BTPLC Annual Report 2006 - Chief Executive's statement

Your company is ambitious. We are much more than a lines and calls business. Our aim is to make life easier, simpler, cheaper and more fulfilling for all our customers. We will continue to do this by providing our business customers, large and small, with productivity improvements and competitive edge in their markets. We will ensure consumers enjoy a joined-up communications experience, enabling them to communicate anywhere, anytime, using whatever device they choose.

HELPING CUSTOMERS THRIVE IN A CHANGING WORLD
We enjoy the fantastic privilege of serving around 20 million customers in 170 countries around the world. Their needs and expectations are constantly changing, so too is the market in which we operate and the technology at our disposal. That’s why an ability to embrace, and thrive on, change – developing new products and services, new ways of working and new ways of interacting with our customers – is essential to what we do at BT.
     When so much is changing, companies have to be crystal clear about what they stand for. BT has a strong and trusted brand, widely recognised around the world by shareholders, customers, suppliers and employees. The brand captures the essence of BT and tells existing and new customers what they can expect from us. We have summed this up in a new vision and mission.
     Our vision is to be dedicated to helping customers thrive in a changing world. And there’s not a wasted word in there. Dedication to our customers is what will differentiate us in an intensely competitive environment. Helping these customers to thrive means enabling them to do the things they want to do, when they want to do them and at the right price. It means helping them to recognise that a changing world is a world of opportunity and new experiences. And it means helping them to seize those opportunities.
     Our mission is to be the leader in delivering converged networked services. That’s the yardstick by which we’ll measure our success. Convergence is at the heart of everything we do for customers.
     We believe that this combination of absolute commitment to understanding our customers and to exploring the possibilities of convergence (blurring the distinctions between networks and services, IT and communications, fixed and mobile, telecommunications and visual services) is extremely powerful.
     Of course, customers are not interested in vision and mission statements. What they are interested in, however, are services that get the job done and that are hassle-free.

THE RIGHT REGULATORY CLIMATE
We operate in a regulated industry and the right regulatory climate is also essential if our customers are to thrive. The regulatory climate is not, however, just something that happens to us; we are helping to shape regulatory thinking.
     In response to Ofcom’s strategic review of telecommunications in the UK, we proposed a series of Undertakings which we believe will result in a fair and flexible regulatory regime, deregulation where possible and the growth of competition through equivalence. Above all, they bring greater regulatory certainty. These Undertakings, which Ofcom accepted, are in our view fundamental to meeting customers’ needs and to enabling us and other service providers to invest in the future with confidence.
     A big part of meeting these Undertakings was the creation of Openreach. This line of business manages our access and backhaul networks and the associated portfolio of products and services. We have established an Equality of Access Board with a majority of independent members to oversee compliance. Service providers are benefiting from lower prices for both connection and rental thanks to the success of products such as wholesale line rental and local loop unbundling.
     BT is committed to meeting its obligations, and we have made good progress so far – though much remains to be done.

OUR STRATEGY
Like our brand, our strategy for profitable growth and transformation is subject to continuous review. There are four parts to our strategy:
•	to pursue profitable growth in new wave markets
•	to maximise the return from our traditional business
•	to transform our networks, systems and services for the twenty-first century
•	to create long-term partnerships with our customers.

NEW WAVE GROWTH
Around one third of BT’s revenue in the 2006 financial year was from new wave activities – that’s up from effectively nothing a few years ago.
     By new wave activities we mean networked IT services, broadband and mobility.
     In short order, BT has established itself as a key player in the global networked IT services market with a strong track record of winning and delivering big, complex contracts for large corporations and other organisations. Major wins such as the contract with Fiat in Italy and the revised agreement with the Department for Work and Pensions in the UK confirmed our credentials. The total value of our networked IT services order intake in the year was £5.4 billion.
     Having hit our target of five million broadband lines in April 2005 (a year ahead of schedule), we’ve boosted that number by more than 50% in the past financial year. For the majority of customers, access to broadband is now a given.
     But broadband is more than just another technology, it enables broader, richer, more compelling experiences. Our focus is increasingly on what customers can do with it. We are delivering speeds of up to 8Mbit/s and launching innovative consumer broadband products and services. One of these, BT Vision, scheduled for launch in the autumn, is broadband TV and will bring a new dimension to home entertainment as customers choose from a huge range of on-demand film, music and TV programming as well as interactive services.
     BT is a mobile virtual network operator in both the business and consumer markets, with more than 340,000 connections. In a convergent world, we aim to offer customers the best of fixed and the best of mobile. We launched BT Fusion, the world’s first service enabling customers to switch seamlessly between fixed and mobile lines depending on where they are. And in the wholesale market, we are one of the first companies in Europe to offer a broadcast digital TV and radio service via mobile handsets, BT Movio.

MAXIMISE THE RETURN FROM OUR TRADITIONAL BUSINESS
The number of fixed-voice calls is no longer the best guide to the success of a telecommunications company as we encourage our customers to take up non-voice and subscription-based packages. At 31 March 2006, 67% of call revenue in the consumer market was under contract. We continue to develop and enhance our traditional services to make them more attractive to customers, as the success of BT Together and BT Privacy has demonstrated.
     In our traditional markets, as in the rest of our business, we are committed to working smarter – avoiding the costs of failure and duplication – and ever more cost effectively through using the internet. For example, over two million customers now receive e-bills.

TRANSFORM OUR NETWORKS, SYSTEMS AND SERVICES FOR THE TWENTY-FIRST CENTURY
Our twenty-first century network (21CN) programme is further evidence of our ambitions. It is a massive investment in the UK’s infrastructure and in the UK’s continued competitiveness in world markets. Based on IP technology, it is designed to ensure that the delivery of the next generation of converged services is rapid and cost efficient.

CREATE LONG-TERM PARTNERSHIPS WITH OUR CUSTOMERS
We never take our customers for granted. Nothing is more important than building successful, innovative, mutually-rewarding relationships with them. In recent years, we have focused in particular on driving down levels of customer dissatisfaction. The emphasis now is increasingly on improving customer satisfaction. In the 2006 financial year, we achieved a 3% increase in the number of customers reporting that they are ‘very satisfied’ or ‘extremely satisfied’ with the services they receive from BT.
     Because the quality of service we offer customers is key to their satisfaction levels, much of our investment in training and development is directed towards developing a truly customer-centric culture in BT.

OUR PEOPLE
BT is a people business, not a technology business.
     Recruiting, developing, rewarding and retaining the right people is critical. Another ‘must do’ is celebrating the power of diversity, ensuring that our people reflect the customers we serve.
     A people business only really fires on all cylinders when its top team is on top of its game, which is why we have rigorously defined the capabilities we expect of leaders in this business and developed programmes to help them become even more customer focused.
     Achieving our ambitions depends as much on the quality and commitment of our people as on world-class products and services, on technology and on a clear strategy. People understand how technology can add value to their customers’ lives and people deliver strategies. People not only know what a business stands for, but they also embody its values. I’d like to thank BT people for their commitment, imagination and dedication to our customers. In my view, they are truly inspirational.

Ben Verwaayen
Chief Executive
17 May 2006