BRITISH TELECOM AND ITS PRIVATISATION
On 19 July 1982, the Government formally announced its intention to privatise British Telecom with the sale of up 51 per cent of the company's shares to private investors. This intention was confirmed by the passing of the Telecommunications Act 1984, which received the Royal Assent on 12 April 1984; the incorporation of British Telecommunications plc (BT) as a public limited company on 1 April 1984; the transfer to BT the business of British Telecommunications, the statutory corporation, on 6 August 1984; and the offer for sale in November 1984.
The Government's desire to open up the telecommunications market to competition, and to allow the privatised BT to compete efficiently within that market, was made clear in the lengthy Parliamentary debates on the Telecommunications Bills. Some relevant extracts from the official record of Parliamentary debates (Hansard) are as follows:-
"The Bill follows logically the measures that we are already taking to bring competition into telecommunications.... Any growing business, such as BT, needs the discipline of the market place to meet the needs of its customers effectively. It needs the right to raise its own finance, the freedom to invest and the freedom to manage its own business" (Patrick Jenkin, then Secretary of State for Industry, 29 November 1982).
"We want BT to have the complete freedom that a private company has. Only in this way can the needs of the country and of BT be met.
The Bill creates freedom from Treasury and ministerial control. It also gives freedom to BT to grow, to operate overseas, and to make acquisitions... the market is growing so quickly that BT can expand only by becoming a free, independent company" (Kenneth Baker, Minister for Industry and Information Technology, 29 November 1982).
"There is every reason to hope BT, freed from State control, will develop over the years into a major force in world electronics and IT (information technology), and rank with AT&T, IBM and other international companies.... That is what we as a government wish to come about" (Cecil Parkinson, then Secretary of State for Trade and Industry, 24 June 1983).
In relation to the Telecommunications Act 1984, the Government appreciated the fact that major changes were required to BT's procurement and manufacture activities. Two further extracts from Hansard are as follows:
"The Government have decided that BT should not be prevented from manufacturing but should be free, like other plcs, to decide on its own areas of business. However, like other plcs, BT's manufacturing interests will be subject to the normal commercial law on monopolies" (Lord Glenarthur, Lord-in-Waiting, 16 January 1984).
"If we were to continue with the old cosy relationship of a public utility with an exclusive privilege, having its accredited manufacturers continuously supplying equipment to the same specifications, this country would become a telecommunications backwater" (John Butcher, Under Secretary of State for Industry, 15 February 1983).
The changes that were required had to enable BT to be more responsive in a new competitive environment and also allow for the company to reach the desired aim of becoming a world force in telecommunications. The commercial freedom of action granted to BT includes the freedom to enter into new joint ventures and, if it so decided, to engage in the manufacture of its own apparatus.
The 1984 Act, in addition to providing for the privatisation of British Telecom, abolished the exclusive privilege of running telecommunication systems and established a framework to safeguard the workings of competition. Now that British Telecom has lost its monopoly in running telecommunication systems, it requires a licence to run such a system in the same way as any other telecommunications operator. The principal licence granted to BT lays down strict and extensive conditions affecting the range of its activities, including those of manufacture and supply of apparatus and is subject to close scrutiny and review by the Director General of Telecommunications, the head of the Office of Telecommunications (OFTEL).
[This article was kindly contributed by the BT Archives and Historical Information Centre]