Humbled BT announces 4,000 job cuts, no exec bonuses and flat outlook

A tough year for UK telecoms giant BT has culminated in the announcement of 4,000 job cuts, a downgraded outlook and a massive remuneration cut for senior management.

The cuts seem to be a direct result of the SNAFU at BT’s Italian arm, which resulted in some hefty write-downs. BT expects to save £300 million over two years by losing those jobs but will take a charge of £300 million as a consequence, so it’s not clear how much that achieves other than symbolic punishment of the Global Services division. That division will also undergo a strategic review designed to make is ‘more digital’, which seems to mean a greater emphasis on cloud-based services rather than owning local networks.

At the same time CEO Gavin Patterson and Group Finance Director Tony Chanmugam will not be receiving bonuses for the 2016-17 financial year in recognition of the underperformance of the group.

“The past year has been challenging,” said Remuneration Committee Chairman Tony Ball. “Although good progress has been made in a number of areas, unfortunately our performance has been significantly affected by the accounting irregularities in our Italian business, the issues that arose in Openreach around Deemed Consent and the significant challenges we faced in the UK public sector and international corporate markets.”

“This has been a challenging year for BT,” echoed Patterson. “We’ve faced headwinds in the UK public sector and international corporate markets and must learn from what we found in our Italian business. Openreach also received a fine from Ofcom after an investigation into historical Deemed Consent practices revealed it fell short of the high standards we expect. We take these issues extremely seriously and are putting in place new measures, controls and people to prevent them happening again. Learning from the challenges of this year will make BT a stronger company for the future.

“We’ve undertaken a strategic review of Global Services. Technology trends mean that we are now less dependent on owning physical local network assets around the world, creating the opportunity to reposition Global Services as a more focused digital business. We are therefore restructuring our Global Services organisation to enable this strategic refocusing.

“We aspire to be the UK’s digital champion. To achieve this, we’re ready to invest in the UK’s digital infrastructure, in continued improvements in our customer service, and in new technologies to further enhance customer experience. To that end, Openreach has today announced that it’s consulting with customers and industry stakeholders on the business case that could support better rural broadband and a large scale Fibre-to-the-premises rollout across the UK.”

The latter point was also the subject of a separate announcement from BT. It seems to amount to BT asking its customers what their feeling are about FTTH and it’s hard to imagine them saying anything other than ‘we’re in favour, get on with it.’

“With the right conditions we could make full fibre connections available to as many as 10 million homes and businesses by the mid-2020s, but we need to understand if there’s sufficient demand to justify the roll-out, and support – across industry, Ofcom and government – for the enablers needed to build a viable business case,” said Ofcom CEO Clive Selley.

That seems to be code for ‘we’re certainly not paying for all of it ourselves,’ so this consultation appears to amount to a massive whip-round. “The right conditions” are presumably an amount of money BT/Openreach needs to receive from its customers and the state before it’s prepared to roll the FTTH dice. BT’s share price was down 3% at time of writing, which is probably down mostly to a forecast of flat growth for the current financial year.