British telecoms giant BT says it will legally separate its broadband unit Openreach to cease concerns over competition in the sector. Created by BT in 2005, Openreach maintains tens of millions of copper and fiber lines connecting telephone exchanges to homes and businesses across the UK. Controversy arose when BT's rivals, including Sky and Vodafone, said the existing set up gave BT a competitive advantage. UK watchdog Ofcom agreed, forcing BT to make changes.
BT announced that 32,000 employees will transfer to the new Openreach Limited which will be "one of the largest such transfers in UK corporate history". The company said in a statement, "BT and Ofcom have reached an agreement on a long-term regulatory settlement that will see Openreach become a distinct, legally separate company with its own board, within the BT Group".
BT added that the agreement is "based upon voluntary commitments submitted by BT that the regulator has said meet its competition concerns." Ofcom chief executive Sharon White said the move marked "a significant day for phone and broadband users" in the UK.
In a statement Ms. White said, "The new Openreach will be built to serve all its customers equally, working truly independently and taking investment decisions on behalf of the whole industry - not just BT."
The announcement received praise from BT's investors, with BT shares up 4.5 percent at 344.90 pence in early trading, topping London's benchmark FTSE 100 index, which was up almost half a percent overall.
"BT's rivals such as Sky, TalkTalk and Vodafone, which use Openreach's network to offer broadband to consumers, have long complained of high charges, poor service and failure to invest in the division," noted Ian Forrest, investment research analyst at The Share Centre.