BT 2000 Annual Report Download - page 31

Financial review
30 Annual report and Form 20-F
prices. The combined e¡ect of the price changes to
¢xed-network calls totalled over »530 million in the 2000
¢nancial year, which was equivalent to a 9% reduction in
call prices following falls of 3% and 6% in the previous
two years.
The main volume growth in ¢xed-network calls in the
2000 ¢nancial year was derived from a signi¢cant increase
in calls to mobile phones and the increased use of the
internet. In the 1999 ¢nancial year, similar factors were
also behind the increase in calls over BT's ¢xed-network,
particularly in the second half of that year. The call
volume growth of 7% in the 2000 ¢nancial year was
at the same level as that in the 1999 ¢nancial year.
While internet-related local calls are growing very
strongly, traditional ¢xed-network local calls are
declining in volume, which we attribute partly to
mobile phone substitution and also to intense
competition. We expect this trend to continue.
Turnover from
exchange lines grew by
5.2% in the 2000 ¢nancial
year to »3,526 million after
increasing by 5.0% in the
1999 ¢nancial year. The
increased turnover was the
combined result of the
growth in business lines and
rental price increases. The
number of business lines
grew by 5.9% in the 2000
¢nancial year and by 6.1%
in the 1999 ¢nancial year, with ISDN services being the
main driver behind this growth. The numbers of residential
lines declined slightly in both years due to the competition
from cable operators largely o¡set by the high number
of BT customers installing second lines. Overall, BT's
total ¢xed-network lines grew by 1.6% in the 2000
¢nancial year to 28.5 million
and by 1.4% in the 1999
¢nancial year to 28.1 million.
Mobile communications
turnover, mainly comprising
calls charged to and
subscriptions from customers,
increased by 55% in the
2000 ¢nancial year to
»2,170 million, following
growth of 29% in the
previous ¢nancial year.
Nearly half of the increase
in turnover in the 2000 ¢nancial year was contributed by
the BT Cellnet Lumina (formerly Martin Dawes
Telecommunications) and DX Communications
businesses acquired in 1999. Otherwise, the turnover
increases in the 2000 and 1999 ¢nancial years re£ected
the 64% and 47% growth in BT Cellnet's customer-base
in the two years, respectively, o¡set by the e¡ect of
reductions in mobile call prices. Nearly 2.9 million new
customers were connected to BT Cellnet's network in the
2000 ¢nancial year, following the 1.4 million connected in
the 1999 ¢nancial year, substantially due to the success of
the ``pre-paid'' mobile phone introduced in the second half
of the 1999 ¢nancial year. BT Cellnet has continued to
attract signi¢cant numbers of customers on post-pay
contracts. BT Cellnet had 7.4 million customer connections
at 31 March 2000, of which over half were on a post-paid
contract basis.
Turnover from receipts from other operators for
interconnect charges increased from »1,249 million in the
1998 ¢nancial year to »1,417 million in the 1999 ¢nancial
year and to »1,974 million in the 2000 ¢nancial year. This
turnover mainly comprises the income BT generates from
other UK operators for passing calls from one operator to
another and for terminating calls on BT's network. It also
includes receipts from international operators for incoming
international and transit calls which BT received before
this activity was transferred to Concert in early January
2000. From that date, this turnover includes receipts from
Concert for terminating incoming calls into the UK and
handling Concert's UK multinational customer domestic
tra¤c. The increases in turnover, in the 2000 and 1999
¢nancial years, primarily re£ect the growing market share
of BT's UK competitors, particularly mobile phone
operators, and the increasing level of tra¤c £owing
through and into BT from their networks. There has been a
large corresponding increase in the payments made by BT
to these operators for tra¤c passing to their networks.
Although growth has been rapid, with volumes growing at
38% for the 2000 ¢nancial year, and 34% for the 1999
¢nancial year, BT's interconnect business does not provide
us with the same overall level of margin as our UK
retail business.
Private services turnover, at »1,135 million in the
2000 ¢nancial year, has remained broadly static over
the three years under review. Demand for digital
private circuit services continued at a high level in all
three years, supported by a signi¢cant migration from
analogue circuits. Price reductions, however, have
prevented any signi¢cant change in turnover over the
three ¢nancial years.