BT’s chief executive, Gavin Patterson, has been ousted following growing shareholder pressures, weeks after he unveiled a major £1.5bn cost-cutting plan. Mr Patterson’s departure – he will stay in post until a replacement is found – leaves plenty to ponder, but perhaps the key question for shareholders is what will happen to the dividend, which last month the company pledged to maintain for the next two years.
Investment in mobile and fibres is scheduled to increase to an annual £3.7bn for two years, and following a triennial review, the company’s £11.3bn pension deficit requires annual top-up payments of £2.1bn until 2020. Given underlying free cash flow (before top-up payments and spectrum-purchase costs) is expected to fall from £3bn to between £2.3bn and £2.5bn this year, we feel any new chief executive is likely to have to seriously consider cutting the £1.5bn dividend bill.
There will be hopes that a new boss will be able to improve the testy relationship Mr Patterson has had with regulator Ofcom, and the future of the costly BT Sports venture is likely to be reviewed given growth in subscriber numbers has underwhelmed.
