BT Group plc Investor meeting slide pack - May 2020 - BT.com
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BT Group plc Investor meeting slide pack May 2020 1
Contents
Overview and Strategy 3 Global 23
24
Consumer 16 Openreach 27
28
Enterprise 20 Appendix 31
32
Overview
2 Consumer Enterprise Global Openreach Appendix
and Strategy
Overview and Strategy 3
Who we are and what we sell to our customers
BT Group Revenue: £22.8bn EBITDA: £7.9bn Normalised free cash flow: £2.0bn
B2C UK B2B Global B2B Fixed Access Network
Divisions Consumer Enterprise Global Openreach
Revenue £10.4bn £6.1bn £4.4bn £5.1bn
EBITDA £2.4bn £2.0bn £0.6bn £2.9bn
Normalised FCF £1.1bn £1.4bn £0.3bn £0.6bn
Customers UK consumers UK SMEs1, Corporates, Public Multi-National Customers Communications Providers
Sector, Communications
Providers
Products Mobile, voice lines, Broadband, networking, voice, Managed network, Fibre and copper broadband,
broadband, mobile, IT services, Ethernet, IT services, Security products voice, Ethernet
TV, BT Sport Ventures services
All FY 2019/20 financials; both Revenue and EBITDA adjusted for specific items.
1 Small-medium enterprises
Overview
4 Consumer Enterprise Global Openreach Appendix
and Strategy
Our strategy – building a better BT for the future
Our Purpose To use the power of communications to make a better world
Our Goal
Drive sustainable growth in value
Lead in converged connectivity and services, seize new business opportunities and deliver industry leadinefficiency
Differentiated Simplified, Lean & Agile
Customer Best Converged Network
Customer Experience Business
Our
strategy
Colleagues A brilliant place to work
Community A valued partner helping build better digital lives
Our Values Personal Simple Brilliant
Overview
5 Consumer Enterprise Global Openreach Appendix
and Strategy
BT – strong market position, uniquely positioned
BT is a clear market leader BT has a portfolio of strong brands
28m 1m+ 800
B2C B2B MNC1
relationships relationships relationships
Positioned across fixed, mobile and strategic partnerships Multi-channel sales and service
Fixed • Superfast speeds: c.90% coverage
infrastructure • Ultrafast speeds: 5.4m premises passed
100% UK & Ireland Launched a team Apps:
Mobile • Award-winning 4G and 5G network contact centres Over 500 BT/EE of Home Tech MyBT (4.4m subs.)
infrastructure • 5G now in over 80 locations from dual-branded Experts MyEE (12.6m subs.)
January 2020 stores to help install Plusnet Mobile
the latest Business mobile
Strategic • Content, technology, device and service BT technology
partnerships vendors
1 Multi-national customers
Overview
6 Consumer Enterprise Global Openreach Appendix
and Strategy
FY 2019/20 Highlights – Building a better BT for the future
2
Group NPS Improvement
• Results in line with expectations 30
• Growing converged and new product offerings 25
Group Perception Movement
1
• Improving customer experience and NPS 20
• Step change on fairness agenda 15
• Phase one transformation largely complete 10
• Streamlining the business through asset sales
5
2
• Leadership maintained on FTTP and 5G - deploying at pace
0
Short-term focus to maintain critical connectivity for the -5
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
nation
2016/17 2017/18 2018/19 2019/20
1
Net promoter score
2
Group net promoter score (NPS) shows the cumulative movement in our customers’ perception of BT since April 2016. It’s a combined measure of ‘promoters’ minus ‘detractors’ across our business units
Overview
7 Consumer Enterprise Global Openreach Appendix
and Strategy
FTTP – future proof network technology
Building across UK, at high quality and competitive cost FTTP Premises Passed (millions)
• Almost 2.6m premises passed
20.0
• Min 2m premises build in 2020/21, 4.5m by March 2021 20
• Target increasing to pass 20m by mid- to late-2020s
1
• Average build cost of £300-£400 per premises passed across 20m 16
• Currently passing c.32,000 premises per week
Driving customers onto the FTTP network 12
2
• Constructive discussions with major CPs
Enablers to support a fair return on investment 2-3m p.a.
