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BT: Self-inflicted wounds

Robert Peston | 10:11 UK time, Thursday, 14 May 2009

Here's an odd thing about BT.

It was privatised 25 years ago. But whenever BT gets its tail up and tries to go global - whenever it leaves these shores in a multinational kind of way - something seems to go horribly wrong.

BT phonebox

Bad stuff happened at the turn of the millennium during the height of new tech and dotcom mania, when BT borrowed far too much on a takeover spree that was supposed to transform it into a worldwide colossus.

The hubristic reward in 2001 was eye-watering losses that took BT to the very brink of collapse.

Which is why, for me, BT's woes of the past few months feel familiar.

Although this time, thank goodness, BT's self-inflicted wounds aren't life threatening.

The charge it's taking of almost £1.6bn to sort out its global services division tips the whole company into loss - of £134m before tax in the year to 31 March.

But the company in the round generates buckets of cash, even when the economy is ailing.

Also, in this first ever recession of the broadband era, it's striking that BT is still signing up new broadband customers.

In other words, the parts of BT familiar to millions of British people - supplying telephony and broadband services to individuals, smaller companies and re-sellers of various sorts - are proving resilient.

What's gone wrong at Global Services - which manages IT and communications for giant organisations like Reuters, the NHS and Microsoft - is that costs have spiralled out of control.

One NHS contract has been particularly horrid - and is responsible for a huge chunk of a £1.3bn one-off debit for sorting out loss-making contracts.

This mess was not how it was supposed to be for Ian Livingston, just a year into his tenure as chief executive.

However when I interviewed him this morning, he resisted the temptation to dump on his predecessor, Ben Verwaayen.

That said, Vervaayen hasn't bequeathed him the easiest of legacies.

There's a massive hole in a £33bn pension fund - though we don't yet know the precise size of the deficit, because the Pension Regulator hasn't given its imprimatur to the official actuarial measure of the gap between liabilities and assets.

Even so, BT has received official sanction from the Regulator for the first phase of its pension-fund remedy: annual payments into the fund for three years of £525m.

These hefty cash costs are in part responsible for the mullering of the dividend payment - slashed by 59% (which of course has the paradoxical effect of inflicting pain on pension funds, like BT's own, which own BT shares).

For all the "challenges" he's inherited, Livingston has no intention of backing away from a plan to reinforce BT's position as the pre-eminent British broadband business.

He's accelerating plans to lay superfast fibre cables - which will provide uber broadband to 40% of the population (the other 60% can't be connected without help from the government and regulator, Livingston says).

So Livingston is not all about cost control and cuts.

That said, he is a grim-ish reaper. Some 15,000 BT jobs have gone in the past year and a similar number will be cut this year.

Livingston told me his ambition is to protect the jobs of permanent BT staff as much as he can, so contract workers and agency workers will be shed by preference, where possible.

Which may be the fair approach for this very British business to take. But it's no comfort to thousand of contract and agency workers facing the imminent hardship of unemployment.


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  • Comment number 1.

    Highly leveraged companies and those with major Overseas exposure, without years of experience abroad are now hurting and will have to retrench to survive.

    Globalization as an attractive business model seems finished, what comes next, I wonder? It is clear that our National average take home pay against what we can buy for such income will fall over coming years leading to a great deal of strife and denial by many.

  • Comment number 2.

    That made my head hurt going from imprimatur to mullering.
    Why is it these companies who have a monopoly, generate huge amounts of cash, still end up in debt ? Why do they get involved in things they dont know ?
    Did the old chairman get a pay off and a pension ? It seems to me he resided over a huge failure.

    I dont blame the people on the ground, the bt engineers numbers have fallen a lot, they dont get paid huge sums, all to generate money for shareholders ?
    I think it would be more prudent for BT to buy most of its shares back, it generates cash why does it need more ?

    You state it will need help to put fibre to the home for 60% of the country, this will be the bits it cant literally throw the cable into the ground and there are thousands of homes around it.

    Scotland only got broadband in most of its exchanges (read outside of Glasgow and Edinburgh) (Aberdeen has cable in some areas) because the Scottish executive stepped in and paid them to upgrade the exchanges with the equipment needed. The equipment at the time coast roughly 20k per exchange, and then they got a flood of customers once that was done. So if they are looking for more money I would argue the case why in this instance, besides the Scottish Budget has taken a haircut despite what the Looney Labour lot say.

  • Comment number 3.

    Robert, any telecom company that runs a national network and charges substantially more for many of its services than its competitors is bound to struggle.

  • Comment number 4.

    Nice to see a "mullering" again - it's been a while.

    Are the days gone when the technology sector was so ill-understood by customers that they would want BT to just "handle everything" for them?

    The following article asks: is it time for Global Services to be sold - or closed?

  • Comment number 5.

    Livingston should have a chat with his HR department before he determines that he's going to lay-off only agency workers...they have significant employment rights if determined as employees in all but name (as many probably are). What happened to the 'natural wastage' line?!

    Is the pain from global services management based or economy based? The strength in other departments seems to suggest the former.

    and yet another pension timebomb...would a Royal Mail bailout set a precedent?

  • Comment number 6.

    Govt hasn't helped by insisting on opening up the market to competition. The farce over last mile issues was all the fault of those Govt lackies at Ofcom...

    It's about time Govt understood that having a monopoly on telecoms but with better regulation would be to our advantage. It's also time Govt looked at where BT is spending it's money... Remember the story of Patricia Hewitt approving BT's decision to buy Chinese made hardware because it was cheaper but then completely wrecking Marconi in the process. Strangely - Ms Hewitt is now a BT Non Exec Director.

  • Comment number 7.

    I agree that the denuement of BT's problems came in 2001, but the seeds were sown several years earlier, starting with the eye-wateringly generous severance packages given to encourage employees to leave as part of the huge redundancy programme which, incidentally, saw the cream of the workforce joining competitors or being re-employed as contrators at a much higher cost.
    This suicidal programme was followed by the equally catastrophic payment of £4BILLION PLUS for 3G licences, which of course went with the demerger of the mobile business without producing any return.
    The demerger of what became O2 was in itself a disaster, not only because strategically it left BT without any mobile capability and the profits and cash which were generated by O2, but also because huge debts were retained by BT which should have been put into O2.
    This demerger therefore hammered the company on all fronts and it also hammered shareholders despite the money they might have made when O2 was subsequently bought by Telefonica.
    On top of these self-inflicted wounds, the regulatory regime has succeded in virtually guaranteeing that a great British company is brought low for minimal benefit to the consumer and to great advantage of its foreign peers.
    Finally, the appointment of a series of mediocre people to very senior positions has resulted in the problems we see today with Global Services and the business in general.
    It's going to take more than a few accounting clearing the deck exercises to turn BT around.

  • Comment number 8.

    I'm not sure how much was borrowed before the dotcom bubble burst but when I worked at Newgate Street in that period all the City kept saying was that BT was far too cash and asset rich and needed to expand. Had it ignored those calls, or to be fair, chosen better investments the company would have thrived. At least the current crisis has its roots in spending at home on a system which (eventually) should improve health services.

  • Comment number 9.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 10.

    As with a previous poster's comments, we also find that BT offers a second-rate or 'below par' Broadband service but expects to get more than almost everyone else in charges.
    We came out of contract earlier this year, since when we have had three calls from BT asking us to renew with a 'special price' offer, but that offer is still more money than deals from other providers.
    If they supplied an 8mb service as advertised, and not the occasional 3.5mb that we get, we would be happy and renew, but until then we are looking elsewhere.
    They really do act and perform like the old Post Office Telephones from whence they came.

  • Comment number 11.

    I worked as a project manager for BTGS for a number of years. The layers of non productive management beggars belief as does the inefficient processes which slow projects to a snails pace.
    Sadly the managers are mostly old BT, the second or third thing they will tell you when meeting for the first time is how many years service they have - badge of honour!
    They are not capable of constructive change, the rules are there in stone - heresy to suggest alternatives.

  • Comment number 12.

