18. Acquisitions and disposals

Acquisition of subsidiary companies and businesses
			Concerta		Otherb		Total
Year ended 31 March 2003			£m		£m		£m
Consideration:
Cash			–		13		13
Carrying value of Concert global venture			338		–		338
Total			338		13		351
In addition, net cash of £56 million was received in settlement of the unwind of the Concert global venture.
			Esat Digifonec		Otherd		Total
Year ended 31 March 2002			£m		£m		£m
Consideration:
Cash			869		27		896
Deferred			–		8		8
Total			869		35		904
	Viag
	Interkome		Telfortf		Otherf		Total
Year ended 31 March 2001	£m		£m		£m		£m
Consideration:
Cash	8,770		1,207		160		10,137
Carrying value of joint venture wholly acquired	479		235		–		714
Total	9,249		1,442		160		10,851

In addition, cash of £1,179 million was paid in settlement of deferred consideration on acquisitions in earlier years.

^aOn completion of the unwind of Concert on 1 April 2002, the former Concert businesses, customer accounts and networks were returned to the two parent companies with BT and AT&T each taking ownership of substantially those parts of the Concert global venture originally contributed by them. As part of the settlement with AT&T for the unwind of the Concert global venture BT received net cash of $72 million (£56 million). This net settlement included the receipt of $350 million reflecting the allocation of the businesses and the payment of $278 million to achieve the equal division of specified working capital and other liability balances. The results of the acquired businesses, both pre and post acquisition, cannot be separately identified and, therefore, cannot be reported.

The consideration was satisfied through the unwind of the Concert global venture, the carrying value of which was £338 million. Accordingly there is no further profit or loss on the unwind and no goodwill on the acquisition.
^bDuring the year ended 31 March 2003, the acquisition of other subsidiary companies and businesses and the consideration given comprised:

^cOn 18 April 2001, the group took full control of O₂ Communications (Ireland) (formerly Esat Digifone). Under an agreement made in 2000 the group purchased from Telenor its 49.5% interest in Esat Digifone for £869 million. Goodwill arising on the acquisition was being amortised over 20 years until it was demerged with mmO₂ .

^dOther subsidiary companies

During the year ended 31 March 2002, the acquisition of interests in other subsidiary companies and the consideration given comprised:

^eOn 20 February 2001, the group took full control of Viag Interkom GmbH & Co (Viag Interkom). Under an agreement announced in August 2000, the group purchased from E.ON its 45% interest in Viag Interkom by means of a put option priced at €7.25 billion (£4,562 million). In January 2001, the group acquired the 10% interest in the company previously owned by Telenor for €1.6 billion (£1,032 million). As part of the transactions, the group repaid loans due by Viag Interkom to E.ON and Telenor totalling £3,165 million. The total cash consideration amounted to £8,770 million, including £11 million expenses.

Since the acquisition was made towards the end of the year ended 31 March 2001, the fair values of the identifiable assets and liabilities were determined on a provisional basis which were then confirmed in the 2002 financial year. Goodwill arising on acquisition of Viag Interkom and remaining in the group was being amortised over 20 years until it was partially demerged with mmO₂ and the remaining balance was written off in the 2002 financial year.

The consolidated results of Viag Interkom for the year ended 31 December 2000 and for the period from 1 January 2001 to 19 February 2001, on the basis of its accounting policies, are summarised as follows:

^gOn 22 June 2000, BT received regulatory approval to acquire the remaining 50% interest of Telfort BV, its provider of fixed and mobile services to businesses and consumers in the Netherlands, that it did not already own for £1,207 million. Goodwill arising on the acquisition of Telfort BV and remaining in the group was being amortised over 20 years until it was partially demerged with mmO₂ and the remaining balance was written off in the 2002 financial year. Telfort BV’s loss after tax for the year ended 31 December 1999 was £141 million and its loss for the six months ended 30 June 2000 was £86 million.

^hOn 5 January 2000, BT and AT&T formed their global venture named Concert for the two companies’ trans-border communications activities. The venture is jointly owned and controlled. The group contributed the majority of its cross-border international networks, its international traffic, its business with selected multinational customers and its international products for business customers, as well as Concert Communications. AT&T contributed a similar set of assets and businesses.

