As and when this happens, BT will be superiorly poised to leverage its huge infrastructure to add to its revenues. (Prodhan G. and Biilingham E., 2009)
Just like any other market, the UK market has two distinct group of consumers; business consumers residing in metropolitan cities who subscribed to high value services, and the vast mass market spread all over the country who are unwilling/unable to pay a premium for high value services. While BT has been able to obtain a legal ruling against imposition of Universal Service Obligation that would have required it to offer fixed-line connectivity to all UK households, any future imposition of similar clauses by the British Government may severely affect its profitability. (Giles C., n.d.)
However, the government also believes that Internet connectivity is core to the growth of the economy and given the severe recessionary conditions now, the government may decide to give a major thrust in increasing Internet connectivity. This may turn out to be a major boost to BT's fixed line business. (Holton K. and Prodhan G., January 2009)
Additionally, it has been indicated that BT will be free to have its own pricing strategy for the 21CN supper fast broad band network. This will help BT increase its profitability. (Parker A. and Fenton B., February 2009)
UK has a very stable and matured economy that has little scope f...
While the national GDP in 2008 was about 1.8 trillion GBP, the growth rate of the economy in 2008 over 2007 was about 3%. The present crisis has hit the economy hard, and the UK economy is expected to shrink by as much as 2%. (UK output, income and expenditure 4th quarter 2008, February 2009).
However, the government has responded by cutting VAT by 250 percentage points, from 17.5 to 15%. If BT can pass this benefit to the end users, it can expect to negate a part of the decline of business due to recession. Additionally, economies do bounce back from recessions with a period of 3 to 5 quarters, and the economy may be expected to hit the growth path by mid/end of 2010.
Bank of England, the central bank, has cut interest rates to 1.5%, there by drastically decreasing the cost of capital. Again a weak pound against the Dollar and Euro is significantly affecting the growth of the communication service providers. (UK in recession as economy slides, January 2009)
The most dampening factor for any business is the prevailing unemployment rates in the country. With an unemployment rate of 6.1%, the general sentiment is highly depressed, and will adversely affect BT's fixed line business. (UK unemployment hits 1.92 million, January 2009)
Given the present recessionary trends, the economic factors are predominantly stacked against any business that is trying to survive and grow. However, supportive government measures and the expectation of an early recovery also offer sufficient hope for BT's fixed line business.
The penetration level of fixed line telecommunications in UK is among the highest in the world. However, there still considerable room for growth. While about 66% of the population has access to Internet, the number of broadband