08 June 2018
| Alan Burkitt-Gray
BT has announced that CEO Gavin Patterson will leave later in the year and says it is looking for a successor.
The UK incumbent has bowed to
pressure from some of its large institutional investors, which earlier this week told chairman Jan du
Plessis that they were "losing faith" in Patterson.
Du Plessis said this morning that "the board is fully
supportive of the strategy recently set out by Gavin and his
team", and yet it decided that the CEO has to go. The statement
seemed to echo the famous surgeon’s comment: "The
operation was successful, but the patient died." In this case,
"the strategy was right, but the strategist has to go".
The statement was headed "BT Chief executive succession
planning", in a bit of spin-doctoring that was trying to
indicate this was a long-term plan instead of something forced
on the group in the last few days by its leading institutional
BT’s shareholders remained unimpressed this
morning. The share price, which was £2.08 on Monday,
briefly spiked but then went down to £2.03 –
implying a 2.5% loss of value in a single week. Two years ago
they were £4.52.
A footnote to the announcement said that when he steps down
Patterson "will be treated as a good leaver and be paid
strictly in accordance with the terms of his employment
contract and BT’s remuneration policy, as approved
by shareholders in 2017". But "he will now not be receiving the
2018 incentive share plan award described in the annual
BT said in May that it will fire 13,000 people from its
workforce, mostly in mid-management roles. The BT board appears
to have accepted that Patterson is not the right person to
handle that – or some of the other challenges that are
facing the group.
With the exception of its mobile operation, EE, and its
last-mile operation, Openreach, most divisions reported poor results a month
ago. BT Global Services showed annual revenue down 9%;
Wholesale and Ventures had revenue down 5%. On the consumer
side, revenue was up 3%, more or less the current inflation
rate in the UK. Overall revenue was down 1% and debt was up
7.7% to £9.6 billion.
This might be the opportunity for a new CEO to make some bold
moves. One possibility would be offering to sell Global
Services, for example, to another global carrier.
BT’s UK competitors have long angled for Openreach
to be moved out of BT’s direct control, either as
a separately quoted company or perhaps jointly owned by major
And of course a new CEO might decide to appoint a new senior
Du Plessis, who became chairman late last year, said this
morning: "The broader reaction to our recent results
announcement has though demonstrated to Gavin and me that there
is a need for a change of leadership to deliver this
He added: "I am confident that, for the remainder of his term,
Gavin and his senior management team will continue to display
the energy required to deal with every dimension of the task at
In Patterson’s statement he led with the launch of
BT Sport – showing defiance to many
shareholders’ dismay at how much the company has
spent on sports rights. He included in his list of achievements
"the purchase and integration of EE" as well as "the agreement
to create greater independence for Openreach" – though
that was forced on BT by the regulator, Ofcom, in the face of
stiff resistance by the company.
He said: "BT is a great business and, with the new management
team I’ve recently put in place, is I believe very
well positioned to thrive in the future."
The new CEO, whoever he or she is, will have barely been in
office more than a few weeks before a significant deadline
looms. In January 2019, BT’s largest shareholder,
Deutsche Telekom with 14%, will be able to sell its shares or
– perhaps more likely – make a takeover
The latest indication, in February 2018,
was that Tim Höttges, CEO of Deutsche Telekom and a
non-executive director of BT, would like to make a bid.