Taking on Sky at its own game: BT chief executive Gavin Patterson

FROM THE ARCHIVE: The BT boss is stepping down. Find out how he rose to the top and how he wrongfooted great rival Sky.

by Andrew Davidson
Last Updated: 08 Jun 2018

It is no surprise to hear Gavin Patterson is being ousted. The BT boss has come under significant fire over the last year. Shares fell, the company had to announce a restructuring plan over disappointing results and Patterson himself lost most of his bonus over an accounting scandal at BT's Italian business.

Rewind four years though, and the story was very different. As this MT Interview from September 2014 shows, back then Patterson was a bright young thing with a bold strategy to challenge Sky on football and take BT back into mobile. 


Right, let's get this out of the way: Gavin Patterson walks in and you think, blimey, he's so handsome and well groomed he should be heading Armani, not a vast, techy monolith like BT. Slim, tall, chisel-jawed, dark-eyed, luxuriant-haired, gentle and genial in manner, the 46-year-old seems altogether too glossy a package to be heading a crusty FTSE 100 giant - the oldest telecom firm in the world.

But then again this is a corporation that is used to shifts in style. Less than a decade ago I sat in the same ninth-floor, pale-panelled CEO office interviewing Ben Verwaayen, the rumpled, brilliant, pixie-sized technologist who liked to write Dutch political party manifestos in his spare time and who committed BT to a multibillion-pound gamble on broadband.

In the same room, not three years ago, I also quizzed Ian Livingston, the super-sharp Glaswegian with Polish-Jewish roots whose formative years in accountancy and electricals gave him just the eye for detail to cut and cut again BT's costs, while pouring money into wiring up Britain with fibre-optic cable and desperately sorting out the group's pension deficit.

And now Patterson, ex-Procter & Gamble and Telewest, the Altrincham-born marketing whizz who took the top seat last year after Livingston shocked his board by suddenly bolting for a job in government. Patterson, quieter than Verwaayen, friendlier than Livingston, was formerly head of BT Retail, its consumer division, and has spent his first year in charge reaffirming the company's surprising new commitment to televised sport.

Last year he bought the UK rights to the European Champions League. This followed his earlier gambit of snatching the rights to a clutch of Premier League matches - annoying BT's biggest rival, BSkyB, in the process.

Sky, says BT, had started the fight by refusing to sell its Premier League matches to others at a reasonable wholesale rate, while rapidly building its own broadband service. Even so, everyone was astounded by the telecom giant's decision to outbid its new rival. Yet to meet Patterson, so sleek and deferential, you couldn't possibly believe he was up for the aggro.

Well, think again. 'Our business is all about broadband and increasingly about fibre broadband. We have made this huge investment in fibre and we wanted to see if we could push it further, and content is the key lever to do that. We couldn't get access to sport in the way we wanted via Sky and if we didn't address that, ultimately, our broadband business would suffer.'

He makes the move into football sound logical and rooted in Verwaayen's gamble of betting the house on broadband. 'People laughed at him,' Patterson reminds me. 'We wanted one million customers. Now we have nearly 19 million.' But only seven million of them buy the service from BT - others use rival ISPs, including Sky, selling on the BT network.

Verwaayen, who hired Patterson into BT a decade ago, also made 'a big bet' on BT's Global Services arm, its B2B division, which provides 40% of the firm's £18bn revenues and works with the world largest companies - a bet that blew up some time later, leading to two profit warnings and all that Livingston cost-shaving. 'But it's a decent business now,' says Patterson.

His focus is on crafting a consumer proposition that binds in BT's customers and feeds naturally into its B2B and infrastructure strength - no prizes for guessing that his early years at P&G, best in class for branding and product differentiation, have had an influence. Hence the Patterson-led BT has doubled down on football and is spending close to £2bn buying sport rights to establish its two BT Sports TV channels, giving its broadband customers something for free that others pay to have, and allowing them to watch it on any platform.

So complete is its need to be seen as a branded provider of content that its London head office in Newgate Street, opposite St Paul's, has carried the huge words BT SPORT above its doors for more than a year, almost as if the whole company has been renamed.

