BT 2011 Annual Report Download - page 14

11BT GROUP PLC ANNUAL REPORT & FORM 20-F 2011
BUSINESS REVIEW
BUSINESS REVIEW OUR BUSINESS AND STRATEGY
9% in BT Business. Within BT Global Services’ ‘right first time’
programme, we reduced customer faults by 11%.
We believe the changes we have made, and will make in the next
financial year, will deliver significantly improved service levels for
our customers.
Cost transformation
Cost transformation goes hand in hand with getting it ‘right first
time’ for customer service – we have continued with our drive to
improve operational efficiency across the business, from using IT
systems more effectively and driving savings from suppliers, to
streamlining internal processes and ways of working.
In 2011 we made good progress with our cost transformation
activities, which have contributed to our operating costs savings of
£1.1bn, representing a 7% decline in our operating cost base. This
represents a cumulative reduction in our cost base of almost £2bn
over the last two years. All of our lines of business and internal
service units have made a contribution to the delivery of these
savings. See Financial review – Transforming our cost base on page
page 47 for further details.
Savings have been delivered from targeted cost reduction
programmes which focus on:
•eliminating the cost of failure across the group
•an overhead value analysis programme, which provides a
structured approach to reducing costs
•process re-engineering, which reviews processes end-to-end
across the group to remove unnecessary steps.
These actions have allowed us to operate more efficiently and
consequently reduce our costs while at the same time reducing
failure in our processes which assist customer service.
We have also continued to review procurement arrangements with
our major suppliers on a group-wide basis and have improved
supply terms and service delivery.
As a result of increased efficiency across our operations we have
continued to reduce our net labour costs, which were down 7%. As
far as possible, we try to retain our permanent workforce through
redeployment, retraining and in-sourcing work which has been
previously performed by third parties. Around 4,000 people have
been re-skilled and redeployed into roles within BT in 2011.
Investing for the future
By being more efficient in customer service and transforming our
cost base we can provide services to our customers on a more
competitive basis and improve our cash generation. This is critical
as it creates the opportunity for us to invest in our strategic
priorities as well as reduce our overall level of net debt, support
the pension fund and pay dividends to shareholders.
In 2010 we set out five strategic priorities which are underpinned
by our views of the markets we operate in. By focusing investment
around these strategic priorities we believe we will build a better
future for all our stakeholders.
In 2011 we added a new strategic priority which reflects our
work to embed sustainability and corporate responsibility at the
core of our business.
Our strategic priorities
Driving broadband-based consumer services
Competition in the UK consumer market is intense and customers’
demands are evolving. Around 99% of UK premises now have
access to broadband and customers are increasingly buying their
line and calls service together with broadband and TV. We already
provide a comprehensive broadband service offering many features
and offer attractively priced bundles of services.
During 2011 we made the following progress:
•we grew our retail broadband customer base to 5.7m, up 11%
•144,000 customers now take our super-fast fibre-based
broadband service, BT Infinity
•79% of the total UK broadband market, including cable, is now
delivered over the BT network, with our retail share at 29%
•our retail share of DSL and LLU net additions in the fourth
quarter of 2011 was 64%, the highest share of quarterly net
additions in eight years
•BT Vision’s customer base grew to 575,000.
Looking ahead, we are aiming to grow the number of services we
provide customers by building on our position as the market leader
in broadband. TV is a growth area for us and one that will benefit
from the roll-out of super-fast broadband. On-demand TV is
becoming more popular and TV services will become increasingly
personalised and interactive. It is for those reasons that we are
investing in content and delivery, improving the user-interface for
BT Vision and participating in the YouView joint venture.
In addition, over the coming years we expect to see the emergence
of a range of broadband-based consumer services, building on new
and existing services. There will also be new opportunities in the
entertainment and networked home space, such as energy usage
management and home automation.
Our future plans for driving broadband-based consumer services
include:
•continuing to offer attractive bundled voice, broadband and
TV services
•enhancing our entertainment offering with services such as
online gaming
•seeking new opportunities to differentiate our services, for
example by using our wi-fi network.
Being the ‘Brand for Business’ for UK SMEs
We are the leading provider of fixed-line communications services for
SMEs in the UK and we are well-placed to grow our revenue from IT
and mobility services. The market remains highly fragmented and we
believe this provides us with further opportunities to become the
main brand SMEs trust by providing a one-stop shop for all their
communications needs, and will help us to increase our market share.
During 2011 we made the following progress:
•improved trends in BT Business compared with prior years,
with revenue only marginally down in 2011
•IT services and mobility revenue grew by 17% and 14%,
respectively.
Our opportunities for growth include selling new services to our
existing customer base and helping customers migrate to cloud-
based services, which allow customers to access IT services on a
more flexible basis.
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