BT Group plc
Q3 2015/16 results - investor meeting slide pack
February & March 2016
Forward-looking statements caution
Certain statements in this presentation are forward-looking and are made in reliance on the safe harbour provisions of the US Private Securities
Litigation Reform Act of 1995. These statements include, without limitation, those concerning: our 2015/16 outlook, including growth in revenue,
EBITDA and free cash flow; EPS and net debt; cost transformation; investment in our networks; growing dividends and continued share buyback; our
investment in and demand for our BT TV and BT Sport offerings, and BT Sport Europe performance; fibre broadband take-up and our investment in
fibre rollout.
Although BT believes that the expectations reflected in these forward-looking statements are reasonable, it can give no assurance that these
expectations will prove to have been correct. Because these statements involve risks and uncertainties, actual results may differ materially from those
expressed or implied by these forward-looking statements.
Factors that could cause differences between actual results and those implied by the forward-looking statements include, but are not limited to:
material adverse changes in economic conditions in the markets served by BT; future regulatory and legal actions, decisions, outcomes of appeal and
conditions or requirements in BT’s operating areas, including competition from others; selection by BT and its lines of business of the appropriate
trading and marketing models for its products and services; fluctuations in foreign currency exchange rates and interest rates; technological
innovations, including the cost of developing new products, networks and solutions and the need to increase expenditures for improving the quality of
service; prolonged adverse weather conditions resulting in a material increase in overtime, staff or other costs, or impact on customer service;
developments in the convergence of technologies; the anticipated benefits and advantages of new technologies, products and services not being
realised; the timing of entry and profitability of BT in certain communications markets; significant changes in market shares for BT and its principal
products and services; the underlying assumptions and estimates made in respect of major customer contracts proving unreliable; uncertainties and
assumptions relating to the planned EE acquisition, conditions of the acquisition not being satisfied and the anticipated synergies, benefits and return
on investment not being realised; and general financial market conditions affecting BT’s performance and ability to raise finance. BT undertakes no
obligation to update any forward-looking statements whether as a result of new information, future events or otherwise.
29 February 2016
© British Telecommunications plc
2
Contents
Page
1. Financial and strategic overview
4
6. BT Consumer
43
2. Cost Transformation
12
7. BT Wholesale
55
3. Mobility & EE
17
8. Openreach, fibre and regulation
59
4. BT Global Services
32
9. Pension
81
5. BT Business
39
10. IR contact details
86
© British Telecommunications plc
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Page
BT Group plc
1. Financial and strategic overview
4
BT Group financial overview – pro forma
BT Group external revenue1
£23,688m
BT Group EBITDA1
£7,742m
8%
14%
7%
29%
34%
13%
26%
12%
18%
BT Global Services
BT Consumer
BT Wholesale
1 before
19%
BT Business
EE
Openreach
specific items. For FY 2014/15 based on pro forma published 12 February 2016.
© British Telecommunications plc
5
13%
7%
BT Global Services
BT Consumer
BT Wholesale
BT Business
EE
Openreach
Financial objectives
Drive sustainable, profitable revenue growth
Grow EBITDA
Grow free cash flow
Invest in
business
© British Telecommunications plc
6
Reduce
net debt
Support pension
fund
Pay progressive
dividends
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
Deliver superior customer service
Group-wide changes
 Openreach Charter
–
–
–
investing in coverage and speed
raising service standards
increasing speed of service delivery and improving the
number of on-time installations
 3,000 engineers recruited in last 18 months
Future plans
Acting on insight
–
Keeping customers connected
–
 ‘View my Engineer’ service launched
–
text updates and online information to keep customers
informed of where their engineer is
1,000 more to be recruited
commitment to have >80% of consumer customer calls
answered within UK by the end of 2016; plans to go further
–
allows customers to view and amend their products,
change appointments and contact BT directly
© British Telecommunications plc
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easy-to-use interfaces for our contact centre
advisors and customers, with engineer tracking
Working end-to-end
–
 ‘My BT’ app launched
–
a programme of targeted network maintenance
will reduce faults by 200k+ in 2015/16
Creating great systems and tools
 > 1,000 new contact centre roles created
–
–
end-to-end measures of customer interactions
on and offline, allowing prompt intervention
global access delivery times being reduced by up
to 5 days
Supporting our people
–
new operating models that embed accountability
and ownership
Improved revenue trend, steady growth in EBITDA, strong cash flow
YoY change in underlying1
revenue ex transit
1%
0%
Adjusted EBITDA1
6,400
Normalised free cash flow1
3,000
6,200
2,500
-2%
6,000
£m
5,800
-3%
5,600
-4%
5,400
-1%
1 before
specific items
© British Telecommunications plc
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£m
2,000
1,500
1
2015/16 revenue outlook updated
Underlying revenue2 ex transit
1-2% growth
EBITDA3
Modest growth
Normalised free cash flow4
Around £2.8bn
Dividend per share
Up 10-15%
1 standalone
BT, excluding any impact of EE acquisition
specific items, foreign exchange movements and the effect of acquisitions and disposals
3 before specific items
4 before specific items, pension deficit payments and the cash tax benefit of pension deficit payments
2 excludes
© British Telecommunications plc
