Ofcom to set up separate unit to monitor BT's Openreach

Regulator Ofcom said on Thursday that it will establish a separate unit to monitor the performance of BT's broadband network operator Openreach.

Ofcom announced measures to ensure Openreach will be held to account, as it becomes legally separate from BT, so it delivers for both phone and broadband users.

“We expect the reformed Openreach to engage with industry to deliver widespread fibre networks, offering fast, reliable broadband. The new company should provide a good service to meet the needs of all the people and businesses who rely on its network, together with a step change in quality of service,” Ofcom said.

“Ofcom will closely monitor BT’s compliance with its new commitments, and how effectively Openreach serves the whole industry. We will measure how far Openreach is improving its network and helping to deliver better quality of service.”

The separation of Openreach will take place once the government has amended the Crown Guarantee, which underwrites the BT Pension Scheme, so that it maintains pensions protection for members of the scheme who transfer to the new Openreach.

After that, BT’s pension trustees would need formally to agree that Openreach will become a participating employer in the pension scheme. BT must also complete a consultation process for the transfer of employees to the new Openreach.

BT shares were up 3.5% to 300.30p at 1430 BST, with traders highlighting a positive note from Numis, which initiated coverage of the stock at ‘buy’ with a 390p target price.

“Earlier this year the company and Ofcom gave many BT shareholders much heartache, but at current levels we believe the share price discounts some incredible assumptions. Most importantly, we believe only BT’s Openreach is prepared to deliver the scale, all-fibre infrastructure Britain wants, but it will not spend NPV-negative capex. So forecasts of much extra capex but no extra returns are excessively bearish,” it said.