BT, which recently announced pre-tax profits of pounds 2.2bn for the last nine months of 1993, was also making one-off payments to thousands of other managers.
BT managers were 'furious' at the decision and many took spontaneous protest action outside company offices, including the headquarters in central London.
The company said its first imposed wages settlement came after a study of pay at other firms. With pay rates ranging from pounds 26,000 to almost pounds 35,000 a year, BT said it found that most of its managers were being paid above the average.
The top 10 per cent of performers are to get an average increase of 3 per cent from April. One-off payments - averaging pounds 800 - will go to 85 per cent of BT's 26,000 junior and middle managers, while 15 per cent will have their pay frozen.
Peter Archer, director of employee relations, said BT had to take a 'more measured position' on the level of its managers' pay.
He said it was a 'matter of regret' that agreement had not been reached, but added: 'We believe that what we are doing is a good deal for our managers and is very sensible for the company.'
Leslie Manasseh, national organiser of the Society of Telecom Executives, said: 'The company is making enormous profits and is cutting staff so productivity is increasing, yet they have decided to freeze pay rates. Thousands of managers will get nothing at all. If BT thinks it can bulldoze this through, then performance and commitment will fall.'
Iain Vallance, the chairman of BT, and members of the board had their pay frozen last year, although they will get bonuses.