The substantially higher charge in the 2002 and 2001 financial years are mainly due to the cost of funding the acquisition of mmO2's third-generation mobile licences, principally in the UK and Germany, and the cost of acquisitions in the 2001 and 2000 financial years. In the 2002 financial year, the group's net interest charge was further increased by the £162 million exceptional cost of novating interest swaps as a consequence of the property sale and leaseback transaction. In the 2001 financial year, there was also a one-off £194 million increase in BT's share of its ventures' interest charges principally through the Japanese investments and Viag Interkom which was partly offset by an exceptional interest receipt of £25 million relating to the rates refund from the UK Government, noted in the following link.

The 2002 financial year did not have the full year benefit of the £5.9 billion proceeds raised by the rights issue and the £8.0 billion proceeds from the disposal of non-core businesses. This will reduce interest charges in the 2003 financial year.

Interest cover for continuing activities in the 2002 financial year represented 1.9 times total operating profit before goodwill amortisation and exceptional items, and compares with interest cover of 2.4 in the 2001 financial year and 10.0 in the 2000 financial year. The decline in cover is due to the increase in the interest charge and decrease in the operating profit before goodwill amortisation and exceptional items. We expect the net interest charge to decrease and interest cover to improve in the 2003 financial year following the significant reduction in net debt during the 2002 financial year.