Telecoms giant to plug £7bn pensions deficit
BT rolling out ultra-fast broadband across UK
The company’s existing network now covers three-quarters of the country and said strong demand from all telecoms providers was driving take-up in a competitive market.
BT’s announcement came alongside third quarter figures showing underlying revenue dipped by 2% but a 2% rise in EBITDA following a programme of cost cutting.
Chief executive Gavin Patterson said now was the time to roll out the next phase of broadband technology.
“This quarter we have delivered good growth in profit before tax and strong free cash flow,” he said in a statement.
“Openreach achieved the highest growth in the number of landlines on record. It was also our best ever quarter for fibre broadband net additions. All the major communications providers are responding to the strong market demand for fibre broadband, helping to drive take-up in what is already a very competitive market.
“Our superfast fibre broadband network now covers around three-quarters of the UK. BT has been at the forefront of fibre innovation and investment, from which all communications providers benefit. We aim to keep it that way. So today we’re announcing large-scale pilots this summer of ultrafast broadband with G.fast. We now think we can deploy this technology at scale which will enable us to deliver ultrafast speeds of up to 500Mbps to most of the UK within a decade.”
The company has also agreed a 16 year recovery plan to bridge a £7 billion shortfall in its pension scheme. It will pay £2 billion into the scheme over the next three years, less than it paid over the previous three years. Further payments will follow each year util 2030.
Mr Patterson said it was able to make these payments because of its strong future cash flow generation.
He said good progress was being made towards the acquisition of mobile network EE.
The pensions recovery plan
Over the next three years payments will total £2bn. BT will pay £1.5bn by the end of April 2015 out of existing cash and current investment balances which totalled £2.8bn at 31 December 2014. This will be followed by £250m in each of the years to March 2016 and March 2017.
For the seven years from 2018 to 2024 BT will make payments in line with the 2011 agreement. These will be followed by five annual payments of £495m through to 2029 and a final payment of £289m in 2030.
BT and the Trustee will review the funding of the scheme at the 2017 valuation. If the deficit is lower than the remaining recovery plan, that reduction will be reflected in the new recovery plan.
BT has agreed to continue to provide the Trustee with certain protections as detailed in the notes below. BT has also discussed details of the potential acquisition of EE with the Trustee.
Tony Chanmugam, BT group finance director, said: “This agreement is a good outcome for the Scheme’s 300,000 members and BT. The increase in the deficit from the 2011 valuation reflects the low interest rate environment. We have agreed a 16 year recovery plan reflecting the strength and sustainability of our future cash flow generation.
“We remain focused on our prudent financial policy of investing in our business, reducing net debt, supporting the pension fund and paying progressive dividends.”
Paul Spencer, chairman of the BTPS Trustee, said: “The valuation reflects the economic and market conditions at the valuation date and the improved financial position of BT. The agreement with BT secures an updated funding plan for the Scheme supported by a range of enhanced protections.”