BT Nationalisation and Promises, Promises

We are clearly in a run up to a General Election when politicians promise all kinds of “free” gifts to the electorate. The latest promise, even before the manifestos have been published, is the Labour Party’s commitment to give everyone in the UK free broadband. This would be achieved by simply nationalising BT Group (BT.A) apparently.

I just had a quick look at the cost of this commitment. BT actually receives over £15 billion annually according to the last accounts from Consumers and from Openreach. There is some profit margin on that of less than 20% which might be discounted, but there are many households who do not yet have a fibre connection so that would be an additional cost to be covered by the Government.

In addition there would probably be some cost of nationalising BT Group and paying compensation to shareholders. The current market cap of the company is about £19 billion. They might get away with paying £10 billion up front but the annual cost of at least £12 billion to maintain the network would be an enormous burden on the state. They might be able to raise that by taxing multinationals or others but it still makes no sense.

I am not a BT shareholder currently although I am one of their customers. I also remember how dreadful the service from BT was before it was nationalised. It may not be perfect now in comparison with some of their competitors but nationalised industries such as telecoms, the railways, the motor industry, the coal industry, shipbuilding, the gas/electric/water utilities and about 40 others were all abject failures. They typically lost money and provided diabolical service.  The young who are voting socialist may not remember but Jeremy Corbyn should do so.

The fact that the share price of BT only dropped by 1% today (at the time of writing) just shows you how much credibility investors attach to this promise. It also surely shows how desperate the Labour Party is to win some more votes as they are now trailing well behind in the opinion polls.

Roger Lawson (Twitter: https://twitter.com/RogerWLawson )

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