    Will Brown and Mandy nationalise BT to get its hands on the pension pot to pay down national debt?

  • Comment number 13.

    Rule one: Do not outsource your backbone. That is exactly what BT has done.

    For example consider changing the name of an account holder after a death -

    case 1 electricity supplier all done online by the consumer.

    case 2 BT can't be done online. Phone call to BT call centre in Bangalore. 'It can't be done like that sir/madam' (PS it is 34 degrees and five and half hours ahed of the UK in Bangalore today!) 'we have to close the account and open-up a new one in the new name'. OK, but the tariff that was in the name of the deceased is no longer available to 'new' customers - they don't actually tell you this!. So they do it without explaining the implications. A closing credit arrives. and later a closing credit payment from BT arrives. Next, later, a bill arrives that is astonomic. Phone up again (this time handled in the UK) explain the problem. BT agreess it mis-sold the service and will take the line back and cancel the bill. Next a credit note arrives for only part of the cancelled bill. Phone up again. They say they will send the remainder of the credit. 2 copies of the same credit note arrive by the same post in seperate envelopes and a letter too in another envelope.

    It does not take a mathmatical genius to understand that the BT way of doing things costs many many many times that of the electricity supplier.

    BT have outsourced their administartive system to such an extent that they have lost sight of the objective of efficiently supplying a service to customers at a huge cost to BT. Is it any wonder that this fat, flabby and poorly managed organisation is yet again in trouble! It is not the outsourcing centre's fault it is BT's management - they have lost sight of the ball, who ever is responsible for organising its administrative systems needs reprimanding and retraining.

    This story should horrify BTs shareholders! If BT can't do the simple things simply, heaven knows how they manage complex things!

  • Comment number 14.

    i only have two comments about BT
    1. BT levies a charge for some customers who chose to pay bills in a way they dont "aprove". Add this to their exhorbitant charges and the lowly worthless home owner will probably find it easier and less expensive to change to a rival comms provider.
    2. I've tried calling BT on many occasions usually to reduce my commitment to this once British Institution only to find i have to speak to someone at an Indian call-centre whom i find difficult to understand.

    It would appear that BT is not interested in providing a reliable and reasonably priced service to the British public, the general targets being multinational corporate bodies.

    When my "contract" with BT expires i will certainly be looking for an honourable provider as , i suspect, will many others.

  • Comment number 15.

    Pity it isnt the call centre in Asia they are closing! When I had a problem recently 20 calls over 18 months to asia couldnt solve it so I resorted to non payment. Eventually got to speak to someone in UK and problem instantly solved.

  • Comment number 16.

    Quoting from Mr Peston's blog:

    "Although this time, thank goodness, BT's self-inflicted wounds aren't life threatening.

    The charge it's taking of almost £1.6bn to sort out its global services division tips the whole company into loss - of £134m before tax in the year to 31 March.

    But the company in the round generates buckets of cash, even when the economy is ailing."

    This neatly encapsulates the type of delusional thinking that has got us into this recession. Okay so three out of four divisions have done well but one has done very badly - the net result for the company is a loss. For Mr Peston to state that "the company in the round generates buckets of cash ..." is thus self-evidently false, it is clear that the company in the round has generated a loss.

    Although I'm no economist and have no understanding of finance, it appears to me that this type of wilful self-deceit is so entrenched in the modern business psyche that it has almost ceased to feel like self-deceit. Is this what the French and the Germans regard as the "Anglo-American business model"? - if so their scepticism is entirely justified, in my opinion.

    The net loss generated by BT is no different from say, a football club losing a match because their defence was sloppy and conceded four goals even though their attacking play was good and produced three goals - what's the result of the game? ... yes, you lose, and you get no points in the league.

    If Man Utd lost a game and Sir Alex came out afterwards and said - "I'm not bothered that we got no points from that game, we scored three goals you know - just a shame we let four in really but it's a funny old game isn't it" - people would think he had lost his marbles.

    That's exactly what Mr Peston is saying about BT.

  • Comment number 17.

    Part of the problem BT suffers from and also Royal Mail is their compulsory provision of "service" to loss making or non-profitable (ie. remote) areas of the country. Their competitors have no such commitments. They can simply undercut in the prime areas due to less overhead. This makes a "service" vulnerable to privatisation of its profitable arms and a hollow loss making shell of the rest. A kind of slow motion asset strip. BT was offering to install a fibre in every home (for free) as early as the beginning of the '90s but the government wouldn't grant them licence to carry broadcast, preferring, instead, to give those rights to (foreign owned)cable & satellite companies. Former nationalised 'companies' have to compete with private companies with one hand tied behind their back. No one would really notice the demise of individual courier companies but the loss of a Post Office affects everyone local. The customer is not king at a rural level.

  • Comment number 18.

    The fortunate thing about mobile techonolgy and competing means of communication mean that they will not be able to "muller" their customers. Soon they will have to reduce their astronomical fees for broadband as well. Perhaps they should ask Intel how to run a trip to a brewery.

    Robert I would like your take on the world of farming which appears to be bucking the credit crunch.

  • Comment number 19.

    Interested to hear that BT plan to use 'natural wastage'. A personal friend who works for BT has informed me that they are effectively manging people out of the company by downgrading annual appraisal scores and emplying a '3 strikes and out' approach, thereby avoiding redundancy payments. He was told that any constructive dismissal cases that are brought and won by employees would cost less than Voluntary redundancy packages, meaning this is the cheaper option. Nice to see BT living up to their 'Investors in People' status. Not...

  • Comment number 20.

    Hope its the high earners that get the chop! without any fancy golden handshake. I know wishful thinking on my part. Someone commented on BT getting assistance from the Scottish Parliament to beef up exchanges to provide broadband........well most certainly did not cover me, lucky to get a speed of 400-500k...............on a good day!

  • Comment number 21.

    I am rather tired of "eye watering" experiences perhaps you will consider rotating with:- nipple piercing, testicle clenching, gut renching, buttock skidding, breast scratching, finger crunching etc.

    Seriously will BT be pulling out of the NHS IT contracts like other players or exploit its near monopoly position!

  • Comment number 22.

    13 and 14, I totally agree.

    As someone charged an exorbitant fee when I moved house to "connect" a line that was already working, I am well experienced at being fobbed off by someone in an Indian call centre who I cannot understand. The Ombudsman was not interested, being unaware that unjustified connection charges were "still" an issue.

    Sadly BT would rather rip a customer of 14 years off for a one off fee than continue to do boring old long term profitable business. I for one will never go back to BT.

  • Comment number 23.

    Of very small comfort to the rising numbers of unemployed is that an economic depression/recession within a 'democracy' does promote the opening of cans of worms. Even within the elected guardians of democracy, who did after all deliver what is turning out to be in part, the self cleansing 'Freedom of Information Act'.
    Its not all bad as long as we retain a sufficient free and independent judiciary and press (not forgetting that Il Duce started out as a journalist) who keep the Mugabe types well at bay.

  • Comment number 24.

    I appreciate the frustration of John_from_Hendon. Even as an employee with an understanding of how the administrative functions worked internally it was impossible as a customer to get decent customer service. I suffered a similar afate and spent many hours and many phone calls trying to get Broadband installed. Sure enough as an ex employee without employee discount.I am no longer a customer of BT!

    I also thoroughly agree with edwardtrunk. For those who have worked in BTGS it is very clear why this organisation is failing so spectacularly. The inefficiencies of the process and the technology used are absolutely astonishing added to which layers and layers of management appear to add no real value to the customers. The icing on the cake here though is the sale of solutions for a price that the business quite simply can not deliver against. Doesnt take a genius to work out that this will fail.

    BT should rethink their redundancy policy and consider assessing the value of individuals to the customer therefore considering keeping contract and agency workers and consider ridding themselves of the old BT managers who are simply waiting for their final salary pensions in 10 years time who will add no real value to the business throughout this period!

  • Comment number 25.

    I thought BT was long ago acquired by a german telecoms company. This may explain why it is cutting so many jobs in the UK (rather than in their own country) as foreign-owned multinationals like to in times of recession.

