British Sky Broadcasting and Carphone Warehouse on Tuesday pledged to fight any move by regulators to allow BT to include some of the cost of reducing its large pension fund deficit in the wholesale charges it levies on rivals.
Sky and Carphone reacted furiously to a document by Ofcom, the telecoms watchdog, that seeks views on whether BT should recoup some of the cost of servicing the deficit through the wholesale charges paid by them.
Ofcom said such a reform could increase BT’s wholesale charges by 4 per cent and the rise would likely to be passed on by Carphone and Sky to their customers.
But Sky said it would be “plain wrong” for BT’s rivals to have to “bail out BT for the mismanagement of its pension fund”, while Carphone promised to resist Ofcom’s mooted reform “as hard as we can”.
BT has the largest defined benefit pension scheme in the UK, and the deficit mushroomed from £4bn at March 31 to £9.4bn at September 30 under accounting rules, partly because of lower interest rates.
The UK’s leading fixed-line phone company cut its 2008-09 dividend by 59 per cent after saying it would increase its annual “deficit repair” payments to the pension fund from £280m to £525m.
Ofcom sets the prices that Openreach, BT’s wholesale access division, can levy on the likes of Sky and Carphone for renting some of the company’s copper-based landlines.
They rent the lines in order to provide phone and broadband services to consumers.
Ofcom is now consulting on whether Openreach’s charges should, for the first time, include some of the cost of the pension deficit repair payments. It said the move could increase the charges by up to 4 per cent.
The regulator made no commitment to the suggested reform and a final decision will not be made until next year.
But Ofcom highlighted how other watchdogs covering the electricity, gas, water and postal industries allowed companies to include some of the cost of servicing pension deficits in their regulated charges.
Sky highlighted how BT’s pension fund deficit was partly due to how the scheme’s assets were heavily invested in equities until at least 2007.
Sky also pointed to BT’s decision to stop making contributions to the fund during the early 1990s, when the scheme was in surplus.
“BT has made some aggressive investment decisions …and systematically under-contributed towards the cost of pensions,” Sky said.
BT welcomed Ofcom’s document and noted the regulator had concluded that the pension scheme’s investment returns were in line with the market.
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