British Telecoms (BT) could be facing fines in the region of tens of millions of pounds after official watchdog Ofcom accused the major supplier of telecoms of abusing it’s position as the market leader to push out rival companies.
In a strongly worded statement, Ofcom said BT may have resorted to a ‘margin squeeze’ to ‘ eliminate or weaken’ rivals in the UK’s fiercely competitive market for landline calls.
The regulator of media and telecoms suspects that BT have been setting the price of it’s charges for line rental at a deliberately low rate in a bid to undercut it’s competition.
Following a two-year investigation by Ofcom a formal accusation has been made, the investigation began after complaints from two of BT’s smaller rivals. It is alleged that the FTSE 100 corporation was undercutting the small rivals in a way that made it difficult for any to compete.
It is the second blow the company has received at the hands of Ofcom in a matter of days, after the regulator last week blocked a raise in wholesale pricing to help plug the deficit on its pension scheme.
The case presented by Ofcom relies on BT’s wholesale products- which are business to business products that allows other firms to offer calls packages to consumers and businesses.
BT have protested it’s innocence in the case, however, if they are found guilty of breaking competition laws, they could be fined up to 10percent of the annual revenues generated from the product.
Analysts have suggested that the penalty could reach into tens of millions of pounds.
A spokesman for the company said: ‘BT refutes, in the strongest terms, any allegation that we applied incorrect pricing to our wholesale calls product.
‘We will, of course, participate fully in the Ofcom investigation over the coming months and defend our pricing vigorously,’ it added.
Ofcom rules now suggest that BT will have a 12 week period to respond to the statement made today which detailed the objections. Ofcom will then decide whether a full competition investigation into how BT has set its wholesale pricing is required.
The release of the complaint sent BT shares down by 1.3p.
The corporation has enjoyed a strong revival this year amid a huge cost cutting drive and the easing concern over the hole in its pension scheme. The company was refused permission to take this shortfall into account when pricing it’s wholesale products by Ofcom last week.