The shareholdings amassed by activist overseas investors in key British communications enterprises including Royal Mail, BT and Vodafone raised red flags on Whitehall over potential security and public interest conflicts.
Looked at from the viewpoint of billionaires such as the ‘Czech sphinx’ Daniel Kretinsky, who has a 23 per cent stake in Royal Mail owner International Distribution Service (IDS), and Swiss-Israeli telecoms titan Patrick Drahi, with 18 per cent of BT, these companies present a terrific business opportunity.
The share prices of Royal Mail, BT and Voda are depressed by a variety of factors.
Strikes: The Communications Workers Union seems unwilling to accept that Royal Mail is now fully in the private sector and executives are hidebound by competitive pressures
These include management shortcomings, union intransigence, neglect of investment and a catastrophic failure of UK pension funds to invest in FTSE companies.
One may not approve of the way in which such stakes are built, sometimes using derivatives rather than cash.
Nevertheless, what all these ailing giants may need is the hard-headed thinking of Kretinsky at IDS, Drahi at BT and Swedish activist Christer Gardell, of Cevian, at Vodafone.
In its strikes against Royal Mail, losing £1m a day, the Communications Workers Union (CWU) is on a suicide mission.
The public may have sympathy for the good-natured posties and want to see them claw back income swallowed by inflation.
But the CWU seems unwilling to accept that Royal Mail is now fully in the private sector (colleagues were gifted shares on flotation) and executives are hidebound by competitive pressures.
Super-charged pay deals of the kind achieved by staff at Rolls-Royce can only be paid for by superior productivity.
Everything Royal Mail touches crumbles. The sensible effort to barcode postage stamps has been beset by confusion, bureaucracy and incompetence.
One doesn’t have to be a business genius to recognise that packages are the future. Royal Mail’s European parcels arm GLS is going great guns and every day its deliveries are cancelled here is a gift to competitors.
Amazon was delivering packages to the doors of ‘Prime’ customers over Christmas in less than 24 hours from online ordering.
Royal Mail has an expensive last-mile public service obligation. But accelerating the decline and allowing competitors to eat its cake is not an option.
Among the keys to Britain lifting productivity and giving its valuable tech and AI the bandwidth to grow is the delivery of fast fibre to the door.
The performance of BT/Openreach on this front is feeble compared with much of Europe, not to mention Asian competitors such as South Korea.
In Britain full fibre broadband is available in 42 per cent of homes in 2022 and climbing. Large swathes of Europe are on a better trajectory. Spain has 90 per cent full fibre, along with Portugal and Latvia, and France 60 per cent. Only Germany is a laggard – at less than 20 per cent.
If you imagined that the UK was a leader in 5G mobile coverage, think again. Ofcom figures show ‘very high-confidence’ of 5G working outside 31 per cent-45 per cent of premises.
Italy, Denmark, the Netherlands are at, or near, 100 per cent and Germany in the high 80s. In an age when so much commerce, banking, travel, watching sport and much else is done on the move this places the UK at severe disadvantage.
It is hard to think that Drahi, a dominant player in telecoms in France, Israel and elsewhere, isn’t fully cognisant of how BT fails to deliver for businesses, homes and mobile users.
He must know the potential presented by broader and better coverage, and the pricing power that could unlock.
BT’s current leadership of politically savvy chairman Adam Crozier and chief executive Phil Jansen have reached out to Drahi, as its biggest investor. The jury is out on what difference that has made so far.
Vodafone, which suffers much less of the treacle layers of bureaucracy that hamper Royal Mail and BT, is in a different place. It is currently searching for a chief executive, with Nick Read leaving on New Year’s Eve.
It has spent too much time doing deals and struggling with debt burdens rather than focusing on execution and cleverly exploiting its assets. Cevian has harnessed change at insurer Aviva and could be just as helpful at Vodafone.
Instead of shunning and denigrating Kretinsky at Royal Mail and Drahi at BT, maybe it is time to embrace their input. The two firms are dinosaurs struggling with a public sector culture long after privatisation.
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