BT Group PLC (LSE:BT.A) agreeing a pay deal with the Communications Workers Union and Prospect union is good news, say analysts, but may be short-lived.
The pay award, including pay of all frontline staff permanently increasing by £1,500 from last April, is earlier than expected and has a lower financial impact, said Barclays.
Furthermore, union support suggests a “likely end to industrial action”, so the news “should be taken positively, in our view”, Barclays added.
It should see strike action called off by mid-December when the union members’ vote results are in, Jefferies analysts said.
This is “helpful respite” for Openreach, which has blamed lost production for line losses and with the slowing of fibre roll-out, “creating friction with major ISPs”.
The new pay award is effective from the start of January 2023 and is estimated to lead to a £35-40mln incremental cost in the fourth quarter of the next year, and £105-120mln over the first nine months of the 2024 financial year.
However Jefferies analyst Jerry Dellis said the “respite could be short-lived” as the next pay review is scheduled for September 2023, “so negotiations will be getting underway again just as BT is issuing FY24 guidance”.
So from the third quarter FY24, there is the prospect of additional cost arising from the Sep 2023 pay review – “the financial implications of which are unclear at present”.
No deal has yet been agreed for those who earn over £50k a year, ie managers, which is around 15% of UK staff, but the analyst predicts it will averages 3.5% tat BT already implemented in April.
With BT having attributed a large part of the worsening broadband line loss reported by Openreach in last quarter to lost production arising from the strikes, and fibre provisioning bottlenecks having become “a source of friction with ISP customers” the pay settlement “should be helpful on both fronts”.
“However, the prospect of another pay review as soon as Sep 2023 takes some shine off.
“It means that BT could find itself issuing FY24 guidance in May with union negotiations about get underway again, with little visibility on pay costs in 2H FY24 and (arguably) with limited incentive to talk up the group’s prospects.”