BT 2011 Annual Report Download - page 18

15BT GROUP PLC ANNUAL REPORT & FORM 20-F 2011
BUSINESS REVIEW
BUSINESS REVIEW OUR MARKETS AND CUSTOMERS
The UK consumer broadband market has grown to reach more than
17.7m households. BT has contributed to this growth by supplying
LLU over which suppliers can deliver broadband services. The UK is
now the sixth largest broadband market in the world by number of
households.
Broadband penetration has increased year-on-year and the fixed
broadband penetration rate now exceeds 65%. This has been
driven by the increasing use of the internet by consumers. The
number of adults accessing the internet every day has increased
42% over the past three years.
We believe that fixed broadband will remain most popular with
customers and mobile broadband will be largely complementary.
The increasing importance of broadband-enabled services in our
daily lives and initiatives such as the Government sponsored Race
Online 2012 have contributed to continued growth in the
broadband market.
Pay TV services remain popular with customers and this sector
continues to grow in size. The UK pay TV market is estimated at
around £5.7bn and has increased by over 30% in the past three
years. Customers value the convenience of internet-based TV
content. Ofcom data shows that 31% of internet-enabled
households watched catch-up TV online, up from 23% a year
earlier.
There are a number of companies in the UK market supplying pay
TV, video-on demand, and catch-up TV services. YouView, the joint
venture between the BBC, ITV, Channel 4, BT and others is expected
to be launched in calendar year 2012 and will make a significant
contribution to the UK TV market.
Consumers are increasingly demanding more ethical and
environmentally-friendly business practices from their suppliers. A
growing number of customers want to buy services which will allow
them to improve their own sustainability performance by improving
efficiency and reducing emissions. We have met this demand by
developing products such as our Home Hub 3 which uses 39% less
power than previous models.
UK SMEs
The overall SME market in the UK is estimated as having 4.8m
customers with spend on IT, broadband and network services
estimated at about £29bn. Competition to supply services to SME
customers remains fragmented, with many of our competitors
typically focusing on specific segments of the market depending on
customer size, focus and geography. Our competitors include
companies focused on providing services to SMEs such as Daisy and
Opal, larger companies such as Virgin Media and Cable & Wireless
Worldwide, and mobile operators and IT services companies such as
Phoenix IT and Computacenter.
We are the leading provider of fixed-line communications services
for SMEs in the UK market. Our share of the fixed-line market is
52% and we have around 1m SME customers, characterised by
their diversity. They range from start-ups and ‘microbusinesses’
with fewer than 10 employees to medium-sized business with up
to 1,000 employees.
The recession has had an impact on SMEs’ spending levels with the
markets for fixed-line voice and data, mobile services and IT
services all declining since 2008. IT services spend is expected to
resume growth in calendar year 2011, while we expect the fixed-
line voice and data market to continue to decline, driven in part
by the significant fall in fixed-line business call minutes. A positive
trend in the market is SME customers’ increasing preference to buy
bundled services, comprising fixed lines, mobile and broadband.
Calendar year 2010 saw a modest recovery in the economy with
GDP growth becoming positive after shrinking 3.5% the previous
year, but conditions for SMEs remain challenging. We have seen
a 14% reduction in the 2010 calendar year in the number of
companies going into liquidation, but levels remain above
historical trends.
Global networked IT services
The global market for networked IT services is fragmented with
a wide range of products and services and with many different
competitors, from large IT corporations and network-based
vendors, such as BT, through to niche technology suppliers.
Estimates of industry size and growth trends vary. The global IT
services market is estimated to have a value of US$584bna. After
several years of relatively flat spend on IT services due to economic
conditions, many industry analysts are forecasting higher rates of
growth for 2012.
Forecast increase in demand for managed networked IT services
Multinational managed service spend
$bn
2010 2011 2012 2013 2014
Source: IDC Market Model 2010. Forecast includes 1P VPN, Ethernet, Network management,
Applications Visibility, Control & Optimisation and Managed Security for multinationals over
1,000 employees.
0
10
20
30
40
50
SME preference to buy bundles
%
Apr-Jun
2010
May-Jul
2010
Jun-Aug
2010
Jul-Sep
2010
Aug-Oct
2010
Sep-Nov
2010
Oct-Dec
2010
Nov ’10-
Jan 2011
Dec ’10-
Feb 2011
Jan ’10-
Mar 2011
Source: GfKNOP on behalf of BT. Survey of SMEs with fixed-line, broadband and mobile.
Agreement with statement ‘your organisation prefers to buy complete Comms/IT products in
combined package’ with score 1 to 10.
0
10
20
30
40
50
60
4.8
5.0
5.2
5.4
5.6
5.8
6.0
6.2
1-4 Disagree 7-10 Agree Mean Score
Score
aIDC Global IT services Market size. Source Worldwide Black Book Q1, 2011.
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