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By | Christopher Williams 3rd October 2008 12:01

BT plots massive Openreach outsourcing deal

Engineers could face open exit

Exclusive BT is secretly considering outsourcing the operation of its heavily regulated and unionised network access division Openreach, sources have told The Register.

Major outsourcers are currently preparing bids for what would be a multi-billion pound contract. It's understood that EDS and Alcatel-Lucent are among the contenders.

Asked to comment on the alleged plans, BT said: "Openreach continually reviews all aspects of its cost base, operational efficiency and customer service. At any one time we may have a number of programmes in operation or under consideration with outside agencies, many of whom currently partner with us on a wide range of operational activities."

Regarding the alleged involvement of Alcatel-Lucent and EDS, it said: "We do not comment on rumour or speculation."

Openreach was established after Ofcom's strategic telecoms review in 2005. BT must abide by an agreed set of undertakings to give rival ISPs and telcos equal access to exchanges and the "last mile" of the national network.

According to BT's latest annual report (pdf), Openreach has 25,000 engineers, who would probably be offered significantly less generous benefits under an outsourcing deal, according to industry sources.

The Communications Workers Union, which represents BT technicians, said it was not aware of the plans.

It also employs 1,100 customer service staff.

An Ofcom spokeswoman said there were no barriers to stop BT from employing another company to run Openreach's operations, assuming the regulatory undertakings are kept to.

Alcatel-Lucent and EDS did not immediately return calls and emails requesting comment.

BT Global Services already has a £176m outsourcing contract with Alcatel-Lucent, signed in 2006. Former BT CEO Ben Verwaayen is now CEO of Alcatel-Lucent.

Openreach's last reported revenues, for the three months to June 30 this year, were £1.3bn. Most of those sales come from other BT divisions - external revenues from local loop unbundlers were £234m. BT is currently in talks with regulators to raise the price caps imposed on Openreach. ®

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