BT 2009 Annual Report Download - page 119

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ADDITIONAL INFORMATION FINANCIAL STATEMENTS REPORT OF THE DIRECTORS BUSINESS AND FINANCIAL REVIEWS OVERVIEW
FINANCIAL STATEMENTS CONSOLIDATED FINANCIAL STATEMENTS – NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
117BT GROUP PLC ANNUAL REPORT & FORM 20-F
FINANCIAL STATEMENTS
27. Financial commitments and contingent liabilities
2009 2008
Capital expenditure contracted for at the balance sheet date but not yet incurred was as follows: £m £m
Property, plant and equipment 414 639
Software 37 101
Total 451 740
2009 2008
Future minimum operating lease payments for the group were as follows: £m £m
Payable in the year ending 31 March:
2009 – 469
2010 484 453
2011 455 432
2012 430 408
2013 403 388
2014 377 365
Thereafter 5,855 6,227
Total future minimum operating lease payments 8,004 8,742
Operating lease commitments were mainly in respect of land and buildings. Leases have an average term of 23 years (2008: 24 years) and
rentals are fixed for an average of 23 years (2008: 24 years).
At 31 March 2009, other than as 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 O2UK Limited prior to its demerger with O2on 19 November
2001. O2plc has given BT a counterindemnity for these guarantees. The maximum exposure is US$110m as at 31 March 2009 (2008:
US$72m), approximately £77m (2008: £36m), although this could increase by a further US$399m (2008: US$402m), approximately
£278m (2008: £202m), in the event of credit default in respect of amounts used to defease future lease obligations. The guarantee lasts
until O2UK Limited 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 (universal mobile telecommunication system) auction in 2000. 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 defendants were also acquitted. The Public Prosecutor has appealed the court’s 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 formally investigated the way the UK government set BT’s property rates and those paid by Kingston
Communications, and whether or not the Government complied with European Community Treaty rules on state aid. It concluded that no
state aid had been granted. The Commission’s decision has now been appealed, but the company continues to believe that any allegation
of state aid is groundless, and that the appeal will not succeed.