BT 2013 Annual Report Download - page 61

Performance 59
Performance
Contracts won include:
Customer Contract
Telefonica UK A 10-year contract to support the introduction
of 4G services to its O2 customers. Provision of
a sizeable increase in backhaul capacity to new
and existing sites, and also a dedicated high
capacity transmission network
BSkyB A new five-year contract to continue to provide
wholesale voice services for BSkyB off-network
fixed-line customers
MBNL An increase in the scope of our MEAS contract
to provide more backhaul capacity at key base
stations across the UK
Customer service delivery
More reliable next generation broadband services led to a 9% reduction
in broadband faults reported in the year. We are also better at fixing
reported faults, with our diagnostic tools automatically fixing 79% in
the fourth quarter of 2012/13, up from 67% in the same period of the
prior year. This gave our advisors more time to focus on providing better
customer service, for example by sorting out problems before they
affected end-users. We also improved our broadband order handling,
with our systems automatically processing half a million orders, and
we achieved an 84% efficiency improvement in our Ethernet order
handling.
We introduced a digital content exchange service in London and
Manchester. Through our International Media Centre at the BT Tower, we
broadcast the TV content for the London 2012 Olympic and Paralympic
Games across the world.
Cost transformation
Net operating costs reduced by 11% (2011/12: 6%) or by 1% excluding
transit costs (2011/12: 3% increase). This was achieved by reducing
labour costs, which fell by 15% (2011/12: 8%), lower third-party costs
and rationalising our networks. These reductions have been partially
offset by higher cost of sales due to the change in product mix.
Investing for the future
This year we invested both in creating new products and services and in
improving the resilience and footprint of our existing growth products.
Our key investments included:
— a new suite of hosted communications services for launch in
2013/14
— new solutions based on small cell technology for mobile operators
toboost their coverage
— extending our national broadband, Ethernet and MEAS footprints
— new management information and routing systems to support
growth in international voice calls
— a new online portal that will offer better tools for pricing, ordering
and support.
We also invested in our customer service operations, to help cut costs
and make it easier for customers to do business with us.
We will continue with this investment strategy in 2013/14.
Financial performance
Year ended 31 March
2013
£m
2012
£m
2011
£m
Revenue 3,588 3,923 4,201
Underlying revenue excluding
transit (2%) (2%) (3%)
Net operating costsa2,420 2,715 2,885
EBITDA 1,168 1,208 1,316
Depreciation and amortisation 593 604 619
Operating profit 575 604 697
Capital expenditure 233 336 329
Operating cash flow 896 800 911
a Net of other operating income.
Underlying revenue excluding transit declined by 2% (2011/12: 2%),
or by 1% excluding ladder pricinga, with growth in managed network
services, Ethernet and IP Exchange offset by the ongoing migration of
broadband lines to LLU and by declines in other traditional services.
Total revenue declined by 9% (2011/12: 7%), or 7% excluding ladder
pricing, mainly due to a £277m (2011/12: £224m) reduction in transit
revenue including mobile termination rate reductions of £132m and
lower volumes. Revenue from MNS contracts continued to grow and
accounted for 32% of external revenue in the year, up from 27% in the
prior year.
EBITDA decreased by 3% (2011/12: 8%), or 1% excluding ladder
pricing. Depreciation and amortisation reduced by 2% (2011/12: 2%)
and operating profit declined by 5% (2011/12: 13%), but was flat
(2011/12: 14% decrease) excluding ladder pricing.
Capital expenditure decreased by 31% (2011/12: 2% increase) primarily
due to lower spend on Ethernet as a result of improvements in capacity
management and lower spend on our WBC copper broadband product
which is now in exchanges serving more than 90% of UK premises.
Operating cash flow increased by 12% (2011/12: 12% decrease)
principally due to the reduction in capital expenditure.
a For a definition of ladder pricing, see page 195. For more details on ladder pricing, see page 39.