Compare and contrast: The Competition and Markets Authority has allowed BT, Britain’s monopoly fixed-line operator, to buy the absurdly-named EE, Britain’s biggest mobile supplier, without conditions. Any time now the other big UK telecoms deal, the proposal to merge Britain’s third and fourth mobile networks, may run into too many conditions to make it worth doing. Never mind the curious carve-up of responsibilities between the European Union commission and the CMA, the EU’s tiger mom, Margrethe Vestager, may conclude that 02 into 3 doesn’t go.
The deal’s proponents, not all of them with life-changing fees in prospect, reckon three mobile networks is enough. Common sense and Ms Vestager both suggest that it is easier to raise prices against two competitors than against three, and that she should require some mind-concentrating conditions if she is to allow more consolidation to proceed.
Step forward Xavier Niel, whose Iliad group is upsetting France’s mobile markets with Free – surely just the name to trigger a price war. He is looking across the channel with a view to picking up any spectrum which Ms Vestager might force 3O2 to surrender. The merging pair might feel that letting in a fourth player would rather defeat the object of the exercise, and that abandoning the deal might be more profitable than letting Mr Niel in.
Things do not stand still for long in the febrile world of telephony. The next question is whether BT should be forced to split off Openreach, its subsidiary that so often fails to fix that fault in your broadband (whoever provides it). Long dubbed Openwound in the trade, there is a danger that Ofcom might now seek to correct the CMA’s curious indifference. However, an independent Openreach would still be a monopoly. Better to keep the political pressure on BT to improve it. After all, two wrong (numbers) don’t make a right.
Well, they funked it, and it is not hard to see why. The make-up-your-mind board meeting at EDF Owas supposed to press the nuclear button on Hinkley Point, until the directors finally realised that it is so financially radioactive that it could bankrupt the company. The two similar power stations it is currently building are years late and billions over budget – one may never finish – and the balance sheet is already creaking.
Even with the 35-year UK state guarantee of twice today’s price for electricity, Hinkley’s construction risks mean lenders are too scared to finance this £25bn financial black hole. Last October, during the government kow-tow to Xi Jinping, we were told that the Chinese were fully committed. This has turned out to be yet another example of the sort of PR spin that characterised the Blair administration. Even if the Chinese premier was on the point of signing then, he is surely well away from it now.
Fortunately for everyone connected to the mains in Britain, the serious money has not yet been spent. Writing off the odd billion in sunk costs is a small price to pay for abandoning this ill-starred venture. A fraction of the money saved would build enough gas-fired power stations to keep the lights on, assuming a rational pricing regime. If it means we need to burn coal for longer, that is better than making a multi-billion, 35-year mistake.
Tony to Mike: don’t do it
Tony Shiret really dislikes Sainsburys’ proposal to buy Home Retail. His pessimistic assessment of the Argos owners: “We have received no co-operation from Home in our analysis, which…may limit the accuracy of our conclusions” and “We assume that Sainsbury has probably done the same work we have managed in a couple of days over the last six months.” This should upset both sides ahead of next week’s put-up-or-shut-up deadline to bid.
He thinks Sainsburys’ CEO Mike Coupe should call the whole thing off, and investors with a big short in Home desperately hope he does. Mr Shiret’s employer, Haitong Securities of Shanghai, is not exactly an investment banking heavyweight over here, but he is one of the City’s most respected analysts. Mr Coupe ignores him at his peril.