TIDMBT.A
RNS Number : 2200F
BT Group PLC
26 July 2016
July 26, 2016
OPENREACH TO BE MORE INDEPENDENT AND TRANSPARENT
An Openreach Board to be established with a majority of
independent members
Openreach to have greater autonomy, budgetary control and
decision making powers
New commitments to improve transparency and industry
consultation
BT today confirmed it has volunteered significant governance
changes to further increase the independence and transparency of
its local network business Openreach. It believes these
unprecedented changes, elements of which have been welcomed by
Ofcom today, can form the basis for a fair, proportionate and
sustainable regulatory settlement. They can also help Ofcom
conclude its review and achieve its aims in a quicker
timeframe.
The changes will enable BT to focus on its plans to further
improve the UK's digital infrastructure. The UK is already the
leading digital economy in the G20 and BT will help it maintain
that lead by investing a further six billion pounds in its fixed
and mobile networks over the next three years. Capital expenditure
has risen by more than thirty per cent at Openreach over the past
two years and will rise again this year as the business focuses on
delivering better service, broader coverage and faster speeds.
The main governance changes include: the creation of an
Openreach Board with an independent Chair and a majority of
independent members; the greater delegation of strategic,
operational and budgetary responsibilities; and an enhanced
consultation process with industry on future investment plans.
BT believes the re-organisation of Openreach addresses the
concerns relating to governance set out by the Culture, Media and
Sport select committee which last week requested that BT "allows
Openreach much more autonomy over what it invests, when and where".
The changes also meet all of the objectives Ofcom outlined for the
strengthened independence of Openreach in February(1) .
-- "More independent governance, with a responsibility to serve
all customers equally". BT will establish an Openreach Board as a
board committee of BT plc, BT's main operating company. It will
have a majority of independent members, including the Chair, all to
be appointed in consultation with Ofcom. The Board will be
accountable for Openreach's strategy and operational delivery. The
Openreach CEO will be accountable to this Board and will report
into the BT Group Chief Executive.
An obligation for Openreach to serve all its customers equally
will be included in the Articles of Association of BT plc. This
will supplement the legal obligations set out in the current
regulatory Undertakings and strengthen Openreach's purpose to serve
all of its customers equally.
-- "Increasing Openreach's autonomy over budget and decision
making". Openreach and its Board will enjoy a high level of
autonomy. Openreach will produce Annual Operating and Medium Term
Plans setting out its budgetary, strategic and operational
objectives. The Openreach Board and CEO will also control how they
deploy capital, within the overall budget agreed with the BT Board.
This is in keeping with its wider corporate responsibilities and
its legal duties as a public company.
-- "Improving Openreach's approach to consultation with
customers". A formal three stage process will be introduced whereby
industry will be consulted in advance on substantial investment
decisions and the development of new products. This process will
include an early stage during which Openreach can engage with its
communications provider customers on a confidential basis.
-- "Enhancing Openreach's operational capacity". Openreach will
have access to sufficient capabilities and resources to make its
own decisions and run its own operations.
Gavin Patterson, BT Group Chief Executive, said: "The UK is the
most digitally advanced nation in the G20 and further investment is
required if it is to keep and extend that lead. That's why we are
poised to invest a further six billion pounds in our UK networks
over the next three years".
"We have listened to Ofcom and industry and are introducing
significant changes to meet their concerns. These changes will make
Openreach more independent and transparent than it is today,
something both Ofcom and industry have requested.
"Openreach is committed to delivering better service, broader
coverage and faster speeds and these changes will enable it to do
just that. Our proposals can form the basis for a fair and
sustainable regulatory settlement and we believe they can also
enable Ofcom to bring its Review to a speedier conclusion."
BT's re-organisation of Openreach will provide all the benefits
that Ofcom is seeking while avoiding the extensive,
disproportionate costs that would be incurred if assets had to be
transferred into a newly incorporated subsidiary company. It will
also ensure that Openreach continues to benefit from being part of
the larger BT Group, which helps to reduce the risk it faces when
investing in new products.
Openreach will remain a heavily regulated business with Ofcom
determining the prices for more than ninety per cent of its
products. It will continue to be overseen by Ofcom which already
has powers to ensure that Openreach serves all of its customers on
an equal basis, supporting what is an intensely competitive retail
market. BT's governance changes will serve to supplement and
reinforce this existing regulation.
Patterson added: "Proportionality has to underpin any regulatory
solution and we believe our proposals are a bold and appropriate
response to the concerns outlined by Ofcom and others. We have
considered the more extreme solutions proposed by others but they
would be overly complex, disproportionately costly and time
consuming to implement. They would also undermine Openreach's
ability to invest and create years of uncertainty."
BT has discussed its governance changes at length with Ofcom
over many months. It formally notified them on 19 July, stating
that it intends to implement them within six months, subject to
Ofcom agreeing to vary the existing Undertakings. It is calling on
Ofcom to support these proposals as the best way forward for the
country and as the foundation for the competition and investment in
digital networks that the UK needs.
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.
Notes to Editors:
BT has submitted a formal notification to Ofcom of its intention
to implement changes to the existing functional separation
arrangements of Openreach in full immediately upon Ofcom agreeing
to vary BT's Undertakings. In any event, BT intends to implement so
much of this reorganisation as possible whilst remaining compliant
with the Undertakings in their current form, within six months.
BT has submitted a formal notification to Ofcom under section
89C Communications Act 2003, which implements Article 13b of the
Access Directive which allows for operators to implement functional
separation on a voluntary basis. Ofcom must as soon as reasonably
practicable consider the impact of this notification on the
existing SMP regulation on Openreach.
In parallel, BT has submitted an application for material
variations to the existing BT Undertakings under section 154(7)
Enterprise Act 2002, which Ofcom is also required to consider as
soon as reasonably practicable.
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, BT Group's reported revenue
was GBP19,042m with reported profit before taxation of
GBP3,029m.
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.
For more information, visit www.btplc.com
(1) Section 6.66 of Ofcom's Digital Communications Review
Initial Conclusions
This information is provided by RNS
The company news service from the London Stock Exchange
END
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