OWN GOAL

£1.2bn on TV football rights? BT should be more worried about providing decent broadband

BT’S grandiose ambition to become a leading player in British sports broadcasting and entertainment seems to know no bounds.

Using huge cash resources garnered from a domination of Britain’s telecoms and broadband market, it has again outbid other commercial outfits, including Sky, to win the rights to screen top European football.

It is paying the enormous sum of £1.2 billion to dominate the broadcasting of the European Champions League, as well as Europa League games in the second-tier competition, through to 2021.

Frankly, the folly of BT’s business strategy takes some beating. Skyrocketing prices for football rights are having a grotesque impact on the national game in terms of grossly inflated salaries, indefensible transfer fees, and overseas takeovers of historic clubs.

Instead of blindly following the Sky Sports model of two decades ago, when sport was used as a commercial battering ram to win TV subscribers, BT ought to be using the vast income streams it generates to modernise Britain’s unreliable broadband system and provide the first- class customer service the public deserves.

As Britain quits the European Union, it is ever-more important that this country has superfast broadband and telecoms services which play to the nation’s strengths in high-tech industries, the City of London and scientific research. BT, as the main supplier of communications services, holds a vital key to our economic prosperity.

In spite of the efforts since privatisation in 1986 to open up Britain’s telecoms market, BT still has monopoly sway over telecoms services. Indeed, last year it was allowed to tighten its grip on the market when it spent £12.5 billion on buying mobile operator EE.

The UK’s feeble regulator of takeovers, the Competition And Markets Authority, nodded the deal through in the face of fierce opposition from industry rivals who are fearful of BT’s awesome power.

Ambitions

Some mobile operators are currently campaigning to prevent BT making a grab for more control by outbidding them for the ‘next-generation’ 5G mobile spectrum (the radio frequencies allocated to the mobile phone industry).

Competitors complain that BT already controls 37 per cent of the mobile spectrum, and that if it is permitted to bid for more it will distort the market, reduce consumer choice and could lead to higher prices for smartphone users.

The truth is that BT is able to pursue its ambitions almost unchallenged as a result of an historic accident.

Most homes and businesses in Britain choose to retain landlines rather than rely on mobile devices for their phone calls and internet provision.

It is the quarterly rental from the landlines, and the charges made by BT when people make calls from traditional landline phones to mobiles, which deliver a huge bounty to BT in terms of income.

The group’s ‘free cash flow’ — the money it generates each year after paying the bulk of its expenses — currently stands at more than £3 billion per annum. This gives the company firepower to invest in what it chooses, from mobile services to sports and movies on its dedicated TV channel.

At present it is fighting a rearguard action to keep its hands on Openreach, the central network of exchanges, tunnels and wires which delivers landlines and broadband to our front doors. BT’s main rivals, such as TalkTalk, Sky and Vodafone, are only able to deliver services to our homes by accessing exchanges and wires controlled by BT. It is like Sainsbury’s controlling all the warehouses through which supermarket chains have to source food supplies.

This might not matter if BT’s debonair chief executive Gavin Patterson were more focused on delivering the best technology and service.

Grandiose

But instead of investing in modern fibre equipment, capable of delivering the highest speeds and most reliable service, BT has preferred to upgrade the antiquated copper wires, which are incapable of delivering the speed and capacity required for superfast broadband.

Moreover, in spite of a public service obligation to provide broadband to more remote rural areas, it has fallen behind schedule. This means that countless rural businesses must operate with one arm tied behind their back.

Then there is the issue of BT’s contentious customer service. The public might be more forgiving of BT’s grandiose soccer dreams if it offered well-informed, easy-toaccess services when telephone lines or broadband fail. But the reverse is often the case.

As a cost-saving measure, the company shifted customer services to the Indian sub-continent several years ago, where the person on the end of the phone was likely to have little local knowledge that might help the customer, and there could be a language barrier.

To be fair, in response to such problems, BT has been working hard to bring its customer services back to the UK.

But the change of tack, costing several hundred million pounds, has made little difference on customer complaints.

For all that, as long as BT continued to make strong profits and pay dividends, its investors — including the regiments of small shareholders who bought in at privatisation — had no real reason to object to the way BT was run.

But earlier this year, investors received a nasty shock when it emerged the group’s Italian subsidiary, part of its global networks division, was fiddling its financial results and the company had to own up to a £ 500 million black hole in its accounts.

The stock market reaction knocked 37 per cent off BT’s share price, and it raised serious questions about financial controls on its underperforming international operations. Senior managers have acknowledged to me that its global services have not only gobbled up large sums, but have been a distraction to management, diverting attention from providing core services to British customers.

With all these issues in the background, one wonders why BT has chosen to commit £1.2 billion to football rights.

Stranglehold

But there is plainly an executive view at BT that even though the company has a stranglehold over basic telecoms services, it needs to offer more in the way of sports and other broadcasting in order to compete effectively with rivals such as Virgin Media, Sky and Vodafone.

But is BT’s rush to become a sports giant actually badly timed? There is a private view, held by Sky and others, that the country may have reached ‘peak football’. In other words, there is simply too much of the game on television.

Even I, as an avid football fan and a season ticket holder at Chelsea, find the endless TV broadcasting of the game tedious. One has limited tolerance of teams from the lower leagues and across Europe battling it out to the sound of commentators desperate to make the dull sound exciting.

Recently, when last year’s Premier League champions Leicester City played the Spanish side Sevilla, reports suggested that the British TV audience could be measured in the tens of thousands, and may have been outnumbered by the fans at the ground. Hardly the mass audiences for which BT is paying so lavishly.