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The CEO of broadband and mobile giant Virgin Media and O2 (VMO2), Lutz Schüler, has today warned the UK government against reforming business rates in a way that would impose a “hefty hike” on telecoms providers because, he says, it would act as a “disincentive to invest that will be a real kick in the cabinets” to the industry. At a time when they’re already under pressure.
Not unlike the BT Group, VMO2 (inc. nexfibre) are currently in the middle of a major infrastructure programme, which reflects their ongoing roll-out of 5G based mobile broadband technology and the upgrade, as well as expansion, of their existing fixed broadband network to adopt the latest 10Gbps capable XGS-PON full fibre (FTTP) infrastructure.
However, as well as being under pressure from the existing business rates regime and rising costs (i.e. build costs, high interest rates, competition etc.), VMO2 has also had to contend with some disruption to their plans from partner Telefonica’s decision to conduct a Strategic Review of their heavily indebted business (here and here).
Suffice to say that the last thing VMO2 want to see right now is the government reforming business rates in a way that would significantly raise the tax burden of deploying new fibre and mobile infrastructure. The Chief Financial Officer (CFO) of BT Group, Simon Lowth, recently made similar points via a more in-depth blog post (here); this followed earlier remarks from the group CEO, Allison Kirkby (here).
Lutz Schüler, VMO2 CEO, said (Telegraph):
“A hefty hike in business rates is a direct network tax and a disincentive to invest that will be a real kick in the cabinets to the telecoms industry at a time when business costs in the UK are already eye-watering. We urge the Treasury to rethink its business rates proposals and ensure critical infrastructure investment remains proportionately incentivised and supported in line with the Government’s growth mission.”
A spokesman for HM Treasury said:
“We’re making business rates fairer by introducing permanently lower rates for retail, hospitality and leisure from April, funded by a higher rate on less than 1pc of the most valuable business properties. We’ve also capped corporation tax at 25pc, the lowest in the G7, secured major trade deals with the US, EU and India, and seen interest rates cut five times since the election to help businesses across Britain.”
However, despite the concerns, the Government currently seems set to continue with their changes. The move puts them in the somewhat confusing situation of trying to both encourage investment in new digital infrastructure – sometimes with public money (Project Gigabit, SRN etc.) – while, at the same time, running the risk of discouraging it via higher taxation.
In an ideal world the network operators would probably prefer it if the government excluded digital infrastructure from their changes or introduced another targeted relief from business rates, but there’s currently no sign of that happening.