BT and Ofcom agree for Openreach to become legally separate company

BT and Ofcom have announced a regulatory settlement which will see Openreach become a legally separate company with its own Board, within the BT Group.

Once the separation is completed, around 32,000 employees will transfer to the new Openreach Limited following TUPE consultation, and once pension arrangements are in place.

This transfer of employees will be one of the largest such transfers in UK corporate history.

Following the separation, Openreach Limited will have its own branding, which will not feature the BT logo. Openreach will also manage and operate its assets and trading but ownership of those assets and trading will remain with BT.

In addition, the Openreach CEO will report to the Openreach chairman with accountability to the BT Group chief executive with regards to certain legal and fiduciary duties that are consistent with BT’s responsibilities as a listed company.

Openreach, which builds and maintains the tens of millions of copper and fibre lines that run from telephone exchanges to homes and businesses across the UK, will have a great level of independence with its own Board of Directors.

The agreement is intended to help ensure that the UK telecommunications market remains one of the most competitive in the world.

Gavin Patterson, BT chief executive, said: “I believe this agreement will serve the long-term interests of millions of UK households, businesses and service providers that rely on our infrastructure.

“It will also end a period of uncertainty for our people and support further investment in the UK’s digital infrastructure.

“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.”

The separation, when in place, will provide BT and other companies with greater regulatory clarity and certainty which is vital for investment. This will help the UK retain its position as the leading digital economy in the G20 by share of GDP, with the largest superfast network among major European nations.

The agreement builds on changes that BT has already made to the governance of Openreach in recent months. These include the creation of an Openreach Board with a majority of independent members.

This Board will set Openreach’s medium term and annual operating plans and determine which technologies are deployed, within a strategic and financial framework defined by BT.

Openreach will be free to explore alternative co-investment models in private with third parties.

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