BT shareholders reject idea of break-up

BT Group yesterday answered Ofcom's question as to whether the telecoms giant should be demerged by dismissing the idea, insisting instead that its current form was central to the health of the UK economy.

Shareholders in BT also gave the idea of splitting BT into its retail and wholesale divisions a lukewarm response.

The possibility of demerging BT was floated by Stephen Carter, the chief executive of Ofcom, yesterday when he announced phase one of a wide-ranging strategic review of the telecoms industry - the first in 13 years. The initial consultative process will last until June 22 when the regulator will propose a number of policy options for regulating the industry. A third phase at the end of the year will present Ofcom's recommendations and future approach to regulation. At the heart of the first phase are five key questions that Ofcom is seeking responses to. One of them reads: "At varying times since 1984, the case has been made for structural or operational separation of BT, or the delivery of full functional equivalence. Are these still relevant questions?"

BT said Ofcom was right to ask the question about splitting the company in two, but added that the answer was self-evident.

"No other nation has contemplated the break-up of a former incumbent and the arguments against such a move are well rehearsed. The UK economy benefits from a strong, vibrant and competitive BT."

Asked if there was much appetite for a demerger of BT among its shareholders, Chris Adams of Morley Fund Management, which owns more than 2 per cent of the company, said: "As a shareholder in BT, not really. As a shareholder in alternative telecoms carriers, possibly would be the answer. The devil would be in the detail."

The other questions which Ofcom is consulting on are: What are the key attributes of a well-functioning telecoms market in serving the interests of citizen-consumers? Where can effective and sustainable competition be achieved in the UK telecoms market? Is there scope for a significant reduction in regulation, or is the market power of incumbents too entrenched? How can Ofcom incentivise efficient and timely investment in next generation networks?