BT has scrapped its dividend for the first time in more than a decade to free up billions to invest in building 5G and next generation full-fibre broadband across the UK.
BT, which is facing a new rival after the owners of Virgin Media and O2 announced a £31bn merger earlier on Thursday, reported a 12% fall in pre-tax profits to £2.3bn for the year to the end of March.
The company said profits has been partly impacted because of a £95m charge due to Covid-19, “mainly reflecting increased debtor provisions”.
“Of course, Covid-19 is affecting our business,” said Philip Jansen, chief executive of BT. “But the full impact will only become clearer as the economic consequences unfold over the next 12 months.”
The company said it has suspended the £1bn final dividend for last year and the estimated £1.5bn in dividends for the coming financial year to the end of March 2021. When the dividend is re-introduced in 2022 it will be at half the previous annual amount, another £750m saving for BT. The company last moved to cut or suspend its dividend during the financial crisis in 2008-09.
Jansen said the money would form part of a £12bn investment to accelerate the process of getting “gold standard” full-fibre broadband to 20m UK homes by the mid- to late 2020s. BT had previously pledged to reach 15m homes on that timescale.
“In order to deal with the potential consequences of Covid-19, allow us to invest in FTTP [full-fibre broadband] and 5G, we have taken the difficult decision to suspend the dividend until 2022 and rebase thereafter,” he said.
Jansen also unveiled a new five-year modernisation plan for the business, resulting in £2bn a year in savings, which will include cuts to its 100,000 global workforce.
“BT needs to be leaner, simpler and more agile,” he said. “This initiative will re-engineer old and out of date processes, rationalise products, reduce re-work and switch off many legacy services. But in five years time will we end out with less people in BT, definitely.”
He added that the company has completed a three-year, £1.6bn cost-savings plan, which included 13,000 job losses and selling BT’s London headquarters, a year ahead of schedule.
The company has experienced a surge in broadband and mobile use during the coronavirus lockdown and said that its networks are “performing well, and comfortably within capacity”.