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No Quick Fix for New BT, Vodafone Bosses

Iain Morris
7/12/2019

Nick Read and Philip Jansen, the respective CEOs of Vodafone and BT, have not had the best start to their tenures at the top of UK telecom, it is fair to say.

Read, who took charge of Vodafone on October 1, has watched his firm's share price drop more than 18% since he became boss. BT's share price is down about 16% since February 1, when Jansen assumed control.

It's hard to believe both companies recently launched 5G, a next-generation mobile technology touted as a panacea for the world's problems. Their glitzy launch events in central London conveyed messages of success and confidence. Vodafone even got Formula 1 champion Lewis Hamilton on stage to emphasize its hip, superfast, winning credentials. Yet back in the office, Read was asking himself how he could justify his £6 million ($7.5 million) bonus package. And Jansen was wondering how to warn shareholders that dividends might be cut.

Those moves were confirmed this week. Read will forego about £1.3 million ($1.6 million) in stock, according to Bloomberg. That still reportedly leaves him with a share bonus of £5.1 million ($6.4 million), and his basic pay of £947,000 ($1.2 million) in the last fiscal year -- up handsomely from £722,000 ($904,000) in the previous one -- means he probably won't be shopping in Poundland anytime soon. But it's a significant concession to angry shareholders. Vodafone CFO Margherita Della Valle is also taking a cut.

As for Jansen, he was in recent days widely reported to have told shareholders at BT's annual meeting that dividends might need trimming in the next couple of years to pay for all-fiber network rollout to the British public. Vodafone had already cut its dividend earlier this year.

Both Read and Jansen have inherited problems. Vodafone's underperforming businesses in Spain and Italy have been a drag on the group's results. A merger with Liberty Global operations in Germany and other European markets has proven more difficult than Vodafone had expected because of regulatory pushback. Vodafone's share price fell nearly 28% in the two years before Read became CEO.

BT's malaise runs even deeper. Under Gavin Patterson, Jansen's flamboyant predecessor, the former state-owned monopoly spent billions on sports rights but allowed the UK to fall behind other European countries on the rollout of all-fiber networks. On top of that it has faced an accounting scandal in Italy, the perennial problem of its pensions deficit, a gloomy outlook in corporate and public-sector markets and mounting competitive and regulatory threats. In the two years leading up to Jansen's appointment, its share price dropped a quarter.


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Turning around these juggernauts will require management skill and demand the patience of shareholders. Vodafone's route looks smoother. Parts of its business empire are performing strongly, and several analysts applauded its "challenger" moves at the recent UK 5G launch. Press reports have suggested that regulatory officials may soon approve its Liberty Global merger.

Jansen has an unenviable task as BT's new boss, though. He may need to find the money to extend all-fiber networks to around 15 million UK properties in the next few years. BT is cutting 13,000 mid-level management and back-office jobs to reduce costs, but it's also had to hire thousands of engineers for the network rollout. Infrastructure rivals are coming. And regulators continue to threaten BT with dismemberment if it does not stay in line.

For both operators, but especially BT, one of the main sources of anxiety is the UK's next political leader, and what madness he could unleash. It is now almost certain that blond political bombshell Boris Johnson will succeed Theresa May as prime minister. He waded into the broadband discussion, and showed his ignorance of economics, when he recently called for ubiquitous all-fiber networks by 2025. Clive Selley, the CEO of BT's Openreach networks business, diplomatically called that a "stretch target" at an industry event last month. And the alternative to Boris could be Labour's Jeremy Corbyn, who is reportedly considering the renationalization of BT. Selley and his colleagues may need some creative new expressions.

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— Iain Morris, International Editor, Light Reading

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