BT CEO eyes deeper job cuts as AI becomes more powerful, FT reports

BT Group CEO Allison Kirkby indicated that advancements in AI could lead to deeper job cuts than the 40,000 already planned as part of a 3 billion pound cost-saving initiative by the end of the decade. Kirkby also suggested a potential spin-off of Openreach if its value is not reflected in BT's share price, despite Openreach's resilience offsetting declines in other units and contributing to strong full-year earnings.

Analysis

BT Group (BT.L) CEO Allison Kirkby has signaled that the integration of artificial intelligence could lead to more extensive job reductions than the 40,000 initially planned, aiming to achieve 3 billion pounds in cost savings by the decade's end. This revises the 2023 target of up to 55,000 job cuts (including contractors) as BT seeks a smaller workforce and a significantly reduced cost base. Kirkby also alluded to a potential spin-off of Openreach, the company's network infrastructure division, if its intrinsic value is not adequately recognized in BT's current share price. This strategic consideration arises even as Openreach's strong performance, coupled with over 900 million pounds in realized cost savings, has been pivotal in supporting BT's full-year earnings and cash flow. The resilience in Openreach has helped mitigate declining revenues and profits within BT's business and consumer segments, which are experiencing challenges from dwindling legacy voice services and reduced handset sales. The market's mildly positive sentiment and defensive tone suggest these aggressive restructuring measures are viewed as potentially value-enhancing in the long term.

Key Decisions for Investors

• Investors should closely monitor BT's execution of its AI-driven cost-cutting initiatives, as their success beyond the stated 3 billion pounds could materially enhance future margins and shareholder returns.
• The potential spin-off of Openreach represents a significant catalyst; developments on this front warrant careful attention as it could unlock value currently not reflected in BT's consolidated share price.
• Consider the contrasting performance between the resilient Openreach unit and the declining business/consumer segments, weighing the impact of ongoing cost savings against these headwinds when assessing BT's overall investment profile.