Bt Share Discussion Threads

[kazoom] 27/5/2018 21:21

toon - I would have to disagree on one point, it will be a minority of Openreach employees that are members of the Defined Benefits schemes - remembering that they closed to new members I think it was 17 years ago.

Your point though did trigger me to think that ALL of the members of the DB schemes are now 'deferred' members, given that there are no future contributions to the scheme either. On this basis; IF there were a deal done, then it would actually make sense for BT to retain all of the pension liabilities.

The only uncertainty I have on this point is whether members of the schemes will still have their pensions based on final salary when they actually retire, or final salary when the scheme 'closed' then inflation linked up until their retirement date.

Perhaps there are some existing members who could confirm this?

I seems to me that the majority of employees that have been with the company for 17 years plus, would be better off with the latter scenario, this would also be the simplest in the event of any divestiture ; but I haven't read anything that would actually confirm which is the case.

[diku] 27/5/2018 20:48

De merge?...

[boytoy] 27/5/2018 20:29

Why on earth would BT sell its most profitable part of its business, it just wouldn’t make sense.
Although I reckon it could be very profitable for current BT shareholders, new listed company etc .......

[montyhedge] 27/5/2018 18:48

Mistake I will go back on the other thread, otherwise they will miss the no.1 trader. Lol

[diku] 27/5/2018 18:35

monty..you switch threads..

[gaffer73] 27/5/2018 17:54

My apologies, you are correct. After looking at the details I noticed this:"5.2.1. Continuation of the protection, such that in the event that BT generates net cash proceeds greater than GBP1bn from disposals (net of acquisitions) in any 12 month period, BT will make additional contributions to the Scheme equal to one third of those net cash proceeds. This obligation applies until the next valuation is signed"

[toon1966] 27/5/2018 17:43

Only time will tell Pace. The following is an extract from the article I posted (remember the articles a couple of years old):

Separating Openreach would create all sorts of complex operational problems, but would also raise the problem of dealing with BT’s huge pension scheme. It is the largest of any UK company, with £47bn of IAS19 liabilities and a £5.9bn deficit as of December last year. It has more than 300,000 members, including 200,000 pensioners, and operates under three separate sections. Adding to its size and complexity, a Crown guarantee was issued when BT was privatised in 1984. This means that if BT were to go bust, the government would meet its pension obligations. After lengthy litigation, the courts have ruled that the guarantee applies to all 300,000 scheme members, including those who joined since privatisation. The FT’s Lex column goes as far as saying that “BT’s mountainous pension liabilities” make separating Openreach “effectively impossible”.

Is this an exaggeration or could BT’s pensions be a stumbling block to spinning off Openreach? There are many examples where a company has been sold and all pension liabilities remain with the vendor. When Pearson, the education company, sold the Financial Times to Nikkei, the Japanese news group, for £844m, it retained all the pension liabilities for FT employees and made a £90m contribution. In 2013, Invensys, the engineering group, sold its rail division — representing half its operating profit — for £1.7bn and made a £625m contribution. As BT would not receive any cash proceeds from an Openreach spin-off, it would borrow to fund the cash contribution. Since a pension deficit is equivalent to debt, this borrowing would effectively be a refinancing (higher borrowing offset by a lower pension deficit) and should be neutral for its credit rating. As part of the spin-off, BT’s total borrowings, including the new pension borrowing, would be split between Openreach and the remaining BT.

If all pension liabilities stayed with BT, the Crown guarantee could simply remain in place unchanged for the benefit of all scheme members. As an alternative, pension liabilities for former and current Openreach employees could be transferred to a newly established Openreach scheme, which would take its pro-rata share of scheme assets. Although there are also examples of this approach, any transfer of BT’s pension liabilities would require the government to extend its guarantee to cover them as members of a new Openreach scheme, which may be contentious. What about the role of the BT pension trustees? Some trust deeds give trustees the power to set employer contributions, putting them in a strong bargaining position when a disposal is being considered. They can, in theory, demand a large employer contribution to compensate for the weaker corporate credit risk.

The BT trust deed does not give trustees power to set employer contributions, so they do not have any legal powers to block an Openreach spin-off by demanding a large pension contribution. In practice, BT would, of course, negotiate in good faith with the trustees to agree the contribution. The Crown guarantee means the BT scheme is not subject to the pension regulator’s jurisdiction. This may put the trustees in a weaker negotiating position, as the regulator’s nuclear power to impose a contribution on an employer does not apply. As part of new employment terms, Openreach would have to provide future pensions for its employees currently in the BT pension scheme, either defined contribution or a new defined benefit scheme. Sorting out BT’s pensions is just one of many operational and financial issues that must be addressed if Openreach were spun off, but it is certainly not a deal-breaker.

