Ofcom reviews BT charges in light of pension hole

Telecoms regulator Ofcom may allow BT to charge more for wholesale services by taking into account the company's need to reduce the size of a gaping pensions deficit. "Because of the financial significance of these payments in the case of BT, Ofcom considers it right to consult on whether or how such payments should be factored in when setting BT's regulated prices" the regulator said in a statement on Tuesday.

Ofcom currently uses BT's reported pension costs, excluding any additional payments to pay down the deficit, when setting regulated wholesale charges for services such as broadband and telephone lines.

It said it was consulting with stakeholders on whether they believed there were good reasons for changing the current approach and what any changes should be.

BT's pension deficit stood at 9.4 billion pounds before tax as at Sept 30, more than double the 4 billion pound deficit as at March 31, and it made gross deficit pension payments of 525 million pounds for the half year to that date.

Should the regulator include these deficit repair payments in its calculations they could increase charges on wholesale services by up to 4 percent, it said on Tuesday.

If Ofcom maintains the current principles in relation to pension costs, the charges would remain unchanged.

A third option is that the regulator will change its stance on service costs and cost of capital which would result in regulated charges falling by a small amount.

Ofcom said it will publish a further consultation on BT's pension costs in spring 2010 and make a statement later that year.