BT warns of challenge to Ofcom fees ruling

BT has warned it could sue the telecoms regulator if it refused to let the fixed-line phone company use a rise in wholesale fees levied on rivals to help repair its pension deficit.

Ian Livingston, BT Group’s chief executive,said he would take a “very serious look” at launching a legal challenge if Ofcom did not let the company raise the fees.

His stance is likely to alarm British Sky Broadcasting and TalkTalk, which have opposed BT’s plea that the wholesale charges should partly reflect the cost of servicing BT’s pension deficit.

Ofcom said in July that it had seen no compelling evidence to support letting BT include some of the cost of reducing the deficit in the wholesale charges levied by BT Openreach, the subsidiary that provides rivals with access to BT’s network.

Ofcom, which regulates Openreach’s charges, is expected to confirm its position in December.

BT has highlighted how companies in other industries may remedy pension deficits via charges. Ofgem allows gas and electricity distribution companies partly to fix deficits via wholesale charges.

Mr Livingston said Ofcom’s interim decision in July was wrong and that Openreach’s charges should be able to include an element partly to cover the cost of servicing the pension deficit.

He said: “We think it [allowing an element in charges] is consistent with how other regulated industries are treated and it’s also the fair and right thing to do”.

Mr Livingston also said he did not think BT’s defined benefit pension scheme fell under the jurisdiction of the Pensions Regulator because it was largely covered by a crown guarantee.

In October, the High Court ruled that under the guarantee’s terms, the taxpayer had to underwrite most of the scheme’s liabilities if the group collapsed.

BT’s pension position has been uncertain since February when the Pensions Regulator expressed concerns about plans to fix the deficit, which stood at £9bn on an actuarial valuation at December 2008.

The regulator’s concerns are assumed to focus on how BT plans to remedy the deficit over 17 years. BT began making annual top-up payments of £525m into the pension scheme last year.

BT’s pension deficit fell to £5.2bn on an accounting basis at September 30. Mr Livingston held out the possibility that the top-up payments could fall after the next actuarial valuation, due in December 2011.

Alternatively, he said the payments could be made over a less than 17 years.

The Pensions Regulator declined to comment.

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