According to the company, it reported an 18% decline in pretax profits, from just above £1bn to £831m, year-on-year, in the six months to September. It also stated that its energy bill would be £200m more this year.
According to the telecom company, it was forced to increase its cost-savings target by £2.5bn to £3bn by 2025 due to inflation reaching a 40-year high as well as an increase in energy prices.
Philip Jansen (BT’s chief executive officer) stated that he is doing everything possible to ensure that BT is the most efficient organisation possible.
It is inevitable that some jobs won’t exist in the future, but this has been the case for the past few years. Natural attrition will be used as much as possible. We must double our expenses in these tough circumstances. We don’t have any numbers in mind. The cost-cutting program will continue until 2025.
To reach these £ 3 bn cost savings, everyone has to feel the pain – all 100,000 BT employees.
The last official job reduction plan for BT resulted in a 13,000 decrease in the workforce over a period of three years. This was part of a cost-cutting strategy that Gavin Patterson, the former chief executive, initiated in 2018.
Jansen also promised to implement inflation-busting price increases for its millions of customers next spring, when mid-contract increases are made in their bills despite the current cost of living crisis.
BT uses a mechanism that increases the cost of bills each year by the rate at which inflation is measured in January by the consumer prices index, plus 3.9%. This means customers will see bill increases of approximately 14% next fiscal year.
Companies like BT have been criticized for making billions off the price rises. The telecoms regulator Ofcom – who has stated that a record 8,000,000 households have had difficulty paying bills – has asked internet companies to “think carefully” about continuing to increase their prices.
Jansen stated that the prices of household bills will rise by CPI plus 3.9% in the next year. “We were transparent about it. It’s in the contracts.”
According to the company, the profit slump in half-year was due to higher costs in its business and the PS15bn cost to roll out next-generation full-fibre broadband throughout the UK.
BT also stated that around 40,000 homes were not able to have their broadband connections completed in time because of ongoing strike action.
The telecoms company is currently dealing with rolling nationwide strikes by tens of thousands of its nearly 60,000 frontline workers over pay, conditions and wages.
Jansen claimed that the eight days of strike action had only had a “relatively small” effect on costs. He also criticised Communications Workers Union (CWU), for the negative impact it has on broadband customers.
Jansen stated, “Those 40,000 customers are disappointed.” Jansen said, “Hopefully they’re just delayed customers. They had scheduled appointments on days of strike, and if they can’t reach them, they don’t get connected. We want to replace those lost appointments. We believe that the biggest impact on our customers is what we do.
Openreach, a BT subsidiary responsible for expanding and maintaining large parts of the UK’s broadband network said that its customer base declined by 89,000 in its second quarter. This compares with a 29,000 increase in the same period last.
BT’s energy prices are expected to rise significantly next year, as the mechanisms that protect against price increases run their course.
Simon Lowth, BT’s chief financial officer, stated that BT’s energy costs were 75% to 80% hedging at “reasonable” prices in this year – but this still equates to a £200m rise. Next year, however, energy costs will rise significantly as BT’s energy consumption is only 50% hedged. This means that it will need to trade at market price for the remaining half of its energy consumption.
Lowth stated that BT had held discussions with the government about potentially using the hundreds if not all of its backup generators at its exchanges in the UK. These generators are intended to kick in if power is lost and can be used to assist with rolling blackouts nationwide.
He said that he had spoken to the government about how he could help them over peak energy demand this winter by using our backup power to assist with peak demand. “We will do everything we can to manage the UK’s overall energy situation.”
