Summary directors' report
BT performed satisfactorily during the year, in spite of considerable regulatory pressure and a general slowing of the economy. Profit before tax was up 13 per cent in the year, largely due to lower redundancy costs. Turnover grew by 4 per cent to £14.4 billion, aided by a 30 per cent increase in turnover in the mobile market, where the number of customers grew on average by about three per cent a month.

Although the rate of volume growth of inland calls was down slightly on the previous year, the number of international calls grew significantly, helping to offset the effect of the current price cap of RPI minus 7.5 per cent, agreed with Oftel, which remains in place until a new price cap becomes operative in 1997.

BT spent more last year on marketing - with advertising campaigns such as 'Work smarter, not just harder' aimed at the business market. More was also spent on BT's expansion overseas and in the mobile market.

The year also saw the first full year's contribution from CI. The results were healthy, but affected by BT's £73 million share of MCI's restructuring costs.

BT's capital expenditure increased by 4 per cent. BT spent more than £2 billion in the year on modernising and expanding its networks to meet the wide-ranging needs of its customers at home and abroad.

Overall, BT's balance sheet remained strong with a £1.3 billion fall in net debt.

The directors are proposing a final dividend for the year of 11.25 pence per share.

Pricing
BT introduced per second pricing in June last year, the first national operator in the world to provide such a facility on all direct dialled calls. Since privatisation in 1984, BT's main call prices have fallen on average by more than half in real terms. The UK's telephone prices are now among the lowest in the world, according to an independent report from the OECD.

The number of customers taking advantage of BT's residential discount packages, which offer savings of up to 25 per cent on calls, continued to rise. Membership of PremierLine doubled in the year and the number of customers who have opted for Friends & Family trebled.

New services are being developed all the time, and in February BT launched its own Internet product. In addition, children in schools will be able to access the Internet through CampusWorld - a new on-line education service to which more than 2,000 schools have subscribed.

BT is determined to continue to improve the quality of all its services for customers. Overall, the latest figures show that the reliability of the network continues at a high level. BT has significantly improved its repair service with more than 82 per cent of residential and nearly 90 per cent of business repairs now completed within the target time.

Around the world, BT aims to provide services to multinational customers and their extended enterprises in Europe, North America and the Asia-Pacific region. In Europe, BT and VIAG, who have already formed a joint venture company known as VIAG INTERKOM, moved towards forming a triple alliance with German industrial group RWE to offer telecommunications services in Germany, the largest telecommunications market in Europe.

BT people
By the end of March 1996, around 130,000 people were employed by BT, compared with 227,000 five years ago.

BT remains committed to equal opportunities and actively encourages the employment, training and career development of disabled people. It has registered under the Government's Two Ticks disability scheme.

Although telecommunications technology is extremely energy efficient and is an alternative to travel, BT is conscious of its own effect upon the environment. Each year it sets itself targets for environmental improvement and has reduced energy consumption by over 13 per cent in the last four years.

Important note
This summary financial statement does not contain sufficient information to allow as full an understanding of the results of the group and state of affairs of the company or the group as would be provided by the full report and accounts.

Shareholders who would like more detailed information may obtain a copy of the full report and accounts for 1995/96 and/or future years, free of charge, by completing and returning the request card which accompanies this annual review.