This compromised deal is the best pensions solution

To the casual observer, this might look like a terrible deal for BT. Openreach is to be legally separated from it. It will have its own board. BT’s logo will disappear from its network of vans. The needs of other telecoms providers will be considered when investment is under discussion and its 32,000 employees will transfer off BT’s books.

But, actually, it’s quite the opposite. Although it’s some way from the FTSE 100 telecoms giant’s opening negotiating position when Ofcom’s Sharon White began the regulator’s 10yearly look at the UK’s communications firmament almost two years ago to the day – on March 12 2015 – it is actually a very constructive deal for the FTSE stalwart.

The agreement essentially ring-fences Openreach, BT’s safest and most cashgenerating business, with a rule similar to those that force banks to ring-fence their “safe” retail operations from “riskier” investment banking businesses.

But although legally separate, Openreach is not entirely devoid of BT’s clutches. Importantly its cash will still flow back to BT, its accounts will still be consolidated in the group’s, and although Openreach boss Clive Selly now reports to Openreach chairman Mike McTighe and its independent board, he will have a dotted reporting line to BT boss Gavin Patterson in some important areas.

One analyst, slightly cruelly perhaps, yesterday branded the agreement “Openfudge”. At one level, he is right. But in reality what this delivers is a halfway house approach which allows telecoms rivals like Sky and TalkTalk a say in how Openreach’s investment is spent, but with the financial backing of a behemoth like BT.

What it also delivers is certainty – something BT investors welcomed yesterday as its shares traded up as much as 5.75pc at one stage – against years of uncertainty if White had pushed this through to regulators in Brussels.

Central to negotiations between the two sides – a point that Patterson has not shied away from making – has been the BT pension scheme and its deficit of £10bn or so.

Patterson was keen to have a deal in place before the telecoms giant’s next triennial valuation in June, a valuation which will reset how much BT must pay into the deficit, and how much it can hand back to investors.

White also clearly listened to advisers who warned that fully separating from Openreach – which could have been the outcome had European regulators been involved – could have cut the pension cord and weakened the covenant. The outcome, though somewhat of a compromise, is the best way of dealing with that complex pension conundrum.

As with any protracted negotiation, the implementation will be just as important as the wrangling and BT must do all that it can to ensure that Openreach is a force for good in our increasingly digital landscape.

‘BT must do all that it can to ensure that Openreach is a force for good in our digital landscape’