Ofcom Proposes Treatment Of BT's Pension Costs Be Maintained

23rd Jul 2010 07:16

LONDON (Dow Jones)--The U.K. Office of Communications, or Ofcom, said Friday it hasn't received compelling evidence from stakeholders which would justify a change in approach to the way it takes BT Group PLC's (BT) pension costs into account when setting regulated wholesale charges for certain telecoms services, including broadband and landlines, adding that the current approach to the treatment of BT's pension costs should be maintained. MAIN FACTS: -No proposed change to link with regulated prices. -Regulatory controls also apply to certain other services provided by BT Wholesale such as leased lines. -Ofcom has Friday set out three proposals in relation to BT's pension costs: * Deficit repair payments (cash amounts which the company pays over time to reduce a pension fund deficit) and pension "holidays" aren't currently taken into account when Ofcom sets BT's regulated charges. Ofcom proposes not to change this. * Ongoing service costs - these are the estimated costs of pension benefits earned by employees for service in the current period. Ofcom currently includes reported costs from BT's statutory accounts in its regulated charges. Ofcom proposes not to change this in order to provide consistency and certainty for stakeholders. * Cost of capital - the cost of capital is an element of the return BT is allowed to make on its investments and assets as periodically determined by Ofcom in order to set charge controls. There is, in principle, a potential connection between the existence of a defined benefits pension scheme (such as that operated by BT) and the estimated cost of capital. At present, however, Ofcom considers that there is insufficient evidence to support the need to make an adjustment. -Ofcom expects to publish a final statement on its pensions review by the end of 2010. -BT shares closed Thursday at 141 pence valuing the company at GBP10.94 billion. -By Ian Walker, Dow Jones Newswires; 44-20-7842-9296; [email protected] (END) Dow Jones Newswires July 23, 2010 02:16 ET (06:16 GMT)