BT Group lifts savings target to £3bn amid inflationary concerns

BT Group has raised its cost-cutting target by a further £500m as the telecom giant warned of increased inflationary pressures, including higher energy costs.

Chief executive Philip Jansen said the company is now targeting savings of £3bn by the end of 2025, up from £2.5bn, to ensure cash flow is sufficient to fund its network investments.

The company had previously raised its savings target – also by £500 million – when it released its full-year results in May after achieving £1.5 billion in savings in the previous 12 months.

BT did not specify how the additional savings would be realized, but it has already cut costs by reducing its workforce, ending legacy apps, digitizing its operations and closing a number of offices.

The group also plans to retire aging fixed and mobile networks and sell unused exchange sites, while moving to a full fiber network will save them significant amounts of capital expenditure.

In addition, it plans to spend £15bn by December 2026 to install broadband in 25 million UK homes and businesses, about a third of which are in hard-to-reach rural areas.

Jansen said: “Given the current high inflation, including significantly increased energy prices, we need to take additional measures on our costs to maintain the cash flow needed to support our network investments.

In interim results released Thursday, BT told investors it had expanded its fiber-to-the-building broadband ISP network to 8.8 million properties, of which 2.8 million are in rural areas.

Still, the number of Openreach broadband customers fell by 89,000 in Q2 due to a broadband market slowdown and strikes involving 40,000 BT employees last month.

It still managed to marginally increase revenues to £10.4 billion in the six months ended September as growth in its consumer and Openreach networks offset lower spending from large corporate clients and sales of BT Sport. compensated.

The company’s reported profit has also more than doubled to £893 million, but still BT Group shares were 6.4 percent lower at 119.55p in early trading on Thursday, making it the third largest decliner on the FTSE 350 Index. Over the past six months, their value has fallen by about 30 percent.

Sophie Lund-Yates, the principal equity analyst at Hargreaves Lansdown, said: ‘It’s never good to have to cut your cost base in the name of preserving cash flow.

‘That leads to sensible efficiency planning in healthcare. The biggest question mark left by the announcement is exactly where the cuts will come from.

“Supply chain efficiencies and product offering improvements are seen as primary sources of the savings, but how much excess juice needs to be squeezed out of these areas remains to be seen.”