BT.A Bt Group Plc

(Refocuses headline, lead and second paragraph to add BT's response, updates share prices in the third paragraph and adds two further paragraphs at the end)

 
   By Adria Calatayud 
 

The U.K. communications regulator published Friday a set of draft measures aimed at increasing investment in fiber broadband networks, which BT Group PLC (BT.A.LN) estimates will hit revenue and profit at its network division Openreach.

The Office of Communications, or Ofcom, eased its price-control proposal on how much BT Group should charge rival providers for using its physical infrastructure. The regulator said it would set a monthly cap for Openreach's basic superfast broadband service of 11.92 pounds ($16.6) by 2021. In March 2017, Ofcom had proposed setting that price at GBP11.23.

Shares in BT rose in early trade following the news and were up 4.1% at 0954 GMT, while TalkTalk Telecom Group PLC (TALK.LN) was up 2.9%.

The new measures will halve upfront costs of building ultrafast broadband networks, Ofcom said. BT's broadband infrastructure will be further opened to rival providers, which will reduce by half costs of laying fiber cables and accelerate installation, Ofcom said. Competing providers will invest in building their own networks only if this is more attractive than buying wholesale services from BT, the regulator said.

BT won't be allowed to cut prices in areas where rivals are starting to build new networks, Ofcom said.

The announcement by the regulator comes on the heels of a series of plans by U.K. broadband providers that would increase fiber coverage in the country to up to 20% by 2020. Current coverage is 3%.

BT and Vodafone Group PLC (VOD.LN) in partnership with CityFibre Infrastructure Holdings PLC (CITY.LN), TalkTalk and KCOM Group PLC (KCOM.LN) are among those that have rolled out plans to deliver fiber connectivity.

In response to Ofcom's plans, BT said it anticipates the proposed changes will reduce Openreach's revenue and profit by GBP80 million to GBP120 million in fiscal 2019, and that it expects an additional hit as a result of price reductions and increased market pressure. The FTSE 100-listed company added that Ofcom's statement gives certainty on pricing for the next three years and that it can now go ahead with its plan to deliver fiber broadband to three million U.K. homes and businesses by 2020.

Meanwhile, TalkTalk regarded Ofcom's move as "good news for consumers, competition and investment."

Write to Adria Calatayud at adria.calatayudvaello@dowjones.com

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(END) Dow Jones Newswires

February 23, 2018 05:32 ET (10:32 GMT)

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