BT’s £9 billion pension black hole

David Kuo, Director at the financial website The Motley Fool - Fool.co.uk, says: "There used to be a running joke that BT was a pension fund running a telecoms business. The joke lost some of its punch this morning when BT Group revealed a £9 billion deficit in its pension scheme.

"The black hole is as big as the company itself. Furthermore, the regulator has expressed concerns about the valuation and recovery plan of the scheme.

"That said, BT is making good progress in cutting costs faster than the business is shrinking. While revenues contracted 4% in the third quarter, it managed to reduce underlying costs by 13%.

"Many income investors are understandably drawn to BT's above average prospective dividend yield of 5.7%. However, given the concerns of the regulator, better prospects may be available elsewhere. Vodafone is on a prospective yield of 5.8%."