BT 2013 Annual Report Download - page 40

Business
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Gartner expects the market to grow in all the regions we operate in –
albeit at different rates. Continental Europe is expected to experience
the lowest rate of growth at 2.0% a year over the next three years. In
contrast, Asia Pacific, Latin America, Turkey, the Middle East and Africa
should grow at 3.3% a year.
In the global business ICT market, we are focused on delivering major
managed networked IT services securely, efficiently and globally.
According to ISG Research, BT has the highest standalone managed
network services (MNS) market share globally, is the only provider with
double-digit share for standalone MNS services in each of the three
major regions (Americas, Asia Pacific and EMEA), and is the standalone
MNS market share leader in EMEA.
We experienced tough conditions in Europe and the financial services
sector during the year. But we are increasing our market share in the
high-growth regions.
The public sector generated 26% of our revenue. In the UK, we are one
of the Government’s largest suppliers of networked IT services – as a
whole, they are our biggest customer. Except as described on page 39,
we have a normal customer and supplier relationship with them. Of
our corporate customers, financial institutions are our largest customer
segment, generating 19% of our revenue in the year. We also supply a
range of services to other telecoms companies.
BT Global Services 2012/13 revenue by sector
Corporate customers 46%
Public sector
(UK and overseas) 26%
Financial Institutions 19%
Transit 6%
Other global carriers 3%
We serve:
— 94% of the FTSE 100 companies
— 74% of the Fortune 500 companies
— 100% of Interbrand’s top 50 annual ranking of the world’s most
valuable brands
— the world’s top stock exchanges, leading broker-dealers and
biggestbanks
— national and local government organisations and other public
sectorbodies in 26 countries around the world.
As well as pursuing new customers, we aim to grow our share of existing
customers’ spending through increasing the number of products and
services we sell to them.
Wholesale customers
We serve the wholesale telecoms customer segment in Great Britain
through Openreach and BT Wholesale. In Northern Ireland and the
Republic of Ireland, we serve wholesale customers through BT Ireland.
Everywhere else in the world, we serve the wholesale market through
the wholesale arm ofBT Global Services.
Openreach sells local loop and backhaul services to around 500 CPs –
the largest being Sky, TalkTalk and BT lines of business.
BT Wholesale works with more than 1,400 CPs, including all the big
fixed and mobile operators, ISPs and broadcasters. We manage and
support the network and services needs of many UK operators including
EE, KCOM Group, MBNL, O2, Virgin Media and Vodafone. Our biggest
competitors are Cable & Wireless Worldwide, Colt Group, TalkTalk and
Virgin Media, as well as Ericsson for managed services.
Outside the UK, we offer wholesale telecoms services to more than
1,200 CPs around the world. We compete with the wholesale divisions
of local incumbents, alternative network operators and global wholesale
telecoms companies like BICS and Level3.
We are Europe’s largest telecoms services wholesaler by revenue.
European wholesalers market share by revenue
BT 17%
Deutsche Telekom 12%
FT-Orange 12%
Telefónica 9%
Telecom Italia 7%
Other 43%
Source: Ovum, December 2012 (based on 2011 data)
Regulation
Communications services are vital in a modern
world. This means the industry sometimes needs
to be controlled and monitored. In nearly all our
markets, these services are subject to regulation
by governmental and non-governmental bodies.
In this section we explain some of the recent and
upcoming decisions taken by regulators and how
they affectus.
European Union (EU) regulation
In EU countries, electronic communications services are governed by a
number of European directives and regulations. These create a Europe-
wide framework covering services including fixed and mobile voice,
broadband, cable and satellite TV.
Different countries have implemented the existing directives in different
ways. The directives include rules covering access and interconnection,
universal service obligations, and how often national regulators should
review markets for significant market power (SMP). They also cover how
regulators set price controls. They require regulators to consult with the
European Commission (EC) on any price control decisions before they are
finalised to make sure they are consistent with the European regulations.
During 2013/14 the EC is expected to issue guidance on regulating
next generation fibre access networks. We expect this to align the rest
of Europe more closely with the existing UK approach. The EC is also
expected to review the scope of the relevant market segments covered
by telecoms regulation.
UK regulation
The telecoms industry is regulated through various European directives,
the Communications Act 2003 (the Communications Act) and Ofcom
(the UK’s independent regulator) as well as other regulations and
recommendations.
The Communications Act
The Communications Act gives Ofcom legal powers and sets out the
legal requirements for how electronic communications services should
be regulated in the UK. It includes the conditions imposed by the
European directives. The Government is currently reviewing our sector’s
regulatory regime, with a new framework planned for 2015. The review
is looking into how to encourage growth and innovation and how to
remove unnecessary regulation.