    As for the £33bn hole in the pension fund, I'm not sure that annual payments into the fund for three years of £525m will quite fill that gap. Whilst the sums may be simplistic, this does rather smack of an organisation who is putting off that problem for another day (and another chairman with their neck on the block).

    Not that I want to sympathise with BT. I've been amazed at the contempt with which they treat their customers (if you don't know what I mean, check your next BT home phone bill and look for any spurious "one off" charges they might have dreamed up). Just like any privatised utility with a relative monopoly, they won't improve until they are really threatened by serious competition.

  • Comment number 26.

    very British business

    Which Part? Its all been outsourced to India
    What about the bit "Getting rid of contractor and agency staff" No mention of the 60k Indian work force which BT employs ONSHORE through companies like Infosys Accenture TECHM ect. Yep BT can keep employing non eu Onshore and offstaff but Projects are going way over budget due to quailty of the Development and testing. Lets face it if outsourcing is the right way to go why is BT in so much trouble and why are other companies moving away from outsourcing.

  • Comment number 27.

    @ redrobb for those at the end of the line ie more than 6 miles or so you wont get BB, but there was a scheme for people to register and interest , those that registered got a subsidised satellite service, not ideal but its better than nowt.
    The sooner the fibre cable is routed to the house the better

  • Comment number 28.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 29.

    I have worked for BT for a number of years and they are making me redundant in the next week, I am not leaving the company because I'm bad at my job in fact I have awards from the heads of the company I am being made to leave because I am classed as agency. There are people I still work with who have worked here for nearly ten years who are also agency, BT will only take you on to the company if you can work very late in the evening or very early in the morning something you can't do if you live out of the area and rely on public transport or are a parent. Nor will they take you on if your sick more then twice a year even if you have a disability and this is the reason behind your absence. They do not reward the peple who are good at thier job only those who can get rid of customers the fastest and put so much pressure on us that I have had colleges in tears around me on a day to day basis. Now their getting rid of some of us and are planning to get rid of more, saying they will save the 'permanent staff' the customer service will get even worse and the pressure will mount further I don't envy people who will be left and I dont know if the company can survive much more when they think so little of their staff and customers.

  • Comment number 30.

    "Livingston told me his ambition is to protect the jobs of permanent BT staff as much as he can, so contract workers and agency workers will be shed by preference, where possible." A friend of mine used to do a bit of contract work at BT. Every month a round of e-mails would go out to permanent BT staff offering voluntary redundancies. The good permanent staff, who could walk into another job, frequently took the redundancy. This caused a lowering of the average ability of the permanent staff remaining, while this was made up for by contract and agency workers this was not a problem but if BT now get rid of these C&As they will be left with a talent gap.

  • Comment number 31.

    These 'newly discovered' holes in pension funds? Are they just the result of a significant decrease in the actuarial valuation based on the current market? Are these valuations being overly pessimistic? The Royal Mail's pension deficit has doubled in the last year? Surely the basis of the valuations has to be questioned (either now or in the past) - I know for the last 8 years there has been issues on pension fund defecits (hence the opposition to an accounting standard which would have made companies account for them through their P&L) - I'm a little concerned that the underfunding of them may be a little exaggerated (although still a worry)

  • Comment number 32.

    I dont want to seem keen to jump on the bashing BT bandwagon but unfortunately the incident I am going to share with you is true and did happen to me personally last month.

    I was moving house in April this year and as I was within contract with BT I called them to shift my phone. Their call center told me that my new house does not have the line connected (there is a physical BT line though) and that I will have to pay £124 to get the line connected before I can get my services. When I said I do not want to fork out an additional £124 I was told that in this case I would be breaching my contract and would be hit by all the relevant penalties! I was not sure if my service provide could ask for an installation charge 4 months into my contract!

    Nonetheless I took the argument to a very senior person in BT (after hunting online forums for hours!) by writing him a polite email. His office soon got involved and I was told that they are investigating this problem. When they came back to me eventually I was told

    1. There is a physical line at the new property.
    2. The line IS connected but for some reason their records show it as disconnected.
    3. Since line is already connected I will not have to pay £124 but since they have their records wrong, I will have to accept a charge of £124 on my moving statement which will be returned to me as a credit later on.

    Had I not invested my time and effort in trying to contact someone high up in BT, I would have been forced to pay £ 124 for THEIR ILL MAINTAINED RECORDS! I wonder how many other gullible customers have had to part with their hard earned cash when they shouldn't have had to.

    The whole thing beggars beleif but I still have all those written emails to prove that this did happen to me!

  • Comment number 33.

    Robert, here is a typical case which will tell you why BT are in the mess they are in;

    Pal of mine is retiring from BT at age 60.

    He is earning 35,000 per annum and his index linked pension will be 17500 per annum.

    Now, How much do you think it would cost you or me to get a pension of that level............................................................

    (annuity rate of 4.48 is the best buy today)

    470,000 That is four hundred and seventy thousand pounds.

    Now of course the BT pension does not have to pay that out on day one. But that is the comparative figure to establish liability.

    I hope that this mathematical principle gives readers some idea of the REAL issue.Magnify that for the civil service, public sector workers, MPs and the Royal Mail and the nightmare of pensions come to light.

  • Comment number 34.

    Comment #6 "It's about time Govt understood that having a monopoly on telecoms but with better regulation would be to our advantage."


    I have an orange mobile because its the best value for me. As soon as my AOL broadband contract expires I'll switch to a combined phone/digital TV/internet package from one of the cable companies because it will save me over £100 a year compared to my current situation.

    WHY ON EARTH would I benefit from being forced to use BT? It removes the only power I have over my service providers- the threat of moving my business elsewhere if elsewhere are cheaper or have better services. I don't see why when working for a private company that offers no pension I should be forced to bail out the pension funds of BT, Royal mail or anyone else for that matter. Being forced to use a monopoly by the state ensures that thats exactly what I'd be doing.

  • Comment number 35.

    BT in so much trouble as is the case with many knowledge based industries

    The UK Commission for Employment and Skills has found that despite the huge sums of public money being spent and the political noise being made about apprentices and workplace training, Britain has actually slipped further behind its international competitors and, on current trends, will miss most of Leitch's targets.

  • Comment number 36.

    Bless them - A big part of BT's DNA is still hanging on to the Public Sector culture. They have tried hard to change it but there is still a big tail end that won't move on. No wonder it does not do well overseas - they probably still believe we have an empire. Trouble is, let the contract workers go and keep the old faithfuls and you will put the culture change clock back a generation. - Now did you really want to do that?

  • Comment number 37.

    The UK Commission for Employment and Skills has found that despite the huge sums of public money being spent and the political noise being made about apprentices and workplace training, Britain has actually slipped further behind its international competitors and, on current trends, will miss most of Leitch's targets.

    No wonder BT is going for others.....

  • Comment number 38.

    I left BT 3 years ago and went to Talktalk. BTs billing arrangements seemed deliberately confusing and cost me about GBP 100 a quarter without broadband. I am now paying less than GBP 20 per month and this includes 7.2 mbs broadband and 24 hr free landline telephone calls to UK, europe, USA, Aus & NZ. It is about time BT started to compete!

  • Comment number 39.

    One of the biggest problems with companies ''going global'' is that they use the same business model from where they have sprung.
    Thus major cultural,historical and social difficulties e.t.c. can impair and hamper the companies development.
    Poor management, lacking proper insight into the ''local/national/continental'' ways, try and impose unfamiliar methods and practices, often without adequate training.
    The same applies for different companies in like cultures, BT simply fails to deliver what the various companies are looking for and a multitude of problems and complaints occurr.
    This has been the climatical situation at BT for many years. Hence the share is a dog.

  • Comment number 40.

    I wrote to Verhaayen and the BT board some years ago to complain about BT's service,but more importantly to complain about his huge remuneration which I think was about £3m that year, asking him and the rest of the board (including such labour noteworthies as Baroness Jay)how he could possibly be worth that much money, particularly given BT's revenues are largely captive (line rentals etc).

