BT to phase out wholesale division?

British incumbent BT is planning to abandon its wholesale unit and incorporate the division into its Openreach subsidiary, the Telegraph reports.

BT has reportedly appealed to communications regulator Ofcom for permission to merge BT Wholesale – which reported sales of £2.4 billion last year – into Openreach.

The move is designed to improve customer service and cut costs for the operator, and is likely to cause concern among rivals that already fear its power.

“We are always looking at ways in which we can better meet the needs of our customers and reflect market changes,” a BT spokesperson said.

“One question we are examining is how we can better service our wholesale communications provider customers currently addressed by Openreach and BT Wholesale.”

Openreach and BT Wholesale sell some of the same services to telecoms companies, and if plans go ahead, the combined unit would overtake BT’s outsourcing division – Global Services – to become the company’s largest sector, boasting a turnover of approximately £7.5 billion.

The merger would also cut costs and remove existing processes which see BT Wholesale buy network access from Openreach as outside parties do.

There are not expected to be any redundancies as a result of the union and James Barford, head of telecoms research at Enders Analysis, said that he expects it to “allow BT to take out some overheads, and some more substantial cost savings in terms of process simplification as well”.

“The main concern for competitors would probably be that the merger might make it easier for BT to wholesale bundles of services at a loss with regard to regulated input prices but then recoup its margin via Openreach,” Barford added.

BT is reportedly seeking approval in a matter of weeks, but Ofcom has said that a full public consultation is required.

“Ofcom does not discuss publicly any confidential dealings or correspondence from stakeholders,” the regulator said in a statement.

“In the event of Ofcom receiving an official request from BT to vary its undertakings, we would consider it with due process, involving a full public consultation with interested parties and industry.”