BT share price: Vodafone calls for structural separation of telco

Rival telecoms groups continue to press for a structural separation of BT Group Plc (LON:BT.A), involving spinning the Openreach infrastructure unit out of the former state monopoly. The latest call for the break-up has come from mobile phone giant Vodafone Group Plc (LON:VOD), as part of a once-in-a-decade review of the UK telecoms sector by the industry watchdog Ofcom.

A report on BT margins compiled by the mobile group is being submitted to the regulator, the Guardian said yesterday. According to Vodafone’s data, over the past eight years, BT has made a return of £16.7 billion by selling products to other telecoms groups. This is more than the £11.3-billion rate of return required to compensate investors, a benchmark set by Ofcom, the mobile carrier says. The benchmark is used by the regulator to help determine the prices at which BT should sell wholesale access to its networks.
Vodafone’s report also touched upon the quality of service provided by BT, claiming that it was declining. The mobile group said that number of faults on lines had increased, while the time taken to supply competitors with superfast ethernet lines had been below target since 2012.
The creation of Openreach, the division in charge of BT’s phone and broadband networks, came as a direct result of Ofcom’s previous review of the telecoms sector a decade ago. BT was required by the regulator to run the unit separately from the rest of the group and ensure that it provides the same service at the same price for all companies in the market including BT’s rivals. The regulations spurred rapid growth in home broadband, allowing for other telecoms firms to launch competing services on BT’s network. However, rivals are now pressing for more radical measures.
“We absolutely think structural separation of BT is something that should be part of the digital communications review,”Vodafone UK regulatory affairs head Matthew Braovac said, as quoted by the Guardian.“We support it, we think it should happen. We think it is a good way of cutting through an otherwise intractable set of regulatory problems.”
In response to the report, a BT spokesman said: “This report is ludicrous and it was ludicrous two years ago when it first surfaced … BT is subject to stringent regulation in the UK with many of our prices set by the regulator. We are confident we meet those obligations, that the calculations in this report are flawed and that the figures claimed are wildly inaccurate.”
Ofcom launched the latest review earlier this month, saying that over the next few months it would meet with companies, consumer groups, the government and other interested parties and publish a discussion document in the summer. The regulator expects to publish its initial conclusions around the end of the year.
In today’s trading, BT shares were down 1.9 percent at 461.60p, as of 09:31 UTC. The stock has risen nearly 15 percent since the start of the year. The company’s market capitalisation currently stands at £38.8 billion.
As of 10:02 GMT, Thursday, 26 March, BT Group plc share price is 461.55p.