Telecoms row over BT's control of Openreach

BT Group's control over Openreach is being challenged by Sky after findings that the company's £47bn retirement scheme would be unaffected by financial independence for the network unit.

Regulator Ofcom will this month publish a detailed proposal for the future of Openreach, a monopoly which owns all the pipes and telephone cables in the UK. As a subsidiary of BT, many competing broadband providers are concerned it makes BT too dominant in the market.

BT has, however, defended its position saying their pension scheme will be put at risk if it no longer maintains control of the network unit.

BT, having the largest pension scheme in Britain’s private sector, said that the retirements of 300,000 current and former staff could be jeopardised if Openreach became independent.

Sky has argued that pension experts say the contrary. A report by law firm Sackers, which was due to be released on Thursday, claims there are many “straightforward” options to maintain the scheme if Openreach is incorporated as a legally separate subsidiary with control over its own cash flows.

“There is no bar from a pensions perspective to achieving functional and legal separation of Openreach,” said Sackers.

Andrew Griffith, Sky’s chief operating officer, said: “BT wrongly claims that its pension scheme is an obstacle to the separation of Openreach."

“This research by the leading pensions law firm shows that this is absolutely not the case. BT pensioners would be unaffected while broadband consumers in the UK would be better off.”

Former City minister Lord Myners also backed this view saying pensions are, "not a major hurdle when Ofcom considers the best route to reform the UK’s digital communications network”.

Sky aren’t the only ones pushing Ofcom to take action over the structure of Openreach. Talk Talk and Vodafone are also complaining about the current set up, saying it causes poor service and underinvestment.

BT have retorted saying Sky is attempting to “wish away inconvenient truths”, and insisted there will be a negative impact. “We at BT are clear about this, and our view is supported by authoritative, independent analyses by KPMG, PwC and Freshfields,” said BT.

BT has also discredited the law firm’s report saying: “Sackers has raised the importance of the employer covenant and the critical impact this will have, but unlike KPMG and PwC, they are not employer covenant advisers.”

Another possible downfall is that taxpayers may have to pay the bill if BT hits financial difficulties. There is also a shortfall in funding for the scheme, estimated by analysts at £12.2bn.

Ofcom has reserved the right to pursue a formal split of BT if it cannot get the reform it says is required.

BT’s shares rose 2.09% to 395.60p at 1134 BST.