BT Retail

In 2008, BT Retail revenue was £8,477 million, compared with £8,346 million in 2007 and £8,447 million in 2006. This represents an increase of 2% in 2008, compared with a decline of 1% in 2007. The increase in revenue in 2008 was driven by growth in the broadband, networked IT services and other new wave markets, whilst our traditional defence was based on combining great customer service with competitive pricing.

New wave revenue increased by 20% to £2,089 million in 2008 (2007: £1,735 million, 2006: £1,352 million) representing 25% of BT Retail revenue in 2008 (2007: 21%, 2006: 16%).

BT Retail revenue – new wave and traditional
(£m)
			New wave
			Traditional

New wave revenue growth has been primarily driven by broadband services which increased by 22% to £1,084 million in 2008, compared with an increase of 24% in 2007. Our broadband installed base increased by 742,000 taking us to 4.4 million customers and retaining our status as the UK’s most popular broadband supplier. These additions represented a 38% share of the total broadband DSL and LLU net additions in 2008. At 31 March 2008 our share of the installed base was 35% (2007: 34%, 2006: 33%). We offer our customers much more than just broadband access. At 31 March 2008, we had 214,000 customers on our next generation television service, BT Vision; 594,000 broadband digital vault customers and more than 2 million VoIP customers.
     Revenue from networked IT services increased by 29% to £508 million in 2008, compared with an increase of 3% in 2007. The accelerated rate of growth was driven by BT Business which continues to develop simple and complete solutions for the SME market. Our portfolio includes IP infrastructure – WAN/ LAN, IP telephony, data centre services, security, applications and outsourcing. The 2008 results include the acquisitions of Basilica and Lynx Technology.
     Mobility and other new wave revenues increased by 9% to £497 million in 2008 (2007: £455 million, 2006: £255 million), driven by dabs.com, and our Redcare business.
     Traditional revenue declined by 3% in 2008 to £6,388 million, compared with a decline of 7% in 2007. The slowing rate of decline reflects our robust defence of the traditional market through innovative pricing packages for all our customers in a highly competitive market.
     Gross profit increased by 6% in 2008 to £3,116 million (2007: £2,940 million, 2006: £2,843 million), compared with an increase of 3% in 2007. Gross profit margin increased by 1.6 percentage points to 36.8% in 2008, showing steady growth across all three years under review (2007: 35.2%, 2006: 33.7%).
     S,G&A costs were £1,621 million in 2008, compared with £1,583 million in 2007 and £1,617 million in 2006. The increase in S,G&A costs was driven by extra investment in product development, marketing and acquisitions, the impact of which has been partially offset by savings from a number of our cost efficiency programmes. These programmes continued to focus on improving sales channel effectiveness, reducing overheads and removal of inefficiencies and duplication.
     The above factors resulted in EBITDA increasing by 10% to £1,495 million in 2008 (2007: £1,357 million, 2006: £1,226 million) and a 15% improvement in operating profit to £1,050 million in 2008 (2007: £912 million, 2006: £814 million).
     Future growth in our BT Retail line of business will come predominantly from the increased roll out of broadband, converged services, BT Vision and networked IT services to SME customers.

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