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Business Analysis & Features

Nick Clark: Sigh of relief at telecoms giant but the uncertainty continues

So BT has survived the prospect of a devastating strike, for now. Executives will have breathed a huge sigh of relief after the surprise news that legal technicalities – principally concerning the definition of "a workplace" for its mobile workforce – would invalidate a move by its 50,000 engineers and call-centre workers to down tools.

Yet they will know this is just a stay of execution. The market was shut by the time the news emerged and avoiding a strike that could have started next Monday should be well received. Yet the ongoing uncertainty – once again – will dampen much of the enthusiasm.

This is not the only uncertainty facing BT. In February, the pensions regulator voiced "substantial concerns" about its strategy for dealing with a £9bn black hole in its pension fund, pointing out that its timetable for doing so was a lot longer than might be expected.

The pensions issue has long held sway over the company's shares and they dropped 8 per cent after the regulatory uncertainty emerged. There are also doubts about BT's "crown guarantee," introduced when it was privatised, and the company is heading to court to secure the state protection of its pension fund should it go bust. The case is expected to drag on until October.

All this has overshadowed news that BT Vision should finally lift itself off the mat after striking a deal to screen Sky Sports, and BT's global services (GS) business is stronger than it was a year ago. Managers acted to turn around a business that had plunged into the red following a disastrous performance from GS. Cost-cutting was instrumental in returning it to a £1bn profit last year.

Now BT has to avoid stumbling back into a strike that would cause untold damage to its service and reputation. The company is seeking urgent talks with the union and is likely to offer a 5.1 per cent pay rise over two years.

The argument really boils down to one issue: whether BT will go above a 2 per cent pay increase for workers in the first year. So far, it has steadfastly refused to budge, and if it maintains that position, it can prepare for further ballots on industrial action.

BT has already claimed that a national strike would encourage customers to leave BT, leading to job losses at the company.

The CWU is left with the problem of ironing out all the legal issues that BT could bring to stymie the potential strike a second time. Yet talk of setting legal precedents suggests the union is willing to see the process through to the end.