David Cameron summons telecoms bosses
Coalition pushes for concessions from all major mobile and fixed line telecoms companies to keep price inflation under control. Read more…
BT returns to mobile phone business with EE deal
More than 10 years after selling off O2 network, BT to offer 4G smartphone connections bundled with broadband, landline calls and pay TV in bid for edge over BSkyB. Read more…
BT has ‘near monopoly’ on rural broadband say MPs
Government mismanagement means plans to roll out superfast broadband in hard-to-reach areas are in chaos, says report. Read more…
BT chief executive takes aim at ‘publicity seeking’ tax committee
Margaret Hodge’s public accounts committee has attacked firm for demanding subsidies to build rural broadband networks. Read more…
George Osborne’s high-speed broadband plan ends in vouchers
Chancellor’s scheme to spend £150m on broadband infrastructure has been scaled back following legal challenges. Read more…
BT is offering me a higher pension now in return for lower increases in future. How do I get the best advice on what to do?
I am a pensioner and my former employer, BT, has offered me a higher pension in exchange for receiving lower pension increases in the future. I have never heard of such a scheme. Is this normal?
BT has offered the services of a helpline run by independent financial advisers (IFAs) before I make a decision, but I would prefer the advice of someone I am comfortable with. Can you suggest a course of action? BS, Derry, Northern Ireland
Since April 2009, retiring BT pension scheme members have been able to opt to receive a higher starting pension, by giving up some of their future pension increases. BT says it is now extending this voluntary option to existing pensioners, giving them more choice and flexibility.
You, and other members, will get detailed information on the option and how it would apply to you but, says BT, you will also need to speak to a freephone helpline staffed by IFAs before taking the option. It is right to steer you in the direction of an IFA (either the ones it pays for on its helpline or your own) as the decision is far from straightforward.
Nick Bamford, an IFA at Informed Choice, says you would need to take into account your future view on inflation (would you rather take, say £100 now with a guarantee your pension will rise in line with the RPI or would you prefer to have, say, £105 now and gamble on future rates of inflation?). You would also need to consider your financial situation (do you need more money now or are you likely to need a higher amount later?) and your views on your life expectancy. As you subsequently told us your life expectancy and provision for your wife is your major concern as you have inoperable prostate cancer, we suggested you take more general advice about your financial situation. You can find an independent financial adviser in your area via www.unbiased.co.uk.
We welcome letters but cannot answer individually. Email us at [email protected] or write to Bachelor & Brignall, Money, the Guardian, 90 York Way, London N1 9GU. Please include a daytime phone number
Ian Livingston’s annual earnings have risen to £8.5m after a 50% rise in BT’s market value in the last year
BT chief executive Ian Livingston’s annual earnings have risen to £8.5m, boosted by a rise in the company’s share price which will also see 1,000 managers share windfall payouts averaging £120,000.
Having overseen a 50% rise in BT’s market value in the last year, Livingston has been granted shares worth £6m from the scheme, which was designed as a reward for a three-year turnaround plan. His managers have received £120m from the pot of 38m shares, which was distributed following annual results last week.
“BT’s remuneration policy is based on reward for success,” a spokesman said. “The company has more than one million shareholders and they have benefited from healthy dividends, as well as a share price which has more than doubled over three years.”
Livingston’s bonus and the number of shares awarded were lower than last year, but because of the increase in BT’s share price, his overall package has risen from the previous £7.7m total.
He waived a pay rise for the second year in a row, taking home a base salary of £925,000, although his cash in lieu of pension contributions has risen to £270,000, £50,000 more than last year.
The chief executive’s cash bonus was £1.196m, effectively equal to his salary plus pension money, and he received a further £21,000 in other benefits which range from a company car to home security.
In addition, if Livingston is still chief executive of BT in three years, he will take possession of shares worth more than £2m at current prices.
BT will adopt government proposals on executive pay in 2014. These include binding shareholder votes and publishing a single figure for each executive’s total pay. The firm’s remuneration committee is chaired by former Labour health secretary Patricia Hewitt, who receives £160,000 a year for being a BT board member.
