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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. Total fixed-to-fixed voice call minutes in the UK market as a whole declined by 3% in the 2006 financial year. This was driven by customers making use of alternatives such as mobile calls, e-mail, instant messaging, corporate IPVPNs (internet protocol virtual private networks) and VoIP, continuing the trends of recent years. However, the call minutes measure is becoming less important to BT as customers increasingly opt to sign up for pricing packages and take other non-PSTN (public switched telephone network) services.
Our BT Local Business initiative helped to secure BT’s position as a key player in the SME market. At the end of the 2006 financial year, BT Local Business was active in 83 locations around the country, managing £1.2 billion of annual billed revenue.
During the year, the sale of WLR services continued to grow, reaching a total of 2.9 million lines by 31 March 2006. Rental charges for consumer lines were reduced by 50 pence a month from 1 August 2005 and a further 35 pence from 1 March 2006. The monthly charge for business lines was reduced by 78.3 pence from 1 March 2006. WLR and LLU products will be reported within Openreach for the 2007 financial year.
We continue to benchmark ourselves against the best in the industry and aim to achieve savings of at least £400 million in each of the next three years. In the 2006 financial year, efficiency programmes delivered savings of over £400 million, enabling us to invest in growing our new wave activities. A key area of focus has been enhancing the ways in which customers can deal with BT, simultaneously saving costs and improving customer service. Programmes have targeted the cost of failure by, for example, minimising the number of times a customer call is transferred before resolution and reducing the amount of call waiting time through better call routing. The number of transactions via bt.com grew by 28% in the 2006 financial year, and we now have approximately 2.3 million customers receiving e-bills – half a million of whom do not receive a paper bill. We have also been reducing the complexity of our systems and processes and intend, for example, to transform our billing function – rationalising more than 90 systems and at the same time improving the end-to-end customer experience. Other programmes relate to innovative procurement and sourcing. Our IT team, for example, has moved to global sourcing and 90-day delivery cycles, and implemented ‘hot housing’ principles – bringing customers and suppliers together in an intense design session at the beginning of a project, reducing risks and driving up benefits. We continue to look at ways of streamlining our organisation and eliminating duplication. The integration during the 2006 financial year of the BT team serving major corporate customers in BT Global Services (previously part of BT Retail) should enable more effective account management for our global customers. We also continued to reduce overheads such as accommodation, using buildings more efficiently and introducing flexible working practices. In the 2006 financial year, we vacated around 135 buildings and installed an additional 250 flexible workstations which can be shared by multiple users. A number of other programmes are underway, including structural changes in our network management and planning divisions. Some of these are related to our 21CN initiative and will, we believe, help achieve the significant reduction in operational and capital expenditure that we expect from this programme in the next few years.
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