© Reuters. FILE PHOTO: Logo of British Telecom (BT) is displayed outside a store in London, Britain, November 15, 2019. REUTERS/Simon Dawson
By Paul Sandle
LONDON (Reuters) -BT Group, Britain’s biggest broadband and mobile provider, will cut up to 55,000 jobs including contractors by 2030 – potentially over 40% of its workforce – as it completes its fibre roll-out and adapts to new technologies such as AI.
The company has been working through a transformation plan to build a national fibre network under boss Philip Jansen, as well as rolling out high-speed 5G mobile services.
The former state monopoly reported on Thursday pro forma revenue and core earnings growth for the first time in six years in the year to the end of March, but the cost of transforming the business, and the hit to its free cash flow took a toll, sending its shares down 7% in morning trade.
Jansen said after completing the fibre roll-out, digitising the way it worked, adopting artificial intelligence (AI) and simplifying its structure, BT would rely on a much smaller workforce and significantly reduced cost base by the end of the 2020s.
“New BT Group (LON:) will be a leaner business with a brighter future,” he said.
The group’s total number of workers would reduce from 130,000 to between 75,000 and 90,000 by its 2030 financial year at the latest, it said. Some 30,000 of its current employees are contractors.
Jansen said BT’s ongoing job cuts would accelerate as it completes its fibre build and switches off 3G.
“It’s a rolling programme (of cuts), but it’s a five-to-seven-year landing zone,” he told reporters.
The Communication Workers Union (CWU) said the job cuts were “no surprise” given the coming changes in infrastructure and technology. Talks between BT and the CWU were necessary to ensure a smooth transition on that front said the union, adding that BT should aim to keep direct jobs and cut contractors.
BT’s rival Vodafone (NASDAQ:) said on Tuesday it would cut 11,000 jobs worldwide to try to restore its competitive edge.
Jansen said around 10,000 fewer network engineers would be needed to run digital networks, while technologies like automation and AI would replace another 10,000.
There were “huge opportunities” to use AI, he said, adding that generative AI large language models would be a leap forward that rivalled the arrival of the smartphone.
BT would use AI to deliver better customer service, driven by customer needs, he said, as well as capturing other business opportunities.
“We’re not going to be in a situation where people feel like they’re dealing with a robot,” he said. “”We’ve got multichannel, we’re online, we have got 450 stores, that’s not planning on changing.”
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On the full-year results, Jansen said BT had made good progress while navigating an “extraordinary macro-economic backdrop”.
It met market expectations with a 5% rise in adjusted core earnings of 7.9 billion pounds ($10 billion) after growth in networks and consumer businesses offset a decline in enterprise.
But free cash flow (FCF) fell 5% to 1.3 billion pounds, at the lower end of its guidance, due to increased cash capital expenditure. Forecasts for free cash flow for 2024 were also lighter than analysts had expected.
Chief Financial Officer Simon Lowth said BT would invest the proceeds of the British government’s new tax expensing in its network build and on connecting customers to fibre.
That would result in free cash flow of 1.0-1.2 billion pounds this year, he said, below market expectations of 1.22 billion pounds.
The group’s networks arm, Openreach, reaffirmed its target to reach 25 million premises with ultra-fast full-fibre connections by the end of 2026.
It has been investing heavily to build out its fibre network faster than rival Virgin Media O2 and smaller “alt nets”.
BT said it expected to grow both revenue and core earnings on a pro forma basis this year.
($1 = 0.7923 pounds)
This story originally appeared on Investing
