Auditel Consultant:
Nick Beaumont-Jones

BT rivals face price rises to plug pension gap

01 Dec 2009 | Filed under: Industry Comment

An extract of the story in today’s Times:

Ofcom, the telecoms regulator, launched a consultation today into BT’s burgeoning £9.4 billion pension deficit, which could force the company’s customers and rivals to pay higher charges to cover the gaping shortfall.

The review will determine whether Openreach, the wholesale arm of BT, which leases phonelines to third-party phone and broadband providers, including Carphone Warehouse and BSkyB, which is 39.2 per cent owned by News Corporation, parent company of The Times, should be allowed to increase its charges to take BT’s pensions shortfall into account.

Companies’ bills could rise by up to 4 per cent, the regulator said, if it pushes ahead with its plan, which could ultimately be passed on to retail customers as an increase in phone and broadband charges.
Ofcom’s announcement, which is expected to prompt a fierce backlash from rivals, sent shares in BT up 1.55p or 1.11 per cent, to 141.61p. Ofcom said it believed that it was in the interest of stakeholders to decide whether to allow the telecoms provider to raise charges.
“It’s not a foregone conclusion that prices will rise,” a spokeswoman said. “We may keep the status quo.”
The review was in part prompted by lobbying from BT, which had, it said, argued that Ofcom’s approach was at odds with regulators in other sectors.
(The pension fund) had liabilities of more than £40 billion and a pre-tax deficit of more than £9 billion, as at September 30, 2009.
Nearly three times as many pensioners receive benefits as active BT employees contribute to the scheme.
Last week the group reported an improved performance in the first half of the year with a 2 per cent rise in earnings to £1.4 billion — its first growth at that level since the first quarter of last year.

For the full story visit: http://business.timesonline.co.uk/tol/business/industry_sectors/article6938593.ece