Tuesday, 17 July 2018

Life after Gavin Patterson - What's next for BT?

By Chris Kelly, Total Telecom
Friday 15 June 18

With current CEO, Gavin Patterson, agreeing to step down after more than 5 years at the helm, a host of challenges and opportunities await his successor, whoever they may be…

It's been an eventful few months for BT. The UK's former incumbent telco has announced a host of ambitious plans aimed at realigning its public image and helping it deliver innovative and progressive products and solutions to its customers.  The company has high hopes for 5G and has publicly stated that it wants to launch next generation mobile networks in the UK by 2019, significantly ahead of other European operators.  BT has also announced that it plans to launch its fully converged, hybrid Smart Network, which will offer seamless connectivity across the company's fixed, mobile and WIFI infrastructure by 2022.  And if all that wasn't enough to cheer the hearts of BT's customers and shareholders…

It's been an eventful few months for BT. The UK's former incumbent telco has announced a host of ambitious plans aimed at realigning its public image and helping it deliver innovative and progressive products and solutions to its customers. 

The company has high hopes for 5G and has publicly stated that it wants to launch next generation mobile networks in the UK by 2019, significantly ahead of other European operators. 

BT has also announced that it plans to launch its fully converged, hybrid Smart Network, which will offer seamless connectivity across the company's fixed, mobile and WIFI infrastructure by 2022. 

And if all that wasn't enough to cheer the hearts of BT's customers and shareholders, it has also pledged to bring its offshore customer service call centres back to the UK by 2020. What's not to like about any of that?

But this raft of smart, forward looking initiatives has struggled to outpace the cloud of bad publicity that has engulfed BT in recent months. BT stunned the industry when it announced plans to make 13,000 redundancies last month, and while you can't argue with the logic of making BT a more agile, nimble beast, you can certainly question the wisdom of making such an announcement only days before revealing that the company's CEO will be taking home a whopping, multi-million pound bonus for his efforts this year.  

As BT's share price continued its 2-and-a-half-year nose dive, the company's biggest shareholders began to lose patience with the situation, and it was with an air of growing inevitably that earlier this month BT announced that its CEO, Gavin Patterson, would be leaving the company.

Since then, BT's board of directors has been at pains to emphasise that it is fully behind the strategic vision that Patterson had outlined for the company – it just feels that the vision needs a new steward. 

Ultimately, it was the tumbling share price that did for Patterson, not his plans for the company, and he hinted as much, when he took questions at a media session during London Tech Week. When asked what his advice to his potential successor would be, Patterson replied: "Whatever you decide to do, make sure that you get a return on it, from a BT share holder perspective."

So, what does the future hold for BT and what does life after G-Pat look like? Most importantly of all, who is likely to step up to the challenge and become BT Group's next CEO. Whoever they are, they will be joining BT at a genuinely exciting time and their stewardship could well be the deciding factor as to whether BT delivers on its lofty ambitions. 

 

The contenders

Many analysts and commentators (myself included) believe that Marc Allera, CEO of BT Group's Consumer Division, is the natural choice. Allera has risen quickly through the ranks at EE and now holds one of the most important positions within the BT Group. 

Another name that has been suggested is Openreach's CEO, Clive Selley, but given Ofcom's recently voiced concerns over the amount of influence BT is able to wield over Openreach, I would be surprised (flabbergasted, more precisely) if BT's board of directors went in this direction.  

Whoever BT appoint, they will need to fit the model and vision that has been left by Patterson, as Matthew Howett, founder and principal analyst at Assembly Research explains:   

"I think they have to be someone that embodies the new BT and the BT that it's transitioning to. Gavin was a good fit in this sense, in that he saw the need to be bold and make BT relevant again. He did that with sport and acquiring EE. Not only does the new person have to implement a big new strategic direction, but also appease stakeholders - principally Ofcom and Openreach's largest customers," he said. 

In truth, there are almost as many likely candidates as there are analysts to suggest them. Paolo Pescatore, VP for multiplay and media at CCS Insight believes that the board of directors may look outside of BT Group, rather than promoting someone from within, in order to gain a truly fresh perspective on their existing strategy. 

"The likes of Ronan Dunne, from Verizon Wireless; former O2 chief, Liv Garfield; and Olaf Swantee, the former head of EE who is now running Swiss telecoms firm Sunrise, are all very good candidates in their own right," he said. 

An international appointment, particularly one from the US, would certainly add experience and expertise to BT's drive to rollout 5G. That being said, it seems unlikely that BT Group requires that level of technical expertise from their potential CEO. They have the teams in place to deliver on their targets for the UK in the mobile and fixed line markets. 

What BT needs is a figure head. Someone that the group can rally around – someone with the intelligence and charisma to inspire their colleagues and communicate the company's plans for innovation to its customers. Of course, that person will need to possess the financial acumen to deliver a tangible bump in the company's share price, while simultaneously investing in research and development to keep the companies ambitious plans on track. 

It remains to be seen who BT's board of directors will pick to fulfil this role, but for my money, Marc Allera is the stand out candidate. I would be very surprised if he wasn't there or thereabouts come the final reckoning.

 

Friday Review 15/06/2018

 

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