BT plans mass layoffs after cutting 8,500 jobs in last year

　　BT's long-suffering ordinary employees have lived in fear ever since former boss Philip Jansen told UK newspapers three years ago that his workforce would shrink rapidly this decade, pulverized partly by AI. With about 130,000 employees in total, including contractors, the UK telecom incumbent would be able to reach 2030 with between 75,000 and 90,000, he warned. Allison Kirkby, his successor, appeared to agree, maintaining the workforce target. She has now sharpened the axe and narrowed the range. More heads will roll than staff would have hoped.

　　It was left to CFO Simon Lowth, who retires this summer, to deliver the update earlier today during BT's presentation of annual results. BT's bosses still expect it to employ no fewer than 75,000 people in 2030, he told equity analysts, but they don't plan to have more than 80,000. At the midpoint of these two ranges, this would leave BT with 5,000 fewer employees than it previously expected. Under even the most favorable outcome for staff, BT will have cut about 50,000 jobs, a stunning 38% of the earlier total, in just seven years.

　　This is not just talk designed to please investors, who are conscious BT's only method of boosting returns and dividends is cost reduction. Since Jansen spoke to the press about his plans, BT has cut more than 22,000 jobs, including more than 8,500 in the last year alone, its latest financial reports show. Nearly all those recent cuts have affected direct employees rather than contractors. By March, BT's headcount excluding contractors numbered just 77,152 individuals. Almost one in ten jobs had disappeared since March last year.

　　Finishing up on fiber

　　Despite the incessant messaging about AI, very little of this was caused by the newfangled technology. Most of it came in response to business challenges and the retirement of antiquated platforms other than Lowth. BT's sales stopped growing long ago and the company has more recently been shrinking a little each year, like people of a certain age.

　　For the first time since 2015, when it did not own a mobile network, its full-year revenues were below £20 billion (US$26.8 billion), at about £19.7 billion ($26.4 billion), and the annual amount has dropped by £4.4 billion ($5.9 billion) since 2016. Under Kirkby, BT is quitting the international scene to focus on a saturated domestic market awash with phones and broadband lines.

　　But all BT's investment has been channeled into defending its dominant position. Openreach, its fixed network arm, has raced desperately to bring full-fiber connections to UK homes and beat infrastructure rivals trying to poach its broadband customers. As a civil-engineering project, it has been a huge success, providing a positive, private-sector contrast with the UK's HS2 rail fiasco. But that and other projects have cost BT about £5 billion ($6.7 billion) in capital expenditure each year, squeezing margins. BT's normalized free cash flow fell 6%, to about £1.5 billion ($2 billion), last year.

　　Nor has Kirkby been able to completely staunch the line losses to competitors. BT waved goodbye to 825,000 broadband subscribers last year and expects another 800,000 to leave this year. In the last four years, it has lost 2.4 million subscribers, about 11% of the earlier total. The disappearance of another 800,000 would push line losses up to 3.2 million, representing almost 15% of the previous subscriber base.

　　Kirkby, then, was under immediate pressure to find savings when she took over the job in February 2024, and she has found them in several areas. Most importantly, thanks to an acceleration of the full-fiber rollout by Openreach, the planned deployment to 25 million UK premises is almost complete.

　　BT had reached almost 23 million by the end of March and expects to finish the project this year. With a diminishing need for duct diggers and pole climbers, the operator has cut the size of the Openreach workforce by more than 10,000 positions in the last two and a half years, giving it a headcount of fewer than 25,000 employees in March.

　　The retirement village for old tech

　　In parallel, BT has also been switching off old network technologies and simplifying its IT estate. The 3G mobile network has already been taken out of service and 2G is expected to follow later this decade. By January next year, BT expects to retire its public switched telephone network, the old circuit-switched, copper-based system built for landline calls.

　　Ultimately, BT reckons shifting to full fiber should allow it to close about 4,600 of its 5,600 exchanges, currently leased from property firm Telereal.

　　"Some exchanges will be vacated ahead of the Telereal lease expiry in 2031 and, indeed, we recently closed the first exchange at Deddington," Lowth told analysts today. "The exchange closure program will deliver further significant savings beyond FY30."

　　In May 2024, BT targeted annual cost savings of £3 billion ($4 billion) by 2029. With the revision to headcount plans announced today, Lowth has now upped the target to £3.7 billion ($5 billion) by 2030. "We will have delivered cumulative gross cost savings of £6.7 billion [$9 billion] over the decade to FY30," he said. "These cost savings will have offset significant cumulative inflation and driven EBITDA growth from a smaller, more profitable, more focused BT."

　　All this should result in fatter profits and juicier dividends for shareholders. Kirkby wants to reduce capital expenditure from £5.1 billion ($6.8 billion) last year to £4.3 ($5.8 billion) for the current one, and she has assured investors that free cash flow (FCF) will rise from £1.5 billion ($2 billion) to around £2 billion (£2.7 billion) over this period.

　　That would be a huge increase, lifting FCF to a level BT has not seen since 2020, when sales were up at almost £23 billion ($30.9 billion). By 2030, Kirkby is aiming for £3 billion. It is what any shareholder would hope to hear. But for thousands of people who still work at BT, 2030 could mark the end of the line.