BT Fails to Address Competition Concerns, Says Regulator -- Update
November 29 2016 - 4:57AM
Dow Jones News
(Adds response from BT and share price.)
By Ian Walker
LONDON--Ofcom said Tuesday it plans to proceed with a formal
notification requiring BT Group PLC (BT.A.LN) to separate its
infrastructure arm Openreach, after the telecommunications company
failed to offer voluntary proposals that addressed its competition
concerns.
Earlier this year the U.K's telecom regulator called for BT's
network business to become a distinct company with its own board,
but stopped short of calling for a full separation of the
businesses at the time.
The move was rejected by BT, but it said it would make
"significant governance changes" to Openreach, including forming a
new board and greater budget independence. BT said legal separation
would be step too far and it also disagreed with Ofcom's proposals
for Openreach to have its own network assets and staff.
BT, a 170-year-old former state-run monopoly known as British
Telecom, lays down most of the U.K.'s telecom lines and makes a
hefty chunk of its revenue through its Openreach division by
connecting up the country's copper wire and high-speed fiber-optic
cable network.
Ofcom said Tuesday it was now preparing to notify the European
Commission of its intention to implement plans requiring the legal
separation of Openreach to make it more independent.
"Throughout this process, we remain open to BT bridging the gap
between its proposal and what is required to address our strong
competition concerns," it said.
Ofcom is calling for Openreach to become a distinct company with
its own board comprised mainly of non-executive directors,
including the chair, who would not be affiliated with BT.
"Openreach would be guaranteed greater independence to make
decisions on strategic investments, with a duty to treat all of its
customers equally," the regulator said.
BT said Tuesday it is implementing proposals put forward in
July, and in doing so has appointed Mike McTighe as chairman of the
network busines from January.
It added that it is in talks with Ofcom on two outstanding
issues--the reporting line of the Openreach chief executive and the
form of legal incorporation.
"We will continue to work with Ofcom to reach a voluntary
settlement that is good for customers, shareholders, employees,
pensioners and investment in the U.K.'s digital future," BT
said.
BT shares at 0910 GMT are up 2.8 pence, or 0.8%, at 353.1
pence.
Simon Zekaria contributed to this article.
Write to Ian Walker at ian.walker@wsj.com
(END) Dow Jones Newswires
November 29, 2016 04:42 ET (09:42 GMT)
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