BT boss signs off with strong quarter

* Outgoing CEO Patterson has better-than-expected quarter

* New CEO Jansen faces headwinds

* Says stockpiling for Brexit

* Shares (Berlin: DI6.BE - news) reverse falls to trade up 1.5 pct (Adds further comments on legacy, Brexit)

By Paul Sandle

LONDON, Jan 31 (Reuters) - BT Group (Other OTC: BTGOF - news) 's outgoing CEO Gavin Patterson said he was handing over a company with the momentum needed to see through a major restructuring and withstand pressures ranging from demands from regulators to aggressive competition in consumer broadband.

Philip Jansen, a former Worldpay chief executive, takes the helm at Britain's biggest broadband provider on Friday, eight months after Patterson launched a cost-cutting plan to tackle financial and operational underperformance.

Patterson signed off with better-than-expected third quarter numbers and a forecast that full-year earnings would come in at the top end of guidance.

But the outlook made clear the challenge facing Jansen.

"We continue to expect regulation, competition, cost inflation and legacy product declines to impact in the short term before being more than offset by improved trading and cost transformation by our 2020/21 financial year," Patterson said.

He said in May he would cut 13,000 jobs to tackle problems ranging from criticism of BT's fibre broadband plan to an underperforming IT services business.

BT's shares, down 31 percent since Patterson took over in 2013, reversed falls early on Thursday to trade up 1.5 percent at 237 pence at 1154 GMT.

Hargreaves Lansdown (Frankfurt: DMB.F - news) analyst George Salmon said Patterson had had his critics in recent years, but the results meant he was leaving on an upbeat note.

"That's not to say BT is out of the woods though," he said. "Competition is fierce in mobile and broadband, and falling profits at Openreach are a timely reminder that regulation has the potential to limit progress at any time," he said.

Patterson said the highlights of his tenure included buying Britain's biggest mobile operator EE and moving into sports broadcasting, two moves that transformed BT's consumer business.

Put there were negatives, including an accounting scandal in Italy two years ago and a rocky relationship with Britain's telcoms regulator.

Patterson said in retrospect he could have launched the restructuring plan a year earlier.

"Time (Frankfurt: A11312 - news) goes very quickly as a CEO and you need to move today rather than move tomorrow," he said.

BREXIT PLANNING

BT said it was stepping up planning for Britain leaving the European Union in March, including a disorderly exit that it and other businesses fear.

"We need to plan for all eventualities including a disorderly transition," Patterson said.

BT was building up stock of key equipment such as broadband hubs and set-top boxes in case there were delays in the supply chain, he said.

It was also making sure it could continue to serve customers through its European subsidiaries and would not have problems moving data about.

"Like everyone else we are expecting it hopefully to be a negotiated managed exit but are prepared for the worst if it were to happen," Patterson said.

The stockpiling costs would be covered by its working capital provisions, the company said.

BT reported revenue of 5.98 billion pounds ($7.85 billion), down 1 percent, and core earnings of 1.88 billion pounds, down 3 percent, for the quarter to the end of December, beating analysts' expectations of 5.93 billion pounds and 1.82 billion pounds respectively.

Revenue and earnings grew strongly in its consumer business, helped by a September price increase and higher handset costs, offset by a decline in its enterprise business and in its Openreach networks arm, which was hit by regulated price cuts.

It said adjusted core earnings for the year to end-March would be around the top end of guidance of 7.3 billion to 7.4 billion pounds.

($1 = 0.7617 pounds) (Editing by Mark Potter and Jane Merriman)