BT cuts 4,000 jobs, CEO’s pay after accounting scam

BT Group is clawing back management pay and eliminating 4,000 jobs as it seeks to rebuild investor confidence and overhaul the division involved in an accounting scandal in Italy.The cuts involve scrapping bonuses for chief executive officer Gavin Patterson and former chief financial officer Tony Chanmugam for the 2017 fiscal year, BT said on Thursday as it released fourth-quarter results that narrowly beat analysts’ estimates. The company also reduced its outlook for 2018 normalised free cash flow and dividend growth.Shareholders have been pushing the former British phone monopoly to adjust executive pay after it revealed in January that accounting irregularities in its Italian business were worse than expected, leading to a larger write-down and contributing to a reduced profit outlook. The scandal added to investor concerns over regulatory, investment and competitive pressures for BT, making it one of the worst-performing stocks in the FTSE 100 this year.“I felt it was inappropriate to take a bonus,” Patterson said in a Bloomberg TV interview Thursday immediately after the results. Shareholders have been supportive in a challenging year, he said.Patterson would have had the opportunity to earn a bonus of as much as 240% of his salary of £993,000 ($1.28mn) in fiscal 2017. A reduction in deferred bonus plan share awards for the two executives totals more than £500,000.The stock was down 3.2% as of 10:20 a.m. in London, at 301.90 pence. The shares, which had 13 buy, nine hold and two sell recommendations from analysts before the results, are down 17% this year, with only Centrica Plc performing worse on the FTSE 100 Index.The company said it will revamp the global services division that includes the Italy unit following a review. Changes include replacing the division’s CEO, Luis Alvarez, with Bas Burger. The carrier will make the business more digital and less focused on owning local network assets around the world, which Patterson said could mean disposing of one or two units outside the UK.The 4,000 job cuts will come from global services and BT’s technology, service and operations unit and the company will face a restructuring charge of about £300mn over the next two years, BT said. The carrier has more than 100,000 employees.The weaker financial outlook included a 10% reduction in the estimate for normalised free cash flow in the 2018 fiscal year, to £2.7bn to £2.9bn. Underlying sales will be broadly flat. Adjusted earnings before interest, taxes, depreciation and amortisation will be slightly lower, at a range of £7.5bn to £7.6bn. Dividend growth is now forecast to be lower than the 10% or more previously expected.BT didn’t provide guidance for the fiscal year after this one, as it historically has, given uncertainty about the cost of proposals by communications regulator Ofcom to reduce wholesale broadband prices at BT’s network unit, Openreach. BT could also spend more on rolling out fiber directly to buildings in its network, Patterson said. Openreach said yesterday it would consult with other communications providers on more investment in full-fibre connections.“There are a couple of things that we need better visibility on before we can guide beyond the next 12 months,” Patterson told reporters. Additional fibre investment “could be a significant number” and would have a long payback period, he said.Revenue in the three months ended March 31 increased 10% to £6.12bn, beating the £6.03bn  average of five analysts’ estimates compiled by Bloomberg. Adjusted Ebitda rose 2% to £2.07bn, above the £2.03bn average estimates.