BT to slash another 10,000 jobs

[Scoobs]

BT is preparing to axe another 10,000 jobs. The huge redundancy programme will be announced next month alongside a horrendous set of year-end figures that will include provisions of about £1.5 billion.

The results will mark one of the lowest points in BT’s history since it was privatised in 1984. The share price has crashed to 81p, valuing the telecoms company at £6.3 billion. It will also seriously damage the legacy of Ben Verwaayen, BT’s former chief executive, who left eight months ago and has since become chief executive at Alcatel-Lucent.

The dividend is likely to be cut by up to 60%, while profits will be further dented by a big contribution to address a pension deficit that will exceed £8 billion.

The redundancies, which result from an improvement in BT’s efficiency, are in addition to the 10,000 job cuts made last year and will be spread around BT’s 160,000 workforce.

BT’s chairman Sir Mike Rake and his chief executive Ian Livingston know they have one chance to clear up the group’s balance sheet and have no intention of underestimating the scale of provisions required.

They intend to present a company that has a sustainable dividend policy, cash flow and profits that can be delivered at the same time as reducing a debt burden of £11 billion.

The new business plan will be built around conservative assumptions and draw a line under further provisions at Global Services.

Its remaining three divisions, retail, Openreach and wholesale, are performing at their best for five years.

A large portion of the provisions relate to contracts agreed during Verwaayen’s time at Global Services, which serves big, multinational customers.

This division, which was meant to be the group’s growth engine, is a financial disaster.

BT has already made a £336m provision against 15 of its 17 biggest contracts. But the remaining two are seen by insiders as toxic. The biggest is the National Health Service (NHS) and the other is thought to be Reuters.

Final negotiations are still going on with both customers and, depending on the outcome of the talks, the scale of the provisions could vary by hundreds of millions of pounds.

BT has three big contracts under the NHS’s troubled £12 billion programme to upgrade its IT. Two have gone well. A broadband communications network is up and running, and the “spine”, which holds national records, is regarded as a success.

The problems have come on the third contract, to install new IT systems across London.

Source Times online