BT Openreach’s conscious uncoupling: Reactions from four City analysts (and one business school professor)
Entire geological eras have passed since Ofcom first began um-ing and ah-ing about spinning BT's Openreach broadband division out from the main company.
Today the communications watchdog said it will definitely push ahead with plans to legally separate the two entities, causing BT's share price to fall as much as 1.5 per cent this morning, before paring some of those losses. Here's how the City reacted.
1. Not much more than we already knew
Neil Wilson, senior market analyst at ETX Capital:
"Today’s news from Ofcom doesn’t appear to amount to much more than we already knew.
In July that BT dodged a bullet when Ofcom said it wants Openreach hived off into a separate company with its own board within the group. Ofcom could have forced BT to shed the infrastructure part of the business completely to address what still looks like pretty fair concerns around competition.
"This meant BT keeping hold of its prized asset and Ofcom isn’t really saying anything radically different today in terms of the actual meat of the changes. What’s concerning investors is the detail of the separation, such as the transfer of pension liabilities and budget autonomy – BT’s pension black hole has ballooned to top £10bn and this is a concern for investors."
2. Big news for small rivals
Mike van Dulken, head of research at Accendo Markets:
"This morning’s news comes after BT failed, since a generous August reprieve, to voluntarily offer satisfactory reforms to address competition concerns. It is especially significant for smaller peers and competitors like TalkTalk in that it would likely result in significantly more transparency about Openreach, especially how profitable the infrastructure division that they piggy-back actually is. This would in turn allow them to see whether they have been paying over the odds for access to the UK’s copper and fibre optic network and surely shake things up with the new entity having a duty to treat all customers equally."
3. Partial victory
Kester Mann, principle analyst, operators at CCS Insight:
“No doubt, BT’s rivals will criticise Ofcom for not being brave enough to push for structural separation. But after many months of campaigning, they should see the regulator’s efforts to engage with Brussels as a partial victory. The move toward legal separation and greater independence will bring important benefits to companies like Sky and TalkTalk in the long-term.
“Today’s announcement represents just the next stage in a long and protracted issue. Expect further lobbying from all parties and old arguments to be recycled. In the interest of stability and market certainty, the sooner a final outcome can be reached the better.”
4. Harder, better, faster, stronger
Mark Skilton, professor of practice at Warwick Business School:
"The Internet of Things, super fast broadband, 5G and other types of networks may be better delivered and served with having multiple large scale companies in a more devolved network.
"Separating the BT and Openreach monopoly will in my view help this move towards a faster network of providers and hence one that is not driven at the speed of one large operator's priorities. This has counter arguments of reliability and avoiding vested interests in zoning in on specific cities and regions for preferential treatment. But with Ofcom and government leadership now so critical in the Brexit era we now find ourselves in, we need to think faster and more nationally and internationally in how we connect to the wider world."
5. Heel-dragging or red tape?
Dan Howdle, director of communications at Cable.co.uk:
"It's tough to read whether BT's heel-dragging is as a result of a tactic with the intention to deliberately delay and undermine the process, or whether, rather like Brexit, the process of separating Openreach is simply too vast and complex to be fully planned out in such a short period of time.
"That Ofcom has had to speak out of its 'frustration' suggests to me there is more to this delay than bureaucracy and red tape – that unwillingness to comply is also playing some part."