8
• WFTMR3 a significant step forward
c.4.5
• Constructive discussions with Ofcom and Government
4
2.6
• Critical that regulation implemented as expected 1.2
4 0.6
Estimated mid-case project returns estimated 10%-12% 0
2017/18 2018/19 2019/20 2020/21 Mid-late
2020's
1 The gross build costs in schemes supported by public subsidy which we also expect to contribute to the 20m plan are significantly higher than this range; the build cost of FTTP deployed at new housing sites which
also contributes to the 20m is also higher since the build and provision stages are typically collapsed into one phase and there is less existing passive infrastructure available to use
2
Communications Providers
3
Wholesale Fixed Telecoms Market Review
4
Pre-tax nominal rate of return
Overview
8 Consumer Enterprise Global Openreach Appendix
and Strategy
Existing transformation ahead of schedule, and the modernisation of BT
• Phase one transformation programme delivered a year ahead
Phase one transformation Modernisation of BT
of schedule
March 2025
• Next phase of transformation: the modernisation of BT March 2023 targets
Progress today: targets
– annualised gross cost savings of £1 billion pa by March 2023,
largely complete £2bn pa
£2 billion pa by March 2025
March 2021 £1bn pa gross cost
– to be realised through reductions in total labour costs and targets £1.6 bn reduction
gross cost
spend with external suppliers pa gross
c.£1.5bn reduction
pa gross cost
• Taking actions to mitigate impact of Covid-19 cost reduction
reduction £1.3bn
• Disposals made to better focus on core business cost to
£0.9bn
– sale agreed of selected domestic operations and
£670m
cost to achieve
c.£800m cost to
infrastructure in Latin America achieve achieve
cost to
– sale agreed of Spanish managed ICT services business achieve
– entered exclusive negotiations on the sale of domestic c.9,000
operations in France c.13,000 gross
gross role
– sale of BT Fleet Solutions completed, and sale of Tikit role reduction
announced in fourth quarter reduction
Overview
9 Consumer Enterprise Global Openreach Appendix
and StrategyEmbarking on the next phase of modernisation
New outcomes … … realised by end-to-end value streams … … focused on four missions
Customer journeys
Customer Industry Learn Buy Get Use Pay Support
Simplify product portfolio
Experience leading
Value
streams Consumer
Transform end-to-end
customer journeys
Best SME
Colleague
place to
Experience
work
Corporate and public sector Accelerate modernisation of
digital and IT architecture
Wholesale
Industry
Productivity top Migrate customers from and
quartile Multi National Customers decommission legacy
networks
Overview
10 Consumer Enterprise Global Openreach Appendix
and StrategyContinuing to build a better BT for the future
• Results in-line with expectations
• Delivered positive progress in all strategic focus areas
• Critical decision areas:
– revising dividend policy to:
– create capacity for value enhancing investments
– manage confidently through the Covid-19 crisis
– accelerating FTTP with 20m premises passed target by
mid- to late-2020s
– modernisation delivers gross annualised savings of £2bn
over five years
– supporting the nation through the Covid-19 crisis
Short term focus to maintain critical connectivity for the
nation
Overview
11 Consumer Enterprise Global Openreach Appendix
and StrategyQ4 and FY 2019/20 results – financial overview
Q4 2019/20 Change YoY FY 2019/20 Change YoY
Adjusted Revenue1 £5,632m (4)% £22,824m (3)%
Adjusted EBITDA2 £2,007m (1)% £7,907m (3)%
Capital Expenditure (excluding BDUK clawback) £3,943m 5%
Normalised Free Cash Flow £2,011m (18)%
• FY 2019/20 – final dividend suspended
• FY 2020/21 – all dividends suspended
