BT looks set for sale of ailing global arm
BT looks set to sell its ailing international business as the telecoms firm launches a review under its newly appointed chairman.
The Global Services division provides IT services to 6,200 corporate and public sector customers in 180 countries and employs 18,500 people.
But it was rocked by an accounting scandal in its Italian arm, which forced the company to write-off £530m.
Chief executive Gavin Patterson admitted that ‘inappropriate behaviour’ had caused it to exaggerate its profits in Italy.
Now incoming chairman Jan du Plessis, who is replacing Sir Mike Rake, will be faced with the challenge of finding a solution. He is joining the business in June from mining giant Rio Tinto where he has led a sweeping restructure.
Sources say bosses at BT have realised that selling the division could be the best solution. Pat- terson has also previously committed to a fundamental review of the division, adding that he was ‘not religious’ about any part of the company.
He said he would make a decision over the future of Global Services in the next few months.
He hopes to give an update at the company’s fourth quarter results on May 11.
The Italian scandal is not the first time Global Services has been in the spotlight for the wrong reasons. In 2008 the unit missed its targets for profit growth and costs, and it was later found that the value of contracts it had signed had been overstated. This wrote down the division by £2bn.
While it takes an enormous amount of management time and resources, it made just 16pc of earnings last year despite contributing 34pc to group revenue.
It will also take some time to recover from its multi-million pound write-down.
Guy Peddy, telecoms analyst at Macquarie, said the future of Global Services was always in review. ‘The risk is it has got a bit elaborate with too much geographical diversity,’ he said.
And although he said selling it could be an option, he added: ‘The question is, who would buy it? Even if there is a demand for it by someone else, it is a very difficult business model.’
BT has already slimmed down Global Services in the UK. Last year it moved its UK public sector clients – such as the NHS – into BT Business.
Finding a solution to the prob- lem is the next challenge facing BT. Last week it announced it would legally separate its Openreach division following pressure from competitors and telecoms regulator Ofcom.
BT had faced growing calls from rivals to hive off Openreach, and in November Ofcom ordered a legal separation of the firm.
On Friday BT and the watchdog came to an agreement that would see Openreach become a distinct, legally separate company with its own board, within the BT Group.
BT will still set the budgets, but Openreach will have the freedom to spend the money as it wishes.
Openreach, which is also responsible for repairing and installing lines to homes and businesses, has also been accused of favouring BT customers over those of firms such as Sky, TalkTalk and Vodafone which run services via the cables.
It is hoped a more independent Openreach will invest more and treat all customers equally.
BT declined to comment on speculation of a sale of Global Services.