BT cuts jobs and shrinks base
• Radical action needed to rebuild the group, says chief
British Telecom (BT) will cut 13,000 managerial and back-office jobs and move to a smaller London base in its latest attempt to rebuild from an accounting scandal and pressures on its business.
British Telecom (BT) will cut 13,000 managerial and backoffice jobs and move to a smaller London base in the latest attempt by the boss of Britain’s biggest telecoms group to rebuild from an accounting scandal and multiple pressures on its business.
CE Gavin Patterson said that radical action was “absolutely critical” to ensure BT could deliver the next-generation fibre and mobile networks Britain needed. “We need to make ourselves more efficient, we need to create oxygen within the business,” he said on Thursday.
But a failure to hit a revenue target in the last quarter and a disappointing outlook for no growth in profit for a couple of years sent the shares down 9% to five-year lows.
Since he took the top job in 2013, Patterson has spent billions of pounds on TV sports rights, network investment and customer service improvements, all while trying to keep regulators, pension fund trustees and investors on side.
On top of that, fraud was discovered in Italy while the group was also blindsided by a downturn in corporate and public sector markets.
Patterson tried to placate shareholders by maintaining the full-year dividend on Thursday and he also agreed a new pension funding plan.
Bernstein analysts called the earnings report “disappointing”.
“BT has now firmly gone from being a reasonably predictable growth story, an outlier in the incumbent landscape across Europe, to becoming a cost restructuring story.”
Traders said guidance for the current financial year was lower than expected, while fourthquarter revenue fell short of targets, showing the challenges facing Patterson as he seeks to rebuild a group that employs more than 100,000 staff.
FIBRE ROLL-OUT
BT, which owns Britain’s biggest mobile operator, EE, said it would hire about 6,000 engineers and frontline customer service staff to support its rollout of fibre and 5G networks.
About two-thirds of jobs cuts will fall in Britain while the rest will be abroad, Patterson said.
The company has been based at the BT Centre, near St Paul’s Cathedral in the City of London since it was privatised in 1984 but will now move to smaller premises in the capital.
“If we compare how we manage the business with our peers, we’re frankly too complex and overweight. This is a big deal,” said Patterson.
BT has faced growing competition from nimble young rivals including Sky, which has expanded from being a pay TV firm to offer a range of broadband services.
BT’s expansion into television was an attempt to defend its customer base.
The job cuts, the highest number by the former monopoly since 2008, will save £1.5bn in costs in three years, the company said. The restructuring will cost £800m to implement.
Some of the proceeds will go towards increasing capital expenditure on new fibre fixedline connections and 4G and next generation 5G mobile networks to about £3.7bn over the next two years.
The new strategy is the latest throw of the dice from Patterson, who won early plaudits from investors when he moved BT into sports TV and mobile.
That goodwill came to an end when the group delivered a major profit warning in January 2017 due to problems at its multinational Global Services division and the discovery of the Italian scandal.