Vodafone plans Openreach tie-up to upgrade broadband network

VODAFONE is in talks with BT’S network subsidiary Openreach about a groundbreaking joint investment in new ultra-fast fibre-optic broadband for British cities.

The two companies are in what are described by industry sources as “early but serious” discussions about combining their financial strength to build large-scale new infrastructure to replace ageing copper telephone lines.

It is understood Vodafone plans to target the upgrades at major metropolitan areas initially, to allow it to provide faster and more reliable broadband to swathes of homes and businesses quickly.

The proposed joint investment has uncertain costs, with the price of new lines falling and under negotiation, but could run into billions of pounds over time. It would signal a radical shift in Britain’s telecoms industry.

Previously the only large-scale infrastructure investors have been Openreach – which provides regulated wholesale access to its network to BT’S rivals including Vodafone, Sky, and Talktalk – and Virgin Media.

The cable operator is the only retailer of broadband via its network and is currently able to trade on its speed advantage over the Openreach network. Large-scale investment in cities by Vodafone and Openreach could threaten Virgin Media by leapfrogging its technology.

It could also kill off speculation that Vodafone could one day merge with Virgin Media’s parent company Liberty Global, or hand its UK mobile operation over in exchange for cable assets in Europe. Sources said the regulations faced by Openreach were currently viewed as a potential hurdle to a joint investment with Vodafone.

Under rules set by Ofcom, the former state telecoms monopoly must sell access to its network on equal terms to all retailers including BT’S consumer arm. Vodafone is understood to be demanding a period of exclusivity over any new infrastructure, however, to allow it to build its position in the market. It is understood that Openreach and Ofcom have held early talks over how the regulations could be relaxed to allow Vodafone to invest.

The operator could have sole use of new broadband lines at first, for instance, and access to faster speeds than rivals once the infrastructure is opened up to competition. Sources suggested

deficit in July may raise hopes that the Government efforts combined with a growing economy and high employment could limit the rise.

Ruth Gregory, UK economist at Capital Economics, said the surplus is likely to be a “temporary blip”.

She said: “July’s public finances brought some cheer for the Chancellor. But this will probably prove to be just a temporary blip, rather than the start of a more sustained improvement.”

Economist Philip Shaw at Investec said: “So far this year, the deficit is rising at an average of close to £0.5bn per month.

“Were this to be maintained over the remaining eight months, borrowing over 2017-18 as a whole would rise to £50.8bn.”

A spokesman for the Treasury said: “We are making good progress in strengthening our public finances and living within our means.

“Our national debt, at £65,000 for every UK household, is still too high. That is why we have a clear fiscal plan to reduce our debts and build a stronger economy for every household.”

The ONS said public sector net debt, a figure which excludes the borrowing undertaken to bail out the banks in the financial crisis, has jumped by £143.9m to £1.76 trillion since July last year, and now equates to 87.5pc of GDP.