BT given break-up warning over Openreach performance

LONDON (Reuters) - Britain's biggest telecoms provider BT (BT.L) should be forced to break up the group unless it improves service levels at the Openreach business that provides the broadband lines used by rivals and its own customers, MPs said on Tuesday.

A parliamentary committee said that BT has underinvested in infrastructure by as much as hundreds of millions of pounds a year, citing an independent report it had commissioned, increasing pressure on telecoms regulator Ofcom to take a harder line with the company.

Ofcom has said there should be wider separation between Openreach and its owner to boost investment and improve broadband access for households, but the Culture, Media and Sports Committee wants to see service levels improve accordingly.

"If BT fails to offer the reforms and investment assurance necessary to satisfy our concerns, Ofcom should move to enforce full separation of Openreach," it said, noting that capital investment in the business had been broadly flat from 2009 until this year.

BT said it was "disappointed to be criticised for having invested more than 1 billion pounds a year in infrastructure when the UK was emerging from recession and rival companies invested little".

It said Openreach investment was 30 percent higher than it was two years ago and would grow again this year, adding that it was making significant progress in improving service levels.

"We are already pumping in hundreds of millions of pounds of extra money and we have also committed to invest a further 6 billion pounds over the next three years," the company said.

It said it hoped to reach a settlement with Ofcom on increasing the autonomy of Openreach.

TalkTalk (TALK.L), a BT rival and a long-standing critic of Openreach's performance, said the report put beyond doubt the need for radical reform.

"As Ofcom considers how to improve Britain's broadband, it should feel emboldened to know it has cross-party political support to be radical," Chief Executive Dido Harding said.

Shares in BT, which have fallen 10 percent since Britain voted to leave the European union last month, were down 0.6 percent at 1015 GMT.

UBS analyst Polo Tang said the report was likely to be negative for investor sentiment, but concerns about calls for more investment in broadband infrastructure may have been already discounted given the underperformance of the shares so far this year.

(Reporting by Paul Sandle; Editing by David Goodman)