And sport is not the half of it. Already this summer BT has relaunched itself into the mobile phone market, 13 years after it sold off its Cellnet arm (later rebranded as O2). Since July it has been softly selling a new mobile offering to business customers, with a consumer launch widely expected before Christmas.

'Actually, I told the press that the consumer launch would be "in the next 12 months",' Patterson corrects me. 'People have speculated that it's before Christmas but we'll announce it when we're ready to sell it.'

Branded BT or something new? Sold on price or on added gizmos? He frowns. 'I'm not giving any details. We have benefited a lot from not making a song and dance about it until we are ready to launch. If you look at what we did with Sport, we only announced it when we were ready to sell.'

Patterson is genial until you push him, when he reveals the flinty side that has propelled him to the top. Fifteen years ago, he was selling Pantene shampoo and other beauty products for P&G, so the combination of sheen and sharpness should not surprise. But the way he is pushing BT to be braver has turned heads. It brings yet another shift in culture for the telecom giant's 80,000 employees.

Everything now seems a little bit bolder - just look at the chief executive's office. Where Livingston had one flatscreen TV opposite his desk, Patterson has three. Where the old CEO had one framed, signed football shirt (Celtic), the new one has two (Liverpool). One shirt is Steven Gerrard's, the other is Luis Suarez's.

Now there's another risky choice to admire ...

Patterson just smiles. 'It shows what a fine line there is between success and failure.'

Old colleagues say Patterson works hard at being likeable. Philip Jansen, the Worldpay boss who recruited him at P&G and then took him to Telewest, says you shouldn't mistake his deferential demeanour for hesitancy. 'Gavin is quieter than the average CEO, but always good fun, very calm under pressure, great intellect, people trust him,' he sums up.

Behind the good looks and charm, the BT boss is also seriously ambitious. His father was a business lecturer who encouraged his teenage son to read management books, and Patterson, who studied chemical engineering at university on an ICI bursary before switching to P&G, has wanted to lead from an early age.

He says he aims to make BT 'a genuinely customer-oriented business' with 'a truly high-performance culture', and is looking to the leisure industry, the high-end hotel sector and multinationals such as Amazon for benchmarks.

'In our marketplace there isn't anyone who is truly customer oriented. If you were able to create a fantastic experience for customers, akin to the service you get from best-in-class operators, how difficult would that be for others to mimic?'

That, however, is hard to achieve as an infrastructure and technology business that has to coax along often perplexed and angry customers. Anyone who has sat waiting for an answer from a BT helpline will be reading his quotes and laughing.

'It's worth striving for,' he counters. BT has invested large sums in laying fibre-optic cable across Britain and the biggest challenge it faces is maximising the return on that investment. Around 90% of the UK will have access to fibre-optic by 2017, which is basically everyone in a city, town or village. Those who live more remotely will have the option of paying to have their own cable laid.

Is that fair? 'We are not a charity,' says Patterson firmly. 'We have to look after the needs of our shareholders. Remember, this company took a bet of £2.5bn to invest in fibre in 2009. We were not encouraged by government. We were about to enter a significant recession - show me another infrastructure project of that scale over that period. There wasn't one.'

Was it backed by a unanimous board?

'Yes. The board deserves a lot of credit, and frankly we were late. I was running BT Retail and watching Virgin investing in network and getting further and further ahead of us.'

Would he have stayed if BT hadn't made the investment? He pauses.

'It would have made it very difficult to run the consumer side. This is a business that needs constant investment.'

And is the government supportive now?

'Yes. I think it has understood how important fibre-optic is, what it can do in terms of creating jobs and growth, and underpinning social mobility goals. The rollout has taken us to 70% of UK homes in the past four years; we now have the second-highest speeds of any country to Japan, and a clear pathway to go to 90% plus.'

Yet for one business to be spread so broadly, there must inevitably be conflicts: consumer vs B2B, infrastructure vs retail. Where's the logic?

'This is a network business, and to optimise value you need to fill the network at different times with different kinds of customers. You see it around the world: the best telcos have both consumer and business arms using the network.'

