BT books £216m charge to cover cost of restructuring

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The Independent Online

A major restructuring charge has taken the shine off BT's dominance of the UK broadband sector after the telecoms giant said that more than 2,000 managers have left the company over the past six months.

BT has booked a £216m restructuring charge as part of a £450m investment in sharpening up its systems and processes over the next few years. As part of the efficiency drive, BT has initiated a voluntary redundancy plan that has already seen 2,000 of its managers leave the company.

Ben Verwaayen, BT's chief executive, said that up to 4,000 managers could leave BT as part of the shake-up. However, he said that a lot of staff have been retrained to take on new responsibilities as BT continues to transform its business and that the company is adding staff as it grows. BT has added 2,500 engineers over recent months.

Reports of a major bloodletting at BT proved wide of the mark with the company arguing that 5,000 people leave every year and that this year won't see a major increase from that figure. Even the trade unions praised BT, despite its restructuring.

Jeannie Drake, the deputy general secretary of the Communications Workers Union, said: "BT needs to become a successful software services provider with high standards of customer service if it's going to achieve sustained commercial success and provide sustainable jobs. These results confirm that it is heading in the right direction."

BT expects the restructuring to boost its profits in about three years but the short-term financial impact of the shake-up has hit its profits. The impact of the restructuring charge masked a robust performance by the company's consumer-facing operations, which grew revenue for the first time in four years. BT shares lost 4 per cent on the back of the results as analysts opined that revenue growth is still not feeding through to profitability.

Overall, BT recorded revenue growth of three per cent to £5.1bn in the three months to the end of September, driven by the continued strength of its broadband operation and new contracts at its Global Services division. The company took a 37 per cent share of new broadband customers, excluding the cable network, and added a net 178,000 customers, which took its customer base to more than four million for the first time.

Mr Verwaayen said its broadband growth was twice that of Carphone Warehouse, which offers high-speed internet for free, proving that customers are willing to pay for the product if the company provides good service and value for money. He pointed to a rise in the company's average revenue per user, which increased £5 to £271, as an example of how its customers will spend more to get more. BT has launched digital television through its BT Vision product as well as a variety of new services which have bolstered its revenue.

Ian Livingston, the head of BT Retail, said the company would continue to maintain its prices above its competitors despite rivals such as Virgin Media and Sky looking to up the ante in the high-speed internet market. "Trying to be cheaper than the next guy is a short-term mug's game," he said.

The company's wholesale division turned in a disappointing performance as more of its rivals migrated broadband customers on to their own networks. Mr Verwaayen said this was partially offset by growth at its Openreach division, which provides network services across BT's network.

Martin Mabbutt, an analyst with Nomura, said: "We would not read too much into what was seen as a slightly disappointing second quarter performance." He said that cost savings are likely to accelerate in the second half and the company looks likely to hit market expectations for growth.