BT 2001 Annual Report Download

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BT is one of Europe’s leading communications
companies, offering high quality innovative
voice, broadband, data, internet and wireless
services. We aim to help our customers make the
most of the unprecedented opportunities that
are arising as communications technologies
advance and develop.
We have announced our intention of forming
two strong and separately listed companies,
BT Wireless and Future BT, with the objective
of further increasing our ability to build
shareholder value.
British Telecommunications plc is a public limited company
registered in England, with listings on the London, New York
and Tokyo stock exchanges.
This is the annual report for the year ended 31 March 2001.
It complies with UK regulations and is the annual report on
Form 20-F for the Securities and Exchange Commission to meet
US regulations.
This annual report has been sent to shareholders who have
elected to receive a copy. A separate annual review and
summary financial statement for the year ended 31 March 2001
has been issued to all shareholders.
BT Annual report and Form 20-F 01

Table of contents

  • Page 1
    ...build shareholder value. British Telecommunications plc is a public limited company registered in England, with listings on the London, New York and Tokyo stock exchanges. This is the annual report for the year ended 31 March 2001. It complies with UK regulations and is the annual report on Form 20...

  • Page 2
    ...-year financial summary 30 Financial review 49 Board of directors and executive committee 52 Report of the directors 53 Corporate governance 57 Risk factors 62 Report on directors' remuneration 71 Statement of directors' responsibility 72 Report of the independent auditors 73 Accounting policies...

  • Page 3
    ... Years ended 31 March 2001 2000 1999 Group turnover Exceptional operating costs Total operating profit (loss) Profit on sale of fixed asset investments and group undertakings Profit (loss) before taxation Profit (loss) after taxation Basic earnings (loss) per share Dividends per share...

  • Page 4
    ... 2000/2001 ¢nal dividend and also the current year's interim dividend. Future dividend policy will be decided by the individual listed companies, taking into account their respective capital structures, their cash requirements and the markets in which they operate. 04 BT Annual report and Form 20...

  • Page 5
    ...is changing, and I am con¢dent that we can complete the process in the best interests of our shareholders, our customers and our employees. ''This amounts to nothing less than a structural and financial transformation of BT.'' Sir Christopher Bland Chairman 22 May 2001 BT Annual report and Form...

  • Page 6
    ... group concentrating on voice and data services. Its aim is to create value based on service excellence, its brand leadership, its large scale networks and its existing customer base. It will also develop and market new, higher value broadband and internet products and services. 06 BT Annual report...

  • Page 7
    ... the most part as Chairman of the BT group. The group has been a front-runner in the telecommunications world in countless ways. That can be put down to the talent and professionalism of its management and employees, and to the loyalty of its shareholders. BT has won through some turbulent times in...

  • Page 8
    ...internet business focused increasingly on broadband services; and BT is one of Europe's leading providers of communications services, including: & exchange lines and private circuits, and ¢xed local, national and international voice and data calls to homes and businesses in the United Kingdom (UK...

  • Page 9
    ... calls Exchange lines Receipts from other operators Wireless products Private services Solutions Yellow Pages and other directories Customer premises equipment supply Other sales and services Group turnover Share of associates' and joint ventures' turnover Trading between group and principal joint...

  • Page 10
    ... in Japan Telecom, J-Phone and Airtel to Vodafone for »4.8 billion in cash. The sale comprises our 20% stake in Japan Telecom, our 20% stake in J-Phone Communications and shares to be converted from a call option, which (i) Includes turnover between businesses. 10 BT Annual report and Form 20-F

  • Page 11
    ... videoconferencing. Marketing and pricing Total turnover EBITDA Operating profit before goodwill amortisation Capital expenditure on plant, equipment and property Net operating assets Employees mobile phones and the level of internet usage both increased strongly. This largely o¡set the decline...

  • Page 12
    ... and applying new technology to boost capacity, expand its product portfolio and reduce costs. We believe this should minimise erosion of market share and generate attractive returns on capital. During the 2001 ¢nancial year, we continued to invest in our UK network to meet increasing demand for...

  • Page 13
    ... portfolio. BT Wireless Year ended, or as at, 31 March 2001: BT Wireless' strategy is to attract and retain high-value customers and increase revenues per customer by positioning itself as a leader in the European mobile data market. Being wholly owned, the wireless businesses will be managed on...

  • Page 14
    ... the UK's ¢rst exclusively online mobile service, o¡ering mobile phones with mobile internet access through text messaging and WAP. By o¡ering high quality content and applications and developing personalised relationships with our customers, we believe Genie will assist in increasing average...

  • Page 15
    ... of BT, in the 2001 ¢nancial year. External turnover from solutions accounted for 5% of group turnover in the same period. Syntegra, our global consulting and systems integration business, is a market leader in creating new systems, which, through the use of the internet and associated technologies...

  • Page 16
    ..., operator-assisted, classi¢ed information service; The Business Database, which provides customer-speci¢c, direct marketing and database development services to businesses; Service Call, a telephone answering service; and sales agent services which Yell provides for the BT Phone Book white pages...

  • Page 17
    ... customers with advanced information and communication services. In the 2001 ¢nancial year, we invested »364 million in research and development, compared with »345 million and »268 million in the 2000 and 1999 ¢nancial years, respectively. Major areas of work included nextgeneration internet...

  • Page 18
    ...related share option scheme. Share options are normally exercisable on completion of a three or ¢ve-year save-as-you-earn contract. Number of employees in the group: UK Non-UK Total employees 117.9 19.1 137.0 126.0 10.8 136.8 118.9 5.8 124.7 signi¢cant value to BT, we have formed a joint venture...

