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BT has a significant market
share in its main UK markets for fixed-network calls and provision of exchange
lines. Competition has eroded BT’s market share significantly in key market
sectors, in particular areas of the UK and for certain products and services.
We estimate that BT had 57% of the market for national calls in the 2001
financial year, compared with 64% and 69% in the 2000 and 1999 financial years,
respectively, and supplied 83% of the exchange lines in the UK at 31 March
2001, compared with 84% and 86% at 31 March 2000 and 1999, respectively.
Additionally, we estimate that BT had 71% of the market for local calls in the
2000 financial year, compared with 74% and 78% in the 2000 and 1999 financial
years, respectively.
The growth in cable operators’ networks in the UK is having
an adverse effect on BT’s share of the residential market.
In recent years, BT has experienced a small net annual reduction
in residential exchange line connections as a result of increasing
competition from these cable operators in certain geographic areas.
This small rate of reduction is expected to continue.
In an environment of strong
competition, BT Cellnet had 26% of the market based on the number of customer
connections at 31 March 2001, compared with 27% at 31 March 2000 and 30% at 31
March 1999. There has also been a downward pressure on prices.
The group has seen some
diversion of demand from its fixed network as a result of the growth of other
licensed operators’ activities. This diversion may intensify now that BT’s
fixed-line customers are able to pre-select their carrier.
Additionally, BT’s Licence
was amended in April 2000 to require BT to provide other operators with use of
the lines connecting BT’s local exchanges to its customers and allow operators
to install equipment in BT’s exchanges (local loop unbundling). This amendment
took effect in December 2000. This could result in further intensification of competition
and have an adverse effect on BT’s results.
For its operations as a
whole, BT expects the competitive pressure to persist and it will continue to
defend its market share vigorously and fairly.
The strength of the UK
economy is an important determinant of BT’s business volumes and the gross
domestic product grew by 2.5% in the 2001 financial year, compared with 2.9%
and 1.5% in the 2000 and 1999 financial years, respectively. |
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