BT is to cut 15,000 more jobs this year as it reported another set of disappointing financial results.
BT Global Services’ gross profit fell by 9.26 per cent and EBITDA more than halved over 2008. Job cuts for 2009 are thought to now total around 30,000.
Gartner research vice president Scott Morrison commented on the job cuts, saying: “The 15,000 jobs to go are mainly among contractors, allowing BT to keep its promise of no compulsory redundancies among employees. This should streamline some of the back-office operations, and won’t just affect the market-facing units such as BT Global Services. But there isn’t a doomsday scenario here – all the contracts have been retained, albeit with lower profitability expectations than in the past.
“The need for BT to continue down the line of automation and industrialisation of its portfolio is now more urgent, as it doesn’t have the luxury of providing such a high-touch, bespoke relationship to all its large enterprise customers as was the case in the past. If it can get this automation right it will not only improve its margins, but should improve also the quality and consistency of its delivery, thereby positively impacting customer satisfaction levels – which, incidentally, remain reasonable in any event.”
According to Ovum analysts David Molony and Richard Mahoney, the company’s decline is likely down to falling prices in core network services and currency factors.
Molony and Mahoney said the “star performer” of the group was BT Retail, which, whilst it reported near flat revenues for the year, delivered a 9.33 per cent growth in EBITDA over the previous year. Call and line revenues continue to decline, but UK broadband continues to perform well.
Its pension liability fell into a deficit of £2.9 billion net of tax over 2008 and BT announced additional funding of £525 million
The analysts’ note said: “Whilst this financial performance is disappointing, it’s the write-down of £1.639 billion in the year that is the immediate concern. It is speculated that the write-downs are from two accounts. BT emphasised that these costs have already been incurred and therefore there is limited impact on the free cash flow of the business. In response to the weak financial performance, BT announced that this year there will be a similar level of job cuts as last year, which ended up at around 15,000.”
BT announced a restructuring of Global Services into UK Domestic (with 1,100 customers, revenues of £2.5 billion and EBITDA of £0.4 billion). The analysts said the highlights of its new operational model are the consolidation of group functions in sales, marketing and professional services and that the creation of the BT Global Services Enterprises unit offers a more locally driven portfolio.
“The regional focus also extends to systems – for example, the business has given up on one single global billing platform. Improving the bid process, consolidating customer support centres by investing in few but larger ‘regional’ operational hubs and the continued search for network efficiencies are also initiatives designed to reduce cost and commercial risk. In addition, £200 million of business is being transferred from BT Global Services to BT Business (Retail), which further emphasises the more localised approach of the business,” they said.