BT to cut 15,000 jobs

BT has stated its intention to chop a further 15,000 jobs on top of the already named 15,000 set to go over 2008 to 2009. It also said it would cut its final dividend for the first time in seven years, by almost 60%, thanks to a poor performance at Global Services, Group’s struggling IT services division.

Thanks to BT Global Services, the dividend cut brings the price to 6.5p, which is in line with analysts’ predictions, yet 59% lower than the previous year’s figures.

BT revenues for the year rose 3% to £21.3 billion, yet earnings, including charges related to the Services division, push the Group to a pre tax loss of £134 million, compared to last year’s profit of £1.97 billion.

Gartner research vice president, Scott Morrison, commented that the recession has hit the Services division hard: “The write-offs on the remaining two major contracts have proven to be much higher than expected, which suggests BT is trying to draw a quick line under its past expansionist strategy, and focus on growth with margin for the new financial year.

“The 15,000 jobs to go are mainly among contractors, allowing BT to keep its promise of no compulsory redundancies among employees,” explained Morrison. “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.

He continued that the need for BT to continue down the line of automation and industrialisation of its portfolio is now more urgent, as it does not 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,” concluded Morrison.

Andy Kerr, The Communication Workers Union (CWU) deputy general secretary, said: “15,000 is a very challenging level of job losses, especially on the back of last year’s reductions.

“We expect the majority of job losses to be third party – contractors and agency staff – as they were last year with many jobs being lost outside of the UK. However this is a serious day for staff at BT.

“There was a damaging mis-management of Global Services by senior managers, which has been the main cause of these poor results. These managers have been removed and we’re hopeful that this difficult time is now behind the company.

“We’re working closely with the company to ensure any losses are voluntary and we’re looking at new ways of finding new work and retaining permanent employees, including secondment agreements.”

According to the FT today, the move was also an attempt by BT to close the large gap in its pension fund, the largest defined benefit scheme in the UK. BT said its net pension position as of 31 March was a deficit of £2.9 billion (£4 billion gross of tax), compared with a net surplus last year of £2 billion. It said it would raise its annual pension contributions to £525 million from £280 million over the next three years.