Lalani and the new group finance director, Tony Chanmugam, have been poring over the group's books and slashing the value of the business. Since then, 85% of the unit's senior managers have gone, including its chief executive, François Barrault, who was replaced by the group finance director, Hanif Lalani.
BTSEARCH 2009 UPGRADE
but as a result of the change in the market, the amount that we have to put into the pension has gone up and that money has come out of the dividend."īT dramatically warned on profits in October as it emerged that BT Global Services had overestimated the potential profitability of many of its biggest contracts, including its part in the upgrade of the NHS IT systems. "But we have seen a massive change in the market, we are certainly not the only company that has reduced its dividend.
"Shareholders, of which I am one, would like to see a higher dividend, obviously," he added. "We can do a number of things: we can invest for the future of the business, we can pay down debt, we can support the pension scheme and do that with a dividend. "We are absolutely confident that we will have a sustainable dividend," Livingston added. "We will do our best to avoid compulsory redundancies," he said.īoth Rake and Livingston said there had been no discussion, either internally or with investors, about a possible rights issue and the company would be able to generate more than £1bn in cash this year, enough to meet further dividend payments, investment and reduce the company's £10.4bn debts. Livingston stressed, however, that he hoped staff jobs would go through voluntary redundancy and people taking early retirement. Last year BT made 10,000 contractors and 5,000 staff redundant and the firm is looking for a similar reduction this year. Andy Kerr, deputy general secretary of the Communication Workers Union, said: "Global Services has been a disaster and the staff in BT are having to pay the price for their mismanagement."īT employs 147,000 people – 42,000 of whom are contractors who have already seen their pay drop by an average of 14% as the company squeezes costs. The company has already frozen pay for all staff.
Union leaders, however, reacted angrily to the news that jobs would be cut because of the failure of BT Global Services. Sir Michael Rake, the chairman, added: "We are all extremely unhappy it is very disappointing, given the performance of the other three divisions, that we have had these issues in Global Services but the best thing that we can do for all our shareholders is fix it quickly and grow the dividend again from a sustainable base." I think the question is are the management team today doing the right thing to deliver for shareholders in the future and that's my real duty." "It has been a really difficult year and yes I apologise to shareholders," said Livingston, who took over from Ben Verwaayen less than a year ago. The dividend cut will save BT more than £700m. Its 1.1 million shareholders, meanwhile, many of whom rely on the company's dividends to augment their pensions, will see their income plunge as the company plans a final dividend of just 1.1p a share, making its payout 6.5p this year compared with 15.8p last year.
The failure of the loss-making BT Global Services, which made wildly over-optimistic projections about future profits, has forced BT into a cash squeeze as it must also pump an annual £525m into its huge pension scheme over the next three years to plug a widening funding gap caused by the recession.Īs part of a plan to cut operating costs and capital expenditure by more than £1bn, BT will axe 15,000 jobs this year – about 10% of its workforce – on top of 15,000 who left the firm last year, 5,000 of whom went in the first three months of this year alone. BT's chief executive, Ian Livingston, has apologised for more than halving the dividend to shareholders, many of whom bought shares on privatisation in the 1980s, after its IT services business plunged the firm deep into the red.