BT warns of more job losses as rising bills force more cost-cutting

BT has warned of more cuts after it was forced to find more than £500m in additional savings due to soaring inflation and energy bills.

The company, which reported an 18% fall in pre-tax profits from just over £1bn to £831m year-on-year in the six months to the end of September, said its energy bill will be £200m higher this year.

The telco said it has been forced to raise its cost-cutting target from £2.5bn to £3bn by the end of the 2025 financial year in response to inflation hitting a 40-year high and a sharp rise in energy costs.

“We are leaving no stone unturned to ensure that BT can be the most efficient organization it can be,” said Philip Jansen, chief executive of BT.

“Inevitably, this means that some jobs will not exist in the future, but that has been true in recent years as well. We will use natural attrition as much as we can. In these difficult conditions, we know we have to double our costs. There are no specific numbers in mind.This [cost-cutting programme] is up to the end of 2025. Everyone has to share the pain – all 100,000 people at BT – to get to that £3bn of cost savings.”

BT’s latest official job cuts plan resulted in a reduction in the workforce by 13,000 over a three-year period, in a cost-cutting strategy initiated by former chief executive Gavin Patterson in 2018.

Jansen also promised to push through anti-inflation rate hikes for his millions of customers next spring when the cost of their mid-contract bills is pushed through despite the cost of living crisis.

BT uses a mechanism to annually increase the cost of bills by the rate of inflation as measured by the Consumer Price Index (CPI) in January, plus 3.9%, meaning customers face bill increases of around 14% next year.

Companies including BT have been criticized for making billions from the price hikes and telecoms regulator Ofcom – which has said a record 8 million households have already experienced difficulties paying their bills – has told internet companies to “think hard” about continuing to make big increases.

“Household bill prices will rise by CPI plus 3.9% next year,” says Jansen. – We have been transparent about it. It’s in the contracts.”

The company said the half-year profit fall is down to a combination of higher costs across the business as well as the £15bn cost of rolling out next-generation full-fibre broadband across the UK.

BT also said around 40,000 homes missed out on having their broadband connections completed on time due to ongoing strike action.

The telco, which is dealing with rolling national strikes by tens of thousands of its nearly 60,000 frontline workers over pay and conditions, said the industrial action was affecting the rollout of broadband to new customers.

Jansen, who said the eight days of strike action had so far only caused a “relatively modest” impact on costs, criticized the Communications Workers Union (CWU) over the impact it is having on broadband customers.

“The 40,000 are disappointed customers,” Jansen said. “Hopefully they’re just late customers. They had meetings scheduled on strike days and if we can’t get to them they won’t be connected. We hope to [those lost appointments] up. The biggest impact is on our customers and that is why we want to stop it and end a dispute that is not helping anyone.”

Openreach, the BT subsidiary responsible for rolling out and maintaining much of Britain’s broadband network, said its customer base fell by 89,000 in the company’s second quarter, compared with an increase of 29,000 in the same period last year.

BT’s energy costs will rise significantly more next year as mechanisms to hedge against price increases expire.

Simon Lowth, BT’s chief financial officer, said BT’s energy costs are 75% to 80% hedged at “reasonable” prices this year – although this still represents a £200m increase. But next year energy costs will rise significantly further with BT’s energy use only 50% hedged, meaning it will have to trade at market prices for the other half of its energy use next year.

Lowth also said BT has been in talks with the government about potentially using the thousands of back-up generators it has on its exchanges across the UK, which are designed to kick in if there are blackouts, for wider use to help deal with potential nationwide rolling black outs this winter.

“We have had conversations about whether we can help the government over peak energy demand [this winter] by proactively using [our] Backup power to handle peak demand, he says. “We will do what we can to manage the overall UK energy position.”

BT operates 6,000 switches across the UK, each of which has a back-up generator in the event of a power failure.

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