BT 2006 Annual Report Download - page 15

high-quality customer experience. Our core people engagement
initiative, the ‘my customer’ programme, aims to enable all BT
people to deliver great customer service through teamwork. In
the 2006 financial year, ‘my customer’ included:
sa ‘back to the floor’ event for 1,100 senior managers
smore than 4,500 BT people participating in customer
satisfaction improvement programmes
sthe introduction of a ‘customer connected’ programme for
BT people who do not interact with customers directly but
who, nevertheless, play a critical role in delivering customer
satisfaction.
ACQUISITIONS AND DISPOSALS
Acquisitions and disposals prior to the 2006 financial year
The BT of today was largely created by a radical restructuring of
the company in the 2002 financial year. This restructuring
involved the UK’s largest-ever rights issue (raising £5.9 billion),
the demerger of O2 (comprising BT’s wholly-owned mobile
assets in Europe), the disposal of significant non-core
businesses and assets, the unwind of Concert (our joint venture
with AT&T) and the creation of customer-focused lines of
business.
In the 2005 financial year, we acquired Infonet, one of the
world’s leading providers of international managed voice and
data network services, for £520 million, including acquisition
costs. Excluding Infonet’s net cash balance, the net value of the
deal was £315 million. We also acquired the 74% of Albacom
that we did not already own for a total acquisition cost of
£131 million. Albacom provides data transmission, voice and
internet services to the Italian business communications
market. In October 2004, there was an IPO (initial public
offering) of the Singapore telecommunications and media
company, StarHub, in which BT held an 11.9% stake. We
disposed of our entire holding through the IPO for net proceeds
of £77 million. In December 2004, we completed the sale of
our 15.8% stake in Eutelsat to GS Capital Partners – an
investment partnership affiliated with Goldman Sachs – for net
proceeds of £356 million.
Acquisitions and disposals in the 2006 financial year
A number of acquisitions and disposals were completed in the
year, including:
sin April 2005, we completed the acquisition of Radianz, the
leading financial services extranet provider, from Reuters for
a total consideration of £143 million. The purchase of
Radianz is another vital step in our transformation into a
global provider of networked IT services
sbetween July and September 2005, the conditions enabling
BT to redeem the exchangeable bond over our shares in LG
Telecom were fulfilled. As a result, virtually all the
bondholders exercised their right to convert their bonds into
LG Telecom shares, enabling us to dispose of all our shares.
The transaction gave rise to a bond redemption gain of
£27 million
sin February 2006, we acquired Atlanet, a Fiat subsidiary
providing domestic telecommunications services to Fiat and
other non-Fiat business customers throughout Italy, for
approximately E80 million, further reinforcing our position in
the Italian market.
We also completed a number of smaller acquisitions in the
2006 financial year, including CW Business Solutions (Cable
and Wireless’s retail operation in Spain), SkyNet Systems (an
independent LAN solutions provider focused on the education,
health, local government and media markets), Total Network
Solutions, (a provider of business solutions to UK corporate,
public sector and service provider customers) and Cara Group (a
provider of communications solutions to business and public
sector clients in the island of Ireland).
REGULATION, COMPETITION AND PRICES
BT operates in an increasingly competitive and dynamic
commercial environment, both in the UK and around the world.
The 2006 financial year saw the most significant change to the
UK regulatory regime since BT was privatised when, in response
to Ofcom’s strategic review of telecommunications, we
proposed a number of legally-binding Undertakings under the
Enterprise Act 2002 (the Enterprise Act). These Undertakings
were accepted by Ofcom and came into force in September
2005. (See BT’s Undertakings under the Enterprise Act)
The Undertakings are intended to deliver clarity and
certainty to the UK telecommunications industry, leading to
regulation being focused on the deepest point in the network at
which competition is feasible, and rolled back elsewhere.
This is mainly being achieved through the creation of a new
Openreach line of business to manage our access and backhaul
networks and their associated portfolio of Openreach products
and services. Apart from any exceptions agreed with Ofcom,
these products and services are to be made available in exactly
the same way to all communications providers who wish to use
them – including BT itself – under the same timescales, terms
and conditions – including price – and using the same
processes, with the same information available to all.
By offering services equivalently, BT anticipates deregulation
and the benefits this will bring to consumers and others in the
marketplace as part of enhancing the competitive process.
Regulation in the UK
Our policy is to comply fully with the regulatory framework in
which we operate. For example, we are committed to meeting
the obligations imposed under the Communications Act 2003
(the Communications Act) and BT’s Undertakings to Ofcom
under the Enterprise Act, and complying with generally
applicable legislation such as the Competition Act 1998 (the
Competition Act), while competing fairly and vigorously within
the rules.
We continue to work closely with compliance professionals in
the telecommunications and other regulated industries in the
UK and the EU (European Union) to establish best practice. We
publish an annual compliance report (which does not form part
of this report) at
http://www.btplc.com/Societyandenvironment/index.htm
Ofcom
The Office of Communications (Ofcom) was set up under the
Office of Communications Act 2002 to provide a single,
seamless approach to regulating the entire communications
market. Its functions were defined by the Communications Act.
In carrying out its functions, its principal duty is to further the
interests of citizens in relation to communications matters, and
secondly to further the interests of consumers in relevant
markets, where appropriate by promoting competition. In
performing its duties, it must have regard to a number of
matters, including the desirability of promoting competition and
the use of effective self-regulation, encouraging investment and
innovation, and encouraging the availability and use of high-
speed data services (including broadband).
Regulation takes the form of sets of conditions, mostly laid
down by Ofcom, and directions made by it under these
conditions. Some conditions apply to all providers of electronic
communications networks and services; others apply to
Operating and financial review BT Group plc Annual Report and Form 20-F 2006 13