BT 2004 Annual Report Download - page 32

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BT Retail’s results have demonstrated the strategic
focus of defending traditional turnover and gross
margins, cost reductions through a series of cost
transformation programmes and focusing on turnover
growth through new wave initiatives in the ICT,
broadband and mobility markets. In the 2004 and
2003 financial years, the results include those of the
re-integrated Concert business relating to UK
multinational customer accounts, including the
associated sales force and account management
functions.
BT Retail’s turnover decreased by 3% in the 2004
financial year to £13,534 million after rising by 5% in
the 2003 financial year. The growth in new wave
turnover of 29% in the 2004 financial year was more
than offset by the decline in traditional turnover driven
by the increased impact of regulation and competition.
After adjusting for the regulatory impact of the
reduction in mobile termination rates, turnover
declined by 2% compared to the 2003 financial year.
The increase in the 2003 financial year included
turnover from the UK multinational customers
re-integrated into BT Retail from the Concert global
venture. Turnover for the three years is summarised as
follows:
BT Retail turnover 2004
£m
2003
£m
2002
£m
Voice services 9,012 9,665 9,590
Intermediate products 2,356 2,534 2,285
Traditional 11,368 12,199 11,875
ICT 1,734 1,502 1,378
Broadband 307 131 31
Mobility 84 42 –
Other 41 8–
New wave 2,166 1,683 1,409
Total 13,534 13,882 13,284
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 7%
lower in the 2004 financial year after an increase of 1%
in the 2003 financial year.
The overall market for fixed to fixed voice call
minutes in the 2004 financial year was estimated to
have declined by 2%, partly reflecting the migration to
new wave products and services such as IPVPN’s and
substitution by e-mail, instant messaging and mobile
services. In the 2003 financial year, the estimated
overall market for fixed to fixed voice call minutes
declined by 3%.
BT Retail’s total originating measured call volumes
declined by 10% in the 2004 financial year (2003 –
5%) with geographic (local, national and international)
calls declining by 8% (2003 – 4%), reflecting the
decline in the market and some loss of market share
due to CPS. Fixed to mobile call volumes were flat in
the 2004 financial year after a 6% increase in the 2003
financial year. BT Retail’s internet and data related call
volumes declined by 16% reflecting the move to
wholesale flat rate internet access products in the
2004 financial year. Total BT Group internet and data
related call volumes increased by 1% (2003 – 30%),
with the decline in the year on year rate of growth
driven by the migration to broadband which is not
measured in minutes and a slow down in the growth of
flat rate internet access minutes. As a result, BT
Group’s total originating measured call volumes
declined by 2% in the 2004 financial year (2003 – 13%
increase).
The directory services market was deregulated
following an announcement in September 2001 which
resulted in the introduction of the new 118 XXX
number range in December 2002 and the termination
of the 192 and 153 services in August 2003. BT’s
market share of the deregulated directory enquiries
market through the 118 500 service has increased
during the year as the benefits and awareness of the
quality of service and pricing, supported by a
marketing campaign became apparent. However,
revenues reduced significantly year on year due to a
contraction in the market.
Turnover from intermediate products in the 2004
financial year of £2,356 million decreased by 7% in the
2004 financial year after increasing by 11% in the
2003 financial year. In the 2004 financial year, the
change was mainly driven by a decline in retail private
circuits and ISDN as customers migrate to cheaper
partial private circuits and new wave products such as
broadband and IPVPN. In the 2003 financial year
growth was achieved, which included the benefit of the
re-integration of Concert, despite the migration of
customers from retail private circuits to partial private
circuits. As a result of changes required by Ofcom,
partial private circuits used by UK fixed network
BT Annual Report and Form 20-F 200431 Operating and financial review
Group operating profit (loss)
before goodwill amortisation
and exceptional items Depreciation
Amortisation of
intangible assets
EBITDA before
exceptional items
2004
£m
2003
£m
2002
£m
2004
£m
2003
£m
2002
£m
2004
£m
2003
£m
2002
£m
2004
£m
2003
£m
2002
£m
1,434 1,528 1,006 162 201 209 –––1,596 1,729 1,215 BT Retail
1,681 1,758 2,149 1,919 1,923 1,914 –––3,600 3,681 4,063 BT Wholesale
(105) (375) (294) 610 609 503 343508 238 212 BT Global Services
(118) (121) (90) 230 278 348 –––112 157 258 Other
––––––––––––Intra-group
2,892 2,790 2,771 2,921 3,011 2,974 3435,816 5,805 5,748
Total continuing
activities
––(191) ––414 ––11 ––234
Discontinued
activities
2,892 2,790 2,580 2,921 3,011 3,388 34145,816 5,805 5,982 Group totals