BT Report 2001



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Year ended, or as at, 31 March 2001:

Total turnover	Ł11,493m
EBITDA	Ł4,278m
Operating profit before goodwill amortisation	Ł2,540m
Capital expenditure on plant, equipment and property	Ł2,273m
Net operating assets	Ł12,511m
Employees	30,000

BT Wholesale provides network services within the UK to communication companies, network operators and service providers. Together, BT Retail, BT Ignite and BT Wireless currently account for some 70% of its turnover, the majority of which is subject to regulatory price control.

BT Wholesale will build on its reputation for delivery of wholesale network solutions to BT Retail and other communications companies. BT Wholesale’s strategy is to extract efficiencies from the scale and scope of its operations, broaden its customer base and expand next generation services by, among other things, satisfying demand for bandwidth and applying new technology to boost capacity, expand its product portfolio and reduce costs. We believe this should minimise erosion of market share and generate attractive returns on capital.

During the 2001 financial year, we continued to invest in our UK network to meet increasing demand for high-quality fixed-network products and services, both narrowband and broadband. During the year, network reliability remained good. On average, customers will experience a fault with our network only once in seven years.

Many other telecommunications operators use our network to help deliver their customers’ calls. This interconnect activity has increased rapidly as competition in the fixed and mobile sectors has intensified. The receipts from other operators for this activity accounted for about 14% of group revenues in the 2001 financial year.

Growth in UK core network traffic was met in the year by replacing 46 trunk exchanges with Next Generation Switches (NGS), which have double the capacity of the replaced exchanges. This means that, in less than a year, nearly half of the trunk exchanges, which took five years to install in the 1980s, have been replaced. Plans are in place for introducing a further 13 NGSs, and the upgrade and expansion of 27 of the switches to include Asynchronous Transfer Mode (ATM) switching, by March 2002, again potentially doubling the capacity of each switch.

We are upgrading our network to meet the growing demand for bandwidth. We believe that BT is ahead of similar European operators in large-scale deployment of high-capacity Synchronous Digital Hierarchy (SDH) and Wavelength Division Multiplexing (WDM) technology.

We are also upgrading our exchange-based switches to provide carrier pre-selection (CPS). This enables customers to pre-select an alternative carrier for their calls without having to dial additional access codes. CPS was introduced, on an interim basis, by means of auto-diallers installed on customers’ premises. An exchange-based solution became available for national and international calls in December 2000, and should be available for all calls by December 2001.

Digital Subscriber Line (DSL) services turn a normal copper telephone line into a high-speed digital access line, providing residential and business customers with fast access to high-value, multimedia-rich content. BT launched its first DSL-based services in June 2000. At 31 March 2001, 839 UK exchanges were equipped to provide Asymmetric DSL (ADSL). This means that 50% of UK households are now in areas currently served by an ADSL-enabled exchange.

During the 2001 financial year, BT participated in implementing and accelerating the local loop unbundling (LLU) programme in the UK. LLU enables other telecommunications operators to use the existing local loop (the connections between customers’ premises and the exchange) to connect directly with their customers to provide telecommunications services, including DSL-type broadband services. Operators install their own equipment either in exchanges or in nearby buildings to provide this service.

We have been offering LLU since December 2000. The roll out of LLU has been the subject of an amendment to the BT Licence, a specific EU regulation and, in the UK, agreements with Oftel. BT has met all of the requirements set out in the EU regulation and has also met the objectives concerning implementation, as set by Oftel.

In November 2000, BT and Crown Castle UK entered into an agreement to provide infrastructure to 3G mobile and wireless operators. This should enable us to receive significant rental income through the development of the roof-space and surroundings of, initially, 4,000 of our exchange buildings. The programme has the potential to be extended to cover all of our operational buildings. Agreements have been signed with three of the 3G licence holders, including BT Wireless, for use of the combined BT and Crown Castle portfolio.