StudentShare solutions
Triangle menu

British Telecommunications - Assignment Example

2) BT's current focus on cost savings and retained earnings to fund operations has created heightened investor confidence and has made the company leaner, which will help it compete effectively in markets facing price pressures (Engebretson 2003).
3) As BT makes capital structure decisions going forward, it should adhere to the 'pecking order' philosophy of capital structure, which states that a firm's first choice for financing should be internal funding, followed by debt and then the issuance of equity (Liesz 2001).
Like many firms throughout the world, BT became caught up in an acquisition frenzy during the late 1990s and at the turn of the century. In the process, BT relied on a capital structure that was very dependent on bank debt to finance its activities.
Richard Fairchild points out that BT management consistently increased the company's level of debt from 1998-2001 and, in the process, investor confidence eroded (Fairchild 2003). Perhaps BT, as a former government monopoly, does not attract investors looking to assume a high level of risk. At any rate, investors took notice of BT's mounting debt and BT's stock price suffered.
From 1998-2001, BT's debt increased from 4.8bn to 31bn, mostly from acquisition activities, particularly the licensing rights for 3G (third generation) in the United Kingdom and Germany (Fairchild 2003). Fairchild points out that, during this period, BT's stock price decreased by approximately 65%, eventually leading the company to use a rights issue in 2002, to decrease its debt to 18.4bn (Fairchild 2003).
It is hard to blame BT management for increasing the company's bank debt during this period, as this path was followed by several other European telecommunications companies. BT competitors France Telecom, Deutsche Telekom and KPN all have sold or spun-off divisions in the past five years to protect their credit ratings after acquiring high levels of debt (Asset sales to provide new challenge for telco 2006). Analysts described the problem faced by telecommunications providers as a "damned if they do, and damned if they don't" scenario (Asset sales to provide new challenge for telco 2006).
In BT's situation, the market clearly was nervous about management's decision to base its capital structure around bank debt. Fairchild points out that when BT increased its level of debt to 31bn, Standard and Poors downgraded BT's credit rating from AA+ to A, which is a reduction of four levels (Fairchild 2003).
One could argue that the market was ignoring the various positive aspects of debt in a company's capital structure. As Fairchild indicates, capital ...Show more


British Telecommunications, which once enjoyed freedom from competition as a government monopoly, is now facing unprecedented challenges from communications providers in every part of the world in which it operates. Over the next several years, BT will continue to confront price pressures in its broadband unit, declining residential phone service sales and a need to keep pace with the rapid technological development occurring in its various industries (BT Group 2006).
Author : mbreitenberg
British Telecommunications
Read Text Preview
Save Your Time for More Important Things
Let us write or edit the assignment on your topic
"British Telecommunications"
with a personal 20% discount.
Grab the best paper

Check these samples - they also fit your topic

Nortel Telecommunications Company. Disconnection In Innovation
This is because the innovative product created will not reflect the goals of the organization. A good case study is the failure of Nortel Telecommunications Company to develop an innovative product that reflects its goals and objectives (Shehabuddeen, 2007)
4 pages (1000 words) Assignment
British Airways
Marketing is the process of planning and executing the concept of marketing mix to create exchange of goods/ services/ideas that satisfy consumer demand and achieve organizational objectives. A company may have a great product, but the product may taste success in the market, if it is not marketed properly.
6 pages (1500 words) Assignment
Mobile Telecommunications
Vodafone was formed in 1984 as a subsidiary of Racal Electronics Plc. In September 1991, it was fully de-merged from Racal Electronics Plc and became an independent company, at which time its name changed to Vodafone Group Plc ( Between 1991 and 1999, the Group consolidated its position in the UK and enhanced its international interests through a series of transactions.
10 pages (2500 words) Assignment
Business Tourism
Such is the scope of the commercial activity set to accompany the Games that multinational conglomerates; government agencies and the private sector are scampering to ready Britain for the massive economic windfalls to be realised. The report aims to consider the full impact on the economy - specifically that of London - of the impact of Business Tourism.
8 pages (2000 words) Assignment
British Banking
The U.K. market is one of the most competitive banking markets in the world and international research shows that U.K. banks provide extremely good value for customers unlike in other countries where customers pay both to have bank account and for the services they use whereas in U.K.
10 pages (2500 words) Assignment
Multinational Enterprises Assignment
To create a global strategy, a company must carefully define what globalization means for its particular business. This depends on the industry, the product or service, and the requirements for global success. For Coca-Cola, it meant duplicating a substantial part of its value-creation process-from product formulation to marketing and delivery-throughout the world.
13 pages (3250 words) Assignment
Land law
ess purposes.1 The clause developed again may mean that a leaseholder is unable to assert that the landlord has considerably interfered with an easement given by the lease. The rights cannot permit the total demolition of an easement. Demonstrations in the pre-lease by the
10 pages (2500 words) Assignment
British Airways
It is one of the leaders in the category of premium international airlines. As of December 31, 2013, British Airways had employed 38,592 people. The company has a very strong brand image that gives it a significant competitive edge helping it grow in
2 pages (500 words) Assignment
Management Systems & Financial Information for Decision Making
The employees of BT and Tesco can access financial information regarding their respective firm from annual report of the company. Disclosure of financial information to employees empowers and motivates them and helps in
12 pages (3000 words) Assignment
Intellectual property
However, the injunction may be sound because the threshold conditions for granting an injunction are met in the case. Injunctions are effective in
12 pages (3000 words) Assignment
Comments (0)
Click to create a comment
Let us find you another Assignment on topic British Telecommunications for FREE!
Contact us:
Contact Us Now
FREE Mobile Apps:
  • About StudentShare
  • Testimonials
  • FAQ
  • Blog
  • Free Essays
  • New Essays
  • Essays
  • The Newest Essay Topics
Join us:
Contact Us