BT 2001 Annual Report Download - page 34

Financial review
the 2001 ¢nancial year compares with 7% in the 2000 ¢nancial
year. While ¢xed to mobile and internet-related local calls
continued to grow strongly, traditional geographic ¢xed-
network calls declined in volume, which we attribute partly to
mobile phone substitution and also to intense competition. The
trend in ¢xed network call volumes, which we expect will
continue, is illustrated in the table below:
12 months’ volume growth (decline)
Fixed network calls volume growth
2001
%
2000
%
Non-geographic calls:
Internet related and other 38 95
Fixed to mobile 30 48
Geographic calls:
Local (12) (9)
National (7) (4)
International (3) (3)
Overall 27
Turnover from exchange lines grew by 4.2% in the 2001
¢nancial year to »3,674 million after increasing by 5.2% in the
2000 ¢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 5.4% in the 2001
¢nancial year and by 5.9% in
the 2000 ¢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
other ¢xed line providers largely
o¡set by the high number of BT
customers installing second
lines. Overall, BT’s total ¢xed-network lines grew by 1.3% in
the 2001 ¢nancial year to 28.95 million and by 1.9% in the 2000
¢nancial year to 28.58 million.
Private services turnover decreased by 3.9% in the 2001
¢nancial year to »1,091 million, following a decline of
0.4% in the previous ¢nancial year. The decline in both years
was mainly attributable to the transfer of activities to the
Concert global venture in January 2000.
BT Retail achieved an operating pro¢t of »1,004 million,
before exceptional items, in the 2001 ¢nancial year on turnover
of »11,813 million. Margins for the year have been a¡ected by
the adverse mix e¡ect of the increase in calls from ¢xed to
mobile and the Internet, with declines in geographic calls,
although the rate of decline in geographic calls reduced in the
last quarter of the year. We believe that this is linked to the
success of the new BT Together family of products which have
now been taken up by eight million customers.
BT Wholesale
The majority of BT Wholesale’s turnover is derived from
supplying network services to BT Retail. Its external turnover
is derived from receipts from other operators for interconnect
services.
Turnover from receipts from other operators for
interconnect charges increased by 39% in the 2000 ¢nancial
year and by 43% to »2,814 million in the 2001 ¢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. In the 1999
and 2000 ¢nancial years, it also included 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 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 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 39% for the 2001 ¢nancial year, and
38% for the 2000 ¢nancial year, BT’s interconnect business
does not provide the group with the same overall level of
margin as its UK retail business.
In the 2001 ¢nancial year, BT Wholesale contributed an
operating pro¢t before exceptional items of »2,540 million on
turnover of »11,493 million. Externally generated turnover
amounted to slightly over »3 billion for the year. BT Wholesale
has the responsibility for wholesale broadband products and
the losses for this activity are included in the results. Return on
capital employed was 20%.
BT Wireless
The group’s wireless turnover mainly comprises calls charged
to and subscriptions from BT Cellnet customers in the UK. It
also includes the turnover of the three major acquired
companies, Esat Digifone in Ireland since its acquisition in
March 2000, Telfort’s mobile activities in The Netherlands since
its acquisition in June 2000 and Viag Interkom’s mobile
activities in Germany since its acquisition in February 2001.
Wireless turnover increased by 27% in the 2001 ¢nancial
year to »2,760 million, following growth of 55% in the previous
34 BT Annual report and Form 20-F