BT share price rises as it agrees solution with Ofcom after "long and challenging" debate over the future of Openreach

 
Oliver Gill
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Today's news will likely give BT boss Gavin Patterson plenty to smile about

Shares in BT were up more than three per cent as the market opened, after it emerged it will retain control of broadband provider Openreach, although the company will be carved out.

Watchdog Ofcom announced this morning the "biggest reform of Openreach in its history is set to conclude" after the FTSE 100 firm met all of its requirements in what Ofcom said was "a comprehensive solution to problems in the market that Ofcom had identified".

The news will come as a relief to both parties after Ofcom said it was preparing for the lengthy process of going to European authorities to force through the changes it wanted.

Read more: TalkTalk brands Openreach board line-up as "meaningless"

While Openreach will become a distinct company, it will remain within the wider BT group.

This means Openreach will have the "greatest degree of independence from BT Group possible without... structural separation or the sell-off of Openreach to new shareholders".

BT chief executive Gavin Patterson said:

This has been a long and challenging review where we have been balancing a number of competing interests. We have listened to criticism of our business and as a result are willing to make fundamental changes to the way Openreach will work in the future.

Shares in BT have led the FTSE 100 today up almost five per cent in the wake of the news.

Despite its disaster January, when an accounting scandal in Italy and a group profit warning wiped a fifth of its market cap, BT's share price is now pretty much back where it was when Ofcom first started proceedings to take its demands to European authorities in November.

Crown guarantee

BT is facing a number of challenges in 2017, one being a three-year review of the firm's pension scheme by trustees. Currently in deficit by around £9bn, the ability for BT to consolidate cashflows from its highly cash generative infrastructure arm was pivotal to maintaining the trustee's view of the group's ability to meet pension liabilities.

Read more: BT Openreach changes aren't enough for Ofcom

The firm has a guarantee from the UK government to bail out any pension deficit in a doomsday scenario. This, Ofcom said, will remain in place: "To implement this agreement with the smallest possible effect on BT’s pension scheme, the existing Crown Guarantee would need to be maintained for Openreach staff who are members of BT’s pension scheme."

Ofcom Chief Executive Sharon White said: "This is a significant day for phone and broadband users. The new Openreach will be built to serve all its customers equally, working truly independently and taking investment decisions on behalf of the whole industry – not just BT."

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