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Shareholder returns
Dividend per share
10.9p
9.5p
6.9p
7.4p
+7%
8.3p
+14%
6.5p
5.7p
2.3p
2.4p
2.6p
2009/10
2010/11
2011/12
3.0p
3.4p
3.9p
4.4p
2012/13
2013/14
2014/15
2015/16
Final dividend
 Share buyback
– £35m spent in Q3, £285m year to date
– continue to expect to spend c.£300m for the year
© British Telecommunications plc
+13%
+15%
+13%
+15%
Interim dividend
11
8.5p
7.5p
+8%
+4%
+10-15%
+15%
+12%
5.0p
4.6p
+14%
12.4p
Outlook
BT Group plc
2. Cost Transformation
12
Cost Transformation progress
6-year cost base1 reduction
£1,471m
Capex
£3,088m
£1,016m
£949m
£1,308m
£132m
£611m
Opex
£16,305m
Capex
£2,326m
Still more than
£1bn of gross
cost saving
opportunities
Opex
£11,580m
2008/9
2010/11
2011/12
2012/13
2013/14
2014/15
2014/15
Capex
Labour costs incl. contractors
Consultancy
Supplier renegotiation
Overhead Value Analysis
Process re-engineering
Right First Time
BT-centric
Insourcing
Output-based pricing
Continuous Improvement
Quick wins
Forensic
Pan – BT
© British Telecommunications plc
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2009/10
1
opex is before specific items, depreciation & amortisation. Capex is before purchase of telecommunications licences. 2008/9 opex estimated for
impact of historic Other Operating Income restatement
It’s needed to offset the headwinds in our business
Cost reduction
Cost pressures
Natural attrition/retirement
Inflation
Cost Transformation programmes
Margin mix
Improving revenue performance
© British Telecommunications plc
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Cost transformation examples
 Pan BT – network planning and engineering support
–
–
–
–
consolidate >500 locations down to 31 larger centres of excellence – run more efficiently
simplify systems, increase automation
focus on managers’ role in coaching teams to be highly productive and effective
on track for >£100m savings, as well as speeding up processes and improving service
 Global Services and BT Business - customer premises equipment (CPE)
CPE
–
–
–
–
consolidating supplier base; centralising ordering in centre of excellence
maximise discounts and rebates from suppliers
refurbish and re-use CPE
c.£50m opportunity
 Pan BT – travel and subsistence
–
–
© British Telecommunications plc
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expect costs for 2015/16 to reduce by £12m to £75m
compares with £102m two years ago
Cost transformation supporting investment in service
 Insourcing saves money, protects BT jobs,
improves service
– >14,000 jobs insourced since 2008/09
Net labour costs
5,500
5,000
 Improving back-office efficiency
– c.6,000 jobs created in Central Business
Services unit in UK & overseas
 Investing in customer service
– >2,000 new UK contact centre staff, >80%
consumer calls answered in UK by end 2016
– 3,000 Openreach engineers hired in last 18
months
© British Telecommunications plc
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4,500
£m 4,000
3,500
3,000
2,500
2009/10 2010/11 2011/12 2012/13 2013/14 2014/15
BT Group plc
3. Mobility & EE
17
Mobility and future voice – strategic overview
 Customers want seamless, fast and reliable access to content
 Exciting opportunity to leverage our brand and capabilities
 Acquisition of EE completed
For businesses
 A complete, converged fixed and mobile solution
 Single platform available wherever
customers are
 BT One Phone and 4G mobile plans launched
© British Telecommunications plc
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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 >300,000
EE acquisition completed 29 January
 We’ve bought a great business
 Creating the UK’s leading
communications provider
 A digital champion for the UK
– providing high levels of investment
– driving innovation in a highly
competitive market
– combining the power of fibre
broadband with the convenience of
leading-edge mobile services
© British Telecommunications plc
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Position
No.1 in fixed
No.1 in mobile
Mobile market
share1
<1%
33%
Broadband
market share1
33%
4%
A highly complementary
combination, with little overlap
1
Source: Company reporting and Ofcom subscriber data
EE strengthens our future
BT in the UK previously
BT in the UK with EE
Proposition
Best of fixed
Always best connected
Customers
A relationship with UK
households and businesses
A relationship with UK individuals,
households and businesses
Core asset
A fixed network increasingly
talking to personal ‘mobile’ devices
A ‘best of both’ network designed
from the bottom up for data
Economics
Scale in fixed
Scale in fixed and mobile
Opportunity to generate considerable customer and shareholder value
© British Telecommunications plc
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EE – transaction financing (I)
 New BT shares issued at closing – 12% of enlarged group to DT,
4% to Orange
c.£6.8bn
– 1,595m shares issued; valued at capped share price of 428p
 Equity placing constituting c.3% of BT’s share capital
Financing
1
–
completed 12 February 2015
 Existing cash and net new debt financing
c.£2.5bn
 EE Net Debt1
c.£2.2bn
 Total Enterprise Value
£12.5bn
Estimated at completion; will be subject to customary post-completion adjustments
© British Telecommunications plc
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£1.0bn
EE – transaction financing (II)
Creating value
Pro-forma net debt
EV/EBITDA
 6.0x EBITDA1
EV/opFCF
 9.6x opFCF1
FCF per share
 1st full year post completion
accretion
EPS accretion  2nd full year post completion2
ROIC>WACC
1 EV
c.£2.2bn
0.8x
EBITDA
£3.5bn
© British Telecommunications plc
c.£10.7bn
£5.0bn
Net debt at Cash paid out to
31 Dec 2015
DT & Orange
of £12.5bn is adjusted for £3.0bn NPV of cost synergies post integration costs. Based on EE financials for the 12 months to 31 December 2014
on aggregate financial forecasts for BT and EE including synergies; does not take into account the impacts of any purchase price allocation
2 Based
22
 Comfortably in 3rd full year
post completion
c.1.4x
EBITDA
EE net debt
Pro-forma post
transaction net
