Wednesday, March 27th, 2019 (4:46 pm) - Score 10,627

The new CEO of UK telecoms giant BT, Philip Jansen, is reported to be considering a huge reduction in jobs that could cut another 25,000 staff from their current workforce of nearly 100,000 (i.e. 82,500 direct employees and 12,300 contractors). Such a move might help to fund their roll-out of “full fibre” broadband ISP technology.

According to Bloomberg‘s sources within BT, the discussions are currently at a preliminary stage and BT’s plans may yet change. Similarly if the plan did proceed then BT probably wouldn’t announce it until after their annual results in May 2019, with the cuts then being made gradually over a 5 year period.

At this point it’s worth reminding readers that BT’s former CEO, Gavin Patterson, last year began a strategy to axe 13,000 jobs over 3 years (mainly back office and middle management roles), although they mitigated some of that by hiring thousands of new employees (here) to support network deployment (e.g. Openreach engineers) and customer service. So far BT has already made about a quarter of these cuts.

Patterson’s plan aimed to achieve a year 3 cash cost reduction of £1.5 billion with costs to achieve of £800 million and two year payback. By comparison the new plan could yield further annual savings of several hundred million pounds.

A Bloomberg Intelligence Spokesperson said: “A bigger push on job cuts could yield extra annual savings of as much as 900 million pounds, in our view, boosting midterm Ebitda up to 10%. Reversing a negative earnings trend may help boost confidence in BT’s ability to invest in fibre and 5G, and still pay a growing dividend.”

Apparently the new cuts, if confirmed, would be balanced by accelerated automation of back-office processes, business disposals and a more streamlined management structure. As before this seems likely to benefit Openreach’s on-going work to deploy Fibre-to-the-Premises (FTTP) technology, which is currently in the process of hiring lots of new engineers in order to ramp-up its roll-out.

Openreach hopes to cover 3 million premises with FTTP by the end of 2020 (March 2021 financial) and then possibly 10 million by around 2025. Likewise their mobile division, EE, will also be making a significant investment to deploy the new generation of ultrafast 5G technology over the next 7 years or so.