Regulator proposes BT wholesale price rises

Ofcom, the communications regulator, has proposed increasing the wholesale prices that BT Group charges other telecoms providers to cover the impact of inflation and rising costs over the last three years.

Ofcom said the new prices were designed to maintain fair competition in the voice and broadband market, but BT said it did not think the price rises for its Openreach unit went far enough. For the year 2009/10, Ofcom said it would propose annual rental charges for a fully unbundled line of between £85 and £91, up from £81.69.

A BT spokesman said the increase would not cover the rise in inflation since the 2006 set-up of Openreach, which operates as a separate business providing wholesale access telecoms services to communications providers such as Carphone Warehouse.

At the time, Ofcom set the maximum prices that Openreach could charge for its wholesale services, but did not include an annual adjustment for inflation or changes to other costs.

Dresdner analyst Lawrence Sugarman said he thought BT would have hoped for a greater increase but said if Ofcom opted for the top of the range rise it would result in an increase of £15 to £20 million in revenues that should flow straight through to the bottom line.

Morgan Stanley said it saw the announcement as a small positive for cash flow.