BT chief is ‘not the right man for the job’, says top in­vestor

The Sunday Telegraph - Money & Business - - Front page - By Christo­pher Wil­liams

BT share­hold­ers are urg­ing more change at the top of the com­pany, with one top 20 in­vestor call­ing on the board to line up a re­place­ment for Gavin Pat­ter­son, the chief ex­ec­u­tive.

The in­vestor, who con­trols a stake in BT worth hun­dreds of mil­lions of pounds, said that “with the ben­e­fit of hind­sight, Gavin Pat­ter­son was not the right man for the job”.

He added: “Few of us said so at the time but it has shown to be the case. What BT ac­tu­ally needed was a guy who could take on the reg­u­la­tor, not a re­tailer and mar­keter.

“A lot of what has gone wrong has not been Gavin’s fault but we’d like to see progress on a process and new lead­er­ship in the next year.”

The call is the clear­est pub­lic sig­nal yet that BT’S re­cent stum­bles have raised doubts over Mr Pat­ter­son in the City and this week­end prompted the com­pany to de­fend Mr Pat­ter­son and back him to see it through a com­plex re­struc­tur­ing.

The shares have lost all the ground they gained fol­low­ing his ap­point­ment in 2013. The Brexit vote, reg­u­la­tory bat­tles, and the com­pany’s Ital­ian ac­count­ing scan­dal have out­weighed progress by BT’S con­sumer busi­ness, in­clud­ing the suc­cess­ful £12.5bn takeover of EE.

The in­vestor, who asked not to be named, said his fund wanted BT to be led by “an ex­ter­nal can­di­date with a reg­u­la­tory and, prefer­ably, also an engi­neer­ing back­ground”.

BT is al­ready mak­ing ma­jor lead­er­ship changes un­der Mr Pat­ter­son, who is be­ing ad­vised by con­sul­tants from Mckin­sey. John Pet­ter, his long-time

ally and head of BT’S con­sumer busi­ness, abruptly opted to leave last month de­spite talks over a pro­mo­tion to a strat­egy and re­struc­tur­ing role.

Those re­spon­si­bil­i­ties are be­ing now taken on by chief fi­nan­cial of­fi­cer Si­mon Lowth, who is seen by some in the City as a po­ten­tial suc­ces­sor. Marc Allera, pro­moted to run a com­bined EE and BT con­sumer busi­ness, is also tipped as a key player in the com­pany’s fu­ture.

There is not a clam­our for im­me­di­ate change, af­ter nearly all BT share­hold­ers ap­proved Mr Pat­ter­son’s reap­point­ment at its AGM last month.

Ques­tions over BT’S fu­ture ex­ec­u­tive lead­er­ship are part of a busy agenda for Jan du Plessis, the in­com­ing chair­man, who is due to take the helm in Novem­ber and must also com­plete cru­cial ne­go­ti­a­tions over the com­pany’s mas­sive pen­sion deficit.

Mr du Plessis said he looked for­ward to “sup­port­ing Gavin and his man­age­ment”.

Sir Mike Rake, the cur­rent chair­man, said this week­end: “There is strong sup­port for Gavin and the way he has han­dled the is­sues BT has had re­cently. It is very much in the in­ter­ests of BT and its stake­hold­ers that he stays to lead the com­pany.”

The re­struc­tur­ing now un­der way is ex­pected to take more than two years to com­plete.

Mr Pat­ter­son, who has been at BT for 13 years, has ex­pressed anger and dis­ap­point­ment over the Ital­ian ac­count­ing scan­dal.

He also re­ceived no bonus last year and re­paid a por­tion of ear­lier pay­outs af­ter an in­ves­ti­ga­tion un­cov­ered com­plex fraud in Italy. BT’S cash flow took a £500m hit this year and it was forced to take a £530m im­pair­ment, send­ing its shares plum­met­ing.

Fur­ther bills re­lated to the scan­dal have fol­lowed, and in­vestors were also shocked by a £300m bill for fail­ures at its Open­reach net­work di­vi­sion.

An­a­lysts at Bar­clays last week said there was cause for op­ti­mism, how­ever, in part be­cause BT may have been “too con­ser­va­tive” in mak­ing its pro­vi­sion for com­pen­sa­tion for the fail­ures.

Vir­gin Me­dia, one of the cus­tomers Open­reach failed, said it had re­ceived £22m. The fig­ure was less than ex­pected and could in­di­cate a fi­nal cost of only £150m.

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