Will we be propping up BT?

Ofcom recently launched a review into whether they should raise Openreach wholesale pricing to compensate for BT’s burgeoning pension defecit, that currently stands at c.£9.4billion. We use Openreach for the metallic path to underpin our DSL in our direct channel, and in line with current gu-estimates, may be hit with a price raise of up to 4%. In the market, we’re not a big Openreach customer, but for the likes of Carphone Warehouse, Easynet et al, that 4% could be millions. Even worse is the prospect that Ofcom could raise this in line with further fluctuations with BT’s pension defecit.

Admittedly when comparing this with other industry regulators actions, this is no different. Ofgem actively police British Gas and include their pension defecits in their charges. The same goes for the respective watchdogs for the postal and water industries. However as Openreach is meant to be a private entity, this presents an intersting argument for it’s competitors. The harsh stance to take would be that due to BT’s poor management policies in allowing this debt to grow to such an insurmountable proportion, this is now having a direct effect on the rest of the industry. From my perspective, BT has always made a lot of noise about how they have been proactive in rectifying their defecit gap. Indeed in May, BT stated that they would make annual payments of £525million into their pension scheme over the course of 3 years. If this has to come directly from the competitors of BT then I’m sure there will be a few wry smiles about this prospect from within the BT tower.

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