debt
EE – transaction detail
 Standstill period
–
Share
conditions
 Lock-up period
–
–
–
1
for a 3 year period, DT unable to increase its stake above 15%1; Orange unable to go
above 4%
DT and Orange unable to sell down for 18 months and 12 months, respectively
Orange is permitted to sell its BT shares to DT at any time, subject to DT’s 15%
standstill restriction
off-market sales will be permitted in certain circumstances but BT will have a right of
first offer
Shareholder
approval
 As a Class 1 transaction, shareholder approval was required
Relationship
agreement
 DT CEO Tim Höttges has joined BT board as non-executive director
 >99.7% vote in favour
–
appropriate compliance procedures to manage potential conflicts of interest
During the standstill DT can increase its holding from 12% to 15% only by buying some of Orange’s shares in BT
© British Telecommunications plc
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Confident of EE synergies
 Total opex and capex
c.£360m
synergies in 4th full year
post completion
 Total NPV of opex and
c.£3.0bn
capex synergies post
integration costs
c.£1.6bn
 Total NPV of revenue
synergies
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 Integration planning over last 6 months
– >50 operational experts from both BT and EE
– 15 work streams, eg call centres and finance
– plus group-wide programmes, eg procurement,
people and culture
 Leaders from BT and EE involved to provide
both perspectives and get full buy-in
 Using same forensic methodology used for
cost transformation
EE – creating value and unlocking significant synergies
Revenue synergies:
Opportunity to expand overlap
 Cross-selling and bundling opportunities
across enlarged customer base
–
fixed-line sales to EE customers
–
accelerating sale of FMC services to BT’s
existing consumer customers
–
opportunity to increase market share in
business mobile
–
creation of new services by combining
portfolios, skills and networks
Broadband / TV cross sell into mobile base
Households
consolidate
to one
mobile
provider
Mobile cross sell into BT premises
c.£1.6bn total NPV of revenue synergies
© British Telecommunications plc
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EE – encouraging trends
1
Strong growth in postpaid base
A growing fixed broadband base
950
900
850
800
k 750
700
650
600
16
14
12
10
m 8
6
4
2
0
Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4
2011
2012
2013
2014
2015
Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4
2011
2012
2013
2014
2015
EBITDA2
£/month
Stable ARPU
20
500
18
400
300
16
£m
14
100
12
0
10
Q1
Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4
2011
2012
2013
2014
2015
1
200
Q2
Q3
2014/15
Q4
Q1
Source: Company reporting, calendar years
© British Telecommunications plc
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2
EE’s EBITDA, presented on the basis of BT’s accounting policies
Q2
2015/16
Q3
BT & EE pro forma financials
Revenue1
£6.3bn
£0.5bn
EBITDA1
£23.7bn
1
£7.7bn
EE
Pro-forma BT
£6.3bn
£17.9bn
BT
£1.5bn2
EE
Eliminations
Pro-forma BT
BT
From pro forma historic financials published by BT on 12 February 2016 under BT accounting policies. Revenue and EBITDA are Adjusted measures for the year ended 31 March 2015
EE’s Adjusted EBITDA for the year ended 31 March 2015 under BT’s accounting policies. Includes: accounting policy adjustments, brand fees and differences in treatment of specific items. Before
purchase price accounting adjustments.
2
© British Telecommunications plc
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EE – strong network coverage and performance
No.1 for 4G coverage1
 RootMetrics overall performance winner in H2 20153
85%
75%
Overall performance score
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
No.1 for network performance
73%
51%
EE
O2
Vodafone
3
– ‘double-speed 4G’ available to 80% of the population
>14 million 4G subscribers
Source: “Connected Nations 2015” report, Ofcom, 1 December 2015
2 As at 31 December 2015; source: EE Q4 2015 results, 12 February 2016
© British Telecommunications plc
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85
79
80
77
70
60
3
Vodafone
O2
Source: RootMetrics
EE tops five out of six RootMetrics rankings3
Strong spectrum position with 105MHz paired
spectrum
3
1
88
90
EE
Source: Ofcom
95% of UK population covered by EE 4G network2
100
RootMetrics® award ranking based on RootMetrics 2H 2015 UK RootScore Report for mobile performance
as tested on best available plans and devices on 4 mobile networks across all available network types. The
RootMetrics award is not an endorsement of EE. Your results may vary.
See rootmetrics.co.uk for details.
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
–
>200m 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
 Currently consumer FMC propositions are only
offered by Virgin Media and TalkTalk in the UK
50%
40%
30%
20%
10%
0%
 BT will be better equipped to provide FMC
services in the UK, with its own networks
1
KPN
Telenet
Orange
France
Belgacom Telefonica
Spain
All figures per latest company report at 5 February 2015 (date of EE acquisition announcement). 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
© British Telecommunications plc
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Next steps to unlocking value and synergies
1 February organisation
Next steps
 Integration project management office
to manage overall process
BTC
BTB
BTGS
BTW
TSO
 EE and BT brands retained for mobile
consumers
 New EE CEO Marc Allera to join BT
Operating Committee
© British Telecommunications plc
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OR
 BT board integration committee will
track progress
 Begin transition to future operating
model
– alignment of corporate functions
– new, UK-centric Business and Public
Sector division
New UK-centric division for Business and Public Sector
1 April organisation
Main changes
EE MVNO
 A UK-centric organisation, combining three UK
businesses into one, aiming to provide:
Specialist
businesses
–
BTC
BTB
EE B2B
BTGS
BTW
OR
–
TSO
–
a more regional and focused approach to serving
the UK public sector
