BT 1999 Annual Report Download - page 14

13
BUSINESS REVIEW
Commission, taken in August 1998, to exclude BT from
its continuing investigations into the high level of
interconnection rates in Europe. We believe that the
Commission’s decision to concentrate its investigations on
arrangements involving seven other European operators
recognises the competitive nature of the UK market for
international communications.
The volume of international calls continues to grow, partly
because of significant price reductions. However, these
price reductions and increased competition continue to
have an adverse effect on revenues.
It is intended that much of our international call business
will be transferred to our proposed global venture
with AT&T later in 1999 once regulatory approvals
are obtained.
Mobile services in the UK
Mobile communication services and products supplied
by BT in the UK mainly comprise cellular telephony,
together with radiopaging and voice messaging.
We have a 60% stake in BT Cellnet, one of the four
cellular telephone network operators in the UK licensed
by HM Government. BT Cellnet had 4.5 million
customers at 31 March 1999, representing 30% of
the UK market. During the course of the year,
HM Government indicated that it would no longer
object if BT decided to buy the 40% of BT Cellnet
owned by Securicor.
In March 1999, BT Cellnet acquired an 80% stake
in the mobile service provider Martin Dawes
Telecommunications (MDT) for approximately
£130 million. MDT, which will continue to be run as a
separate business unit at least for the 2000 financial
year, has 800,000 customers, mainly small and
medium-sized businesses. Vodafone holds the remaining
20% of MDT and, until September 1999, has the right to
sell it to BT Cellnet.
The market for mobile services is expanding faster than
most other sectors of the UK telecommunications market
but is extremely competitive with great pressure on
prices. Throughout the year, BT Cellnet has responded
with a number of marketing initiatives: discount offers
specifically designed for particular types of customer
(marketed as “BT Cellnet First”), products and services
aimed at young people and, most notably, “pre-paid”
phones. These can be bought over the counter at a range
of outlets, including supermarkets and electrical stores,
complete with a set amount of call time which can be
topped up later, so avoiding the need for written contracts
and monthly subscriptions. They have proved very
popular and have been a major contributor to the large
increase in BT’s mobile communications customer
base (up 47% over the 1999 financial year) and turnover
(up 29% over the year, even after significant
price reductions).
BT Cellnet has continued to invest in its digital cellular
GSM network to improve its quality and capacity.
Vodafone, Orange and One 2 One are the other
licensed mobile operators in the UK. They had 5.6 million,
2.5 million and 2.3 million connections, respectively, on
31 March 1999, up from 3.4 million, 1.3 million and
1.2 million at the same time last year.
As a result of an Inquiry by the Monopolies and Mergers
Commission (MMC) (renamed the Competition
Commission from 1 April 1999), the price of calls to BT
Cellnet and Vodafone was reduced from 30 April 1999 on
5
9
7
9
11
% annual international
call volume growth
YEARS ENDED 31 MARCH
95 96 97 98 99
1.7
2.4
2.7
3.1
4.5
BT Cellnet customers
(millions)
AT 31 MARCH
95 96 97 98 99