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Telecoms old guard need to show their mettle

WAY BACK IN 1953, a Canadian businessman called Roy Thomson rescued the then troubled Scotsman newspaper group by buying a majority share of the business from its Scottish owners. 

 

Up to then he had owned a few small newspapers and TV stations in Canada but, at nearly 60 year of age when most people are thinking about retirement, he decided that in order to move his career up a gear (and maybe to gain a knighthood) he should try to break into the UK. 

 

Luckily his name, Thomson, was spelled the Scottish way, without a ‘p’ in the middle, and so the owners of the Scotsman regarded him as sufficiently of Scottish descent to allow him control of their precious title. It all worked out; he went on to set up Scottish Television (which was so profitable that he described it as a ‘license to print money’) and went on to buy lots more newspapers, including the Sunday Times and The Times

 

On the back of all this success he was also able to enter the package holiday market (Thomson Holidays) and invest in North Sea Oil. But he didn’t get his knighthood – he got a peerage instead.

 

Anyhow, back to the Scotsman. After some negotiation, Thomson agreed to buy 75% of the company for £393,750 which gave him control of the business including ownership of the premises from which it operated – the entire block of offices and shops between North Bridge and Cockburn Street, the Royal Mile and Market Street. The building was worth at least £1m – so after he sold it, the proceeds more than paid for the newspaper. Effectively, he got the Scotsman for free.

 

I was thinking about this story the other day when I saw an article in The Register claiming that BT has 75 million miles of copper cables which are used to deliver a telephone and data service to every home and business in the UK. 

 

Tim Worstall, the author of the article, calculated that this copper network weighs about 132kg per mile making 10 million tonnes of copper which, valued at the current copper price of over £5000 a tonne, means that BT owns copper wire worth £50Bn. The current market capitalisation of BT is just under £15Bn. So if you could buy it and sell off the copper, you would stand to make a profit of £35Bn.

 

BT have contested this claim. Although they admit they do have 75 million miles of cable they assert that this is 2-wire cable, not the 10-wire the article claimed, that scrap copper is worth a fraction of the spot copper price, and, of course, it would cost significant money to remove the wires. They calculate that the copper in their network is ‘only’ worth between £2.5Bn and £5Bn.

 

However there is no doubt that the continued rising price of copper is alarming the older global telecoms companies as thieves increasingly strip wires at the dead of night for their scrap value.

 

If BT were to more aggressively switch from its dependence on copper wire, which is total unsuitable for broadband, to optical fibre, they could provide a massively improved service. They have recently announced 520 new hires (mostly ex-Army) in order to do this task, 38 of them in Scotland. Somehow it doesn’t seem enough to make much of a dent on the 75 million miles of cables.

 

Maybe they should speed it up by employing the equivalent of ‘Del Boy’ to strip out the copper and sell it off.

 

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