BT Group Plc Chief Executive Officer Ben Verwaayen will step down after six years at the United Kingdom's largest telephone company amid the slowest sales growth since 2004.
Ian Livingston, who heads the retail division, will succeed Verwaayen on June 1, London-based BT said yesterday in a statement. Livingston, 43, joined BT as finance director in 2002.
"He's got a lot of challenges ahead," said Colin Morton at Rensburg Fund Management in Leeds, England, which owns about 5 million BT shares among the 1.6 billion pounds (US$3.2 billion) under management. "They've got to make themselves competitive in price and make sure their services are very good."
Verwaayen cut about 5,000 jobs a year as falling sales at BT's land-line voice-calling business and lower earnings from network clients held back revenue. Livingstone has led an expansion into high-speed Internet access, adding 4.25 million broadband users and making BT the biggest British provider.
Sales in the third quarter ended December 31 rose 0.5 percent, missing analysts' estimates. BT probably had sales of 20.6 billion pounds for the year, up 1.8 percent from last year, according to the median estimate of 23 analysts surveyed by Bloomberg News. The company reports earnings on May 15.
Verwaayen, 56, will leave the board on June 30. He joined BT in January 2002 from Lucent Technologies Inc, where he was vice chairman. BT Chairman Michael Rake said in the statement that Verwaayen changed BT from a "deeply troubled" firm into a thriving global business.
"There is a shelf-life time for good and effective leadership," Verwaayen said in a Bloomberg Television interview. He said the decision to leave was his own. "If you stay too long then it won't be your own decision any more."
BT shares rose 1.75 pence, or 0.8 percent, to 231.50 pence as of 9:50am in London trading. Before yesterday, the shares had fallen 16 percent this year. The stock returned an average of about 4.3 percent annually, including dividends, during Verwaayen's tenure, compared with 6.2 percent for the FTSE 100 Index and 2.6 percent for the Bloomberg Europe Telecommunication Services Index.
Verwaayen also helped lead BT's expansion of broadband and networking services. His cost cuts helped offset a drop in sales at the company's wholesale unit, which sells network access to companies including Internet and mobile-phone providers.
Rake said the board's decision to choose Livingston was unanimous. Livingston, who took over as CEO of BT's retail unit in 2005, will be replaced by Gavin Patterson, head of BT's consumer division. Patterson will become CEO of BT Retail and join the company's board on June 1.
Verwaayen, a native of the Netherlands, worked for a decade at Royal KPN NV, the largest Dutch phone company, before joining Lucent. BT paid him 1.86 million pounds in fiscal 2007, up 9.8 percent from the previous year. BT has about 106,000 employees.
"He did a very good job," said Morton. "He came in when BT was a mess and turned the company around." BT lost 1.87 billion pounds in fiscal 2001.
Another possible successor to Verwaayen, Andy Green, left BT last year to become CEO of LogicaCMG Plc, the Anglo-Dutch computer-services provider. Paul Reynolds, who ran BT's wholesale business, also left last year.