BT 2009 Annual Report Download - page 94

ADDITIONAL INFORMATION FINANCIAL STATEMENTS REPORT OF THE DIRECTORS BUSINESS AND FINANCIAL REVIEWS OVERVIEW
92 BT GROUP PLC ANNUAL REPORT & FORM 20-F
FINANCIAL STATEMENTS CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. Segmental analysis
Primary reporting format – business segments
The group’s principal activities include: the provision of networked IT services; local, national and international telecommunications
services; broadband and internet products and services; and converged fixed/mobile products and services.
The group is organised into four customer-facing lines of business, BT Global Services, BT Retail, BT Wholesale and Openreach,
which are supported by two internal functional units, BT Design and BT Operate.
The activities of each of the customer-facing lines of business are as follows:
BT Global Services serves major corporate, carrier and government organisations across the world, providing high-performance managed
networked IT services, application management, professional services and outsourcing solutions.
BT Retail serves consumer customers and small and medium-sized enterprises (SMEs) in the UK, providing a range of innovative
communications products and services. BT Retail also includes BT Ireland, which operates across the major corporate, SME, consumer and
wholesale markets throughout the Republic of Ireland and Northern Ireland, and Enterprises, which comprises a number of individual
businesses such as BT Conferencing, BT Directories and BT Payphones.
BT Wholesale provides services to UK communications providers through a diverse portfolio ranging from nationally available broadband,
voice and data connectivity services and interconnect to bespoke, fully managed network outsourcing and value-added solutions.
Openreach is responsible for the crucial ‘first mile’ connecting communications providers’ customers to their local telephone exchange,
giving them equal, open and economic access to the UK network. Openreach products are sold on an equivalent basis to BT lines of
business and other communications providers at the same arm’s length prices, with the BT lines of business being treated no differently
than any other customer with regard to terms and conditions or access to systems and data.
BT Design and BT Operate are internal functional units which support the four customer-facing lines of business. BT Design is
responsible for the design and build of the platforms, systems and processes which support the provision of the group’s products and
services, and BT Operate is responsible for their operation. The group’s reportable segments are the four customer-facing lines of business;
neither BT Design nor BT Operate are reportable segments. Neither BT Design nor BT Operate generate any revenue and both operate on a
cost recovery basis. The costs incurred by BT Design and BT Operate are allocated to the customer-facing lines of business in line with the
services they provide. The depreciation and amortisation incurred by BT Operate in relation to the networks and systems they manage and
operate on behalf of the customer-facing lines of business are allocated to the lines of business based on their respective utilisation. The
assets managed by BT Operate and their capital expenditure in the year are also allocated to the lines of business in a manner consistent
with their depreciation and amortisation. Accordingly, the segmental results do not necessarily reflect the operating results of the lines of
business as if they were independent business operations.
Intra-group revenue generated from the sale of regulated products and services is based on market price. Intra-group revenue from the
sale of other products and services is agreed between the relevant lines of business.
In addition to the four customer-facing lines of business, the remaining operations of the group are aggregated and included within the
‘Other’ category to reconcile to the consolidated results of the group. In the prior year, the results of ‘Other’ included any over or under
recovery of costs by BT Design and BT Operate. In the current year, all costs from BT Design and BT Operate have been fully allocated to the
customer-facing lines of business in line with the services they provide. This amounts to £32m of operating costs and £129m of
depreciation and amortisation in the year to 31 March 2009. In 2008, there was no such allocation as we were transforming the business
and developing the trading model.
Revenue by line of business
BT Global
Services BT Retail BT Wholesale Openreach Other Intra-group Total
Year ended 31 March 2009 £m £m £m £m £m £m £m
External revenue 8,828 8,112 3,430 978 42 – 21,390
Internal revenue – 359 1,228 4,253 – (5,840) –
Total revenue 8,828 8,471 4,658 5,231 42 (5,840) 21,390
BT Global
Services BT Retail BT Wholesale Openreach Other Intra-group Total
Year ended 31 March 2008 £m £m £m £m £m £m £m
External revenue 7,889 8,194 3,707 886 28 – 20,704
Internal revenue – 283 1,252 4,380 – (5,915) –
Total revenue 7,889 8,477 4,959 5,266 28 (5,915) 20,704
BT Global
Services BT Retail BT Wholesale Openreach Other Intra-group Total
Year ended 31 March 2007 £m £m £m £m £m £m £m
External revenue 7,312 8,100 4,109 685 17 – 20,223
Internal revenue – 246 1,277 4,538 – (6,061) –
Total revenue 7,312 8,346 5,386 5,223 17 (6,061) 20,223
FINANCIAL STATEMENTS