back to article BT sees 35% sales gain as it digests hearty EE meal

Sales jumped by 35 per cent for BT's first quarter to £5.7bn, with profit before tax up 16 per cent to £802m - mainly due to its £12.5bn slurp of EE. The mobile operator contributed £1.2bn for the quarter and £84m in operating profit. Elsewhere other parts of the biz were lacklustre. Its Wholesale biz fell 10 per cent to £ …

  1. Anonymous Coward
    Anonymous Coward

    7.6Bn pension deficit

    that's why I pulled mine out, sadly.

  2. Kevin Johnston Silver badge

    Companies running a pension deficit should have payout caps on pensions to protect those on the lower levels while the higher levels feel the impact of decisions they probably took part in. Also have a requirement that a percentage of pre-tax profit must be used to reduce the deficit.

    Oh yes, and the company is not permitted to use that forced payment in any positive promotion of how they are handling their finances.

    1. Steven Jones

      "Oh yes, and the company is not permitted to use that forced payment in any positive promotion of how they are handling their finances."

      What on Earth does that mean? There is no positive promotion of a pension deficit. It's a drag on the share price.

      As for the suggestion that there is a cap on the pensions paid, just how many people do you think that would affect and how much difference would it make to the total? The number of people involved in making decisions which would have impacted on any pension deficit is tiny and the BT pension scheme has well over 300,000 members.

      In any event, it's a complete irrelevance as the whole thing is covered by pension regulation. BT are obliged to agree a plan to cover the deficit with the trustees of the scheme. It clearly has impact on the OR division as they will (due to historic employment patterns) have a duty to provide some cashflow to cover the deficit (at the moment it's only reported at group level). If you care to read the Ofcom proposals on OR separation you will find a large section given over to that very subject.

      There is no Philip Green figure that can extra money from a privately owned company leaving it unable to service the pension deficit. BT is a PLC, whilst BHS was not.

      nb. ultimately the government is on the hook for the deficit due to the Crown Guarantee at the time of privatisation. Briefly, if BT Group were to go insolvent then any deficit is guaranteed by the state (which has been established in court). Given that the government had to pick up the Royal Mail pension deficit (about £8n), I doubt they want to see that happen.

    2. Anonymous Coward
      Anonymous Coward

      "Companies running a pension deficit should have payout caps on pensions to protect those on the lower levels while the higher levels feel the impact of decisions they probably took part in. Also have a requirement that a percentage of pre-tax profit must be used to reduce the deficit."

      The deficit is probably inherited - a civil service pension scheme set up to guarantee income to pensioners who were expected to live a handful of years after retirement who might now well manage 25. The demand on the scheme would be four or five times what it was set up to fund.

      If you introduce your profit rule companies will just reduce their profits by re-timing capital investments. Deficits have to be made up over a long time in a careful and planned way, because a sure way of really messing up a pension fund is to have the company financing it go bust.

      I doubt the scheme in deficit is open to new entrants so it's unlikely that any current executives would feel the impact of any cap - it would be existing pensioners and people yet to retire.

      There's a reason problems like this are considered and managed by experts in the field rather than by taking the first few below the line comments on an Internet forum and adopting them as policy. If a complex problem seems to be easy to solve, you've probably not understood it.

    3. Doctor Syntax Silver badge

      Pension deficits

      "Companies running a pension deficit should have payout caps on pensions to protect those on the lower levels while the higher levels feel the impact of decisions they probably took part in"

      Pension deficits can have complex causes.

      In part they come from HMRC or its predecessor, the IR. They tend to assume when companies get their pension funds in surplus that they're trying to hide excess profits and order a contribution holiday. If the surplus was due to the investments doing particularly well as soon as normal service is resumed the fund finds itself in deficit.

      Then there were some decisions of our never-wise (even after the event) chancellor Gordon Brown. Remember the changes to tax allowances on dividends to shares held in pension funds?* And at the same time I understand that he introduced accounting changes which effectively raised the significance of pension funds in stock market valuations; given that companies have their pension funds invested in each other it put in place a positive feedback mechanism which exaggerated the effect of the tax changes.

      And, of course, if the stock market goes down even a previously balanced fund goes into deficit.

      In BT's case there is certainly a long term plan to rectify the situation by excess payments. As a BT pensioner myself it's something I keep an eye on.

      *I think the pension firms were supine about this. They give annual projections of what pensions are worth. If they'd given an addition projection of what the pension would have been worth without the tax even Brown would have had to back off before the next election.

  3. Christopher Rogers

    Why is the pension thing not raised more? I mean that should be a headline on the 6 O'clock. BT need to get that shit sorted right out as a priority!

    Then take Openreach off them.