seamless, converged products across fixed, mobile
and IT services
better alignment of resources to improve customer
service and delivery
UK corporates
& public sector
 Allows Global Services to sharpen focus on global
and international customers
Business and
Public Sector
Global Services
c.£5bn pa revenue
c.12,000 people
c.£5bn pa revenue
c.17,000 people
© British Telecommunications plc
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 EE’s MVNO operations and specialist businesses
in BT Business (eg BT Fleet) moving to Wholesale
BT Group plc
4. BT Global Services
32
BT Global Services – improved cash generation
 Q3 underlying revenue ex transit up 2%
–
–
UK up 2% helped by large equipment sales
Continental Europe up 6%, IPX particularly strong
 Q3 EBITDA up 9% ex FX
–
continue to expect H2 to grow YoY
 Operating cash flow improved
–
(1)%
- u/l ex transit
2%
EBITDA
£276m
6%
12-month rolling operating cash flow
cyber security
improving cloud capabilities
expanding BT MeetMe with Dolby Voice into LatAm
strong mix of orders
£m
600
500
400
300
200
100
0
Q1
Q2
Q3
2013/14
© British Telecommunications plc
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£1,675m
12-month performance best on record
 Order intake down 19%, 12-month rolling up 1%
–
YoY change
Revenue
 Product developments
–
–
–
Q3 2015/16
Q4
Q1
Q2
Q3
2014/15
Q4
Q1
Q2
2015/16
Q3
Leading global companies – strategic overview
Achieved so far
 New products
– BT Compute Storage
– BT Assure Cyber and BT Assure Threat Defence
– BT Assure Ethical Hacking for Vehicles &
financial sector
– cloud-based DDoS mitigation services
– cloud-based CRM service
 Expanding the network
– new cloud-enabled data centres in Argentina,
Japan, South Africa and Colombia
 Improving the network
– Riverbed network acceleration technology
added to the core of our global network to
improve cloud performance
© British Telecommunications plc
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Future plans
 Increasing share of wallet (SOW)
– extending industry focus, expanding solutions
– Top 30 customers = c.40% of revenue, we have
25% SOW
– Top 1,000 customers = c.90% of revenue, we
have 8% SOW
 Supporting multinational and overseas
customers
– investing in global account management and
network
– new structure allows sharper focus
 Selective network expansion
 Focusing on gross margin and cash
Global Services - overview
2014/15 revenue by region
 2014/15 underlying revenue ex transit down 4%
–
2013/14: down 1%
 2014/15 12-month rolling order intake down 7%
 United Kingdom
–
–
13%
deep and broad service offering
strength in retail, banking, professional services
13%
43%
 Continental Europe
–
–
large businesses in Benelux, Germany, Italy & Iberia
strength in manufacturing
 United States & Canada
–
–
 High-growth regions
–
–
–
investing in Asia Pac, LatAm, Turkey, MEA
supporting emerging multinationals
strength in logistics and mining, oil & gas
© British Telecommunications plc
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31%
challenging regulatory environment
strength in consumer packaged goods, finance
UK
US & Canada
Continental Europe
High-growth regions
Global Services - key customer segments
 Corporate customers
–
–
–
–
98% of FTSE 100 companies, 82% of Fortune 500
MNCs with global contracts
international companies
domestic and SME customers
2014/15 revenue by customer type
5%
5%
20%
 Public sector customers
–
–
–
–
UK and international government
UK local councils
health services providers
expect further declines in local government
revenues
 Global telecoms sector
–
managed IP services, consulting and transit
to other telecoms companies
© British Telecommunications plc
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52%
18%
Corporate
Transit
Financial institutions
Other global carrier
Public sector
Global Services - product portfolio
Outsourcing
BT Assure
Firewalls, web security,
intrusion prevention,
and threat monitoring
Managed services
BT One
Communications that unify
BT Assure
BT One
Voice, voicemail, SMS, IM,
email, video conferencing,
and data sharing solutions
Security that matters
BT Contact
Contact centre solutions
including email, web chats,
social media and voice calls
BT Compute
BT Contact
Relationships that grow
Services that adapt
BT Advise
BT Advise
Consulting, integration and managed services
© British Telecommunications plc
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BT Compute
Services hosted in
global data centres,
delivered over the
global network
© British Telecommunications plc
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BT Group plc
5. BT Business
39
New UK-centric division for Business and Public Sector
1 April organisation
Main changes
EE MVNO
 A UK-centric organisation, combining three UK
businesses into one, aiming to provide:
Specialist
businesses
–
BTB
EE B2B
BTW
UK corporates
& public sector
Business and
Public Sector
Global Services
c.£5bn pa revenue
c.12,000 people
c.£5bn pa revenue
c.17,000 people
© British Telecommunications plc
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BTGS
OR
–
TSO
–
Market size (£bn)
BTC
10
a more regional and focused approach to serving
the UK public sector
seamless, converged products across fixed, mobile
and IT services; opportunity to grow share of wallet
better alignment of resources to improve customer
service and delivery
8
6
4
2
0
30%
6%
1%
Fixed-voice and
data
Mobility
BT
Rest of market
Addressable IT
services market
BT Business – headwinds beginning to ease
 Q3 underlying revenue ex transit flat
–
–
–
voice down 3%
Ireland up 4%
data & networking up 4%
 Business fibre broadband net adds up 26%
Q3 2015/16
YoY change
£779m
(1)%
Revenue
- u/l ex transit
flat
EBITDA
£268m
1%
 IP lines grew 57%
–
–
helping to offset decline in PSTN lines
BT Cloud Voice and BT Cloud Phone performing well
 Underlying operating costs ex transit down 1%
 EBITDA up 1%
 Good operating cash flow, up 9%
–
lower capex and working capital timing
 Order intake down 5%
–
–
reflects strong performance in Ireland in prior year
12-month rolling down 1%
