BT and UK regulator Ofcom announced that they have reached agreement on a long-term regulatory settlement based on voluntary commitments submitted by BT that address Ofcom’s competition concerns through which Openreach will become a distinct, legally separate company with its own board within the BT Group.
Once implemented, the agreement stipulates that:
1. Approximately 32,000 employees will transfer to the new Openreach Limited, following TUPE consultation, and once pension arrangements are in place.
2. Openreach will manage and operate its assets and trading, but ownership of the assets and trading will remain with BT.
3. The new Openreach will have its own branding that will not feature the BT logo.
4. 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 consistent with BT’s responsibilities as a listed company.
5. Openreach, which builds and maintains the millions of copper and fibre access lines from telephone exchanges to homes and businesses and currently delivers fibre connections to around 26 million premises, will gain greater independence under its own board of directors.
The agreement, once implemented, is designed to provide BT and other companies with greater regulatory clarity and certainty and to encourage investment. The new agreement builds on recent changes made by BT relating to the governance of Openreach, which include the creation of an Openreach board with a majority of independent members.
The new Openreach board will define the businesses medium term and annual operating plans and determine which technologies are deployed within line a strategic and financial framework defined by BT. Openreach will be free to explore alternative co-investment models with third parties.
BT stated that implementation of the agreement is subject to the satisfaction of certain conditions, including the drawing up of new legislation relating to the BT pension scheme. In addition, formal approval of the agreement is required by the BT board.
