BT Cuts 4,000 Jobs After Italy Accounting Scandal

BT Group is clawing back management pay and eliminating 4,000 jobs as it seeks to rebuild investor confidence and overhaul the division involved in an accounting scandal in Italy, according to Bloomberg.

The cuts involve scrapping bonuses for CEO Gavin Patterson and former CFO Tony Chanmugam for the 2017 fiscal year, BT said as it released fourth-quarter results that narrowly beat analysts’ estimates. The company also reduced its outlook for 2018 normalized free cash flow and dividend growth.

Shareholders have been pushing the former British phone monopoly to adjust executive pay after it revealed in January that accounting irregularities in its Italian business were worse than expected, leading to a larger writedown and contributing to a reduced profit outlook. The scandal added to investor concerns over regulatory, investment and competitive pressures for BT, making it one of the worst-performing stocks in the FTSE 100 this year.

The company said it will revamp the global services division that includes the Italy unit following a review. Changes include replacing the division’s CEO, Luis Alvarez, with Bas Burger. The carrier will make the business more digital and less focused on owning local network assets around the world, which Patterson said could mean disposing of one or two units outside the U.K.

The 4,000 job cuts will come from global services and BT’s technology, service and operations unit and the company will face a restructuring charge of about 300 million pounds over the next two years, BT said. The carrier has more than 100,000 employees.

BT didn’t provide guidance for the fiscal year after this one, as it historically has, given uncertainty about the cost of proposals by communications regulator Ofcom to reduce wholesale broadband prices at BT’s network unit, Openreach. BT could also spend more on rolling out fiber directly to buildings in its network, Patterson said. Openreach said Thursday it would consult with other communications providers on more investment in full-fiber connections.

Revenue in the three months ended March 31 increased 10 percent to 6.12 billion pounds, beating the 6.03 billion-pound average of five analysts’ estimates compiled by Bloomberg. Adjusted Ebitda rose 2 percent to 2.07 billion pounds, above the 2.03 billion pound average estimates.