BT to spin out its network division into a separate company; stops short of full split

Billed as "the biggest reform of Openreach in its history", BT, in agreement with UK regulator, Ofcom, will splice out its network division into a new company which will include its own staff and management. Furthermore, the new company will have to define its own strategy and legal purpose. The move comes after Ofcom had foreshadowed the possibility of Openreach being broken apart from BT early last year.

In terms of ongoing management and operations, Openreach will be run by its own Board, appointed by BT over the last few weeks and will also become responsible for appointing future Chief Executives who will, in turn, become accountable to the Board. However, while control of all network assets will be handed over to Openreach, BT will retain ultimate ownership of those assets.

Unfortunately, for those advocating for a full split, which included some of BT's major competitors such as Sky, the arrangement agreed with the regulator falls just short. While Openreach will become its own legal entity, it will still reside within the BT Group and, at least in part, retain some accountability through to BT.

In response to BT's agreement, Ofcom Chief Executive, Sharon White, said:

"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."

However, others such as Virgin Media CEO, Tom Mockridge, seized the opportunity to take a shot at the outcome and said:

""Openreach is just the same old snail's paced network with a new shell. Call it what you like but it's still BT, four times slower than Virgin Media"

Virgin Media also followed up with a tongue in cheek proposition for a new logo:

Here's a starter for 10 if you're looking for a new logo, @OpenreachGB. pic.twitter.com/3h8X5t34sc

— VirginMediaCorporate (@VirginMediaCorp) March 10, 2017

However, other companies were less snarky in their assessment of the situation, with a Sky spokesperson saying that it was "a welcome step that we have long called for on behalf of our customers."

In terms of immediate impacts, BT's shares rose 3.7% while approximately 32,000 employees will be transferred across to Openreach.

Source: Ofcom