BT 2016 Annual Report Download - page 181

187
Overview The Strategic Report Governance Financial statements Additional information
8. Specific items
Year ended 31 March
2016
£m
2015
£m
2014
£m
Revenue
Retrospective regulatory matters (203) (128) –
Impact of fair value adjustment to deferred revenue on acquisition of EE 70 – –
(133) (128) –
Operating costs
Retrospective regulatory matters 203 75 –
EE acquisition-related costs 99 19 –
Integration costs 17 – –
Property rationalisation costs 29 45 –
Restructuring charges –315 276
Profit on disposal of property –(67) –
Profit on disposal of businesses –(6) –
348 381 276
Net finance expense
Interest expense on retirement benefit obligation 221 292 235
EE-related financing costs 8 7 –
229 299 235
Share of results of associates and joint ventures
(Profit) loss on disposal of interest in associates and joint ventures –(25) 4
Net specific items charge before tax 444 527 515
Taxation
Tax credit on specific items above (70) (121) (111)
Tax credit on re-measurement of deferred tax (96) –(208)
(166) (121) (319)
Net specific items charge after tax 278 406 196
Retrospective regulatory matters – in July 2014 the Supreme Court overturned a Court of Appeal judgment, made in July 2012, which
had disallowed our ladder pricing policy relating to 0800, 0845 and 0870 calls from mobile phones terminating on our network. In
2012/13 we had recognised specific item charges of £85m and £58m against revenue and EBITDA respectively relating to this matter.
In 2015/16 we recognised revenue and costs of £203m, being the prior year impacts of ladder pricing agreements with the UK mobile
operators following the Supreme Court judgment.
In August 2014 the Competition Appeal Tribunal (CAT) handed down judgment on various appeals brought against a December 2012
Ofcom determination on the pricing of certain Ethernet products. We disagree with the CAT’s judgment and have been granted permission
to appeal to the Court of Appeal. Ofcom had determined that BT had overcharged for certain services between 1 April 2006 and
31March 2011 and required BT to make repayments. The CAT judged that BT should also pay interest on these amounts. Together with a
review of our regulatory risk position in relation to other historical matters, we recognised a specific item charge of £75m in 2014/15.
Impact of fair value adjustment to deferred revenue on acquisition of EE – we recognised a fair value adjustment on the acquisition of
EE which reduced the amount of deferred income in relation to its prepaid subscriber base by £70m. The step down reflects the difference
between the amount recorded by EE on acquisition and the fair value calculated based on the incremental cost that a market participant
would incur to take on the liability plus a reasonable profit margin. This amount was released as a reduction to revenue in the period
between acquisition and 31 March 2016, reflecting the period over which EE provided the related service.
Acquisition, integration and financing costs relating to EE – transaction costs of £99m (2014/15: £19m, 2013/14: £nil) and
integration costs of £17m (2014/15: £nil, 2013/14: £nil) were incurred relating to the acquisition of EE and debt financing fees of £8m
(2014/15: £7m, 2013/14: £nil) were incurred arranging a £3.6bn acquisition facility.
Property rationalisation costs – we recognised a £29m charge (2014/15: £45m, 2013/14: £nil) relating to the rationalisation of the
group’s property portfolio.
Restructuring charges – There were no restructuring charges for the current year. The components of the restructuring charges
recognised in the prior years were: people and property charges of 2014/15: £294m and in 2014/15 (2013/14: £217m), principally
comprising leaver costs of 2014/15: £237m in 2014/15 and (2013/14: £175m), property exit costs and networks, products and
procurement channels rationalisation charges of 2014/15: £21m and in 2014/15 (2013/14: £59m).
Profit on disposal of property – in February 2015 we disposed of a surplus building in London, Keybridge House, for a consideration of
£93m resulting in a profit of £67m.
Interest expense on retirement benefit obligations – see note 20 for more details.
Profit or loss on disposal of interest in associates and joint ventures – in 2014/15 we recognised a £25m profit on the disposal of an
associate, which was held at nil cost.
Tax credit on re-measurement of deferred tax – see note 9 for more details.