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BT prepares merger of struggling business units to purge costs

BT is preparing to merge two of its struggling divisions serving corporate clients in a significant escalation of a squeeze on costs imposed by chief executive Philip Jansen.

The former telecoms monopoly is poised to combine its Global Services division, which provides security and cloud computing services around the world, with its Enterprise unit, which serves business and government customers in the UK.

It comes as Mr Jansen scrambles to trim costs amid soaring inflation and energy bills.

Earlier this month he asked staff to “treat company money like their own money” as the FTSE 100 group lifted its target for cost savings by £500m to £3bn.

By merging the divisions, BT will also slim down two struggling parts of its business that are taking the shine off growth in its broadband operations and EE mobile network.

The enterprise division shrank 5pc in the first half of the year while profits slumped by almost a quarter as the economic outlook darkened and the company lost a major contract with Virgin Mobile.

Revenues from global services also fell 2pc due to lower equipment sales and the impact of surging prices.

A senior industry source described BT’s business-to-business operations as a “drag”, adding that growth in its consumer division could not compensate for the decline.

Global Services has been a particular thorn in the company’s side for years, with alleged fraud in its Italian unit prompting a £530m writedown and BT’s worst ever day on the stock market when it was discovered in 2016. Early in his tenure as chief executive, Mr Jansen came close to a deal to offload Global Services to private equity, but it fell through.

The source added that a merger could take £10m to £20m of costs out of the business, although it is understood that no final figures have been agreed.

A BT spokesman said: “We know that there is some overlap of activities between our Global and Enterprise units, and we are working on ways to eradicate this.”

It is not clear how many job cuts will be required. However, it is likely to create further friction amid a long-running battle with unions.

Up to 30,000 BT engineers and 10,000 call centre workers, including 999 call handlers, walked out last month in a dispute over pay.

The company blamed the strikes for a drop of 89,000 broadband customers using its Openreach network in the three months to the end of September.

However, Mr Jansen has refused to reopen talks over union bosses, insisting the company’s 5pc average pay offer was “market leading” when it was made in April.

BT has also stoked anger among industry rivals by slowing down its rollout of superfast broadband connections while holding talks about lowering wholesale prices.

The moves sparked accusations that BT is seeking to push out rivals by undercutting them before raising prices once it has cemented control over the market.

A BT spokesman added: “BT Group is making once-in-a-generation investments in the UK’s digital infrastructure at a time when inflation is at a 40-year high and our markets have never been more competitive. We will continue to build like fury for the good of our customers and the country but to maintain this momentum we need to make every pound and penny count.

“We recently increased our target from £2.5bn to £3bn of annual cost savings by 2025. We’re already more than half way to achieving this but to hit our goal we will continue to deliver further savings by simplifying our product portfolio and our internal processes and systems; driving procurement and supply chain efficiencies; and simplifying our organisational structure to remove any duplication of work.” Telegraph

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