Watchdog eyes BT credit crackdown

BT has imposed harsh new credit control terms on companies it deals with because of fears that scores of communications firms could go bankrupt.

Telecoms watchdog Oftel has been asked to intervene in the row sparked by BT's introduction of the credit vetting and control procedures on as many as 200 competitors.

A source at Oftel said that about 200 firms ranging from small companies supplying phone cards to major network operators are protesting at BT's new contract terms. The source said: 'The dispute has been running for a while, but finally BT brought the row to us itself and we are urgently trying to resolve it.

'When it was referred to us on 15 June, some 200 firms were affected, but our case officer understands that some have now agreed terms with BT.'

The bursting of the telecoms bubble has led to a wave of bankruptcies around the world. In BT's financial year 2000/01 just three operators went into some form of insolvency; in 2001/02 this number rose to 22, according to the company.

Traditionally, the cost to BT of bad debt from other operators has been low, but the slump in telecoms has led to that figure soaring, said a spokesman. BT has been exposed to these collapses because it must carry other operators' calls over its network in what is known as interconnect agreements. Thanks to the terms of its licence, the former monopoly must offer standard terms to all-comers, regardless of financial strength.

'Until now, our only option has been to slam the stable door after the horse has bolted,' a spokesman said. 'BT goes to the back of the creditors' queue with the other trade creditors.'

Internal BT documents show it is demanding credit vetting procedures on all new operators and threatening to impose further credit protection measures such as a deposit, bank guarantee, standby letter of credit or other proof that money will be available to pay debts.