Brussels may scupper the bid to split BT from Openreach arm

PLANS to legally separate BT from its Openreach arm to improve broadband provision in the UK could be blocked by Brussels in a move likely to spark anger among BT’s rivals.

Telecoms regulator Ofcom said last week that it would begin moves to force a legal separation, but investment bank Goldman Sachs pointed out that the European Commission would have to approve Ofcom’s plan. The bank predicted that Brussels would create considerable obstacles.

Goldman Sachs said: ‘We expect a high hurdle rate for EC approval of the plan. There is no precise definition of market failure and proportionality that Ofcom cites as driving its desire for legal separation as a remedy. But they would likely need to be viewed as extreme for the EC to approve Ofcom going beyond standard regulatory remedies.’

Ofcom is calling for full legal separation of BT from Openreach after it concluded that BT could favour its own retail broadband arm when making strategic decisions about Openreach.

BT is resisting Ofcom’s terms, saying that such a move could affect BT pensioners and drawing attention to the fact that it has obligations to shareholders to retain control of the business.

The broadband arm operates the wires and other hardware used to provide broadband on behalf of BT and rivals including Sky and TalkTalk. BT’s competitors claim Openreach provides slow speeds and a poor service.

BT said: ‘We put forward proposals in July that we believe are fair and sustainable and that meet Ofcom’s objectives. We are implementing these proposals and have just appointed Mike McTighe to be the first chairman of Openreach.’