  • Page 19
    ... and management development. Increasingly, we are using the internet to deliver training and development programmes. The BT Academy is a web-based corporate learning portal that delivers world-class e-learning to BT people via the company's intranet. During the year, BT became the largest company to...

  • Page 20
    ...telecommunication system in the UK. The Secretary of State is responsible for issuing licences after consulting the Director General. The BT Licence a prohibition on showing undue discrimination or unfairly favouring any part of its own business as against competitors on the basis of price terms or...

  • Page 21
    ...to business customers. The control package for small business customers provides that call charges will be no higher than the prices used for calculating adherence to the residential price control, and line rental increases will be no more than the change in RPI. Under the price controls for private...

  • Page 22
    ... is planned. In April 2000, the Japanese government invited applications for 3G mobile licences. In June 2000, J-Phone In developing its business internationally, BT must take account of the regulatory regimes in the countries in which it operates or wishes to operate. 22 BT Annual report and Form...

  • Page 23
    ... market power. CPS allows customers to opt for certain classes of call to be carried by an alternative operator, selected in advance, without having to dial additional access codes. Software changes to BT's local exchanges could not be introduced before January 2001 (for national and international...

  • Page 24
    ... others, is seeking full rights of appeal against regulatory decisions and the incorporation within OFCOM of 24 BT Annual report and Form 20-F On 11 May 2001, the Director General of Fair Trading issued a statement that, at the request of the Secretary of State for Trade and Industry, the OFT is to...

  • Page 25
    ...to meet its Licence obligations to provide UK telecommunication services, and to do so to any speci¢ed standards. BT's directors are required to submit an annual compliance certi¢cate to the Director General. Relationship with HM Government HM Government collectively is BT's largest customer, but...

  • Page 26
    ...Bon¢eld has Board level responsibility for environmental matters. The Environmental Policy Steering Group has operational management responsibility and delivers an annual report to the Board and the Executive Committee. This report advises the Board of the extent to which the company is meeting its...

  • Page 27
    ... be introducing an internal governance process into the restructured BT, based around our existing Statement of Business Practice. For more information, you will ¢nd our latest environmental and social report at www.groupbt.com/society We are committed to supporting all our customers and, through...

  • Page 28
    Five-year financial summary Profit and loss account Years ended 31 March 1997 £m 1998 £m 1999 £m 2000 £m 2001 £m Total turnover - ongoing activities - discontinued activities Total turnover, including discontinued activities Group's share of associates' and joint ventures' turnover Trading ...

  • Page 29
    ... Years ended 31 March 1997 £m 1998 £m 1999 £m 2000 £m 2001 £m Cash ï¬,ow from operating activities Dividends from associates and joint ventures Returns on investments and servicing of finance Taxation paid Capital expenditure and financial investment Acquisitions and disposals Equity...

  • Page 30
    ... newly acquired businesses and the adverse e¡ect which competitive pressures have had on our Summarised profit and loss account Total turnover Group's share of ventures' turnover Trading between group and principal joint venture Group turnover Other operating income Operating costs Group operating...

  • Page 31
    ... over a major part of our international communications activities and is currently managing the communication needs of a number of our multinational corporate customers. At the same time, it also acquired the Concert Communications Services group (Concert Communications) from BT. As a consequence...

  • Page 32
    ... ¢nancial years for all the lines of business, these two earlier years are discussed in general terms in the context of the relevant line of business. BT has a signi¢cant market share in its main UK markets for ¢xed-network calls and provision of exchange lines. 32 BT Annual report and Form 20-F

  • Page 33
    ... calls Exchange lines Receipts from other operators Wireless products Private services Solutions Yellow Pages and other directories Customer premises equipment supply Other sales and services Group turnover Share of ventures' turnover Trading between group and principal joint venture Total turnover...

  • Page 34
    ... terminating incoming calls into the UK and handling Concert's UK multinational customer domestic tra⁄c. The increases in turnover, in the 2001 and 2000 ¢nancial years, primarily re£ect the growing market share of BT's UK competitors, particularly mobile phone operators, and the increasing level...

  • Page 35
    ... its US operations in its ¢rst full year. BT Annual report and Form 20-F 35 Turnover from the external sales of BT Ignite Solutions and Syntegra, which provides outsourcing and systems integration services, both in the UK and worldwide has grown by 17.4% in the 2001 ¢nancial year to »1,074...

  • Page 36
    Financial review Total turnover In the 2001 ¢nancial year, the numbers employed in the group increased by 200 to 137,000 at 31 March 2001. Over 5,800 people left the group on voluntary release and other incentive terms and some 3,000 people transferred to joint ventures. Over 7,500 people joined ...

  • Page 37
    ..., accommodation and marketing costs, the cost of sales of customer premises equipment and redundancy costs. The increase in costs in the 2001 ¢nancial year is mainly attributable to the other operating costs of acquired businesses. The costs incurred in supporting the high growth of BT Cellnet was...

  • Page 38
    ...nancial year. Shortly before the 2001 ¢nancial year end, BT reduced its economic interest in the J-Phone companies and after the year-end reduced its direct interest in Japan Telecom. We have now agreed to sell these investments. We have aligned the accounting of all the BT Wireless operating units...

  • Page 39
    ... mobile licences, principally in the UK and Germany, and the cost of acquisitions in the 2001 and 2000 ¢nancial years, including the BT Cellnet minority interests, the Esat group, Telfort and Viag Interkom. There has also been a »194 million increase in BT's share of its ventures' interest charges...

