BT ready to pay Mercury pounds 90m in Oftel deal

BT EXPECTS to pay Mercury about pounds 90m as a result of a new agreement imposed by Oftel, the industry regulator, writes Mary Fagan.

The agreement covers the cost of Mercury linking into BT's network to complete calls and is backdated to June 1992. BT said it had already provided for the payment and it would not have an impact on this year's results. BT shares dipped 9p to 469p while Cable & Wireless, Mercury's parent, were up 3p at 490p. But the precise effects of the deal, which has been under discussion for months, were still unclear yesterday.

Mercury estimated it would receive a net benefit of pounds 50m this year from the renewed interconnection agreement, plus a one-off pounds 9m concerning work done in the past by BT, for which Mercury says it was charged twice.

Mercury also criticised the deal for not changing the entire structure of charges for interconnection to BT's network, on the grounds that it does not reflect BT's underlying costs. Mercury is expected to seek an independent review of the whole interconnection system. It is also unhappy about Oftel's ruling that it will have to pay a contribution to BT to cover its losses in the local line rental and connections business. BT claims to lose pounds 2bn a year in local network operations because regulation limits price rises while it is forced to supply uneconomic customers with lines.

BT said it subsidises the line business through higher call charges, and that other users should be forced to help by paying an access deficit charge.