ANOTHER week . . . another few billion pounds invested in telecom networks. It seems scarcely a week goes by without the announcement of another huge investment in telecoms somewhere in the world, on top of the odd acquisition sometimes involving tens of billions.
This time it is BT saying it is investing a further #5bn to improve and extend its network for data and multimedia. The
driver for this spending is the rapid growth in data traffic,
particularly the Internet and
e-mail - and the need to keep up with, and outdo, the competition.
Data already exceeds voice traffic, and it is estimated that the total communications market will double in five years, with the bulk of the growth being non-voice. Large increases in capacity are needed, as well as the ability to put one cable to a
number of simultaneous uses. This requires broadband fibre networks, which will also deliver better quality, more reliable links.
The high-bandwidth network is primarily for business users, but will be extended to domestic customers as it is required. For example, one member of the household could be using the telephone - conventional or video - while another could at the same time be downloading a film to watch on the television, and a third surfing the Internet. All this on a single telephone line. Copper wires can take broadband, but only for short distances, which is insufficient.
The planned European network of BT and its partners will go live on schedule next month. Its alliance with AT&T, which still has to be cleared with the regulatory authorities, will realise a similar network internationally. It is all good news for BT's intention to be a leading global player.
The group can comfortably afford all this and the likely purchase of the minority holding in Cellnet from Securicor because of its huge cashflow. It is generating #1bn cash a year after allowing for dividends, and has negligible debt. The danger is that it will be tempted to spend unwisely, but so far it appears to be doing the right things.
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