The FTSE 100 firm unveiled a strategy update alongside its fourth quarter figures in which it laid out plans to cut costs by £1.5bn through slashing thousands of back office jobs in a bid to offset short-term cost and revenue pressures.
Over three years BT said it plans to get rid of 13,000 employees in mainly back office and middle management roles.
But the telecoms giant said it will be hiring about 6,000 new staff to support network deployment and customer service.
In another bombshell announcement, the group confirmed it would be exiting its headquarters in central London, as part of a move to consolidate its offices across the UK.
By focusing on 30 “modern strategic sites”, the firm said it would create a more “collaborative, open and customer focused working culture” and reduce the “inefficiencies” of being housed in numerous sites across the UK.
Too little too late
However, some commentators speculated that BT’s restructuring efforts to stake its claim in a quickly evolving digital marketplace could be too little too late.
Lee Wild, head of equity strategy at Interactive Investor, called the changes “sensible and critical” for BT’s ability to keep up with its rivals, many of whom have adapted to change quicker.
“Too long a bloated, lumbering beast, BT’s recognition that it must become a ‘lean and agile’ organisation is long-overdue,” he said.
But Wild added investors need some convincing, as based on the “grim response” to its fourth quarter results and pension review.
Over the fourth quarter, the group’s revenue fell 3% on a reported basis to £6bn. Over the full year 2017, revenue was 1% lower at £23.7bn.
BT’s pension deficit currently stands at £11.3bn, which The Share Centre investment research analyst Ian Forrest points out is “clearly a significant figure but less than many had feared”. He said it is worth noting that BT plans to make payments of £4.5bn to the pension scheme, including an extra £2bn contribution.
“BT shares are down sharply but remain cheap on most valuation models and a dividend of yield of over 6% is compensation for risk involved in making Gavin Patterson’s grand plan work,” added Wild.
Dividend
BT also said that it would maintain its full year dividend from 2016/17 at 15.4p.
However, Justin Cooper, CEO of Link Market Services, said the telecom giant’s cost cutting agenda will only likely protect the dividend for the next couple of years.
“BT has paid its shareholders £10.7bn in dividends in the last decade, almost the size of its current pension deficit,” said Cooper.
“Shareholders still need the company to invest for the future, and they are on the hook for the company’s pension scheme one way or another. The big cost reductions BT has announced today will protect the dividend for the next couple of years, but its longer-term prospects are still unclear.”
