The potential break-up of BT was placed at the heart of a strategic review of the telecoms sector by regulator Ofcom.

The issue was listed among five fundamental questions to be considered by the new watchdog by the autumn and analysts believe the final report on the future of the industry at the end of the year may recommend splitting BT's network infrastructure from its retail arm.

BT yesterday signalled its intention to meet the threat head-on, dubbing the question "an old chestnut with an obvious answer".

A spokesman said: "No other nation has contemplated the break-up of a former incumbent and the arguments against such a move are well rehearsed. "The UK economy benefits from a strong, vibrant and competitive BT."

He said hundreds of other businesses and suppliers benefited from BT's investment in telecoms and added: "An end-to-end supplier is the best way to achieve that."

Competitors such as Centrica Telecoms have sought the break-up of BT after struggling to eat into its 70 per cent share of the fixed-line market.

Telecoms expert Christian Maher, of stockbrokers Investec, said earlier this week that the review was likely to be radical.

He said: "We have speculated since the review was commenced at the turn of this year that a split of BT was on the agenda."

BT pledged to work with Ofcom on the strategic review, which it said was balanced and well thought-out overall.

Consultation would take place on questions such as where effective and sustainable competition could be achieved in the UK telecoms market.

It will also consider the investment in next-generation networks and levels of regulation.

The regulator will assess responses and present final recommendations at the end of the year.

Thursday April 29, 2004