BT has launched a new set of cost-saving initiatives worth £3 billion, following the completion of significant investments in its UK full-fibre broadband network, which prompted a rise in dividends.
The company saw a slight increase in revenue, reaching £20.8 billion—a 1% increase from the previous year—fueled by increased broadband prices, strong fibre product sales via Openreach, and growth in its consumer division.
However, even with increased revenue, the company’s profitability suffered, with pre-tax profits decreasing by 31% to £1.18 billion, although adjusted EBITDA saw a small increase of 2% to £8.1 billion.
Investment in infrastructure and network expansion
Capital expenditure decreased by 3% to £4.9 billion due to reduced network spending, but Openreach’s FTTP rollout accelerated impressively, connecting 78,000 homes per week in the recent quarter. To date, approximately 14.8 million FTTP broadband connections have been established, with a take-up rate nearing 34%.
BT also announced that it had achieved its £3 billion cost savings target for 2025 a year ahead of schedule, largely due to its ongoing job reduction program, which aims to eliminate 55,000 jobs by the end of the decade.
Allison Kirkby, who took over as chief executive earlier this year, declared that BT has reached a strategic ‘inflection point.’ Under her leadership, BT aims to implement another £3 billion in cost reductions by 2029. This announcement coincides with a steep decline in the company’s share price, which has fallen 45% from 208p in May 2019 to just 105p this year.
New financial goals and workforce strategy
BT, having surpassed its cost-savings goals earlier than planned, has now formulated a new target of achieving £3 billion in gross annualised cost savings by 2029. This plan involves an ongoing rigorous reduction of its workforce, with the goal of decreasing its employee count from 130,000 to a range of 75,000 to 90,000 by 2030, incorporating artificial intelligence to replace roughly 10,000 jobs.
Kirkby has high hopes for the company’s latest financial strategies, projected to substantially increase short-term cash flow and could more than double its normalised free cash flow in the next five years.
“As we move into the next phase of BT Group’s transformation, we are sharpening our focus to be better for our customers and the country,” Kirkby added. “We are accelerating the modernisation of our operations and evaluating options to optimise our global business. This will create a simpler BT Group, fully focused on connecting the UK, and well positioned to generate significant growth for all our stakeholders.”
In the wake of those announcements, BT’s share price jumped 8% in early trading to just over 122p. Its new CEO also delivered good news regarding the shareholder dividend, rising by 3.9% to 8p per share.
Financial challenges and investor scepticism
Meanwhile, amidst all these strategic changes, BT must still rapidly expand its FTTP network while further cutting costs to manage its £20 million debt pile. This financial balancing act has prompted investors to place a £300m short on BT shares this week—the largest in 12 years—as the company struggles to halt a slide in its share price.
Significant investment players, including BlackRock and Canada Pension Plan Investment Board, together with hedge funds such as AKO Capital and Kintbury Capital, have taken short positions in 2.79% of BT’s shares, positioning it as the sixth most shorted stock in the FTSE 100.
Confident in her strategy, Kirkby remarked, “I always love to squeeze the shorts . . . and prove them wrong,” signalling a bold stance against sceptical investors.
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