BT Fine: Equity Analysts View

BT announced on March 26 that it has agreed to a settlement with Ofcom, the U.K. telecom regulator, regarding its use of deemed consent

Allan C. Nichols, CFA 28 March, 2017 | 8:59AM

BT (BT.A) announced on March 26 that it has agreed to a settlement with Ofcom, the U.K. telecom regulator, regarding its use of deemed consent. Deemed consent allows for halting or rescheduling the delivery of Ethernet services based on a number of circumstances beyond its control.

Apparently, BT used this excuse inappropriately to slow down services its competitors needed. Ofcom imposed a fine of £2 million for the seriousness of the violations. This is one of the largest fines Ofcom has ever given. Ofcom also fined BT £300,000 for failing to provide accurate and complete information under the Communications Act 2003.

Finally, BT agreed to compensate affected communications providers outside of BT, which is estimated to cost about £300 million. These charges basically offset the time value of money that has accrued since our last update, so we won't change our fair value estimate or narrow moat rating. However, they are another black eye on the reputation of BT and management, primarily CEO Gavin Patterson.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
BT Group PLC114.25 GBX-0.65

About Author

Allan C. Nichols, CFA  is a senior stock analyst and international investing specialist with Morningstar.

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