BT may get pension cash from rivals

Dec 2 2009 by Iain Laing, The Journal

BT’s rivals could face higher charges if they are pressed into sharing the burden of plugging its £9.4bn pension gap.

One option under review at telecoms regulator Ofcom would see firms such as Carphone Warehouse and BSkyB pay up to 4% extra for using wholesale telephony from BT to take account of its pension deficit payments.

Consumers could face higher charges themselves if any increases are passed on.

Ofcom said it was not committed to making changes to the regulated charges set for BT’s wholesale arm Openreach. But it said pension deficits were now an issue for many companies across the whole of the UK economy.

“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,” it added.

BT revealed last month that its pension hole had ballooned to £9.4bn gross of tax as at the end of September, compared with £4bn in March.

The group is paying £525m extra a year into its final salary pension fund to help fill the deficit.

BT has long lobbied for these charges to be taken into account when Ofcom sets the regulated fees for renting its copper-based landlines to telecoms services providers.

The group yesterday cheered the launch of Ofcom’s investigation, although it stressed it was too early to conclude the outcome of what could be a lengthy process.

“We welcome Ofcom’s consideration of this issue and consider it entirely reasonable that we should be able to recover an appropriate share of our pension deficit costs through regulated charges,” said BT. “There is good regulatory precedent for pension deficit costs to be recovered in this way in other regulated industries.”