BT Report 2001



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Year ended, or as at, 31 March 2001:

Total turnover, including share of ventures	Ł3,947m
Group turnover	Ł3,408m
EBITDA before exceptional items	Ł220m
Operating loss before goodwill amortisation and exceptional items	Ł(225)m
Capital expenditure on plant, equipment and property	Ł1,105m
Net operating assets	Ł18,634m
Share of ventures’ net assets, including goodwill	Ł27m
Employees	14,900

BT Wireless consists of our wholly-owned interests in European wireless operations, including BT Cellnet in the UK, Viag Interkom in Germany, Telfort in The Netherlands and Esat Digifone in the Republic of Ireland. BT Wireless has approximately 16.9 million customers. BT Wireless also includes Genie, our mobile internet business, one of Europe’s leading mobile portals.

BT Wireless’ strategy is to attract and retain high-value customers and increase revenues per customer by positioning itself as a leader in the European mobile data market. Being wholly owned, the wireless businesses will be managed on a unified basis, facilitating the development of common technology and the swift roll out of services, such as the Genie mobile internet portal and associated content and applications, across the BT Wireless networks. BT Wireless has developed relationships with a large number of applications and content developers through its application developer forum. It will seek productivity improvements through these cross business synergies and seek network sharing options with others to reduce build out costs where allowed.

The UK
BT Cellnet is our wholly-owned wireless business in the UK and is the second largest mobile network operator in the UK, with 11.2 million customers, an increase of more than 50% during the 2001 financial year. This represents an estimated market share of approximately 26%. BT Cellnet’s total turnover for the 2001 financial year was Ł3,031 million, with EBITDA for the same period of Ł591 million. In the UK wireless markets, BT Cellnet has the second largest market share by customer base and a strong position in the business market.

The UK market grew rapidly during the 2001 financial year and remained extremely competitive, reflecting significant demand for competitively priced pre-pay products.

BT Cellnet launched General Packet Radio Service (GPRS) services in June 2000. In the UK Government’s 3G licence auction, which concluded in April 2000, BT obtained a licence for Ł4.03 billion to operate 3G mobile services.

In April 2000, BT Cellnet purchased, for Ł45 million, the 60% of The Mobile Phone Store that it did not already own, as part of BT Wireless’ initiative to obtain increased control over its distribution channels.

Germany
BT Wireless’ German operations are conducted through Viag Interkom, which, since February 2001, has been our wholly-owned subsidiary. Viag Interkom launched mobile telephony services in October 1998 as the fourth entrant into the German market and, by 31 March 2001, had achieved an estimated 7% market share with over 3.7 million customers. Viag Interkom’s turnover, including its fixed business, for the year ended 31 March 2001 was Ł1,078 million, with negative EBITDA for the same period of Ł407 million before exceptional items. The fixed business market formerly addressed by Viag Interkom is now served by BT Ignite Germany.

The German market is currently a highly competitive four-player market, and two further entrants are possible following the auction of six 3G licences carried out by the German Government in August 2000. Viag Interkom holds one of the 3G licences, which was purchased for Ł5.13 billion.

The construction of Viag Interkom’s Global System for Mobile communications (GSM) network is ongoing. It currently covers an estimated 81% of the German population, but a national roaming agreement with T-Mobil allows Viag Interkom to offer service covering approximately 99% of the German population.

Viag Interkom launched GPRS services in January 2001.

Viag Interkom is developing other initiatives to achieve a greater share of the business market, such as cooperation arrangements with specialised service providers. It is also seeking to improve network costs per minute by increasing use of its network from selected wholesale opportunities and by other initiatives, such as outsourcing functions to achieve cost efficiencies.

Republic of Ireland
Our wireless operations in the Republic of Ireland are conducted through Esat Digifone, which became a wholly-owned subsidiary in April 2001. Esat Digifone entered the Irish market in March 1997 and, by 31 March 2001, it was serving over 1.1 million customers, representing an estimated market share of approximately 41%. Esat Digifone’s turnover for the year ended 31 March 2001 was Ł312 million, with EBITDA for the same period of Ł69 million. Esat Digifone expects to apply for one of the four licences to be offered by the Irish Government to build and operate a 3G network in Ireland.

The Netherlands
Telfort launched its service in 1998 in the Dutch mobile market. It now has a network covering over 97% of the population and more than 918,000 customers representing an estimated market share of approximately 8%. Telfort’s turnover, including its fixed business, for the year ended 31 March 2001 was Ł301 million, with negative EBITDA for the same period of Ł118 million before exceptional items. The fixed business market formerly addressed by Telfort is now served by BT Ignite Netherlands.

Telfort was awarded a 3G licence in July 2000 for Ł267 million.

Genie
Genie is BT’s mobile internet portal, comprising web and WAP portals in the UK, France, Germany, Hong Kong, Italy, The Netherlands and Spain. With more than four million registered customers, according to Red Sheriff Services’ data collection software, Genie is one of the major players in the mobile internet portal market, offering content including entertainment, m-commerce, games, and the latest sports, news and business information.

Genie also functions as an Application Service Provider (ASP) to network operators, offering hosted, secure access to enterprise applications through an integrated customised portal, and provides mobile internet communications and portal services on a hosted basis in the Asia-Pacific region.

In November 2000, Genie launched the UK’s first exclusively online mobile service, offering mobile phones with mobile internet access through text messaging and WAP.

By offering high quality content and applications and developing personalised relationships with our customers, we believe Genie will assist in increasing average revenues per user and reducing churn.