§ The Earl of Northeskasked Her Majesty's Government:
What conclusions they draw from the level of debt currently being experienced by the telecommunications sector and its implications for the future development and advancement of information technology. [HL22]
§ Lord Sainsbury of TurvilleI draw a number of conclusions.
First, the level of debt being borne by the telecommunications sector indicates that a high level of investment is being undertaken. Additional investment, be it in networks, equipment, software and applications, must be to the ultimate benefit of the consumer and the telecommunications sector itself.
Second, the level of financing being provided by the financial markets indicates that they believe they understand the telecommunications sector and can model risk and return. Of more concern would be an industry sector which was unable to raise affordable finance.
Third, efficient companies will always leverage their equity and, provided that it is properly managed, debt is a cheaper form of financing than issuing equity.
Finally, I believe that the apparent willingness of telecoms firms to invest; the readiness of financial markets to provide finance to the sector; and the efficiency with which telecoms firms are managing their equity is positive for the future development and advancement of information technology. While there are continuing concerns voiced about debt in the telecoms sector, these seem as much to be about the exposure of lenders to the telecoms market as about the level of debt being borne by the sector as a whole.