BT fights a rearguard action

Telecoms giant offers rivals cash after Oftel launches competition probes, reports Clayton Hirst
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BT is attempting to see off a series of investigations into alleged anti-competitive behaviour, in one case by offering to hand out thousands of pounds to competitors "as a gesture of goodwill".

Telecoms regulator Oftel is examining whether BT restricted competition in the deregulated directory enquiry market and also staged a so-called "dirty tricks" campaign to win back customers.

In response to these claims, BT has written a series of letters to its rivals urging rapprochement and has hinted that it may challenge Oftel.

Oftel will next week order BT to halt the distribution of phone books carrying a front-page advert for BT's new directory enquiries number. Oftel is investigating claims that BT "hijacked" the directory, which is funded by a 20p charge on every phone bill. Rivals were allowed to advertise only on a leaflet inside.

The Independent on Sunday has obtained a letter from BT to the operators, offering to reimburse their costs. Written by BT Retail's chief executive Pierre Danon, it says: "I am conscious of the bad feelings which have been created. In order to correct this, as a gesture of goodwill and without admission of moral or legal liability ... I have decided to refund the costs."

BT claimed that a single advert placed inside the directory cost £13,800. However, advertisers dispute this, saying the price was £30,000.

Liam Young, chief executive of directory enquiries firm Conduit, said: "BT spent months negotiating with us to put a small leaflet in the phone book. At no time was it suggested that BT would itself advertise on the front of the book. This is why BT is offering to pay the money back."

Ian El-Mokadem, managing director of Centrica Telecoms, said: "BT is effectively exploiting its monopoly in one market to gain a stranglehold in another."

Separately, Oftel has asked the Advertising Standards Authority to investigate BT's press adverts for its directory enquiries number. The regulator is concerned that the adverts could have been mistaken for a public announcement.

The second Oftel investigation is into claims that BT deliberately switched back customers who had defected to rivals. Last month Oftel issued a draft ruling limiting BT's powers. But in a strongly worded letter to the regulator, BT claims the proposals are "seriously flawed" and that it "challenges the legality of the director-general's draft direction".

A BT spokesman said it was "too early to speculate" whether it would challenge Oftel.

A few weeks earlier, Mr Danon again wrote to his competitors urging a "high-level meeting to discuss the issues openly". Most operators rejected the offer.