BT to Explore Further Cost Savings as Revenue Sags
02 November 2018 - 5:16AM
Dow Jones News
By Nina Trentmann
BT Group PLC is looking for additional savings on top of a
continuing cost-cutting drive at a time of declining revenue.
The British telecommunications company Thursday reported group
revenue of GBP11.59 billion ($14.77 billion) for the six months
ended Sept. 30, down from GBP11.79 billion in the prior-year
period. Revenue is set to fall by around 2% in the 2018-19 fiscal
year ending March 31, BT said.
It launched a program in May to reduce head count by 13,000 over
three years and to dispose of various real-estate assets, netting
total savings of GBP1.5 billion. BT had 105,800 employees as of
March 31.
Around 2,000 people have left the company already, and savings
will amount to GBP350 million by the end of the financial year, the
company said.
"There may be scope to accelerate" the GBP1.5 billion
cost-savings drive, Chief Financial Officer Simon Lowth said in an
interview with CFO Journal, adding that management would evaluate
the potential for further opportunities "to address costs and
productivity." This could involve simplifying some of the company's
processes, he said.
The decision about extending the cost-savings program likely
will be taken by incoming Chief Executive Philip Jansen, who takes
over from Gavin Patterson on Feb. 1.
BT's CFO has no choice but to drill down on costs, according to
Dhananjay Mirchandani, an analyst at Sanford C. Bernstein. "Cost
reduction is a nonnegotiable item in an industry with anemic or
even declining revenue growth," said Mr. Mirchandani. "Most of the
incumbents in this industry are in a stage of very slow earnings
growth."
The company's expenses for content and customer service have
risen, and wages for its employees in the U.K. could follow suit,
said Mr. Mirchandani, underlining the need to shrink costs.
There is additional potential to do so in BT's Openreach
division, the unit that develops and maintains the U.K.'s main
telecommunications infrastructure, according to Mr. Mirchandani. BT
has around 31,000 engineers in its Openreach business, compared
with about 14,000 at competitor Deutsche Telekom AG. "There is a
material opportunity for elevated efficiency," the analyst
said.
BT's finance function is contributing to the cost-savings drive,
said Mr. Lowth, adding that some jobs might be cut there to help
reach the layoffs target. The finance department also is looking to
overhaul its processes and infrastructure, Mr. Lowth said. "We are
in the early stages of applying artificial intelligence and
automation," he said. He didn't provide more specifics.
Write to Nina Trentmann at nina.trentmann@wsj.com
(END) Dow Jones Newswires
November 01, 2018 14:01 ET (18:01 GMT)
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