Ofcom refuses BT charges hike
The share price of BT fell sharply after it was announced by industry watchdog Ofcom that the company could not ask wholesale customers to pay more in order to plug BT's huge pension deficit.
BT had asked Ofcom to reconsider the prices it allows the company to charge other communications providers to deliver services to consumers.
Ofcom already factors in the cost of running the pension scheme when it decides the amount BT can charge. However BT wanted that to be extended to take into account the extra costs of topping up the deficit on its final salary pension scheme deficit.
No justification for charges hike
That is understood to be currently around £7.5bn ($11.6bn). Ofcom said it had not seen any compelling evidence that would justify changes to prices set for BT's wholesale Openreach service - which leases dedicated lines to companies - to take account of reducing the pensions deficit.
BT had hoped for more flexibility from Ofcom pointing to the fact that other companies have been allowed to rebuild their pension schemes by increasing regulated charges.
A statement from the company said: "It is right that Ofcom has considered this matter, as there is regulatory precedent from other industries for BT to be able to recover some proportion of its total pension costs through regulated charges."
BT Review
The company added it would be reviewing Ofcom's findings in detail. BT had been hopeful that a positive ruling would have resulted in tens of millions of pounds in revenue.
As things stand the scale of BT's pension deficit remains colossal with little in the way of a fair and feasible solution to plugging the gap imminent.
Published: Daily Finance, 23rd July, 2010
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