BT shares soar after it clinches Openreach deal

BT struck a ground-breaking deal with the telecoms regulator on Friday to retain ownership of Openreach, ending years of pressure over a monopoly of broadband infrastructure.

However, in what was seen as a major concession, it has agreed to split the division into a separate legal entity with its own board.

Openreach, which maintains the UK’s network of phone and internet cables for 30 million customers, will manage the assets on behalf of BT, which retains 100% ownership.

“It’s a relief for everyone, not just ourselves,” chief executive Gavin Patterson (pictured) said: “It’s been a tough process and one where we have faced criticism. We have taken that criticism on board and are making changes. A giant shadow has been removed from our business.”

Around 32,000 staff will move across into the separated group. New laws are required to ensure a government guarantee to fill any black hole in the new company’s pension scheme still stands although Patterson expects the issue to be resolved within months.

The newly minted Openreach outfit will ditch all BT’s branding from its distinctive vans although the board, led by chairman Mike McTighe, will still report to BT’s board, soon to be led by chairman Jan du Plessis.

The deal follows two years of tense negotiations between BT and regulator Ofcom, which has been pushing for a more independent national infrastructure network to spur investment in UK broadband.

Ofcom threatened to take BT to the European Commission to force a separation if it failed to act, heightening uncertainty about the future of Openreach. Today’s settlement removed that fear, sending BT shares up 4.4%, or 14.55p, to 344.75p.

Rivals, who had long criticised BT’s control of Openreach, welcomed the legal separation. The move paves the way for Openreach to start striking its own deals with BT’s rivals like Vodafone and BT. “We hope this is the start of a new deal for Britain’s broadband customers,” TalkTalk chief executive Dido Harding said. Sky said the move was “a step towards delivering better service to customers”.

Chris Pateman, CEO of the Federation of Communication Services, which represents BT customers, was more sceptical, saying despite the legal separation BT remained under the control of its ultimate owner BT. “It remains our view that the only long-term, sustainable solution for Openreach is complete separation,” he said.

Talks between the regulator and BT has focused on whether the telecoms group could maintain de facto control of Opengroup’s assets.

Transferring ownership of Openreach’s network of copper cables would have weakened BT’s balance sheet, causing pension problems.