BT workers accepted a 3.5 per cent pay rise yesterday - at the same time as it emerged the group's chief executive could earn up to £2.8 million this year.

Members of the Communication Workers Union voted 4-to-1 in favour of the deal, after previously rejecting a

2.7 per cent offer and warning of industrial action if an agreement was not reached.

The 3.5 per cent pay offer benefits more than 77,000 workers but is a long way from the 60 per cent increase that boss Ben Verwaayen could attract if he meets all the performance targets in a new executive pay plan. Such an improvement would be heavily reliant on bonuses as Mr Verwaayen's basic salary has been frozen at £700,000 for the last four years.

And he will have to wait three years to get the maximum £2.1 million bonus element - and only if he is still with the company.

The firm said the package was put together with management retention in mind, particularly as chairman Sir Christopher Bland is due to leave in 2007.

BT, which recently lost the boss of its retail arm Pierre Danon, said the package was in line with the 30 largest companies in the FTSE 100 Index.

Mr Verwaayen, who joined the company in early 2002, picked up a total package of £1.74 million in the year to March 31, compared with £2.39 million a year earlier.

He received an annual cash bonus of £448,000, plus an expenses allowance of £196,000 and a contribution to his personal pension of £110,000.

His bonus, which was about half the maximum entitlement, was boosted with £ 224,000 worth of shares, although these cannot be touched for three years.

The package, which was detailed in the company's annual report published yesterday, was awarded after a year in which BT increased annual profits by four per cent and said it had more than doubled its number of broadband connections.

A spokesman said: "What is clear from this is that the remuneration committee sets challenging targets for our senior executives."

The company said the targets set for boardroom directors were based on earnings per share, cash flow and customer satisfaction.

It was the fourth year running that the company imposed a boardroom salary freeze, including for Sir Christopher, who as nonexecutive chairman received £500,000 in the year to the end of March.

Meanwhile, the CWU described the agreed offer as one of the best deals achieved in industry this year.

Deputy general secretary Jeannie Drake added: "BT's other pay offers throughout negotiations would have meant a pay cut in real terms, and that was unacceptable to us." As well as 50,000 CWU members, another staff union, Connect, accepted the same terms.

BT said: "Both offers are good, particularly in view of the challenging market conditions, a declining traditional business and the need for significant investment in building our new wave business."

Meanwhile satellite operator Inmarsat has began the countdown to one of the City's biggest stock market listings of the year.

Inmarsat, which has ten satellites serving customers ranging from shipping companies to broadcasters, will be valued at more than £1 billion following the flotation - set to happen at the end of this month.

The London-based company, which is 51.7 per cent owned by private equity companies Apax Partners and Permira, said the move would raise around $690 million (£379.8 million).

The timing comes as Inmarsat looks to concentrate on driving revenue growth following a period of heavy investment, which culminated in the launch of its latest and most powerful satellite in March.