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We
face continued challenges in our traditional markets as a result of regulatory
intervention, competition and a shift in our customers’ buying patterns,
as we provide them with higher-specification, high-value,
new wave products.
Private circuit volumes fell, due to the switch into lower-priced partial private circuits (as a result of regulatory intervention).
Total fixed-to-fixed voice call minutes in the UK market declined by an estimated two percentage points in the 2004 financial year. This was driven by customers making use of alternatives
such as mobile calls, e-mail, instant messaging, corporate IPVPNs and VOIP.
However, call minutes are less important to BT as customer take-up of pricing packages continues and we actively migrate customers to new wave services such as broadband.
| Traditional services for consumers |
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The BT Together pricing packages, which
offer a range of competitive call prices and fixed-fee pricing options,
are an important part of our traditional revenue defence strategy, and
had around nine million customers as at 31 March 2004. During the year,
we announced we would abolish the standard rate on 1 July 2004 to give
more value for money. Existing standard rate customers will move to join
those already on BT Together Option 1, which will become the benchmark
for our fixed-line call prices. |
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We transformed more than 1,300 payphones
in UK high streets, shopping centres, airports and stations into internet
kiosks, offering internet access, e-mail, text messaging and video. These
kiosks give fast access to a range of services, from news and sport to
shopping, games, local maps and information about shops and restaurants.
We also continued to offer space in
our payphone kiosks for mobile antennas, Wi-Fi hotspots and CCTV (closed-circuit
television). |
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During the 2004 financial year,
we launched new calling card products to serve the needs of businesses
and international travellers, including a virtual card for data-only
users. |
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The immediate impact of the opening up
to competition of the directory enquiries market in the UK in August
2003 was significantly to reduce the overall size of the market. Volumes
of calls have continued to decline since deregulation. According to the
latest figures from Ofcom, calls to all 118 service providers from the
BT network in the April 2004 sample were 23% down on September 2003.
However, since deregulation, calls to BT Directories 118 services have
performed far better than the total market. Calls to 118 500 are 30%
up on the level experienced immediately following the 192 switch-off. |
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We successfully re-entered the classified
directories market with The BT
Phone Book. 62,300 advertisers have signed up and 116 directories have
been published, achieving market penetration of 5% in the first year.
Our online directory enquiries service, www.bt.com/directoryenquiries,
is the leading online player in the market, with almost 1.5 million searches
(business name, residential and classified) a week. The classified service
is currently generating more than one million searches a month. |
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| Traditional services for business
customers |
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During the 2004 financial year, we introduced
an enhanced version of BT Business Plan offering a ten pence price cap
on calls to the US and a 20 pence cap on calls to Europe and certain
countries in the Asia Pacific region. We also reduced the annual spend
commitment to £250. As at 31 March 2004, BT Business Plan had over
175,000 customers, compared with 20,000 as at 31 March 2003. |
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Our innovative BT Local Business initiative
helped us gain traction in the SME market by building closer relationships
with smaller business customers, who are often more comfortable dealing
with other small companies rather than large corporations. At the end
of the 2004 financial year, BT Local Business was active in 73 locations
around the country and managing £1.1 billion of annual billed
turnover. |
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BT remains the largest supplier
of public and managed payphones, strengthening our market position during
the year by securing a five-year deal with BAA to supply traditional
and new multimedia payphones. |
Traditional
services for wholesale customers
Our strategy in
the UK traditional wholesale market has been to stem the decline
in traditional revenues while seeking areas for revenue growth.
Our traditional UK wholesale business has been under pressure
from several directions over the year. As 77% of our traditional
revenue is regulated, the impact of regulatory changes served
to reduce UK wholesale revenues. The impact of the mobile termination
rate price cuts reduced our external UK wholesale revenue by £126
million (4%) in the year. The reductions from the regulatory network
charge control pricing formulae resulted in weighted average price
reductions of around 7% across the basket of relevant products.
New
regulatory-driven products, such as carrier pre-selection and
wholesale access lines, necessitated investment to create and
introduce systems and processes – all of which are at a cost.
However, we achieved a 1% increase in our UK external revenues
(excluding the impact of mobile termination rate cuts). We have
further developed our product portfolio, launching products such
as wholesale calls and ISDN 30 Service Provider. We have continued
with our cost reduction programmes across the business and reduced
our UK operating cost base by 4% over the financial year.
In
May 2004, we announced we will be introducing a new wholesale
calls product for carrier pre-selection (CPS) operators that will
allow them to use BT directly for certain calls at a price such
that their overall costs can be considerably reduced. This will
be developed in consultation with Ofcom and the industry, with
interim arrangements to be put in place from July 2004.
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