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Investing for growthSean WilliamsGroup Director Strategy, Policy and Portfolio
10 December 2015
© British Telecommunications plc
Our purpose, goal, strategy and culture
Broaden and deepen our customer relationships
FibreTV and content
Mobility and
future voice
UK businessmarkets
Leading global
companies
Our strategy
A growing BT: to deliver sustainable profitable revenue growth
Invest for growth
Our goal
A healthy organisation
Deliver superiorcustomer service
Transformour costs
Our purpose
Our culture
2
To use the power of communications to make a better world
© British Telecommunications plc
1. Leading global companies
3
New products– BT Assure Threat Defence; BT Compute Storage
– cloud-based CRM service
Expanding network– new cloud-enabled data centres in Argentina, Japan,
South Africa and Colombia
A leader in Gartner’s Magic Quadrant for Global Network Service Providers
Future plans
Increasing share of wallet– extending industry focus, expanding solutions
Supporting multinational customers– investing in global account management and network
Further network expansion
Focusing on gross margin and cash
Achieved so far
Source: Gartner, Magic Quadrant for Global Network Service Providers, Neil Rickard, Bjarne Much, January 14, 2015
This graphic was published by Gartner, Inc. as part of a larger research document and should be evaluated in the context of the entire document. The Gartner document is available upon request from http://www.globalservices.bt.com/uk/en/news/gartner-nsp-mq-2015.Gartner does not endorse any vendor, product or service depicted in its research publications, and does not advise technology users to select only those vendors with the highest ratings or other designation. Gartner research publications consist of the opinions of Gartner's research organization and should not be construed as statements of fact. Gartner disclaims all warranties, expressed or implied, with respect to this research, including any warranties of merchantability or fitness for a particular purpose.
© British Telecommunications plc
4
© British Telecommunications plc
Growing share of wallet with existing customers
Developing new IP-based voice and data products
Cross-selling from leading position in fixed
2. UK business markets
5
Achieved so far Future plans
Benefits of BT Business organisation
– simplified structure
– synergies from combining IT services units
Portfolio evolution
– IP voice services
• BT Cloud Voice
• Wholesale Hosted Centrex
– new broadband portfolio including IT support and Office 365
– streamlined IT services portfolioFixed-voice and
dataMobility Addressable IT
services market
BT Rest of market
Mar
ket
size
(£
bn
)
30%1% 6%
1086420
© British Telecommunications plc
3. Mobility and future voice
Customers want seamless, fast and reliable access to content
Exciting opportunity to leverage our brand and capabilities
£12.5bn acquisition of EE expected to complete by end of 2015/16
6
For businesses
A complete, converged fixed and mobile solution
Single platform available wherever customers are
BT One Phone and 4G mobile plans launched
For consumers
Fast and reliable data and voice services wherever they are
Compelling propositions at competitive prices
Three SIM-only deals launched March 2015
– customer base now >200,000
© British Telecommunications plc
Position
Mobile market share1
Broadband market share1
No.1 in mobile
35%
3%
No.1 in fixed
<1%
32%
Combining the UK’s fixed and mobile market leaders
7
Innovative, seamless services combining fibre,
4G and wi-fi
Cross-selling opportunities
Significant cost synergies
A highly complementary combination, with little overlap
Combining best fixed-line network with best mobile
network
1 Source: Company reporting and Ofcom subscriber data
Enhanced distribution
network with c.550 retail stores
© British Telecommunications plc
8
FMC customers as % of broadband customers/households1
European examples show strong penetration of FMC offerings
Move from voice to data has blurred lines between fixed and mobile propositions
– tablets/phablets/smartphones used for both home broadband and on the move
– >250m iPads sold worldwide since launch in 2010
Some European telcos have signed up more than half of their broadband customers to mobile offers
Currently consumer FMC propositions are only offered by Virgin Media and TalkTalk in the UK
BT will be better equipped to provide FMC services in the UK, with its own networks
0%
10%
20%
30%
40%
50%
60%
70%
KPN Telenet OrangeFrance
Belgacom TelefonicaSpain
1 All figures per latest company report. KPN: Penetration rate calculated as 4P customers as % of "Residential Broadband Customers“; Telenet: percentage of unique customer relationships taking mobile services; Orange France: Orange Open customers excluding Open multi-ligne (multi-sim 4P) as proportion of total broadband customers; Belgacom: percentage of households with a fixed and mobile component; Telefonica: Fusion customers as % of total broadband customers
Meeting customer demand for FMC products
© British Telecommunications plc
9
Popular BT TV channels- 1.3m BT TV customers
Popular BT Sport rights- 5.2m BT Sport households, incl. wholesale1
- 3.3m retail customers1
1 As announced at Q4 2014/15 results, 7 May 2015
4. TV and content offering overview
© British Telecommunications plc
TV strategy is working
10
Consumer line loss BT TV net adds
