BT 2010 Annual Report Download - page 127

FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
125BT GROUP PLC ANNUAL REPORT & FORM 20-F
FINANCIAL STATEMENTSADDITIONAL INFORMATION REPORT OF THE DIRECTORS REVIEW OF THE YEAR OVERVIEW
27. Financial commitments and contingent liabilities
2010 2009
Capital expenditure contracted for at the balance sheet date but not yet incurred was as follows: £m £m
Property, plant and equipment 368 414
Computer software 15 37
Total 383 451
2010 2009
Future minimum operating lease payments for the group were as follows: £m £m
Payable in the year ending 31 March:
2010 – 484
2011 494 455
2012 460 430
2013 431 403
2014 400 377
2015 375 356
Thereafter 5,527 5,499
Total future minimum operating lease payments 7,687 8,004
Operating lease commitments were mainly in respect of land and buildings which arose from a sale and operating leaseback transaction in
a prior period. Leases have an average term of 22 years (2009: 23 years) and rentals are fixed for an average of 22 years (2009: 23 years).
At 31 March 2010, other than as disclosed below, there were no contingent liabilities or guarantees other than those arising in the
ordinary course of the group’s business and on these no material losses are anticipated. The group has insurance cover to certain limits for
major risks on property and major claims in connection with legal liabilities arising in the course of its operations. Otherwise, the group
generally carries its own risks.
The group has provided guarantees relating to certain leases entered into by O2UK Limited prior to its demerger with O2on
19 November 2001. O2plc has given BT a counter indemnity for these guarantees. The maximum exposure was US$132m as at 31 March
2010 (2009: US$110m), approximately £87m (2009: £77m), although this could increase by a further US$304m (2009: US$399m),
approximately £200m (2009: £278m), in the event of credit default in respect of amounts used to defease future lease obligations. The
guarantee lasts until O2UK Limited has discharged all its obligations, which is expected to be when the lease ends on 30 January 2017.
We do not believe that there is any single current court action that would have a material adverse effect on the financial position or
operations of the group. However the aggregate volume and value of legal actions to which the group is party has increased significantly
during 2010.
There have been criminal proceedings in Italy against 21 defendants, including a former BT employee, in connection with the Italian
UMTS (universal mobile telecommunication system) auction in 2000. Blu, in which BT held a minority interest, participated in that auction
process. On 20 July 2005, the former BT employee was found not culpable of the fraud charge brought by the Rome Public Prosecutor. All
the other defendants were also acquitted. The Public Prosecutor has appealed the court’s decision. The appeal was unsuccessful and no
damages follow.
The European Commission formally investigated the way the UK Government set the rates payable on BT’s infrastructure and those paid
by Kingston Communications, and whether or not the UK Government complied with European Community Treaty rules on state aid. The
Commission concluded in October 2006 that no state aid had been granted. The Commission’s decision was appealed. Judgement on the
appeal has not yet been given but we continue to believe that any allegation of state aid is groundless and that the appeal will not
succeed.