The mystery of BT’s boardroom bust-up

BT’s boardroom drama has quickly descended into farce.

This month the UK telecoms group has unexpectedly lost a respected chairman in Jan du Plessis, tried ineffectually to quash reports of a boardroom ultimatum from chief executive Philip Jansen and instead stoked talk that the CEO is under pressure from non-executives unhappy with his behaviour.

All this, and it’s not entirely clear what’s behind the ruckus. But it feels like a question of style more than substance.

BT’s chief is a man in a hurry, frustrated by the speed of decision-making as he tries to overhaul the group. Leave aside for a moment the fact that boards are meant to be a little frustrating — it’s part of their job. 

Coming from the buccaneering world of private equity, it can’t have come as too much of a shock that a former monopoly in a highly regulated sector was, in Jansen’s words, “bureaucratic” and “slow moving”. 

And the fact that in two years he has persuaded his board to junk its previous strategy and axe its dividend for the first time since privatisation suggests his chairman — veteran of no fewer than four blue-chip boards — hasn’t been as unyielding as all that.

So where would Jansen like to go faster? One obvious answer is in BT’s £12bn rollout of full-fibre broadband, the underpinnings of its new strategy. Except that Jansen himself has been playing the “go slow” card in negotiations with regulators, with a crucial Ofcom review expected imminently on BT’s regulation (and therefore returns) in fibre.

The reality is that BT, regulatory hand-wringing aside, is already moving at pace. Openreach added 550,000 premises to its network in the quarter to December, more than double the pace of two years earlier, according to Enders Analysis. It is closing in on 5m premises, making its target of 20m by the “mid to late-2020s” look not just within reach but faintly unambitious.

Perhaps, then, this strategic bust-up was more about his drive to “modernise” BT, which led Jansen to split the company’s technology division this year, hiring a new executive to work on digital innovations. 

The board can hardly have blocked new opportunities just yet. And in any case, Jansen’s modernisation efforts have as much to do with rationalising and updating tired, legacy systems as launching whizzy new products. It’s hard to imagine even the stuffiest chair determinedly defending a morass of incompatible technologies that make even basic tasks a trial.

All of which leaves structural change, the great hope of many a BT investor, as reason for the bout of BT melodrama. Du Plessis wouldn’t be the first BT non-executive to look at a separation of Openreach and conclude that it simply wouldn’t work. 

But a stake sale has obvious appeal to a CEO looking at a share price 40 per cent below where it was when he joined. The £20bn valuation mooted for Openreach last summer still far exceeds BT’s total market value, which at about £13.7bn is not much above what it paid for mobile provider EE in 2015.

If his chairman resisted, it hardly counts as a roadblock to Jansen’s strategic overhaul. The timing for a trade, in any case, seems odd. Any self-respecting buyer should want to see the outcome of the Ofcom review. BT has already taken the pain on its dividend, saving £2.5bn to pour into the fibre rollout. 

At this stage, better to make good on your pitch to be the saviour of British broadband than be distracted by a corporate value play.

BT’s widely panned statement on this mess claimed “no misalignment” over strategy, which strangely rings true. If it’s a case of an assertive chief executive straining at the boardroom leash, the onus is on BT to find a replacement with every ounce of the credibility and experience that du Plessis brought to the job.

Finally, BT has a strategy that makes sense, a decent relationship with its regulator and a chief executive who seems to be delivering. Forget the boardroom theatrics, Jansen should just concentrate on getting on with the job.

helen.thomas@ft.com
@helentbiz