BT 2003 Annual Report Download - page 33

including the associated sales force and account
management functions.
Within the residential voice market BT Retail
maintained market share as it has done since June
2000, with share internally estimated at around 73%.
In the business voice market, internal estimates put
BT Retail’s market share at 45% compared to 49%
and 53% in the 2002 and 2001 financial years.
BT Retail’s turnover increased by 4% in the 2003
financial year to £13,301 million after rising by 2% in
the 2002 financial year. The increase in the 2003
financial year included revenues from the UK
multinational customers re-integrated into BT Retail
from the Concert global venture. As well as the benefit
of the returning Concert business, BT Retail continued
to defend core revenues and grew new wave revenues.
Turnover for the three years is summarised as follows:
BT Retail turnover 2003
£m
2002
£m
2001
£m
Voice services 9,578 9,561 9,711
Intermediate products 2,873 2,668 2,413
Total core 12,451 12,229 12,124
New wave 850 582 417
Total 13,301 12,811 12,541
Sales to other BT businesses
included above 1,968 2,087 1,820
Voice services comprise calls made by customers on
the BT fixed line network in the UK, analogue lines,
equipment sales and rentals and other business voice
products. Overall turnover from voice services was
maintained in the 2003 financial year after declining
by 2% in the 2002 financial year.
Call revenues comprise all calls made by customers
on the BT fixed line network in the UK, including
outbound international calls, calls to mobile phones
and calls to the internet. These were 2% lower in the
2003 financial year and 5% lower in the 2002 financial
year as a result of price and volume reductions.
BT Retail’s total call volumes declined by 5% in the
2003 financial year (2002 – 6% growth, 2001 – 8%
growth) with geographic (local, national and
international) calls declining by 4% (2002 – 6%, 2001
– 10%). This decline in geographic call volumes has
been offset by growth in fixed to mobile call volumes
of 6% (2002 – 10%, 2001 – 32%). The rate of decline
in geographic call volumes has been stemmed due
to initiatives in the residential market such as
BT Together, Chataway weekends and the 1571
service. In the business voice market, volumes have
declined in both the 2003 and 2002 financial years,
driven by a combination of customers switching out
of traditional telephony and pressure from the
implementation of Carrier Pre-Selection (CPS).
Building on the success of the BT Together residential
packages, BT Business Plan was launched in January
2003 to combat the effect of CPS, a competitive
package which places a ceiling of 10 pence on national
and local business calls, rewards loyalty and provides a
single BT customer contact.
Non geographic call volumes switched from growth of
23% in the 2002 financial year to a decline of 6% in
the 2003 financial year mainly reflecting the switch of
internet calls from measured call minute products to a
mixture of flat rate based products and broadband
products. This continued trend will dilute the
correlation between revenues and call minutes.
Turnover from analogue exchange lines and other
voice services (which includes operator services,
directory enquiries, payphones and chargecards) of
£4,896 million (2002 – £4,778 million, 2001 –
£4,654 million) increased by 3% in both the 2003 and
2002 financial years.
Turnover from intermediate products in the 2003
financial year of £2,873 million (2002 – £2,668 million,
2001 – £2,413 million) increased by 8% in the 2003
financial year and 11% in the 2002 financial year. This
is despite the migration of customers from retail
private circuits to partial private circuits. As a result of
changes required by Oftel, partial private circuits used
by UK fixed network operators are no longer provided
by BT Retail, but are provided as a BT Wholesale
product. This reduced revenue by approximately
£100 million in the 2003 financial year.
The total number of BT Retail lines have increased
by 1% to 29.3 million at 31 March 2003 following an
increase in the 2002 financial year, with high speed
ISDN lines being the main driver behind the growth.
New wave revenues grew by 46% to £850 million
in the 2003 financial year compared to a growth of
40% to £582 million in the 2002 financial year. This
growth reflects the continued focus on the ICT,
broadband and mobility products. The key contract
wins in the 2003 financial year were Unilever, Bradford
& Bingley, National Australia Group, Abbey National
and Honeywell. Under the terms of the trading model
with BT Global Services these ICT revenues are
recognised as an internal sale by BT Retail.
BT Broadband and BT Openworld broadband
products performed strongly. BT Broadband, launched
in September 2002, had 137,000 connections at
31 March 2003 and the BT Openworld broadband
product, launched in March 2002 had 292,000
connections at 31 March 2003 giving total BT Retail
broadband connections of 429,000, 54% of
BT Wholesale’s 800,000 ADSL connections.
Gross margin increased by 12% to £3,874 million
in the 2003 financial year and was flat in the 2002
financial year. The improvements are driven by the
success of BT Together packages, improved product
mix and lower wholesale prices which more than offset
the impact of the decline in call volumes.
Gross margin is turnover less costs directly
attributable to the provision of the products and
services reflected in turnover in the period. Selling,
general and administration costs are those costs that
are ancillary to the business processes of providing
products and services and are the general business
operating costs. BT Retail analyse their costs in this
manner for management purposes in common with
Financial review
32 BT Annual Report and Form 20-F 2003