BT CEO Gives Boris Johnson a Reality Check Over Fiber Ambitions

(Bloomberg) -- BT Group Plc Chief Executive Officer Philip Jansen has given Boris Johnson a reality check.

To help secure his party's nomination to the U.K. premiership, Johnson pledged Britain's 32 million homes would have faster and more reliable fiber-optic broadband by 2025. The target raised eyebrows among industry executives, given that it was eight years earlier than his predecessor's. But the U.K.'s biggest network builder has to take it seriously.

In a call with reporters Friday, Jansen said the government would need to rip up current planning rules and give carriers building rights now enjoyed by water and power utilities. The industry would also require about 30,000 more workers to dig up roads.

“It could be a very positive story: national mission, get rid of the obstacles, build like fury, get people the benefits, create a load more jobs -- circa 30,000,” said Jansen. “It's a no-lose story here.”

Telecom executives want to know if Johnson is serious about fiber, and if they'll get a fair return on their investment. He has wavered on key pledges in the past, including on a third runway at Britain's largest airport and previous Prime Minister Theresa May's Brexit deal.

“Is it a national mission or is it not? If it is, great, accept a little bit of inconvenience, but let's get it done and we'll all get the benefits,” said Jansen. “Of course, the productivity of the nation isn't in my business case.”

He needs to tread carefully -- his predecessor was pushed out partly because he lost key battles with regulators.

“Having mishandled relationships during changes in political and regulatory personnel in the past, BT will be keen not to contradict Mr. Johnson, even though his ambition flies in the face of previous BT comments about the practical limits of fiber-to-the-premise rollout,'' Berenberg analyst Carl Murdock-Smith wrote in a note to clients last week.

Over his five-year tenure, previous CEO Gavin Patterson clashed with various officials at regulator Ofcom in terse and protracted talks over the independence of BT's Openreach network. That discussion will also continue -- Johnson has appointed a senior business adviser who has previously called for Openreach to be split out of the company.

Analysts at Jefferies Group LLC called BT's first-quarter earnings a “low-quality beat” due to boosts from one-offs and soft consumer division results. Shares were down 4% at 10:34 a.m., steeper than the 2% decline in the FTSE 100 index of Britain's biggest companies.

Achieving the fiber goals "is a tough challenge, but at BT we're up for playing our part in it," Jansen said. "What we need from the government is quick decisive action."

To contact the reporter on this story: Thomas Seal in London at tseal@bloomberg.net

To contact the editors responsible for this story: Rebecca Penty at rpenty@bloomberg.net, Jennifer Ryan

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