Capital
expenditure
Capital expenditure is a
measure of our expenditure on property, plant and equipment and software.
It excludes the movement on capital accruals and any assets acquired
through new acquisitions in a year. Capital expenditure totalled £3,339
million in 2008 compared with £3,247 million and £3,142
million in 2007 and 2006, respectively. The increased expenditure
in 2008 related to investment in the creation of re-useable capabilities
for major contracts and up front capital expenditure associated with
contract wins at the end of the year. 21CN expenditure was higher
than 2007 and included equipment deployment, customer site readiness
as well as customer migration. 21CN expenditure is mainly reflected
in other network equipment. The additional expenditure on 21CN has
been partially offset by reduced spend on legacy equipment, including
transmission and exchange equipment. Capital expenditure is expected
to reduce to around £3.1 billion in 2009.
Of
the capital expenditure, £316 million arose outside of the UK
in 2008, compared with £296 million in 2007.
Contracts
placed for ongoing capital expenditure totalled £740 million at
31 March 2008. 21CN is being developed using stringent capital return
criteria and a rigorous approach to any investment in the narrowband
network. 21CN aims to deliver long-term, structural cost reduction,
as we progressively migrate onto a simpler, lower cost network architecture.
We expect that future capital expenditure will be funded from net cash
inflows from operating activities, and, if required, by external financing.
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Movement
in capital expenditure by asset category
(£m)
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