BT 2002 Annual Report Download - page 15

Business review
14 BT Group Annual Report and Form 20-F 2002
`150' customer service function and piloted among the
engineering community.
Towards the end of the 2002 ®nancial year, BT Retail
announced a key initiative in its drive to improve customer
service and increase ef®ciency Ð a plan to create a network
of 30 next-generation multi-function contact centres. A total
of £100 million will be spent on the new centres, which will
be multimedia, have more seats and use leading-edge
CRM technology to provide consistent standards, a better
customer experience, a state-of-the-art working
environment and signi®cant cost savings.
As part of the project, more than 50 existing call
centres will close over the next two years.
BT Wholesale
Years ended, or as at, 31 March 2002 2001
Group turnover £12,256m £11,728m
Group operating pro®t £2,242m £2,538m
No. of employees ('000) 29.8 30.0
Note ± before goodwill amortisation and exceptional items
BT Wholesale provides network services and solutions
within the UK to communication companies, network
operators and service providers, and to other BT lines of
business.
Its 29,800 skilled employees manage the largest
capacity communications network in the UK, with the
greatest geographical reach and customer coverage.
120 million copper pair kilometres and six million optical
®bre kilometres give it the ability to touch virtually every
home and business in the country. Its 900 local and trunk
exchanges handle an average of 300 million calls every day.
The 2002 ®nancial year was characterised by:
&the launch of a bold plan to accelerate the growth of
BT Wholesale's new broadband business;
&good progress in growing new business sales and the
wholesale ``one-stop shop''; and
&the successful delivery of a strong performance,
despite the dif®cult trading conditions in the UK TMT sector,
through a focus on operating free cash ¯ow.
Changing market conditions
As a result of the reversal in world markets following the
dot.com crash, which has been especially pronounced in
the communications industry, the wholesale
telecommunications market is experiencing its most
signi®cant slowdown in many years. Approximately 5% of
BT Wholesale's UK customers have gone into
administration or the like, resulting in around £200 million of
lost external sales.
Consequently, BT Wholesale's external turnover growth
(including mmO2 as external) has slowed substantially, from
over 30% in the 2001 ®nancial year to below 19% in the
2002 ®nancial year. Its internal turnover (mainly with BT
Retail and BT Ignite) reduced by 1% in the 2002 ®nancial
year.
However, BT Wholesale responded quickly to the
changed market conditions by cutting its capital
expenditure from £2,273 million in the 2001 ®nancial year to
£1,974 million in 2002. This enabled it to grow free cash
¯ow by 9% in the 2002 ®nancial year in a tough market.
Strategic objectives
Throughout the 2002 ®nancial year, BT Wholesale
continued to drive its strategic objectives to:
&evolve the UK network from a predominantly
®xed-voice technology towards data, Internet Protocol (IP)
and mobile technologies;
&create a portfolio that will enable it to sustain traditional
product revenues, while migrating its customers up the
value chain to more advanced services, and providing a
``one-stop shop''; and
&become the number one provider in the high-growth
UK broadband market.
BT Wholesale has continued to invest in its network in a
highly focused way, using new technology to grow scale
and capabilities for the future. A total of 70 next-generation
switches (NGS) have now been deployed to replace the
trunk exchange network. In January 2002, the world's ®rst
hybrid NGS, using voice over asynchronous transfer mode
(ATM) technology, was brought into service.
In addition, more than 700 digital local exchanges have
now been enabled to redirect all internet-type calls
originating from BT customers. These calls are grouped
together and routed directly to BT's Dial IP platform and
other operators' networks. This enhanced functionality in BT
Wholesale's switched network is enabling the evolution from
circuit switch and voice to packetised data and IP.
In line with its strategy to migrate customers towards
more advanced services, BT Wholesale generated over
£100 million from new business revenues, comprising sales
of broadband and data products, network facilities
management, and content and applications solutions. This
represented a growth of 240%, compared with the previous
®nancial year, and resulted from opportunities continuing to
be sought and won through deeper customer relationships
with the leading ®xed and mobile operators and strategic
customer and supplier partnerships.
In addition, BT Wholesale continues to invest in
e-business channels to improve its responsiveness to
competitive market needs and to reduce costs.
Broadband
BT Wholesale's most notable achievements in the 2002
®nancial year have been in the broadband arena. From
1 June 2001, we vested the end-to-end management of
broadband digital subscriber line (DSL) in BT Wholesale.
This move was designed to bring all elements of broadband
DSL delivery under one management team, including
platform development, product development and in-life
management, implementation and service assurance,
marketing and channel development. Since then,
BT Wholesale has: