BT will cut 4,000 jobs and replace the boss of its global services business in a plan to tackle the source of an Italian accounting scandal that shook Britain’s biggest telecoms group in January. A restructuring of the unit, which employs 18,500 people, is part of Chief Executive Gavin Patterson’s attempt to recover from the scandal and a profit warning caused by a slowdown in government work that wiped 8 billion pounds ($10.3 billion) from the company’s value. The company said it no longer needed to own local networks outside Britain to serve its multinational customers, and could instead use new network technology and partnerships. “This has been a challenging year for BT,” Patterson said.
“We’ve faced headwinds in the UK public sector and international corporate markets and must learn from what we found in our Italian business,” he added. Seeking to draw a line under the Italy scandal, BT also said Patterson and former Group Finance Director Tony Chanmugam will not receive a bonus for the 2016/17 financial year. Luis Alvarez, the boss of global services for the last five years, would be replaced by Bas Burger, who was most recently president of BT in the Americas, the company said. “We wanted to make sure we had clear leadership to take us through this next period of the journey (and) we felt it was the right thing to do to make a change,” Patterson told reporters.
DIVIDEND GROWTH TO SLOW
BT reported broadly flat underlying revenue for the year to the end of March of 24.1 billion pounds and underlying earnings of 7.65 billion pounds, in line with guidance it cut in January. It increased its dividend by 10 percent, but it said its dividend would not grow at the same rate next year. The shares, which have barely recovered from January’s plunge, fell 3 percent on Thursday, as analysts noted a lack of longer-term earnings guidance, breaking with past practice. Patterson said he needed more clarity on changes regulator Ofcom has proposed to the pricing of some of the most popular superfast broadband services before he could offer a view on 2018/19.
He also needed a clearer picture on any additional investment in fibre to the home. BT has said it will connect 2 million homes with full-fibre by 2020. For the current 2017-18 year, BT stuck to its previous forecast that underlying revenue would be broadly flat and core earnings would be between 7.5 and 7.6 billion pounds. Openreach, which has been legally separated from the wider BT group and which owns the core network, said on Thursday it was consulting peers on plans to support a larger-scale full-fibre broadband network. Paterson said as many as 10 million homes and businesses could be connected to full-fibre services by the mid-2020s if there was sufficient demand and support from Openreach’s customers, which include Sky and TalkTalk. “One of the advantages of the new model is it allows us to test that demand before we commit the addition capex, including new co-investment plans,” he said.