    I did not get a response from any board member.

    Yet another example of directors reducing the value of our pensions by taking such a large part of a company's worth for themselves whilst performing poorly, and being mainly interested in feathering their own nests, aided and abetted by fund managers who stand idly by, raking in their own huge remuneration, which of course we pay for too.

  • Comment number 41.

    No wonder BT are in such a mess. The packages they offer are reasonably priced and clearly set out on their web page. I signed up for one last week and that is where the nightmares started. It has been a horrific week of unending basic errors (even got my address wrong and I have been a customer for 15 years). How they could make such a mess of a simple order for someone who is already a customer I do not know. I am hoping to get their Broadband tomorrow but going by their service in the last week I am not holding my breathe and am already regretting changing to them before it has even happened. (I have to say that they have a very good online service called "Live Chat" but you can't use this service after you have signed up with them.) Also - if you have the luck to press the right buttons on your phone you might get an efficient Scottish lady to save your sanity. It is by far the worst customer service I have come across in a long time and I find it hard to believe that BT could get so much wrong in such a short a time. It is all very depressing.

  • Comment number 42.

    Poweromics* and out of date management practices are systematically destroying BT ... I know because I used to work there ... and many friends/colleagues say it's got much worse since ...

    Few companies increase their market value by simply cutting costs (e.g. as the first chapter of my book pointed out) ...

    and all the ex finance directors now running BT are out of date in the type of practices they need to use - it's not about cost accounting or simple head-count reduction ... its about innovation and continuous improvement, as well as applying 'lean accounting', 'value management' and 21st Century management practices.

    Are they applying these - unfortunately not - and until they do self-inflicted wounds will only continue...

    David Clift, a Future 500 Leader

    * Poweromics = People use position and power for their own personal gain, based on poor moral values, self interest and greed.

  • Comment number 43.

    Having used BT in the past the thing which made us switch to cable was the line rental charge, as we only wanted a broadband connection and no land line we all use mobile phones and cable only charges for the broadband connection they do not force the customer into taking a land line/phone service they do not want, I had a long conversation with their customer service department but encountered a take it or leave it attitude, that attitude might be ok here in the UK, but I am not surprised they have not been successful in the USA and other parts of the world.

    will not be coming back

  • Comment number 44.

    Horned-Devil 31

    Thanks for your well thought through comment.

    It would be helpful if the Peston blog put a bit more flesh on the bones,instead of relying on alliteration and soundbites.

    You ask Is the problem with pensions being overstated.

    Well, sadly not.

    The actuarial assumptions being used are actually optimistic and assume some 3.54% annual growth on the fund and mortality rates based on the last 20 years figures.

    I gave some figs earlier to demonstrate the real costs of pensions.But to illustrate further, when Speaker Martin retires, the cost of giving him an index linked pension of 50k per annum at age 63 will be in the region of 1.7 million pounds.

    The vast majority of people retiring at BT have got a 50% pension owing to them, and this expectation is absolutely reasonable. However the bulk of private companies closed their final salary pensions down years ago,and unless you have been putting aside thirty odd per cent of your income each year you have no chance whatsoever of matching a public sector equivalent.

    I'm sorry to be so negative about this but it seems that the financial journo's are just not revealing this horror in the cellar.

  • Comment number 45.

    #33. anewworld wrote:

    "Pal of mine is retiring from BT at age 60.

    He is earning 35,000 per annum and his index linked pension will be 17500 per annum.

    Now, How much do you think it would cost you or me to get a pension of that level..."

    I don't know.

    But you haven't told us how long your "pal" has worked for BT for (I'd guess 30 years, if he's getting half his final salary), or whether he's contributed to it, or made additional contributions. And you haven't considered how much his salary might have been if his employer had not contributed to his pension.

    In any case, BT is a private company, so why does it matter?

  • Comment number 46.


    not to worry, those private sector / tax paying suckers will cough up. All together now, bend over and take a deep breath!

  • Comment number 47.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 48.

    The 3G auction heists around Europe marked a real change. The purchasing of mobile assets in Ireland was at £1bn+ over the odds.

    The subsequent sale of the Mobile division for £5bn while holding the debt really hurt.

    In the 1990's the job was to grow revenues faster than we lost to Ofcoms favoutire competitor Mercury - whom were useless and we squeezed to death. It was fun. Cable were also pretty poor and were kind enough to take lots poor paying customers in Council estates - they had build targets.

    We were winning,we were better which was not hard, and at the second attempt Oftel(Ofcom) - got CPS and LLU (two attempts) through which Carphone had the chance to create Talk, Talk, and SKy to bundle Broadband. They had headline margins enough to take customers, and the TV and Mobile were attractive.

    Now the job in BT is not outgrow your losses, but cut costs faster that the reduction in underlying revenues - 8% in calls and lines. So BT Retail is reduced to increasing minimum call rates and begging for an annual rental increase, but no opportunity to converge fixed and mobile services. - no fun at all.

    BT need to find a deep relationship with a mobile partner, and start transferring costs to Broadband. Ignore NGN/IMS fantasies and use the Internet as a platform to re-invent legacy services.

    Global - well the headline deal at any cost, collect the commission, and look for cost savings later.

  • Comment number 49.

    Oh forgot to say from post 47, that the staff are just a number working like a robot to meet the unrealistic demands set by the fat cats of the company, target this and target that, and every order has to be completed in 400 and something seconds which of course is a joke in itself.
    If you are late paying your bill they cut you off, you pay what you owe and then you have to have the line re-connected which takes another 2 days unless they have turned it off at the exchange if thats the case you have to pay £122 to get it back on, you are now classed as a brand new customer and have to pass a credit check, which would of had a default put on as you missed your original payment and have to pay either £25 or £50 advanced payment.
    No wonder BT are in a mess, if they stopped looking after shareholders or the senior management and treated their customers and staff much better then you wouldn't be reading this!

  • Comment number 50.

    I work for BT, or rather an agency contracted by BT, and id have already lost my job if the management here hadnt offered me and my team another assignment. My job was taken and given to a BT employee.

    BT already cust corners all over the place. It hs no investment in its staff at all (never had training in 7 years from them) so i wouldnt be suprised if they lay more off after this year as there isnt anywhere for savings to be made bar wages.

    Then there is the layers of management that exist for no reaosn whatsoever....but thats another story for another day

  • Comment number 51.

    why are they in the mire over, simple they have 1000's of over paid, under par contractors working on the NHS project, they also employ 1000's of people though 3rd parties. As for selection it is "do you have NHS experience? great news you are in..." Probably slightly unfair, but the main reason these projects have gone so badley.. Are these the people you want to be running a £13 billion project? if you pay someone the money they pay them, surely only the best will do? Added to this the NHS project in question is the worst most horrible project with the worst terms ever laid out by a client - they picked this up in 2002ish when there was very little else on the table.
    The problems have been in the post for a while and I will be suprised if they do not make another huge loss next year.

  • Comment number 52.

    I could write a book on the disastrous history of BT as I worked for them
    for over thirty years.It's a catalogue of senior management ineptitude,
    selling off the mobile network ( now owned by the Spanish company Telefonica) 3G licencing, trying to be a global player by taking over other Telco's. Mr.Preston says the current CEO cannot blame Ben Verwaayen, of course he can't he an has honary knighthood for services to the telecom industry!
    BT's real problem is the layers and layers of highly paid managers who know very little about telecomms or IT.For years they have lived off the back of the technical staff who in general are the backbone of the company,yet everyone knows where the cuts will come.The money spent
    on ludicrously high salaries, company cars etc... since privatisation has
    become obscene,unless of course you are in that club.
    Bt's only chance is a major cull,root and branch of non-jobbers,remove the treacle that pervades the company,stop outsourcing and give customers what they want, good telecomms at a good price,staff that know what they
    are doing and call centres that answer within seconds not hours

    Lord Timmo

  • Comment number 53.

