BTPLC Annual Report 2004 - Financial review

	Capital expenditure on plant, equipment and property (excluding the movement on capital accruals) totalled £2,673 million in the 2004 financial year, compared with £2,445 million and £3,908 million in the 2003 and 2002 financial years, respectively. Of the total capital expenditure in the 2002 financial year, £3,100 million was in relation to the group’s continuing activities. Work continues on enhancing the intelligence of the network to enable customers to benefit from advanced services and improving the network’s capacity to carry high-speed data. Capital expenditure is expected to rise, but remain within its £3 billion annual target, in the 2005 financial year as the group invests in its 21st century network (21CN) programme. Capital expenditure in relation to the group’s discontinued activities amounted to £808 million in the 2002 financial year. Prior to the demerger, mmO₂ continued improving the quality and capacity of its digital GSM network. Of the capital expenditure, £86 million was in Europe, outside the UK, in the 2004 financial year and £138 million was spent there in the 2003 financial year. Contracts placed for ongoing capital expenditure totalled £879 million at 31 March 2004. We plan to develop the 21CN using stringent capital return criteria and a rigorous approach to any investment in the narrowband network. 21CN aims to deliver long term, structural cost reduction, as we progressively migrate onto a simpler, lower cost network architecture. BT expects that future capital expenditure will be funded from net cash inflows from operating activities, and, if required, by external financing.



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