

The Profitability margins have declined for the period. However, despite the decline in profits, the Company continues to make investments to improve customer experience and take measures to reduce the costs.

Despite the Covid-19 crisis, the Company delivered a strong operational performance and a relatively strong financial performance and reached an important milestone of rolling out FTTP to 3 million premises.

BT Group’s performance is subjected to macro-economic factors, exchange rate fluctuations, interest rates risks. Changes in geo-political environment can impact the performance of the company in the long term.  

BT Group’s shares were trading at GBX 107.90 on 9 October 2020 at GMT 11:30 AM +1, which were up by 1.27 per cent from the previous day closing price. From January till date, BT Group’s shares have plunged by more than 45 per cent.

Also read: BT Group Plc Ramping Up Efforts to Face the Challenge of Virgin Media & O2 Combine

Exclusion of Huawei from the telecom industry is a setback for the 5G services roll out across the UK. BT group earlier scrapped its dividend for FY20 to free up investment in building 5G network and roll out high-speed broadband across the UK. Businesses are transforming their existing business models for the digital age. The pandemic has taught the value of internet technology, as it has remained unfazed during the unprecedented crisis. The internet has kept a lot of Britons going, particularly in the services sector.

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