Investing for growth
Sean Williams
Group Director Strategy, Policy and Portfolio
10 December 2015
Our purpose, goal, strategy and culture
Our purpose
Our goal
To use the power of communications to make a better world
A growing BT: to deliver sustainable profitable revenue growth
Broaden and deepen our customer relationships
Our strategy
Deliver superior
customer service
Fibre
Our culture
© British Telecommunications plc
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TV and
content
Transform
our costs
Mobility
and
future voice
Invest for
growth
UK business
markets
A healthy organisation
Leading
global
companies
1. Leading global companies
Achieved so far
A leader in Gartner’s Magic Quadrant for Global
Network Service Providers
 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
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
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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.
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2. UK business markets
Achieved so far
–
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 portfolio
 Growing share of wallet with existing
customers
 Developing new IP-based voice and data
products
 Cross-selling from leading position in fixed
Market size (£bn)
 Benefits of BT Business organisation
Future plans
10
8
6
4
2
0
30%
Fixed-voice and
data
Mobility
BT
© British Telecommunications plc
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6%
1%
Rest of market
Addressable IT
services market
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
For businesses
 A complete, converged fixed and mobile solution
 Single platform available wherever
customers are
 BT One Phone and 4G mobile plans launched
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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
Combining the UK’s fixed and mobile market leaders
Position
No.1 in fixed
No.1 in mobile
Mobile market
share1
<1%
35%
Broadband market
share1
32%
3%
A highly complementary combination, with little overlap
Combining best
fixed-line network
with best mobile
network
1
Source: Company reporting and Ofcom subscriber data
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Cross-selling
opportunities
Significant cost
synergies
Enhanced
distribution
network with c.550
retail stores
Innovative,
seamless services
combining fibre,
4G and wi-fi
Meeting customer demand for FMC products
 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
European examples show strong penetration of
FMC offerings
FMC customers as % of broadband customers/households1
70%
60%
 Some European telcos have signed up more
than half of their broadband customers to
mobile offers
50%
 Currently consumer FMC propositions are only
offered by Virgin Media and TalkTalk in the UK
20%
40%
30%
10%
0%
 BT will be better equipped to provide FMC
services in the UK, with its own networks
1
Telenet
Orange
France
Belgacom Telefonica
Spain
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
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KPN
4. TV and content offering overview
Popular BT TV channels
- 1.3m BT TV customers
1
As announced at Q4 2014/15 results, 7 May 2015
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Popular BT Sport rights
- 5.2m BT Sport households, incl. wholesale1
- 3.3m retail customers1
TV strategy is working
Consumer line loss
BT TV net adds
BT Consumer revenue growth
8%
‘000s
‘000s
6%
0
120
4%
-50
100
2%
0%
80
-2%
-4%
60
-150
-6%
40
2011/12
-200
20
-250
Q1 Q2 Q3 Q4 Q1 Q2
2011/12
2012/13
2013/14
2014/15 2015/16
2012/13
2013/14
Q3 Q4 Q1 Q2
2
As reported
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2014/15
2014/15
2015/16
£m
1,000
900
 Line loss 67% better over nine
quarters post-BT Sport launch
versus nine quarters pre-launch
2013/14
BT Consumer EBITDA
0
-300
2
BT
Sport
-100
 Best-ever BT TV net adds in Q2
 1.3m BT TV customers
800
700
600
2011/12
2012/13
2013/14
2014/15
5. Fibre - four pledges to support the UK’s digital future
1
Deliver minimum
broadband speeds
of 5Mbps to 10Mbps
3
Take the UK
from a Superfast
to an Ultrafast nation
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2
Expand the reach
of fibre broadband
beyond 95%
4
Raise the bar
on service
The Openreach charter
Coverage
Speed
Service
we aspire to go beyond the UK’s 95% target for fibre
broadband
we 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
we will raise our service standards, offering quicker
installations and faster fixes
 On track to help government 95% fibre by 2017
 UK average speeds - 20x increase (1-23Mbps ) and
G.fast CP trials
 Achieved all 14/15 Ofcom Minimum Service Levels
(MSLs)
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
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 partner
Contribution to our community
Investment
we will be a trusted partner for CPs, continuing to
guarantee fair and equal treatment for all
we will make a difference to the communities we serve,
inspiring over half our people to become volunteers in the
community
we will invest to sustain Britain’s digital leadership
 Serve 500+ CPs equivalently (c.40% revenue from
non-BT CPs)
 Support communities through employment,
infrastructure and volunteering
 Invested over £10.5bn in digital infrastructure,
including over £3bn on fibre
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
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
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
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
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Increasing broadband speeds
 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 highdemand 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
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1,000,000
G.fast
VDSL
100,000
Downstream rate (kbps)1
–
Evolution of access speed standards
ADSL
10,000
1,000
Broadband
100
10
Narrowband
1
0
1960s
1 Log
scale
2025
Digital communications is a UK success story
% of GDP driven by internet (eGDP)
1st
UK
China
South Korea
Japan
USA
India
G20
Germany
Australia
Mexico
2nd
3rd
4th
5th
0
2
4
Source: BCG UK eGDP, May 2015
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6
8
10
Competitive
intensity
(HHI)
Most
affordable
pricing
Source: Analysys Mason
Fixed
broadband
penetration
Avg. measured
bandwidth
downstream
Superfast
coverage
Superfast
take-up
Ofcom’s Strategic Review of Digital Communications
What do we want from the review?
 Certainty
– regulatory timescales aligned to network
investment horizon
Broadband pricing1
£40
£30
£20
£10
£0
£30.45
£24.26
£12.19
 Clarity
UK
– a simple and robust framework
 Fairness
– companies able to generate an appropriate
return on investment
– Ofcom should look at pay-TV market
1 Monthly
© British Telecommunications plc
£17.01
France Germany
Italy
Spain
Pay-TV pricing1
£80
£60
£40
£20
£0
£62.57
prices in the ‘Big 5’ European economies; source: Ofcom International Communications Market Report, December 2014
Broadband: Comparative stand-alone ‘lowest available’ fixed-line broadband pricing; family household with multiple needs
Pay-TV: Premium pay-TV with HD and PVR
15
£16.81
£52.79
£40.35
UK
Spain
France
£37.61
Italy
£29.58
Germany
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
Investing in a strong platform for growth
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