UPDATE: BT Group Reaches New Staff Pay Deal With Union

9th Jul 2010 10:21

(Adds analyst comments, details) By Lilly Vitorovich Of DOW JONES NEWSWIRES LONDON (Dow Jones)--BT Group PLC (BT.A.LN) said Friday it has reached a new pay deal for staff with its biggest union after weeks of wrangling, ensuring the U.K. telecommunications firm's 23 year strike-free record remains intact. BT staff will receive a 3% annual pay increase from April 2010 to March 2013 with the rise being backdated to January 2010. The Communication Workers Union will recommend the deal to its 55,000 BT call center, engineering and retailer members in a consultative ballot which will take place in the next few weeks. BT Chief Executive Ian Livingston said the agreement is good for the company, its employees, shareholders and customers. "BT will benefit from a long period of certainty whilst our employees will have financial stability during uncertain economic times. I am pleased that we have been able to work with the union's leadership to resolve this matter as industrial action would have been in no-one's interest," he added. The deal comes just a few days after the CWU canceled its ballot for strike action on legal advice and said it would resume talks with BT over the pay dispute while continuing with plans to re-ballot if necessary. The agreement was well received by the market and at 0904 GMT BT shares were up 3 pence, or 1.9%, at 139 pence on the London Stock Exchange, valuing the company at GBP10.74 billion, in a flat market. Liberum Capital analyst Mark James reiterated that "BT has much more flexibility to cut costs than some of its European peers", such as France Telecom (FTE.FR), where last year staff costs rose 6% versus a 10% year-on-year decline at BT. Prior to Friday's new pay deal, the CWU was demanding a 5% pay rise this year. BT was offering a 2% pay increase this year and a 3% rise in 2011, plus additional one-off payments and guarantees on job security but these additional benefits are not part of the new pay deal. "We know how important job security is to people and we have said in our agreement with the CWU that we will continue to work together to provide job security for our people, raise the performance of the organisation and develop a shared agenda to support the future growth of BT and create a better future for our employees," a BT spokesman said. Prospect, BT's second-biggest union with 30,000 members who are mainly managers, has already agreed to a 2% pay rise this year. The dispute over pay comes after CEO Livingston's bonus payments more than tripled in fiscal 2010 as he presided over a recovery in the company's financial performance. According to BT's 2010 annual report, Livingston's bonus payments rose to GBP1.2 million in fiscal 2010 from GBP343,000 the previous year, taking his total remuneration to GBP2.1 million from GBP1.2 million. Livingston accepted a 2% increase on his base salary of GBP850,000. In May, BT swung to a net profit in the fiscal fourth quarter from a loss a year earlier, and forecast further gains. Over the next three years, BT expects to improve its underlying revenue trends and increase adjusted earnings and free cash flow, while investing in the business, supporting the pension fund, reducing net debt and paying progressive dividends. BT made around 20,000 job cuts in fiscal 2010, reducing its total workforce to 128,000. The majority of staff reductions comprised agency and third party workers. BT's pay deal with the CWU will be the envy of many companies, particularly British Airways PLC (BAY.LN), which has endured months of industrial action over pay and changes to working practices. -By Lilly Vitorovich, Dow Jones Newswires; 44-0-207 842 9290; [email protected] (END) Dow Jones Newswires July 09, 2010 05:21 ET (09:21 GMT)