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Future investment in telecommunications networks is at risk unless government and unions act to tackle the excesses of private equity. That’s the warning from the TUC Conference which has passed a motion condemning the short-term outlook and lack of transparency that typifies many leveraged buyouts in the sector. The dangers were highlighted by the leader of communications union, Connect, who was speaking at the annual gathering of British trade unions in Brighton.



Connect claims that the record of private equity firms in the telecoms sector is typified by the pursuit of short term cash in preference to long term investment decisions.



Connect General Secretary, Adrian Askew said: “Private equity bosses claim to take over poor performing firms, strip out inefficiencies and leave them stronger. But all too often they don’t see the long-term advantages of key parts of the business, like research and development."



“Firms with their eyes on five-year profit targets are often too short-sighted to make the financial commitment needed for infrastructure investments, which can take many years to show benefits on the balance sheet. Fund managers have found that they can make easier money by stacking the business with major debts and making money on the side through tax loopholes. We have witnessed a twenty-first century gold rush.”



The union pointed to examples of leveraged buyouts in Denmark and Ireland, where telecoms companies have been saddled with high debts that have proven to be a barrier to investment. Adrian Askew continued:



“If the government wants the UK to be a leader in the knowledge economy, we will need to have world beating communications systems so we can use that knowledge.



“Yet the evidence is that where private equity gets involved, investment plummets, new services decline and broadband networks deteriorate.”