[pacemaker1000] 27/5/2018 17:24

Pension scheme now much simpler since amendments. Easy really, the individual and their 'employer' just continues to pay into the same scheme be it BTPS or BTRSS. deferred or drawing pensions already covered

[pacemaker1000] 27/5/2018 17:20

Yes life expectancy over exaggerated. Mind, given people now have to work longer due to poorer pensions this is also a major contributory. Catch 22 that the cynical would say has been planned al along.
Read years ago that the ultimate time to retire was at 55. After that you’re eat8ng into your end date.
How many times do you meet an ex colleague and say 'wow you look well'

[toon1966] 27/5/2018 17:13

Gaffer - it's not so straightforward. Remember Openreach employs nearly 32000 people, majority of who will be paying into a BT Pension scheme and then there's those who are actually drawing their pension. An old article but explains some of the complexities of hiving off Openreach

[hamhamham1] 27/5/2018 16:59

Interesting times ahead.

[gaffer73] 27/5/2018 16:49

BT have already agreed a payment structure for the pension defecit, as per the last results. The sale of Openreach will have no bearing on that.

[montyhedge] 27/5/2018 15:16

Just remember the new chairman who is renown for getting things done. Bought half a million pounds worth at 255p. At 209p with a 7% yield look good to me. Champions League Final was superb by BT Sport.

[nicholasblake] 27/5/2018 14:18

Private equity would price BT pension liability so negatively that they are unlikely to be a realistic buyer for OpenReach unless BT retains pension liabilities. In which case pension scheme would want big slice (25%+?) of proceeds. But BT ought to be able to dump a fair bit of debt in a sale, if it so desired.

[montyhedge] 27/5/2018 12:52

Well done BT Sport great coverage Champions League Final.

[careful] 27/5/2018 10:16

It is an ill wind...
Todays Sunday Telegraph report that pension deficits are being helped by a falling life expectancy. The benefits of better medical care are being outweighed by the effects of sedentary lifestyles.

On several fronts it feels as though sentiment towards BT is at last turning positive.
It has been an horrendous collapse from £5 over the last 2-3 years.

[pacemaker1000] 27/5/2018 09:31

At last a realisation the customer has to pay for a better service!
You wouldn’t expect to just swap your old banger for a new car for free would you?

[nw99] 27/5/2018 08:47

Industry observers said, however, that the government would need to draw up more radical plans to achieve the end goal of connecting all homes and businesses to fibre, which would cost an estimated £25bn-£30bn.Hammond stated last week that he did not want to force telecoms companies to roll out more fibre "by government diktat". However, in a signal that he is unwilling to commit taxpayer money to the project, he said: "We will do it by creating the conditions for the market to deliver."One way to reduce costs would be to move all customers in areas earmarked for fibre expansion to the upgraded networks, regardless of whether they want the faster service or not. This would cut costs for BT Openreach, as it would no longer have to keep its copper wires in operation alongside the up-to-date networks. However, it would almost certainly push up monthly bills.

[diku] 27/5/2018 08:38

monty no;1...where to put the noughts and cross on resolutions no: 2, 4, 5, 6, 7, 8, 9, 10, 11, 12, 14, 15, 16, 19,? For or Against...

[kazoom] 26/5/2018 23:11

That's a good question toon.

As a first step there would need to be an agreement between 'BT' and 'OpenReach' as to the split of the pension liabilities and assets - theory that could be massively complex given that many (potential) pensioners worked for both or neither.

In practise though it would be a simple numbers game in that the (hypothetical) acquirers would simple trade off the price they were prepared to pay against the share of the deficit they would take.

In general terms though, I believe the "pension black hole" is much overstated and is not a major challenge to manage when left to the grown ups - but in terms of the potential split because of the differences of opinion on this matter , there could be a range of outcomes.

FWIW - I don't think the split will happen, because although the companies are now 'effectively separate' there are a lot of shared costs that would be subject to unproductive renegotiation.

[toon1966] 26/5/2018 13:24

Just out of interest how would these private equity firms deal with the pension liabilities?

[hamhamham1] 26/5/2018 13:19

If there was to be a bid from one of the big private equity firms? Really it would make sense to buy BT as a whole then spin off all the assets, there are so many components to BT, they would be ebaying for years and make a packet

[toon1966] 26/5/2018 13:11

Times article offers nothing new. In fact it refers to Bloomberg's piece and then goes on to regurgitate information on BT Group we already know! Cheap and opportunist journalism.

[kulvinder] 26/5/2018 13:03

Exactly my brother, I think a few are going to be scrambling over the trenches to secure a few on opening bell on Tuesday, hopefully bringing a short squeeze with it.

[montyhedge] 26/5/2018 12:56

That's the valuation put on Openreach by brokers, RBC for one. They have analyst just for different sectors.It not the tea lady plucking figures out the air. So Openreach at 25 billion, what's that 230p a share roughly for. Openreach alone.