BT 2005 Annual Report Download - page 8

Introduction
BT Group plc is the listed holding company for an
integrated group of businesses, which together form one
of the world’s leading providers of communications
solutions serving customers in Europe, the Americas and
the Asia Pacific region. British Telecommunications plc is
a wholly-owned subsidiary of BT Group plc and holds
virtually all businesses and assets of the BT group.
Our aim is to increase shareholder value through
service excellence, an effective brand, our large-scale
networks and our existing customer base, and also
through innovation in products, services and solutions.
Our principal activities include networked IT services;
local, national and international telecommunications
services; and higher-value broadband and internet
products and services.
In the UK
BT is the UK’s largest communications service provider,
by market share, to the residential and business markets,
supplying over 20 million customers with a wide range of
communications products and services, including voice,
data, internet and multimedia services, and offering a
comprehensive range of managed and packaged
communications solutions.
Our core portfolio covers traditional telephony
products such as calls, analogue/digital lines and private
circuits. New wave revenue generation is focused on
networked IT services, broadband and mobility.
In the UK wholesale market, we provide network
services and solutions to over 600 communications
companies, including fixed and mobile network operators,
ISPs (internet service providers) and other service
providers. We interconnect with more than 180 other
operators, as well as carrying transit traffic between
telecommunications operators.
Our aim in these markets is to continue to increase
profitable revenues from data and advanced broadband
and internet services, further reducing our dependence on
revenues and profit generated by traditional fixed-line
voice services.
In the 2005 financial year, 91% of our revenues were
derived from operations within the UK.
Globally
We supply managed services and solutions to multi-site
organisations worldwide – our core target market is
10,000 multi-site organisations including major
companies with significant global requirements, together
with large organisations in target local markets. We
provide them with global reach and a complete range of
networked IT services.
Our extensive global communications network and
strong partnerships enable us to serve customers in the
key commercial centres of Europe, North America and the
Asia Pacific region. We own operations in the Americas,
Africa, the Asia Pacific region, Belgium, France, Germany,
Ireland, the Netherlands, Spain, Italy, Scandinavia,
Switzerland and Central and Eastern Europe. In a small
number of countries we use a combination of direct sales
and services capabilities and strategic partners to deliver
the services our customers want. We currently have
employees in 12 countries in Asia Pacific, and operate
multiple sales offices in the Americas.
Our global communications services portfolio includes:
desktop and network equipment and software; transport
and connectivity; managed LAN (local area network),
WAN (wide area network) and IPVPN (internet protocol
virtual private network) services; managed mobility;
applications hosting; storage and security services; and
business transformation and change management
services.
Governance
BT’s policy is to achieve best practice in our standards of
business integrity in all our operations, in line with our
published statement of business practice – The Way We
Work. This includes a commitment to maintaining the
highest standards of corporate governance throughout
the group (see Corporate governance).
Corporate social responsibility
We are committed to enhancing our positive impact on
society through leadership in CSR (corporate social
responsibility). In our view, a well managed CSR
programme supports the delivery of strategy and is in the
best interests of customers, shareholders, employees and
the community (see Our commitment to society).
Ofcom’s Strategic Review of Telecommunications
Shortly after assuming its regulatory functions in
December 2003, the Office of Communications (Ofcom)
began conducting a Strategic Review of
Telecommunications, the aim of which is to consider the
scope for the further development of effective
competition in the telecommunications sector.
The Review has found that although the UK
telecommunications market has delivered significant
benefits for consumers and businesses, the current
market situation is not acceptable or desirable going
forward. Consequently, Ofcom’s second consultation put
forward three options:
&withdrawal from regulation in favour of reliance on
competition law;
&a market investigation reference to the Competition
Commission under the Enterprise Act; or
&the delivery by BT to other industry participants of
‘real equality of access’.
BT supports the concept of a settlement based on
equality of access which would, in our view, be an ideal
opportunity to focus regulation on economic bottlenecks
and reduce it elsewhere; sweep away the ‘regulatory
mesh’ that has grown up since 1984; and deliver
regulatory stability and certainty, promoting the
confidence that market participants need if they are to
invest and innovate. Consequently, in our response to
Ofcom’s second consultation we put forward a package of
proposals under which BT would make significant
organisational and other changes to address issues of
market confidence and transparency. We stressed that as
part of this package, we would need Ofcom to take
certain measures, notably to make a commitment to rapid
and significant deregulation.
Ofcom is currently involved in discussions with BT and
others aimed at assessing whether a settlement based on
equality of access would be feasible. If it concludes it is
not, it will consider adopting the second of the three
options outlined above, ie an Enterprise Act reference.
See Regulation, competition and prices for more
information on Ofcom’s proposals and BT’s response.
Operating and financial review BT Group plc Annual Report and Form 20-F 2005 7