The UK's biggest operator realizes its CEO is not the right man for the job days after it was revealed it have given him a £1.3 billion bonus last year.

Iain Morris, International Editor

June 8, 2018

6 Min Read
BT Waves Goodbye to Gorgeous Gavin

He looks like a Hollywood hero, and he is evidently so disconnected from reality that he might as well be one.

Days ago, BT Group plc (NYSE: BT; London: BTA) boss Gavin Patterson was revealed to have enjoyed an effective pay rise of 72% in BT's last fiscal year, collecting a nice little package of £2.3 million ($3.1 million) in overall compensation. To most earthlings, this would have seemed unacceptable, with BT's share price at a six-year low, the operator lurching from one crisis to another and 13,000 jobs up for scrappage. But not to Patterson and BT's remuneration committee. Hollywood hero? Make that Russian Tsar, preening himself in his palace while the serfs starve. (See BT's Patterson Gets Tasty CEO Bonus as Troops Suffer and BT to Slash 8% of Jobs in Efficiency Drive.)

Figure 1: Separated at Birth? Michael Landon, star of 1970s TV series Little House on the Prairie, and BT boss Gavin Patterson bear more than a passing resemblance. Michael Landon, star of 1970s TV series Little House on the Prairie, and BT boss Gavin Patterson bear more than a passing resemblance.

It is not the serfs who have rebelled in this case, however, but the BT shareholders. Under mounting pressure from disgruntled investors, Patterson has been in talks about his future with BT's other managers, including South African Chairman Jan du Plessis, who sounds rather like Joss Ackland in Lethal Weapon 2. (See Eurobites: BT Shareholders Call for Patterson's Head.)

"Mind the plastic, I'm having some painting done," said Ackland in that movie to an underperforming henchman, who is then swiftly dispatched with a gore-spattering gunshot to the head. Du Plessis was less brutal with Patterson, but BT's CEO was evidently persuaded to hand over the palace keys. In a statement this morning, BT's board said he would quit later this year. It expects to have a successor in place in the second half of 2018.

So what about that gob-smacking pay rise? BT points out that Gorgeous Gavin will continue to receive pay on the same basis disclosed in its 2018 annual report. The only change is that he will "now not be receiving the 2018 incentive share plan [ISP] award."

As far as Light Reading can discern, this will make not a jot of difference to Patterson's compensation for the last fiscal year, because he received nothing under the ISP anyway (see columns seven and eight in the graphic below). The sharp increase in his pay was entirely down to a £1.3 million ($1.7 million) bonus he scooped as BT suffered.

Figure 2: Executive Compensation Source: BT. Source: BT.

Judging by the share price movements, BT's investors seemed underwhelmed by the strategy update Patterson announced just a few weeks ago, when BT published its full-year figures. But perhaps it was only Patterson who underwhelmed, because BT is not about to jettison those plans. (See BT's Patterson May Be Running Out of Time.)

"The board is fully supportive of the strategy recently set out by Gavin and his team," said du Plessis in a statement. "The broader reaction to our recent results announcement has though demonstrated to Gavin and me that there is a need for a change of leadership to deliver this strategy."

For the avoidance of any doubt, this means more convergence, more high-speed mobile (we might even get 5G next year), more promises to roll out fiber if regulators play ball, and more "cloudification" of business offerings. In other words, it largely resembles the strategy that other big European telcos are pursuing. But no one ever accused an operator of originality.

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

It would be grossly unfair to depict Patterson as a managerial muppet from start to finish, though. Until revelations of an accounting scandal at the Italian unit of BT's global services business, the UK operator seemed to be riding high. The consumer division, where Patterson cut his teeth, was the star of the show. It had ended Sky's monopoly in the TV market for soccer rights and its broadband arm was growing faster than its rivals. Ownership of the Openreach infrastructure business before "legal separation" came along left BT in a kingly position. (See Only BT's Dismemberment Will Sate Rivals and BT's Bogeyman: A Soccer-Mad Amazon.)

Patterson's crowning achievement has to be the £12.5 billion ($16.8 billion) takeover of mobile giant EE in early 2016. To the disgust of opponents, he persuaded competition authorities that a merger with the UK's biggest and fastest 4G network was in the best interests of the sector and the broader economy. As Europe prepares for the introduction of 5G services in the next year or two, BT is on safe mobile turf. (See BT Locks Down £12.5B EE Takeover Deal and BT Kicks Off 5G Campaign With Plans for 2019 Launch.)

Ignoring the Italian scandal, the biggest question is whether spending billions on soccer rights makes long-term commercial sense. For some observers -- who note that BT has fewer than 2 million TV customers years after first entering the market, and that it lost TV customers in each of the last two quarters -- the answer is an emphatic no. The great unknown is the extent to which BT's broadband business would have suffered without a foray into sport.

With Openreach now under closer scrutiny than ever before, and as BT's rivals invest in their own fiber networks, the UK incumbent faces a waning of its market dominance in the next decade. The juggling of different shareholder and political interests will be an even tougher job for BT's next CEO. (See Eurobites: Vodafone Goes Hand in Glove With CityFibre, Lays Down the Gauntlet to BT and Vodafone UK Boss Slams Openreach 'Stranglehold'.)

Whatever Patterson's legacy, admirers of a perfectly groomed coiffure and the shirt-buttons-undone approach to business attire will remember this day with sadness. "Unusually charismatic," was how a UK radio show described Patterson this morning. "I think what they meant was that he had lovely hair and didn't look like a gargoyle," said Paul Rainford, Light Reading's self-appointed Lord of Copy, speaking from Eurobites Towers earlier today. Here's hoping that Patterson quickly resurfaces in the industry, if only so we can wheel out that Michael Landon picture many more times.

— Iain Morris, International Editor, Light Reading

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About the Author(s)

Iain Morris

International Editor, Light Reading

Iain Morris joined Light Reading as News Editor at the start of 2015 -- and we mean, right at the start. His friends and family were still singing Auld Lang Syne as Iain started sourcing New Year's Eve UK mobile network congestion statistics. Prior to boosting Light Reading's UK-based editorial team numbers (he is based in London, south of the river), Iain was a successful freelance writer and editor who had been covering the telecoms sector for the past 15 years. His work has appeared in publications including The Economist (classy!) and The Observer, besides a variety of trade and business journals. He was previously the lead telecoms analyst for the Economist Intelligence Unit, and before that worked as a features editor at Telecommunications magazine. Iain started out in telecoms as an editor at consulting and market-research company Analysys (now Analysys Mason).

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