June 18, 2010 10:31 pm

BT warns of strike danger to network upgrade

A national strike at BT could scupper the telecommunications company’s plans to build a superfast broadband network past 4m homes by the end of the year, according to one of group’s top managers.

Steve Robertson, head of Openreach, the BT subsidiary responsible for constructing the network, told the Financial Times that the strike – which would be the first in 23 years – sought by the Communication Workers Union could mean that the company missed its 4m target.

Such a scenario would damage BT’s efforts to catch up with Virgin Media, the cable television operator that is providing industry leading broadband download speeds.

Strike ballot papers on Friday went out to about 50,000 BT blue-collar workers who are members of the CWU. Many of them are Openreach engineers responsible for maintaining BT’s existing networks as well as building the new superfast broadband infrastructure.

The CWU is seeking a 5 per cent pay rise this year for BT employees who are union members. BT has offered a rise of 2 per cent. The ballot result will be announced on July 5, and a “yes” vote by a simple majority could lead to the first national strike at BT since 1987.

Industrial action could start as soon as mid-July and BT is preparing contingency plans under which Openreach managers who are not CWU members could do the work of striking engineers.

Mr Robertson said Openreach would focus on fixing problems with services for existing customers if a strike goes ahead.

Openreach would also focus on connecting new customers to BT’s networks, but Mr Robertson said construction of the company’s new superfast broadband network could not be a top priority during industrial action.

“If it was extensive and intensive industrial action, what we are going to be doing is focusing on repairing services and providing new services, not building out infrastructure,” said Mr Robertson.

“It’s fair to say the 4m target [of 2010] could be in jeopardy.”

Mr Robertson insisted that BT could hit its targets for the high-speed network to run past 40 per cent of homes by mid-2012 and 66 per cent of households by 2015.

In a letter to employees seen by the FT, Alex Wilson, BT’s human resources director, warned that strike action could result in the company losing customers, divisions among workers and job losses. “Industrial action will be damaging for BT,” he said.

The CWU insists that BT’s 2 per cent pay offer is unacceptable given the contribution employees have made to the company’s turnround.

BT fell to only its second pre-tax loss since privatisation in 2008-09 because of acute problems at Global Services, the subsidiary serving the telecoms needs of multinationals.

But the company reported a pre-tax profit of £1bn in 2009-10, due to an improved performance by Global Services and group-wide cost-cutting. BT employees accepted a pay freeze in 2009 and about 35,000 jobs have been removed over the past two years.

The CWU is confident of a large “yes” vote for strike action and hopes it will force BT to increase its pay offer before any industrial action takes place.

However, the union leadership is prepared to organise a lengthy strike if it is necessary to secure an improved pay offer.

The CWU has accused BT’s management of “double standards” because the company’s finance director and head of retail will get salary rises of 7 per cent and 5 per cent respectively this year.

Mr Robertson responded by saying that most managers were getting a 2 per cent salary rise, including himself. Ian Livingston, chief executive, is taking a 2 per cent increase.

Mr Robertson described the proposed 2 per cent pay rise for blue-collar workers as a “really good offer” and stressed that BT could not put itself at a competitive disadvantage to rivals. Virgin Media has agreed a 2 per cent pay rise for employees this year.

He said BT had no plans to increase the 2 per cent offer and warned it would be withdrawn if a strike went ahead. Mr Robertson added that any subsequent offer might involve a rise of less than 2 per cent, although he ruled out a pay freeze.

Mr Robertson also insisted the pay dispute was not the precursor to a broader showdown between BT and the CWU.

He dismissed comparisons between BT and British Airways, where Willie Walsh, chief executive, is trying to break the grip of the Unite union that represents cabin crew.

BT and the CWU on Friday insisted that they were willing to hold further talks, but the two sides looked far apart.

A summer of discontent at BT appears increasingly likely.

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