BT sees strong case for network investment if it stays intact

(adds further quotes, Minister comments)

By Paul Sandle

LONDON, Oct (HKSE: 3366-OL.HK - news) 19 (Reuters) - BT said there was a "strong case" for the group to invest more in fibre-optic broadband networks, but the numbers would not add up if it was forced to spin off its Openreach network division.

Chief Executive Gavin Patterson also warned that splitting up the British telecoms company - an option that the government says remains on the table - would require a long, difficult and costly separation of the group's pension liabilities.

Patterson said investment in Openreach, which is used by rivals such as Sky (Frankfurt: 893517 - news) and TalkTalk as well as BT's retail customers, had increased 30 percent in the last two years, providing a service that balanced speed, price and coverage.

"The case for more investment is quite strong," he said at the Broadband World Forum.

"There is going to be no shortage of opportunities to invest, the challenge for us as a company is to make sure the investment cycles are reasonable and we are able to make a return from them."

He said the case for further investment stacked up if Openreach was held within the wider group.

"If you are only looking at the wholesale side, the Openreach side, then some of these investments are going to be challenging business cases to make," he said.

He also said BT's pension scheme, already under increasing pressure from falling bond yields, would be further endangered by a "value destructive" split.

Britain's telecoms regulator Ofcom is approaching the end of a long-running review of the market that has been dominated by the question of whether Openreach should remain part of BT.

Sky, TalkTalk and Vodafone say an independent Openreach would deliver better networks and service, while BT argues the opposite.

Matt Hancock, the minister for the digital economy, said splitting up BT remained "on the table".

"My goal is clear: I am focused that we get (fast fibre-based) connectivity," he said earlier at the event.

"The route to that connectivity, both in terms of market structure, in terms of technology, in terms of the details along the way are of course very complex.

"(But) I think you can see from what I've said today and the measures we are putting through, our absolute determination to get that and we are not going to let anybody get in our way." (Editing by James Davey and Louise Heavens)