BT stockpiles networking kit for no-deal Brexit as Patterson exits

BT is stockpiling networking equipment ahead of the UK’s scheduled exit from the European Union (EU) on 29 March 2019, as concerns grow that a no-deal Brexit will have a catastrophic impact on the economy amid ongoing political confusion.

Speaking on an end-of-quarter investors’ and analysts’ conference call, transcribed by Seeking Alpha, outgoing chief executive Gavin Patterson –who formally stepped down on 31 January – revealed how BT was enacting emergency contingency plans for Brexit

“Our primary focus is to ensure uninterrupted service to our customers, which includes increasing inventory to protect against potential import delays,” said Patterson.

“A disorderly exit could damage consumer and business confidence, although it is too early to estimate the size of any potential impact.”

In January, leaked documents from a closed-doors meeting between EU officials and MEPs revealed that Brussels might consider taking steps to strip BT of £150m of contracts it currently holds with the EU.

Among the contracts held by BT are a £49m deal with the European Parliament and two other contracts worth £24m to provide cloud services at 52 European institutions.

European Parliament secretary general Klaus Welle noted that should the UK crash out of the EU in a no-deal scenario, without the “benefit” of the 21-month transition period built into prime minister Theresa May’s withdrawal agreement, the risk of contracts with the likes of BT being cancelled would be heightened.

Patterson also addressed the continuing furore around the use of Huawei equipment in critical national networks – in 2018, BT said it was going to pare back its exposure to Huawei in the existing EE 4G mobile network and the future 5G network.

Noting that the debate around Huawei was not specifically a BT issue, but affected all other operators, he said that nevertheless, BT did have a longstanding relationship with the firm.

“We’ve also got very clear architectural principles and very strong robust security controls,” he said. “And these we operate with close alignment with the NCSC (National Cyber Security Centre) to proactively manage how we use Huawei in our network.”

Meanwhile, former fintech leader Philip Jansen has formally taken up the mantle of chief executive at BT as of 1 February 2019, following Patterson’s exit at the end of its third fiscal quarter.

Patterson, who announced he would step down last year as BT shareholders, unhappy with his performance, threatened to force him out, has left an organisation in rude financial health despite its recent problems.

Group-wide sales for the quarter were down 1% to £17.56bn, with growth in the consumer business offset by regulated price cuts at the quasi-independent Openreach unit, and declines at its enterprise business. Pre-tax profit grew by 20% to £2.09bn, and earnings before interest, tax, depreciation and amortization (EBITDA) was flat at £5.55bn.

Jansen – who has been boning up on BT for the past month, and did the rounds at the World Economic Forum in Davos alongside Patterson and BT chairman Jan du Plessis – has already laid out some of his short-term goals for the coming months.

Joining Patterson on the end-of-quarter call, he said: “I plan to take the next few months to review every aspect of our business, our strategy and our plans, with particular emphasis on meeting colleagues and hearing direct from customers.

“Although I can see a fair bit of bureaucracy, it’s also great to see how committed our colleagues are to BT and to delivering great things for our customers.

“It is clear that we are in a period of sustained investment, which is required to transform BT’s business. And finally, in terms of direction of travel, although it is early days, I thought it worth clarifying that in my view, differentiated customer experiences, integrated network leadership and transforming our operating model will endure as key pillars of any future strategy.”

Jansen added: “I would like to take this opportunity on behalf of the BT board to thank Gavin for his commitment to BT over more than a decade at the company.”