Ofcom paves way for BT to lift wholesale charges by 4 per cent
BT could pass on cost of plugging its £9.4bn pensions deficit, regulator suggests
Wednesday 02 December 2009
The communications regulator Ofcom could allow BT to increase its charges to wholesale customers such as BSkyB and Carphone Warehouse to help plug its £9.4bn pensions deficit.
The watchdog signalled yesterday that one outcome of its review into potentially taking pension costs into account when setting BT's wholesale charges could allow the group to raise its prices by 4 per cent.
BT welcomed Ofcom's move, saying it was "entirely reasonable that we should be able to recover an appropriate share of our pension deficit costs through regulated charges".
The telecoms group pointed to such precedents as Ofwat's approach to the water industry, Ofgem's approach to the power transmission and distribution companies, and the Office of Rail Regulation's stance on similar issues at Network Rail.
Morten Singleton, an analyst at Collins Stewart, said it was "another area where regulation could benefit" BT after the company was allowed to offer bundled telephony, internet and television services. BT recently agreed to pay £525m a year into its pension fund until 2011 to make good the deficit and this represented "no small cost at BT", Mr Singleton added. Ofcom sets the prices BT's wholesale business can charge; in the past this has excluded such pension deficit "repair" costs.
"In recent years, pension deficit payments have become an issue for many companies across the whole of the UK economy," Ofcom said in its statement yesterday.
"Because of the financial significance of these payments in the case of BT, Ofcom considers it right to consult on whether or how such payments should be factored in when setting BT's regulated prices."
BT offers wholesale services to rival telecoms companies through its Openreach division, whose network covers 30 million home and business customer lines in the UK.
Its customers reacted angrily to Ofcom's move yesterday. A spokesman for Sky said: "Forcing customers to bail out BT for the mismanagement of its pension fund would be plain wrong. This would be a reward for failure that discourages BT from managing down its deficit." The pension fund is managed by Hermes, and BT sources pointed out that Ofcom had said the returns were in line with the market.
The regulator said it had not taken a view yet but that changes "would not necessarily be felt proportionately by consumers".
Ofcom will publish a further consultation next spring. Will Draper, an analyst at Execution, said: "There is sure to be massive resistance from the likes of Carphone Warehouse and Sky, which means the outcome of the review is not a forgone conclusion."
- 1 Sofyen Belamouadden murder: The inside story of a crime that horrified Britain
- 3 Company breaks open Apple Watch to discover what it says is 'planned obsolescence'
Top 20 misconceptions people believe are true
Sofyen Belamouadden murder: The inside story of a crime that horrified Britain
'We're not heroes, just tourists': Swedish police officers on holiday stop vicious assault on New York subway
Nepal earthquake: More than 1,100 killed across four countries and in Mount Everest avalanche
Australian student Tommy Connolly, 23, adopts his pregnant, homeless 17-year-old cousin to give her a chance at 'a better life'
The sickening truth about food banks that the Tories don't want you to know
Migrant boat disaster: Ukip candidate mocks victims in sickening Twitter post
Nigel Farage wants the BBC to stop making programmes like Doctor Who, Strictly Come Dancing, and Top Gear
Global warming: Scientists say temperatures could rise by 6C by 2100 and call for action ahead of UN meeting in Paris
General Election 2015: Britain would become a 'communist dictatorship' under Ed Miliband and Nicola Sturgeon, claims wife of Michael Gove
Rupert Murdoch berated Sun journalists for not doing enough to attack Ed Miliband and stop him winning the general election
iJobs Money & Business
£50000 - £55000 per annum: Ashdown Group: Business Analyst - Financial Service...
£18000 - £23000 per annum + OTE £45K: SThree: At SThree, we like to be differe...
£20000 - £25000 per annum + competitive: SThree: Did you know? SThree is the o...
£22000 - £24000 per annum: Recruitment Genius: This is an opportunity to join ...