Jan du Plessis is not one for shirking a challenge. As chairman of Rio Tinto he has faced a barrage of questions over a bribery scandal in Guinea and boardroom diversity, and later this year he will swap the miner for BT.
The telecoms operator is not short of problems, either. In January its shares plunged 20%, wiping almost £8bn off its value, because of an accounting scandal in Italy. At 313.1p, the stock is trading at levels last seen in 2013.
Then there is its long-running infrastructure battle with the telecoms watchdog Ofcom, its huge gambles on mobile phones and sport, and its vast pensions black hole. Of all these, the latter is BT’s biggest headache.
A legacy of the days when the company was a state-owned monopoly, the scheme supports about 300,000 current and former employees with generous final-salary pensions and is underwritten by the government.
Like many retirement schemes, it has fallen foul of ultra-low interest rates. The deficit will be formally valued in June, when a three-year funding plan will be put in place. By then, analysts expect the funding gap to be as much as £11bn, up from £9.5bn last October and £7bn in 2014. Should that happen, BT could have to stump up even more than the £2bn it agreed to pump in last time.
Du Plessis and the chief executive, Gavin Patterson, may need to take drastic action to tackle this albatross. The scheme is still open to accruals by existing staff — a rarity in the corporate world. But closing it would be no simple matter, as threatened strikes at Royal Mail and BMW over the same issue show.
The last thing BT needs is a damaging industrial dispute as it rolls out a vast investment programme for superfast broadband and 4G coverage. It dodged the ultimate sanction of a break-up last month when Ofcom allowed it to keep its Openreach infrastructure network, yet it is repeatedly hit with reprimands from the watchdog. Most recently it was the target of a record £42m fine for failing to compensate rivals adequately for late line connections.
It must cut costs even more aggressively to shrink a debt pile that had swollen to nearly £9bn at the start of the year, thanks to its £12.5bn acquisition of the mobile operator EE, all the while sticking to its commitment to grow its dividend by at least 10% year on year. Even with du Plessis’s steady hand on the tiller, this constellation of problems leaves me cold. Avoid.
