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Today as regulation recedes and privatisation and competition become the norm, operators can offer any service to any customer and the challenge is to offer the most competitive, end-to-end service for customers. New companies and alliances are springing up to meet the demand. (Graham Wallace- Chief Executive)

There is one outstanding difference between BT and Cable and Wireless. BT is a company that was stuck in its ways because for at the time when it was a monopoly it was successful, now that the markets are changing, so the company needs to. Cable and Wireless has constantly reinvented itself as markets and technology has changed, this is reflected in the larger dedication to Internet and data communications. BT has recently (last 2/3 years) realised that it needs to adapt and it is now starting to see the fruits of these changes.

Financial Similarities

Clearly BT is larger company than Cable & Wireless, but to such a large extent that they are not able to compete against one another.

Conclusion

In conclusion to how our group made the decision of our competitor, we based it around the facts that both companies were working, at least partly, within the same market and that they were both targeting the same consumers using the same or similar services. We did look at other companies such as Orange and Vodafone who could also be considered to competitors to BT but we considered that their areas of competition was only within the mobile communication market, and therefore decided that Cable and Wireless were a better all round competitor.

BT and Cable & Wireless share prices

This section will present the share prices of both companies from 21st Oct 1999 to 3rd Oct 2000, along with the FTSE-100 index value. BT s share price movements will be compared to Cable & Wireless s and both will be linked to economic events during this period. The general trend of all graphs will be discussed, before analysing in greater detail any significant increases or decreases in the share prices.

The daily share prices are under appendix (I). Two graphs displaying the data are under appendix (II).

The first thing that has to be noted is that during the period followed Cable and Wireless significantly out performed BT, even though for long periods BT had a higher share price. Cable and Wireless had a starting share value of 668.5 pence and finished the period with a value of 1243 pence. This was an 86% increase. This compared to BT starting on 935.5 and finishing on 975, just a 4% increase in share price. However, up until the middle of December share prices were increasing at similar rates.

The graphs represent the period up until 14th Dec. On the printed graph a linear trend line for each company has been added. It can be seen that the lines are very nearly parallel. This goes to show that both share prices have been increasing at similar rates.

The superimposed graph represents the movements of the FTSE 100 up until the middle of December. When compared to the graph above it can be seen that the trend line is steeper, i.e. increasing at a greater rate than the two companies. This implies that BT and Cable & Wireless are not performing as well as the economy in general. Any possible reasons for this will be discussed later in the report.

It is from the middle December onwards that significant changes start to occur. BT had a fall in fortunes where as Cable & Wireless continued to enjoy increased value.

It is these movements that need greater analysis to interpret why the share prices moved in separate directions. Each company will be dealt with in turn with timely comparisons being made when needed.

Cable and Wireless share price movements

The first big move was an increase from 898 to 1081 pence. That was a 20 % increase in value in just 4 days during December. This increase occurred during the announcements of their expansion in the net. The expansion includes Cable and Wireless re-inventing itself as a high quality global platform for business data and Internet Protocol. This has attracted a lot of investment from American funds; thus the share price has risen. During this period BT s share value was decreasing suggesting that investors could have been switching to a company that seems to be expanding more rapidly in the search of increased returns.

The next noticeable movement was another large increase mid way through January 2000. An increase from 1047.5 to 1338 pence per share occurred in just 1 week, taking the price of Cable and Wireless shares above that of BT s. This increase was the markets reaction to the fact that just 1 week earlier on the 13th January it was announced that the company had acquired eight of Europe s leading Internet Service Providers (ISP s) increasing their total investment in European business ISP s to 300m. Also the acquisition of a new network set Cable & Wireless as one of the leading providers of business Internet services in Europe. This investment was relating to its plan to expand in Internet Protocol and undoubtedly provoked another increase in demand for cable and wireless shares. The fact that Cable & Wireless has already invested a great deal in this ever, expanding market should result in large future profits.

BT share price movements

The end of December marked the first of the big decreases in BT s share price. On 29th Dec the price was 1513 pence, by 7th Jan it had slumped to 1201 pence. During this period it was announced that BT were making a joint bid with Vodafone for the Spanish mobile Phone Company Airtel . It could be expected that news of potential take over would increase the demand for BT shares in the expectation of higher dividends from profits made by the subsidiary company. Evidently this did not occur. BT was not the only company that had this drop in share price. Markets across

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