BT to appeal courts' pension calculation rulings

BT is planning to appeal against two court judgments that ruled the telecoms giant cannot change the way it calculates pensions for thousands of employees.

Britain's biggest telecoms operator sought a court ruling last year to change the index used to calculate pension increases paid to certain members of its defined pension scheme, from the retail price index (RPI) to the consumer price index (CPI)

CPI is generally lower than RPI, which is no longer used widely in government.

BT had argued that RPI was therefore no longer appropriate for increasing pensions.

The company appealed the High Court decision but on 4 December the Court of Appeal upheld the ruling for CPI-based calculations to remain in place.

At the time, white collar union Prospect said BT was "seeking to cut the future incomes of BT pensioners and current employees by tens of thousands of pounds in order to transfer an estimated £2bn to shareholders."

BT said on Wednesday in a trading statement: "In its judgement handed down on 19 January 2018 the High Court decided that it is currently not possible to change the index used to calculate pension increases for Section C members of the BTPS (BTpension scheme).

"In November 2018, the High Court ruled against BT in the judicial review proceedings in relation to a decision by HM Treasury concerning public sector pension increases."

"We are seeking permission to appeal both judgments."

The company pension scheme saw a rise in its deficit to £5bn net of tax in the third quarter to December 31, up from £4.5bn net of tax in the previous quarter.

BT saw reported pretax profit in the period up 20% to £2.1bn.

Reported revenue was £17.6bn, down 1%.

It said underlying revenue was down 0.9% "as growth in our consumer business was offset by regulated price reductions in Openreach and declines in our enterprise businesses."

BT announced in May last year that it is to cut 13,000 jobs by 2021 as part of a restructuring plan to invest in ultrafast broadband and the next generation of mobile networks.

The telecoms giant had previously announced 4,000 job cuts, saying that middle management and back-office roles would face the brunt of the cull.

But it also announced this week that it will recruit up to 3,000 engineers in order to meet its targets for broadband expansion.

Outgoing chief executive Gavin Patterson said the overall outlook for the full year remained unchanged.

The trading update marked Mr Patterson's last, as new CEO Philip Jansen takes up the reins at BT on 1 February.

George Salmon,equity analyst at Hargreaves Lansdown (Frankfurt: DMB.F - news) said: "Outgoing CEO Gavin Patterson has had his critics in recent years, but these results mean he's leaving on an upbeat note.

"The consumer business is again strong, and improvements in BT's global operations are coming faster than expected.

"That's not to say BT is out of the woods though.

"Competition is fierce in mobile and broadband, and falling profits at Openreach are a timely reminder that regulation has the potential to limit progress at any time.

"With (Other OTC: WWTH - news) the combined pension and net debt position a rather daunting £16.1bn, it's hard to see the new CEO raising the dividend in May's full years."