BT needs to be able to "hire and fire" Openreach board and had to get the deal done before starting pension negotiations

 
Oliver Gill
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Chief exec Gavin Patterson said upcoming pension negotiations will be easier after agreeing a deal with Ofcom (Source: BT)

BT chief exec Gavin Patterson has said having the ability to “hire and fire” the Openreach board was a red line that the telecoms giant couldn’t cross in agreeing a deal with Ofcom over the future of its infrastructure arm.

And breaking the deadlock with regulators over Openreach’s independence was imperative before entering into negotiations with trustees on the telecoms giant’s £9.5bn pension deficit in the coming months.

Read more: BT retains control in Openreach separation

This morning, Ofcom announced BT had agreed to all of its demands in what it labelled the “biggest reform of Openreach in its history” leading to the "greatest degree of independence from BT Group possible without... structural separation or the sell-off of Openreach to new shareholders".

It is understood that independent reporting lines between the Openreach board and BT was Ofcom’s own red line and a key sticking point in negotiations.

But speaking to City A.M. this afternoon, Patterson said:

Ultimately as the 100 per cent owner of Openreach we have to be able to demonstrate that we can control it sufficiently and that will ultimately mean we have the ability to hire and fire the directors. That’s what you need to be able to do to retire your responsibilities as directors.

“It was one of those things that was actually always going to be the case, otherwise we wouldn’t have been able to consolidate the business.

“The Openreach board will run the process, if there is a search for the chief executive in the future. You would expect they would consult their shareholders on who the right person for the job.”

Read more: BT Openfudge? What you need to know about the Ofcom deal

Multifaceted pensions

Patterson also revealed the Ofcom negotiations were “multifaceted” and included discussing matters with both pension trustees and the Pensions Regulator.

“We haven’t started the triennial negotiation yet,” he said. “What I will say is that having certainty and clarity on the regulatory framework for the UK is very helpful in that negotiation. It would have been difficult to go into it with a high degree of uncertainty.”

Read more: BT and Ofcom's Openreach deal: How the City reacted

Meanwhile the chief executive of Ofcom, Sharon White, said the regulator would be monitoring changes made by BT and Openreach “very robustly”. She told City A.M.:

We ought to have a pretty good idea early whether the new culture of Openreach really is genuinely independent of BT and starts to deliver investment and choice that work for everyone.

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