BT Group PLC (LON:BT.A) confirmed this morning that its chief executive Gavin Patterson is to step down later this year.
Truth be told, Patterson’s departure after almost five years at the helm doesn’t come as that much of a surprise.
READ: BT boss to step down later this year
Investors had been agitating for his removal for a while, given the share price performance over the past year or so, and some of the company’s big-name backers reportedly met with chairman Jan du Plessis this week to express their dissatisfaction.
With no successor lined up, it would seem that pressure might have twisted Patterson’s and du Plessis' arms to reach the decision they have.
Much of the discontentment stems from last January, when BT wrote down the value of its Italian subsidiary by more than £500mln after it uncovered years of “inappropriate” accounting behaviour.
READ: BT shares plunge amid Italian accounting scandal
The stock registered its biggest ever one-day fall on that day, and it hasn’t recovered since; in fact, it has only got worse. Since the scandal came to light, BT’s share price has almost halved.
Patterson’s issues arguably started long before that, though.
The 50-year-old spent billions establishing BT as a major sports broadcaster, while he also returned the company to the mobile phone market with the £12.5bn acquisition of EE in early 2016. Neither venture has been as successful as Patterson would’ve liked.
BT Sport ‘has failed’
“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,” said Markets.com analyst in a note.
“Similarly, the EE acquisition was expensive but hasn't worked out as planned. BT has become a genuine quad-play provider under Patterson, but it's come at a huge cost to the business at a time when debt has been allowed to spiral.”
Many in the market have been critical of these moves, instead suggesting that BT should have been using its resources to improve the breadth and speed of its broadband coverage.
Patterson has also had to plough billions into the group’s pension pot to try and reduce its whopping £11.3bn deficit.
Ofcom has been a thorn in the side of the former Proctor & Gamble marketing man, too. He has had regular run-ins with the regulator, mainly over its Openreach infrastructure division. In March, BT was handed a record £42mln fine for delays in installing high-speed lines.
Amid fears that BT might be forced to sell off Openreach – competitors argued Openreach unfairly favoured BT – one small victory for Patterson during his tenure was that he kept it under the BT umbrella.
Confusion ahead
To try to get the company back on an even keel, Patterson launched a restructuring plan last month, which included cutting thousands of jobs in a bid to reduce its cost base by some £1.5bn.
Negative reaction to those plans is what BT said was responsible for the decision to part ways with its chief executive.
You would assume that would mean that BT would rethink those ideas, but du Plessis said he and the executive team remain “fully supportive of the strategy recently set out by Gavin and his team”.
“What’s the point in changing the man at the top if he is merely tasked with carrying on with a flawed strategy?” asked Accendo Markets’ head of research, Mike van Dulken.
“Patterson is also potentially in place for another 6-7 months. Will he continue to lead his troops on the same bumpy trail?”
BT shares gained 1.7% to 206.4p in mid-afternoon-trading.