“Executive remuneration remains a lively and often controversial issue,” she wrote in the annual report, published on Thursday. “The committee has kept closely in touch with developments, recognising that this is a key issue for investors, employees and other stakeholders.”
During his tenure, Livingston has initiated a £2.5bn investment to replace copper broadband lines with fibre cables, serving two thirds of the UK population by 2014.
Earlier this month, the company kicked off what analysts expect will be a pay TV price war by launching two sports channels that will broadcast Premier League games free to those customers who already take BT broadband. The move has boosted BT’s shares, while denting those of rival pay TV companies BSkyB and TalkTalk.
Livingston has also tackled BT’s ballooning pension deficit, and kept costs under control at its global services division, which secures telecoms contracts from government organisations and large companies.
When Livingston joined in June 2008, global services was in trouble after signing too many unprofitable contracts. By March 2009, it had plunged to a £2bn operating loss. The division is still on a knife edge, but managed to report a £3m profit this year.
• Man Utd’s sluggish revenues
• BT’s sporting gamble
• What is Co-op’s raison d’etre?
• Stuart Rose off to a flyer
Contrary to some reports, Manchester United’s New York-listed shares did not plunge on Sir Alex Ferguson’s retirement. They ended the week 2.7% lower than they started it – that’s next to nothing.
But they should have plunged. By conventional financial yardsticks, the club is grossly overvalued at $3bn (£1.9bn) while also carrying £368m of debt. Now that the most reliable asset is giving up front-line duties, the stock deserves to be a double “sell.”
The valuation issue is basic: revenues were only £320m last year and half that sum was paid straight out as salaries. At the operating level, profits were only £44.9m. That entire sum was then consumed by finance costs of £49.5m, leading to a pre-tax loss of £4.7m. Naturally, there was no dividend.
None of which is to deny that the Glazers’ financial gamble has paid off. The £800m leveraged buyout in 2005 looked reckless at the time, not least because the adventure was funded in part with those notorious payment-in-kind (PIK) notes that accumulated interest at the potentially poisonous rate of 14.25%.
But the PIKs were paid off in 2010 and the moment of maximum financial danger passed. Ferguson kept the club in the Champions League every season and collected trophies. In doing so, he made the Glazers’ optimistic financial assumptions work. The current debt is clearly manageable. If the Glazers’ stone-cold equity investment was £500m-ish, they are clearly going to make a big profit if, and when, they sell their controlling shareholding.
It’s just that ascribing a £1.9bn value to the equity is wild. Manchester United may be the biggest football club in the world but it is not a large company. The Glazers have cranked up the commercial operation but overall revenues advanced by only 14% between 2009 and 2012. The current year has been stronger (revenues up 13% at the nine-month stage) but, for context, it will still take Man Utd 12 months to generate the revenues that Sports Direct achieves in 12 weeks.
The stock market valuation makes sense only if the Glazers can find somebody wealthier than themselves to pay the princely sum of £2bn-plus for the honour of owning Man Utd. The Premier League has become the playground of oligarchs and sheikhs, so it’s not out of the question. But the task looks harder in the post-Ferguson era. His presence was almost a guarantee of glory on the field. If that guarantee is ever seen to weaken, the short list of individuals with a couple of billion to spare may become even shorter.
The mistake made by failed entrants in the pay-TV market was to try to knock BSkyB off their effing perch, as Ferguson might have put it. That was always likely to be a losing game for the likes of Setanta and ESPN.
BT’s idea is smarter. Behind the obligatory bombast, chief executive Ian Livingston is clear that he is aiming only for co-existence with Sky. BT should be able to justify its three-year £1bn investment by attracting more broadband subscribers, especially from Virgin and Talk Talk. Analysts reckon one million extra customers would be a useful start. That goal ought to be within reach as BT completes its £2.5bn fibre network and pulls in viewers who want to save a few quid by living on a lower-fat sports diet. Sky will still have the gourmet sports dishes but, in a world of triple-play (broadband, TV and phone), BT’s offer looks competitive in a way that Setanta et al could never achieve.