    @ 44 - thanks for clearing that up a bit! The thing that still confuses me is not how the size of the funds can be so big (your example clearly indicates that) but more so how these holes have "suddenly" got so large - the recent market crash would have meant an increase in the liability but on an actuarial basis (over a number of years with mortality rates etc and payment amounts over an even further period) it can't have got that much larger surely? How come all of these companies are now discovering their pension holes? The market was significantly higher a year or so ago than even a few years back so were they showing significant surpluses at the time? I think not - this is just an issue which has come to light because of all the clearing the skeletons out of the closet and not a "sudden" phenomenon surely?

  • Comment number 54.

    The fundamental problem at Global is hardly likely to be BT. More likely, it is a symptom of the BT customer base. They are all large, multinational and suffering from inefficient business models. BT Global provides utility communication services which Customers see as costs rather than innovation. If BT were to dump some of their less imaginative customers, their financial "crisis" would largely evaporate. BT Global is, like most businesses, suffering from the nonsenses of allowing "the right to manage" to reside in shareholders and banks rather than those involved in the management of the business.

  • Comment number 55.

    My Grandad worked for the Post Office (BT) for 30 odd years. He smoked about the same number of fags every day. He was given fags free during the war - the one's without filters. He died at 72 of lung cancer, although he got a lot of pleasure out of the colour television he recieved as a retirement gift (one of a choice from a catalogue).

    Thus he only got his pension for a 7 stretch. How many more like him.

    Funny, he used to "hold the lantern" at the Union meetings, but was a share owning Tory on death.

    Too much television ?


  • Comment number 56.

    What a surprise....NOT!

    If someone throws a punch in BT it takes 2 years before it lands on the target's chin.

    While there are lots of good people in BT it is clear that things go wrong from the first layer of management, and this is because of all the things that go wrong at the layers of management above.

    Too many layers. Too much sub-contracting and parcelling up of junk - exactly like the financial mess - but with a pension fund to make it that little bit special. The management DO NOT KNOW what is going on, or how to manage it.

    Go back to what you know best, and build out slowly.

  • Comment number 57.

    BT suffers from the same ailments as all our over-large enterprises. That is they have set up systems that are efficient for THEM not for us the customers. It is of no concern to almost all of these corporations that you have to queue for 10-30 minutes to talk to them. Then get transferred, then wait, then get transferred then wait, then get cut off. Repeat.

    Why are they surprised that people get a little aggressive, when after all this they are simply told that what they want, or need done, can't be achieved without another series of phone-menu puzzle-loops, transfers and waiting? While endlessly giving their coveted should-be-protected personal details to all and sundry in 3 countries. I'm reasonably convinced that they have instigated these systems and difficulties in order to increase the stickiness of their customer base.

    What the organisations' managers don't appreciate is that we householders, workers and small business people have to deal with this c**p all day long when we want some small thing changed or corrected. They don't want to consider that we have a busy life outside of waiting on telephone call centres. I now take the line of keeping the person I have got through to on the line for as long as I had to wait while holding, being transferred, or choosing from phone menus. If we all did this they would have to change their ways.
    Sometimes though, when it is a small amount or small problem, I just give up. It is simply not worth the frustration and time for what is often a fiver a month. A sad reflection on customer service.

  • Comment number 58.

    #33 anewworld made a good post :
    "Pal of mine is retiring from BT at age 60, earning 35,000 per annum, index linked pension 17,500 per annum.
    = NPV 470,000."
    OK so what has happened is last year BT did an entry :
    Debit Salaries £35,000
    Credit Cash £35,000.
    That £35,000 went into prices so say £40,000 (inc Profit) will be requested back from the consumers.
    So in the first instance there is a short fall of £5,000 between what business wants in prices and what consumers have in their pockets. By having that money not spent and saved for a pension, only say £30,000 is available to spend on prices. This then exacerbates the problem we have: shops full of stuff and consumers short of cash to buy the stuff and someone somewhere having to go into debt to make up the difference. And consumers clamouring for yet more work to do - which will make more yet more prices just in order to buy the stuff already there.
    You see money saving should reflect reality and when you are at the production frontier and need to have production directed away from producing consumer goods bananas to eat in order to build a boat (investment/capital goods) to catch fish (consumer goods- but later), then it is reasonable to pay a dividend/interest free fish to those consumers who saved (agreed to eat less bananas themselves so these bananas could feed the boat builders). But if we are not at the production frontier and have all the bananas we need and excess production capacity then this saving thing makes no sense it just means paying people to produce stuff now telephone lines in this case and then they dont use them because they are saving it till later when they retire and this then causes a big problem for business as they usually rely on people buying their stuff now. There is a better way to do these things where the numbers money matches reality : NEFS Net Export Financial Simulation.
    PS one thing I find a little amusing about this is after years of people saying that economics was a miserable science (miserable its just plain wrong in my book), there was a series of New economics books produced a couple of years ago saying how clever economists were. The big example they all gave was the success of the game theory inspired auction of the 3G licences !

  • Comment number 59.

    BT and its predecessor, the GPO, has always been a laggard in introducing new innovations. (It was one of the last in Europe to invest in ADSL broadband). It is paying for that now. It is still, after 25 years of privatisation, run and regulated by civil servants. In the process of losing its mobile business, trying to become a 'global' operator and fending off local competition, it has failed on every count. It has tried, by reducing call charges to almost zero and hiking rental charges to astronomical levels, failed. (The latest is to raise line rental by 8.7%. No signs of recession here.) In the process it has managed to destroy the UK communications manufacturing industry. Where is STC, Plessey, GEC, TMC, Pye, and all the others? Gone!

  • Comment number 60.


  • Comment number 61.

    I consider myself fortunate to have got out of BT 8 years ago on voluntary redundancy terms after nearly 26 years. When it was privatised I remember the ringing endorsement the management gave and how they said it would be good for everyone working for them even though no one believed it. As it turned out it was great for those paid enough and those fortunate enough to be able to invest in BT shares - so long as they got out relatively quickly. But the reality is that the big winners were the senior managers (now isn't that a surprise!) with the story for most being a rapid deterioration in working conditions and loss of jobs for many; whole divisions were wiped out. BT was handicapped from the beginning, just as Royal Mail is now, by profitable areas of the business being opened to competition whilst the unprofitable "rump" parts remained to provide the services that no other private would touch with a bargepole. Nothing has been learned. Morale in both outfits must now be at rock-bottom.

  • Comment number 62.

    RBS TEMP at 45

    Thanks for your comment.

    Yes. He has worked for BT for 32 years and receives a final salary pension plus tax free cash which equates to 50% of his salary as pension..It is based on 1/80th per year of service. So 32 divided by 80 is He is absolutely entitled to this deal and I think it right that he should receive it.Yes of course he has contributed to it 6% per year.

    My point was, not that it was wrong, but that it is costly.It is especially costly because the directors have had many years of underfunding the scheme.

    It matters though, because the BT pension is underwritten by the government. When BT were privatised this was an agreement signed off by the Tory govt in order to get the deal through with the unions.

    By the time the other utilities were privatised, this clause was excluded.The BT unions did a fantastic job at the time and it is astonishing that the other unions didn't insist on the guarantee.

    So it may then be our problem. If BT fail to meet their pension shortfall,we will.

    My comment was not made to be inflammatory and I must apologise if you feel it was ill-considered.

  • Comment number 63.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 64.

    When BT changed it's logo to the present unmemorable one (sort of wispy ribbons in the wind) it's fortunes seemed to decline. It seemed to me the Conservatives had the same experience. In the 80's I think.

    I see Nick Robinson's blog on MP's expenses has been closed after only five hours.

    The condemnation was universal and I suppose there was no point in continuing.

  • Comment number 65.

    Here we go again.
    Another pension fund wrecked by the City.
    Pension funds cannot win.
    By the time they react, the Citys' "sharp boys" have left the stocks that these funds are backing.
    They always lose.
    They always will.
    It's just another case of the working man losing his shirt to the City "wide-boys".
    The working man keeps contributing, and getting poorer.
    The City keeps taking the contributions, and "losing" them....straight into their fat pockets.
    Capitalism has become "the financial wide-boys charity fund".

  • Comment number 66.