  • Page 40
    ...Future dividend policy will be decided by the individual listed companies, taking into account their respective capital structure, cash requirements and the markets in which they operate. The board expects that Future BT will recommence a ¢nal dividend in respect of the 2002 ¢nancial year. BT paid...

  • Page 41
    ... investments in LG Telecom and Maxis Communications, as well as additional funding of our European ventures. We paid the consideration of »856 million for the completion of the Esat Digifone minority acquisition in early April 2001. Equity dividends paid in the 2001 ¢nancial year totalled »1,432...

  • Page 42
    ... billion two-year £oating rate notes. Loans repaid during the year totalling »225 million were mainly in respect of the Esat Telecom acquisition. In the 2000 ¢nancial year, the group borrowed »1,473 million in long-term loans and repaid »587 million in long-term 42 BT Annual report and Form 20...

  • Page 43
    ..., in part, BT's acquisitions of thirdgeneration mobile licences and investments during the year. Foreign currency and interest rate exposure investments in its subsidiaries and ventures and on any imbalances between the value of outgoing and incoming international calls with Concert. To date, these...

  • Page 44
    ... 44 BT Annual report and Form 20-F During the 2001 ¢nancial year, BT completed a number of acquisitions of businesses, mainly located outside the UK. The total amount invested, including further funding of existing ventures, was »14,501 million. In April 2000, we took an equity interest, jointly...

  • Page 45
    ... year, BT also completed a number of acquisitions of businesses or interests in ventures. The total amount invested, including deferred considerations and further funding of existing ventures, was »8,755 million. The investment in the new Concert global venture, in the form of assets contributed...

  • Page 46
    ... in LG Telecom in the Republic of Korea was acquired for »234 million. BT continued to share in funding the development of its then ventures, Viag Interkom (»482 million) and Telfort (»103 million). Return on Capital Employed The group's annual pension charge for the 2001 ¢nancial year of »326...

  • Page 47
    ... arising on the provision of exchange lines. New UK accounting standards We are in negotiations with Land Securities Trillium and the William Pears Group, for their joint venture company to provide property services to BT. We are planning to grant long leases on much of our specialised properties...

  • Page 48
    ... UK business and the associated costs. US GAAP The group's net income (loss) and earnings (loss) per share for the three ¢nancial years ended 31 March 2001 and shareholders' equity at 31 March 2001 and 2000 under US Generally Accepted Accounting Principles (US GAAP) are shown further in the United...

  • Page 49
    ... the date of the 2001 AGM. Helen Alexander (b) (d) Helen Alexander joined the Board on 1 June 1998. She has been chief executive of The Economist Group since January 1997. Helen Alexander joined The Economist in 1984 and was managing director of The Economist Intelligence Unit from 1993 to the end...

  • Page 50
    ... Advisor to the UK business and later became Commercial Director. In 1996, he was appointed President of BT Europe, leading BT's expansion into Europe. He was appointed to the Executive Committee in July 2000 as Group Director of Strategy and Development. Aged 46. 50 BT Annual report and Form 20-F

  • Page 51
    ... and managing the totality of the restructuring programme, including the project teams working on the creation of a BT group holding company, the structural separation of BT's business and the potential stock exchange £otation of BT businesses. Aged 40. John Steele Group Personnel Director Colin...

  • Page 52
    ...and the report on directors' remuneration on pages 62 to 71 form part of this report. The audited ¢nancial statements are presented on pages 73 to 131. Principal activity BT's policy is to use its purchasing power fairly and to pay promptly and as agreed. BT has a variety of payment terms with its...

  • Page 53
    ... (BT Wireless, BT Ignite, BTopenworld, BT Wholesale and BT Retail), the Chief Executive of BT Business Services, the Group Strategy and Development Director, the Group Communications Director, the Group Engineering Director and Chief Technology O⁄cer and the Restructuring BT Annual report and Form...

  • Page 54
    ...the 2001 ¢nancial year. Material joint ventures and associates, which BT does not control, outside the UK have not been dealt with as part of the group for the purposes of this internal control assessment. The Board is responsible for the group's systems of internal control and risk management and...

  • Page 55
    ...the Audit and Remuneration committees are at the AGM and are available to answer questions. BT's practice is to post the Annual Report and Notice of AGM in the most cost-e¡ective manner, given the large number of shareholders. We aim to give as much notice as possible and at least 21 clear days, as...

  • Page 56
    ... assets of the pension fund, which are held separately from those of the company. The pension scheme funds can only be used in accordance with its rules and for no other purpose. On 1 April 2001, we introduced a de¢ned contribution scheme for new employees after closing the BT Pension Scheme to new...

  • Page 57
    ... the value of our UK property portfolio through a sale BT Annual report and Form 20-F 57 Due to this increase in borrowings, as well as decreased stability and predictability of revenue streams from our new business sectors such as mobile data services, the capital expenditure investment needed...

  • Page 58
    ... dividend policies in accordance with their respective capital structures, cash requirements and the markets in which they operate. As a result, we can give no assurance to our shareholders as to the level of dividends, if any, to be paid after February 2002 by us, or any of the new public companies...

  • Page 59
    ... that the demand for 3G mobile products and services will justify the related costs or that Viag Interkom will develop a competitive 3G network. We have not managed a similar sized operation outside the United Kingdom in recent years. We can give our shareholders no assurance that Viag Interkom...

  • Page 60
    ... industry with a recent history of fast technological changes. We expect that new products and technologies will emerge and that existing products and technologies will develop further. We cannot predict the actual e¡ect of these technological changes on our business or on our 60 BT Annual report...

