3. The Openreach Division

3.1 The Openreach line of business (the Openreach LoB) means the business of BT which consists of the products listed in paragraphs 3.2 and 3.3 below, the trading associated with them and the assets referred to in paragraph 3.5 below.

3.2 The Openreach Division (which means, taken together, Openreach Limited and the Openreach LoB) shall provide on behalf of BT plc those SMP Products which are provided over BT�s Access Network and BT�s Backhaul Network and which are important in supporting future downstream competition. These products currently include:

(a) Dark Fibre Access;
(b) MPF;
...
....

Link in the last line of this post. The relevant bit starts on Page 2.

In reply to a post by Bob_s2:

INCORRECT. IT becomes a totally separate legal entity and as stated previously it has its own company name and board. It will not report to the BT board as that would break company law for starters (other than for some regulatory requirements)

There's a chart floating about that shows the new company setup. I don't know if it's public but the details of what it shows ARE public.

Openreach CEO reports to the independent Openreach chairman and independent Openreach board. Who then report to BT Chairman and BT Group Plc Board. That's a FACT.

It also says that the Openreach CEO is "accountable to BT CEO for issues relating to BT's responsibilities as a publicly listed company".

So the Openreach Division essentially just becomes a shell division within BT Group that owns the assets and (presumably) the shares in the new limited company. I'm not really sure that's what people are going to be thinking of when they use the name Openreach in the future, especially as there's not to be any mention of BT on Openreach vans and equipment.

In reply to a post by RobertoS:

In reply to a post by AndyHCZ:

Rather interestingly, it looks like Adrian Kennard of AAISP had already been running a dormant company called Openreach Limited.

This entity was 'voluntarily' dissolved by Adrian Kennard last year.

Even more interesting is this search, the second result. Either someone else who has been forced off the non-Limited version, or a stooge. The new name certainly suggests a non-voluntary name change and the new one is of RevK's style.

That guy seems to spend an awful lot of his time worrying about BT Group.

To me the whole scheme is utter tripe. A stitch-up between BT and Ofcom to stop the criticism and demands for a split.

I admit I've only read the whole Ofcom/BT agreement once, hours ago, and two or three sections a few more times, but it doesn't really amount to much at all in my eyes.

It does seem to allow for more cooperation with Sky/TT/Vodafone over infrastructure development, possibly even new product development research, but largely a damp squib.

Edited by RobertoS (Fri 10-Mar-17 18:40:25)

I'm a little surprised BT's lawyers were not trying to protect their trademark with this one.

Either way though, it does seem like a waste of £12 to start the company, £13 for the AR01 and then £10 for striking it off.

I like the FT's summary of things:

Ofcom reaching a voluntary agreement for legal separation of Openreach where BT does nearly nothing and Ofcom crawls back into its box without anything it set out to achieve.

Goldman Sachs give a good summary:

1) We would not expect a legally separate Openreach to make materially different strategic or investment decisions compared to if it were a legal part of BT. Crucially, we believe Openreach, as a legally separate entity, will continue to prioritise �Future of Fixed� G.fast copper upgrade technology investment (subject to conditions set in an upcoming Ofcom �WLAR� review), which we see as value accretive. This compares to fibre-to-the-home (FTTH), which we see as likely value destructive.

While today�s news is a positive for BT in our view, we expect further ducts and poles regulation to come with the WLA.

2) It does not appear that BT has had to commit to any material FTTH roll-out to reach the agreement. This was a key concern expressed by investors, with a concern that FTTH would be value destructive

3) BT will continue to set the capex budget for Openreach. The limit with regards to capex decisions for Openreach is £100 mn and anything above needs to go to BT board.

4) While Openreach management will report to an independent Openreach board, the reporting line into BT Group will not be severed. Ofcom states �Executives will be accountable to the new Board. Openreach�s Chief Executive will in future be appointed by, and accountable to, the Openreach Board. BT Group will be able to veto appointment of the Openreach CEO, but only on notification to Ofcom. The Openreach Chief Executive will then be responsible for other executive appointments, and will report to the Openreach Chair � with a secondary accountability to the Chief Executive of BT, limited to necessary legal, fiduciary or regulatory obligations.� The BT CFO is on the Openreach board.

5) There is limited detail on the pension allocation.

Investor focus has been on Openreach treatment for the last 18 months and this has been seen as the key regulatory uncertainty. As such, we see today�s announcement as a material positive for the shares. But as we state above, we do not believe Openreach decision-making will change materially as to the method of upgrading the network or how to monetise it.

However, there are two more ongoing uncertainties for BT:

1) Wholesale Line Access Review (decision expect this �spring�) - this is potentially more influential to BT returns. In this, Ofcom will decide whether Openreach will have wholesale pricing flexibility on G.fast. This is critical to its monetisation of the network upgrade.

2) B2B - following the recent profit warning, this has resurfaced as a business unit with limited visibility, at least for investors.

So they are saying 2+2 still = 4 ?

That FT quote is a very good way of putting it. That live feed goes on a fair time, now I've found it.

I also found a fuller article which doesn't add anything we don't know. There seems to be another article on the subject, behind a "Premium" paywall I didn't know existed. It gives access to the e-paper.

I'm sure I had that when I first subscribed .

Edited by RobertoS (Fri 10-Mar-17 23:01:12)

It will be interersting to read the verdicts of LLU ISPs and how this might impact on their service provision, customer response and competetiveness.
But it feels like the continuation of the status quo but with the appearence of more even-handedness.

Gosh! It seems to be smoke-and-mirrors everywhere you look these days, doesn't it!