Pension liabilities error and sales dip overshadow climbing profits at BT

Quarterly update reveals 2pc drop in revenues at the telecoms giant in the face of tougher markets

BT HAS revealed that an “isolated human error” by its actuary Willis Towers Watson meant it underestimated its pension liabilities by half a billion pounds.

The mistake has sparked a review by BT of Willis Towers Watson’s calculations in relation to Britain’s biggest private sector pension scheme. The firm has assured BT following its own review that there are no other errors.

Set against BT’S £50bn pension liabilities, the error was small and will have no impact on members.

However, it negates some of the telecoms giant’s efforts during the first quarter to close its pension scheme deficit with a £2bn topup payment funded by new borrowing. Simon Lowth, BT’S chief financial officer, said he had “expressed our concerns” to Willis Towers Watson over the incident but did not comment on whether the firm would be replaced.

The error was revealed alongside BT’S first quarterly report since it ousted Gavin Patterson, its chief executive, who remains in place while the company seeks his replacement.

The update showed that BT continues to struggle in most areas of its business, with revenues down over the three months to June 30.

However, the performance figures were slightly ahead of forecasts and contained no nasty surprises for investors who have been repeatedly shocked by profit warnings.

Shares rose 5pc to 236p on the relief, their highest level since early May, as BT reaffirmed forecasts for the year.

Total revenue for the quarter was down 2pc to £5.7bn. Only BT’S consumer unit reported a 2pc increase as regulation and tough markets squeezed sales in its other businesses. Mr Patterson said BT Plus, the company’s first consumer service to combine its broadband and mobile networks, had attracted an “encouraging” 100,000 customers since its launch last month.

Such “convergence” is at the centre of BT’S plan to charge “more for more” connectivity over time.

Openreach, its network subsidiary, was down 2pc as it was forced to cut prices and suffered a decline in broadband connections as the expansion of Virgin Media’s cable network increased competition.

Turnover in both the wholesale and global services units was down 8pc, while the business and public sector arm registered an improvement on last year with a 4pc decline.

Reported profit before tax for the quarter was up by more than two thirds to £704m based on a flattering comparison with last year, when it counted the costs of fraud in Italy. Excluding such oneoff costs, adjusted pretax profit was up 3pc.