The job losses – which amount to 10% of its total headcount – will be largely in the UK and will be in addition to the 15,000 already lost in the past year. So 30,000 in total - 5,000 more than the firm anticipated. BT’s financial performance has taken a pasting, with a profit of nearly £2bn for last year turning into a £134m loss for the 12 months to March 31 2009. Making the announcement, BT CEO Ian Livingston said he hoped to avoid compulsory redundancies by cutting back on agency staff rather than permanent employees wherever possible.
It’s not only BT’s existing workforce that will be feeling anxious. The firm is struggling to cope with a ballooning pension fund deficit - currently standing at £2.9bn, as against a £2bn surplus last year - and has been forced to stump up £525m to keep on top of it. Livingston must be wishing he could reverse the charges on that little lot.
And, lest BT’s crack team of executive doom-merchants be accused of leaving anyone out, long-suffering BT investors will also have to share the pain. Not only is the group’s perpetually-undervalued share price now down at around 90p (that’s 40p less than the price at privatisation way back in 1984), it's also going to cut its dividend by 60%, the first such cut in seven years. It never rains but it pours.
So what’s to blame for this precipitous decline in the fortunes of everyone’s favourite former state monopoly? In a word (or two), Global Services, BT’s IT consulting arm, which cost the group an eye-watering £1.3bn write-down in the third quarter alone, as big-ticket deals like the NHS Programme for IT turned out to be a very great deal less profitable than expected.
Ironically Global Services was supposed to be the engine of growth that pulled BT out of the last big pickle it got into, after the dotcom crash of 2001. To be fair, it did do that for a while, but the division has rapidly degenerated from cash cow to dead parrot in the harsh climate of the last 12 months. Change is underway - it’s had a new boss since last October in the shape of Hanif Lalani - but there is clearly a huge job still to do.
But the biggest irony of the lot is that the underlying performance of the boring traditional bits of BT - i.e. providing phone, data and broadband services - was pretty respectable, given that we're in the middle of a recession. Total revenues for the year actually rose by a modest 3% to £21.4bn. But none of that counts for very much against the calamitous adventure at Global Services.
Rather like those banks that so enthusiastically embraced the trade in securitised debt products, the risks of which they didn't appreciate, BT is finding out the hard way that when you leap into new markets that you don’t understand, it is very easy to get your wires in a terrible tangle.
In today's bulletin:
BT loses 15,000 jobs - and £134m
Mortgage cheer as first-time buyers jump by a third
Network Rail boss gives gravy train the swerve
UK workers don't trust social media
Home-working causes headaches and clumsiness