Where the business is unusual is in having a separate infrastructure division, Openreach, that ensures rival telecom operators have equal access to BT's local network. 'That is unlike any telco in the world,' he nods. Some of BT's customer service problems stem from that. 'It's not an excuse. We just have to overcome it.'

The hope is that, as phones, screens and media converge, BT could be in the sweet spot, if it gets its propositions right. Patterson has a slick Powerpoint slide that shows the company's 'purpose, goal, strategy and culture'. Bang at the top of strategy is 'broaden and deepen our customer relationships'. In other words, he wants us not just to use BT, but to love and want it too.

'The brand works well across both consumer and business, and you can see the impact of the sport and fibre investments coming through in brand equity now. In WPP's BrandZ top 100 global brands list we went from 94 to 64 this year - the third-highest mover in the world.'

So has the company ignored its brand equity in the past decade?

'That could be the case - it had other worries. But both Ben and Ian understood the value of brands. What is clear is that the injection of confidence that has come from our investments in fibre and sport has had an effect across the whole company. Even when we're talking to CEOs on the B2B side, selling global networks or solutions, they recognise the impact sport has had.'

But how much TV does BT want? More packages of Premier League TV rights come up for auction next year. Presumably football's owners will be licking their lips as BT, backed by a formidable cash flow, and Sky, desperate to maintain its audience, try to outbid each other.

Patterson gives nothing away. 'We are in the sport business to grow our broadband business - I can't repeat that enough. We have added rugby, tennis and MotoGP; next year we have Champions League and Europa League football exclusively. We have choices. We don't have to get more football but I'd be surprised if we didn't participate. We could go for the number one position or number two, we could be outbid, but we'll always have the Champions League.'

Will BT charge for it? No, he says, not for customers watching in standard definition, although they will be asked to pay for high definition and 'certain extras'. Yet some analysts in the City don't see how BT will ever make its money back on this basis. In fact, they reckon the financials - first-quarter profits up 7% and group revenues ahead of forecast - would be even better if the company simply closed BT Sport as soon as possible.

'I understand that,' says Patterson calmly. 'But we don't look at it as a standalone investment, we judge it on whether the consumer business grows in the medium term. It is growing 9% top line and 5% bottom line, so that is a very good result.'

And linking sport with the new mobile offering could create a powerful package if all the moving parts at BT can be entwined and synchronised. Again, it's all about the proposition, and the BT board is backing Patterson to build a winner.

'Gavin had a long run as head of Retail,' says Tony Ball, the former Sky boss who has been a BT non-executive director since 2009. 'It's been the most successful bit of BT. Now the focus for the company is less on taking the costs out and more on getting the product right.'

That should play to Patterson's strengths. Jansen, who plucked him from the university milkround for P&G, points out that the BT boss, while at Telewest, put together the first package offering unlimited internet access for consumers. He can spot opportunity.

'And Gavin's time at P&G is important,' says Jansen. 'People tend to see it just as a marketing business but you learn much more: you focus on the product, its performance and the consumer experience, and on your own people internally.'

Patterson says he gets his interest in big business from his parents. His father was an engineer-turned-lecturer, his mother a teacher. 'She has tremendous drive and energy, my father is more reflective. I have a bit of both.'

The middle child of three, with two sisters, Patterson still speaks with the short As of a northern accent but was mainly schooled in Somerset, where his family moved after his father switched careers. As a teenager Patterson worked holidays at ICI while studying at Cambridge, before ditching the chemical giant for P&G. He had already caught the American firm's eye by setting up a university research venture aimed at selling student data to blue-chip companies before the milkround.

Patterson describes his nine years at P&G as simply 'a brilliant business education'. Yet in 2000 he jumped bravely into Telewest, the listed firm aiming to cable up Britain. Why?

Because, he says, the P&G ladder headed inexorably abroad, with little chance of return. 'And when I started in FMCG you'd flick through the FT and it was FMCG front and back. By the 1990s it was all telecoms, internet and media. It felt like the time to make that move.'

