Chairmanís statement

BT has had a satisfactory year, rather than an outstanding one. The tough regulatory regime and the unexciting growth in the UK economy both took their toll. We have kept our eye on the long run, through focusing on customers, developing high-quality products and services and putting in place the various pieces of our overseas strategic jigsaw.

Turnover grew by 4 per cent, helped by innovative marketing campaigns and continued rapid growth in the mobile telephony market. Although the rate of growth of inland call volumes was down slightly on the previous year, this was offset by significant growth in the number of international calls.The news is good on costs; most of the downsizing exercise is now behind us and efficiency savings are coming through.

The year also saw the first full yearís contribution from MCI, our partner in the United States. Our joint venture company, Concert, has just completed its first trading year and has won $1 billion dollars in committed revenue, with as much again in the pipeline.

In mainland Europe - with the liberalisation in telecommunications just over 18 months away - we have a significant presence in most of the major markets. In the Asia-Pacific region we continue to form special relationships with leading telecommunications companies at a sub-regional level. The termination of merger discussions with Cable and Wireless leaves our strategy unchanged.

Earnings per share increased to 31.6 pence. The recommended final dividend of 11.25 pence per share brings the total dividends for the year to 18.7 pence, an increase of 5.6 per cent on last year.

Competition is now a major factor and we relish it. The UK has 150 licensed operators, including the cable TV companies, and we are competing vigorously and fairly.

The regulatory environment is much the same as when I wrote to all shareholders about it in February. Our view is that Oftelís proposals will not promote sustainable competition in the telecommunications market but will simply deter investment. They also concentrate too much power in the hands of one individual. I still hope continuing discussions will bring a better result for BT, for our customers, for you, our shareholders, and for the industry.

BTís long-run trading prospects are very good, but susceptible to short-run turbulence in the regulatory environment, overseas as well as in the UK. We have a talented management team and a committed workforce - under our new Chief Executive, Sir Peter Bonfield. We have a growing focus on our customersí requirements; we are strong financially and technologically; and we have the right relationships and partners outside the UK. All the main pieces are in place to build a sound future for the group.

Sir Iain Vallance
Chairman
21 MAY 1996

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