BT agrees to Openreach separation


The FTSE 100 giant has agreed that Openreach will become a distinct company with its own staff and management, “together with its own strategy and a legal purpose to serve all of its customers equally”, reports The Telegraph.

Openreach controls the fibre connections, ducts and pipes behind the UK’s broadband infrastructure and sells access to BT’s rivals, such as Virgin Media and Sky.

Last year Ofcom proposed a legal separation of Openreach, a move that BT has resisted. But now the telecoms giant has acceded to the regulator’s plan, meaning that Ofcom will not need to resort to legislation to introduce the change.

Under the agreement, 32,000 BT employees will transfer to the new company. The Openreach board, set up by BT last year, will run the business as a separate company within BT, and BT branding will disappear from Openreach vans.

The chief executive of Openreach will report to the Openreach chairman. That person will answer to BT’s chief executive “with regards to certain legal and fiduciary duties”. BT will have the power to block the appointment of the Openreach chief executive, but only if it notifies Ofcom first.

Openreach’s future has become a huge political row. Rivals have claimed that BT has a huge advantage because it owns the UK’s broadband infrastructure.

Ofcom introduced the current structure in 2005, but became concerned that BT was making decisions about Openreach to benefit its own retail business, rather than competitors.

Rival telecoms companies have complained that BT has been slow in opening up the network to other operators, meaning the roll-out of broadband has been held back. In July last year, MPs claimed that BT has “significantly under-invested” in the network.

Sharon White, Ofcom chief executive, said: “This is a significant day for phone and broadband users. The new Openreach will be built to serve all its customers equally, working truly independently and taking investment decisions on behalf of the whole industry – not just BT.

“We welcome BT’s decision to make these reforms, which means they can be implemented much more quickly. We will carefully monitor how the new Openreach performs, while continuing our work to improve the quality of service offered by all telecoms companies.”

Gavin Patterson, BT chief executive, said: “I believe this agreement will serve the long-term interests of millions of UK households, businesses and service providers that rely on our infrastructure. It will also end a period of uncertainty for our people and support further investment in the UK’s digital infrastructure.

“This has been a long and challenging review where we have been balancing a number of competing interests. We have listened to criticism of our business and as a result are willing to make fundamental changes to the way Openreach will work in the future.”

BT’s pension fund had been seen as a stumbling block to splitting the two companies. Ofcom said today the “Crown Guarantee” would need to be maintained for Openreach staff who are members of BT’s pension scheme. The Crown Guarantee is legislation agreed on BT’s privatisation in 1984 that ensures the Government would meet BT’s obligations to the pension scheme in the unlikely event that the company should be wound up.