• BT’s CEO, Allison Kirkby, has signalled a new era of modernisation and retrenchment
• Her focus is on getting a return on the capital invested in BT’s UK infrastructure
• Another £3bn in costs will be cut in the next five years
• BT’s international operations look set for the chop

The investors who recently shorted BT’s stock will be wiping away a cold sweat today after the UK national operator’s share price jumped by more than 12% to 127 pence on the London Stock Exchange as the telco announced modest annual results and plans to further cut costs and retrench its operations in the coming years. 

The financial results themselves are not spectacular – full financial year revenues up by 2% (on an adjusted basis) to £20.8bn and adjusted EBITDA also up by 2% to £8.1bn. But alongside those numbers are indications of a slimmer organisation that will drastically reduce its operating costs in the coming years and focus on maximising its returns on the investments it has made in its fibre access and radio access network infrastructure in the UK.

Allison Kirkby, who took on the BT CEO role in February, is known as a pragmatic, results-oriented executive who focuses on the strengths of businesses and seeks to offload sub-optimal operations: That’s what she did during her tenure as the CEO at Swedish operator Telia, where she adopted a back-to-basics turnaround strategy – see For telcos, getting back to basics is key to future growth.

Her predecessor, Philip Jansen, pursued a very deliberate strategy of technology investment to set BT up for the future, and although it was an approach supported by the telco’s board members, which included Kirkby, that approach meant lower margins and a depressed share price – see The future’s brighter for BT, says outgoing CEO Philip Jansen.

Jansen stepped down just as the period of major capital investments was coming to an end, allowing BT to focus on getting a return on those investments and executing on a major revamp that, the telco has clearly signalled, will result in a dramatic reduction in the service provider’s workforce – see BT to cut up to 55,000 jobs in AI-enabled efficiency drive.

So what comes next? Last month, Kirkby set up a new strategy and change unit to pinpoint how BT can transform itself into a profitable, modern, efficient digital service provider as it transitions away from its capex-intensive period.   

And her comments in today’s earnings press release suggest BT will also be getting back to basics for the rest of this decade. “Having passed peak capex on our full fibre broadband rollout and achieved our £3bn cost and service transformation programme a year ahead of schedule, we’ve now reached the inflection point on our long-term strategy. This delivery and greater capex efficiency gives us the confidence to provide new guidance for significantly increased short-term cash flow and sets out a path to more than double our normalised free cash flow over the next five years. This enhanced cash flow allows us to increase our dividend for FY24 by 3.9% to 8.0 pence per share. We’re also setting a further £3bn of gross annualised cost savings to be reached by the end of FY29,” noted the CEO. 

So further cost cuts, much greater cash generation and a greater likelihood of shareholder dividends are on the cards over the next five years, it seems. 

And there’s more.

“As we move into the next phase of BT Group’s transformation, we are sharpening our focus to be better for our customers and the country, by accelerating the modernisation of our operations, and by exploring options to optimise our global business. This will create a simpler BT Group, fully focused on connecting the UK, and well positioned to generate significant growth for all our stakeholders,” stated Kirkby. 

This puts the BT Business division, which was formed in late 2022 when the operator merged its Global and Enterprise divisions, firmly in the spotlight, especially as it reported a 2% year-on-year decline in revenues to £8.13bn and a 16% dip in earnings before interest, tax, depreciation and amortisation (EBITDA) to £1.63bn in the full financial year. In addition, BT Group recorded a non-cash goodwill impairment charge of £488m allocated to BT Business “reflecting a decline in profitability in recent years.” 

So it seems like the international operations are going to either be sold or mothballed and the enterprise services operations will focus on British business customers.   

That retrenchment means the operator will focus more intensely on sweating its now considerable assets in its domestic market, where its fibre-to-the-premises network now reaches more than 14 million premises and the initial rollout process has already commenced on reaching a further 6 million. BT says its quasi-autonomous wholesale fixed access division, Openreach, is on course to reach 25 million premises by the end of the calendar year 2026.   

All of those plans clearly resonate with investors, hence the share price hike, though it should be noted that today’s rise only takes the stock back in line with where it started the calendar year and it’s still 16% lower than a year ago.

So the focus now is on the UK, where the operator has done well with its 5G rollout and marketing, and now has 9.5 million consumer 5G customers, though there’s plenty of work still to be done in BT’s domestic market. 

Openreach is arguably BT’s crown jewels right now and its revenue and earnings growth was strong during the financial year, but it suffered a 2% decline of 491,000 connections to just below 21 million in its wholesale broadband connections base due to intense competition from rivals (which were not named but include Virgin Media O2, Cityfibre and other altnets). “We expect that the broadband market will recover over the medium term but if it remains weak over the next 12 months, then we can expect Openreach’s broadband base to be impacted by moderately higher competitor losses,” noted BT. 

Kirkby will be looking to address that situation as she will want to see all of the numbers heading in the right direction. 

- Ray Le Maistre, Editorial Director, TelecomTV