BT takes ‘drastic action’ to rebuild as Wholesale and GS slump in revenue

11 May 2018 | Alan Burkitt-Gray

Revenue and profit of BT’s Global Services division and its Wholesale and Ventures divisions were both down sharply last year.

A close reading of yesterday’s BT results – when it announced 13,000 job losses over the next three years – shows that its wholesale and enterprise activities are both suffering badly.

Most of those 13,000 will be among managers and professionals, while BT’s Openreach last mile division will 6,000 more people to speed up network deployment.

The only light for any of BT’s wholesale operations came from Openreach, which showed revenue up marginally – though even this division, which runs last-mile fibre and copper in the UK – reported earnings down.

Global Services showed annual revenue down 9%; underlying revenue excluding transit was down 8%. EBITDA was down 12%. Wholesale and Ventures showed revenue down 5% and EBITDA down 10%.

There was hardly a division of BT that did not have bad news. The mobile unit, EE, was one of the exceptions, with revenue up 4% and EBITDA up 17%. Consumer, which includes BT Sport, showed revenue up 3% – approximately the UK’s current inflation rate – but EBITDA up just 1%.

Overall BT’s revenue was down 1% but EBITDA was up 2%. Net debt was up 7.7% to £9.6 billion.

CEO Gavin Patterson tried to put an optimistic spin on it. "BT is uniquely positioned to be a leader in converged connectivity and services," he said. "I am really excited to be delivering the next stage of BT’s transformation."

A number of commentators questioned that last sentence, with some suggesting that Patterson’s future at the top of BT was in jeopardy – especially as the company’s share price was down sharply from £2.38 at the start of Thursday to £2.19 at the end of the day.

The fall over the past year is even more significant: it peaked at £3.17 in late May 2017. Go back to late November 2015 and BT shares were selling at almost £5 each.

Dave Millett of a broker called Equinox told the thisismoney.co.uk website: "I cannot think of many chief executives that have survived that kind of share price drop, so the stakes are very high for Patterson now. … He may find that he ends up being one of the 13,000 casualties."

Another, George Salmon, of Hargreaves Lansdown, questioned whether the move was enough. He told the same site: "13,000 job cuts and a move out of central London are drastic actions and should help deliver cost savings. But they still aren’t enough to dig BT out of the hole it’s in."

It has also announced that it will move out of its headquarters in central London and concentrate activities on "30 modern strategic sites", with the aim of "reducing the inefficiencies that exist by being housed in numerous sites across the UK".

BT will offer further developments next week, when it announces changes to its consumer operation.

CCS Insight’s Paolo Pescatore, VP for multiplay and media, commented: "It’s been a while since BT acquired EE and we’ve yet to see significant benefits from the deal given the ongoing challenges facing the overall group. With this in mind it is unsurprising that some of the successful executives at EE have now secured key roles as part of the new entity."

Pescatore said that Marc Allera, the former EE executive who is now CEO of the consumer division of BT, "has a lot to ponder and faces some tough decisions with the integration of the consumer units. His strive for simplicity and customer-friendly approach will put the new entity in good stead."

The analyst warned: "He now needs to take a broader role beyond mobile and individual consumers and more about household telecom requirements."

Mark Newman, chief analyst at the TM Forum, said: "The BT layoffs illustrate two major challenges facing the telecoms industry: culture and vision." He warned: "Many large telecoms companies are struggling with digital transformation, because of a hierarchical, slow and risk-averse organisational structure."

He warned that many telcos "are stuck in 20th century ways of working, [with a] lack the vision and leadership". They need "to become more customer-centric and focussed on opening up new digital ecosystems, including IoT, smart-manufacturing, digital-health and smart-cities. This is starting to happen, but progress is too slow."

Pescatore added: "The new organisation structure and strategy cannot come soon enough. However, in reality it will be some time before this comes into effect and lot can happen given recent developments."

Meanwhile, former Openreach CEO Liv Garfield last night was named Veuve Clicquot Business Woman of the year. She is CEO of the quoted water and sewage company Severn Trent, which last year had sales of £1.8 billion and income of £543 million.





Topics: BT, Global Services, Wholesale, revenue, annual results, Openreach, EE