  • Page 61
    ...may be used uneconomically and our investment in these assets may not be recovered through pro¢ts on ¢xed network calls and line rentals. Impairment write-downs may be incurred and margins may decline if ¢xed costs cannot be reduced in line with falling turnover. Health concerns from mobile phone...

  • Page 62
    ... their service contracts, salaries, other bene¢ts, including bonuses and participation in the company's long-term incentive plans, and other terms and conditions of employment. It also agrees terms for their cessation of employment and their appointments as non-executive directors of non-BT group...

  • Page 63
    ... primarily for overseas employees and, in the UK, for employees of BT's internet business and/or new recruits. The price at which shares may be acquired is the market price at the date of grant. For options granted in the 2001 ¢nancial year, the exercise of the option is generally phased over three...

  • Page 64
    ...group, the awards will vest after the end of a cumulative three-year cycle. The ¢nal awards under the PSP are due to vest in August 2001. Based on 64 BT Annual report and Form 20-F A shareholding programme, which requires executive directors and EC members to build up a shareholding in the company...

  • Page 65
    ...months' notice. Further details of their appointment arrangements are set out on page 53 in the section of the annual report dealing with corporate governance issues. Non-executive directors' remuneration For the executive directors and most other senior executives, the policy is to provide pension...

  • Page 66
    ... on the Community Support Committee, for which she received fees of »5,000 in the 2001 ¢nancial year (2000 ^ »5,000). Termination payments Sir Peter Bon¢eld's contract entitles him to 12 months' compensation on termination by BT. His contract will terminate 66 BT Annual report and Form 20-F

  • Page 67
    ... October 2001. Pensions He is a member of the BT Pension Scheme, but as he is subject to the earnings cap, which is a restriction on the amount of pay which can be used to calculate pensions due from a tax approved pension scheme, the company has agreed to increase his bene¢ts to the target level...

  • Page 68
    ... lapse on 31 December 2001, twelve months after he ceased to be employed by the company. (b) Option under BT Employee Sharesave Scheme exercisable over a maximum of 1,921 shares for six months from 31 March 2001, the date on which Bill Cockburn ceased employment with the company All of the above...

  • Page 69
    ... award, including reinvested dividends, vested on 1 August 2000. (c) Based on the market value of the company's shares at 31 March 2001. The minimum figure represents those shares held at 31 March 2001 which will transfer to each director under the ESP at the end of year five of the plan (2001...

  • Page 70
    ...the 2001 ¢nancial year was as follows: 2001 £000 Salaries and benefits Annual bonuses Termination and retention payments Provision for long-term incentive awards Company pension contributions Total 3,699 1,599 97 5,693 936 12,024 Options over 5,058 shares under the BT Employee Sharesave Scheme...

  • Page 71
    ... group as at the end of the ¢nancial year and of the pro¢t or loss and cash £ows of the The directors consider that, in preparing the ¢nancial statements for the year ended 31 March 2001 on pages 73 to 131 the company has used appropriate accounting policies, consistently applied and supported...

  • Page 72
    ..., group and company balance sheets, group cash £ow statement, group statement of total recognised gains and losses and the related notes which have been prepared under the historic cost convention and the accounting policies set out in the Accounting Policies section and the United States generally...

  • Page 73
    ..., payments to telecommunication operators, depreciation, employee pension schemes and taxes. Certain comparative ¢gures have been restated to conform with revised presentation and reclassi¢cation of ¢gures in the year ended 31 March 2001. II Turnover Expenditure on research and development is...

  • Page 74
    ...sterling at year-end exchange rates. Investments in associates and joint ventures are stated in the group balance sheet at the group's share of their net assets, together with any attributable unamortised goodwill on acquisitions arising on or after 1 April 1998. The group operates a funded de¢ned...

  • Page 75
    ...intervening years, the actuaries review the continuing appropriateness of the contribution rates. The cost of providing pensions is charged against pro¢ts over employees' working lives with the group using the projected unit method. Variations from this regular cost are allocated on a straight-line...

  • Page 76
    ...Acquisitions £m Total £m Total turnover Group's share of joint ventures' turnover Group's share of associates' turnover Trading between group and principal joint venture Group turnover Other operating income Operating costs Group operating profit (loss) Group's share of operating loss of joint...

  • Page 77
    ... Acquisitions £m £m Goodwill amortisation and exceptional items £m Total £m Total turnover Group's share of joint ventures' turnover Group's share of associates' turnover Trading between group and principal joint venture Group turnover Other operating income Operating costs Group operating...

  • Page 78
    ... acquisitions £m Notes Goodwill amortisation and exceptional items £m Total £m Total turnover Group's share of joint ventures' turnover Group's share of associates' turnover Trading between group and principal joint venture Group turnover Other operating income Operating costs Group operating...

  • Page 79
    ... (loss) on transfer of assets and group undertakings to a joint venture Total recognised gains and losses for the financial year 215 245 (31) (49) (1,430) (27) (141) 102 159 2,148 3 27 15 - 3,028 (915) (974) 79 (1,810) 2,576 (480) (41) 2,055 3,362 (362) (17) 2,983 BT Annual report and Form 20-F 79

  • Page 80
    Group cash flow statement for the year ended 31 March 2001 Notes 2001 £m 2000 £m 1999 £m Net cash inï¬,ow from operating activities Dividends from associates and joint ventures Returns on investments and servicing of finance Interest received Interest paid, including finance costs Net ...

  • Page 81
    ...joint ventures: Share of gross assets and goodwill Share of gross liabilities Investments in associates Other investments Total investments Total fixed assets Current assets Stocks Debtors Investments Cash at bank and in hand Total current assets Creditors: amounts falling due within one year Loans...

