Telecoms watchdog Ofcom this morning handed down its largest ever fine to BT after an investigation found the telecoms giant was in “serious breach” of rules governing how it managed other internet providers.
The £42m penalty was only part of the story as BT has estimated it will need to fork out a further £300m in compensation to so-called communication providers.
Here’s how people reacted to the news.
More pressure on the dividend?
George Salmon, equity analyst at Hargreaves Lansdown said BT was “definitely on the naughty step at the moment”.
“This latest misdemeanour follows hot on the heels of an accounting scandal in Italy, and the enforced separation of the Openreach business
As a result the demands on BT’s cash flow are adding up, in the short term at least.
The Italian accounting irregularities are already set to trim BT’s cash flow for the year by up to £500m, so the news it now has to fork out £300m in compensation to competitors, plus a £42m fine to Ofcom, makes for further disappointment for shareholders.
What’s more, net debt and the pension deficit each stand at over £9.5bn, and more cash could be needed to plug that pension shortfall after a review later this year.
With BT targeting dividend increases of at least 10 per cent this year and next, the pressure is increasingly on the consumer facing divisions to generate continued growth.
Martin Lane, Managing Editor of money.co.uk said:
This ruling highlights how serious Ofcom is about helping the nation get high-speed internet. BT has been too slow to provide the necessary technology and they’ve paid dearly for it.
“Many areas of the country still suffer from very slow internet – especially in rural areas and I hope this fine will help get us all up to speed without having to pay through the nose.”
Dan Howdle, consumer telecoms analyst at Cable.co.uk added: “Today’s ruling offers insight into just some of the factors contributing to Ofcom’s decision to split BT and Openreach into two separate entities.
“Clearly, being the sole owner of shared infrastructure has given rise to precisely the sort of conflict of interest of which BT has long been accused.”
Customers must never be allowed to become collateral damage in the battle to gain the upper hand in the market. Fines such as this, painful though they are for those on whom they are levied, are vital in maintaining a fair, competitive marketplace in which business can thrive.
Investigator: BT broke the rules
Gaucho Rasmussen, Ofcom’s investigations director, said: “These high-speed lines are a vital part of this country’s digital backbone. Millions of people rely on BT’s network for the phone and broadband services they use every day.
Read more: BT Openreach changes aren’t enough for Ofcom
“We found BT broke our rules by failing to pay other telecoms companies proper compensation when these services were not provided on time.
The size of our fine reflects how important these rules are to protect competition and, ultimately, consumers and businesses. Our message is clear – we will not tolerate this sort of behaviour.