The Communication Workers Union (CWU) has cancelled a strike ballot that was expected to favour the start of the first national strike in 23 years at BT.
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If the strike had gone ahead, it could have disrupted BT's phone and broadband services because most CWU members are network engineers or call centre staff who deal with faults.
The CWU stopped counting votes in the light of a series of letters from BT over the past few weeks which effectively amount to a legal challenge, according to the Financial Times.
The CWU has received legal advice that BT had a reasonable chance of securing a court injunction that would stop a strike going ahead, the paper said.
After the ballot was cancelled, both the union and BT expressed hope that the pay dispute could be resolved through negotiation.
The CWU has been pressing for a 5% pay rise for its 55,000 members at BT after the company froze all pay for all workers last year.
The union called a strike ballot after rejecting a BT offer of a 2% rise backdated to January and a 3% increase for 2011.
The union said the offer was unacceptable in the light of the larger salary increases and bonuses for senior executives.
BT said it was pleased the CWU has withdrawn its ballot, which will provide the opportunity to reach an amicable agreement.