Dividend • FY 2021/22 – expected dividend 7.7 pence per share
progressive policy for future dividends
Prior year comparatives on IFRS 16 pro forma basis
1
Before specific items
2
EBITDA before specific items, share of post tax profits/losses of associates and joint ventures and net non -interest related finance expense
Overview
12 Consumer Enterprise Global Openreach Appendix
and StrategyDividend – creating capacity for value creative investments
• Suspended the final dividend for 2019/20 and all dividends for
2020/21
– To be reinstated at 7.7pps in 2021/22 with a progressive
dividend policy beyond this
– c.£2.5bn from suspended dividends over next 18 months
and c.£750m pa beyond this
• Creates capacity for investment and enables the Group to
deal confidently through the Covid-19 crisis
• Provides clarity on our dividend intentions
• Reinstated level more sustainable allowing for future growth
• Commitment to BBB+ through cycle and minimum BBB credit
rating ensures financial strength and flexibility, gives customers
confidence and supports a stronger covenant for the pension
Overview
13 Consumer Enterprise Global Openreach Appendix
and StrategyCustomer facing units results summary
1 2
Adjusted Revenue Adjusted EBITDA
2019/20 2019/20
Full Year to 31 March Change YoY Change YoY
(IFRS 16) (IFRS 16)
Consumer £10,388m (2)% £2,426m (5)%
3 3
Enterprise £6,093m (5)% £1,965m (3)%
Global £4,361m (8)% £634m 5%
Openreach £5,112m 1% £2,858m (3)%
Other £1m n/m £24m n/m
Intra-group £(3,131)m 6%
Total £22,824m (3)% £7,907m (3)%
1
Before specific items.
2
EBITDA before specific items, share of post tax profits/losses of associates and joint ventures and net non-interest related finance expense.
3
Year-on-year percentage change figures include the impact of divestments. Excluding the impact of divestments FY2019/20 revenue decreased 2% and EBITDA decreased 1%.
Overview
14 Consumer Enterprise Global Openreach Appendix
and StrategyFocused on sustainable growth in value
Drive sustainable growth in value
Grow EBITDA
Grow free cash flow
Invest for Support Progressive Maintain strong
growth pension fund dividends balance sheet
• Target 4.5m FTTP by end • Fair and affordable • Suspended final dividend • Smooth long-dated debt
2020/21, 20m by mid- to recovery plan for 2019/20 and all maturity profile
late- 2020s • £2bn bonds issued to BTPS1 dividends for 2020/21 • Commitment to BBB+
• Aim to double 5G footprint in 2018/19 • To be reinstated at 7.7pps through cycle and
by end 2020/21 • £900m payment to BTPS1 in in FY2021/22 with a minimum BBB credit rating
• Modernisation 2020/21 progressive dividend policy
programmes beyond this
1 BT pension scheme
Overview
15 Consumer Enterprise Global Openreach Appendix
and StrategyConsumer 16
Consumer – at a glance
EE and BT Consumer brought together from 1 April 2018 with three distinct brands
46% 31% >14m >1bn
of BT Group revenue of BT Group EBITDA homes with yearly customer
in FY 2019/20 in FY 2019/20 30m relationships touchpoints
Home-centric Mobile-centric Value-focus
#1 for ultrafast fibre #1 UK mobile brand #1 value brand
Convergence ready #1 mobile network High NPS
Premium content Digital savvy, data hungry, younger Broadband and mobile
Reliability and peace of mind audience Seek value, honest service
Connectivity for the whole family Mobile handset most important device Less interested in convergence
Overview
17 Consumer Enterprise Global Openreach Appendix
and StrategyConsumer – strategy to become UK market leader in convergence
Our To use the power of communications to make a better world
purpose
Become the UK market leader in convergence, to drive sustainable
Our
vision growth in value
5m 13m
(BT
(BThomes
homes (homes with
(homes withno
no
with
with no EE
