BT 2007 Annual Report Download - page 29
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Major contracts
Our business may be adversely affected if we fail to perform on
major contracts.
We have entered into a number of complex and high-value
networked IT services contracts with customers. Our pricing, cost
and profitability estimates for major contracts generally include
anticipated long-term cost savings that we expect to achieve
over the life of the contract.
These estimates are based on our best judgment of the
efficiencies we plan to deploy. Any increased costs, delays or
failures to achieve the anticipated savings could make these
contracts less profitable or loss making, adversely impacting our
profit margins.
In some cases, our products and services incorporate software
or system requirements from other suppliers or service providers.
Our ability to meet our commitments in a timely manner may
depend on the ability of these suppliers and service providers to
meet their obligations. Failure to manage and meet our
commitments under these contracts may lead to a reduction in
our future revenue, profitability and cash generation.
Networks and systems failures
Our business depends on our ability to transfer substantial
volumes of data speedily and without interruption. Any
significant failure or interruption of such data transfer as a result
of factors outside our control could have a material adverse
effect on the business and our results from operations, including
the deployment of 21CN. We have a business continuity strategy
in place, designed to deal with such catastrophic events
including, for example, major terrorist action, industrial action,
extreme computer virus attack, hurricane or flooding. A failure
to deliver that strategy may result in a material loss and there
can be no assurance that material adverse events will not occur.
Pensions
Declining investment returns and longer life expectancy may
result in the cost of funding BT’s defined benefit pension
scheme becoming a significant burden on our financial
resources.
As a result of the triennial actuarial valuation of the BTPS at
31 December 2005, BT agreed to make annual deficiency
payments of £280 million over ten years. The first three
instalments have been paid up front with £520 million paid in
the 2007 financial year and a further £320 million was paid in
April 2007.
The results of future scheme valuations will be impacted by
the future performance of investment markets, interest and
inflation rates and the general trend towards longer life
expectancy, as well as regulatory changes, all of which are
outside our control.
Report of the Directors Business review
28 BT Group plc Annual Report & Form 20-F