BT shares crash as Labour vows to nationalise broadband business

Oscar Williams-Grut
Senior City Correspondent, Yahoo Finance UK
BT Openreach controls just under half of UK market for telecoms infrastructure. Photo: NurPhoto/Getty Images

BT (BT-A.L) lost about £680m in value on Friday morning as investors reacted to the Labour party’s plans to nationalise part of the business

Shares in the telecoms company fell by about 3% in early trade, knocking almost a quarter of a billion pounds off its value. Shares were still down 2.2% after 45 minutes of trading in London.

The slump came after Labour shadow chancellor John McDonnell told the Mirror on Thursday night that his party would nationalise BT’s Openreach business if they won December’s general election. The policy forms the cornerstone of plans to offer free broadband to everyone in the UK.

“A new public service delivering the fastest broadband free to everyone is at the heart of Labour’s plans to transform the future of our economy and society,” Labour leader Jeremy Corbyn is set to say in a speech on Friday.

“The internet has become such a central part of our lives. It opens up opportunities for work, creativity, entertainment and friendship. What was once a luxury is now an essential utility.”

Yahoo Finance UK first reported that Labour was considering nationalising BT in July.

BT's share price drop. Photo: Yahoo Finance UK

Openreach is one of BT’s main businesses and provides telecoms infrastructure across the country. The division maintains telephone wires and lays broadband cables not just for BT but other internet and phone providers too.

Openreach controls just under half of the entire UK market for fixed communications infrastructure and accounted for 10% of BT’s total revenues last year, bringing in £2.2bn.

READ MORE: Labour looks at nationalising BT following proposal from Corbyn ally

Labour claims nationalising the business would save the average Brit £30.30 per month and boost productivity by £59bn by 2025, citing study by the Centre for Economics and Business Research. The plan would be paid for by a tax on big tech firms like Amazon, Google, and Facebook.

“Every part of this plan has been legally vetted, checked with experts, and costed,” McDonnell said in a statement.

BT CEO Philip Jansen told the BBC Labour’s plans could cost as much as £100bn over several years.

“It should be a top political priority to super-charge the roll-out of full fibre broadband and 5G right across the UK so we can build the digital economy of the future,” a spokesperson for BT told Yahoo Finance UK. 

“Whatever the result of the election, we’d encourage the next government to work with all parts of the industry to achieve that. It’s a national mission that’s bigger than any one company.”

READ MORE: Tony Blair on the 'dire state' of British politics, Brexit, and 'extraordinary' election spending plans

Labour has ambitious and far-reaching plans for nationalising businesses. Other targets include utility companies, rail operators, and the Royal Mail.

Michael Hewson, chief market analyst at CMC Markets, said investors would now be scanning their portfolios to identify other businesses at risk of nationalisation under Labour. 

“Companies like Royal Bank of Scotland, National Grid, Centrica, Severn Trent, Royal Mail as well as the rail company franchisees, like Go Ahead Group and National Express to name but a few, are already trading at a nationalisation discount,” Hewson said.

“For now, given Labour’s current polling numbers the concern is fairly minimal, and investors will be hoping it stays that way, which helps explain the fairly muted share price reaction.”

Phone and internet provider TalkTalk (TALK.L) announced on Friday that it is pausing the sale of its fibre broadband business FibreNation in light of Labour’s announcement. TalkTalk’s stock was down 1.5%.

Shares in Vodafone (VOD.L) also suffered, falling 1.4%.

Critics argue Labour’s nationalisation plans will be costly and time consuming, and deliver little value to the economy.

READ MORE: Labour's nationalisation plans 'will cost £196bn'