Line loss 67% better over nine quarters post-BT Sport launch versus nine quarters pre-launch
Best-ever BT TV net adds in Q2
1.3m BT TV customers
2013/14 2014/15 2015/16
-300
-250
-200
-150
-100
-50
0
2013/14 2014/15 2015/162012/132011/12
0
20
40
60
80
100
120
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
600
700
800
900
1,000
2011/12 2012/13 2013/14 2014/15
BT
Spo
rt
-6%
-4%
-2%
0%
2%
4%
6%
8%
2011/12 2012/13 2013/14 2014/152
2 As reported
BT Consumer EBITDA
BT Consumer revenue growth
£m
‘000s ‘000s
© British Telecommunications plc
5. Fibre - four pledges to support the UK’s digital future
11
Deliver minimumbroadband speedsof 5Mbps to 10Mbps
Expand the reach of fibre broadband beyond 95%
Take the UKfrom a Superfast to an Ultrafast nation
Raise the baron service
1 2
3 4
© British Telecommunications plc
Coverage we aspire to go beyond the UK’s 95% target for fibrebroadband
On track to help government 95% fibre by 2017
Plans:• Help to go further, with £130m BDUK dividend
• Extend our ‘community fibre partnerships’ – our intention is to ‘never say no’
• Ambition to offer fibre solutions for all new sites
Speedwe will work to provide the speed people need, including our proposal to give 10 million homes and businesses access to ultrafast broadband by end of 2020
UK average speeds - 20x increase (1-23Mbps ) and G.fast CP trials
Plans:• Upgrade special fibre offer for 400k slow copper lines
• Ultrafast to 10m premises by 2020 – G.fast and FTTP
• 1Gbps fibre product for SMEs
Servicewe will raise our service standards, offering quicker installations and faster fixes
Achieved all 14/15 Ofcom Minimum Service Levels (MSLs)
Plans:• Aim to exceed future MSLs, with 95% on-time
installations by 2017• Provide CPs with a menu of repair options and
‘View my engineer’• Increase Ethernet circuit connections by 30% YoY
Trusted partnerwe will be a trusted partner for CPs, continuing to guarantee fair and equal treatment for all
Serve 500+ CPs equivalently (c.40% revenue from non-BT CPs)
Plans:• Consult with CPs on offering:
• increased end customer contact with Openreach
• Consumer and business customer panels to input to our service and product developments
Contribution to our communitywe will make a difference to the communities we serve, inspiring over half our people to become volunteers in the community
Support communities through employment, infrastructure and volunteering
Plans:• Support our people to be community volunteers,
doubling by 2020• Increase support for charities, especially our partner
SSAFA• More job opportunities for military veterans and
apprentices
Investmentwe will invest to sustain Britain’s digital leadership
Invested over £10.5bn in digital infrastructure, including over £3bn on fibre
Plans:• Continue to roll out fibre as widely as possible
• Ultrafast to 10m premises by 2020 – G.fast and FTTP
• Continue investing to extend, upgrade and maintain our networks
The Openreach charter
12
© British Telecommunications plc
Increasing broadband speeds
13
Raise minimum broadband speeds to 5-10Mbps
More than 80% of UK premises passed with fibre– working with government to help reach further than 95%
G.fast improvements will enable cabinet-based deployment– builds on existing NGA investment– scale trials in Huntingdon and Gosforth now running– 300Mbps-500Mbps to 10m premises by 2020– up to 500Mbps available to most of the UK by 2025– premium 1Gbps fibre broadband services for high-
demand customers
Investment managed broadly within existing capex envelope
Also trialling XG-FAST, a new variant of ultrafast, in partnership with Alcatel-Lucent– 5.6Gbps demonstrated over 35 metre copper cable
0
1
10
100
1,000
10,000
100,000
1,000,000
Do
wn
stre
am r
ate
(kb
ps)
1
Evolution of access speed standards
ADSL
VDSL
G.fast
1960s 2025
1 Log scale
Narrowband
Broadband
© British Telecommunications plc
0 2 4 6 8 10
MexicoAustraliaGermany
G20IndiaUSA
JapanSouth Korea
ChinaUK
Source: BCG UK eGDP, May 2015
% of GDP driven by internet (eGDP)
Competitive intensity
(HHI)
Most affordable
pricing
Fixed broadband penetration
Avg. measured bandwidth
downstream
Superfast coverage
Superfast take-up
Source: Analysys Mason
1st
2nd
4th
5th
3rd
14
Digital communications is a UK success story
© British Telecommunications plc
15
Certainty
– regulatory timescales aligned to network investment horizon
Clarity
– a simple and robust framework
Fairness
– companies able to generate an appropriate return on investment
– Ofcom should look at pay-TV market
£62.57£52.79
£40.35 £37.61£29.58
£0
£20
£40
£60
£80
UK Spain France Italy Germany
£12.19£16.81 £17.01
£24.26£30.45
£0
£10
£20
£30
£40
UK France Germany Italy Spain
Broadband pricing1
Pay-TV pricing1
1 Monthly prices in the ‘Big 5’ European economies; source: Ofcom International Communications Market Report, December 2014Broadband: Comparative stand-alone ‘lowest available’ fixed-line broadband pricing; family household with multiple needsPay-TV: Premium pay-TV with HD and PVR
What do we want from the review?
Ofcom’s Strategic Review of Digital Communications
© British Telecommunications plc
Summary
Progress in our five key growth areas
Operational trends show our strategy is working
– innovative business solutions driving orders in BT Global Services and BT Business
– BT Mobile has built on its strong start
– record TV net adds
– contribution of BT Sport Europe ahead of our expectations
– fibre going from strength to strength
16
Investing in a strong platform for growth