    #62. anewworld wrote:

    "My comment was not made to be inflammatory and I must apologise if you feel it was ill-considered."

    Then I apologise unreservedly for my hasty reply (and, re-reading your post, I now see it in a different light).

    It's just that there are so many posts in this forum, day after day, moaning about public-sector pensions that I assumed it was yet another one.

  • Comment number 67.


    I agree.... They were pretty much the last to make investment in broadband and when they did they had to buy French hardware for their exchanges. There were no UK suppliers of course because BT and our industrially treacherous City hugging Govt had allowed them if not encouraged them into an early death.

  • Comment number 68.

    Dear Mr Peston, as a big fan of yours who has rad your bnook as well as seen how dig you can deep to find the facts I have to say I am a little dissapointed about your analysis of BT, particularly the Global Services arm.
    I speak as someone who has worked for 20+ yars in IT Services and have been a customer of BT for corporate needs as well as in opposition to Global Services (GS) on bids for new contracts. What I know is that similar to the banks, GS had a bunch of cowboys in charge who bid on anything and low balled the price to win. Thus they won many bids, like NHS, and paid themsleves megabonuses as a result. This was close to being fraudulent but I'll leave Mr Livinston and his new management to decide on who to prosecute.
    Meanwhile the mega bid for NHS has over taken GS, not because costs are out of control, but because the business case is unsound and the costs could never be what was bid. On top of that old BT-GS management has been taking early recognition of revenues, a near the edge practise that happens in a lot of IT services companies by the way. It seems odd that revenue can recognises before the cash comes in but it seems that flexible auditors can let this go into the books. This time the revenue hasn't actually turned up and now GS has to account for the losses. By the way GS previous leader knew this was going on as it was talk of the GS canteens long before he left. The bad news was reported by whistleblowers early in 2008 but little happened. The GS team got away with this because the traditional BT leaders do not understand and have no management skills or processes in the IT Services game. So, just like like many a merchant bank that hit the wall when a 'smart' dealer mistraded, BT has hit their GS wall.
    They are world leaders in Telcomms and really ought to build on that skill, otherwise the entire business could fail.

  • Comment number 69.

    All you BT workers who are worried about your pensions may be asking yourselves..."where has all the money gone"?
    I'll tell you where it's gone.....straight into the pockets of a hundred thousand nobodies in the City, who couldn't tell a fibre-optic cable from a curtain rail.
    But there is one thing they are expert at....."removing your money".
    Real, expert, parasites.
    Capitalism, which has served us so well for decades, is now infested with them.

  • Comment number 70.

    BT is a national embarrassment that is too expensive for its residential and business customers, that outsources most of its customer services to India, can't get it into its corporate thick head that most broadband users want to receive and send data, not watch TV shows from curiously obscure TV companies, and sets out on ridiculous grand projects that have the words 'ill-fated' written all over them in big red letters. Apart from the recently announced 25p it intends to invest in fibre for a couple of thousand lucky souls, BT ignores its antique copper-wire-based infrastructure that is its proud legacy from the mid-20th century.

    Despite this, I bet the senior execs and the shareholders always get their money.

    BT will never be a 'worldwide colossus' as long as it remains a costly, short-sighted, muddle-headed, national joke.

  • Comment number 71.

    The best thing the City can do is have an almighty "whip-round" and REPLACE the 6 billion or so that it has "removed" from the BT pension fund.
    After all, these BT guys have been providing the City with its' vital communications for decades.
    Could you ever see the City doing anything as community-minded as that?
    Don't hold you breath.

  • Comment number 72.

    No, I'm not an anti-capitalist.
    I believe in good businesses, manufacturing, heavy industry, responsible service industries...all thriving and making a profit, with competition keeping them on their toes.
    What I don't believe in is the modern parasitic financial industry, which has been given a free rein to plunder the economy and put so much of the nations' wealth in its'pocket.
    I remember the City when it had decency, and a respect for other peoples' money.
    Now it's just a self-interested bear-pit.
    It has NOTHING for the ordinary man, it only takes.
    Far from being a "wealth creator", it is greatly damaging ordinary folk, and REDUCING their standard of living, whilst it grows fatter and fatter on OUR money.
    A good, decent, financial industry is very important.
    But this one is corrupt, being supported in all directions by the taxpayer, and loaded with wheeler-dealer billionaire types who are a curse on all of us.
    It is, in short....sick.

  • Comment number 73.

    Just for the 'soon to be' out of work MPs (I pray for)

    ...and in the meantime our Lions (led by donkeys) are dying in Afghanistan.

  • Comment number 74.

    Somewhat ironic since BT Global Services are keen to point out that at
    they are shown as top of the "Magic Quadrant for Pan-European Network
    Service Providers". This is a function of "ability to execute" and "completeness of vision". Sadly what it is not is a measure of profitability.

    Once again management's short term desire to boost returns by entering new and "exciting" markets has lost sight of the basics. Yes it's good to talk but even better to do so at a profit. Volume may be mundane but it's generally a sound if unsexy source of surpluses. Single contracts with large global entities at paper thin margins will always be a pricing gamble.

    Meantime anyone that claims to be a Management Consultant who invents a measure such as the "Magic Quadrant" needs to be treated with the suspicion reserved for those who claim to be alchemists.

  • Comment number 75.


    The culture change you describe is part of the problem for BT. Too much experience went out of the business, and too quickly, because it wasn't valued. The reality is that in clearing out what is perceived as the "Old Guard" of entrenched attitudes the replacement was in the main of less experienced people with a totally different culture NOT based around service. Of course, this is a generalisation but profit now comes before service. The balance isn't even struck.

    The large redundancy packages that were granted in the 90s were as a result of the feeling for quick change and the follwing of the doctrine of "downsizing" that was then the fashionable business idea of the day. I believe its prophet in later years actually said he had been wrong!

    It should also be remembered that in the early years of privatisation BT was deliberately hobbled by the regulator to give competitors a chance. Though portrayed as small players these competitors were actually run by large outfits in their own right. Running on lower costs(less manpower) they resulted in the anihilation of Operator Services in BT. How many remember the impossibility of getting assistance from those other companies back in the 90s when things went wrong? Well, they in turn forced BT to operate at that same level to cut costs. If it wasn't for Indian based call centres it would be even harder to contact BT now than it is - and that can be extremely difficult especially at peak times.

  • Comment number 76.

    Bland knew what he was doing and had a clear strategic vision for the business, which I believe he wrote out on his very first day in the job.

    Now if he had had a very talented techie somewhere around the top layer of the business (they never are) who could dimly 'see the future', for example IPv6 not ISDN, Wi-Max not 3G and so on, then BT's future might have been very, very different.

    As it is, short-termism such as shunting work off to India, in theory 'saving money,' but the complexity of the management interface goes up by an order of magnitude thus eating into any possible savings, and as other bloggers have mentioned, slying getting around restrictions on Indian staff over here in England to work, eventually turn out to be false economies.

    I saw of this coming a long time ago, as I did some freelance work for BT back in the mid-1990's.

    One area where they are still effective is in the outstanding marketing of the business to local consumers - Bob Hoskins picked up around a million or so for the ads he did for them back in the early 1990's so goodness knows how much young Chris Marshall is picking up, probably several millions, but hey if they can flog ADSL off of it, then good luck to them.

    They'll need it.

  • Comment number 77.

    BT's problem is that it knows it needs to move outside its traditional strengths but does not have the expertise in house. It therefore believes the big words of the wizz kids it brings in along with the flash partners it engages with. The wizz kids move on and the partners melt away leaving the core business to pick up the pieces once again.

  • Comment number 78.

    Thank you Benedict Brogan...thank you again!

    You are a man with cajones the size of Big Ben. IT'S SHAME OUR LEADERS JUST DON'T KNOW WHAT THESE ARE!

  • Comment number 79.

    Everybody knows that any company with 'British' or 'Virgin' in the name will be poor in service and rely on expert Marketing and in the case of the Privatised Utilities its monopoly power and inertia of the existing customer base.

