Advertisement
Singapore markets closed
  • Straits Times Index

    3,224.01
    -27.70 (-0.85%)
     
  • Nikkei

    40,168.07
    -594.66 (-1.46%)
     
  • Hang Seng

    16,541.42
    +148.58 (+0.91%)
     
  • FTSE 100

    7,964.77
    +32.79 (+0.41%)
     
  • Bitcoin USD

    71,293.83
    +2,231.24 (+3.23%)
     
  • CMC Crypto 200

    885.54
    0.00 (0.00%)
     
  • S&P 500

    5,253.63
    +5.14 (+0.10%)
     
  • Dow

    39,784.02
    +23.94 (+0.06%)
     
  • Nasdaq

    16,399.62
    +0.10 (+0.00%)
     
  • Gold

    2,235.10
    +22.40 (+1.01%)
     
  • Crude Oil

    82.69
    +1.34 (+1.65%)
     
  • 10-Yr Bond

    4.1870
    -0.0090 (-0.21%)
     
  • FTSE Bursa Malaysia

    1,530.60
    -7.82 (-0.51%)
     
  • Jakarta Composite Index

    7,288.81
    -21.28 (-0.29%)
     
  • PSE Index

    6,903.53
    +5.36 (+0.08%)
     

BT to risk wrath of regulators with inflation-beating rise in broadband bills

Philip Jansen chief executive officer of BT Group - Hollie Adams /Bloomberg
Philip Jansen chief executive officer of BT Group - Hollie Adams /Bloomberg

BT is to hit millions of households with an above-inflation increase in their broadband bills next spring despite an urgent review by regulators into whether telecom companies are mistreating their customers.

Philip Jansen, the telecoms company’s chief executive, said a price rise forecast to be 13pc - adding £53 to the average bill - will “absolutely” go ahead in April because the challenging economic environment and rising costs had left the company with no choice.

The business is also facing a revolt from its workers over pay, with union members to go on strike on Friday and Monday.

It puts BT at risk of a clash with the industry watchdog Ofcom, which is preparing to take action on misleading small-print charges. Sources claim that a review into billing practices has been stepped up in light of the inflation crisis.

ADVERTISEMENT

Mr Jansen's decision to press ahead is likely to raise fears that the cost of living squeeze will persist into next year despite efforts by the Bank of England to bring it under control, with energy bills and rail season tickets both already expected to increase sharply in January.

BT's customer contracts state that it will put up prices every year by inflation plus 3.9pc. Analysts expect inflation to stand at around 9pc in early 2023, meaning customers face a rise in their bills of 13pc.

This would add about £53 per year to the cost of a typical BT Fibre Essential package, its cheapest standard broadband and phone tariff which costs £33.99 per month.

The price increases apply across the company’s broadband, EE mobile and BT Sport packages.

With other broadband operators likely to introduce similar price rises next year, sources said that Ofcom is speeding up a review into the small print of annual rate increases, in particular whether consumers were made fully aware that their monthly fee could soar when they signed up. There is no suggestion BT has broken any rules.

Mr Jansen said he was hopeful that inflation “would be on the low side”.

Nadine Dorries, the Digital Secretary, hauled telecoms companies to Downing Street in June to discuss the cost of living crisis, meeting executives from TalkTalk, BT-owned Openreach and Vodafone.

Ministers are concerned that not enough people are taking advantage of discounted tariffs for those on the lowest incomes. Above-inflation price rises were also criticised by officials.

A Government source said: “Companies need to think hard about the impact of price rises on hard-pressed consumers, and we urge continued focus on supporting the most vulnerable.”

Mr Jansen defended the price increase, which is written into customer contracts, saying the company still offered “absolute value for money”.

He added: “People realise inflation is very high and it is keeping going and we have economic uncertainty and the prospect of recession.”

In April this year, the company pushed up prices on most of its packages by 9.3pc. Consumer advice groups branded the increase a “tax on working from home”.

Multiple mobile phone and broadband operators include above-inflation price rises as part of their deals. Vodafone and O2 also have clauses that threaten to push bills up by more than inflation next April.

Rivals have lobbied Ofcom to investigate these annual price rises. A spokesman for fellow provider Hyperoptic said: “Ultimately these clauses mean a customer is not able to know how much they will be paying for the length of their contract. We don't think that should be allowed.”

The planned price increases next year will pile further pressure on household budgets after a gruelling winter, with mean energy bills likely to hit £500 in January alone according to research by the consultancy BFY.

Rail ticket prices are also linked to inflation and earlier this year commuters were hit by the biggest price rise in a decade. A further double-digit rise is likely next year.

Ofcom research has found that 2 million households are struggling to afford their broadband costs.

An Ofcom spokesman said: “Under our rules, companies must set out price rises clearly before customers sign up; they can’t just include them in the small print. We are monitoring this area closely and checking that providers are communicating any price rises in line with our rules.”

Mr Jansen said the company would continue to offer a basic “Home Essentials” package, which costs £15 per month, for those on Universal Credit. The company has not decided whether to increase the price of this package for 2023.

Broadband and mobile operators argue that consumers are getting a fair deal as the overall amount of data they get for every pound spent goes up.

A BT spokesman said: “Our annual price rises are contracted and we make this clear when customers sign up.”

Rocio Concha, director of policy and advocacy at Which?, said: “News of further hikes from BT will come as a shock to customers, many of whom are already struggling during the cost of living crisis.”

His comments came as BT reported its first revenue growth in five years. Revenues rose 1pc to £5.1bn for the three months ending in June, although the company missed its targets for business customers and pre-tax profit dropped by 10pc to £482m.

Labour and raw materials costs have risen, including the cost of fibre optic cables, pushing up charges for network operators such as BT's Openreach division. Shares were down 9.6pc on Thursday.

Mr Jansen said the company’s fibre broadband rollout was ahead of his expectations, with more than 8 million premises now hooked up.

The results come as the company readies for a strike by the Communication Workers Union after failing to reach a pay deal. The union has said it will continue to keep some essential services, such as 999 calls, running as normal. Mr Jansen said there were “no winners” from the strikes. It is the first national strike of telecoms workers since 1987.

BT offered staff a £1,500 pay increase, around 5pc, which unions dismissed as "arrogant". Mr Jansen said: "I am really sad about it," but added that he appreciated the union making an exception for critical 999 calls. Around 40,000 staff are due to walk out.

On Thursday, the union hit out at price rises, saying: “No price rises whilst making profit. It should be that simple.”

The BT chief executive received a 32pc pay rise last year to £3.5m, owing to previous share awards.