BT hangs up on CEO Patterson

Stuart Lauchlan Profile picture for user slauchlan June 7, 2018
Gavin Patterson is finally on the way out the door at BT. Is there a chance for the provider to redeem itself?

Gavin Patterson

There are days - not that many of them, but a few - when I’m happy to be proved wrong. Just about a month ago, when looking at BT CEO Gavin Patterson’s latest recovery plan for the beleagured provider, I observed of the forthcoming 13,000 job cuts that:

To my mind, there’s one job that should be going in the latest round of cuts and that belongs to Gavin Patterson. But there’s no chance of that happening…or not just yet, at any rate.

But here we are a few weeks later and it’s been confirmed this morning that Patterson is out. Or rather, he will be very soon as he’s decided to “step down”.

Now cynics - hi! - will immediately snort at the use of “step down” after the CEO led the privatised near-monopoly network provider to its current state. But let’s stick to the party line here.

At last month’s quarterly results announcement, BT Chairman Jan du Plessis gave his backing to Patterson:

Our leadership position in the UK reflects our long and proud history in this country, although credit must also go to Gavin for important strategic initiatives like the acquisition of EE. Without it, BT today would simply not have been the same company.

Well, the last part’s certainly true.

What with accounting scandals in Italy, record fines from regulator Ofcom, a share price down 25% since the start of 2018, thousands and thousands of job losses, the closure of  BT's flagship London HQ, open defiance of the government (including threats of appealing to the European Commission to protect its self-interest), there’s a lot to take in just over the past 18 months of Patterson’s five year tenure at the helm.

Today, du Plessis takes a slightly different tack, thanking Patterson for his contribution, but saying that:

The broader reaction to our recent results announcement has, though, demonstrated to Gavin and me that there is a need for a change of leadership to deliver [the recovery] strategy.

For his part, Patterson seems pleased with his performance and his legacy:

It’s been an honour to lead BT since 2013 and serve as a member of the board for the last 10 years. Throughout that time I’ve been immensely proud of what we’ve achieved; in particular the transformation of the business in recent years, with the launch of BT Sport, the purchase and integration of EE and the agreement to create greater independence for Openreach. BT is a great business and with the new management team I’ve recently put in place, is, I believe, very well-positioned to thrive in the future.

Jolly good. Others may view things differently - shareholders, employees facing unemployment, customers who can't get anything approaching decent broadband speeds etc - but jolly good.

Patterson will remain CEO until a successor is found, which looks to be in the second half of the year. Until then, he’ll pick up his usual salary, after which he’ll be entitled to the equivalent of a year’s salary, benefits and bonus.

Last year, he took home £2.3 million, which included his basic salary of £997,00 and a bonus of £1.3 million. (That was announced by BT the day after Patterson announced that 13,000 of his colleagues would be axed.) He’s likely to walk away with the same sort of sum when he departs later this year.

Where next?

What’s likely to change under a new CEO? That remains to be seen, but as of this morning du Plessis isn’t flagging up any radical change of direction:

The board is fully supportive of the strategy recently set out by Gavin and his team.

So why lose Patterson then? It seems clear that du Plessis misread the investor mood - he’s only been in situ himself for a few months - but the volte face is unlikely to convince market watchers that the ship is on a steady course.

The investor backlash may have been the driver for the decision to seek a new CEO, but there are those who question the timing of the announcement. Dhananjay Mirchandani, an analyst with Bernstein, argues:

The fact that Gavin Patterson was under immense pressure from shareholders is no secret. The timing of this announcement, however, is highly puzzling and worrying. While the markets are likely to receive the news positively — it seems obvious that Mr Patterson and the BT board have acknowledged shareholder disquiet — it does beg the question as to why the transition was announced after the company launched a fundamental transformation programme flanked by a reorganisation of the management structure with new appointees.

Whoever takes over - and both internal and external candidates are being interviewed - he or she will have a massive job to do. Apart from steadying the ship, there are ongoing decisions to be made about the full fibre push, the ongoing battles with Ofcom and the government over minimum broadband speeds etc.

One question that should be easier to answer is whether to continue pouring millions of pounds into football screening rights. Neil Wilson, chief market analyst for, observes:

The expensive move into football rights was a mistake and evidence that management lacked focus under Patterson. The recent bagging of more games was even more expensive than previous deals. Fundamentally the TV foray seems to have failed as the number of new subscribers each quarter has collapsed and, critically for the strategy, it's not produced the broadband customers that it was supposed to.

Martin Courtney at analyst firm TechMarketView suggests that an enterprise re-focusing should be top of the to-do list:

The first priority for whoever takes the hot seat is to arrest the decline of BT’s enterprise divisions, particularly BT Global Services, which many feel have been neglected as BT poured resources into expanding its consumer broadband, mobile and media businesses.

My take

When asked about Joan Crawford’s death, Bette Davis infamously replied that her mother had told her only to speak good of the dead:

Joan Crawford is dead. Good.

Gavin Patterson is out. Good.

The problems that BT has and the problems that it inflicts on others, not least the growth of the UK digital economy, are not going to be solved overnight.

But there’s more chance of change under a new face - and that face is surely going to have to come from outside BT to bring the necessary clear perspective and willingness to change. Patterson had been with BT for 9 years before taking the top seat for the past five. He was institutionalised before he began.

But he’s going - and that’s a start at the very least. As's Wilson notes:

There's been more wrong than right for BT since he took over five years ago.

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