Analysts outline challenges ahead for BT's new chief

Macquarie Capital believes BT’s newly announced chief executive could win over wary investors, as the bank laid out the key areas Philip Jansen will need to focus on.

The telecoms group announced on Thursday that Jansen, currently chief executive at payments processing giant Worldpay, would take over from current boss Gavin Patterson on 1 January.

BT has struggled recently, as it clashed with regulator Ofcom and warned on profits after an accounting scandal at its Italian business. Patterson was pushed aside by the board in June following the profits warning.

The blue chip's shares have lost a third of their value in the last five years, and on Thursday they were down 4% at 239.75p at 12.30pm in London.

But Macquarie analyst Guy Peddy said: “BT has committed to our thematic path for the sector [that] we have been articulating for much of the decade. BT’s scale offers a competitive advantage in the network-intensive outlook for the sector. A new chief executive has the ability to win back investor confidence.”

He conceded, however, that BT was a difficult company to manage, encompassing as it did retail, wholesale, consumer, business and enterprise-focused divisions, and “operating in a structurally challenged industry and subject to regulatory oversight and political interference”.

In a note to investors, he outlined what Jansen’s immediate agenda should be.

A priority, he argued, should be cutting the dividend, “to remove the continuous headache and debate over its sustainability”. Macquarie is targeting 10p per share for the full year 2018/19.

Other areas of focus should include pushing 5G technology, investing in IT, accelerating the move to IP, and avoiding any further separation of Openreach, BT’s infrastructure business. BT still owns Openreach but following a battle with Ofcom, it finally agreed this year to legally separate the network business in order to increase its independence.

Macquarie also stressed that Jansen should work closely with Matthew Key, the former Vodafone and O2 executive who is joining the board as non-executive director. “He understands the value of digital and brands,” argued Peddy, noting that his appointment was “perhaps even more interesting” than Jansen’s.