no EE
1 2 3 4 5 6 relationship) relationship with
relationship with
relationship) +
1 Consumer brands)
Consumer brands)
Our Personalisatio
strategy Best personal
Three One smart n through Best for Open, super-
& and local
great brands network data partnerships aggregator TV
enablers service
and digital
3m
(homes with
(homes withaa
relationship
both BT &
with
relationship with
EE)
5m
both BT & EE) +1 (EEhomes
homes with
Best place to work (EE with
no BT
no BTrelationship)
relationship) +1
Our
values Personal Simple Brilliant 1m
1As of May 2018 excludes EE prepaid customers
Overview
18 Consumer Enterprise Global Openreach Appendix
and StrategyConsumer – standing by our customers
• Covid-19 response: Q4 Change FY Change
2019/20 YoY 2019/20 YoY
– removing all data usage caps on home broadband
– unlimited mobile data for all NHS workers Revenue £2,493m (4)% £10,388m (2)%
– BT Sport customers offered two months of bill credit EBITDA £626m (7)% £2,426m (5)%
– landline-only customers charge cap of £5
Capex £948m 0%
– tech skills partnership with ITV
– UK-based call centres maintaining customer support BT & ITV Tech Tips Helping NHS workers
• Covid-19 impact:
– lower BT Sport revenue
– lower roaming volumes
– lower transaction volumes
– £9m Covid-19 specific item charge
Overview
19 Consumer Enterprise Global Openreach Appendix
and StrategyEnterprise 20
Enterprise – customers include over half the FTSE 350
Revenue by sales channel1 and customers
Products:
Broadband, Mobile, Networking, IT
services, Business apps and Phone
Systems including cloud-based and
on premise
Corporate
10%
Broadband 5G mobile on
with built-in 4G the UK’s no.1 Public Sector &
Assure backup network Major Business
(exc. ROI)
29%
SME
27%
Wholesale
(inc. MVNO
Ventures and M&B)
8% 26%
1 FY 2019/20
Overview
21 Financials Consumer Enterprise Global Openreach Appendix
and StrategyEnterprise – at a glance
1 Enterprise operating costs
27% £m
1,150 5%
of Maximise our 1,100
group revenue market reach 1,050
in FY 2019/20 6 2 1,000
Provide
straightforward 950
Simplify
and reliable
25%
operations and 900
optimise sales customer Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
experience 2019/20
2018/19
of Enterprise
group EBITDA Priorities Voice lines – 000s lines/seats
in FY 2018/19 Leverage the Lead the
Traditional voice lines VoIP seats
UK’s best migration to 3,000
networks IP
1.2m
2,500
5 Innovate in 3
converged 2,000
products and
Customers new 1,500
propositions
1,000
500
4 -
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2017/18 2018/19 2019/20
Overview
22 Financials Consumer Enterprise Global Openreach Appendix
and StrategyEnterprise – supporting customers more than ever before
• Covid-19 response: Q4 Change FY Change
2019/20 YoY 2019/20 YoY
– ensured businesses can access the best remote working
tools 1 1
Revenue £1,543m (3)% £6,093m (5)%
– enhanced monitoring capability for all critical services,
1 1
prioritising faults as they may arise EBITDA £507m (2)% £1,965m (3)%
– maximised 999 capacity
Capex £501m (9)%
– providing the justice system with more conference solutions
and facilities 999 workload2
– enabled hospitals across the country to provide electronic Workload (Hours)
tablets to patients in intensive care 1,200
1,100
• Covid-19 impact: 1,000
900
– £51m charge taken in Q4 2019/20, mainly for expected 800
credit losses against trade receivables 700
600
– expect further impact on roaming revenue and from
500
company insolvencies
– anticipate lower volumes compared with previous
Actual Workload Typical Workload
forecasts
1
Year-on-year percentage change figures include the impact of divestments. Excluding the impact of divestments FY 2019/20 revenue decreased 2% and EBITDA decreased 1%.