    As earlier posters point out a self serving management clique exists which will cut any workers apart from the ones they need to cut - the managers themselves.

    The use of foreign workers by BT on shore who have been allowed in from non EU countries such as India and the like is an absolute disgrace and a damning indictment of NuLab the so called 'Workers Party'.

    I for one have no sympathy for BT at all.

  • Comment number 80.

    Last year I had 13 years with BT when our jobs were sent to Manila, instead of India, so customers wouldn't know that the call handlers they were talking with were not English speakers. We were UK based with 500 years of experience between us. We cared. We wanted to to the best for our customers. It mattered to us. We saw the results in our dividends and our pay.I had the least amount of service among my colleagues some had more than 30 years. Our pensions have been decimated. We wonder why ?
    Maybe its time for the execs to listen to their customers, we want UK call centres with excellent customer service and people who can meet the customers percieved requirements first time everytime. That was once our centre's mission statement and I would, as a customer, like to see BT re-introduce this policy. We were once proud to be BT employees because BT was a company to be proud of !

  • Comment number 81.

    I left BT at Christmas after 36 years man and boy, I felt there was no future in staying as sucessive high level managers have made decisions of such epic blundering it beggars belief. All levels of management in BT are obsessed with "stats", they have no long term business plan, prefering to "fire fight" and not looking more than 3 months ahead. The guys at the sharp end bear the brunt of this disaster as usual, now they are being put on unobtainable performance targets with the management using unjustified disciplinary procedures to "manage people out of the business". That's how BT will avoid compulsary redundancies, they just sack people. A lot of good engineers have gone and without its engineers what use is a telecoms company? Sit back and watch as BT whirls to self destruction.

  • Comment number 82.

    bt has lost the plot,the shares used to be £15, then top people suddenly left[no names].recently bt have lost the deal to provide northern ireland with 100% broadband by satellite, this was snapped up by avanti.

    if they can do that,?what was bt doing by getting off an earner?

    the company is top heavy with people doing nothing except going to meetings[carbon footprint springs to mind]..brentwood/sheffield/birmingham/sevenoaks/croydon/bt tower/bt al....


  • Comment number 83.

    Decades ago I was seconded by my company to work with an IT focused part of the very old GPO which defined, developed and implemented the first "community system" in the world. That linked together HM Customs (as they then were - and rightly claimed to be the most cost-efficient part of the Treasury), airlines and freight forwarders. That proved a starting point for on-line transactions around the world.

    Decades later, I joined the "IT systems integration" division of BT. Still full of people with bright ideas. Run by a tight cabal of directors who were never challenged by the BT board, as they had no idea what that division was doing. Directors so far out of touch with the business and people they oversaw that, if you saw one of them on the ground floor, common humanity kicked in and you felt obliged to steer them towards the staff who were their direct reports (classic case when someone was leaving and his director had no idea where he actually worked), or even to point out which corridor led to the staff canteen/restaurant!!!

    The tight knit clique of directors (there were other operational directors who knew what they were doing) were rarely allowed to interact with customers or prospective customers, for fear they would screw up. Overheads were rediculously high, reflecting a navel-gazing structure that assumed that damned silly personnel/HR initiatives just had to be supported, while business drifted out of reach because pricing to customer was so far away from a genuine cost-of-doing-business.

    That state of play existed before I joined. Lasted for 6 or 7 years afterwards, until the main BT board woke up. They shook out the bright - but useless - divisional directors (who had plotted a management buyout, on the absurd assumption that staff would follow them into the unknown. I couldn't find anyone who would have lept off a cliff for that bunch.). For some reason, the same bunch had been allowed to carry on for a decade. Can you imagine not introducing new blood at the highest level of any division for that long?

    That bit of business was a "consultancy led integration organisation". Some bits worked OK. But sometimes specialist areas would arrange meetings with interesting prospects, turn up with 2 or possibly 3 people to cover sales/industry understanding and technical aspects, then find 10 people popping out of the big BT group because the prospect was a "strategic target". So 2 or 3 people knew why they were there. Others sat around to keep tabs. And that could happen internationally, as well as down the road in the UK!

    (It's a fact that one main-BT commercial guy was named "international salesman of the year" because the integration group had won a contract in Europe. But the guy didn't know what had happened, had no idea what the sale involved, and had to be briefed about it just days before he accepted his award.)

    It was stupid. Plain stupid.

    The part of BT I worked for was rolled into Global Services. It's sad, but no surprise that things look bad today. The divisional board didn't want to allow "big BT" to get too close. But, when bidding for major projects they needed someone to back them up. (Bit hard to prove financial muscle when you're a fairly minor and wholly owned subsidiary limited company with no claims on a plc's clout!) It was good to see the old directors shaken out just before I left. Bunch of prats. There was far more time spent on producing statistics to prove worth than engaging with prospective customers.

    The sad thing is that the old "IT" bit of BT could have been a real player. Held back by directors who never ventured forth to understand the market, rarely left the safety of the "3rd floor cocoon" and played with a BT division as if it were a private fiefdom.

    Sad that BT never got its act together before all the brown stuff hit the fan. Bad management. Bad outcome.

    Maybe, soon, the remnants of patriarchal management will be finally shaken out by BT.

  • Comment number 84.

    Typical BT, sack workers rather than actually provide the services customers pay for. I suppose I'll spend most of this weekend with no internet access as has been the case every week since I found myself at the mercy of one of its broadband packages (I'd earlier been booted off an "unlimited" dialup connection for er, exceeding the linit). Never mind, at least they left their mark by leaving us with telephone boxes you can't hear yourself in for traffic noise and pushing the minimum local call charge up from 2p to 40p. The sooner this dismal bunch of profiteering incompetents goes under, the... no, I doubt we'll even notice.

  • Comment number 85.

    Having been with BT for 35 years,the only thing that keeps me with them is the dire customer services of every other telecoms and broadband supplier. BT,s advertising slogan used to be "Its good to talk" that was, unless you wanted to talk to BT.
    Pure hell to deal with and the sooner we get rid of uncaring, overpriced and useless utiltiy suppliers the better. Oh for a competent alternative and one that cares about its customers, but that is true of most large UK (so called) businesses these days.
    Thier useless and couldnt care less buddies in the regulator doesnt help either. Another once great British Company down the same pan has GB itself.

    Call centres, probably the worst stress inducer this country has ever created. But, like our politicians, today's Directors just dont "Get It"

    I hope soon to be an ex BT customer (when I can find another supplier who can rate more than 2 out of 10 for service)

    Had enough !

  • Comment number 86.

    I recently signed up for BT's broadband service during a house move. This was advertised as 'up to 8MB' speed. When I entered my post code on their web site, it quoted 1MB for my area. Now I have a line working, it runs at just over 400K. When I phoned BT to report poor service, an Indian call centre took 15 minutes to tell me this was working as normal. How do they expect to retain customers?

  • Comment number 87.

    After a number of years of continuing work with BT management, I have to conclude that the general standard is poor. Moreover,and more importantly, the culture is poor also. In working with some of Global Services customers in financial services, I find that it is not the basic infrastructure on offer ("pipes in the ground") but the service layer that is broken. GS customers complain often of content-free meetings and committments left unhonoured "The account manager committed to action one day and then went on holiday for six weeks." is a common refrain. There is also within BT a clear mis-understanding of the basic position of BT in the global market. Depsite endless strategic reviews and one "reorganisation" after another the basic issues fail to be addressed.

    Fundamentally, BT is, at the management and employee level, almost perversely risk-averse. This has many deliterious effects, but one that is most far reaching is that it forces the BT board to do silly and risky things e.g. globalise. It is and has been clear to see by any customer who has entered 81 Newgate Street.

    On a final note, one of the principal architects of the BT GS mess is running one of UK plc's largest IT services companies. And, worse, has been making absurdly optimistic noises about IT bucking the recessional trend. I think as shareholders it's time we made a call to his Chairman before further damage to UK plc is done by these time-serving employees posing as businessmen.

  • Comment number 88.

