BT 2002 Annual Report Download - page 34

was more than offset by the effect of signi®cant price
reductions.
Turnover from exchange lines grew by 7% to
£3,926 million in the 2002 ®nancial year after growth of 4%
in the 2001 ®nancial year to £3,674 million. The number of
business lines grew by 1.3% and 5% in the 2002 and 2001
®nancial years, with high speed ISDN services being the
main driver behind this growth. The number of residential
lines has been broadly ¯at during the period under review.
Competition from other ®xed line providers has largely been
offset by the success of the BT Together packages and
customers returning to BT. Overall, BT's total ®xed-network
lines grew by 0.6% to 29.1 million in the 2002 ®nancial year
after growth of 1.3% in the 2001 ®nancial year.
Turnover from receipts from other operators for
interconnect charges increased by 11% to £3,113 million in
the 2002 ®nancial year compared to 43% growth in the
2001 ®nancial year, re¯ecting the reduced growth in
interconnect volumes. 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 2000 ®nancial year, 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 traf®c. The
increase in turnover, in the 2002 and 2001 ®nancial years,
primarily re¯ects the growing market share of BT's UK
competitors, particularly mobile phone operators, and the
increasing level of traf®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
traf®c passing to their networks. Although growth has been
rapid, with volumes growing at 12% and 50% for the 2002
and 2001 ®nancial years, BT Wholesale's interconnect
business does not provide the group with the same overall
level of margin as its UK retail business.
Private services turnover decreased by 5% to
£1,039 million in the 2002 ®nancial year after declining by
4% in the 2001 ®nancial year.
Turnover from the external sales outsourcing and
systems integration services grew by 55% to £1,661 million
in the 2002 ®nancial year after growth of 17% in the 2001
®nancial year.
Turnover from BT's other sales and services has grown
by 31% to £2,754 million in the 2002 ®nancial year after
growth of 16% in the 2001 ®nancial year. The increase
includes the results of the BT Ignite European Connectivity
and UK IP revenues.
Total turnover
Total turnover from continuing activities in the 2002 ®nancial
year of £21,815 million includes BT's proportionate share of
its ventures' turnover of £4,049 million before adjusting for
trading between the Concert joint venture and the BT
group. This total turnover grew by 4% in the 2002 ®nancial
year after growing by 16% in the 2001 ®nancial year.
Other operating income
As part of the arrangements for the establishment of
Concert, BT had been seconding staff and providing
administrative and other services from its launch in early
January 2000. The income from these services totalled
£135 million in the 2002 ®nancial year, £168 million in the
2001 ®nancial year and £79 million in the 2000 ®nancial year.
Operating costs
Total operating costs from continuing activities increased by
30% in the 2002 ®nancial year to £18,854 million after
increasing by 12% in the 2001 ®nancial year. As a
percentage of group turnover from continuing activities,
operating costs from continuing activities, excluding
goodwill amortisation and exceptional items, increased from
80% in the 2000 ®nancial year to 84% in the 2001 ®nancial
year and to 87% in the 2002 ®nancial year. In all three
®nancial years, net exceptional costs were incurred. These
amounted to £2,696 million, £7 million and £64 million in the
2002, 2001 and 2000 ®nancial years, respectively. These
exceptional costs are considered separately in the
discussion which follows.
Operating costs 2002
£m
2001
£m
2000
£m
Continuing activities:
Staff costs 4,260 4,069 3,959
Own work capitalised (623) (642) (475)
Depreciation 2,974 2,689 2,446
Goodwill and other
intangibles amortisation 124 91 10
Payments to
telecommunications
operators 4,289 3,736 2,992
Other operating costs 5,134 4,550 3,989
Total operating costs from
continuing activities
before exceptional costs 16,158 14,493 12,921
Exceptional costs 2,696 7 64
Total operating costs from
continuing activities 18,854 14,500 12,985
Total operating costs from
discontinued activities 2,546 6,259 2,374
Total operating costs 21,400 20,759 15,359
Staff costs increased by 5% in the 2002 ®nancial year to
£4,260 million after increasing by 3% in the 2001 ®nancial
year. In the 2002 ®nancial year, the numbers employed in
the continuing activities decreased by 8,200 to 108,600 at
31 March 2002 after decreasing by 4,000 in the 2001
®nancial year. Higher pension costs and the annual pay
awards were the main reasons for the increase in staff
costs.
The allocation for employee share ownership, included
within staff costs, was £25 million in the 2002 ®nancial year.
The allocation for the 2001 ®nancial year was £32 million.
Financial review
BT Group Annual Report and Form 20-F 2002 33