  • Page 82
    ...customers using its mobile phones, from subscription fees charged to its contract customers and from handset equipment sales. BT Ignite mainly generates its turnover from outsourcing and systems integration work and from the ¢xed network operations of the group's European subsidiaries. The business...

  • Page 83
    ...form. Financial information in its then new form and set out for the year ended 31 March 2000 was made available to the senior management of the group with respect to accounting periods from 1 April 1999. Operating profit (loss) of associates and joint ventures £m Turnover Year ended 31 March 2001...

  • Page 84
    ... 4,156 Year ended 31 March 2000 External £m Internal £m Turnover Business total £m Depreciation and amortisation £m Operating profit (loss) of associates and joint ventures £m Total operating profit (loss) £m Markets Enterprises Networks & Systems Mobility Products and Solutions Other...

  • Page 85
    ..., incoming and transit international calls by country of origin and turnover with non-UK joint ventures and associates would be treated di¡erently but would not lead to a materially di¡erent geographical analysis. See the ''information about geographic areas'' above. BT Annual report and Form 20...

  • Page 86
    ... network calls Exchange lines Receipts from other operators Wireless products Private services Solutions Yellow Pages and other directories Customer premises equipment supply Other sales and services Group turnover Group's share of associates' and joint ventures' turnover Trading between group and...

  • Page 87
    ... arose from activities outside the UK (note 2). Unaudited information concerning the group's classi¢ed directory business in the UK is shown on page 142 of this annual report. Concert, the joint venture with AT&T, was formed on 5 January 2000 (see note 16). From that date, international calls into...

  • Page 88
    Notes to the financial statements 5. Operating costs 2001 £m 2000 £m 1999 £m Staff costs: Wages and salaries Social security costs Pension costs (note 30) Employee share ownership scheme (a) Total staff costs Own work capitalised Depreciation (note 19) Amortisation and impairment of goodwill ...

  • Page 89
    ... subsequently wholly acquired in the year ended 31 March 2001. 200 132 185 - - 84 - - 17 7. Profit on sale of fixed asset investments and group undertakings In November 2000, the group sold its 34% stake in sunrise communications, its joint venture in Switzerland, to a fellow shareholder for...

  • Page 90
    ... ordinary activities 2001 £m 2000 £m 1999 £m United Kingdom: Corporation tax at 30% (2000 - 30%, 1999 - 31%) Deferred taxation charge (credit) at 30% Taxation on the group's share of results of associates Taxation on the group's share of results of joint ventures Prior year adjustments Total UK...

  • Page 91
    ... capital allowances Lower effective tax on net foreign exchange gains Effect of reduction in UK corporation tax rate on deferred tax provision Lower effective tax on gain in MCI shares Lower effective tax on gain on disposal of fixed asset investments and group undertakings Prior year adjustments...

  • Page 92
    ... in issue after deducting the company's shares held by employee share ownership trusts. In calculating the diluted earnings (loss) per share, share options outstanding and other potential ordinary shares have been taken into account. The weighted average number of shares in the years were: 2001...

  • Page 93
    ...-term investments and deposits not repayable on demand are reported under the heading of management of liquid resources. 16. Acquisitions and disposals Acquisition of subsidiary companies Year ended 31 March 2001 Consideration: Cash Carrying value of joint venture wholly acquired Total Cellnet Group...

  • Page 94
    ...term liabilities Group's share of original book value of net assets Goodwill Total cost Consideration: Cash Carrying value of joint venture wholly acquired Total 6,728 619 (585) (2,505) 4,257 4,992 9,249 8,770 479 9,249 Since the acquisition was made towards the end of the year ended 31 March 2001...

  • Page 95
    ... given comprised: Year ended 31 March 2001 Minority Interest Fixed assets Current assets Current liabilities Group share of original book value of net assets (liabilities) and fair value to group Goodwill Total cost Consideration: Cash Carrying value of joint venture wholly acquired Total Telfort...

  • Page 96
    ... Data Systems), an international systems integration company based in the USA, for »213 million. Goodwill arising on acquisition of Syntegra (USA) is being amortised over 20 years. Syntegra (USA)'s loss after tax for the year ended 31 December 1998 was »37 million. 96 BT Annual report and Form...

  • Page 97
    ... interest Fixed assets Current assets Current liabilities Long-term liabilities Group share of original book value of net assets (liabilities) Fair value adjustment to achieve consistency of accounting policies Fair value to the group Goodwill Total cost Consideration: Cash Deferred Loan notes 1999...

  • Page 98
    ... 31 March 2001. Acquisition of associates and joint ventures Year ended 31 March 2001 Group share of original book value of net assets (net liabilities) Fair value adjustment to achieve consistency of accounting policies Fair value to the group Goodwill Total cost Rogers Cantel Mobile Communications...

  • Page 99
    ..., in the J-Phone companies. During the year ended 31 March 2001, the group held an e¡ective 23% interest in J-Phone. The impact of the combined J-Phone/Japan Telecom ownership structure, however, led the group to re£ect 63% of the J-Phone results at the turnover and operating pro¢t levels and all...

  • Page 100
    ...) (p) MCI Communications Corporation In September 1994, the company completed the acquisition of a 20% equity interest in MCI (a major carrier of long-distance telecommunications services in the United States) represented by a holding of 136 million unlisted Class A common shares, whereupon MCI...

  • Page 101
    ...been allocated to the goodwill arising on the acquisition of the remaining 55% interest in the company that was purchased during the year. The remaining goodwill of £1,921 million will be amortised over 20 years in accordance with the group's accounting policies. BT Annual report and Form 20-F 101

  • Page 102
    ...Total £m Company Cost Balances at 1 April 2000 Additions Transfers Disposals and adjustments Total cost at 31 March 2001 Depreciation Balances at 1 April 2000 Charge for the year Disposals and adjustments Total depreciation at 31 March 2001 Net book value at 31 March 2001 Engineering stores Total...

  • Page 103
    ... Long leases (over 50 years unexpired) Short leases Total net book value of land and buildings 1,514 170 230 1,914 1,327 182 202 1,711 319 119 165 603 365 120 157 642 Group 2001 £m 2000 £m (b) Expenditure on tangible fixed assets comprised: Plant and equipment Transmission equipment Exchange...

  • Page 104
    ...financial statements 20. Fixed asset investments Interests in associates and joint ventures(b) Share of post acquisition profits (losses) £m Shares £m Loans £m Other participating interests £m Other investments (c) £m Total £m Group Cost Balances at 1 April 2000 Additions Joint ventures...

  • Page 105
    ... Performance Share Plan and the BT Deferred Bonus Plan (note 33). They also include ordinary shares of the company, with a net book value of »64 million and a market value of »122 million, held in trust for employee sharesave schemes. In the group balance sheet at 31 March 2001, listed investments...

  • Page 106
    ... Company 2000 £m Listed investments Short-term loans to subsidiary undertakings Other short-term deposits and investments Total current asset investments Market value of listed investments 85 - 2,472 2,557 85 419 - 1,632 2,051 420 5 3,965 1,655 5,625 5 5 1,466 277 1,748 5 106 BT Annual report...

  • Page 107
    ... Total listed bonds, debentures and notes Lease finance Bank loans due 2000-2009 (average effective interest rate 9.6%) Euro ï¬,oating rate note 2000-2005 Floating rate note 2000-2009 (average effective interest rate 5.4%) Other loans Bank overdrafts and other short-term borrowings Euro Medium Term...

  • Page 108
    .... Prior to the change in policy the total loans and other borrowings would be »31,081 million. 24. Other creditors Group 2001 £m 2000 £m 2001 £m Company 2000 £m Trade creditors Amounts owed to subsidiary undertakings Amounts owed to joint ventures (trading) Corporation taxes Other taxation and...

  • Page 109
    ... shares allotted during the year were as follows: Number Nominal value Consideration(a) £m £m Savings related schemes (b) BT Employee Share Ownership Scheme Other share option schemes Stock purchase plan Totals for the year ended 31 March 2001 (a) Consideration excludes contributions from group...

  • Page 110
    ... financial year Dividends (21.9p per ordinary share) Unrealised gain on transfer of assets and group undertakings to a joint venture Balances at 31 March 2000 Employee share option schemes - 78 million shares issued (c) (note 33) Movement relating to BT's employee share ownership trust (c) Currency...

  • Page 111
    ... the year ended 31 March 2001 the company issued shares at a market value of £400 million (2000 - £375 million) in respect of the exercise of options awarded under its principal savings-relating share option scheme. Employees paid £145 million (2000 - £118 million) to the group for the issue of...

  • Page 112
    ... Group 2001 £m 2000 £m 2001 £m Company 2000 £m Contracts placed for capital expenditure not provided in the accounts Operating lease payments payable within one year of the balance sheet date were in respect of leases expiring: Within one year Between one and five years After five years Total...

  • Page 113
    ...group's main pension scheme, the BT Pension Scheme (BTPS). The increase in cost in the year ended 31 March 2001 was mainly attributable to the general trend towards longer life expectancy and a smaller amortisation of the combined pension fund position and pension provision held in the group balance...

  • Page 114
    ..., share options and other long-term incentive plans is shown in the report on directors' remuneration from pages 66 to 71. 32. People employed 2001 Year end '000 Average '000 Year end '000 2000 Average '000 Year end '000 1999 Average '000 Number of employees in the group: UK Non-UK Total employees...

  • Page 115
    ...stock purchase plan for employees in the United States. It also has several share plans for executives. Share option schemes The major share option scheme, the BT Employee Sharesave Scheme, is savings related and the share options are normally exercisable on completion of a three- or ¢ve-year Save...

  • Page 116
    .... Awards may vest in annual tranches. The shares are transferred at the end of a speci¢ed period, only if the individual is still employed by the group. The corporate performance measure assesses the company's overall performance against those top 100 companies listed on the London Stock Exchange...

  • Page 117
    ... 1998 for employees in the United States. Under this plan, employees may purchase American Depositary Shares (ADSs) on a monthly basis at a price equal to the lower of (i) 85% of the average trading price of the ADSs on the New York Stock Exchange on the date on which the purchase rights are granted...

  • Page 118
    ... trade debtors and trade creditors ^ arise directly from the group's operations. The group ¢nances its operations primarily by a mixture of issued share capital, retained pro¢ts, long-term loans and, increasingly over the years ended 31 March 2000 and 2001, short-term loans, principally by issuing...

  • Page 119
    ...2000 ^ »1,852 million) for sales of currency. These fair values have been estimated by calculating their present values using the market discount rates, appropriate to the terms of the contracts, in e¡ect at the balance sheet dates. At 31 March 2001, the group had deferred unrealised gains of »13...

  • Page 120
    ... the same maturities where they existed, and on calculations of the present value of future cash ï¬,ows using the appropriate discount rates in effect at the balance sheet dates, where market prices of similar issues did not exist. (e) The fair value of the group's outstanding foreign currency and...

  • Page 121
    ... to mature within one year of the balance sheet date. The maturity pro¢le of ¢nancial liabilities is as given in note 23. Financial assets After taking into account the various interest rate swaps and forward foreign currency contracts entered into by the group, the interest rate pro¢le of the...

  • Page 122
    ... entered into to manage those currency exposures. At 31 March 2001, the group also held various forward currency contracts that the group had taken out to hedge expected future foreign currency purchases and sales. Fair values of financial assets held for trading 2001 £m 2000 £m Net gain...

  • Page 123
    ... quoted rates. In calculating the average variable rates, the latest rates agreed with the counterparty on each swap have been used. Changes in interest rates will a¡ect the variable rate information disclosed above. Unused committed lines of credit Unused committed lines of credit for short-term...

  • Page 124
    ... at market value with appropriate valuation adjustments recorded in pro¢t and loss and shareholders' equity, respectively. Certain derivative ¢nancial instruments which qualify as hedge accounting under UK GAAP do not qualify for hedge accounting under US GAAP. 124 BT Annual report and Form 20...

  • Page 125
    ... the net book value of assets contributed by the group to the joint venture is amortised over the life of the items giving rise to the di¡erence. (h) Employee share plans Certain share options have been granted under BT save-as-you-earn plans at a 20% discount. Under UK GAAP, the share issues are...

  • Page 126
    ... income and shareholders' equity from that reported under UK GAAP to that which would have been reported had US GAAP been applied. Net income Years ended 31 March 2001 £m 2000 £m 1999 £m Net income (loss) applicable to shareholders under UK GAAP Adjustment for: Pension costs Redundancy charges...

  • Page 127
    ..., net of bank overdrafts. Under FRS 1, cash £ows are presented for operating activities; returns on investments and servicing of ¢nance; taxation; capital expenditure and ¢nancial investments; acquisitions and disposals; dividends paid to the company's shareholders; management of liquid resources...

  • Page 128
    ...: 2001 £m 2000 £m 1999 £m Service cost Interest cost Expected return on scheme assets Amortisation of prior service costs Amortisation of net obligation at date of limited application of SFAS No. 87 Recognised gains Additional cost of termination benefits Pension cost for the year under...

  • Page 129
    ... the year Actual return on scheme assets Employers' contributions (b) Employees' contributions Other changes Benefits paid or payable Fair value of scheme assets at the end of the year 29,876 (350) 605 183 31 (1,314) 29,031 25,120 5,619 483 171 21 (1,538) 29,876 2001 £m 2000 £m Funded status...

  • Page 130
    ...to BT Cellnet Limited. (f) In March 2001, Cellnet Group Limited changed its name to BT Wireless Limited. (g) On 17 April 2001, Telenor exercised a put option for BT to acquire its shareholding - Esat Digifone is now 100% owned. (h) Formerly Control Data Systems Inc. 130 BT Annual report and Form 20...

  • Page 131
    ... in Springboard Internet Services Limited on 25 April 2001. Share Capital b = billions m = millions Activity Issued(a) Percentage owned Country of operations(b) Associates Cegetel SA Japan Telecom Company Limited (c) J-Phone Communications Co Limited(c) Maxis Communications Berhad (e)(f)(g) Rogers...

  • Page 132
    ...) Year ended 31 March 2000 Quarters 1st £m 2nd £m 3rd £m 4th £m Total £m Total turnover Group's share of associates' and joint ventures' turnover Trading between group and principal joint venture Group turnover Other operating income Group operating profit Group's share of operating...

  • Page 133
    ... in this Annual Report on Form 20-F for the ¢nancial year ended 31 March 2001 and the audited consolidated ¢nancial statements of Viag Interkom and the related notes thereto, furnished to the US Securities and Exchange Commission on Form 6-K dated 10 May 2001. BT Annual report and Form 20-F 133

  • Page 134
    ... due after more than one year Loans and other borrowings Provisions for liabilities and charges Total net assets (liabilities) Minority interests Capital and reserves (deficit) (18,775) (723) 14,568 499 14,069 14,568 US GAAP information Total assets Total shareholders' equity (deficit) 33,435...

  • Page 135
    ...Pro forma BT £m Group turnover Other operating income Operating costs Group operating profit (loss) Group's share of operating loss of associates and joint ventures Total operating profit (loss) Profit on sale of group undertakings and fixed asset investments Net interest payable Profit (loss...

  • Page 136
    ...Pro forma BT £m Year ended 31 March 2000 Group turnover Other operating income Operating costs Group operating profit Group's share of operating profit (loss) of associates and joint ventures Total operating profit (loss) Profit on sale of group undertakings Net interest payable Profit (loss...

  • Page 137
    ... 2001 and as a subsidiary in the period 20 February 2001 to 31 March, 2001. For the purposes of the pro forma statement of operations for the year ended 31 March 2001, adjustments have been made to account for Viag Interkom as though it had been acquired on 1 April 2000. BT Annual report and Form...

  • Page 138
    ... £m Total £m Group turnover Operating costs Group operating profit (loss) Group's share of operating loss of associates and joint ventures Total operating profit Profit on sale of group undertakings and fixed asset investments Net interest payable Tax on profit (loss) on ordinary activities...

  • Page 139
    ... between UK and US GAAP that are relevant to the BT pro forma ¢nancial information is set out on pages 124 to 126 of this Annual Report on Form 20-F. The calculation of pro forma combined net income under US GAAP for each of the three years ended 31 March 2001 is as follows: 2001 £m Years ended 31...

