BT to cut 18,000 more jobs and switch 5 million to broadband

BT's new chief executive, Ben Verwaayen, outlined a challenging new strategy for the telecoms giant yesterday that will see it aiming to win 5 million broadband customers over the coming four years while pledging to eliminate another £4bn of debt.

The new three-year strategy will involve 18,000 job losses from the current workforce of 108,000 and further cost savings in the next 12 months of £375m. Mr Verwaayen also served notice that BT intended to sort out its loss-making Ignite division which could entail further job losses. The plan will see BT focus on driving growth from its core UK market, signalling the end of the company's restructuring. "BT was the first major telco to redress its balance sheet and restructure itself for the new dynamics of the market. And BT will be the first to return to the fundamentals of good business practice," Mr Verwaayen said.

He reiterated that broadband high-speed internet access remained at the heart of the operation and said the company would focus on "customer satisfaction" combined with "financial discipline".

As part of the plans he promised BT would resume paying dividends in 2002. Shares in BT closed down 5.5p at 268p after Mr Verwaayen shared his long-awaited strategic vision with the investment community. "We're going to fight back. It's as simple as that," he said. "We won't jump into categories we don't understand."

BT Retail, BT's consumer arm, will unveil a "direct" broadband product later this month designed to connect customers directly with the internet without using an internet service provider. That product, it hopes, will help it get to its goal of 5 million broadband users by 2006.

The presentation went down well with City analysts who were relieved that the company did not have anything more radical up its sleeve. "It was quite bland which is a good thing in this market. People don't want surprises. We've had enough negative surprises, especially at BT," said Eric Lakin, an analyst at Banc of America Securities.

BT's financial restructuring last year saw it mount a £6bn rescue rights issue, and make a raft of disposals including Yell, its yellow pages business, and the demerging of its mobile phone business ­ now known as mmO2.

Mr Verwaayen ruled out further flotations and restructuring yesterday. "We are an integrated telecommunications company but with separate operating lines of business. There will be no IPOs, no burying our heads in internal restructuring."

Instead, he set out a list of financial targets he described as "tough but achievable", including getting 6 to 8 per cent compound annual growth and earnings per share growth of at least 25 per cent.

Capital expenditure, he said, would be held at below £3bn while debt, already cut from £30bn to about £14bn, would fall to below £10bn. That debt reduction plan will see the company make further disposals, including the sale of its 26 per cent holding in the French telecoms firm Cegetel ­ a move that analysts estimate could net it £2bn to £3bn and see BT win back a 'single A' credit rating.

"The targets are certainly achievable and if they do achieve them, it's pretty encouraging," Mr Lakin said. "I think they can, although forecasts look challenging."

Mr Verwaayen said that he was targeting Ignite to increase revenues by 15 per cent a year while making sure the loss-making businesses became break-even, on an Ebitda basis, by March of next year.

Any businesses not meeting that target would be shut down, he said, adding that the company was also considering "consolidation opportunities" there over the longer term.

He described customer satisfaction as the "cornerstone" of the new strategy and said the company would target cutting customer dissatisfaction by 25 per cent a year.