Additional information in relation to BT's Current Cost Financial Statements for 2008

In the published Current Cost Financial Statements for 2008, published on 16 September 2008, BT restated the prior year comparative internal and external volumes and revenues in the following markets:

• Traditional interface symmetric broadband origination (up to and including 8Mbit/s and >8Mbits)
• Wholesale Trunk Segments
• Technical Areas (Point of Handover)
• Technical Areas (Interconnect Circuits)
• Alternative Interface Symmetric Broadband Origination (AISBO)

These markets were restated to reflect;

• additional service granularity and revised revenue calculations following Ofcoms Replicability review
• the exclusion of non-chargeable in-span connection services from the Technical Areas (Interconnect Circuits) market

The restated revenues for 2006/07 did not have a significant impact on the associated costs to any of these markets. The costs have not therefore been restated.

Ofcom commissioned an independent consultant (Analysys Mason) to review these restatements and their conclusions were published in their report “a study of BTs Regulatory Financial Statements for business connectivity markets” on 19 November 2008

Since publication of the 2008 statements, a number of questions have been raised about how the restated volumes would affect 2006/07 unit cost information shown at the service level

We have therefore agreed to provide additional information in relation to BT’s Current Cost Financial Statements for 2008. This information is a supplement to the published financial statements, not a revision of them. Consequently, the published financial statements, together with the related report of the independent auditors, remain in issue.

The additional information shows how the fully allocated costs for those products where revenues were restated would have been affected by the use of the revenue system size basis for cost attributions to network components in 2007.

This additional fully allocated cost information has been presented on the following pages of schedules to the financial statements:

• Pages 30-42, 57-58, 60-62, 75-77, 84, 86-7
• Please note that the component cost calculations in Section 6 have been updated only where the services have been restated. Where components are shared with markets other than those that were restated, the costs have not been changed in these other markets as the impact is not material.