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| BT chief executive Gavin Patterson to leave this year | BT chief executive Gavin Patterson to leave this year |
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| The BT chief executive, Gavin Patterson, is to leave the telecoms giant this year after investors made it clear they had lost confidence in his ability to lead the company through an ambitious turnaround plan. | The BT chief executive, Gavin Patterson, is to leave the telecoms giant this year after investors made it clear they had lost confidence in his ability to lead the company through an ambitious turnaround plan. |
| In a surprise move, the company said it had started the process of looking for his successor and expected to appoint a new chief executive in the second half of the year. | In a surprise move, the company said it had started the process of looking for his successor and expected to appoint a new chief executive in the second half of the year. |
| Jan du Plessis, the chair of BT, thanked Patterson for his contribution over the past 14 years but said the company needed a change in leadership, despite having publicly backed him a month ago. | Jan du Plessis, the chair of BT, thanked Patterson for his contribution over the past 14 years but said the company needed a change in leadership, despite having publicly backed him a month ago. |
| Du Plessis said on Friday: “The board is fully supportive of the strategy recently set out by Gavin and his team. 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.” | Du Plessis said on Friday: “The board is fully supportive of the strategy recently set out by Gavin and his team. 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.” |
| The announcement comes after a backlash from shareholders over BT’s recent results and concerns that Patterson was not the right person to lead the company through an ambitious restructuring plan. | The announcement comes after a backlash from shareholders over BT’s recent results and concerns that Patterson was not the right person to lead the company through an ambitious restructuring plan. |
| Investors welcomed the news, with BT shares initially rising 2.5% to 208p. When Patterson was appointed chief executive in September 2013, the shares were trading at about 340p, before hitting a high of almost 500p in early 2016. | Investors welcomed the news, with BT shares initially rising 2.5% to 208p. When Patterson was appointed chief executive in September 2013, the shares were trading at about 340p, before hitting a high of almost 500p in early 2016. |
| Neil Wilson, the chief analyst at markets.com, said investors had “finally lost patience and driven him out”. | Neil Wilson, the chief analyst at markets.com, said investors had “finally lost patience and driven him out”. |
| He added: “There’s been more wrong than right for BT since he took over five year ago. It’s been a disappointing time for BT and for its shareholders.” | He added: “There’s been more wrong than right for BT since he took over five year ago. It’s been a disappointing time for BT and for its shareholders.” |
| The restructuring strategy includes 13,000 job cuts and a move out of BT’s central London headquarters after almost 150 years as it attempts to slash costs amid growing competition and falling revenues. BT missed profit and revenue targets in the year to the end of March, sending shares in the company to a six-year low. | The restructuring strategy includes 13,000 job cuts and a move out of BT’s central London headquarters after almost 150 years as it attempts to slash costs amid growing competition and falling revenues. BT missed profit and revenue targets in the year to the end of March, sending shares in the company to a six-year low. |
| Days after the news of the job cuts, BT revealed Patterson was paid about £2.3m last year, including a £1.3m bonus on top of his basic salary of £997,000. | Days after the news of the job cuts, BT revealed Patterson was paid about £2.3m last year, including a £1.3m bonus on top of his basic salary of £997,000. |
| At the time of the strategy update last month, Du Plessis publicly endorsed Patterson as the person to steer the company through the changes but the position changed after the BT chair held a series of conversations with shareholders. | At the time of the strategy update last month, Du Plessis publicly endorsed Patterson as the person to steer the company through the changes but the position changed after the BT chair held a series of conversations with shareholders. |
| Patterson said he was disappointed the market had not responded as positively as he would have liked to the planned changes. He said he felt the broad message from investors was “we like the strategy, it’s going to take a while to see the benefits, come back to us when you’ve got results”. | Patterson said he was disappointed the market had not responded as positively as he would have liked to the planned changes. He said he felt the broad message from investors was “we like the strategy, it’s going to take a while to see the benefits, come back to us when you’ve got results”. |
| Patterson, who has been at BT for more than 14 years, will remain CEO until a replacement is found. | Patterson, who has been at BT for more than 14 years, will remain CEO until a replacement is found. |
| Reflecting on his time in the role, Patterson said: “I’m not somebody who has regrets – I try to look forward. There hasn’t been any falling out. I’m an adult, I’ve seen this movie before.” | Reflecting on his time in the role, Patterson said: “I’m not somebody who has regrets – I try to look forward. There hasn’t been any falling out. I’m an adult, I’ve seen this movie before.” |
| Patterson will continue to be paid his usual monthly salary until his successor is appointed, after which point he will be entitled to up to 12 monthly payments covering his basic salary, benefits and bonus. | Patterson will continue to be paid his usual monthly salary until his successor is appointed, after which point he will be entitled to up to 12 monthly payments covering his basic salary, benefits and bonus. |
