SIR Christopher Bland, the chairman of BT, yesterday signalled that the telecoms group was unlikely to allow its retail division to break away from the rest of the business, adding to speculation of a boardroom rift.

The chairman overruled Pierre Danon, head of BT’s retail operation, who for months has been lobbying for the chance to create his own broadband internet product. BT Retail is forced to buy its capacity from BT’s wholesale business at prices that M Danon regards as uncompetitive.

Sir Christopher, who until now has sat on the fence over the issue, said that allowing BT Retail to get its way “is not our preferred option”. He was concerned that the idea could lead to BT’s wholesale arm losing revenue from its biggest customer.

M Danon wants to be able to invest tens of millions of pounds in installing broadband equipment of his choice in BT’s telephone exchanges. This process, called “local loop unbundling”, would place BT Retail on a par with BT’s competitors, such as Cable & Wireless.

Sir Christopher’s preferred option would be for the telecoms regulator to allow BT Wholesale to charge lower prices for broadband products. BT, unlike rivals, is prevented from offering cut-price deals to gain market share.

The chairman denied that there was a boardroom rift, saying that there was simply debate.

The discord overshadowed BT’s second-quarter results, unveiled by Ben Verwaayen, the chief executive, which boasted the strongest rise in revenues at the group for almost three years. Revenue from IT and broadband products shot up 36 per cent to £1.03 billion.

So-called “new wave” products are seen as vital to BT’s future as its traditional, fixed-line business slumps, down 6 per cent on the same period last year.