© British Telecommunications plc
41
YoY change in underlying revenue ex transit
1.0%
0.0%
-1.0%
-2.0%
-3.0%
Q1
Q2
Q3
2013/14
Q4
Q1
Q2
Q3
2014/15
Q4
Q1
Q2
2015/16
Q3
Business - opportunities and challenges
Opportunities
 Cross-selling from leading position in fixed
–
–
converged fixed-mobile services launched
leveraging network advantage as IT services move
to the Cloud
Challenges
 Highly competitive market
 Market sensitive to economic pressures
 Building on strong brand, breadth of portfolio
and channel reach
 Declining fixed-voice market with falling call
volumes
 Driving fibre by developing new IP voice and data
products to meet customer needs
 Data price declines
 Continuing to focus on cost transformation, and
improving customer service
Aiming to be first choice SME supplier for fixed, mobile and IT services needs
© British Telecommunications plc
42
BT Group plc
6. BT Consumer
43
BT Consumer – best revenue growth on record
 Q3 revenue up 11%
–
–
broadband and TV up 23%
helped by BT Mobile, now >300,000 customers
 ARPU up 7% to £439
–
Revenue
EBITDA
–
despite investment in BT Sport Europe
and BT Mobile
continuing to invest in customer service
 Operating cash flow of £348m, up 27%
–
–
YoY change
£1,205m
11%
£270m
8%
pick-up in growth rate since start of year
YoY revenue growth
 Q3 EBITDA up 8%
–
Q3 2015/16
higher EBITDA
benefitting from phasing of UEFA rights
payments
12%
10%
8%
6%
4%
2%
0%
-2%
-4%
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
2012/13
2013/14
2014/15
2015/16
© British Telecommunications plc
44
Consumer - financial overview
BT Consumer revenue growth
Consumer market
10%
Market size
£5.8bn
£3.4bn1
£5.2bn
5%
0%
100%
80%
-5%
60%
40%
42%
20%
0%
Calls and lines
Source: Ofcom





2
5%
Broadband
TV
1
As reported
-10%
2
2011/12
2012/13
2013/14
2014/15
BT Consumer EBITDA
includes Business
Competitive market with several strong players
Growing demand for faster broadband
Market is increasingly triple-play
Investing for growth, with fibre at the heart
Fibre and TV underpin future plans
© British Telecommunications plc
45
32%
1,000
£m
BT
Sport
Market share
BT market share
900
800
700
600
2011/12
2012/13
Aim to grow top and bottom line over medium-term
2013/14
2014/15
BT Consumer – Q3 strong across all KPIs
Consumer lines
50
‘000s
Retail broadband net adds
BT retail net adds
‘000s
BT share of net adds
180
0
TV net adds
160
120
90%
100
140
-50
80%
120
-100
-150
100
70%
80
60%
50%
40
20
0
-250
2012/13
2013/14
2014/15 2015/16
 Consumer lines up 6,000
–
best performance in over
a decade
1 includes
2
business customers
DSL & fibre
© British Telecommunications plc
46
2013/14
2014/15
20
30%
0
–
–
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
2015/16
 Strong broadband performance
–
40
40%
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
2011/12
80
60
60
-200
‘000s
100%
130,000 retail broadband net
adds1, 71% of market2 growth
250,000 retail fibre net adds
46% of broadband customers
on fibre
2013/14
2014/15
2015/16
 97,000 TV net adds
–
1.4m TV customers
 Average BT Sport viewing
up 46% YoY
Consumer - TV market summary
Key
purchase
drivers
Households
Freeview
Basic pay-TV
High spending TV
(upgraders)
(Sky & VM switchers)
(Sky & VM customers)
 Value for money
 Simplicity/ low
commitment
10m
 More choice – greater
variety of channels
 Wide range of premium
sports
 More HD channels
 Blockbuster movies
6m
8m
4m
6m
2m
2m
c.2.8m
© British Telecommunications plc
47
Consumer - TV and content offering overview
Popular TV channels
- 1.4m TV customers
1
As announced at Q4 2014/15 results, 7 May 2015
© British Telecommunications plc
48
Popular BT Sport rights
- 5.2m BT Sport households, incl. wholesale1
- 3.3m retail customers1
Consumer - TV package details
Entertainment Starter - £0
80 Freeview channels, catch up
Total Entertainment - £13
Entertainment Plus - £10
As Starter, plus
record 600 hours of TV
50 premium channels
inc. 13 in HD + 9 Kids channels
TV on the go
1TB YouView+ Ultra HD box
up to £500 off LG Ultra HD TV
As Starter, plus
record 300 hours of TV
28 premium channels
TV on the go
Pause & Rewind
Rent movies on
BT Store
HD Extra - £4
AMC – £0 with BT TV
Netflix – from £5.991
BT Music - £3
BT Kids - £3
9
premium
channels
including
BT Sport
BT Sport Lite - Free
1
2
BT Sport Pack – Free to BT TV customers,
£5 to BT Broadband-only customers
Sky Movies - £13.50
Inc. in Entertainment
Ultra HD
Netflix - SD: £5.99, HD: £7.49, UHD: £8.99
Sky Sports - SD: £16.50 for one or the other of the channels; £22 for both. HD: £21.50 for one or the other of the channels; £27 for both
© British Telecommunications plc
49
TV Everywhere with
Extra Box - £5
Sky Sports - from £16.502
Consumer Charging options
value creation
 BT Broadband customers without BT TV to pay £5/month for UEFA Champions League
& Europa League; BT Sport Pack £5 for BT Mobile only customers
 Sky TV customers without BT Broadband to pay £19.99/month for BT Sport pack
 BT Sport available in HD for an extra £4/month
 Winning incremental broadband, telephony, channel and TV customers
Grow volumes
 Additional broadband & fibre volumes in Openreach
 EE customers provide potential to broaden reach
Commercial
 UEFA content provides attractive mid-week content for pubs & clubs
Wholesale
 Wholesale deals with Virgin Media in UK and Setanta in Ireland
Advertising
 Revenue from advertising and programme sponsorship
© British Telecommunications plc
50
 >25,000 commercial BT Sport customers
Consumer -
football content rights
More top matches involving Premier League clubs
New rights reinforce wide football portfolio
Expected number of matches per year Premier League clubs
will be featured on BT Sport1
>110
c.60
54
 Average daily viewing figures up 46% in Q3
 Premier League viewing continues to grow
16
c.15
38
38
2014/15
2015/16
 MotoGP race viewing up 62% for 2015 season
1
© British Telecommunications plc
51
Based on number of times Premier League clubs have appeared, averaged
over the past three UEFA Champions League & Europa League seasons.
In total, BT Sport has rights to 351 matches per season across Champions
League and Europa League.
