TIDMBT.A
RNS Number : 1138Z
BT Group PLC
10 March 2017
This announcement contains inside information.
March 10, 2017
BT AND OFCOM REACH AGREEMENT ON FUTURE GOVERNANCE OF
OPENREACH
Openreach to be a legally separate company within BT with its
own Board
Around 32,000 employees to transfer once pension arrangements
are in place
Openreach Limited to have its own brand without the BT logo
BT and Ofcom have reached agreement on a long-term regulatory
settlement that will see Openreach become a distinct, legally
separate company with its own Board(1) , within the BT Group. The
agreement is based upon voluntary commitments submitted by BT that
the regulator has said meet its competition concerns.
Once the agreement is implemented:
-- Around 32,000 employees will transfer to the new Openreach
Limited following TUPE consultation, and once pension arrangements
are in place.
-- Openreach Limited will have its own branding, which will not feature the BT logo.
-- 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 assume greater independence
under its own Board of Directors.
The agreement is intended to be comprehensive and enduring,
helping to ensure the UK telecommunications market remains one of
the most competitive in the world. Hundreds of telecoms companies
already use Openreach and its national network on an equivalent
basis, and many others are competing with them. That will continue
with enhanced safeguards to ensure all of Openreach's customers are
treated equally.
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."
(1) Following the implementation of the agreement which is
subject to the satisfaction of certain conditions, including those
relating to pensions (see notes to editors).
The agreement, 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 transfer of around 32,000 employees, under TUPE regulations,
will be one of the largest such transfers in UK corporate history.
It will take place once the agreement has been implemented and
pension arrangements are in place for these employees. Under the
agreement, Openreach will manage and operate its assets and trading
but ownership of those assets and trading will remain with BT.
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.
The Openreach CEO will report into 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.
The commitments that BT has notified to Ofcom are available at:
http://www.btplc.com/UKDigitalFuture/
For further information
Enquiries about this news release should be made to the BT Group
Newsroom on its 24-hour number: 020 7356 5369. From outside the UK
dial + 44 20 7356 5369. All news releases can be accessed at our
web site. You can also subscribe to receive all BT announcements
here and you can follow us on Twitter here.
Investor and Analyst Call at 09:30 UK time, 10 March 2017
Dial in:
-- Tel +44 (0)1296 480 100
-- Passcode: March
-- Lines available from approximately 09:15 UK time
Conference call replay:
-- Tel +44 (0)207 136 9233
-- Passcode: 9112 4663
-- Replay available from 11:00 UK time for 7 days
The person responsible for making this announcement is Dan Fitz,
BT's Company Secretary.
Notes to Editors
The implementation of the agreement is subject to the
satisfaction of certain conditions. These include new legislation
providing that the new company's pension liabilities will be
covered by equivalent arrangements to the current Crown Guarantee,
thereby ensuring the transfer does not mean that its BT Pension
Scheme members lose that protection, and the BT Pension Scheme
Trustee having consented to Openreach Limited becoming a
participating employer in the scheme.
Formal adoption by the BT Board of commitments given in favour
of Ofcom is also required to give effect to the agreed
arrangements. These commitments will replace the 2005 Undertakings
given by BT to Ofcom. Pending the implementation of the agreement,
the 2005 Undertakings will continue to apply to the governance of
Openreach, unless otherwise agreed with Ofcom. The replacement of
the 2005 Undertakings with the commitments once the agreement is
implemented will now be consulted upon by Ofcom.
Following implementation of the agreement, as a subsidiary
company, Openreach Limited will continue to be fully consolidated
within BT Group.
Openreach
Openreach Limited will be a distinct company within the BT
Group, providing a wide range of wholesale services to more than
five hundred communications providers on an equivalent basis. It
will continue to be responsible for BT's local access network -
i.e. the tens of millions of copper and fibre lines that run from
telephone exchanges to homes and businesses across the UK.
Communications providers - including those within the BT Group -
will be able to buy 'active' services such as fibre broadband or
dedicated business lines from Openreach or 'passive' services
whereby they can use the business's ducts and poles to lay their
own local networks. Openreach already competes with Virgin Media in
more than half of the country and an increasing number of
independent network operators have emerged in recent years.
Openreach, which began operating in 2006, invested more than ten
billion pounds in capex during its first decade. This investment
has helped to make fibre broadband available to more than 26
million premises and copper broadband available to virtually every
property. Capex at the business was GBP1.45 billion in the 2015/16
financial year and gross capex is set to rise again this year as
the business begins to deploy ultrafast broadband across the UK via
both G.fast and Fibre to the Premises technologies.
About BT
BT's purpose is to use the power of communications to make a
better world. It is one of the world's leading providers of
communications services and solutions, serving customers in 180
countries. Its principal activities include the provision of
networked IT services globally; local, national and international
telecommunications services to its customers for use at home, at
work and on the move; broadband, TV and internet products and
services; and converged fixed-mobile products and services. BT
consists of six customer-facing lines of business: Consumer, EE,
Business and Public Sector, Global Services, Wholesale and
Ventures, and Openreach.
For the year ended 31 March 2016(1) , BT Group's reported
revenue was GBP19,012m with reported profit before taxation of
GBP2,907m.
British Telecommunications plc (BT) is a wholly-owned subsidiary
of BT Group plc and encompasses virtually all businesses and assets
of the BT Group. BT Group plc is listed on stock exchanges in
London and New York.
(1) The results for the period have been revised to reflect the
outcome of the investigation into our Italian business. Detail of
which is set out in our third quarter results announcement
published on 27 January 2017. This financial information is
unaudited.
For more information, visit www.btplc.com
This information is provided by RNS
The company news service from the London Stock Exchange
END
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