  • Page 140
    ... information 9. Reconciliation to US GAAP (continued) The calculation of pro forma BT shareholders' equity (de¢cit) under US GAAP as of 31 March 2001 is as follows: As at 31 March 2001 £m Pro forma capital and reserves (deficit) under UK GAAP Adjustment for: Pension costs Redundancy costs...

  • Page 141
    ... and interest on long-term borrowings, to average capital employed. Capital employed is represented by total assets, excluding goodwill, less current liabilities, excluding corporate taxes and dividends payable, and provisions other than those for deferred taxation. Year-end figures are used in the...

  • Page 142
    ... of the classi¢ed directory business to the Director of the O⁄ce of Fair Trading within nine months of the company's ¢nancial year end. Copies of these accounts, when available, may be obtained free of charge from Yellow Pages at Queens Walk, Reading RG1 7PT. 142 BT Annual report and Form 20-F

  • Page 143
    ... the future of the mobile data market; BT's network development and expansion plans; plans for the launch of new products and services; expectations regarding participation in bids for third-generation (3G) licences outside the United Kingdom; the impact of regulatory initiatives on operations...

  • Page 144
    ... rate between the pound sterling and the US dollar a¡ect the dollar equivalent of the pound sterling price of the company's ordinary shares on the London Stock Exchange and, as a result, are likely to a¡ect the market price of the ADSs on the New York Stock Exchange. 144 BT Annual report and Form...

  • Page 145
    ... company's overall performance. The TSR indices on the above graph are the product of share price movement, plus gross dividends reinvested in the shares to July 1997 and net dividends after that date. Analysis of shareholdings Ordinary shares of 25p each Size of shareholding at 31 March 2001 Number...

  • Page 146
    .... The interim dividend we paid in February 2001 was at the same rate as in the previous year. However, as part of BT's debt reduction and restructuring plans, the Board is not recommending the payment of a ¢nal dividend to shareholders for the year ended 31 March 2001. In addition, the company has...

  • Page 147
    ...and half year 3rd quarter and nine months 4th quarter and full year 2002 annual report and accounts published 26 July 2001 8 November 2001 February 2002 May 2002 June 2002 ShareGift The Orr Mackintosh Foundation operates a charity share donation scheme for shareholders with small parcels of shares...

  • Page 148
    ... upon public companies the power to require information with respect to interests in their voting shares) and they or any interested person has failed to supply to the company the information requested within 14 days after delivery of that notice. These restrictions end (unless the Board decides...

  • Page 149
    ... paid on any class of share on the dates stated for the payments of those dividends. The directors can o¡er ordinary shareholders the right to choose to receive new ordinary shares, which are credited as fully paid, instead of some or all of their cash dividend. Before they can do this, the company...

  • Page 150
    ... whom that share was to be transferred no later than two months after the company receives the transfer form or instruction from the operator of the relevant system. The Board can decide to suspend the registration of transfers, for up to 30 days a year, by closing the register of shareholders. This...

  • Page 151
    ... resolution can increase the fee paid to all or any directors either permanently or for a particular period. The directors may be paid their expenses properly incurred in connection with the business of the company. The Board can award extra fees to a director who holds an executive position; acts...

  • Page 152
    ... the right to sell, their interests in Viag Interkom which holds a third-generation mobile telecommunications licence in Germany. On 19 February 2001, BT and BT Interkom Verwaltungs GmbH exercised their options and entered into share transfer agreements with each of the joint venture partners for...

  • Page 153
    ... principal US federal income tax and UK tax consequences to bene¢cial owners of ADSs who either are resident in the United States or hold ordinary shares or ADSs as assets e¡ectively connected with a US trade or business (US Holders). It is not a complete analysis or listing of all potential tax...

  • Page 154
    ...Holders) above and except in respect of the government of, or any resident of, Iraq or any person treated as so resident. There are no limitations under the laws of the United Kingdom restricting the right of non-residents to hold or to vote shares in the company. 154 BT Annual report and Form 20-F

  • Page 155
    ...request, can be accessed on the internet at www.groupbt.com/investorcentre Document Annual Review including summary financial statement Annual Report and Form 20-F Report for Shareholders Quarterly results releases Current Cost Financial Statements for the Businesses and Activities and Statement of...

  • Page 156
    ... and BT Employee Share Ownership Scheme registers. They also provide a BT Shareholder Helpline service. Shareholders should contact the Registrar (details above) if they have any enquiries about their shareholding. General enquiries British Telecommunications plc BT Centre 81 Newgate Street London...

  • Page 157
    ... company's UK income tax due Equity investees Tax depreciation Other additional capital Accounts payable and accrued liabilities Current liabilities Long-term liabilities Other non-current assets Employee stock bene¢t plans Payroll costs Capital lease Fiscal year Non-current investments Ownership...

  • Page 158
    ...Business review Research and development Financial statistics Financial review Additional information for shareholders Cautionary statement regarding forward-looking statements Board of directors and executive committee Report on directors' remuneration Note to the ¢nancial statements Pension costs...

  • Page 159
    .... Business review Legal proceedings Additional information for shareholders Dividends Financial review Capital resources Notes to the ¢nancial statements Financial commitments, contingent liabilities and subsequent events Additional information for shareholders Share and ADS prices Not applicable...

  • Page 160
    ...32 Research and development 17, 18, 73, 141 Restructuring 4, 6, 7, 8, 31, 58, 82 Return on capital employed 46, 141 Risk factors 57-61 Risk management 118-123 Segmented information 82-86 Share and ADS prices 144 Share capital 109 Share option schemes 115-117 Shareholdings analysis 145 Sta¡ costs 36...