BT Plunges on Weak Outlook

BT Group pledged to cut 13,000 jobs as part of a cost purge that failed to impress investors, who focused instead on the bleak sales outlook and lack of free cash flow growth, according to Bloomberg. That drove their stock down the most in 15 months.

The former phone monopoly, facing price cuts mandated by regulators, political pressure to invest in faster broadband and rising inflation, forecast a flat dividend and a 2 percent revenue decline next fiscal year alongside a drop in earnings and free cash flow, as it boosts spending on fiber. CEO Gavin Patterson said TV that from 2021 onward BT can probably see its Ebitda grow again and is committed to maintaining its dividend despite expectations it may be cut.

“It’s the outlook“ driving the plunge, said Jefferies analyst Jerry Dellis by phone, referring to BT’s free cash flow guidance coming in 10 percent below analysts’ estimates. The spending forecast that’s eating into its cash comes before any acceleration by BT of its fiber build targets, Dellis said, pointing to the risk the carrier will need to invest more.

Patterson has already cut thousands of jobs, overhauled management and changed BT’s strategy for its struggling global services business, as the owner of the U.K.’s largest fixed network and biggest mobile operator seeks to get back in investors’ good books. The strategy update was meant to answer uncertainty over BT’s outlook that had weighed on the stock, which is down 46 percent over the past two years.

BT now plans to eliminate 13,000 back office and middle management jobs but hire 6,000 front-line workers. That amounts to a 6.6 percent net loss to its work force of 106,400, based on the most recent annual report. The company will also vacate its central London headquarters to focus on other sites. Annual savings from cost-cutting of about 1.5 billion pounds are scheduled to take another two years to kick in.