BT starts search for new boss as Philip Jansen quits

Philip Jansen recently estimated that BT, the UK telco he manages, would be able to cut up to 55,000 jobs this decade, blaming the impact of artificial intelligence (AI) for 10,000 of these envisaged layoffs. But he will not be around to witness most of the carnage after tendering his notice this week. Unless generative AI spawns a semi-capable CEObot in the next few months, BT will need a flesh-and-blood replacement.

News of his planned departure emerged from BT's press office at the weekend but did not come as a total surprise. In March, City sources told the Mail on Sunday newspaper that BT was already scouting for potential successors. Jansen has looked increasingly insecure in the top job, upsetting competition authorities with some unguarded remarks to a Financial Times reporter and failing to resuscitate BT's stock.

"The company's shares have almost halved since he took over in early 2019, while recent inflammatory comments about the role of fiber altnets drew concern from Ofcom," said Kester Mann, an analyst with CCS Insight, in an email, writing that Jansen has looked to be "on increasingly shaky ground."

He is to step down "at an appropriate moment over the next 12 months," according to the statement BT issued at the weekend, which appears to mean when BT has identified a successor. Jansen drew attention to his achievements in his own accompanying remarks, noting that BT's full-fiber network has now "passed" 11 million premises and that its 5G one covers 68% of the country. "This is creating a much stronger BT Group which is starting to drive growth for both investors and the UK," he said. "But there's a lot more to do and I am fully committed to driving the business forward until I hand over to my successor."

Paolo Pescatore, another analyst with PP Foresight, sounded unsurprised about the latest developments. "This has been on the cards for some time," he wrote in his own email. "There's not much more left for him to do. He has helped navigate the group through a difficult period. Probably time to think about the next chapter for both him and BT."

The man with the big fiber plan

Jansen will forever be remembered as the man who put some muscle into BT's full-fiber rollout. Gavin Patterson, his predecessor, seemed keener on making BT a TV company, lavishing billions on the rights to show top-flight soccer matches in a clear challenge to Sky, the pay-TV incumbent. When Jansen arrived in early 2019, BT was under threat from altnets building higher-speed broadband networks. The plan to cover 25 million premises by the mid-2020s was drawn up after Jansen took charge.

But it has come at a heavy price. Capital intensity, BT's expenditure as a percentage of its revenues, has soared from less than 17% under Patterson to about 24% in BT's last fiscal year, making it a bigger spender than any European telecom incumbent on this measure. Unlike its altnet challengers, BT already has a massive broadband business and has not been able to grow revenues by upselling fiber to customers on older lines. As the incumbent in a market that has suddenly gained lots of players, it is likelier to lose customers than acquire new ones. BT's headline sales shrank 1% last year and its pre-tax profit fell 12%.

BT's capital intensity (Source: BT)

Not investing would risk a steeper decline as broadband customers decamped to faster networks. But they have not raced to adopt what BT now has to offer. Just 30% of the 10.2 million homes passed at the end of March were subscribing to a full-fiber service. The comparable take-up rate on BT's part-fiber network is about 63%. Low adoption makes it harder for Jansen to justify the investment. It also hinders BT's efforts to decommission older technologies and slash costs.

Jansen made himself unpopular with Ofcom, the UK telecom regulator, after telling the Financial Times that his project would "end in tears" for rivals. It prompted an admonitory letter from Melanie Dawes, Ofcom's boss, threatening regulatory action if a review showed that BT was able to "distort competition." Yet regulators eventually gave BT the go-ahead for its Equinox 2 rates, which controversially lower the fees it charges broadband retailers for the use of its lines. CityFibre, the biggest of the infrastructure altnets, has been especially critical of Equinox 2, presumably fearing BT will undercut its own service.

Hacking into headcount

For all his focus on infrastructure investment, Jansen has not been able to deliver sales growth for BT. Instead, the operator has been targeting costs. It aims to slash £3 billion (US$3.8 billion) off its annual costs by 2025 and boasted gross annualized cost savings of £2.1 billion ($2.7 billion), since April 2020, when it recently published results for the fiscal year ending in March 2023. Overall operating costs for that year came to about £18.1 billion ($23.2 billion).

Besides retiring older technologies – such as the 3G mobile network – Jansen is automating tasks and cutting headcount. BT has already made a net reduction of more than 9,200 jobs since it bought mobile operator EE in 2016. But with more than 97,000 full-time employees, and another 30,000 people working as contractors or part-time, BT continues to look bloated alongside some of its main peers. It generates less in revenues per employee than any of Europe's big telco groups, and the figure has been falling in recent years.

In his most recent update, Jansen described BT as it might look in 2030 when automation and artificial intelligence are widespread. Tens of thousands of jobs could feasibly go after BT finishes work on its full-fiber rollout, and there is unlikely to be another infrastructure project on that scale for decades. Chatbots may have replaced customer-service assistants. Other forms of generative AI will conceivably be helping BT to manage and operate its networks. BT will probably still need a CEO, at the very least.

Attention will now turn to who could follow Jansen in that role. "A prime candidate is already at the business with Marc Allera, who heads up the consumer segment," said Pescatore, while Mann wrote that no obvious candidate springs to mind. "BT will likely cast its net wide, both internally, elsewhere within the telco sector, and potentially in a different industry altogether," he said. The market awaits.

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— Iain Morris, International Editor, Light Reading