BT shares up as telecoms giant avoids break-up

Britain’s biggest telecoms operator BT avoided being broken up when the regulator proposed putting the firm’s network into a legally separate company within the wider group in a bid to improve broadband coverage.

Analysts said the proposals were unlikely to increase costs or damage profits at BT in the short term and its shares rose 4% yesterday.

Britain currently ranks favourably with its European peers in terms of broadband speeds and costs, but with much of the infrastructure based on BT’s copper network, the regulator fears the world’s fifth-largest economy will fall behind unless it upgrades to fibre.

Plans set out yesterday by Ofcom are designed to improve the running of the BT Openreach network and incentivise both BT and its rivals to invest in new infrastructure to enable Britain to be able to compete with the likes of South Korea and Japan.

They are also designed to address years of industry complaints that BT runs the national network to its own benefit — ploughing profits from the division into boosting BT’s consumer broadband and TV offering — at the expense of the network and the smaller competitors who rely on it to offer services.

“I think BT’s Openreach network has not done a good enough job on customer service,” Ofcom chief executive Sharon White told reporters.

“Today is as much about ensuring that the investments that happen in this country aren’t just about serving BT Retail, it’s about serving all customers,” she said.

BT rivals which rely on Openreach had called for BT to be broken up, but in its findings Ofcom said one of the biggest obstacles to a full separation was the BT pension scheme, one of the largest in Britain.

BT, the 170-year-old former monopoly that leads the market in mobile and fixed-line telecoms, said it agreed to most of Ofcom’s proposals but needed to hammer out the finer details of how the separation would affect asset allocations and staffing.

Under the plans, the BT Openreach division will be placed in a legally separate company, with an independent board taking control of its budget, staff and customer relations.

A majority of non-executive directors, including the chairman, will be appointed and removed by BT in consultation with Ofcom.

When making decisions on large-scale investments, the board will also be obliged to consult with customers such as Sky and TalkTalk, who compete with BT in telephony, broadband and TV.

The aim is to make Openreach more independent, enabling it to make investments that work for all operators.

As a legally separate company, Openreach and its directors would be required to make decisions in the interests of all Openreach’s customers, and to promote the success of the company.


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