To become a distinct company with its own staff, management, purpose and strategy
Openreach, the UK subsidiary company of UK telecoms operator, BT, is being split off from the parent company. Openreach, which owns the network that connects almost all UK businesses and homes to the national broadband and phone network, is being reformed after BT agreed to Ofcom’s requirements for the legal separation of the division.
This means Openreach will become a distinct company with its own staff and management, together with its own strategy and a legal purpose to serve all of its customers equally.
BT has agreed to all of the changes needed to address Ofcom’s competition concerns. As a result, Ofcom will no longer need to impose these changes through regulation. The reforms have been designed to begin this year.
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.
The new Openreach will have the greatest degree of independence from BT Group without incurring the delays and disruption – to industry, consumers and investment plans – associated with structural separation or the sell-off of Openreach to new shareholders.
BT’s commitments, combined with regulation imposed by Ofcom through its regular market reviews, will form a comprehensive solution to problems in the market that Ofcom had identified.
Openreach will become a distinct company, incorporated as a legally separate company within BT Group. Openreach will develop its own strategy and annual operating plans, within an overall budget set by BT Group.
The new Openreach will directly employ all its 32,000 staff, who will be transferred across from BT. This will allow Openreach to develop its own distinct organisational culture.
Sharon White, Ofcom chief executive, 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. We welcome BT’s decision to make these reforms, which means they can be implemented much more quickly. We will carefully monitor how the new Openreach performs, while continuing our work to improve the quality of service offered by all telecoms companies.”
Ofcom announced plans last year, as part of its Digital Communications Review, to overhaul Openreach’s governance and strengthen its independence from BT. This followed Ofcom’s concerns that BT has retained control of Openreach’s decisions, while other telecoms companies have not been consulted sufficiently on investment plans that affect them.