2
Workload is derived from volume of calls x average length of call
Overview
23 Consumer Enterprise Global Openreach Appendix
and StrategyGlobal 24
Global – repositioning, focusing on core MNCs, differentiating
We are
We are radically future-proofing
£4.4bn c.5,200 800 >180 We are moving at
repositioning our Global by building
pace to reduce risk
business around our value in strategically
and deliver higher
core markets selected areas of
returns
growth
Total Countries we
Revenue Core MNC
customers deliver
FY 2019/20 customers
served services in
Industry Verticals
Banking
c.3,000 16 125,000 Globally & Financial
Managed Services
MNCs 200
Protect BT customers
Security from over Resources,
Security Operation 125,000 Manufacturing
professionals Centres cyber & Logistics
(SOCs) attacks each Other Focus
MNCs
month 600 customers Technology,
Life Sciences
Regional Enterprise & Business
Services
4,400 customers
Overview
25 Financials Consumer Enterprise Global Openreach Appendix
and StrategyGlobal – increasing asset-light operation with improved returns
Improving
ROCE1
1 Return on capital employed
Overview
26 Financials Consumer Enterprise Global Openreach Appendix
and StrategyGlobal – delivering secure, remote working for global businesses
• Covid-19 response: Q4 Change FY Change
– enabled 130,000 employees to work remotely across 170 2019/20 YoY 2019/20 YoY
1
countries for one MNC
Revenue £1,081m (10)% £4,361m (8)%
– sold 40,000 VPN connections in one week in Spain to
facilitate homeworking EBITDA £175m (1)% £634m 5%
– provided security solutions for trading floors now
operating remotely Capex £223m (9)%
– providing IT support for multiple public hospitals in
Northern Italy Conference call and voice volumes (selected products)
– provided remote access for 45,000 Lloyds Banking Million minutes per week
Group employees 400 200
• Covid-19 impact:
300 150
– Q4 trading results not materially impacted
– additional loss provision of £35m taken against trade 200 100
receivables and contracts at 31 March 2020
100 50
0 0
12-Jan 26-Jan 09-Feb 23-Feb 08-Mar 22-Mar
Conference calls (LHS) Voice (RHS)
1
Multi-national customer
Overview
27 Consumer Enterprise Global Openreach Appendix
and StrategyOpenreach 28
Openreach – at a glance
Core
• Independent, wholly owned subsidiary of BT Group plc Network
• Maintains and builds an access network between homes and
business and exchanges; huge engineering operation
• Ofcom regulates >90% of Openreach revenue
• Commitment to serving >600 CPs nationwide on equal access
terms
• >28m premises passed with superfast fibre broadband
network, maximising the value of the network
• 5.4m premises passed with ultrafast broadband network,
including 2.6m FTTP
Overview
29 Consumer Enterprise Global Openreach Appendix
and StrategyOpenreach – Full Fibre ambition
Build rate/quarter Current FTTP footprint
• Continue to raise service levels, eliminating failure costs OR vs. major altnets Alt-net total: c.2.3m
• Maximise value of the FTTC platform: Openreac 4
5
416,000
h
– multi-year offers with volume, mix and forecasting 3
commitments for long-term discounts to drive superfast
and ultrafast take-up launched in August 2018 Virgin
Media
c.125,0001
FTTP only 2
• Build FTTP infrastructure faster, cheaper and to high quality
• Work with Communications Provider customers to drive CityFibre 100,000+3
rapid FTTP take-up
1
• ‘Fibre First’ target to deliver FTTP to 4.5m premises by March
HyperopticOpenreach – keeping the fixed access network running
• Covid-19 response: Q4 Change FY Change
2019/20 YoY 2019/20 YoY
– focus on service and maintenance to keep customers
connected Revenue £1,295m 2% £5,112m 1%
– national champion ensuring connectivity for all NHS
Nightingale Hospitals and selected food depots and PPE EBITDA £719m (1)% £2,858m (3)%
manufacturers
Capex £2,108m 1%
– network performing well so far with no major outages or
technical issues despite huge increase in demand 2
Completions have fallen during stay at home order
• Covid-19 impact: 140,000 1,600
– restrictions on the range of products we can supply 120,000 1,400
1,200
– fewer new orders 100,000
1,000
80,000
– some SMEs temporarily ceasing some of their lines 800
60,000
– reduction in chargeable repair 600
40,000
1 400
– declared MBORC , giving relief on normal service
20,000
guarantees, reflecting inability to deliver normal high 200
standards 0 0
