Is BT Fit To Run The UK’s Telecoms Infrastructure?

Recently, I attended an event organised by the Energy Institute. The key-note speaker was the distinguished business leader and politician, Lord Digby Jones.

He spoke very candidly with interesting anecdotes about his life and progression into politics and public life. He also shared his blueprint for growth, introducing his latest book - Fixing Business: Making Profitable Business Work for the Good of All.

Digby Jones’ message is a simple one; we need a healthy business community and especially manufacturing and primary industries to generate wealth. Without this wealth creation, we cannot hope to afford the public services that our ageing population will increasingly come to rely upon. Simple!

However, as Lord Jones’ speech continues, he states that business is not popular with the general public and the political establishment use the worsening delivery of social benefit to whip up further anger and resentment. They see this as justification for increasing corporation tax which actually has a greater effect on smaller businesses than the larger corporations.

So Why is Business Not Popular?

The reason is that on occasion, companies act without any ethical or social consideration.  As an obvious target, in his speech, Lord Jones quite rightly identified Sir Philip Green as a good example of a business leader who lacks any moral or ethical compass.

But, there are other considerations to be made too.  Low levels of investment in the labour market across many industries, zero-hour contracts and a concentration of wealth towards the South East financial sector are other examples used to generate malcontent amongst the public.

It can also be argued that businesses do not help themselves by focusing on short-term profits and shareholder benefits. Instead, they should be eyeing the long-term game by increasing wealth for the whole of society and not just the few. Surely this would create more acceptance by the public at large and put the political establishment in its place.

‘BT to shed 4000 jobs in new overhaul’

Fast forward a week to the BT announcement that 4000 jobs would be lost worldwide over the next 2 years, half of which will go in the UK. The company has been fined heavily for breaking the law in Italy. Also, BT’s network subsidiary – Open Reach, has over-promised on its capability and been fined by the regulator, Ofcom. The Chief Executive, Gavin Patterson, has been stripped of his £4 million bonus and his second in command, Finance Chief, Tony Chanmugam has departed from BT and will also forfeit his bonus.

Mr Patterson is known as a hard-line cost cutter, so it can come as no surprise that these measures have been taken. However, from an ethical and social point of view, and following Lord Jones’ argument; cutting jobs after the senior team have been caught overstating profits in Italy, seems out of balance and speaks volumes as to why business gets such a bad name. Does this make the institutional shareholders happy?

This latest corporation axe to come down on BT’s workforce is not only incendiary from a business perspective, but also a public relations disaster. Perhaps Mr Patterson thinks that the general public won’t care and he’s probably right to a point. However, he will have hammered a nail in the coffin of his own business reputation and also done irreparable damage to an organisation which already has a terrible reputation for appalling customer service, and is losing trust with the public, fast.

Neil Wilson, Senior Market Analyst at ETX Capital said…

“It’s been a pretty torrid time for BT management and shareholders of late and there is not a lot of good news in today’s full-year earnings report.  A run of bad news means BT is still cautious and it expects little improvement to earnings and free cash in the coming year.

Removing boss Gavin Patterson’s bonus is aimed at assuaging investor anger, but shareholders won’t be that impressed. His pay is down £4m, small fry in the ocean of BT revenues.”

So here’s the question.. Is BT, who has the monopoly on the UK’s Telecoms infrastructure, still fit for purpose to take care of the majority of our telecommunications?

After all, if Patterson and his senior team are capable of sacrificing 4000 jobs for shareholder dividend, surely they’ll have no problem sacrificing their customer value in the same way?  So, if the private business sector can’t be trusted, what is the answer?

This all comes at a time when Britain’s political parties are launching their manifestos for the forthcoming General Election. Labour’s stance on business is more hard-line than usual in a climate where the general public’s trust in large organisations is at an historic low.

Jeremy Corbyn, the Labour leader, is proposing to take key industries back into public ownership in order to protect the nation's interests from unscrupulous industrial robber barons. So given Patterson’s own professional background, it would seem that he has scored a PR own goal!

Mandy Cormack, Vice President of CSR at Unilever describes the requirements of modern leadership as not much different from the philanthropic captains of industry, such as the Roundtree and Lever-Hume families. However, there is a difference now that is distinct from yesteryear. Now there is an army of bloggers and media hacks willing to cry ‘foul’ towards what they see as errant behaviour.

Maybe Mr Patterson would do well to think twice next time before he decides to take an axe to his workforce for the sake of Shareholder dividends.

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