He halved the dividend and he halved the share price. The financial scorecard for Philip Jansen’s time as chief executive of BT – he’s off in January after five years in charge – is not pretty. The big hope was that the telecoms group, after a deal with regulators to get Openreach to pull its finger out on fast-fibre broadband rollout, would finally be re-rated as a go-getting 21st-century provider of critical infrastructure. It has not been fulfilled.
Thursday’s decent half-year numbers, the last on Jansen’s watch, delivered an upward tick for the shares but nothing to alter the general lack of buzz around BT over the past year. Even takeover talk, the result of the French billionaire Patrick Drahi’s Altice Group building a 24.5% stake, has gone quiet.
For all that, it would be hard to argue that Jansen got the strategy wrong. Circa early 2020, after a years-long standoff with Ofcom, BT plainly had to get with the fibre programme, and never mind the dividend, or risk political fury. The regulator’s “fair bet” terms on future broadband prices were generally regarded as reasonable by investors (and still are) so the investment game became one of swallowing hard and spending £15bn to get the kit in the ground.
What’s changed is inflation, interest rates and investors’ enthusiasm for a programme with a 19 or 20-year payback period. BT had passed 1m fibre premises when Jansen joined and is now up to 12m, so should reach the target of 25m by the end of 2026, at which point the capital expenditure bills should plunge and, if all goes to plan, BT’s annual cashflows will vastly improve. The customer take-up rate for new fibre lines is 33%, which is marginally better than expected at this stage. But 2026 still feels a long way off.
The other problem is that there hasn’t much else going at BT to stir excitement. EE is operationally fine but has also been carrying big spending bills for 5G. The business unit, bogged down by five-year fixed-price deals signed in pre-inflation times, has disappointed. The huge cost-cutting and IT upgrades exercises have been a grind. Nothing ever came of the on-off speculation about flogging a minority stake in Openreach, possibly because the pension scheme remains a formidable obstacle to fancy financial restructuring. A foreign takeover also looks like a long shot as the reality has dawned that the government (quite rightly) would stop it on national security grounds.
Thus the strategic alternatives for Jansen’s successor, Allison Kirkby, who is the chief executive of Swedish group Telia, are limited; and, since she’s been a BT non-executive director for the past four years, she’s fully signed-up to the current direction anyway. She could usefully try to dig faster to bring forward the inflexion point in cashflows, but there’s a limit to what’s possible at this stage. For shareholders, the game of patience goes on. BT, now faced with competition from “alt-net providers” which continue to defy predictions of their demise, should have started down the fibre route well before Jansen arrived. Ultimately, like most BT chief executives over the decades, he was playing a game of catch-up.
