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OPERATING
COSTS
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Total operating costs before specific items increased
by 4% in the 2007 financial year to £17,746 million
which is in line with the 4% increase in revenue. Our
cost efficiency programmes achieved savings of over £500
million in the 2007 financial year which enabled us to
invest in further growth of our new wave activities.
As
a percentage of revenue, operating costs, excluding specific
items, were 88% in the 2007 financial year (2006: 88%;
2005: 86%). In all three financial years, net specific
item operating costs were incurred, amounting to £169
million, £138 million and £59 million in the
2007, 2006 and 2005 financial years, respectively. These
specific costs are considered separately in the discussion
which follows.
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2007 |
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2006 |
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2005 |
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£m |
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£m |
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£m |
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Operating
costs:
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Staff
costs
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5,223 |
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4,966 |
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4,554 |
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Own
work capitalised
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(718 |
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(674 |
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(620 |
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Depreciation
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2,536 |
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2,634 |
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2,694 |
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Amortisation
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384 |
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250 |
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150 |
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Payments
to telecommunications operators
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4,162 |
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4,045 |
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3,725 |
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Other
operating costs
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6,159 |
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5,887 |
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5,426 |
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Total
operating costs before specific items
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17,746 |
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17,108 |
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15,929 |
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Specific
items
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169 |
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138 |
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59 |
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Total
operating costs
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17,915 |
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17,246 |
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15,988 |
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In the 2007
financial year, the number of staff employed increased
by 1,800 to 106,200, compared with increases of 2,300
and 2,200 in the 2006 and 2005 financial years, respectively.
The increases have been mainly due to the additional staff
required to service networked IT contracts, increased
levels of network activity, and in the 2007 financial
year, the investment in service, and meeting the Undertakings.
Early
leaver costs of £147 million were incurred in the
2007 financial year, compared with £133 million
and £166 million in the 2006 and 2005 financial
years, respectively. This reflects the group’s continued
focus on improving operational efficiencies. The group’s
pension expense for 2007 was £643 million, an increase
of £40 million from the 2006 financial year, compared
to an increase of £63 million from the 2005 financial
year.
The
increase in headcount, pay rates and pension costs have
contributed to a 5% increase in staff costs which were
£5,223 million in the 2007 financial year, following
a 9% increase to £4,966 million in the 2006 financial
year. The increase in pension costs in the 2007 financial
year included the adverse impact of using longer life
expectancy assumptions. The increase in pension costs
in the 2006 financial year included a switch between wages
and salaries and pension costs as a result of the introduction
of Smart Pensions, a salary sacrifice scheme.
The
depreciation and amortisation charge increased by 1% in
both the 2007 and 2006 financial years to £2,920
million.
Payments
to other telecommunications operators increased by 3%
in the 2007 financial year to £4,162 million, due
to increased volumes, after increasing by 9% in the 2006
financial year.
Other
operating costs before specific items increased by 5%
in the 2007 financial year to £6,159 million after
increasing by 8% in the 2006 financial year. This reflects
not only the cost of supporting new networked IT services
contracts, but also increased levels of activity in the
network and investment in service levels. Other operating
costs include the maintenance and support of our networks,
accommodation, sales and marketing costs, research and
development and general overheads. |
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