BT to turn to local carriers as Global Services scales back

BT to turn to local carriers as Global Services scales back

BT Global Services is to lose 4,000 of its 18,500 staff worldwide as the company seeks to recover from the Italian fraud that required the group to write off £530 million.

As a result of the scandal, BT is to scale back its ownership of local networks around the world, relying more on local carriers to deliver voice and data to enterprise customers.

The Italian scandal means that BT’s senior management have been unable to sign off the last year’s accounts under the US Sarbanes-Oxley Act. Current group CEO Gavin Patterson and previous group CFO Tony Chanmugam have lost bonuses as a result.

The Sarbanes-Oxley Act was passed following a number of financial scandals in the US, some of which were in the telecoms industry, when companies mis-stated revenue and profits.

The president of BT’s European operations and the CEO and CFO of BT Italy have all left. Luis Alvarez, CEO of BT Global Services, is to leave and he will be replaced by Bas Burger, president of BT in the Americas. Alvarez had been in his current role since October 2012 and with BT since 1999.

BT will start to rotate senior management “among countries to ensure an independently governed and rigorously controlled organisation throughout all parts of Global Services”, said the company. Though cases still have to come to trial, BT believes there was a conspiracy among a group of senior executives in its Italian operation.

An investigation by KPMG “identified collusion, circumvention and override of controls within our Italian business, that was not identified by our monitoring controls thereby resulting in the misstatement of results going undetected for a number of years”, said BT.

“We have also taken steps to enhance the wider controls that monitor our overseas operations in our shared service centres, Global Services and at a group level,” said the company. “Beyond Italy we have completed detailed balance sheet reviews in seven selected country operations in Global Services outside of the UK. … Our review did not identify any similar issues or areas of concern elsewhere.”

However the implication is that BT will carry out a deep review of BT Global Services’ activities, a move that may lead to radical changes in policy.

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