BT 2006 Annual Report Download - page 9

INTRODUCTION TO THE BUSINESS REVIEW
BT Group plc is one of the world’s leading providers of
communications solutions and services operating in 170
countries.
Our vision is for BT to be dedicated to helping customers
thrive in a changing world. Our mission is to be the leader in
delivering converged networked services. We are committed to
increasing shareholder value by transforming the customer
experience through service excellence, by the effective
management of our powerful brand, and by leveraging our large
scale networks and our existing customer base. We aim to find
new and mutually-rewarding ways of engaging with around 20
million customers, to capitalise on the possibilities of
convergence, to offer global reach combined with the service
values associated with local delivery, and to continue to provide
innovative services and solutions.
Our principal activities include networked IT services; local,
national and international telecommunications services; and
broadband and internet products and services. We have ISO
9001 certification (the international quality management system
standard) for most of our operations in the UK and worldwide.
We are committed to enhancing our positive impact on
society through leadership in CSR (corporate social
responsibility), and our policy is to achieve best practice in our
standards of business integrity in all our operations, in line with
our published statement of business practice – The Way We
Work.
How BT operates
BT consists principally of four lines of business: BT Global
Services, Openreach, BT Retail and BT Wholesale.
Openreach was established on 21 January 2006 in response
to Ofcom’s strategic review of telecommunications. It operates
the physical (as opposed to the electronic) assets of the local
access and backhaul networks and provides the services which
use these networks to communications providers, both
internally and externally. (See Regulation, competition and
prices) For financial reporting purposes Openreach remained
part of BT Wholesale until the end of the 2006 financial year. It
will be reported as a separate line of business in the 2007
financial year.
Openreach, BT Retail and BT Wholesale operate almost
entirely within the UK, where BT is the UK’s largest
communications service provider, by market share, to the
residential and business markets, supplying a wide range of
communications products and services, including voice, data,
internet and multimedia services, and offering a comprehensive
range of managed and packaged communications solutions.
In the 2006 financial year, 87% of our revenue was derived
from operations within the UK.
BT Global Services addresses the networked IT services needs
of multi-site organisations both in the UK and internationally.
OUR CUSTOMERS
Revenue by customer segment year ended 31 March 2006
Business
Consumer
Wholesale
(UK and global carrier)
Major corporate
27%
12%
35%
26%
Major corporate customers
Our core target market is 10,000 multi-site organisations
including major companies with significant global requirements,
together with large organisations in target local markets. We
aim to provide them with networked IT services and a complete
range of managed solutions.
In the 2006 financial year, major corporate revenue
increased by 16% to £6,880 million, with new wave revenue
increasing by 35% and traditional revenue declining by 4%. The
increase in new wave revenue for major corporate customers
globally was driven by networked IT services, broadband and
mobility. New wave revenue accounted for 59% of our total
revenue in the major corporate market, compared with 51% in
the 2005 financial year.
The continued migration of our customers from traditional
voice and data services to networked IT services enables us to
build closer, high-value relationships with these customers,
enabling them to manage their businesses more effectively and
gain competitive advantage in their markets. Such relationships
will, we believe, deliver long-term, profitable revenue, more
than offsetting the decline in our traditional business revenue.
As well as local, national and international communications
services and higher-value broadband and internet products and
services, we offer a comprehensive portfolio of networked IT
services focused on messaging and conferencing, CRM
(customer relationship management), convergence, outsourcing
and security. We also offer consultancy services to help
organisations understand network performance, operate their
networks and applications efficiently and transform their
businesses to gain advantage in the digital networked economy.
Our extensive global communications network and strong
partnerships enable us to serve customers in the key
commercial centres around the world using a combination of
direct sales and services capabilities and strategic partners.
Business customers
At 31 March 2006, in the UK we had around 1.5 million
business customers, with more than eight million exchange
lines.
In the SME (small and medium-sized enterprises) market
(typically companies with up to 500 employees), our strategy is
to provide customers with tailored IT and communications
products and services that enable them to manage their
businesses more simply and efficiently.
In the 2006 financial year, 23% of revenue was from new
wave activities, compared with 19% in the 2005 financial year.
However, we face challenging market conditions and, overall in
the SME market during the 2006 financial year, revenue
reduced by 5% to £2,324 million, primarily reflecting the
impact of CPS (carrier pre-selection) and WLR (wholesale line
rental).
In April 2006, we announced that we had acquired dabs.com
plc, one of the UK’s leading internet retailers of IT and
technology products. dabs.com has around one million
customers throughout the UK, and this move strengthens our
online IT and digital products sales and service presence for
SME and consumer customers.
Consumer customers
At 31 March 2006, we had over 18 million UK consumer
customers with around 20 million residential customer lines
(exchange line connections). In the 2006 financial year,
consumer revenue declined by 5% to £5,296 million, primarily
reflecting the impact of CPS, WLR and regulatory price
reductions in mobile termination rates.
Operating and financial review BT Group plc Annual Report and Form 20-F 2006 7