28-Feb 06-Mar 13-Mar 20-Mar 27-Mar 03-Apr 10-Apr 17-Apr 24-Apr
1
Matters Beyond Openreach’s Reasonable Control
2 Number 2019/20 2020/21
of premises completed on a normalised scale
Fibre weekly completions Ethernet weekly completions
31 Overview
Consumer Enterprise Global Openreach Appendix
and StrategyAppendix 32
FY 2019/20 results in line with expectations
2019/20
(IFRS 16)
Adjusted EBITDA1 £7,907m
Depreciation and amortisation1 £(4,296)m
Net finance expense1 £(757)m
Tax1 £(536)m
Adjusted profit after tax1 £2,324m
Specific items £(590)m
Reported profit for the period £1,734m
Adjusted earnings per share 23.5p
1 before specific items
Overview
33 Consumer Enterprise Global Openreach Appendix
and StrategyFY 2019/20 normalised cash flow in line with expectations
2018/19
2019/20
(IFRS 16 Change YoY
(IFRS 16)
pro forma)
Adjusted EBITDA1 £7,907m £8,126m (3)%
Interest £(706)m £(508)m 39%
Tax (ex cash tax benefit of pension deficit payments) £(644)m £(704)m (9)%
Payment of lease liabilities £(651)m £(734)m (11)%
Change in working capital and other £204m £103m 98%
Cash available for investment and distribution £6,110m £6,077m 1%
Cash capital expenditure £(4,099)m £(3,637)m 13%
Normalised free cash flow2 £2,011m £2,440m (18)%
Refund on acquisition of spectrum - £21m (100)%
Net cash flow from specific items £(112)m £(598)m (81)%
Reported free cash flow £1,899m £1,863m 2%
1 Before specific items
2 After net interest paid, before pension deficit payments (including the cash tax benefit of pension deficit payments) and specific items
Overview
Consumer Enterprise Global Openreach Appendix
34 and StrategyStrong cash position and long-dated debt maturity profile
• Prudent financial approach positions us well for period of
Movements in financial net debt
capital markets uncertainty
£ bn
• Cash and current investments of £6.6bn and undrawn credit 12
of £2.1bn 11
• Smooth, long-dated term debt maturity profile 10
9
– term debt of £1.3bn and pension deficit repair payments
of £900m due in 2020/21, already pre-funded 8
31-Mar-19 Normalised Specific Dividends Share Net pension Other 31-Mar-20
free cash items paid repurchases deficit
– no short-term need to access capital markets flow payment
• Issued inaugural hybrid bond of £0.4bn, encouraged by
Term debt maturity profile
demand for the bond
£ bn
• Remain committed to medium-term credit rating target of 10 4.43%
BBB+, with a minimum rating of BBB 9
8
7
6
5
4
3 3.49%
2 2.35% 2.34% 2.24%
2.81%
1
-
2020/21 2021/22 2022/23 2023/24 2024/25 2025/26 After 2026
Percentages are effective interest rates for debt due in each period
35 Overview
Consumer Enterprise Global Openreach Appendix
and StrategyReduction in IAS 19 pension deficit driven by increase in corporate bond yields
• IAS 19 deficit down from £6.0bn at 31 March 2019 to £1.0bn
Movements in bond yields and the pension deficit
(net of tax) at 31 March 2020, driven by:
IAS 19 deficit net of tax
– increase in the real discount rate Deficit contributions
Proxy nominal long-dated AA UK corporate bond yield
– £1.3bn deficit contributions paid over the period Proxy nominal long-dated UK gilt yield
– positive asset returns
£6.0bn £5.1bn £1.0bn
• Expansion in credit spreads during Q4 reduced IAS 19 without
Yield
corresponding reduction in actuarial valuation £1.26bn
3.5%
• Triennial actuarial valuation to take place at 30 June 2020; 3.0%
aiming to conclude in first half of 2021
2.5%
• Other developments: 2.0%
– consultation aiming to align RPI1 with CPIH2, without any 1.5%
mitigating steps, will increase the deficit
1.0%
– consultation on a new statutory funding regime; 0.5%
expectations for the new regime likely to feature in
0.0%
upcoming discussions with the trustee Mar-19 Jun-19 Sep-19 Dec-19 Mar-20
1 Retail Prices Index
2 Consumer Prices Index including owner occupiers’ housing costs
Yields shown are indicative only and not representative of actual discount rates used
36 Overview
Consumer Enterprise Global Openreach Appendix
and StrategyPension – reached agreement in May 2018 on June 2017 triennial
IAS 19 Actuarial
2017 recovery plan, £11.3bn deficit
Measure Accounting Actuarial
£m 1 FY18 + FY20 cash payments total £2.1bn in line with prior agreement
Frequency Semi-annually Triennial
2,000
2 Funded from issuance of bonds to the Scheme
Purpose Regular updates Sets cash deficit recovery payments
1,500 3 13 year plan, maintains end-date.
