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02 August 2021

UK Fibre Broadband Race Heats Up

Chinese shares on Wall Street have risen from mere billions to US$2tn over the span of two decades. However, fears that investors have ignored the risky legal structure that allowed Chinese companies to gain access to huge funds in the US stock market have started to show. Now, Beijing’s clampdown on the US$100bn tutoring industry, comprising a ban on Variable Interest Entities (VIEs), has initiated deep worries for some of the world’s biggest investors. The move by China wiped tens of billions of Dollars from the market value of New York-listed Chinese companies over concerns that the ban on tutoring VIEs could extend to other sectors as well, although many Chinese stocks recovered after the securities regulator sought to ease concern among international investors by holding a meeting last Wednesday night. However, it does not discount the message to international investors of the risks involved with the Chinese stocks. While many Chinese based companies have undoubtedly a long runway of growth ahead of them, investors will have to balance the risks of investing in the region with the potential long-term gains.

Looking at the UK, Virgin media O2 has planned on expanding its fibre network to more than 14 million homes and businesses over the next seven years to compete with BT and other rivals which are trying to take a slice of high-speed broadband market. The company showcased its plans amidst the ongoing race between many smaller network companies and BT’s Openreach, to be the first to lay fibre across large parts of the company.The commitment is Virgin Media O2’s latest among many other plans for major upgrades to UK’s broadband infrastructure and weeks after completion of its £31bn merger with O2. The project is one of the most cost-effective with the value of £1.4bn when compared to BT which has budgeted £15bn for the project. The company seemed quite confident with the present pace of its program as it has already laid fibre to 1.2 million homes and has plans for additional eight million homes on the condition that it is able to sign capacity dealsor find outside investment to fund the development.

Focusing on business in the North of England, in particular Yorkshire, the proposed £6.3bn takeover of Morrisons by Fortress Investment Group has progressed further, and shareholders will now vote on the deal during the AGM on 16th August. Morrisons shareholders will be entitled to 254p per share and the supermarket also plans on declaring a special dividend of 2p per share if the deal is finalised. However, Silchester Asset Management, which owns a 15% stake in Morrisons, expressed disinclination towards the support of the deal. If the deal wins approval from shareholders, which may seem doubtful, Morrisons will cease trading on the London stock Exchange by 25th of August.
 
Please note that investments and income arising from them can fall as well as rise in value. This communication is for information only and does not constitute a recommendation to buy or sell the shares of the investments mentioned.
UK Fibre Broadband Race Heats Up
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