Consumer -
2016 – 2019 Premier League
 Awarded 2 packages of Premier
League rights
Package
Matches
A
28
Saturday 12.30
– 2016/17 to 2018/19 seasons
B
28
Saturday 17.30
– cost of £320m per season
C
28
Sunday 13.30
D
28
Sunday 16.00
– 4 more than current deal
E
28
Monday 20.00 (up to 10 of which can
be scheduled Friday 20.00)
– key 5.30pm slot on Saturday, every
week
F
14
a) 8 matches Saturday 12.30/17.30
b) 6 matches mid-week evenings
G
14
a) 8 matches Bank Holidays
b) 6 matches Sunday 13.30/16.00
 42 matches a season
– cost per game of £7.6m, up 18% vs
current rights
© British Telecommunications plc
52
Kick-off times
Consumer - mobile
Three ‘SIM-only’ plans (12-month contracts)
£5
Per month
£10
Per month
All BT Mobile plans come with:
£20
Per month
4G
Fast 4G on the UK’s
biggest network
500MB data
2GB data
20GB data
200 minutes
500 minutes
Unlimited minutes
Unlimited texts
Unlimited texts
Unlimited texts
 £5 more for customers in non-BT broadband homes
 The discounted prices are available to anyone in a BT
broadband home
 Single bill for all the family, with up to 5 discounted SIMs
on one account
 Launched in March 2015, customer base now >300,000
© British Telecommunications plc
53
Free unlimited
access to >5m BT
Wi-fi hotspots
Monthly
spend cap
Protecting
customers from
‘bill shock’
Free BT Sport app,
giving access to
live Barclays
Premier League
matches
BT Group plc
7. BT Wholesale
54
BT Wholesale – strong growth in IP services
 Q3 underlying revenue ex transit up 3%
–
–
Managed Solutions up 10%; driven by connections
good growth in IP services, up 21%; IP Exchange and
Ethernet growing strongly
 Underlying operating costs ex transit up 4%
–
–
higher volumes in IP services
partly offset by an 8% decline in SG&A costs
 Order intake down 20%, 12-month rolling up 36%
–
Improved mix of orders
£527m
(1)%
- u/l ex transit
3%
EBITDA
£135m
(1)%
12-month rolling order intake
2,500
 Operating cash flow up 5%
Improved working capital movements and lower
capex
YoY change
Revenue
 EBITDA down 1%
–
Q3 2015/16
2,000
£m
1,500
1,000
500
0
Q1
© British Telecommunications plc
55
Q2 Q3
2013/14
Q4
Q1
Q2 Q3
2014/15
Q4
Q1 Q2 Q3
2015/16
Wholesale - overview
Mobile Network
Operators
Fixed Providers
Broadcasters
& Content Owners
Indirect Channel
Improving
network
coverage and
performance,
and adding fixed
telecoms
Providing
off-net
connectivity,
through to full
network
outsourcing
Delivering
content securely
around the
world
Providing
ready-made,
competitive and
easy-to-sell
products
Managed Services
© British Telecommunications plc
56
Distribution
Wholesale - market environment
Opportunities
 Hosted communications
IP migration
 IP Exchange
 IP transformation services
Challenges
Market
compression
 4G-ready backhaul
4G / LTE
Bandwidth
demand
Managed
services
© British Telecommunications plc
57
 Small cells
 LLU rollout
 Market consolidation
 Network sharing
 Virgin Media with MNOs
Competition
 TalkTalk in indirect channel
 Sites & towers
 Vodafone / CWW
 Ethernet growth
 TDM to IP voice
 Fibre broadband
Margin mix
 Media & Broadcast
 Contract re-signs
 Mobile sector
 Smaller comms providers
 Extended proposition
 Private circuits to Ethernet
Regulation
 Business Connectivity Market Review
 Wholesale Broadband Review
BT Group plc
8. Openreach, fibre and regulation
58
Openreach – record growth in fibre in Q3
 Q3 revenue up 3%
–
–
45% growth in fibre broadband
partly offset by c.£30m impact from regulation
 Operating costs up 2%
–
working capital movements
 Fibre going from strength to strength
record 494,000 net connections, up 32%
external CPs accounted for half of net adds
c.5.5m premises connected, 22% of those passed
© British Telecommunications plc
59
3%
£677m
4%
EBITDA
Openreach fibre net adds
BT
500
connecting new homes; Ethernet
 Operating cash flow of £419m, down 11%
–
–
–
£1,294m
leaver costs £22m (Q3 2014/15: nil)
 Capital expenditure up 7%
–
YoY change
Revenue
 EBITDA up 4%
–
Q3 2015/16
External
400
‘000
300
200
100
0
2011/12
2012/13
2013/14
2014/15
2015/16
Four pledges to support the UK’s digital future
1
Deliver faster minimum
broadband speeds
3
Take the UK
from a Superfast
to an Ultrafast nation
© British Telecommunications plc
60
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 end of 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;
investing 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 end of 2020 – G.fast
and FTTP
• Continue investing to extend, upgrade and maintain
our networks
Plans:
• Help to go further, with £179m BDUK dividend
• Extend our ‘community fibre partnerships’ – our
intention is to ‘never say no’
• Ambition to offer fibre solutions for all new sites
© British Telecommunications plc
61
Ofcom’s Strategic Review of Digital Communications
Broadband pricing1
What do we want from the review?
 Certainty
– regulatory timescales aligned to network
investment horizon
 Clarity
£40
£30
£20
£10
£0
UK
– a simple and robust framework
 Fairness
– companies able to generate an appropriate
return on investment
– Ofcom should look at pay-TV market
Spain
£80
£60
£40
£20
£0
UK
© British Telecommunications plc
Germany France
Pay-TV pricing2
Source: Ofcom International Communications Market Report, December 2015
1 lowest available stand-alone fixed broadband, average monthly pricing; >30Mbps, 100GB data
2 lowest available stand-alone pay-TV, average monthly pricing; Premium pay-TV with HD and DVR. Includes licence fees.
