Associates and joint ventures

The results of associates and joint ventures, split between continuing and discontinued activities, are shown below:

During the period under review there has been a significant rationalisation of the group’s investments in associates and joint ventures. On 1 April 2002 the unwind of the Concert global venture was completed and on 22 January 2003 the sale of the group’s stake in Cegetel was completed. As a result BT’s share of its ventures’ turnover fell to £1,455 million in the 2003 financial year from £4,764 million in the 2002 financial year. The disposals made in the 2002 and 2001 financial years resulted in BT’s share of its ventures’ turnover falling to £4,764 million in the 2002 financial year from £9,937 million in the 2001 financial year. In the 2003 financial year, £1,447 million of the total arose from ventures located outside the UK, compared with £4,618 million in the 2002 financial year and £9,677 million in the 2001 financial year.

The principal contributors to turnover in the 2003 financial year were Cegetel in France (£956 million) up to the date of disposal and LG Telecom in Korea (£198 million). The principal contributors to turnover from continuing activities in the 2002 financial year were Concert (£2,158 million), Cegetel (£1,068 million) and LG Telecom (£240 million) and in the 2001 financial year were Concert (£2,576 million), Cegetel (£860 million) and LG Telecom (£281 million).

The principal contributors to turnover from discontinued activities in the 2002 financial year were Japan Telecom and J-Phone (£559 million to June 2001) and Airtel (£76 million to June 2001). The principal contributors to turnover from discontinued activities in the 2001 financial year were Japan Telecom and J-Phone (£4,542 million), and Airtel (£286 million).

The group’s share of its ventures’ operating profits from continuing activities totalled £181 million in the 2003 financial year, before goodwill amortisation and exceptional profits. The comparable losses amounted to £108 million and £157 million in the 2002 and 2001 financial years, respectively.

The principal contributor to the group’s share of operating profits from continuing activities before goodwill amortisation and exceptional items in the 2003 financial year was Cegetel (£198 million). In the 2002 financial year the principal contributor to the loss was Concert (£225 million) offset by profits from Cegetel (£168 million). In the 2001 financial year Concert reported profits of £19 million and Cegetel profits of £90 million, offset by losses in other ventures.

Exceptional items within the operating profits from joint ventures and associates are as follows:

In the 2003 financial year BT completed the exit from its investment in Blu on more favourable terms than anticipated and accordingly exit cost provisions of £150 million were released.

Concert’s performance was a cause of concern in 2001 and in October 2001 BT and AT&T announced the unwind of Concert which was subsequently completed on 1 April 2002. On completion, the businesses, customer accounts and networks returned to the two parent companies with BT and AT&T each taking ownership of substantially those parts of Concert 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 includes 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.

BT and AT&T also terminated their Canadian joint venture agreement under which BT was committed to participate in AT&T’s future obligation to acquire all of the publicly traded shares of AT&T Canada. AT&T has taken full ownership of BT’s interest in the Canadian joint venture and in AT&T Canada, and has now assumed full responsibility for all future obligations of the joint venture. BT has now ceased to have any interest in AT&T Canada, and has been released from its future expenditure commitment associated with AT&T Canada.

In the 2002 financial year BT wrote down the carrying value of its investments in both Concert and AT&T Canada. The exceptional impairment charge of £1,153 million against these investments comprises Concert goodwill impairment of £260 million, Concert tangible fixed asset write-downs of £546 million and the write off of BT’s £347 million interest in AT&T Canada (included within amounts written off investments).

BT also recognised exceptional restructuring charges of £81 million for its share of redundancy and other unwind costs in Concert and BT’s own unwind costs of £172 million have been charged against group operating costs in the 2002 financial year.

In the 2002 financial year exceptional impairment charges and related exit costs totalling £407 million, principally relating to goodwill and asset impairments in Blu and SmarTone, were recognised in the light of the rapidly changing global telecoms market conditions.

In the 2001 financial year there was an exceptional write off of previously capitalised costs in certain non-UK operations related to deferred subscriber acquisition costs in the ventures. In addition goodwill in Asian ventures became impaired and an exceptional impairment charge of £200 million was recognised.

Goodwill amortisation in the 2003 financial year amounted to £2 million, compared to £53 million in the 2002 financial year and £185 million in the 2001 financial year. This reduction reflects the disposals and the goodwill impairment charges referred to above.

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