Following a strong performance by its UK business, including encouraging growth in newer activities, BT's earnings per share grew by 3.7 per cent in the year to 31 March 1997.

The directors are proposing a final dividend for the year of 11.95 pence per share, which will be paid at the same time as the special dividend of 35 pence per share announced last November.

The company is succeeding in growing the market in the UK through a combination of consistently good service and vigorous and fair competition, together with substantial price reductions. Demand for the group's advanced products and services remains strong and costs continue to be kept under control.

BT is thus well positioned, with its commercial and financial strengths, to combine with MCI to form Concert. The new group will be uniquely placed to meet the opportunities of the fast-liberalising global marketplace.

Summary group profit and loss account For the year ended 31 March 1997
	1997	1996
	£m	£m
Turnover	£14,935	14,446
Operating costs (a) Operating profit Group's share of profits of associated companies Profit on sale of group companies Net interest payable Premium on repurchase of bonds Profit before taxation Taxation Profit after taxation Minority interests Profit for the financial year Dividends (b) Retained profit (transfer from reserves) Earnings per share Dividends per share (b) Directors' emoluments (a) including redundancy charges	(11,690) 3,245 139 8 (129) (60) 3,203 (1,102) 2,101 (24) 2,077 (3,510) (1,433) 32.8p 54.85p 2.6 367	(11,346) 3,100 82 7 (170) - 3,019 (1,027) 1,992 (6) 1,986 (1,184) 802 31.6p 18.7p 2.5 421
(b) 1997 figures include ordinary dividends of 19.85p per share, totalling £1,266m, and the special dividend of 35p per share, totalling £2,244m

Summary group balance sheet at 31 March 1997
	1997	1996
	£m	£m
Fixed assets Current assets Creditors: amounts fallling due within one year Net current liabilities Total assets less current liabilities Creditors: amounts falling due after one year Provisions for liabilities and changes Minority interests Capital and reserves	18,075 6,987 (9,654) (2,667) 15,408 2,693 1,391 208 11,116 15,408	17,553 5,983 (6,089) (106) 17,447 3,322 1,267 180 12,678 17,447

Pricing

BT's innovative approach to pricing has been a major success story. Since privatisation, charging bands and tariff periods have been simplified, itemised billing has been made universally available; per second pricing has replaced unit charging and, overall, prices have been cut by more than half in real terms. The UK is now one of the cheapest places in the world in which and from which to make a call.

Price cuts in the year to 31 March 1997 resulted in total customer savings of over £800 million.

Investment

More than £2 billion was invested in networks and systems in the year, bringing the total to more than £27 billion since privatisation. The objective of this investment is to enhance the reliability and flexibility of the network and to enable the introduction of new services more quickly and to make them available to even more customers.

Innovation

BT invests two per cent of turnover in its research and development activities - £291 million in 1996/97. One market of vital importance to the company - and a market that is growing very fast - is the Internet. For example, BT and MCI jointly launched Concert Internet Plus, the world's first high-speed, high-reliability global Internet service, aimed primarily at businesses; while LineOne - a new, mass-market Internet service - was jointly launched by BT and News International. BT is also exploring opportunities in the corporate Internet and intranet markets.

Quality of Service

BT recognises that success in competitive markets requires a resolute focus on customers and a commitment to the continuous improvement of the quality of all its services. Industry-wide comparative performance indicators show that BT's performance continues to compare favourably with that of its competitors.

Outside the UK

The main news in the year was, of course, the proposed £13 billion merger with MCI to form Concert, which BT believes will be very well placed to succeed in the global communications markets of the future. In the first year or two, Concert will focus on the US and European markets, but will also be developing an entry strategy into other markets as they open up, particularly the Asia-Pacific region and Latin America.

BT now has one of the most coherent "extended global families" of any communications operator in the world. And, during the year, it continued to develop that family, particularly in Europe. In addition to agreeing the purchase of a 26 per cent stake in CEGETEL, a new French telecommunications group, at a cost of approximately £1 billion, BT also built up its presence in Germany, the Netherlands, Italy, Switzerland, Spain, Portugal, Greece, and selected parts of Eastern Europe.

Recent alliances with Spain's Telefonica and with Portugal Telecom, not only give BT the opportunity to establish a presence in Iberian markets, but signal the intention, along with MCI, to compete in Latin America.

BT People

By the end of March 1997, around 127,000 people were employed by BT, compared with 227,000 six years ago.

BT remains actively committed to providing equal opportunities for all its people, and continues to encourage the employment, training and career development of people with disabilities.