| Based on current projections, that means he could walk away with about £2.3m, in line with his salary and bonus last year. | Based on current projections, that means he could walk away with about £2.3m, in line with his salary and bonus last year. |
| Under Patterson’s leadership, the business has transformed and become more complex, with a big push into sports broadcasting through BT Sport and the £12.5bn purchase of EE, the British mobile phone network, which got the final go-ahead in January 2016 and which Patterson said was one of the highlights of his stint. | Under Patterson’s leadership, the business has transformed and become more complex, with a big push into sports broadcasting through BT Sport and the £12.5bn purchase of EE, the British mobile phone network, which got the final go-ahead in January 2016 and which Patterson said was one of the highlights of his stint. |
| But he has led the FTSE 100 firm through a troubled 18 months, including an accounting scandal in Italy and a record £42m fine from Ofcom. | But he has led the FTSE 100 firm through a troubled 18 months, including an accounting scandal in Italy and a record £42m fine from Ofcom. |
| George Salmon, an equity analyst at Hargreaves Lansdown, said the first half of Patterson’s tenure as chief executive had been positive, with the rise of BT Sport bringing some good times for investors. | George Salmon, an equity analyst at Hargreaves Lansdown, said the first half of Patterson’s tenure as chief executive had been positive, with the rise of BT Sport bringing some good times for investors. |
| “However, it’s been a different story over the last two years. Since 2016, BT’s share price graph resembles something of a black run: pretty much always on a downward trend and with a few nasty cliffs here and there. | “However, it’s been a different story over the last two years. Since 2016, BT’s share price graph resembles something of a black run: pretty much always on a downward trend and with a few nasty cliffs here and there. |
| “Ultimately, this is what’s behind the change. Shareholder confidence has followed the share price down and with BT embarking on a crucial restructure, the board has decided it’s time for a change.” | “Ultimately, this is what’s behind the change. Shareholder confidence has followed the share price down and with BT embarking on a crucial restructure, the board has decided it’s time for a change.” |
| Five issues for BT under Patterson’s tenure | Five issues for BT under Patterson’s tenure |
| 1. Italian accounting scandal | 1. Italian accounting scandal |
| Almost £8bn was wiped of BT’s stock market value after it admitted an accounting scandal at its Italian division was much worse than originally thought. The company said “inappropriate management behaviour” and “improper accounting practices” in Italy would cost BT £530m. | |
| 2. Openreach deal took too long | 2. Openreach deal took too long |
| BT spent two years at loggerheads with the communications regulator over Openreach, which controls the UK’s broadband network. Ofcom wanted to strengthen the independence of Openreach and BT ultimately agreed a deal to legally separate the business. But it was a lengthy battle, and Patterson admitted on Friday he wished he had concluded negotiations a lot sooner. | BT spent two years at loggerheads with the communications regulator over Openreach, which controls the UK’s broadband network. Ofcom wanted to strengthen the independence of Openreach and BT ultimately agreed a deal to legally separate the business. But it was a lengthy battle, and Patterson admitted on Friday he wished he had concluded negotiations a lot sooner. |
| 3. Falling revenues and complexity | 3. Falling revenues and complexity |
| BT reported a 1% fall in revenue to £23bn for the year to 31 March 2018 and warned that it was expecting a similar performance in the year ahead. BT became a more complex business under Patterson, increasingly diverse and with multiple offices in some cities, and the outgoing chief executive has admitted it needs to modernise. | BT reported a 1% fall in revenue to £23bn for the year to 31 March 2018 and warned that it was expecting a similar performance in the year ahead. BT became a more complex business under Patterson, increasingly diverse and with multiple offices in some cities, and the outgoing chief executive has admitted it needs to modernise. |
| 4. Record fine for BT | 4. Record fine for BT |
| BT was fined £42m – the largest penalty imposed by Ofcom on a telecoms company – for a “serious breach” of rules. The regulator found that BT broke regulations put in place to stop Openreach abusing its “significant market power” by cutting compensation payments to rivals and blaming installation delays on factors beyond its control when this was not the case. BT also said it would pay £300m in compensation to rivals including Sky, Vodafone and TalkTalk. | BT was fined £42m – the largest penalty imposed by Ofcom on a telecoms company – for a “serious breach” of rules. The regulator found that BT broke regulations put in place to stop Openreach abusing its “significant market power” by cutting compensation payments to rivals and blaming installation delays on factors beyond its control when this was not the case. BT also said it would pay £300m in compensation to rivals including Sky, Vodafone and TalkTalk. |
| 5. A costly move into sports broadcasting | 5. A costly move into sports broadcasting |
| BT Sport transformed the telecoms company into a major sports broadcaster. But the question remains whether it was the right move to diversify into a sector in which Sky, Netflix and Amazon are its rivals. Deep pockets are required to pay for the rising cost of sports rights, and analysts have warned that sports-TV packages are the kind of thing that struggling households get rid of first. | BT Sport transformed the telecoms company into a major sports broadcaster. But the question remains whether it was the right move to diversify into a sector in which Sky, Netflix and Amazon are its rivals. Deep pockets are required to pay for the rising cost of sports rights, and analysts have warned that sports-TV packages are the kind of thing that struggling households get rid of first. |
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