BT 2006 Annual Report Download - page 10

In the consumer market we aim to provide customers with a
range of services that help them communicate more effectively,
be entertained and manage their lives. By increasing revenue
from broadband, mobility and internet services, we intend to
reduce further our dependence on revenue and profit from
traditional, fixed-line voice services. We also aim to maximise
the returns from our traditional business and defend market
share vigorously, through service offerings backed by innovative
marketing and excellent quality of service.
Consumer new wave revenue grew by 55% from £412 million
in the 2005 financial year to £638 million in the 2006 financial
year, driven principally by broadband. Residential broadband
customers increased by 52% to more than two million.
Wholesale customers
In the UK wholesale market, we provide network services and
solutions to over 700 communications companies, including
fixed and mobile network operators, ISPs (internet service
providers) and other service providers. We interconnect with
more than 150 other operators, as well as carrying transit traffic
between telecommunications operators.
In the 2006 financial year, external revenue from our
wholesale activities increased by 13% to £4,996 million.
In the UK, external revenue from our wholesale activities was
£4,226 million in the 2006 financial year, compared with
£3,820 million in the 2005 financial year.
New wave revenue was £1,033 million, up 56% on the 2005
financial year. This increase was driven by the success of
broadband as well as a strong emphasis on building innovative
network solutions that help our wholesale customers grow their
businesses and reduce their costs.
We have a long and successful tradition of delivering
network-based connectivity to the carrier and intermediate
telecommunications markets throughout the UK, and have
developed value-enhancing services and solutions. We have a
number of agreements with service providers and mobile
operators to upgrade their IP capability. In addition, we have
used our expertise and geographic reach to provide bespoke
data housing solutions.
In our global carrier business, revenue was £691 million in
the 2006 financial year, compared with £565 million in the
2005 financial year. This strong growth was mainly driven by
revenue from Albacom which we acquired in February 2005.
Our global carrier business customers include other fixed-line
telecommunications operators, mobile operators and selected
ISPs outside the UK.
OUR STRATEGY
Our strategy is to:
spursue profitable growth in new wave markets
smaximise the return from our traditional business
stransform our networks, systems and services for the twenty-
first century
screate long-term partnerships with our customers.
The successful delivery of this strategy depends on the
commitment of all BT people and our continued ability to
manage their development and reward them.
The key performance indicators against which we measure
the success of our strategy are earnings per share before
specific items (see Earnings per share in the Financial review
on page 35), free cash flow (see Financing in the Financial
review on page 36) and customer satisfaction (see Create long-
term partnerships with our customers).
Grow
new wave
Defend
traditional
Long-term
partnerships
with our
customers
Twenty-first
century
network
(21CN)
OUTLOOK
Our performance underpins our confidence that we can
continue to grow revenue, EBITDA, earnings per share and
dividends over the coming year. Revenue growth will continue
to be fuelled by new wave services; the EBITDA improvement
will be driven by the continued growth in BT Retail’s
profitability and an acceleration through the year of the EBITDA
growth in BT Global Services.
We are confident in our ability to improve shareholder
returns and accelerate the strategic transformation of the
business. (See Group risk factors on page 20 and 21)
PURSUE PROFITABLE GROWTH IN NEW WAVE MARKETS
In the 2006 financial year, 32% of our revenue was from new
wave activities – networked IT services, broadband and
mobility.
Build on our networked IT services capability
Our strategy in the networked IT services market is to reinforce
BT’s position as a global player capable of competing with the
world’s best in selected markets. Our portfolio of services
includes IP infrastructure, CRM, security, applications, managed
mobility, hosting and outsourcing.
In recent years, we have developed a track record of winning
and delivering complex, large-scale networked IT services
contracts for large business customers and other organisations
(including the public and government sectors) around the world.
We have shown that we have the experience and expertise to
help our customers succeed in a world in which business
applications are increasingly being networked and networks are
seen as increasingly vital to productivity and competitive
advantage.
We are, for example, playing a prominent role in the NHS
National Programme for IT, delivering:
sthe national broadband network (N3) – we successfully
installed more than 14,000 connections on the N3 ahead of
schedule
sthe spine transactional and messaging database – which now
has about 200,000 registered users
sthe London local service provider IT systems – we deployed
the first patient administration system specifically designed
for the NHS National Programme.
In March 2005, we announced that BT had won a contract
worth up to £1.5 billion over eight and half years to provide and
manage secure data networks for Reuters’ products and
services worldwide. In accordance with the contract, the parties
have tested a number of Reuters’ products over the BT
IP-enabled MPLS (multi-protocol label switching) network and
have started its migration process in a number of countries.
BT Group plc Annual Report and Form 20-F 2006 Operating and financial review8