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BT could reach a compromise with Ofcom to resolve the dispute over the future of its infrastructure division Openreach.

Ofcom recently ordered BT to legally separate from Openreach, so it is run as a distinct and legally separate company with its own board.

The regulator believes this is necessary as BT has not done enough to ease its concerns over competition, particularly its belief that BT has the "incentive and ability to favour its own retail business when making strategic decisions about new network investments by Openreach".

According to the Financial Times, shares in the BT Group dropped slightly during Thursday's stock market trading, as a result of speculation it could be seeking to reach a final agreement with Ofcom on the issue.

According to analyst body UBS, BT could "be willing to reach a voluntary agreement with Ofcom that would see more extensive fibre-to-the-home deployment and lead to higher capital expenditure in return for a milder form of legal separation".

UBS suggested the need to bring the matter to a head could be even more urgent in light of Vodafone's link-up with Virgin Media's parent company Liberty Global.

While there has been speculation that a full-scale merger would take place, so far the only development has been Vodafone and Liberty Global merging their operations in the Netherlands.

However, UBS believes the risk to BT's wholesale revenue from a more extensive merger could be about £250 million a year, should this occur.

Ofcom confirmed last week that it intends to take its proposals for a legal separation of BT and Openreach to the European Commission later this year.

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