£0.4bn of FY21 payment by 30 June 2020
Yield curve for AA corporate Prudent expected return (BTPS
Discount rate
bonds assets)
1,000 2,000
Longevity Future expectations Prudent overall approach
1,250
500 850 900 900 907 907 907 907 907 907 907 907 Inflation Future expectations Prudent overall approach
0 Assets Market value Market value
2019/20 BT Pension Scheme sensitivity analysis
Increase/(decrease) in actuarial liabilities from 30 June 2019
£bn
Increase/(decrease) in assets from 31 March 2020 1
Movements in IAS 19 and actuarial pension deficits 15
£bn
Mar 14 Mar 15 Mar 16 Mar 17 Mar 18 Mar 19 Mar 20 10
0
5
13.1 11.8 7.1 4.9 3.1 0.6 0.0
(5) -7 0 (3.6)
(7.0)
(5)
(10) 1.1 percentage point 0.7 percentage point 1.25 year increase to 20% fall in growth
(11.3) fall in bond yields increase to inflation rate life expectancy assets
Impact of illustrative scenarios which might occur no more than once in every 20 years. The
(15) impact shown under each scenario looks at each event in isolation – in practice a
combination of events could arise.
IAS 19 (gross of tax) IAS 19 (net of tax) Actuarial (gross of tax) Source: BT Annual Report 2020, p169-170 1Assets valued using IAS 19 methodology
Overview
37 Consumer Enterprise Global Openreach Appendix
and StrategyCapex increase from investments in Fibre Cities and 5G
• 2019/20 reported capex excluding BDUK clawback of £3.9bn,
Capital expenditure (excluding BDUK clawback)
increase driven primarily by:
£ bn
– Fibre Cities network build
4.5
– 5G rollout 4.0
– Ethernet provisioning 3.5
3.0
• Capex investment in 2020/21 will be impacted by:
2.5
– length of the lockdown period
2.0
– largely offset by acceleration in FTTP build
1.5
1.0
0.5
0.0
2017/18 2018/19 2019/20
Capacity/network Customer driven Systems/IT Non-network infrastructure
Capex profile excludes BDUK clawback (within capacity/network capex)
38 Overview
Consumer Enterprise Global Openreach Appendix
and StrategyTaken significant steps towards our ambition to deliver FTTP across the UK
Enabler Current position BT view
Indexation of legacy services CPI1 indexation of legacy services in competitive and prospectively competitive areas
Premium of £1.50 to £1.85 per month for the 40/10 Mbps FTTP anchor product with pricing
Premium for FTTP flexibility above the anchor product
Legacy copper stop-sell at 75% ultrafast coverage by exchange area. Further two years to
Switchover withdraw legacy copper services
Geographic pricing flexibility Only allowed on case-by-case basis. Commercial deals subject to Ofcom approval
Commitment to the principle but no firm commitment to a period of minimum forbearance
Fair Bet or guidance on an allowable return
Ofcom prepared to extend the enablers to costliest final 30% of the UK, subject to an
Area 3 Openreach committed build
Barrier busting Welcome changes to wayleaves, building access and mandating FTTP to new premises
Cumulo business rates Requested commitment to exempt FTTP from business rates
Long-term contracts Constrained ability to sign long-term price-volume contracts, crucial to underpin investment
1 Consumer price index
Overview
39 Consumer Enterprise Global Openreach Appendix
and StrategyTV – Partnerships will broaden choice for our TV customers
Super aggregator TV strategy:
