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The liberalisation of the UK telecommunications market began in 1984 when following the passing of the Telecommunications Act 1984, 50 percent of British Telecommunication's shares were sold to the public. By July 1993 substantially all of the government's remaining shares in British Telecommunications were sold in a third public flotation. Moreover, in 1991 the effective duopoly which had been shared by BT and Mercury Communications ended, thereby allowing independent companies to buy wholesale airtime from existing operators and resell it to customers.
The UK telecommunications services market has grown strongly between 1994 and 1998, as demand has been stimulated by the lower prices that have resulted from intense competition. Moreover, much of the growth in the market has been underpinned by unprecedented growth in mobile telecommunications services. Growth in the value of the market peaked in the years to March 1996 and 1997 at 13 percent. Subsequently, in the year to March 1998 market growth slowed to 9 percent, culminating in a value of œ23.3 billion (ECU34.7 billion). This slowdown in the rate of growth reflected the effect that sharp price cuts have had on company revenues.
Fixed operator call services was the leading sector in terms of market value throughout the review period, although this sector's proportion of total revenue declined from 41 percent to 28 percent between the years to March 1994 and 1998. The cellular operators sector achieved the highest growth rate between the years to March 1994 and 1998, of 171 percent. This growth transformed cellular operators from being the smallest to the second largest market sector, accounting for 28 percent of the total value market in the year to March 1998. The remaining 50 percent of the market was accounted for by fixed operator exchange line services, other fixed operator services and other services in the year to March 1998.
MSI have identified many factors that affect demand for telecommunications services in the UK, including:
MSI forecast that the UK market for telecommunications services will increase in value by 10 percent in real terms in the year to March 1999. This higher rate of growth, in comparison with 1998, reflects significant growth in the mobile and internet traffic sectors. Subsequently, between 2000 and 2003, the rate of growth is expected to slow as the intensifying competition continues to drive down prices, and therefore revenues. Conversely, call minutes are expected to continue growing strongly throughout the forecast period.
BT's fixed network market share has continued to fall for all call types in 1998. At the end of March 1998 BT's total market share for fixed network services declined to 74.5 percent, compared with 80.2 percent in the 1997 financial year. BT suffered the largest market share falls in calls to mobiles, international and other calls. Indeed, in the international calls sector, especially for business users, a proliferation of new market entrants has captured significant market share in a short period of time. In cellular telephony, Vodafone Group and Cellnet Group have remained the leading and second placed network operators. However, the newest market entrants, Orange and One 2 One had captured market shares of 12.5 percent and 9.8 percent respectively by March 1998.
MSI have identified a number of factors that are critical to the success of telecommunications suppliers to the UK market, including:
Distribution of telephony services was transformed during the second half of the 1990s, especially with the introduction of pre-paid mobile phone packages. By 1999 telecommunications companies were supplying products and services through a combination of specialist distributors, operator's dealers, independent dealers, high street outlets, supermarkets, catalogues and the internet.
The UK telecommunications market is well advanced in the process of changing from being dominated by one company, British Telecommunications, towards being a fully competitive market. Since privatisation, customers have been able to choose from a number of telecommunications supplier types, including cable companies, fixed radio access suppliers, long distance and regional network operators, indirect services, using BT local lines, four mobile telecommunications network operators and mobile telecommunications service providers.
BT and Cable & Wireless Communications, incorporating Mercury Communications, have remained the leading suppliers of fixed network telecommunications services. However, a proliferation of competitor suppliers has emerged, with leading companies including ACC Long Distance, COLT Telecom Group, Energis, Kingston Communications, MCI WorldCom, Racal Telecommunications Network, ScottishPower Telecommunications, Telewest Communications. By 1999 Atlantic Telecom was the leading fixed radio access supplier, providing services in Scotland. Following much consolidation, Cable & Wireless Communications, Telewest Communications and NTL Group emerged as the leading cable telephony providers by the end of 1998. There remained only four mobile network operators, Vodafone Group, Cellnet Group, Orange and One 2 One. There was speculation at the time of writing that One 2 One may become the first UK mobile network operator to be acquired.
Text © 1999 MSI
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Last updated by Duncan Nottage 8th November 1999