    To rectify things going forward, BT needs to really raise the bar. People have been conscious of the fact that the key stakeholders in BT have not been getting things right first time and now this is the hand that we've been dealt. Our strategic objectives need to geared up and by drawing a line in the sand, collectively the BT-wide business can start ramping up and really offer some value-add. We're not a one-trick pony and once the synthetics and granular detail are sorted out, BT will be chomping at the bit to provide a service that is fit-for-purpose.

  • Comment number 89.

    1. Utilise UK Customer Call Centres Exclusively.
    2. Engage Actively With The Customers.
    3. Value BT's Finest Asset : The Employees.

    Three simple rules to put BT back in profit : job done ?

  • Comment number 90.

    BT deserves to make losses as long as it continues to provide such poor services to its customers. It is a national disgrace.

  • Comment number 91.

    I'm glad to hear that BT is accelerating its plans to lay fibre broadband cables. As they can only afford to cover 40% of the country, perhaps the government could help out with the rest? This is important infrastructure which the country will need. It will also provide much needed employment.

  • Comment number 92.

    The elephant in the room (that a few people have mentioned) is the NHS IT project (NpfIT and all the bits that go with it)

    Like the banks, it's "too big to fail". But fail it will, like the banks have in reality.

    The politicians and civil servants are still waving around the contractual costs of the project, when all the sensible suppliers have walked away from it, seeing that even with taking the contract cancellation hit they'd lose less money than staying the course.

    BT Global is left. This is the result, and it's still early days for the contract. The outcomes are either BT Global will go bust, or the Government will have to admit that the NHS IT project was ridiculously under-bid. Not that the latter will be the words used, all sorts of fluff about "changing needs" and the like will be what we hear.

    If only the individual NHS trusts had been allowed to carry on specifying their own IT systems with national standards for data interchange to meet the clinical needs. Then at least authority and responsibility would have been in the same organisational place. And the whole existing NHS National Network would not have to have been ripped out and replaced. By BT......

  • Comment number 93.

    I read this blog and comments with a clear memory of my 10 years at BT laterly in GS. The last 2 years were purgatory. I left in early 2007. For that time and before, every 6 months there was a new strategy and a new re-organisation! It was like the DFS advert 'Sale must end' only for there to be another 'Sale must end' again the following week! The reasons were the same ...we must repond to market conditions, improve customer service. Funny thing though the numbskulls who put this up every 6 months were there every time setting up the 'new' structure, same faces, same names, same 'teams', same houses of cards, blaming everyone else for the last failed so-called strategy, while the real talent either left or just kept quiet. I left after taking the money ("take it now it'll not be as good next year" we knew that there were to be job cuts every year!). I can say I left to put into practice with my new employer all the things I'd learned at BT... all the things they didn't do properly and ignored because of their navel-gazing! I sold my shares at £3.12 thank you. My new employer recognised my talents that BT did not. I doubled my salary and THE most satisfying thing of all was preventing BT gaining a contarct with my new employer in favour of one of their smaller competitors. A large 8 figure 5 year contract went elsewhere because of my recommendation and what I knew about that wretched company. I do feel for all my ex-colleagues who were good talented people but not part of the 'in crowd'! BTGS was then a shambles and it is now also. I can confirm that which is stated below, that there are thousands sitting idle on full pay because they are part of the old Pension Plan A given to Civil Servants from the time when BT was state-owned. I don't blame them for sitting tight. The top-heavy middle and senior management teams (if you can call them 'managers' or 'teams') are a grubby lot sitting in a house of cards they have created through incompetence. I've done well leaving BT. I genuinely feel for those now going through exactly what I did. I was lucky falling on my feet. For that I count my blessings ... and BT for showing me 'how not to do things' in business!

  • Comment number 94.

    I heard Mr Livingston talk and he came across to me as an asset stripper and BT was fine till it went and made its self something its not like the post office Britian is turning into a corporation companies with no faces own and run Britian and the media sell the image that everyone is trying to get a piece of what is British when its the Govenment selling of British companies as they chose Thatcher did it sold what did not be long to her and its still going on. Were I live is mixed race and age many older people own their homes but we do not have a bus now or post office we still have a chemist a family owned one and than God for the Arabs and Asians as we would have no shops the nearest shops are a mile away but we are about to get a huge Tesco which will kill most of the shops on the main road and I hear that the post office is going inside so you can go and get your money and shop in Tescos, as I hate all super markets I like service and fresh food, we also have a bank that is open three days but a couple of miles away it is open every day but Sunday and its clean and the staff are nice, unlike the place we have.

    BT sold its soul for a flash logo and lots of meetings where nothing was ever sorted, all rubbish. Very like the Govenment really.

  • Comment number 95.

    Jokeling @ 88

    Quite right!

    We just need to drill down to the granular level and grab the low-hanging fruit.

    This of course, was the sort of management gobble-de-gook that S'ralan Sugar slaughtered before he allowed himself to become seduced by the world of show-business.

  • Comment number 96.

    Having recently left BT after several years service, I can see this from both an employee and customer angle. BT is a good employer and one of the most forward-thinking in terms of offering flexible-working that I have come across. In terms of pricing, BT is often restricted here in terms of being able to offer services below cost in order to allow competition in the market- unlike some of its rivals who effectively "buy" market share and puts prices up later. Conversely, as someone else has commented, it does have a Universal Service Obligation which means it must offer services in rural areas often at a loss - other operators don't have to do this. On the flip side, I have recent personal and frustrating experience of the "service" BT offers Consumers - in the end, it was only through my contacts in the company that I was able to resolve my problem satisfactorily - totally unacceptable.

  • Comment number 97.

    Also in terms of redundancies, certainly a few years ago I saw the disastrous approach of letting the best people go who then walked into rival companies with a nice cheque from BT. Whilst that has changed to a degree, one of the problems was how difficult and protracted it was to get rid of any poor performers other than through redundancy routes. I'm sure this is a common problem for all large companies.

  • Comment number 98.

    There are quite a few problems with BT's leadership, in recent years the leadership has seen the way forward as imported generic managerialists who "see the big picture", do management by numbers and provide generic "value add", but unfortunatley these people seldom have a tacit understanding of the technical and operational needs of a telecoms company. Add in a number of identikit axe wielding accountants in senior positions and you have a leadership that isn't terribly engaged with day to day concerns. The worst aspect of all this is possibly that those moving up the chain internally see managerialism as the way forward rather than robust skill and expertise.

    The City has a role to play in this too, it fell in love with "empty suit" managerialistm, probably in no little part because it has the same rotten leadership culture. BT has too many layers of bureaucracy, too many senior managerialists who are "just too busy" to understand the bread and butter of the business. The structure could (and in any sensible world would) be flattened, but starting at the top, beacuase from a cost cutting perspective it's the senior layers of managerialists who actually represent the most expensive flab. Canning a chunk of the senior mangerialists won't impact the customer, it would mean relatively few job losses and it would save a lot of money. They add little beyond politicking and blue sky day dreaming, but managerialists will never lead a cull of their own kind.

    I'd also take the claims about protecting BT staff over agency and contract workers with a big pinch of salt, there's still plenty of offshoring being done, with internal BT employees being replaced by Indian contractors who appear superficially cheaper. However, there is a bit of a false economy, because by getting rid of those who have technical or operational knowledge onshore it takes longer to get things developed. It's just a general symptom of the managerialist rot, it looks like progress is being made in the short-term, but the disruption to those who actually know what is going on and who actually deliver the work sets the overall group back.

  • Comment number 99.

    unfortunately 'ChangEngland' if you put an agent on hold for long periods of time we will generally hang up on you as we are not allowed to be on a call for over 310 seconds, and also if our customers can't get anything done why do customers think making our lives more difficult will get it done? Were more miserable then you are as a customer as it is.

  • Comment number 100.

    The day I left BT was a happy one.

    On several occasions I knew precisely what had gone wrong in my service or billing, but they were endlessly incompetent and failed to LISTEN- prefering to use overseas call centre staff who were clearly reading from a script.

    I eventually had to involve the ombudsman and would never go back to BT.


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