The amazing part is that BT shareholders sanctioned the TV adventure with barely a grumble. Even three years ago, it would not have happened. Livingston was still in the early stages of reviving BT after its accident in its global services division, which runs big IT contracts. His back-to-basics formula has worked wonders: costs have been slashed, service has improved and peace has broken out with the pension fund trustees. The share price has risen from 70p in 2009 to 310p now, after Friday’s forecast-beating profits. The company is spitting out cash again and a £1bn investment is suddenly not such a big deal.
The worry for BSkyB must be what happens in three years’ time if Livingston maintains BT’s overall pace and makes a success of pay-TV. Would BT raise its ambition the next time the Premier League rights are up for grabs?
Welcome to the Co-op Group, Euan Sutherland. You thought you would be chief executive of an outfit with a challenger bank – your predecessor was full of such talk. It turns out you are actually in charge of a challenged bank.
The Moody’s downgrade of Co-op Bank’s debt to junk status does not imply a crisis for the bank’s customers. The boasts about ample liquidity are credible and there are ways to find more capital. A sale of the life insurance business has been agreed and the general business is on the block. If the regulators decide the proceeds are still insufficient, the Co-op Group itself – the ultimate parent – would have to dig deep into its collection of supermarkets and funeral homes.
But, if that prospect is even a vague possibility, it is time for the Co-op movement to consider its role in life. What is it in business to achieve? What is it good at? Are the capital demands of running a bank now too great for an organisation without shareholders?
The 2009 merger with Brittania Building Society should never have happened. As the Moody’s report makes clear, the Co-op “underestimated the risks” of a deal that brought a collection of soggy property loans and sub-prime mortgages. Nor would salvation have arrived via the now-abandoned deal to buy 632 branches from Lloyds. The Co-op would have become bigger in banking but there were “a number of challenges in terms of capital, liquidity and execution risk,” in Moody’s polite language.
Sutherland, who joined this month, is not a banker. He’s out of B&Q by way of Superdrug. His job now is to find some banking expertise, pronto – a point one assumes the regulators have made already. His second task is to spell out to his members what being a bank entails. Peter Marks, his predecessor, used to assert that there was unanimous support within the Co-op for expansion in banking. Really? Sutherland should find out.
How to make £1m. Sir Stuart Rose, when he agreed to become chairman of Ocado in January, was given 452,000 shares as a golden hello. The value of that award at the time was £400,000 and it matched the size of Rose’s purchase of Ocado shares from his own pocket. Now that Ocado’s share price has started to motor (90p to 224p since January), Rose’s freebie award is worth £1m. He can’t bank the sum since vesting depends on his remaining chairman for at least three years. Even so, he’s off to a flyer. Including the gain on the shares he bought himself, he’s up about £1.6m on paper. No bad going before he’s actually chaired a board meeting.
Central bank action, reasonable economic data and upbeat company results continued to support the market
Leading shares rose for the seventh day in a row on Friday, with the FTSE 100 index closing above 6600 for the first time since October 2007.
A combination of central bank action, reasonable economic data and upbeat company results continued to support the market as investors sought returns amid low interest rates.
In the wake of the rate cut by the European Central Bank earlier this month, a number of other countries followed suit last week in continuing efforts to boost the global economy, including Australia, Poland, Korea and Vietnam. The Bank of England however, as expected, refrained from further action after Thursday’s meeting.
Meanwhile signs of life in the eurozone, including positive German manufacturing figures, also helped sentiment.
So the FTSE 100 finished at 6624.98, up 0.5% on the day but off its best levels following a weak start on Wall Street. At the beginning of the shortened bank holiday week, the index stood at 6521. Since the turn of the year, it has climbed around 12% to its current five-and-a-half year high.
During the week both the Dow Jones Industrial Average and Germany’s Dax reached new peaks, while the Nikkei also hit its highest level since 2007.
Back in the UK, BT soared 12.3%, or 33.8p, to 309.5p on Friday after better than expected full year profits of £6.2bn, up 2%. TUI Travel also pleased investors, adding 6.3p to 346.9p as it forecast a profit rise of 10% for the year driven by strong trading in the UK and the Nordic region. It said 58% of its mainstream summer holiday programme was sold. The news came as it reported a first half operating loss of £289m, down from £317m as the winter season closed ahead of expectations.
