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Bt Essay, Research Paper

Introduction

This report follows the financial life of BT and Cable and Wireless over a set period. The start date was 21st October 1999 and the finish data was 3rd February 2000.

In 1984 BT became a public limited company, 51 % of its shares were sold to the public, this was a total of 3012 million shares. The purchase price was 130 pence; the offer was 3.2 times over subscribed. To this day BT remains the largest company in the British telecommunications industry.

Cable and Wireless is one of BT s main competitors but it has a far broader global span, with interests in 70 countries World-wide. The nineties saw rapid growth from both companies and a strategy change in 1999 has BT trying to expand as an international communications supplier.

The report concentrates on changes in their share prices and why these changes may have been caused. It is split into 3 sections. Firstly there is a brief discussions as to why Cable and Wireless was chosen as BT s main competitor. Secondly a general presentation of what has happened to BT and Cable Wireless share prices as well as the FTSE 100. These changes are linked to economic events that occurred during the period studied. Finally there is a more detailed discussion of a major event affecting BT s share price.

A brief discussion of why the competitor was chosen and issues considered when choosing it

Cable and Wireless was considered to be good competitor for our focus company British Telecommunications (see appendix III). The two companies have both close similarities and differences, but working within the same industry providing competing services.

British Telecommunications PLC supplies inland and international telecommunication services within the United Kingdom and overseas. It s main products and services include local, long-distance, and international calls; telephone lines, equipment and private circuits for homes and businesses; providing and managing private networks; and supplying mobile communication services. (FT.com)

Cable and Wireless PLC is an international telecommunications group with operations in seventy countries providing services to both business and domestic users. Services include telephone, Internet, cable television, multimedia and data transmission. (FT.com)

Business Breakdowns

It is very clear from the initial descriptions that there are both definite similarities and differences between the two companies. BT is more telecommunications orientated whereas Cable and Wireless have been breaking through the barriers into Internet and, indeed, cable television services.

To define more exactly where each business was focused we looked at the breakdowns of fiscal 1999 revenues:

British Telecommunications

Inland Telephone calls -30% The majority of BT s business is

Telephone Exchange Line Rentals -20% made up of inland telephone calls.

International Telephone Calls -9%

Mobile Communications -8%

Private Circuits -7%

Customer Premises Equipment Supply -5%

Receipts from UK operators -4%

Yellow Pages and other directories -3%

Other Sales and Services -14% These miscellaneous sales and

services are expected to be partly

TOTAL 100% Internet and multimedia related.

Cable and Wireless

International Telecommunications -39% Large importance of international

National Telecommunications -38% business compared to BT s 9 %

Mobile Telephone services -12%

Cable Television -3%

Cableships -3%

Internet and Multimedia Services -2%

Managed Services and Outsourcing -2%

Other Revenue -1%

(Source; Financial Times Web

TOTAL 100% appendix IV and V)

Looking at these breakdowns it is clear that both companies have very different orientations. It is however important to remember that both of these companies are developing and expanding their business in all sorts of new areas. In particular the up and coming importance and popularity of e-commerce has brought forward expansion, especially in BT, towards more Internet and multimedia development and investment.

Company Objectives

More in-depth research into the companies is needed in order to identify their company objectives and therefore their plans for the future. BT sighted their ambitious objective as being: to be the most successful world-wide communications group . BT was once a UK monopoly; it is now transforming itself from a UK telecommunications company into a global communications company. It has grown from a national telecommunications operator, dealing mainly in fixed-voice telephone calls, to a global communications company with operations that span the world and services that, in addition to fixed-voice telephony, include the Internet, mobile and data communications, and business systems and solutions . BT has recognised the high increase in competition in the UK industry, of which it was once a monopolist, and has realised that to avoid being undercut and forced out of the market it needed to adapt and react to changing environment and increasingly technologically advanced industry.

Cable and Wireless have already recognised the importance of e-commerce and are subsequently setting goals to further this advantage:

Our future success depends on becoming a leader in Internet and data communications around the globe. As the world s most international operator, we are capitalising on our strengths and repositioning Cable and Wireless to seize the ever expanding market opportunities. (Sir Ralph Robins- Chairman)

Cable and Wireless is well aware that it is the only large international operator and is exploiting that fact. Their international coverage and multimedia focus is clearly a result of this:

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