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 stunned Britain's biggest telecoms group in January.
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 stunned 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 together wiped 8 billion pounds ($10.3 billion) from the company’s value.
Seeking to draw a line under the difficult year, Patterson did not get a bonus, meaning his total pay package fell in the 2016/17 financial year to 1.3 million pounds, down by 4 million pounds on the year before.
The company said it would also claw back previous awards worth around 338,000 pounds. “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.
Setting out its plan for Global Services, the company said it no longer needed to own local networks outside Britain to serve its multinational and government customers, and could instead use new network technology and partnerships.
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.
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“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.
The discovery of a 530-million-pound black hole in its Italian accounts had stunned the market and forced BT to cut forecasts for the next two years. As it scrambled to assert control, it appointed Alvarez to take direct responsibility for the European business.
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.
For the current 2017-18 year, BT forecast that underlying revenue would again be broadly flat and core earnings would decline to a level between 7.5 and 7.6 billion pounds. 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.
Richard Marwood, senior fund manager at shareholder Royal London Asset Management, told Reuters he welcomed the move on executive pay and the fresh scrutiny of Global Services, a division that has sparked profit warnings in the past.
“BT is still a business that is generating a lot of cash flow, it’s just that the demands on that cash flow have proved to be quite high” he said. “The dividend is the disappointment in today’s statements.”
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, but it still lags many other countries in Europe.