BT is to axe 4,000 back-office and managerial jobs and has cut its profit and dividend forecasts after a difficult year, which included an accounting scandal in Italy.
The Italian scandal wiped £8bn off the company’s share value and led to a 37% fall in third-quarter profits. Fourth-quarter profits were down even further at 48%, with a fall of 19% for the year as a whole, leaving annual profits before tax at £2.35bn.
As a result BT group chief executive Gavin Patterson and outgoing group finance director Tony Chanmugam will not receive a bonus for the 2016-17 financial year, with Mr Patterson’s overall pay dropping from £2.8m to £258,000.
The job losses are expected to save £50m as BT tries to adapt to the changing marketplace.
As well as the Italian accounting scandal, BT was also fined a record £42m by UK regulator Ofcom and ordered to pay £300m in compensation for ‘serious failings” in its wholesale Openreach division.
On a positive note, over the past financial year BT managed to persuade Ofcom not to compulsorily hive off Openreach, and completed a successful £12.5bn acquisition of UK mobile phone operator, EE, giving it 35% of the mobile consumer market.
Commenting on the results, chief executive Gavin Patterson said: “This has been a challenging year for BT. We’ve faced headwinds in the UK public sector and international corporate markets and must learn from what we found in our Italian business.
“Openreach also received a fine from Ofcom after an investigation into historical Deemed Consent practices revealed it fell short of the high standards we expect.
“We take these issues extremely seriously and are putting in place new measures, controls and people to prevent them happening again. Learning from the challenges of this year will make BT a stronger company for the future.”
He added that looking ahead, BT had a strong business proposition. “Our integration of EE is going well, our UK consumer, SME and corporate businesses are performing strongly, and we’ve made significant progress in improving customer experience across the group.
“Our agreement with Ofcom on Openreach governance brings to an end a period of uncertainty. And securing exclusive rights to top-flight European football until 2021 puts our consumer businesses in a strong position,” he said.
In other telecoms news Telefonica reported quarterly earnings of €4.02bn, below the expectations of some analysts, closing the day at €9.98, down 4.35%.
Earnings dropped 2.6% in Spain, while the company continues to face difficulties in Mexico and Peru, with operating income falling 39% and 23% respectively. Telefonica is hoping to launch an initial public offering of UK mobile provider 02 later in the year, according to sources, as part of its bid to cut its €49bn debt.