After a two year slide, during which the share price has practically halved, trust and confidence amongst BT's investors needs to be rebuilt. Accordingly, the company has announced its biggest overhaul in a decade which sees cost stripping and job losses but also new hires and investment.
Highlights from the results and strategy update presentation include:
Jan du Plessis (BT's Chairman) seemed happy overall with the financials given the difficulties encountered in 2017 and flagged that it would be a very different story today without EE – 'a key strategic decision by Gavin.' He stressed however that BT needed to be still become a leaner, more modern organisation.
Simon Lowth (Group CFO) confirmed his satisfaction with the recent pension settlement and singled out performance by individual lines of business. Openreach was described as resilient but pressured by regulatory costs, enterprise continued to be an area of weakness (as anticipated), and that EE continued to shine but warned against expecting the same level of growth here (17%) to continue.
Gavin Patterson (Group CEO) described the past twelve months as a 'year of disciplined delivery and risk reduction'. Echoing Jan, he pushed the message that BT needs to evolve, adding that BT was well placed to build on its already 'leading position as a truly converged operator with key strategic partnerships.' Essentially this hinges on the idea of seamless convergence coupled with plans for an all IP transformation – something already being described as 'a new product category with improved economics'.
More than once the impact of regulation was mentioned and, as usual, described as a continued headwind for the business. Gavin quantified the impact as being worth £500m over the last year with more than £1bn of impact still to be felt over the next 3 years. While price focused regulation is expected to ease over the next twelve months, the focus instead is expected to be on service.
Ever since it’s privatisation back in the 1980s, BT has been on a continual journey of transformation. Now that the last reinvention as a content player is no longer bearing the fruit that it once did, it’s the right time to consider the next change and shift in focus. With careful execution by the various lines of business, there’s no reason not to believe that the strategy outlined will also go on to to deliver for BT in the same way the venture into sport did initially five years ago.
