Breakingviews-BT does its best to counteract government poaching
(The author is a Reuters Breakingviews columnist. The opinions expressed are his own.)
By Quentin Webb
LONDON, June 19 (Reuters Breakingviews) - BT Group (BT.L) is doing its best to counteract government poaching. After leading an impressive turnaround, Chief Executive Ian Livingston is off to Westminster. The timing is surprising: the telecoms group is just embarking on a big push in television. But it is hard to make the boss turn down a prestigious government gig. And a strong internal successor signals continuity.
Livingston is a loss. He has cut costs, trimmed debts, found a way to plug the huge hole in BT’s pension, and righted the troublesome global services unit. He’s invested too, ploughing money into fibre-optic networks. Shareholders have prospered. The total return since Livingston took over in June 2008 has been 81 percent, Datastream shows, against 26 percent for the FTSE 100.
Yet the only real lesson this teaches about corporate succession is to be prepared. There wasn’t much BT could do when David Cameron called and asked if Livingston would like to become a lord and serve as trade minister, replacing former HSBC (HSBA.L) Chairman Stephen Green. And while corporate succession plans usually span years, political timetables run faster. So it was helpful BT already had a strong heir apparent in Gavin Patterson, who takes over in September. Green’s exit at HSBC created a boardroom split that exposed woeful succession planning.
Patterson makes sense because he leads BT Retail. This deals directly with home and business customers and is BT’s biggest business line by revenue. His background is especially important because the next big challenge is to prove an expensive push into television can pay off. He has been central to this project.
It is always worrying when a celebrated boss leaves. Hence the dip in BT’s shares. One fear is that performance proves unsustainable. Tesco (TSCO.L) is struggling in the post-Terry Leahy era. But BT has a clear strategy, is investing heavily and generates strong cash flows. A second worry is that a canny leader picks the perfect time to leave. But the timing here is not Livingston’s.
The last risk is simply that the successor is mediocre. Patterson has strong credentials. Now he needs to convince investors he is up to the job.
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- BT Group’s chief executive officer, Ian Livingston, will leave in September for a post in the British government, the telecoms group said in a statement on June 19.
- Livingston, who has run BT since June 2008, will become trade and investment minister. He will be replaced by Gavin Patterson, a BT board member and CEO of the group’s retail business.
- Shares in BT fell as much as 4 percent but later recovered. By 1508 GMT they stood 1.66 percent lower at 314 pence a share.
- Reuters: BT CEO Livingston to step down to join UK government [ID:nL5N0EV26Z]
Blood sport [ID:nL3N0DR1XF]
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(Editing by George Hay and Martin Langfield)
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