Deutsche Telekom stake and poor results on agenda for new BT CEO
BT’s new CEO, Philip Jansen, takes over the CEO role on Friday, at the end of what could be a defining week for the troubled company.
Two immediate issues will confront him. First, Tuesday will see the end of the three-year embargo on Deutsche Telekom’s increasing or reducing its 14% stake. Second, on Thursday, BT will publish its third-quarter results: analysts expect revenue to be down 2.3% and EBITDA to be down 6.2%.
But Jansen “is planning on spending his first few days at the helm getting out and meeting people from around the business, primarily”, a company official told Capacity this morning.
Jansen was appointed last October after the BT board decided his predecessor, Gavin Patterson, had the right strategy but was the wrong person to carry it out.
Jansen is a dealmaker. He was managing director of the consumer division of Telewest, a UK cable TV company that later merged with rivals to form Virgin Media. Then he was co-chief executive of payment processing company Worldpay, which a year ago was taken over by Vantiv, with the combined entity keeping the Worldpay name.
When BT announced his appointment chairman Jan du Plessis said Jansen “is a proven leader with outstanding experience in managing large complex businesses”. He added: “Philip’s strong leadership has inspired his teams, successfully transformed businesses across multiple industries and created significant value for shareholders. His most recent success at Worldpay, a technology-led business, means he is well suited to build on the solid foundations that are in place at BT.”
But the “solid foundations”, as du Plessis called them, have increasingly been called into question.
Analysts at UBS said that on Jansen’s agenda will be not only the third quarter results but also the highly competitive broadband market in the UK, lower pricing at its Openreach last-mile subsidiary and the restructuring at BT Global Services.
Bas Burger, CEO of BT Global Services since the company had to write off £530 million on its Italian business in 2017, is trying to shuffle off the division’s low-growth services such as wholesale voice and focus on new sectors.
BT’s group performance over the past few years is reflected in its share price, which has dropped from £4.52 in May 2016 to £2.38 this morning. In euro terms – which is how Deutsche Telekom will view them at its headquarters in Bonn – the falling exchange rate for the pound means a collapse from €5.92 in 2016 to €2.74 now, though the price has stabilised over the past year.
Deutsche Telekom acquired its 14% stake when it and Orange sold UK mobile operator EE to BT. In January 2016 Orange took a smaller stake plus cash, and managed to offload the rest of its shares.
Under the terms of the EE sale in 2106, Deutsche Telekom could not sell any of its 14% stake, now worth £3.3 billion, or buy more shares until this week.
A close observer of BT, speaking to Capacity on condition of anonymity, said: “I wouldn’t be surprised if Deutsche Telekom bid for the company after the AGM in July.”
This observer noted that both BT and Deutsche Telekom are both becoming mobile-first companies, though for both their fixed fibre networks – Openreach’s, in BT’s case – are important sources of cash flow.
Both groups also have challenges with their enterprise divisions. Paralleling BT’s problems with BT Global Services, Deutsche Telekom announced last September that T-Systems will increasingly focus on cloud – and now IBM is set to acquire part of the operator for a reported €860 million.
Jansen might also be expected to look at the cost of BT Sport, its TV service that has challenged Sky in particular for football rights. That landscape has changed in recent months, since Comcast won an auction to acquire Sky for £30 billion, in the face of competition from the Murdochs’ 21st Century Fox.