How BT’s ‘no nonsense’ first female chief helped turn company around | BT
If timing is everything, then Allison Kirkby may have made the most of it.
Since she became BT’s first female CEO more than two years ago, the company’s share price has risen 80 per cent; It was a welcome return for investors and Kirkby was rewarded with a £5.6m pay and bonus package last year; It was the biggest for a telecommunications company boss in more than a decade. But there are questions about how much credit Kirkby can take for the apparent revival of the business.
Last week the 58-year-old Glaswegian, who joined BT’s board in 2019 while he was chief executive of Swedish telecommunications company Telia, was praised for finally developing a solution to tackle the group’s struggling international division.
The split has troubled BT for years, and an exit to focus on making the company a “national champion” has been in a tortuous progression since a scandal at BT Italia knocked more than £8bn off its market value a decade ago and ultimately cost former CEO Gavin Patterson his job.
As years of major investment to address the UK’s global internet lagging status is winding down, full fiber broadband now covers more than two-thirds of the UK and BT could achieve annual free cash flow of £3bn by the end of the decade.
The need for fewer engineers and the introduction of artificial intelligence will see IT’s workforce shrink by around 40% to around 75,000 by the end of the decade; Kirkby last month raised the company’s savings target from £3bn to £3.7bn.
But there are those who believe that much of the benefit Kirkby now enjoys was laid by his predecessor, Philip Jansen.
Jansen’s tenure has been characterized as a wartime general’s, from instigating only the third dividend cut in BT history for national infrastructure improvement, while also facing a pandemic and the company’s first national strike in 35 years, to major staff and cost cuts and easing the burden on the costly BT Sport pay-TV business.
“I think he took over in a good hand with a lot of good foundations; some might say he was a lucky general, but he was also a driving force,” says one former senior executive. “He’s no nonsense, he’s a smart operator and his subsequent decisions have been smart. And he still faces a lot of challenges.”
BT’s largest shareholder, Indian telecom billionaire Sunil Bharti Mittal, and another senior executive from his company took part in BT’s board of directors.
While Kirkby doesn’t need to worry about a potential takeover attempt (the government has said it will block any increase in its current 24.5% stake to maintain control over “nationally sovereign infrastructure”), there is additional pressure to expand in a competitive market.
BT faces competition from a resurgent Vodafone, which overtook EE as the UK’s biggest mobile operator after a mega-merger to form VodafoneThree and saw its market value rise by a quarter last year. Shares of BT, which reported a 3% drop in total revenue last year, are down more than 3% in the same period.
A U-turn to retire the venerable BT as its flagship consumer brand in favor of EE has also been puzzling. The relaunch of the brand, which includes Euro 2028 sponsorship and the return of BT Mobile, took place in May at Wembley, where EE has been stadium sponsor and lead partner since 2014.
“It’s going to be confusing because it’s a flip-flop,” says Polly Hopkins, UK managing director of branding agency Elmwood London. “But the reasoning behind it makes sense. BT is emotionally tied to our culture as a brand; EE has really only been successful on mobile, and what they’re trying to do is be seen as the country’s brand across all connections. That makes sense.”
BT’s fight is paying off, with subscriber numbers growing across its consumer operations (EE, broadband, mobile and television) for the first time in eight years.
The company, which is hemorrhaging customers at its infrastructure arm Openreach, lost 825,000 broadband customers last year in the fight against heavily discounting “alt-net” rivals.
The company estimates it will lose another 800,000 people this year, bringing the total to 3.2 million over the five-year period, or almost 16% of its current broadband base of 21 million users.
But losses have now peaked and are expected to fall to 288,000 annually by 2030.
Kirkby expresses disappointment at the valuation of Openreach, which will reach 30 million homes with full fiber broadband by 2030, which is not reflected in BT’s £19bn market value. Analysts at New Street Research estimate that Openreach alone is worth £30bn.
“Open access is a perennial question,” says Matthew Howett, managing director of Assembly Research. “Looking forward, the largest group is realizing the value of the parts that make up IT. The broader group is not reflecting the value of its components. Open access is probably the most valuable component of it right now, especially once the fiber fabric is complete. How will it realize that?”
Speculation arises every few years that BT might consider selling all or part of Openreach, but this has always been ruled out due to complexities, mostly related to the BT pension scheme into which the telco pays hundreds of millions of dollars a year.
But insiders say that by 2030, with numbers in the scheme starting to fall faster due to age (the main BT pension scheme was closed to new members in 2001), value could finally be realized – and perhaps under Kirkby’s stewardship.
When asked why he turned to leading companies facing major challenges, Scot Adam Crozier, chairman of BT and who also runs Royal Mail and ITV, put it down to a trait he described as “throwaway”, a Scots word meaning difficult or stubborn.
To achieve his goals at BT, Kirkby will need to be sidelined.
