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BT is one of Europe’s
leading providers of communications services, including:
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exchange lines and private circuits, and
fixed local, national and international voice and data calls
to homes and businesses in the United Kingdom (UK); |
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wireless voice and data communication
services and equipment for businesses and individuals in the
UK and internationally; |
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international new-wave products
and services, including internet, multimedia, data transport
and solutions; |
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interconnection services for
other UK operators; and |
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classified advertising directories
in the UK and United States (USA). |
In the 12 months to 31 March 2001 (the 2001 financial year), 9%
of BT’s group revenues derived from activities outside the
UK, compared with around 5% in the previous financial year. This
excludes our proportionate share of the revenues of our joint ventures
and associates.
The table below sets out a summary of our turnover for our products
and services for the years ended 31 March 1999, 2000 and 2001.
Our new structure
During the 2001 financial year, we began a radical restructuring
of our group. As a result, some of our activities have been grouped
by market sector, rather than geography, to form four businesses
with potential for high growth:
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BT
Wireless – an international mobile business,
with particular strengths in mobile voice, data and next generation
services; |
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BT
Ignite – an international, data-centric solutions
and broadband IP business focused on European corporate and
wholesale markets; |
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BTopenworld
– a mass-market internet business focused increasingly
on broadband services; and |
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Yell
– an international directories business. |
These new lines of business have been operating since 1 July 2000.
In October 2000, management of the UK communications services businesses
was split as follows:
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BT
Retail – the UK’s leading communications
business and the prime UK channel to market for our other
businesses; and |
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BT
Wholesale – the provider of network services
and solutions to communications companies, network operators
and service providers, including BT Retail, BT Wireless and
BT Ignite. |
These six businesses operate alongside Concert, our global joint
venture with AT&T, launched in January 2000 which is a leading
communications provider for multinational business customers, international
carriers and ISPs worldwide.
In November 2000, we announced details of a restructuring plan which
was drawn up following the identification of potential benefits
which should follow from a separation of the group into a number
of operating units with defined management accountability. We recognised
the merits of separate flotations, following such restructuring,
to improve our focus on value generation through the creation of
distinct equity for each quoted entity. Our plan was to optimise
the positioning of our individual businesses within their respective
markets. We said we would focus on Western Europe and Japan and
seek to float up to 25% of each of BT Wireless and Yell, and a possible
separate flotation of BT Ignite would be reviewed by the end of
2001. In addition, we described proposals to create a new holding
company to enhance corporate flexibility and provide scope for further
subsidiary listings where advantageous to shareholders. We also
detailed plans to create a new network company, NetCo, which would
be both structurally and managerially separate. Following this corporate
reorganisation, and subject to the satisfactory outcome of necessary
discussions with the UK Government and Oftel, our intention was
to seek a separate listing for up to 25% of NetCo.
During 2000, we had borrowed to finance acquisitions with the intention
of reducing the level of indebtedness by asset sales and other means.
We identified the need to introduce new equity capital into the
business to support the reduction in the unsustainable level of
group debt and we indicated our intention to raise new equity through
the sale of minority stakes, notably of BT Wireless.
Our aim was to reduce the net debt of the group by December 2001
by at least £10 billion using the cash proceeds from the issue of
equity in the various initial public offerings (IPOs), together
with the proceeds of disposals of non-core businesses and assets.
The weakness of the IPO market, particularly for telecommunications
companies, has caused us to review whether the sale of equity in
BT Wireless and Yell still constitutes the best option to strengthen
the group’s capital base.
The Board has concluded that shareholders’ interests are best
served by a rights issue to the company’s existing shareholders.
On 10 May 2001, the Board announced that BT is proposing to raise
approximately £5.9 billion, after expenses, through a rights issue.
The new equity introduced by the issue, together with cash from
the disposals discussed below, should allow us to meet our debt
reduction target of £10 billion by December 2001. Furthermore, the
rights issue enables the implementation of structural change.
We now intend to demerge BT Wireless, which we expect will include
all of BT’s wireless assets in the UK (BT Cellnet), the Isle
of Man (Manx Telecom), Germany (Viag Interkom), the Republic of
Ireland (Esat Digifone) and The Netherlands (Telfort). BT Wireless
will also include Genie, one of Europe’s leading mobile internet
portals.
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| Turnover summary
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| Fixed-network calls
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5,655 |
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5,908 |
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6,026 |
| Exchange lines
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3,674 |
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3,526 |
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3,351 |
| Receipts from
other operators |
2,814 |
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1,974 |
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1,417 |
| Wireless products
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2,760 |
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2,170 |
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1,400 |
| Private services
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1,091 |
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1,135 |
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1,140 |
| Solutions |
1,074 |
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915 |
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746 |
| Yellow Pages and
other directories |
754 |
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642 |
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491 |
| Customer premises
equipment supply |
726 |
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847 |
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870 |
| Other sales and
services |
1,879 |
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1,598 |
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1,512 |
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| Group turnover
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20,427 |
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18,715 |
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16,953 |
Share of associates’
and joint ventures’ turnover |
9,937 |
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3,364 |
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1,270 |
Trading between
group and
principal joint venture |
(698 |
) |
(176 |
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| Total turnover
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29,666 |
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21,903 |
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18,223 |
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Figures for
the 1999 and 2000 financial years have been restated to conform
with the method of classification used in the 2001 financial
year. |
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| Group turnover
on basis of origin |
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| UK |
18,642 |
17,866 |
16,364 |
| Europe, excluding
the UK |
1,183 |
285 |
240 |
| Americas |
368 |
383 |
237 |
| Asia and Pacific
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234 |
181 |
112 |
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| Total |
20,427 |
18,715 |
16,953 |
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We continue with our plans to create a new holding company to give
us corporate flexibility and to facilitate other potential acquisitions,
demergers, disposals or IPOs. We have determined that, in order
to demerge BT Wireless efficiently, the new holding company structure
should be put in place at the same time as the demerger. On demerger,
the capital structure of BT Wireless is planned to include up to
£2 billion of debt. We are reviewing our plans for Yell and are
currently considering proposals to sell or demerge this business,
following a ruling from the UK Secretary of State for Trade and
Industry on a report produced by the Office of Fair Trading that
the prices charged for advertising in UK Yellow Pages directories
should be subject to an RPI minus 6 price cap from January 2002.
Future BT strategy
Future BT will be a focused European network and retail business
concentrating on voice and data services. It will also develop and
market new higher value broadband and internet products and services
to its large customer base. Future BT will comprise principally
four separately managed lines of business, BT Retail, BTopenworld,
BT Wholesale and BT Ignite, with Concert providing international
connectivity. It will have a balanced portfolio of businesses with
well-established, market-leading and cash generative UK retail and
wholesale businesses and, in BT Ignite and BTopenworld, rapidly
developing businesses in internet solutions and broadband in the
UK and elsewhere in Europe. We are discussing a variety of strategic
alternatives to the Concert joint venture, which could include all,
or a substantial portion, of the business currently within BT Ignite.
See “Discussions with AT&T
regarding Concert and BT Ignite” . |
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