It’s been a long time coming, but BT has finally agreed to spin off Openreach, the part of its business that handles most of the UK’s broadband infrastructure. Ofcom, the UK’s media regulator, proposed such a split last July, in a move it believes will improve competition and investment. At the time, BT offered a handful of counterproposals — its preference, of course, was to keep Openreach under its control — but it seems the company has finally relented to Ofcom’s demands. We suspect a possible tussle with the European Commission in Brussels forced its hand.
The new, “legally separate company” will still be a part of the BT Group, but will have its own “staff, management, purpose and strategy.” A new Openreach board has already been established; it will run the new company once the transition is completed later this year. Most importantly, the majority of the board’s directors won’t be from BT — diluting the company’s influence, and any potential criticisms that it’s still playing favorites. The board will also choose the next Openreach CEO, who will hire other executives and generally build the management team. BT will have the power to veto CEO appointments, but only after notifying Ofcom.
Roughly 32,000 BT employees will need to be transferred to the new Openreach company. That will, understandably, take some time. For instance, BT and Openreach have to figure out how pensions are affected by the switch.
As you might expect, BT is now playing the decision off as a victory. “I believe this agreement will serve the long-term interests of millions of households, businesses and service providers that rely on our infrastructure,” Gavin Patterson, BT’s chief executive said. “It will also end a period of uncertainy for our people and support further investment in the UK’s digital infrastructure.”
There was, however, just a hint of BT’s displeasure. “This has been a long and challenging review where we have been balancing a number of competing interests,” he added. “We have listed to critcism of our business and as a result we are willing to make fundamental changes to the way Openreach will work in the future.”