Ofcom to order legal separation of telcoms giant BT and networks division Openreach

A BT Openreach worker installing a new cable.
Photo: Peter Byrne/PA

A BT Openreach worker installing a new cable. Photo: Peter Byrne/PA - Credit: PA

BT is to be ordered to legally separate its Openreach network arm after failing to address competition concerns voluntarily.

Telecoms watchdog Ofcom said it was “disappointed” with BT’s proposals since it outlined plans in July to make Openreach a “distinct company” within the BT group.

The regulator will 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 UK’s main telecoms network used by telephone and broadband providers such as Sky, TalkTalk, Vodafone and BT Consumer.

But it has stopped short of forcing a full break-up and sale of Openreach and added it remains “open” to further proposals from BT for a voluntary separation of the division.

Ofcom said a more independent Openreach, which “works in the interest of all providers, not just BT” was vital to improving broad and telephone services across the UK.

Ofcom said: “We are disappointed that BT has not yet come forward with proposals that meet our competition concerns.

“Some progress has been made, but this has not been enough, and action is required now to deliver better outcomes for phone and broadband users.”

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BT has faced mounting calls from rivals for a full break-up and sale of Openreach after being criticised for poor customer service and a lack of investment.

BT said it was putting in place measures it put forward in July to address Ofcom’s concerns and still hopes to reach a “voluntary settlement”.

On Monday night, BT appointed the first independent chairman of its Openreach arm - hiring Mike McTighe, who was on the board of Ofcom between 2007 and 2015.

But Ofcom wants Openreach to have a board made up of a majority of non-executive directors who are independent of BT.

Ofcom is also concerned that under BT’s plans, the chief executive of Openreach would still report to BT boss Gavin Patterson.

It also wants Openreach to have greater consultation with customers on large-scale investments, its own staff, ownership of assets that it already controls, its own strategy and control over budget allocation, as well as independent branding.

Once legal separation is in place, Ofcom will regularly monitor Openreach and could still force a sell-off if it believes it is not being run as a truly distinct company.

BT said: “We are in discussions with Ofcom on two outstanding issues, the reporting line of the Openreach chief executive and the form of legal incorporation.

“We will continue to work with Ofcom to reach a voluntary settlement that is good for customers, shareholders, employees, pensioners and investment in the UK’s digital future”.