Telecoms watchdog Ofcom has recommended that Openreach, the broadband provision arm of BT Group PLC (LON:BT.A) should be run as a discrete company within BT.
The group has had a stranglehold on the UK’s telecoms infrastructure dating back to the days when it was state-owned and part of the General Post Office, and critics have complained that despite being privatised in the Thatcher years, it has dragged its feet in making its infrastructure available to competitors.
BT today confirmed it has volunteered significant governance changes to further increase the independence and transparency of its local network business Openreach.
BT described the proposed changes as “unprecedented” and said they could form the basis for a fair, proportionate and sustainable regulatory settlement.
“They can also help Ofcom conclude its review and achieve its aims in a quicker timeframe,” the £40bn company declared.
BT said it believes the re-organisation of Openreach addresses the concerns relating to governance set out by the Culture, Media and Sport select committee, which last week requested that BT "allows Openreach much more autonomy over what it invests, when and where".
“We have listened to Ofcom and industry and are introducing significant changes to meet their concerns. These changes will make Openreach more independent and transparent than it is today, something both Ofcom and industry have requested,” said Gavin Patterson, BT’s group executive.
The market clearly thinks BT has dodged a bullet, as the share price had risen 4.8% to 406p by the middle of the morning trading session.
Mike van Dulken, the head of research at spread betting firm Accendo Markets, said BT shareholders breathed a sigh of relief as Ofcom “opted not to pull the rug out from under its key local network business”.
“A favourable response to discussions sees the UK incumbent obliged to open up its Openreach network to competitors (Sky (SKY), TalkTalk (TALK); both shares muted) and consult on any investment including plans to spend £6bn over the next three years. It avoids, however, going as far as calling for a full hiving off of the business from the BT Group which was always an extreme and almost certainly expensive possibility,” van Dulken said.
Shares in rival broadband providers Talktalk Telecom Group PLC (LON:TALK) and SKY PLC (LON:SKY) fell back in a rising market, with the former shedding 1.2% at 222.5p and the latter declining 0.2% to 881.5p.