BT share price: CPS joins calls for Openreach separation

on Feb 18, 2016
Updated: Oct 21, 2019

BT Group Plc (LON:BT.A) has faced fresh calls to divest its infrastructure unit from the Centre for Policy Studies, a think tank, which said that “the current infrastructure market appears anti-competitive” and existing broadband model left BT competitors at a major disadvantage. But at the same time, CPS expressed doubt over whether Ofcom, the communications regulator, had the power to enforce a BT-Openreach break-up and recommended the matter to be referred to the Competition and Markets Authority instead.

Ofcom is expected to publish next week its proposals for the next decade of the telecoms sector based on the findings of its overarching review of the industry. Openreach has been a major focus of the review, with the watchdog considering whether it is necessary to make changes to the current broadband model in Britain. Ofcom has said that it will examine a structural separation of BT and Openreach, along with some more moderate measures. But the CPS said yesterday that the watchdog’s power had been overestimated.

“Ofcom does not have the power to split BT from BT Openreach – despite this being implied,” Dan Mahoney, head of economic research at CPS, said, as quoted by The Telegraph.”Ofcom could, however, refer this issue to the Competition and Markets Authority, if it feels appropriate to do so.”
The think tank cited the damning ‘Broadbad’ report, which claimed that the current status quo was damaging to the quality of the broadband service for many households and businesses in Britain, consequently costing the British economy an estimated £11 billion. The CPS agreed with the claims made in the report and added that “[the current broadband infrastructure market is] undesirable because there’s a big conflict of interest”.
“BT runs the UK’s broadband infrastructure and service providers are forced to use this infrastructure,” Mahoney said. “Furthermore, BT uses its own infrastructure to provide internet services to customers, which is a major disadvantage to its retail broadband competitors.”
In today’s trading, BT shares were up 0.9 percent at 465.80p, as of 10:28 GMT. The stock has fallen 1.3 percent since the start of the year and the company’s market capitalisation currently stands at £46.4 billion.
The 21 analysts offering 12-month price targets for BT have a median target of 535.00p, with a high estimate of 600.00p and a low estimate of 240.00p. As of February 13, 2016, the consensus forecast amongst 25 polled investment analysts covering BT had it that investors should hold their position in the company. The same consensus estimate has been maintained since November 27, 2015, when the sentiment of investment analysts deteriorated from “hold”.
As of 11:19 GMT, Thursday, 18 February, BT Group plc share price is 467.93p.