62
Italy
Spain Germany
Italy
France
Ten years since Openreach was created
Continued investment in its networks
A decade of progress
2006
2016
 £10.5bn capex in Openreach
– capex up in 2014/15 and will grow again
in 2015/16
Fibre broadband availability
 One of the fastest rollouts of fibre
broadband in the world
Average broadband speed
 Supported by £0.5bn annual R&D spend
Number of LLU lines
 Networks open with equivalent access
for all
Ethernet connections
© British Telecommunications plc
63
0%
1.6Mbps
90%
28Mbps
41k
c.10m
1k
c.200k
Digital communications is a UK success story
No.1 of major European countries
4th out of 167 countries (ITU Development Index)
% of GDP driven by internet (eGDP)
1st
UK
China
South Korea
Japan
USA
India
G20
Germany
Australia
Mexico
2nd
3rd
4th
5th
Competition of
broadband
market by HHI
Superfast
coverage
Avg. measured
downstream
bandwidth
Fixed
broadband
penetration
Take-up of
superfast
broadband
Source: Analysys Mason, International benchmarking report, September 2015
Most
affordable
pricing1
Source: Ofcom ICMR 2015
1
© British Telecommunications plc
64
0
2
4
Source: BCG UK eGDP, May 2015
‘Weighted average’ bundled service pricing for a family household with multiple needs
6
8
10
We have delivered low prices in the UK (I)
Fixed voice and broadband1
Fixed voice and superfast broadband2
UK
UK
France
Germany
Germany
France
Italy
Spain
Spain
Italy
0
20
40
60
80
Average monthly price (£)
Source: International Communications Market Report 2015, December 2015, Ofcom
Weighted average of best–value tariff from each of the largest operators by market share; PPP adjusted
1 Connected family: fixed voice: 200 call minutes; fixed broadband: minimum 10Mbps headline speed, 50GB data
2 Sophisticated couple: fixed voice: 100 call minutes; fixed broadband: minimum 30Mbps headline speed, 75GB data
© British Telecommunications plc
65
0
20
40
60
Average monthly price (£)
80
We have delivered low prices in the UK (II)
Weighted average standalone pricing for fixed BB & fixed voice
Weighted average bundle pricing for fixed BB & fixed voice
250
160
140
120
Price (£)/month
Price (£)/month
200
150
100
50
80
60
40
20
0
0
UK
Germany France
Basket 1
Basket 2
Spain
Basket 3
Source: European Broadband Scorecard 2015, December 2015, Ofcom
Pricing is PPP adjusted
Basket 1: 8Mbps, 25GB and 250 mins
Basket 2: 16Mbps, 50GB and 250 mins
Basket 3: 30Mbps, 75GB and 250 mins
© British Telecommunications plc
66
100
Italy
UK
Germany
Basket 1
Italy
Basket 2
France
Basket 3
Spain
Connections per 100 people
Superfast broadband1 connections per 100 people
UK
Germany
Spain
Source: European Broadband Scorecard 2015, December 2015, Ofcom
1 broadband connections with a headline speed of ‘more than or equal to’ 30Mbps; year-end 2014
© British Telecommunications plc
67
France
Italy
Low share of broadband compared to other incumbents
Broadband market share
60%
50%
40%
30%
20%
10%
0%
UK
France
Source: European Broadband Scorecard 2015, December 2015, Ofcom
1 Percentage of fixed broadband lines operated by incumbent; year-end 2014
© British Telecommunications plc
68
Germany
Spain
Italy
Broadband price per Mbps is 1/20th of price 7 years ago
25
10
20
8
M
15
6
Mbps
£ / Mbps
10
4
5
2
0
0
2007
2008
2009
2010
Av. fixed broadband speed (Mbps – LHS)
Source: Ofcom CMR2015
© British Telecommunications plc
69
2011
2012
2013
2014
Av. Unit price (£ per Mbps – RHS)
UK telecom prices have fallen... unlike energy and water
100%
80%
68%
68%
Change in real prices since 1990
60%
40%
21%
20%
0%
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
-20%
-40%
-60%
Telecoms includes: fixed line telephone charges; mobile phone charges
(PAYG and contract); mobile phone applications; subscription to the
internet; bundled communications services; cost of directory enquiries
-54%
-80%
Source: Time series based on UK Office of National Statistics data on constituent parts of RPI
Next update December 2016. (BT source: Antony Clark)
© British Telecommunications plc
70
Telecoms
Water
Gas
Electricity
Openreach - fibre take-up
Openreach fibre premises passed
& penetration
30
Coverage (LHS)
Penetration (RHS)
20%
20
15%
15
10%
10
5%
5
0
0%
2010/11
© British Telecommunications plc
2011/12
2012/13
2013/14
2014/15 2015/16
Premises connected (m)
Premises passed (m)
6
25%
BT
External
c.5.5m
5
25
71
Openreach fibre base
4
3
2
1
0
2011/12
2012/13
2013/14
2014/15
2015/16
Fibre rollout - international comparisons
Take-up of superfast broadband1
Take-up & availability of superfast broadband2
(millions of lines, Dec 2014)
(% premises, Dec 2014)
9
100%
Availability
Take-up
100%
7.7
8
90%
(£ cost per property)
2,500
82%
2,000
80%
7
Expected public cost of superfast broadband3
70%
6
58%
60%
5
1,500
50%
4
40%
3
30%
2
1,000
31%
26%
20%
0.8
1
0.1
0.4
0
500
5%
10%
7%
3%
0%
UK
Singapore
1
New
Zealand
Australia
0
UK
Singapore
New
Zealand
Australia
Source: Analysys Mason, Commerce Commission New Zealand, Chorus, NBN Co, Point Topic, iDA Singapore, Enders Analysis
Source: Analysys Mason, Commerce Commission New Zealand, Chorus, NBN Co, Point Topic, iDA Singapore
3 Source: Analysys Mason
2
© British Telecommunications plc
72
UK
(BDUK)
Singapore
New
Zealand
Australia
Increasing broadband speeds
 Raise minimum broadband speeds to 5-10Mbps
UK NGA broadband coverage versus EU
 More than 80% of UK premises passed with fibre
–
working with gov’t to help reach further than 95%
 G.fast improvements will enable cabinet-based
deployment
–
–
–
–
–
builds on existing NGA investment
scale trials in Huntingdon & Gosforth running
300Mbps-500Mbps to 10m premises by end of 2020
up to 500Mbps available to most of 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
1.8Gbps demonstrated over 100 metre copper cable
© British Telecommunications plc
73
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
UK
Germany
Spain
EU
France
Italy
2011
2012
2013
Source: digital-agenda-data.eu/charts/
Note: EU-wide average not available for 2014
2014
UK broadband connections
25
Virgin Media
c.4.6m (+14%)
m
20
VMED
4.0m
BT
5.8m
BT
c.8m (+37%)
- of which 3.7m fibre
15
10
Other CPs
10.1m
Other CPs
c.11.8m (+16%)
- of which 1.8m fibre
5
0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
2011/12
2012/13
Other DSL
© British Telecommunications plc
74
Other fibre
2013/14
BT DSL
