BT 1998 Annual Report Download - page 18

1998 1997 1996
£m £m £m
)))!! !!!00511111110111
Staff costs 3,917 3,778 3,680
Own work capitalised (424) (399) (417)
Depreciation 2,395 2,265 2,189
Payments to
telecommunication
operators 1,600 1,476 1,383
Other operating costs 4,761 4,309 4,193
00011!!!00511111110111
Total operating costs,
before redundancy
charges 12,249 11,429 11,028
Redundancy charges 106 367 421
00011!!!00511111110111
Total operating costs 12,355 11,796 11,449
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Staff costs increased by 3.7% in the 1998 financial year to
£3,917 million, after rising by 2.7% in the 1997 financial year.
The increase in the 1998 financial year was the result of the
effects of the annual pay awards and compensation for the
special dividend, offset by savings resulting from reduced
pension costs. The compensation of £120 million for the
special dividend is for those employees holding
unexercised rights, mainly under group-wide sharesave
schemes, which lost value on the payment of the special
dividend in September 1997.
The allocation for the employee share ownership scheme
in the 1998 and 1997 financial years was £64 million,
representing 2% of pre-tax profit for those years. In the 1996
financial year approximately 1% was allocated. In the 1997
financial year, the increase in staff costs was the result of
this higher allocation for the employee share ownership
scheme as well as the annual pay awards and staff costs in
Employees (thousands)
94 95 96 97 98
N A N C I A L R E V I E W
14% and 12.9% growth in Cellnet’s customer-base in the
two years, respectively, offset by the effect of reductions
in mobile call prices. Cellnet had 3.1 million customer
connections at 31 March 1998, 75% of which were on its
digital GSM network.
The strong growth in BT’s sales of its advanced services,
including FeatureNet, its Syncordia Solutions operation,
incorporating managed data networks, and Syntegra, the
group’s systems integration business, were the main
elements in the increase of 29% in other sales and services
in the 1998 financial year to £2,606 million and the 23%
growth in the 1997 financial year. Other significant
increases in turnover came from BT’s overseas operations
and interconnect charges.
BT’s turnover from its overseas operations grew strongly.
Concert services to multinational customers provided much
of the growth in the 1998 financial year. Newly-acquired
systems integration businesses in Europe accounted for
about half of the growth in the 1997 financial year with
Concert services providing much of the balance.
Turnover from UK operators for interconnect charges rose
from £265 million in the 1996 financial year to £319 million
in the 1997 financial year and to £496 million in the 1998
financial year. These increases reflect the growing market
share of BT’s UK competitors and the increasing level of
traffic flowing into BT from their networks. There was also
a corresponding increase in the payments made by BT to
these operators for traffic passing to their networks.
Other operating income
Under the terms of an agreement among BT, MCI and
WorldCom, BT received US $465 million on 12 November
1997 as the break-up fee and partial reimbursement of
expenses incurred on the BT/MCI merger agreement.
This receipt, net of relevant expenses incurred in the 1998
financial year, has been included as an exceptional profit of
£238 million in other operating income in the group’s profit
and loss account for this year.
Operating costs
Total operating costs increased by 4.7% in the 1998
financial year to £12,355 million after increasing by 3.0%
in the 1997 financial year. As a percentage of turnover,
operating costs decreased from 79.3% in the 1996
financial year to 79.0% in the 1997 and 1998 financial years.