But at Telewest he walked into a disaster. The business, despite backing from Microsoft, racked up huge debts, its share price nose-dived, its chief executives rapidly came and went.

'It was the best of times and the worst of times,' sighs Patterson. Yet that brush with failure - holding a business together as it collapses - became a key moment in his career.

'Every time a CEO left I got a bigger role, so I was getting great experience in difficult circumstances.' Now he looks for recruits who have battled through similar adversity. 'If you're faced with situations, you have to fall back on your experience, and it's difficult if you've only ever had success.'

Eventually Telewest merged with rival NTL and later rebranded itself Virgin Media, but by then Patterson had been lured into BT by Verwaayen. 'Ben had rebuilt the business, Ian had joined. They were keen to bring in people who had lived through competition.'

At Telewest, of course, that competition included the emerging Sky. 'Yup,' he confirms with a tight smile. So his determination to take on the pay-TV titan may have deep roots? He shrugs. 'Sky was extremely competent then as it always has been.' Ever offered him a job? Pause. 'Yes, it has approached me in the past but ...' He has never been tempted. Sky chief executive Jeremy Darroch is another ex-P&G man. Darroch sends his children to the same Surrey school as Patterson, so doubtless they have plenty to catch up on at the drop-off.

And did he get any tips from Livingston before starting as BT chief executive last year? Patterson laughs.

'You mean, did he leave a note saying: "All the money's gone ..."? Haha! No, it is a bit surreal when you take over, though. I went to a board meeting, then straight in here. He was leaving with his pictures, and that was it.'

But as boss of BT, with its sensitive control of national infrastructure, your life is never the same again. You are security checked and rechecked, and continually held to account. He nods again. 'You have to get used to being constantly in the public eye. No other job I have had has been like that.'

And, as the new boss, everyone wants to meet him. He spent much of last year travelling, seeing major customers. 'They want to meet me and I want to meet them. You can't run a business sitting in your office, even if it has a beautiful view,' he says, gesturing at St Paul's.

He compares the experience to watching the garden grow at a newly bought home. 'You've got to learn where everything is.'

As for the ego that frequently goes with FTSE 100 leadership, he insists his wife and four children keep his feet on the ground. Complaining when the broadband goes down? 'Let's say they are extremely direct in terms of feedback,' he grins.

He lives in Weybridge - close to P&G's UK base - and his weekends are spent 'ferrying around' his children. He and his American wife collect film posters, an addiction they picked up from her father. They have 25 or so, mainly for 1930s Hollywood films that were bought at auction online, hanging around the house.

His home, he adds, 'is a female-dominated household' - three daughters and one son - and any comments about BT being blokeish with its newfound love of sport are wide of the mark. 'A lot of female customers like football. I really don't think it is a male-dominated game.'

Really? Surely BT simply decided that men make the technology decisions in households and bought Premier League football to cling onto them. Or did he just want to stuff Sky for the sheer pleasure of it?

There is no answer to that. How about a little more detail on how BT will use football in its new mobile service?

'It will play a role,' he concedes. 'We recognise we can't come in with a simple vanilla offering. We have to do something different.'

And that is that - it really is hard to pry any more out of him. 'Sorry, I'll sit up straight,' he says, noticing that the photographer has started to take pictures of him before the main shoot starts. She probably cannot resist.

THE FOUR BIGGEST CHALLENGES FACING PATTERSON

Maximising BT's investment in fibre

Making a success of re-entry into mobile

Turning the company into a genuinely customer-oriented business

Creating a truly high-performance culture

PATTERSON IN A MINUTE

1967: Born on 6 September in Altrincham, Cheshire. Educated at Yeovil College, Somerset and Emmanuel College, Cambridge

1991: Assistant brand manager, P&G

1994: Brand manager, P&G

1999: Marketing director, P&G

2000: Marketing director, Telewest (now Virgin Media)

2003: Managing director, consumer division, Telewest

2004: Managing director, BT Retail

2008: Board director and chief executive, BT Retail

2013: Chief executive, BT Group plc.

Image credit: Chatham House

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