(Rewrites with more analyst comments, background, shares)
By Mark Potter and Kate Holton
LONDON, April 8 Ben Verwaayen, the man who
helped to transform BT Group into an IT and broadband-focused
communications powerhouse, is leaving the former state phone
monopoly to be succeeded by high-flying insider Ian Livingston.
Analysts said Livingston, the 43-year-old head of BT's
retail business, was a strong successor, but that Verwaayen's
departure came a little earlier than expected and could spark a
few jitters ahead of BT's annual results on May 15.
Some also thought the promotion of the cost-cutting
Livingston could herald fresh job losses at Britain's biggest
fixed-line telecoms provider.
"We think that Livingston...can get BT focused much more on
costs," Merrill Lynch analysts wrote in a research note,
estimating that BT's core UK fixed-line business could run with
closer to 50,000 employees compared to the current 80,000.
BT said on Tuesday that Livingston was the board's unanimous
choice to succeed Verwaayen and there would be no big change in
"He was in the kitchen for the last six years," Verwaayen
told CNBC television. "It's safe to assume that the strategy
we're in is the strategy we'll be on with him."
Livingston joined BT as finance director in 2002 and became
head of its retail business in 2005. He previously worked for
retailer Dixons and was the youngest director on the FTSE-100
when appointed finance director there at the age of just 32.
He will replace Verwaayen in June and be succeeded as head
of BT's retail division by Gavin Patterson, currently managing
director of its consumer business.
In 1984, BT became one of the world's first state telecom
companies to be privatised. It was one of a string of national
firms to be floated under Conservative Prime Minister Margaret
For years it struggled as regulators imposed heavy
restrictions in a bid to encourage competition at the same time
as its traditional fixed-line business started to decline.
Verwaayen, 56, joined BT in 2002 from Lucent Technologies
and helped to avoid a break-up of the group at the hand of
regulators by opening up its network to rivals. He also
spearheaded a drive into network IT services and broadband which
helped to double the group's share price between 2004 and 2007.
Over the past six months, however, the shares have fallen
around a third as revenue growth fell short of some analysts'
expectations. The stock is now trading close to the level when
Verwaayen took the helm in January 2002.
BT is Britain's biggest provider of broadband Internet
connections, with 4.3 million users. But it faces stiff
competition from the likes of BSkyB BSY.L and Carphone
Warehouse CPW.L which rolled out their own networks, meaning
BT Wholesale made less money from renting out its lines.
"Ian (Livingston) inherits the business at a fairly delicate
time," Deutsche Bank analysts said in a research note, pointing
out that BT is in the midst of a complex and costly network
upgrade and that it also has huge pension obligations of about
40 billion pounds which could drag on future earnings.
Verwaayen's departure also comes just 7 months after BT
changed its chairman and JP Morgan analysts were concerned it
could signal that trade is getting tougher.
But Dresdner's Lawrence Sugarman said Livingston was the
right man for the job.
"He's likely to be more focused on the detailed delivery (of
BT's strategy). Ben was probably a bigger picture thinker ... In
this environment, people probably want someone who's more
focused on the detail," he said.
At 1225 GMT, BT shares were up 1 percent at 232 pence,
valuing the business at about 18 billion pounds ($35.8 billion).
A BT spokesman said Livingston would have a base salary of
850,000 pounds a year and would be entitled to a bonus of the
same amount if the firm meets its targets.
Verwaayen, who was paid a base salary of 742,000 pounds in
the group's 2006-7 financial year, will receive a cash payment
of 700,000 pounds on his departure.
(Editing by Sue Thomas/Andrew Hurst)