British Telecom Group plc (LON:BT.A) has been ordered to make its network arm Openreach a separate company by the UK telecoms watchdog Ofcom.
The regulator said BT had not addressed the competition concerns it spelt out in July and as a result it wanted Openreach to become a distinct company with a separate board and its own chairman.
However, the watchdog again stopped short of forcing BT to diverge ownership of the subsidiary as most of its rivals had wanted.
Sky and Talk Talk both use BT’s broadband infrastructure and have been consistent complainants about the service they receive.
One of the rules governing Openreach in future would be that it will have a duty of care to treat all customers fairly.
This morning, BT announced that Mike McTighe would be Openreach’s first chairman with the division’s first board to be set up early in 2017.
Broker Jefferies said Ofcom’s decision was a surprise. The strong expectation was that Ofcom would ultimately decide that its legal authority to effect radical change was limited and so would back down.
“Much of the BT Bull case has relied on G.fast being a good enough upgrade to satisfy the regulator in the end.
“That isn't supported by today's comments. A legally separated Openreach could incur materially higher capex to deliver Ofcom objectives.”
BT shares rose 2p to 352p.