By Paul Sandle
LONDON (Reuters) - BT Group's Chief Executive Gavin Patterson will step down this year after its chairman said a new leader was needed to restructure Britain's biggest broadband and mobile provider.
Patterson, who has run BT for almost five years, announced 13,000 job cuts last month in an attempt to get to grips with a host of problems including intense competition, an underperforming IT services unit, a huge pension deficit and criticism of its broadband plans.
But a failure to hit a revenue target and a forecast for no growth in profit for the next couple of years sent its shares to six-year lows, putting his position in jeopardy.
Jan du Plessis, former chairman of mining group Rio Tinto who took the same role at BT last November, said the board supported Patterson's strategy but it did not have confidence in his ability to see it through.
"The broader reaction to our recent results announcement has ... demonstrated to Gavin and me that there is a need for a change of leadership to deliver this strategy," he said.
A search for Patterson's successor has started, the company said, and it expects to have his replacement in place during the second half of the year.
BT shares, which have lost nearly 40 percent of their value since Patterson took over, rose more than 2 percent in early trading, before giving up some of the gains by 1030 GMT.
Analysts at Bernstein said it was no secret that Patterson was under immense pressure, but added that the timing of the announcement was "highly puzzling and worrying".
"While the markets are likely to receive the news positively (...) it does beg the question as to why the transition was announced after the company launched a fundamental transformation programme flanked by a reorganization of the management structure with new appointees," they said.
Chief Financial Officer Simon Lowth was a potential successor, they said, but an external candidate was more likely.
Consumer boss Marc Allera would be another possible replacement, having set out plans last month to improve the BT brand.
Patterson won plaudits when he took BT into TV sports, going had-to-head with rival Sky in Premier League soccer rights, and back into mobile by buying market leader EE, sending shares to a 14-year high in 2015.
He was "immensely proud" of what had been achieved at the former telecoms monopoly, in sports broadcasting, mobile and a hard-won agreement with the regulator to keep hold of its networks business Openreach.
But the victories were eclipsed by problems, led by a fraud had left a 530-million pound black hole in its Italian business.
The scandal, which came at the same time as a sharp slowdown in demand from public sector and corporate customers, forced the 50-year-old executive to cut profit targets in 2017.
Patterson received a total of 2.3 million pounds ($3.1 million) in the year to the end of March, according to the company's annual report -- basic pay of 997,000 pounds plus a 1.292 million pound bonus. He had missed out on a bonus in the previous year after a number of setbacks.
Patterson was also embroiled in fractious talks with Britain's telecoms regulator Ofcom about the fate of Openreach, which runs the national broadband network.
He managed to avoid a full break-up of the group by agreeing to legally separate Openreach, but he admitted he had been taken aback by the flak BT had received about its customer service and its networks during the bitter two-year battle.
The bad news continued when Ofcom fined BT a record 42 million pounds for service failures.
Under increasing pressure, Patterson announced a radical plan to cut job and save 1.5 billion pounds a year by 2020/21 last month.
But the subsequent decline in the share price showed investors were not on side.
Analysts at UBS said the fact that the board supported the strategy suggested no significant strategic changes.
But they said the incoming CEO would have to address the pace of rolling out full fibre networks, the BT Sport strategy, the future of its Global Services IT unit and how much of the 1.5 billion pounds of savings should be re-invested in the business. ($1 = 0.7459 pounds)
(Editing by Mark Potter and Keith Weir)