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Openreach Sale Could Spark Consolidation for UK Fibre

BT chief executive Philip Jansen has sent waves of speculation through the telecoms industry by saying at a conference that he would be “open-minded” about selling a stake in Openreach.

Such a sale has long been rumoured, but his comments suggest that BT could be one step closer to making a deal. This follows a year that has seen share prices slide by more than a third as limited growth, huge amounts of debt, and a large pension deficit take their toll on the company balance sheet.

At present share prices, BT is valued at around £12 Bn – a historic low which is thought to have made the company a target of a takeover bid by a number of major private equity firms.

Meanwhile, the legally separate infrastructure division of Openreach has been valued at prices up to £25 Bn, making a potential sale attractive.

The deal would likely face significant uncertainty from Brexit, and attract scrutiny from both the Competition and Markets Authority (CMA), and telecoms regulators (Ofcom). This was acknowledged by Jansen, who said at the conference he can’t see a deal being made “until well after we’ve agreed the regulatory framework, which isn’t until March, April next year.”

But if it passes regulatory muster, the divestment of Openreach could open up the fibre networking market, turning dozens of small alt-nets across the country into ripe targets for acquisition.

“The divestment of Openreach makes strategic and financial sense. The deal would give BT much-needed capital to invest in its core business, and give Openreach a more appropriate ownership structure to focus on building and maintaining full fibre networks.”

“Excitingly, for the UK Altnet community, funds investing in Openreach are likely to want to enhance their returns through M&A, and this could fire the starting pistol on long-anticipated sector consolidation.”

Marcus Allchurch | Partner

Marcus joined Acuity in 2014, before which he held senior leadership and corporate finance positions with some of the UK’s most successful advisory and telecoms businesses. Roles with EE, KPMG Corporate Finance and BDO Corporate Finance have seen Marcus work in the UK and across the globe with successful entrepreneurs seeking exit, and at board level with multi-national corporates looking for growth through organic and inorganic investment.

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