The book value of the assets contributed by the group to the joint venture comprised:

The gain on the transfer of the assets is unrealised since the group continues to maintain a 50% interest in the assets contributed. This gain has been taken to a non-distributable reserve and is shown in the statement of total recognised gains and losses for the year ended 31 March 2000. There is no tax charge on the gain.

During the year ended 31 March 2001, the group’s share of Concert’s opening net assets was amended, due to certain true up contributions, reducing the unrealised gain by £49 million. This is shown in the statement of total recognised gains and losses for the year ended 31 March 2001.

ⁱOn 31 January 2002, one of the venture partners in Blu exercised a put option for BT to purchase a 9% interest for £66 million. The cost of £66 million arising on this purchase was written off. In addition in the year ended 31 March 2002 the value of BT’s investment was reviewed and provision was made for the associated impairment and exit costs. In December 2002 the group sold its interest in Blu (note 7).

^jOn 8 September 2000, BT increased its existing 33% interest in Telenordia, based in Sweden, to 50% for £94 million. Goodwill was being amortised over 20 years until its disposal in October 2001.

^kOn 8 May 2000, the group acquired a 40% interest in a company, with Japan Telecom owning the other 60% interest, which holds a 74% interest in J-Phone Communications Co. Limited (JPC). JPC in turn acquired controlling interests, averaging 51%, in nine regional Japanese mobile phone J-Phone companies. These J-Phone companies merged into three larger regional companies during the year ended 31 March 2001. Japan Telecom also held a direct 18% interest in the J-Phone companies.

During the year ended 31 March 2001, the group held an effective 23% interest in J-Phone. The impact of the combined J-Phone/Japan Telecom ownership structure, however, led the group to reflect 63% of the J-Phone results at the turnover and operating profit levels and all items below including interest and taxation, in accordance with the requirements of FRS 9. In June 2001, the group sold this interest (note 7).

Disposal of subsidiaries and the demerger of mmO₂

In the year ended 31 March 2003, BT disposed of subsidiaries with net assets of £12 million. Consideration amounted to £3 million resulting in a loss on disposal of £9 million.

The table below analyses the disposal of subsidiaries and the demerger of mmO₂ for the year ended 31 March 2002.

		mmO2l		Yellm		Other		Total
Year ended 31 March 2002		£m		£m		£m		£m
Net assets demerged or disposed of:
Fixed assets		20,459		467		211		21,137
Stocks		109		98		–		207
Debtors		1,381		400		19		1,800
Cash		121		21		7		149
Creditors: amounts falling due within one year		(1,790	)	(153	)	(46	)	(1,989	)
Creditors: amounts falling due after more than one year		–		(10	)	–		(10	)
Provisions		(229	)	–		–		(229	)
Intercompany loans		(561	)	–		–		(561	)
Goodwill previously written off to reserves		–		9		44		53
Net assets disposed of		19,490		832		235		20,557
Profit (loss) on disposal		–		1,128		(116	)	1,012
Consideration		19,490		1,960		119		21,569
Cash		–		1,859		119		1,978
Demerger distribution		19,490		–		–		19,490
Loan notes		–		60		–		60
Other		–		41		–		41
Total		19,490		1,960		119		21,569

In addition £9 million deferred consideration was received during the year ended 31 March 2002 in settlement of the disposals on 18 July 1999 of BT New Towns Cable and Westminster Cable Limited.

Amounts included in the cash flow statement for the year ended 31 March 2002 attributable to mmO₂ and Yell and the results of mmO₂ and Yell included in the results for the 2002 financial year to the date of demerger and disposal respectively were:

^lOn 19 November 2001 BT completed the demerger of mmO₂, the group’s former mobile phone business in Europe. mmO₂ consists of O₂ UK Limited (formerly BT Cellnet Limited), O₂ Communications (Ireland) Limited (formerly Esat Digifone Limited), Telfort Mobiel BV, Viag Interkom GmbH & Co, Manx Telecom and Genie.

^mOn 22 June 2001, BT completed the sale of the Yell Group. The Yell Group consisted of the Yellow Pages division of British Telecommunications plc, Yellow Pages Sales Limited and Yellow Book USA Inc., and its group undertakings.

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