    1. Anonymous Coward
      Anonymous Coward

      Selling Openreach

      means that the people who work for OR will have their pension liabilites transferred with them. That creates a big black hole for the company that buys OR.

      After the BHS fiasco no company in their right mind will want to buy OR.

    2. Steven Jones

      OR Confiscation

      So your grand plan is to confiscate a £20bn asset (Openreach) from the shareholders?

      1. Alan Brown Silver badge

        Re: OR Confiscation

        "So your grand plan is to confiscate a £20bn asset (Openreach) from the shareholders?"

        My grand plan is as NZ did - split the company. Existing shareholders get a set of BT shares and a set of Openreach shares. What they do with them after that is up to them.

        It's worth noting that all the doomsaying for Chorus(NZ's openeach) resulted in panic selling and the shares dropping 30% on opening day. Those who snapped them up made out like bandits less than a year later with the shares well above issue price and the financials of the company proven to be solid (it had been all along. the doomsaying was to manipulate shares. Guess who bought up all the sold off ones? Yup, the doomsayers.)

    3. Anonymous Coward
      Anonymous Coward

      BT isn't insolvent, it's a profitable business, so it's not headline news like the BHS pension deficit.

      The pension regulator has to agree plans with companies with a hole so that the gap can be filled. my understanding is that there is a plan.

      BT and Openreach are owned by the shareholders, who themselves are mostly pension funds. If Openreach was forcibly taken from those shareholders a lot of other pension funds suddenly end up in a lot of trouble.

      1. Warm Braw Silver badge

        re: BT isn't insolvent, it's a profitable business

        It is, but Openreach generates most of that profit and most of BT's not inconsiderable debt arises from "stretching itself too thinly by trying to be a global player" (a comment at the time of its sale and leaseback of its property assets) - debts that I imagine will be increased by its acquisition of EE.

        If Openreach were sold, it might give BT the opportunity to top up its pension scheme. And a company without a hole in its pension scheme might be more inclined to invest in decent infrastructure. I'm not sure it's OFCOM's remit to effectively require other telecom providers to subsidise the BT pension scheme by ensuring the continued BT ownership of the Openreach monopoly.

        1. Anonymous Coward
          Anonymous Coward

          Re: re: BT isn't insolvent, it's a profitable business

          "If Openreach were sold, it might give BT the opportunity to top up its pension scheme."

          Wouldn't a lot of the pension liabilities go with Openreach to the new owner? Else BT would be contributing to a pension scheme that benefits the employees of a different business.

  4. Missing Semicolon
    Mushroom

    Serious margin!

    So 85M on 1.2Bn is considered ok. That's 7%.

    OpenReach is 300M on 1.25Bn, 25%

    That's a flippin' enormous margin!

    1) Profiteering, right there.

    2) If it's been like this for a while, how do they get away with not putting an exra 200M or so a year into the pension fund? Isn't that a bit Green-esque?

    1. Craig 2

      Re: Serious margin!

      "OpenReach is 300M on 1.25Bn, 25%"

      Exactly what I was thinking! Openreach should be just past breaking even

      1. Anonymous Coward
        Anonymous Coward

        Re: Serious margin!

        "Exactly what I was thinking! Openreach should be just past breaking even"

        But then where does the money come from for more broadband coverage? Companies re-invest their profits or they have to borrow.

      2. Sunil Sood

        Re: Serious margin!

        But Openreach invested 337m over the same period which comes out of their 300m operating profit - so the rest of BT subsidised Openreach's Capex spending to the tune of over 10%...

  5. Alan Denman

    Pension deficit =

    Ban dividends.

    Oh no, our politicians would rather we the public picked up the tab.

    Yet pension deficits are also bankrupting the country!

    1. Anonymous Coward
      Anonymous Coward

      Re: Pension deficit =

      Those dividends are providing income for other pension funds. Banning them would put other pension funds into deficit.

      As long as there's a plan to make up the deficit and the business is solvent it's not a situation to panic about.

    2. Duncan Macdonald Silver badge

      Re: Pension deficit = Cap Board salaries

      If the pension deficit exceeds 10% of the value of the company then limit Board members salaries to a maximum of £1 million pounds per year (full time board members - pro rated for part timers). This would rapidly get the companies to reduce the deficit.

  6. Nickckk

    Reform the BT Group to resolve the OpenReach issue? Sounds like Groundhog day

  7. Alan Brown Silver badge

    Pension liabilities

    Those are there because cooking the books to make Openreach look in bad shape is normal if you want to make sure you don't get told to divest your cash cow.

    Telecom New Zealand pulled the same stunts and made the same arguments against being split up. Several years on from that event it's the telco which looks decidely shaky whilst the lines company is in rude health.

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