Shire rose 85p, or 4.4%, to £20.19 following news late on Thursday that the drugmaker had won a patent trial against US group Actavis related to a generic version of its ulcerative colitis treatment.
Analyst Peter Verdult at Morgan Stanley said:”This news provides a much needed tonic, given the weak first quarter performance, and lack of significant pipeline data until 2014.Shire is committed to delivering revenue growth of more than 5% per annum, whilst moving to a flatter/more scalable operating structure involving five units (Rare Diseases, CNS, GI, Regenerative & Internal Medicine – ophthalmology) and a single R&D organisation. Efforts to bolster the mid/late stage pipeline are set to intensify.
“We see scope for Shire’s 15% discount [to the sector] to narrow sharply, given market confidence is likely to quickly rebound on the back of the near-term growth outlook improving.”
Brian White at Shore Capital said: “With sales of $400m, Lialda represented 8.5% of sales, and along with Pentasa, represents the cornerstone of the gastro-intestinal franchise. We had previously taken the view that, while there was a potential headline risk from a negative outcome, that the new FDA guidance requirements for generic mesalamine based products were so onerous that they would be difficult for the generic industry to overcome.
“Following the settlement with Actavis regarding Intuniv, success in this dispute with Actavis over Lialda does remove another drag on sentiment for Shire. Hopefully, we can now focus on the growth strategy that new chief executive Flemming Ornskov has recently articulated.”
Earlier in the week Shire was the subject of renewed bid talk. It has previously been linked with Bristol-Myers Squibb, Pfizer and AstraZeneca.
News that ArcelorMittal, the world’s largest steelmaker, had defied fears of a profit warning and kept its earnings forecast for this year helped lift Russian rival Evraz, controlled by Chelsea owner Roman Abramovich, 0.5p to 171.4p.
Controversial Kazakh miner Eurasian Natural Resources Corporation recovered a little ground after recent falls, and closed up 2.4p at 293.9p. Earlier in the week its two brokers resigned, while it also reported a disappointing production update, with iron ore extraction hit by a severe winter in Kazakhstan.
Among the mid-caps, Centamin slumped 7.7p, or 17%, to 37.9p, after the gold miner said a report on its Sukari mine in Egypt was not positive. A court questioned the miner’s right to operate Sukari in October, and now a report from the Egyptian State Commissioner’s office with non-binding recommendations has not helped its case. But Centamin said the recommendations do not address the merits of its appeal, which will be heard on 19 June, and it would continue to defend its rights.
Aim-listed Monitise added 4p, or 11.8%, to 38p after US hedge fund manager Leon Cooperman named the mobile payment group as one of his favourite stocks at SkyBridge Alternatives Conference in Las Vegas on Thursday.
Finally Quindell Portfolio, an acquisitive outsourcing and claims management business whose customers include the RAC, fell another 1.3p, or 18.3%, to 6p. After investors learned of a £13m derivatives contract revealed in its results this week, related to its purchase of Accident Advice Helpline, the shares slumped from 12p. The deal was financed by placing £17m worth of shares, with the derivatives contract designed to offer protection against a fall in the share price. As the market closed on Thursday, Quindell tried to stem the tide of selling by issuing a statement saying it knew of no valid reason for the share price drop. It said it had a strong balance sheet, the equity swap was not material in relation to the size of the company and was not likely to be exercised until the share price was substantially higher. So far these comments seem to have had little effect.
BT broadband customers get its three sports channels for free, so is it worth switching and what will you pay?
BT has announced that its broadband customers will get free access to its three sports channels from 1 August.
What sport will be available?
BT is offering three channels – BT Sport 1, BT Sport 2 and ESPN – which will show a range of sport from football to women’s tennis. The broadcaster has the rights to show 38 Premier League football matches and exclusive rights to show live games from rugby’s Aviva Premiership. There will also be some FA Cup games and Scottish Premier League games.
