BT is to cut 15,000 jobs, or about 10 percent of its workforce, over the next year, after reporting huge losses in its Global Services unit.
On Thursday, the communications and IT giant issued its results for the quarter ending 31 March. The results showed a quarterly loss of £1.5bn in Global Services.
The company said in a statement that three of its four business units have performed well, but the Global Services loss dragged the overall group into the red. For the 12 months up to 31 March, BT Group reported a loss of £134m, compared to a profit of £1.9bn for the previous year.
BT Global Services supplies communications and IT services to large businesses and government organisations. Its clients include Microsoft, Reuters and the NHS. BT has expanded the unit in recent years, but its costs have risen sharply over the past 12 months, the company said.
BT also said its pension scheme had fallen into the red, and that it would make annual contributions of £525m to the plan over the next three years to make up the deficit. BT reported a shortfall of £2.9bn for the fund, compared with a surplus of £2bn the previous year. Over the last 10 years, BT's annual contribution has been £280m.
The group said that it had shed 15,000 jobs over the past year — about 5,000 more than expected — and that it would cut another 15,000 jobs over the coming 12 months. The previous cuts had reduced BT's workforce to about 147,000, BT said.
The company said it hopes to remove the positions through "natural wastage" and voluntary redundancies, avoiding any compulsory cuts, and said it would work with unions on managing the cuts.
Andy Kerr, deputy general secretary of the Communication Workers Union, said in a statement that the 15,000 new redundancies would be "challenging", and blamed BT's financial woes on "damaging mismanagement" of Global Services.
BT referred to Global Services' performance as "unacceptable". The unit will take charges of £1.3bn following the completion of contract and financial reviews, as well as a £280m restructuring charge and further restructuring charges of £420m over the next two years.
The Global Services charges were much higher than expected, according to a statement from Gartner research vice president Scott Morrison, suggesting that BT is trying to "draw a quick line under its past expansionist strategy and focus on growth with margin for the new financial year".
He said the most urgent matter for BT was to push ahead with automation, which could improve the company's margins as well as the quality and consistency of its delivery.
"[BT] doesn't have the luxury of providing such a high-touch, bespoke relationship to all its large enterprise customers as was the case in the past," Morrison stated.
BT said it expects revenues to decline by 4 percent to 5 percent in the 2009-2010 financial year, partly as a result of lower mobile termination rates and the impact of Global Services' restructuring.
BT Global Services had a change of chief executive in October last year when Francois Barrault resigned, to be replaced soon after by Hanif Lalani.