UK - Several UK telecoms companies have attacked proposals which could see them forced to help BT plug a £9bn (€9.92bn) deficit in the defined benefit BT Pension Scheme (BTPS).

The criticism comes after Britain's communications regulator Ofcom last year proposed a 4% increase in charges levied on rival companies to use BT's wholesale service, which could be used to reduce the BT Pension Scheme's losses.

Firms including satellite TV service provider BSkyB and Cable & Wireless (C&W) have attacked the telecommunication company's management of the scheme, with the latter arguing BT has been "the sole architect of the entire deficit".

"It would be wrong from a legal and a moral perspective for Ofcom to take a decision that would allow BT to surcharge the customers of the future for the past decisions of BT's management," C&W argued, in a response to the Ofcom consultation.

Sky took a different direction and claimed Ofcom's proposals were contrary to the principles of a free market.

"In competitive markets, companies that have defined benefit pension schemes must compete with companies who don't, and cannot charge a premium to pay for pension deficit repair."

In its response, BT insisted, however, that the proposed changes were simply a matter of the regulator asking companies to pay adequately for the services provided.

"It has to be appropriate for the regulator to provide an opportunity for the regulated supplier to recover all their relevant costs of providing each regulated service," said BT, adding that failure to allow the additional charges would "undermine" BT's ability to effectively continue running BT Openreach, its wholesale service.

John Ralfe, whose consulting company advised on several of the BT competitors' responses, argued it was indeed unfair for BT to attempt to pass on its pension deficit to the consumer as initial shares were discounted in 1984 - when the company was privatised - because of its known £626m pension deficit.

He argued the pensions shortfall should be met by shareholders as they have benefitted for many years from the company not investing all the money allocated to BTPS in the said scheme.

Ralfe also indicated that the 4% increase would only be aimed at helping an estimated £3bn of the deficit, the amount estimated to be part of BT Openreach's shortfall, leaving over two-thirds of the problem unsolved.

He also claimed the BTPS problems could spell further trouble for the telecoms company if not solved. Unlike at other UK regulators, Ofcom is not bound by a so-called duty to finance.

"In layman's terms, what that means is the regulator has a duty to make sure this business does not go bust. Curiously, for reasons that nobody can understand, Ofcom does not have that legal obligation," the consultant acknowledged.

Ralfe said the problem would not be as extensive as it is now had BT originally addressed the £626m deficit at its flotation if it had applied long-dated inflation0linked gilts to cover the gap. According to Ralfe, this investment could now be worth £4.5bn, almost halving the company's financial burden.

Ofcom has so far published responses to its consultation from 12 companies and organisations, including one from the union Prospect, which cautioned any regulatory pressure on the scheme would be "unwelcome".

If you have any comments you would like to add to this or any other story, contact Julie Henderson on + 44 (0)20 7261 4602 or email julie.henderson@ipe.com

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