Analysts Speculate About BT CEO’s Resignation

BT Group said on Tuesday its CEO isn’t resigning because of the carrier’s financial performance, but analysts debated whether that really is the case.

Ben Verwaayen, who turned BT around after a 1.87 billion pound loss in fiscal year 2001, said on Tuesday he will step down May 31 and leave the board June 30. He will be replaced by Ian Livingston, CEO of BT Retail. BT, which is nine hours ahead of xchange, told Bloomberg that Verwaayen is not leaving because of BT’s slowing sales.

But analysts aren’t convinced. JPMorgan Chase & Co. analyst Hannes Wittig wrote in a client memo that Verwaayen’s resignation well could forecast disappointing fourth quarter and fiscal 2009 earnings.

“Would he have stepped down if he had the clear visibility that over the next six months he would fulfill or beat market expectations?'” Wittig wrote.

Verwaayen’s timing suggests that bad news is on the way. Wittig noted that Verwaayen had renewed his contract through the end of January 2009, making a departure earlier than expected.

An Ovum analyst saw the situation differently. BT is a well-managed company, said Mike Cansfield, telecoms strategy practice leader at Ovum. “Clearly this succession has been well-planned,” he wrote in a research note.

“Cast your mind back six years ago when Chairman Sir Iain Vallance, CEO Sir Peter Bonfield, and CFO Phillip Hampton all left within a short time of each other,” Cansfield said. “As evidence of good management, BT has clearly mastered succession planning.”

Whether or not that’s the case, BT has made fewer sales. In the third quarter that ended Dec. 31, sales only had risen half a percent. That number missed analyst estimates and grew at the slowest rate since 2004. BT, the U.K.’s largest carrier, also brought in less money through its wholesale unit – the division’s sales fell 6.7 percent in the nine months through Dec. 31. That’s because several competitors stopped renting BT’s lines and used their own instead.

Indeed, analysts for Europe-headquartered broker Dresdner Kleinwort, pointed out that Verwaayen’s resignation comes after two poor quarters “with outstanding questions around 21CN capex.”

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