If you’re a football fan you will probably want to run BT Sports alongside your existing Sky Sports package, if you have one. If you are a rugby fan you might just want BT Sports.
How much will I have to pay?
If you are a new customer the monthly cost of taking broadband from BT is £10 on copper broadband or £15 on superfast fibre broadband with capped usage, or £16 a month for unlimited usage. On top of that you will also face a line rental charge of £15.45. To get the sports offer you have to commit to a 12-month contract. Anyone who signs up before 1 August when the channels go live will get free HD channels for a year; those who sign up afterwards will need to pay £3 a month.
When you join you will need to pay £6.95 P&P for the hub. That will be enough to let you watch the channels online. If you want to watch via your TV you will need to get BT TV. This costs £199 upfront with no contract, or £49 if you sign up for a TV package. The cheapest package is £5 a month and you need to sign up for a year. Signing up for BT Infinity, the package delivered through the fibre optic network, means an additional upfront “activation cost” of £30, while the alternative – watching through the TV aerial – will require you to buy a card for £10. Upfront costs can add up to more than £80.
I’m already with BT for broadband and TV, will I get the channels automatically?
No. You will need to commit to a 12-month broadband contract to get it, so you have to actively opt in to receive them. If, for example, you have two months left on an existing contract it can just be extended to 12 months; if you are two months into an 18-month contract you don’t need to make any extra commitments.
I’m with BT for broadband but have a Freeview box. What will I pay?
You can watch the sports channels on your iPad or PC for free through an app. If you want to watch on your TV you will need a set-top box. This costs £199 upfront with no contract, or £49 if you sign up for a TV package. The cheapest is £5 a month and you need to sign up for a year. There are also upfront activation costs (see above).
I’m with BT for broadband but have a Sky box. What will I pay?
You can watch BT Sports through your Sky box for free. You just need to call and request it, giving the details of your set-top box.
I’m with Sky for broadband, phone and TV. What would I pay to get the BT channels?
It depends what you want to do. BT and Sky have done a deal to show each others channels, so you could stay with Sky and add the BT Sports package to your existing deal. This will cost £12 a month, or £15 if you want HD channels.
If you decide to switch entirely you won’t need to pay for a new phone line, but you will need to pay for a new BT set-top box and pay all the activation costs detailed earlier. The cost of your line rental will also increase from £14.50 a month with Sky to £15.45 a month with BT, as will the cost of broadband, from £7.50 with Sky to £16 with BT.
However, BT is offering free broadband for six months, and as such over the first year it claims that the full phone, broadband and TV package will cost £134.65 a year less. After that you will pay £76.50 a month to get a full package including Sky and BT’s sports channels from Sky, and £73.95 a month to get it from BT.
A third option is to keep your Sky TV package and box and to move your phone and broadband. For that your only upfront cost will be £6.95 P&P for the hub.
I’m with Virgin Media for everything. What would I pay to get BT Sports?
Unfortunately at the moment you can’t add BT Sports to your Virgin Media TV package, so you need to switch provider entirely if you want the deal. You will need a new phone line, which means an upfront charge of £30, and your line rental will go up from £14.99 a month to £15.45 (although you can reduce that to £10.75 if you pay for a whole year in advance).
BT claims its total monthly cost of a TV, phone and broadband package including Sky Sports is £55.45, while with Virgin Media it is £66.74. If you wanted a package with TV, broadband and phone and just BT’s sports channels, not Sky’s, it would cost £35.45 a month at BT.
Is this just a one-year deal or will I have to pay next season?
BT says it has no plans to charge for sports next season, but the free HD offer will end after a year. After that, customers who want to continue with HD will pay £3 a month. The company has Premier League football rights for three years and the rugby rights for four years.
Should I be worried about switching provider?
We have had lots of complaints from readers who have tried to get BT phone lines fixed or installed in recent months, so you would be right to have reservations. However, BT says it has taken on new call centre staff and engineers to cope with the demand it expects, but if you want to make sure you get the channels in time for the start of the football season you would be wise not to leave it until the last minute.