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BT loses appeal over pension deficit payments

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  • BT loses appeal over pension deficit payments

UK - Competition authorities have barred telecommunications company BT from passing the cost of pension deficit payments to its rivals.

Upholding a previous ruling by media regulator Ofcom, the Competition Commission said the regulator had correctly decided that BT Openreach, which allows other broadband providers to access BT's network, should not be able to take the company's pension deficit onto account when calculating prices.

The current situation makes allowances for ongoing pension service costs, but does not account for one-off deficit reduction payments, such as the £2bn (€2.5bn) contribution announced towards the end of March.

The scheme currently is the country's largest, with nearly £36bn in assets under management and a deficit of £4.1bn.

"BT alleged that, by failing to allow it to recover an appropriate allocation of its PDR [pension deficit reduction] payments as part of the WBA [wholesale broadband access] Charge Control, Ofcom had failed properly to fulfil its statutory duties and regulatory objectives and had adopted a solution which was disproportionate, discriminatory and clearly inferior to that which BT had proposed," the Competition Commission said.

The telecoms company additionally argued that the deficit reduction payments were "a cost of BT doing business" and that they should therefore be included in any wholesale prices to access the broadband network.

The BT pension scheme has been involved in a number of recent rulings, with trustees last year gaining clarity over the extent of the crown guarantee - under which the government is required to cover costs incurred by the scheme before it was privatised.

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