EU to Investigate Whether BT Gets Unfair State Aid

European Union regulators said Thursday they will investigate whether British telecoms company BT Group is getting unfair financial help from the British government because its state guarantee exempts it from normal company pension rules.

The European Commission can order a government to withdraw or make changes to a state guarantee if it finds that it gives one company a financial advantage over rivals. There is no time limit for it to wrap up its probe.

BT is currently exempted from paying a minimum amount into its pension program and from paying a levy to Britain's pension protection fund, which compensates workers when a fund goes bankrupt.

Since 2004, most pension schemes are required to pay into the fund and are only allowed to opt out if covered by a state guarantee. This exemption for BT and others may mean that the company gets a better deal than its rivals.

"It is important to ensure that BT is subject to the same rules and obligations as its competitors to guarantee a level playing field and fair competition, so that consumers can benefit from high-quality services and competitive prices," the regulators said.

Financial Advantage?

BT's guarantee dates back to 1984 when the former British state telephone monopoly was privatized and the government sought to make sure that BT workers' pension rights would be secured.

The guarantee can only be used should the company go bankrupt and its pension fund not have enough assets to cover the cost of employees' pensions. The EU said it did not challenge the principle of having the guarantee but wanted to see just how far it went to give the company a financial advantage.

BT is now one of the world's largest communications companies, drawing nearly a half of its earnings in the fourth quarter of the fiscal year 2006-2007 from information technology services to global companies such as Pepsi and Unilever.

Already Britain's dominant fixed-line telecommunications provider, the company boasts that it has now overtaken Richard Branson's Virgin Media to become Britain's top broadband Internet supplier.

EU regulators' worries were triggered by a complaint in 2006, they said, without giving details of who had expressed concern.