BT 2004 Annual Report Download - page 39

In the 2003 financial year a number of non-core
investments were sold. The consideration for the
disposals totalled £3,028 million and the profit before
taxation from disposals totalled £1,691 million. This
was principally in relation to the disposal of our 26%
interest in Cegetel, a French telecommunications
operator, on 22 January 2003. The total proceeds
were £2,603 million, received in cash, and the profit
was £1,509 million before the recognition of an
exceptional interest charge of £293 million on closing
out fixed interest rate swaps following receipt of the
sale proceeds.
A major feature of the 2002 financial year was the
successful disposal of many non-core businesses. The
consideration for these disposals totalled £8.0 billion
as shown in the table below.
Disposals
Year ended 31 March 2002
Consideration
£m
Profit (loss)
before tax
£m
Japan Telecom and J-Phone
Communications 3,709 2,358
Yell 1,960 1,128
Airtel 1,084 844
Maxis Communications Berhard 350 (4)
Rogers Wireless Communications 267 (23)
BiB 241 120
Clear Communications 119 (126)
e-peopleserve 70 61
Other 173 31
Total 7,973 4,389
BT completed the sale to Vodafone of its 20%
economic interest in Japan Telecom and its 20%
interest in J-Phone Communications on 1 June 2001
and subsequently its interest in J-Phone group
companies. The total proceeds of sale were
£3,709 million received in cash, and the profit was
£2,358 million.
The sale of Yell, BT’s classified advertising
directory businesses in the UK and the USA, was
completed on 22 June 2001 for a consideration of
£1,960 million, giving a profit of £1,128 million. In
May 2001, the UK Office of Fair Trading announced
that the price controls over the UK Yellow Pages
advertising rates were to be tightened significantly.
The price we achieved for the sale of Yell, which was
announced on 26 May 2001, reflected the impact of
these controls on Yell’s prospects.
BT completed the sale of its 18% interest in Airtel,
a major Spanish wireless operator, to Vodafone for
£1,084 million on 29 June 2001. The profit of
£844 million on the sale compares with BT’s
investment in the company of £223 million, built up
during the 1990s.
In November 2001, BT completed the sale of its
33% interest in Maxis Communications of Malaysia for
£350 million, which broadly equated with its carrying
value. We completed the sale of our interest in Rogers
Wireless to AT&T for £267 million on 29 June 2001
and recognised a loss of £23 million.
BT’s interest in BiB was diluted in July 2000 when
BSkyB gained control and in May 2001 we agreed to
exchange our residual interest in BiB for tranches of
shares in BSkyB. We received the first tranche of
19 million BSkyB shares with an initial value of
£128 million on 28 June 2001. We were required to
hold 50% of this tranche until May 2002 and
recognised a profit on these shares when they were
sold in May 2002. We also received the second tranche
of BSkyB shares with a similar value in November
2002, and they were sold at that time. The profit of
£120 million recognised in the 2002 financial year
relates to the BSkyB shares which we were permitted
to sell on receipt. In the 2003 financial year a profit on
disposal of BSkyB shares of £131 million was
recognised.
In December 2001, BT completed the sale of its
wholly owned subsidiary company, Clear
Communications Limited, which operates a
communications network in New Zealand, for
consideration of £119 million. A loss of £126 million
has been recognised on this sale of which £45 million
relates to goodwill taken directly to reserves before
April 1998.
In February 2002, we completed the sale of our
50% interest in e-peopleserve, a major human
resource outsourcing activity, to our joint-venture
partner, Accenture, for an initial consideration of
£50 million. BT is entitled to receive additional
payments from an earn-out arrangement based on
e-peopleserve’s revenues from customers other than
BT and Accenture over the five years to 2007. These
additional earn-out payments will total between
£27 million and approximately £167 million. A profit of
£61 million on this transaction has been recognised in
the 2002 financial year based on the initial
consideration and the discounted value of the
additional minimum payments of £20 million.
In addition, in the 2002 financial year we
recognised an impairment charge of £347 million in
relation to the fixed asset investment in AT&T Canada,
as noted above, and £157 million in relation to Impsat.
Profit on sale of property fixed assets
In December 2001, as part of a wider property
outsourcing arrangement, BT completed the sale and
leaseback of the majority of its UK properties to
Telereal, a 50/50 joint venture partnership formed by
Land Securities Trillium and The William Pears Group.
Around 6,700 properties – offices, telephone
exchanges, vehicle depots, warehouses, call centres
and computer centres – were transferred totalling
some 5.5 million square metres. Under these
arrangements, Telereal is responsible for providing
accommodation and estate management services to
BT. The consideration received amounted to £2,380
million. BT has leased the properties back at a total
annual rental commencing at around £190 million for
the 2003 financial year and subject to a 3% annual
increase. This charge was offset by reduced
depreciation and interest charges. In addition, BT has
transferred the economic risk on a large portion of its
leased properties to Telereal in return for an annual
rental commencing at approximately £90 million per
annum. This was broadly equivalent to the existing
BT Annual Report and Form 20-F 200438 Operating and financial review