BT Left in 'Good State,' Says Outgoing CEO Patterson

Soon-to-quit BT CEO Gavin Patterson says he is passing the UK telco onto his successor in a "good state" following the 2016 takeover of EE and the development of plans for new network investments.

Under pressure from shareholders unhappy with its recent performance, BT Group plc (NYSE: BT; London: BTA) announced Patterson's departure just last week. He will continue in the CEO role at the former state-owned UK monopoly until BT has identified a successor in the second half of this year. (See BT's Next CEO: The Candidates and BT Waves Goodbye to Gorgeous Gavin.)

Answering questions from Light Reading at today's TechXLR8 event in London, Patterson said it was "too early" to comment on his future plans, describing his five-year stint in the BT hot seat as "a typical tenure for a BT CEO."

"It is a challenging and enjoyable job but also pretty relentless," Patterson told Light Reading. "I think I pass the business on in a good state."

"We've made some important moves," Patterson continued. "The acquisition of EE was the most important in the last few years and we've now set out a strategy for the next few years to address the efficiency challenges of the business but also to invest in new networks and convergence, which is pivotal to the future of the business."

BT's £12.5 billion ($16.7 billion) takeover of EE in early 2016 has given the operator mobile as well as fixed-line capabilities, and a major platform for the launch of "converged" offerings that use both.

However, the UK operator's share price recently fell to a six-year low amid difficulties in various parts of the BT business. An accounting scandal at the Italian unit of BT's global services business has chewed into profitability, while the consumer business has been losing TV customers despite a controversial multi-billion-dollar investment in sports content. (See BT's Patterson May Be Running Out of Time.)

A gloomy outlook in some of BT's public sector and enterprise markets, where some analysts believe the operator is under threat from Internet giants, is a further source of concern.

BT has said it will cut 13,000 middle management and back-office jobs to boost profitability. Those cuts will come on top of 4,000 layoffs in back-office functions and at global services, announced under a restructuring plan in May 2017, although BT also plans to hire 6,000 workers for network rollout and customer services. (See BT to Slash 8% of Jobs in Efficiency Drive.)

The operator's last annual report shows that BT's headcount fell by just 600 employees in the last fiscal year, to about 105,800 employees globally.

Ongoing regulatory pressure is another worry for shareholders. Under instructions from UK national regulatory authority Ofcom, BT was last year forced to "legally separate" its Openreach infrastructure business from the rest of the group. The regulator believes this separation will improve conditions for BT's rivals.

But for some investors, the legal separation of Openreach may seem like a troubling step toward a complete spin-off, with some of BT's competitors still arguing the move did not go far enough. (See Vodafone Grills Authorities for UK's 5G Lag.)

Asked what advice he would give to his successor, Patterson said: "Regulation is part and parcel of the job and it ebbs and flows. You have to work with the regulator to create a competitor environment that supports competition at a downstream but also an infrastructure level. My advice would be to embrace that, be part of the solution and make sure that from a BT shareholder perspective you can make a return on whatever you decide to do."

For more fixed broadband market coverage and insights, check out our dedicated broadband content channel here on Light Reading.

While it has announced Patterson's departure, BT has indicated that it will stick with the strategy he unveiled at the operator's recent earnings update for the last fiscal year.

That includes plans to launch mobile services based on the next-generation 5G standard in 2019, ahead of rivals, and a promise to roll out all-fiber broadband technology for more UK households and businesses, provided regulatory conditions are favorable. (See BT Kicks Off 5G Campaign With Plans for 2019 Launch.)

"We want to put FTTP [fiber-to-the-premises] within reach of 10 million homes by the mid-2020s given the right conditions, and we aim to be the first to launch 5G in the UK in the places where customers need it the most," Patterson told an audience at today's TechXLR8 event.

BT's overriding concern, that like of other European telco incumbents, is that regulatory authorities will force it to provide wholesale services on an all-fiber network at unfavorable rates.

Patterson had little to say about BT's questionable sports strategy during the recent earnings update. Deciding whether to continue splurging billions on soccer rights, and determining the precise role BT plays in the UK's "gigabit" future, will be major considerations for the incoming CEO.

— Iain Morris, International Editor, Light Reading

mendyk 6/12/2018 | 2:32:51 PM
Interesting word A "good" state -- credit Mr. Patterson for probably not overstating the effects of his stewardship.
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