City recoils at Labour plot to nationalise Openreach

Telecoms leaders warn of bankruptcies at broadband providers and £100bn bill for Corbyn’s swoop on BT

A LABOUR plot to seize control of BT’S broadband arm would suffocate competition, bankrupt rivals and cost £100bn, telecom industry leaders have warned.

Plans to nationalise BT’S infrastructure arm Openreach and give free internet to the whole country shocked markets and sparked a major backlash in the City yesterday.

Philip Jansen, chief executive of BT, warned the proposals would cost far more than Labour’s £20bn forecast, and would hit BT employees and pension holders. He estimated a £100bn cost for building a wider broadband network and offering it for free to users.

BT has one million shareholders, the vast majority of them retail investors including many who bought into the company when it was privatised by Margaret Thatcher in 1984.

Labour said that the price for buying back Openreach would be set by Parliament instead of based on the company’s market value – meaning ordinary shareholders could face huge losses. Pension funds that look after millions of workers’ savings are also heavily invested in the telecoms business and would be hit hard too. Shareholders would be given government bonds instead of cash.

Combined with the party’s other plans to nationalise energy, rail and water firms, and the Royal Mail, Labour’s proposal would cost the country billions of pounds and spark questions over whether it is able to pay its debts. Julian Jessop, of the Institute of Economic Affairs, said: “Borrowing is still borrowing, whatever the purpose, and someone would still have to be willing to hold the new bonds.” Meanwhile,

Mr Jansen said that competition has driven major improvements in broadband speed and coverage, which would not have happened in the public sector. “Giving it away for free takes away that competitive nature.”

The average household’s monthly spend on broadband has fallen from £59 in 2007 to £40 last year, driven by innovation among private companies. The Government has already promised to extend one gigabit connectivity speeds – fast enough to download a high definition movie in under 45 seconds – to every home by 2025.

The proposals caused telecoms rival Talktalk to pause plans for a sale of its fibre business Fibre nation on Thursday night, Sky News reported. Its shares fell as much as 5pc before closing down 3pc, while BT ended off 1pc.

Analysts also warned that state control of Openreach could bankrupt rival cable providers, such as Virgin, whose network covers half the UK. Matthew Howett, at research firm Assembly, added: “What would the point of their existence be? ”

Fewer than 10pc of UK households are covered by full ultra-fast fibre-optic broadband, a lower proportion than in other developed economies.

Labour’s plan would renationalise a vast majority of Britain’s telecoms hardware, from copper wire telephones to fibre. The party said it would establish “British Broadband”, a stateowned body, and would expand fibre optic connectivity to everyone in the UK by 2030. This would be paid for by a tax on multinational technology companies such as Facebook and Google.

Neil Ross, at Techuk, however warned a tech tax would simply see firms book profits elsewhere.

It is not clear that the nationalisation policy would be possible under EU state aid rules, sparking questions over the party’s plans for a second referendum on Brexit.