Impact of Brexit on the telecoms sector
The impact of Brexit on the telecoms industry could be substantial and adverse.
BT, Prospect and the Communications Workers Union were so concerned that they sent a joint letter to every BT employee during the referendum to express their deep concern about the potential impact on the company and its employees.
The first concern is that the regulatory regime for UK telecoms is governed by European legislation.
Ofcom decisions which have a bearing on the structure of the industry, for example UK mobile company mergers or the future of BT’s relationship with Openreach, are subject to European Commission approval.
One of the features of the European legislation is a statutory right for unions to be consulted.
The question is: what will replace this European legislation? It cannot simply be repealed and ignored because that would leave the industry and Ofcom in limbo.
Would the UK government replicate the requirement to consult UK unions about such issues in future?
European roaming charges – the costs incurred when using a UK mobile in Europe – have been falling in recent years and will be abolished next year.
Most people do not know that this is the result of European legislation. This legislation will cease to apply when the UK leaves the EU.
Roaming charges can only be implemented across national borders if there is cross-border cooperation. Will it be possible to maintain a roaming, charge-free environment post-Brexit?
A key issue for BT is whether its activities in Europe will be subject to tariffs.
BT is a multi-national company employing 20,000 people outside the UK – 13,000 of them based in the EU.
The company owns physical networks in many European countries. It has a major hub in Hungary – the second largest BT site in terms of the number of employees and second only to BT’s vast research and development centre at Adastral Park, near Ipswich.
BT generates about 12% of all its revenue from its EU activities.
Profit margins in European – and indeed world – telecoms services are slim. A 10% tariff on BT’s activities in Europe would largely wipe out its European profit margin.
It has been argued that European countries would be ill-advised to impose such tariffs, as the UK could, and would, retaliate with its own tariffs.
But the problem for BT is that the four largest European telecom companies –Deutsche Telecom, France Telecom, Telecom Italia and Telefonica – do not generally trade in the UK to anything like the extent that BT trades in Europe.
So these companies would benefit if tariffs were imposed on BT because they would be in a far stronger position to compete with BT in their own countries with nothing to lose in the UK.
That’s perhaps the major reason why BT has opposed Brexit and is arguing strenuously for so-called ‘soft’ Brexit with the UK remaining in the single market.
If we do not, the consequences for BT will almost certainly be dire.
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