Kitz Forum
Announcements => News Articles => Topic started by: sevenlayermuddle on May 15, 2020, 05:30:01 PM
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https://www.theguardian.com/business/2020/may/14/bt-reportedly-starts-talks-to-sell-stake-in-openreach
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At a stroke, a sale would cover BT’s financial issues including a hefty pension deficit and the huge costs of the nationwide rollout of full fibre broadband over the next decade.
Surely the majority of the huge costs of the nationwide rollout of full fibre would be by Openreach not BT? So selling Openreach wouldn't help at all in that.
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I personally think the pension deficit might be a factor, a big problem for any company that offered pension schemes that predated the Blair government’s raid.
In theory it’s very hard for a company to shake of its liabilities to pensioners. In practice, selling off a part of the company, if the pension liabilities go with the sale, can help. The new owner can, if it helps, simply allow his company to go bust, at which point pensioners have to accept transfer to PPF with reduced income. The new owner meanwhile will have made himself a few bucks, while the original company continues to prosper.
All sympathies to BT pensioners but as pressure grows on BT to compete with other companies, that don’t have legacy pension deficits, I don’t see how they can survive.
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Would an ‘independent‘ Openreach be a good thing, whatever independent might mean?
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I'm just trying to wrap my head around what worth BT has without Openreach? I'm still quite fuzzy on what is BT Wholesale vs Openreach to be honest.
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I'm just trying to wrap my head around what worth BT has without Openreach? I'm still quite fuzzy on what is BT Wholesale vs Openreach to be honest.
They are supposedly talking about just a stake.
But even if all of Openreach were to be sold, BT would then be ‘worth’ all of its other assets, plus the proceeds of the sale, and plus the unloaded pension deficits. That would end up being a healthy sum which, I can well believe, would add value to the share price, even if the company served no future purpose other than as a takeover target.
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All sympathies to BT pensioners but as pressure grows on BT to compete with other companies, that don’t have legacy pension deficits, I don’t see how they can survive.
BT's pension was given a Crown Guarantee when it was privatised. Successive governments have challenged this is court and failed. If the pension scheme failed then the tax payer would take the full liabilty.
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BT's pension was given a Crown Guarantee when it was privatised. Successive governments have challenged this is court and failed. If the pension scheme failed then the tax payer would take the full liabilty.
I did not know that, but I wholeheartedly approve, and sincerely hope it proves to be true.
I'm not a BT pensioner myself, but a member of a comparable fund from a similar era, supposedly protected by scheme rules and by legislation, though not as onerous as BT it seems. My own fund has not yet entered the PPF and is not in immediate (this week at least) danger of doing so as the company is still trading. But despite the boast that my scheme is still meeting all its obligations in full, devious lawyers have still found loopholes in the rules that allowed the trustees at the eleventh hour to reduce my pension payments by about 10% below what I was led to expect. :(
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I'm just trying to wrap my head around what worth BT has without Openreach?
The BT Group would still have BT (the UK's biggest retail ISP), BT Business, Plusnet, BT Enterprise/Wholesale.
They would still own EE and all their masts.
It would still be a huge company with considerable assets.
This is just a stake being discussed anyway, not all of OpenReach.
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The latest results from BT state
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Pensions (Note 7 to the condensed consolidated financial statements)
The IAS 19 pension position at 31 March 2020 was a deficit of £1.0bn net of tax (£1.1bn gross of tax), compared with £6.0bn net of tax (£7.2bn gross of tax) at 31 March 2019. The decrease in the gross deficit of £6.1bn since 31 March 2019 mainly reflects an increase in the real discount rate, deficit contributions paid over the period, and positive asset returns.
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So the pension deficit is a lot less than it was – though the current market falls will have increased it somewhat over the past few months.
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So the pension deficit is a lot less than it was – though the current market falls will have increased it somewhat over the past few months.
Not specific to BT... But for defined benefit schemes in general, I wonder whether future actuarial valuations will further reduce the projected deficits, based upon reduction of liabilities (fewer pensioners) as a result of the pandemic.
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Back on-topic . . .
Update 3:15pm The Register (https://www.theregister.co.uk/2020/05/15/bt_openreach_talks_report/) has published an exert from a memo sent to staff by Openreach boss Clive Selley who has spoken to BT Group CEO Philip Jansen with the short summary being the story that surfaced in the evening of 14th May is inaccurate.
Many of you will have seen the reports overnight about BT being in talks to sell a stake in Openreach. I spoke to Philip Jansen last night after the story broke in the newspapers. He is very clear - the story is inaccurate. Openreach is staying in the BT Group.
It appears that the "The Guardian" are guilty of purveying "fake news" (to use a phrase often employed by "T. Ronald Dump").
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It wasn’t just The Guardian, it was in multiple sources, else I’d not have started the thread. I found it first in a Hargreaves Landsdowne investments news article. I chose to link to The Guardian simply as it’s not paywalled, and most important of all, it’s not the BBC.
For example, here is another account (now alleged to be fiction) from the Financial Times also doesn’t seem to be paywalled.
https://www.ft.com/content/0ab3d20a-72d3-4956-8416-6885eca0b7e9
Makes me wonder where the story did begin? It certainly seemed to result in a jump in share price which may possibly suggest a more sinister purpose somewhere down the line.... :o
Edit, PS: FT article is paywalled, can’t see it now. I guess it worked initially as I’d recently deleted all cookies.
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Makes me wonder where the story did begin? It certainly seemed to result in a jump in share price which may possibly suggest a more sinister purpose somewhere down the line.... :o
Attempts to manipulate the minds of others have always existed. >:(
As for the purpose of this attempt, the enhancement of the share price of the BT Group will need to be carefully scrutinised.