BT Reassures on Dividend as CEO Pushes Faster Fiber Rollout

(Bloomberg) -- BT Group Plc’s new boss Philip Jansen kept the phone company’s dividend in the face of declining profits while committing to the turnaround begun by his predecessor.

Jansen said earnings would fall this year and BT needed to be “more competitive” as he laid out plans to accelerate a fiber network rollout. The dividend pledge was a relief for investors as the former monopoly faces enforced price caps, fierce competition for broadband customers and a large pension deficit.

BT Reassures on Dividend as CEO Pushes Faster Fiber Rollout

The former Worldpay Inc. executive avoided major strategic shifts in his first results since taking over from Gavin Patterson on Feb 1. Patterson, a friend and former colleague of Jansen, began cutting thousands of jobs last year after contract losses, an accounting scandal and run-ins with regulators. BT’s shares have lost half of their value in three years.

The cuts are set to free up cash for network spending. Jansen said BT aimed to upgrade 4 million premises with fiber connections by March 2021, up from a previous goal of 3 million, responding to government pressure to improve internet speeds. It aims to reach 15 million premises by the mid-2020s, 5 million more than its previous target.

“BT needs to be there to provide the digital infrastructure for the future,” Jansen told reporters on a call, citing demand for artificial intelligence, machine learning and quantum computing. Addressing analysts later, he said BT had to “massively simplify our processes” and increase the use of robotics and automation.

Outgoing BT CEO Regrets Not Starting Cost Cuts a Year Earlier

Shrinking Workforce

With revenue declining across the entire business except BT’s consumer division, the company had already flagged the profit drop in the year to next March. BT said it expects annual adjusted earnings before interest, tax, depreciation and amortization of 7.20 billion pounds ($9.4 billion) to 7.30 billion pounds. That’s lower than the 7.36 billion-pound average of analyst forecasts compiled by Bloomberg.

What Bloomberg Intelligence Says

“BT’s shareholders may need to absorb a bigger-than-expected squeeze in cash flow of as much as 100 million pounds (5%) in fiscal 2020 as the new CEO pushes harder on investments in infrastructure and systems to keep the company ahead of rivals.”
--Matthew Bloxham, Telecom analyst
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Adjusted Ebitda fell 9.8% to 1.84 billion pounds in the final three months of its financial year, slightly below the 1.86 billion-pound average of six analyst estimates. Adjusted Ebitda for the full year was 7.39 billion pounds, in line with guidance.

Jansen said BT had cut 4,000 jobs as part of Patterson’s plan to shed 13,000 staff over three years. He said there was no intention to accelerate the cuts for now. People with knowledge of the matter said in March that Jansen was considering a deeper restructuring that could see the 100,000-strong workforce shrink by a quarter over five years.

“It’s the end of the first year,” said Chief Financial Officer Simon Lowth. “We’re very much focused on years two and then three, and we know that there’s considerable further opportunity for us.”

BT shares fell 1.2% after fluctuating between gains and losses in early trading, bringing their decline this year to 9% versus a 0.8% decline in the Stoxx Europe 600 Telecommunications index.

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