Telecoms firm BT yesterday announced it was suspending its shareholder buyback scheme to invest £1.5bn in faster broadband for 10m homes by 2012.
The programme will be Britain’s largest ever investment in fibre optic cabling, which can deliver potential speeds up to 100Mbps, compared to the UK average of 4Mbps.
But some analysts questioned whether there was sufficient demand to warrant the capital expenditure, causing the telecom firm’s shares to dip by 5 per cent to 192p.
Its rivals, who have invested heavily in BT’s ageing copper network also slumped. Carphone Warehouse fell by 7 per cent to 186p while BSkyB also fell by 3 per cent to 420p.
“Now is a good time to make a bold step, It is important to invest in the long term, and with the very strong take-up of broadband, we felt that now was the time to enhance that infrastructure,” said chief executive Ian Livingstone.BT said the investment was contingent on a new regulatory framework.
City Views: Would you be prepared to pay more for faster internet?
Christian Adams (Berwain Leighton Paisner): “I’m pretty happy with my Sky broadband connection at the moment and I wouldn’t necessarily shop around for a new deal just because another provider brought out a faster service. BT might be better off making phone calls cheaper rather than plugging money into a very competitive broadband market.”
Jon McLaren (Cable & Wireless): “No, I wouldn’t pay more for a faster service – I’m happy with the Tiscali package I’ve got already. For me, reliability is the number one priority for broadband, and speed comes second. As for the price, there are now lots of companies throwing in TV and phone services with a broadband package, so you can get it quite cheaply.”
Lyn Thomas (Insurance Analyst): “It would depend on the cost – that’s the most important factor for me. I would pay a bit more for faster broadband, but not a lot more. I think BT is right to develop a faster Internet service, though, as the UK is currently lagging behind the rest of Europe in terms of broadband provision.”