BT fibre
2014/15
VMED
2015/16
Openreach - UK lines
 108,000 increase in physical lines in
past 12 months
 Lines supported by population
growth
– UK population projected to grow by
>10m in next 30 years1
– UK expected to be have largest
population in EU by 20451
1
Source: Eurostat
© British Telecommunications plc
75
Rolling 12-month change in physical lines
250
200
150
100
50
0
‘000
-50
-100
-150
-200
-250
2010/11
2011/12
2012/13
2013/14
2014/15 2015/16
Openreach – capital expenditure
1,400
50%
1,200
45%
1,000
40%
800
£m
600
35%
400
30%
200
0
25%
2005/6
2006/7
2007/8
2008/9 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16
Openreach capex (L)
© British Telecommunications plc
76
Proportion of Group capex (R)
Openreach – access network
Exchange
Cabinet
Distribution Point
Home/Business
>5,500 locations
Typ 3.5km from
premises
c.98,000 locations
Typ 350m from
premises
c.4.7m locations
Typ ~35m from
premises
c.29m locations
Core
network
copper
fibre
backhaul
© British Telecommunications plc
77
copper
copper
Future network vision
The convenience of mobile with the power of fixed
Services
 Seamless connectivity to the best fixed and mobile
networks
 Customers migrate to “All-IP” services
–
–
driven by compelling bundles of voice, broadband,
TV and mobility
by 2025, all customers will be using IP voice
Network
 One common access platform
 Connected through copper, fibre and mobile
 A single, IP core network
–
replacing legacy networks and platforms
© British Telecommunications plc
78
Regulation – BCMR and CAR
 Proposed price cuts in BCMR (Business Connectivity Market Review):
Ethernet
(≤1GBps)
Outside London & London Periphery
(not in Central London)
PPC
(≥8Mbps)
Across UK
Proposed
(April 2016 – March 2019)
Existing
(Apr 2013 – March 2016)
Starting price adjustment -10%
&
CPI -12.5% (base case)
No starting price adjustment
Starting price adjustment -5%
&
CPI -3.5% (base case)
No starting price adjustment
RPI -11.5%
RPI +2.5%
 CAR (Cost Attribution Review) proposes £255m net reduction to regulated costs
–
–
–
£67m in Business Connectivity Market Review (impact included within table above)
£177m in Fixed Access Market Review (from April 2017)
£15m in Wholesale Broadband Access, £3m increase in Narrowband Market Review
© British Telecommunications plc
79
Regulation – copper and fibre
Openreach copper rental pricing
Monthly fibre broadband wholesale price
At 31 March
130
Euro
SMPF+WLR
MPF
120
50
110
40
100
£pa
90
30
80
20
70
60
10
50
0
40
2009 2010 2011 2012 2013 2014 2015 2016 2017
Source: Data from Analysys Mason Wholesale FTTx tariff tracker, November 2014. Prices shown
are for Openreach’s 80/20 Mbps service and the closest comparable speed of other operators
© British Telecommunications plc
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BT Group plc
9. Pension
81
Pension – historical overview
 IAS 19 has historically been volatile
2008/9
2009/10
2010/11
2011/12
2012/13
2013/14
2014/15
2015/16
Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
Pension valuation £bn
4
3.2
2
2.5
1.0
0
1.6
2.3
1.0
-0.2
0.7
0.5
-1.5
-2
-3.0
-4
-3.9
-6
-7.0
-8
-9.0
-10
IAS 19 (gross)
© British Telecommunications plc
82
BT’s median estimate (gross)
Actuarial valuation (gross)
Pension – 2014 triennial funding valuation – key features
Pleased to reach agreement given challenging market conditions
1
– continuing low interest rate environment
Deficit of £7.0bn at June 2014 agreed with Trustee
– £5.6bn after tax relief
8.0
2
Recovery
plan
– tax efficient £1.5bn payment by end of April 2015
utilising cash on balance sheet
£7.0bn
6.0
4.0
2.0
£3.9bn
£2.6bn
£2.0bn
2011 valuation
2014 valuation
0.0
Payments in first 3 years
3
16-year recovery plan
4
Agreement on future payment reductions if deficit reduces
© British Telecommunications plc
83
– >£2.6bn paid into Scheme in 3 years following 2011
valuation
£bn deficit
£2.0bn to be paid into Scheme over next 3 years
Residual deficit
– longer-term plan reflects the strength and sustainability of our future cash flow generation
– if 2017 valuation is lower than remaining recovery plan, reduction reflected in new recovery plan
Pension – 2014 triennial funding valuation – recovery plan
1
 Payments in first 10 years of new recovery plan in line with 2011 agreement
2011 Recovery Plan
£m
£2.6bn
£2bn
Agreed payments
2000
Additional contingent payments
1000
2bn
655
666
676
688
699
711
724
670
670
670
2022
2023
2024
500
325
325
295
295
295
295
295
295
295
2013
2014
2015
2016
2017
2018
2019
2020
2021
0
2012
2025
2026
2027
2028
2029
2030
New Recovery Plan
£2bn
£m
Agreed payments
2
1,500
1500
Agreed payments, to be reviewed
at 2017 valuation
1000
688
500
250
250
2016
2017
699
711
724
670
670
670
495
495
495
495
495
2025
2026
2027
2028
2029
289
0
2012
2013
1 Years
2 By
are to 31 March
end of April 2015
© British Telecommunications plc
84
2014
2015
2018
2019
2020
2021
2022
2023
2024
2030
Pension – benefits payable
 The BT Pension Scheme (BTPS)
has an obligation to pay pension
benefits to members over the
next 70-80 years
Forecast benefits payable by BT Pension Scheme
 Using the IAS 19 assumptions at
31 March 2015, the chart
illustrates:
– expected annual future
benefit payments (solid line,
left hand scale)
– expected liabilities (dotted
line, right hand scale), which
fall gradually over time
© British Telecommunications plc
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Forecast benefits payable by the BTPS at 31 March 2015. The figures are estimates, based on a
number of assumptions, such as: future inflation expectations, salary growth, and life expectancy
BT Group plc
10. IR contact details
86
Investor Relations – contact details
Damien Maltarp
Carl Murdock-Smith
Mark Smith
Evelyne Bull
Joanna Gluzman
Jon Cox
Group Investor Relations
Director
Investor Relations Director
Head Investor Relations
Officer
Senior Investor Relations
Officer
Director, SRI engagement
Strategy Specialist, Investor
Relations
+44 (0)207 356 5582
damien.maltarp@bt.com
+44 (0)207 356 5145
carl.murdock-smith@bt.com
+44 (0)207 356 5023
mark.d.smith@bt.com
+44 (0)207 356 6900
evelyne.bull@bt.com
+44 (0)208 948 0613
joanna.gluzman@bt.com
+44 (0)1473 609203
jon.d.cox@bt.com
tel: +44 (0)207 356 4909
email: ir@bt.com
web: www.bt.com/ir
@BTGroup
© British Telecommunications plc
87