London:

BT Group Plc was fined a record £42 million ($53 million) and ordered to reimburse another £300 million to competitors after an investigation found the former phone monopoly failed to adequately compensate them for broadband service delays.

The UK communications regulator Ofcom found a “serious breach” of rules in place to protect competitors’ who rely on BT’s Openreach network, according to a statement late Sunday. The resulting penalty, dwarfing the 4.6 million pounds of fines levied against Vodafone Group Plc last year, puts another blot on the record of Chief Executive Officer Gavin Patterson.

Patterson has struggled to contend with tighter regulation from Ofcom at the same time as BT faces challenges in its government and corporate contracting business and an accounting scandal in Italy. The rebuke over how it treats customer-competitors like Vodafone and TalkTalk Telecom Group Plc sheds light on a yearlong dispute with Ofcom that resulted in an agreement to legally separate Openreach this month. Ofcom said the delays in payments hurt British customers and the roll-out of speedier broadband services.

“Our message is clear — we will not tolerate this sort of behaviour,” Ofcom said in its statement.

Shares of BT fell as much as 2.1 per cent and were down 1.1 per cent at 322.15 pence as of 10:23am in London. The stock has lost 26 per cent in the past 12 months.

The fine raises questions about the sustainability of BT’s dividend growth plan and may affect the rules for how Openreach will provide service to BT’s rivals going forward, Dhananjay Mirchandani, an analyst at Bernstein, said in a note to clients.

“It feels like death by a thousand paper cuts,” Mirchandani said. “Although the company has reiterated its dividend guidance, we struggle to see how it will be able to do so without dipping into capital.”

The debate over Openreach, BT’s biggest income generating unit, has weighed on the company’s stock since Ofcom started consulting the future of the network in February 2016. The separation of Openreach has been seen by the regulator and UK government as a way to spur investment in fibre lines to boost internet speeds, rather than the mix of fibre and copper BT has largely focused on.

The company has also been in the doghouse with shareholders over an accounting scandal in its Italian business and for a slowdown in its UK and international outsourcing businesses, which all contributed to a reduction in its earnings forecast in January.

CEO Patterson and Clive Selley, the head of Openreach, apologised in a statement and said BT has improved the process to deliver high-speed connections. The company is treating the fine and compensation payments as a specific-item charge and said its business outlook for the next two years won’t be affected.

BT received the fine for reducing payments to companies that rely on its network when it didn’t deliver business Ethernet services on time. Ofcom opened a probe into the issue in November 2015 after complaints from Vodafone, and found that BT had misused the terms of its contracts from January 2013 to December 2014.

BT is allowed to assume customer permission to extend its timeline to deliver services in some cases, but Ofcom found BT did this retroactively over a sustained period to reduce the amount of compensation it had to pay for delays.

“We hope this ruling will encourage BT Openreach to finally drop the unacceptable practices it has used to avoid paying compensation for late delivery of fixed fibre lines,” Vodafone said in a emailed statement.

“We look forward to improved quality of service from Openreach in order to deliver high speed broadband to businesses up and down the country.”

BT estimated the compensation it will have to pay at 300 million pounds, though the amount may change. The carrier will also pay a 300,000-pound penalty for failing to provide information to Ofcom.