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Analysing BT’s 13,000 job cuts and strategic overhaul

In light of BT’s recent plans to cut 13,000 jobs, Global Data telecoms expert Gary Barton breaks down the pros and cons of the provider’s big move – and what it means for rivals

 

BT announced last week it will cut 13,000 jobs and move out of its London HQ as part of a restructuring of its operation.

It also has plans to hire 6,000 new staff to “support network deployment and customer service”, as well as invest £3.7bn in its assets and infrastructure in each of the next two years.

The announcement, though radical, didn’t come as a shock to many telecoms experts as the modernisation in this industry doesn’t come without cost these days.

One commentator, Global Data principal analyst and telecoms specialist Gary Barton, broke down the competitive pros and cons of the move and highlighted how the market could and should respond.

Strengths

  • BT will invest £3.7bn in its assets and infrastructure over each of the next two years. It says it is building a single integrated all-IP fibre network across fixed, WiFi, and mobile. Openreach will also deliver fibre-to-the-premises (FTTP) to ten million premises by the mid-2020s. BT will have 95% 4G coverage across the UK by 2020, while it has secured the 5G spectrum and begun the infrastructure work to roll out next-generation connectivity.
BT, London
The BT Tower in Fitzrovia, London
  • The 6,000 hires “to support network deployment and customer service” strengthen BT’s line that its announcement is as much about adjusting to new market conditions as it is about cost-saving.

 

  • Acknowledging its weaknesses is risky, but in doing so BT has reinforced its commitment to modernisation and opens a dialogue on topics such as agile provisioning and network automation/virtualisation.

 

  • In the UK, the unification of BT Business and BT Wholesale under BT Enterprise delivers opportunities to respond to competitors such as Gamma and TalkTalk Business, which have also opted for larger scale, multi-tenanted platforms.

Weaknesses

  • BT’s rivals will seek to portray BT’s announcement, particularly the 13,000 job cuts, as negative. Removing more than 12% of its total workforce will also concern many of its customers.

 

  • The announcement that BT Global Services will focus on “digitisation” is not yet substantiated since it was first announced 12 months ago.

 

  •  BT has highlighted IoT (Internet of Things) as a potential new source of high-margin revenues, but presently has no IoT strategy. Investment in IoT network infrastructure and solutions will take both time and significant investment, whilst rivals such as Vodafone, OBS, and Telefonica have a large head start.

Recommendations for BT

  • BT should highlight that increased automation of network infrastructure reduces the need for the same staffing levels, whilst reduced costs will allow it to remain competitive on price.

 

  • BT should highlight its strong SD-WAN and NFV portfolio developed over the last 12 months. It can also point to important partnerships with companies such as Cisco. Alibaba, and Huawei. BT also works with universities such as Cambridge, institutions in China, and has recently opened a new R&D facility in Northern Ireland.
Openreach, BT
Openreach is a division of BT which maintains telephone wires, ducts, cabinets and exchanges that connect homes and businesses.
  • In the UK, BT needs to indicate how a unified BT Enterprise (bringing together BT Business and Public Sector and BT Wholesale and Ventures) will both deliver efficiencies and a more unified portfolio.

 

  • Within its UK B2B business, BT should streamline its portfolio, as well as its backed systems. For example, allowing BT’s B2B operations to use BT’s previously exclusively wholesale BroadSoft IP voice and UC platform would offer competitive advantages in the SME space.

 

  • For its Global Services (GS) division BT needs to be aware that a lack of clarity can be damaging. BT has a convincing message on cloud connectivity, UC, and virtualization of network functions, but it should beware grouping all of these capabilities under the digitalization heading without developing a clear message on how BT can help its customers.

 

  • BT should not make a clean break from the consulting side of its business as though it may not be the company’s specialty, delivering business insights through big data, and an understanding of how certain technologies apply to specific verticals, will help BT to win customers.

For BT rivals

  • BT GS’ rivals should note that circa one-third of job losses will occur outside the UK, making it harder for the company to compete globally.
  • BT’s international competitors should frame BT’s announcement as too UK-centric.
  • BT’s rivals should have a strong message on their own agility and adaptability to compete with the provider.

Customer actions

  • Existing and potential BT customers should not be panicked by this announcement. Cost-cutting is an integral part of the modern telecoms market, and BT is not the only telecoms provider to face challenges over margins and pension schemes.

 

  • BT’s UK customers should take note that most jobs losses will occur outside the UK, whilst BT/Openreach will take on 6,000 new staff in the UK focused on network delivery and customer services.

 

  • BT GS’ customers can challenge the provider on how reductions in its headcount will affect its ability to deliver and manage services outside the UK. Companies should question whether BT will maintain local points of contact, and whether it is planning any local/global partnerships to mitigate reduced staff numbers.