BT 2011 Annual Report Download - page 34

31BT GROUP PLC ANNUAL REPORT & FORM 20-F 2011
BUSINESS REVIEW OUR LINES OF BUSINESS
BUSINESS REVIEW
Capacity and call-based products
We continue to sell a wide range of capacity and call-based
products and services, both regulated and non-regulated, using
both traditional and IP technologies. As we refresh our core
portfolio with next generation replacements, we are migrating
these services to our IP network platform. One of these new
products is IP Exchange, BT Wholesale’s global IP interoperability
platform that allows CPs to manage traditional and IP voice calls on
a single gateway, regardless of whether the calls are from mobile or
fixed handsets.
White label managed services
Our white label managed services business enables customers with
limited or no infrastructure to offer telecoms services such as
telephony and broadband without the need to invest capital. We
provide a complete service, from accepting and processing new
orders through to customer service and end user billing.
Operating review
We are committed to becoming our customers’ partner of choice
by continuously improving our service delivery and customer
satisfaction, reducing cost, evolving our traditional product
portfolio and launching new IP-based services.
We reduced operating costs by 11% in the year, largely by
eliminating the cost of failure through improvements in the
delivery of products and getting services ‘right first time’. We have
reduced the cost of service delivery by 46% over the last three
years, reduced discretionary spend and consolidated our property
portfolio to reduce costs.
In May 2010 we announced the availability of our global IP
Exchange platform, which is now in use by over 120 fixed-line and
mobile operators worldwide. The number of minutes carried over
the platform doubled over the last year.
MNS & IP
Other
BT Wholesale external revenue excluding transit
£m
2009 2010 2011
0
1,000
2,000
3,000
1,366
1,862 1,537
576
853 969
+48%
+14%
BT Wholesale product portfolio and customers
VOICE
MOBILE NETWORK OPERATORS
BROADBAND TRANSIT MNS
INTERNET SERVICE PROVIDERS
FIXED OPERATORS
BRAND EXTENDERS
BROADCASTERS
BT RETAIL
DATA
We also launched a 1Gbps Ethernet service nationally in the UK and
the sale of our fixed-line Ethernet service increased more than
three-fold over the previous year.
In March 2011 we launched our first digital content distribution
propositions to the UK market.
The majority of BT Wholesale’s largest UK customers by revenue
have signed long-term contracts, typically for between three and
five years. As a result, the proportion of our external revenue
underpinned by long-term contracts remained at 40% in 2011.
Revenue from MNS contracts continued to grow, and accounted for
24% of external revenue in 2011, up from 21% in the previous
year. These contracts include a high proportion of products and
services with low levels of bespoke development. This allows us to
defend existing product and service revenues, as well as creating
new opportunities for growth.
During 2011 we signed managed network services contracts with a
total order value of £1.2bn (2010: £1.8bn). These included:
Date Customer Details
May 2010 Scottish and Re-sign of a long-term agreement for
Southern fully managed voice and wholesale line
Energy rental services that SSE resells under its
(SSE) own brand to more than 250,000
consumers in the UK.
Feb 2011 KCOM Five-year extension of our national
Group managed network outsourcing
agreement with KCOM Group with the
addition of a hosted IP Voice service
that KCOM is reselling.
A number of our existing managed network services agreements
have led to follow-on contracts, such as a power management
contract with Virgin Media.
Our commercial satellite services are also helping non-
governmental organisations provide critical aid services in hard to
reach locations and support the delivery of education services in
developing countries. Our satellite services are helping to improve
the accuracy of European GPS services and are being used by UK
energy suppliers to link remote wind farms in the UK to centralised
monitoring systems.
During the year, BT Wholesale was named ‘Best Wholesale Carrier’
for the first time at the World Communication Awards 2010.
Financial performance
2011 2010a2009a
£m £m £m
Revenue 4,210 4,592 4,800
– Internal revenue 980 1,226 1,228
– External revenue 3,230 3,366 3,572
Net operating costs 2,894 3,239 3,444
EBITDA 1,316 1,353 1,356
Depreciation and amortisation 619 680 686
Operating profit 697 673 670
Capital expenditure 329 325 435
Operating cash flow 911 917 903
aRestated. See page 106.
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