BT shares rose 5 per cent to 348p in early trading as the telecoms giant reached a deal with Ofcom over the future of its Openreach broadband unit.
Following two years of debate with the telecoms regulator, a deal was signed overnight on Thursday that will see 32,000 staff at Openreach – which owns the fibres and wires that supply the UK’s broadband services – transfer to a new legal company within the BT group.
Ofcom says it will promote competition and should remove the threat of a full breakup of BT and Openreach, as was being pushed for by BT’s major rivals.
For investors seeking a higher income, The Share Centre is recommending BT as a ‘buy’ and says its shareholders should feel a sense of relief that a long-awaited resolution has been reached.
The Share Centre investment research analyst Ian Forrest says: “Watchdog Ofcom said the ‘biggest reform of Openreach in its history is set to conclude’ citing that the move will provide a comprehensive solution to problems in the market.
“The update will come as a sigh of relief to both parties given that Ofcom was preparing to take the problem to the European authorities to force through the changes it wanted.”
He adds that as BT competitors Sky, TalkTalk and Vodafone have long complained of higher charges, poor service and a lack of investment, the Ofcom says the deal will see Openreach serving all its customers equally.
Accrding to Ofcom chief executive Sharon White, Openreach will now work “truly independently and taking investment decisions on behalf of the whole industry – not just BT.”
Forrest adds: “Investors interested in BT are likely to rejoice on the news today as it finally removes the element of concern surrounding the issue.
“Moreover, the company have retained ownership of Openreach but not the control so the fact that assets remain with BT will also come as a relief to investors. Subsequently, we continue to recommend BT as a ‘buy’ for higher risk investors seeking income.”