RE: BT’s recovery still stuck on hold30 Oct 2020 08:39
Yet, looking through Covid-19, he has two bigger challenges: his strategy and a bunch of legacy issues. Rightly, Mr Jansen has gone big on full-fibre broadband, something BT should have done years ago. He aims to reach 20 million premises by the mid-2020s: a big jump on the 3.5 million today, whatever recent progress at upping the run rate to 40,000 a week. Since lockdown, inquiries to BT call centres about faster broadband are up by 70 per cent. So demand is clearly there.
But the payback is ages away. And Mr Jansen has raised the stakes by nicking £2.5 billion from the dividend to help fund his £12 billion roll-out. Suspending the payout for more than a year before bringing it back at a half-size 7.7p led to an exodus of income investors; one reason for the weak share price. Plus the fact that the broadband investment case is still out of his hands. He wants what he calls a “fair bet” internal rate of return of between 10 per cent and 12 per cent for putting the fibre in the ground. But that depends on regulator Ofcom and tax breaks from BoJo’s distracted government.
Then comes his inheritance. True, he’s lucked out on EE: the £12.5 billion purchase by his predecessor Gavin Patterson that’s central to BT’s converged mobile and fixed-line offer. Elsewhere, though, as Mr Jansen puts it: “With heritage comes a lot of legacy issues.” These include an £8 billion pension deficit, just £2 billion shy of BT’s market cap, and an antiquated voice calls system. There’s also £17.6 billion net debt. Yes, the virus has proved the case for the better business lurking within BT. Dialling it up is another thing altogether.
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