BT 2006 Annual Report Download - page 99

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27. RELATED PARTY TRANSACTIONS
Amounts paid to the group’s retirement benefit plans are set out in note 29. There were a number of transactions during the year
between the company and its subsidiary undertakings, which are eliminated on consolidation and therefore not disclosed.
Key management personnel are deemed to be members of the Operating Committee. It is this committee which has
responsibility for planning, directing and controlling the activities of the group. Key management personnel compensation,
including the group’s directors, is shown in the table below:
2006 2005
£m £m
Salaries and short-term benefits 5.8 5.2
Post employment benefits 1.9 1.1
Share based payments 2.6 1.8
10.3 8.1
More detailed information concerning directors’ remuneration, shareholdings, pension entitlements, share options and other long-
term incentive plans is shown in the audited part of the Report on directors’ remuneration.
28. FINANCIAL COMMITMENTS AND CONTINGENT LIABILITIES
Capital expenditure contracted for at the balance sheet date but not yet incurred was:
2006 2005
£m £m
Property, plant and equipment and software 754 735
Future minimum operating lease payments for the group were as follows:
2006 2005
£m £m
Payable in the year ending 31 March:
2006 –459
2007 474 450
2008 449 442
2009 439 430
2010 429 419
2011 414 410
Thereafter 7,577 7,574
Total future minimum operating lease payments 9,782 10,184
Operating lease commitments were mainly in respect of land and buildings. Leases have an average term of 25 years and rentals
are fixed for an average of 25 years.
At 31 March 2006, other than disclosed below, there were no contingent liabilities or guarantees other than those arising in the
ordinary course of the group’s business and on these no material losses are anticipated. The group has insurance cover to certain
limits for major risks on property and major claims in connection with legal liabilities arising in the course of its operations.
Otherwise, the group generally carries its own risks.
The group has provided guarantees relating to certain leases entered into by O2 UK Limited prior to its demerger with O2 on
19 November 2001. O2 plc has given BT a counterindemnity for these guarantees. The maximum likely exposure is US$72 million
(£42 million) as at 31 March 2006, although this could increase by a further US$545 million (£314 million) in the event of credit
default in respect of amounts used to defease future lease obligations. The guarantee lasts until O2 UK Ltd has discharged all its
obligations, which is expected to be when the lease ends on 30 January 2017.
The company does not believe there are any pending legal proceedings which would have a material adverse effect on the
financial position or results of operations of the group.
There have been criminal proceedings in Italy against 21 defendants, including a former BT employee, in connection with the
Italian UMTS auction. Blu, in which BT held a minority interest, participated in that auction process. On 20 July 2005, the former
BT employee was found not culpable of the fraud charge brought by the Rome Public Prosecutor. All the other defendents were
also acquitted. The Public Prosecutor is in the process of appealing the courts decision. If the appeal is successful, BT could be held
liable, with others, for any damages. The company has concluded that it would not be appropriate to make a provision in respect
of any such claim.
The European Commission is formally investigating the way the UK Government has set BT’s property rates and those paid by
Kingston Communications. The Commission is examining whether the Government has complied with EC Treaty rules on state aid
in assessing BT’s rates. BT’s rates were set by the Valuation Office after lengthy discussions based on well established principles, in
a transparent process. In BT’s view, any allegation of state aid is groundless and BT is confident that the Government will
demonstrate the fairness of the UK ratings system. A finding against HM Government could result in BT having to repay any
amount of state aid it may be determined to have received. The company has concluded that it is not appropriate to make a
provision in respect of any such potential finding.
Notes to the consolidated financial statements BT Group plc Annual Report and Form 20-F 2006 97