BT boss on Ofcom: "I don't think they are trying to break the company up"

Lynsey Barber
Follow Lynsey
London Enjoys Unseasonal Warm Weather
Sir Mike Rake spoke about Ofcom's decision to push for separation (Source: Getty)

BT has played down damning action by the telecoms watchdog to split up the company for failing to address competition concerns.

Chairman Sir Mike Rake has insisted that Ofcom is not trying to break-up the telecoms firm, just days after the regulator said it was pushing forward with plans to legally separate its Openreach broadband infrastructure division.

Rake denied that Ofcom was calling for a split, saying it was "enhanced functional separation", even after Ofcom slammed the company's voluntary measures so far as not enough, and said it would start proceedings with the European Commission to enforce a split.

Read more: Ofcom will go to European Commission to legally separate BT and Openreach

"What we're negotiating with Ofcom is not necessarily a structural separation of Ofcom, it's more of what's called enhanced functional separation. We are committed to creating an independent board that will run Openreach, with an independent chairman, independent directors, that will run and invest in the networks, which will have more freedom on capital and operating expense than the commercial arm," said Rake, appearing on ITV's Peston on Sunday show.

"I don't think they are trying to break the company up" he said.

"What they announced last week was that they haven't reached an agreement with us on what's called enhanced functional separation, when we incorporate a separate company. They said elements of that still need to be concluded in the negotiations."

He admitted, however, that its customer service was not good enough.

BT was widely seen to have dodged a bullet after Ofcom's long running investigation into Openreach fell short of calling for a structural separation over the summer. But, Ofcom's warning that BT's efforts did not go far enough and the move to push for a legal separation indicated it was willing to take a harder stance if need be.

Read more: BT appoints former Ofcom board member as Openreach chairman

Rivals such as TalkTalk, Sky and Vodafone still believe there should be full structural separation, continuing to apply pressure on BT, while analysts have noted the need for Ofcom to enforce the issue.

"That Ofcom has had to speak out of its 'frustration' suggests to me there is more to this delay than bureaucracy and red tape – that unwillingness to comply is also playing some part," said CCS's Kester Mann after Ofcom's decision.

Richard Neudegg of uSwitch said: "This is a last-minute warning shot to BT to improve its offer on how legal separation would work. It would appear Ofcom is still open to BT proposing a better voluntary deal."

Related articles