Watchdog calls on BT to spin off Openreach division

Rival companies and analysts gave a cautious welcome to the telecoms regulator's decision yesterday to order BT to legally separate from its Openreach business, which runs the UK's broadband infrastructure.

BT has faced mounting calls for a full split from its Openreach arm. Picture: Rod Kirkpatrick/VisualMedia/PA

It comes after Ofcom said it was “disappointed” with BT’s proposals since the former state-owned monoploy outlined plans earlier this year to make Openreach a “distinct company” within the group.

Ofcom said it would now prepare a formal notification to the European Commission to start the process of forcing a legal separation of Openreach, which develops and maintains the telecoms network used by telephone and broadband providers such as Sky, TalTalk, Vodafone and BT Consumer.

Dido Harding, chief executive of TalkTalk, said that the regulator’s action was “a small step in the right direction” but added that “even this complicated legal separation is one that BT Group has been fiercely resisting”.

Kester Mann, an analyst at CCS Insight, said BT’s rivals might criticise Ofcom for not pushing for full separation of Openreach, but that they should see the regulator’s efforts to engage with the EC as “a partial victory”.

Mark Skilton, a professor at Warwick Business School and an expert on telecoms, said: “Separating the BT and Openreach monopoly will help this move towards a faster network of [broadband] providers and hence one that is not driven at the speed of one large operator’s priorities.”

BT’s rivals have said it has not gone far enough in addressing concerns about its ability to favour its retail business when making investment decisions on Openreach.

On Monday, BT appointed Mike McTighe, who was on the board of Ofcom between 2007 and 2015, as the first chairman of Openreach.

It is understood that one major issue between Ofcom and BT remains reporting lines, with the regulator concerned that under the current model put forward by BT, the Openreach chief executive would still report to BT boss Gavin Patterson.

It is thought BT is happy for the new Openreach chairman to report to his counterpart on BT, Sir Mike Rake, but also wants the broadband ­network’s chief executive, Clive Selley, to report to Patterson to satisfy potential legal requirements.

BT rival Sky said yesterday: “Let’s not forget why we are here. BT Openreach has continued to fail consumers. We will now watch closely as to how Ofcom executes its proposals.”

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