Embracing content trends and partnership opportunities, to offer an unrivalled choice of content across the pay-TV providers
✓ All the must-have content
SVoD1 providers: Primary central set-top-box
experience
Multi-screen, multi-platform access
Home-centric
1
All premium Sky content:
OTT2 and digital first
Fully flexible mobile & app centric
Mobile-centric
Pay channels:
1 Subscription video on demand
2 Over-the-top
Overview
40 Consumer Enterprise Global Openreach Appendix
and StrategyThe new portfolio has 5 flexible TV packs which make up the core portfolio
All TV packs can be personalised with bolt-ons
All fibre packs* come with a recordable TV
1 VIP box and 24 month contract +
£60
Monthly Billed Bolt-ons (BT)
2 Big Sport
£40
BT Kids
HD/4K
Big £5 £5
3
Entertainment Flexible Fibre Packs
Combi Extra £15
Fibre
£20 HD/4K Box
4 Sport £5 £5
£15
5 Entertainment Monthly Billed Bolt Ons
£10
£8.99 £11.99 £3.99
6
Essential Available across
£5 agents only
£9.99 / £14.99 / £33.99 £3.99 £3
Sport Flexible Copper Packs
Copper
7
£15
6MF then £5.99 £5.99
8
Essential
£5
Classic Bolt Ons (Classic Entertainment eligible)
Fibre
9 Entertainment
Non-Flexible TV Packs BT
Kids
More
Entertainment
HD/4K
£10 *App Extra not included in Classic Entertainment pack Channels
Overview
41 Consumer Enterprise Global Openreach Appendix
and StrategyBT is stepping up its societal leadership
Our focus areas:
Tackling climate change and Building better Championing human and
environmental challenges digital lives digital rights
• 42% reduction in carbon intensity1 since 2016/17 • Our Skills for Tomorrow programme is aiming to • Steered by the UN Guiding Principles on Business
as part of 1.5°C aligned goal (87% reduction by empower 10 million people by giving them the and Human Rights
2030) skills they need to flourish in the digital world
• We shape debate through collaborations like the
• 92% of the electricity we consume worldwide is • 2.8 million people helped in total since 2014/15 Global Network Initiative
renewably sourced – and we’re at 100% for
directly purchased electricity in the UK (16% • The Skills for Tomorrow online portal3 offers free • A founding partner of UK Modern Slavery Helpline
through power purchasing agreements) access to some of the best resources in one easy and Tech Against Trafficking
to navigate place
• Helped our customers save three times as much • We consider our impacts on people, online and
carbon as our own end-to-end carbon emissions • Pivoted in response to COVID-19 to a fully online offline
– one year ahead of target approach to help thousands of people and small
businesses with navigating a digital world • Joined World Business Council for Sustainable
• Target to be net-zero carbon emissions by 20452 Development CEO call-to-action on human rights
Supported by strong foundations:
Behaving ethically Developing diverse talent Keeping our people safe & healthy
1 Measures for scopes 1 and 2 greenhouse gases, per unit of gross value added | 2 Measures for scopes 1 & 2 greenhouse gases | 3 Skills for tomorrow learning portal: https://www.bt.com/skillsfortomorrow/
Overview
Consumer Enterprise Global Openreach Appendix
42 and StrategyInvestor Relations – contact details
tel: +44 (0) 20 7356 4909 BTGroup
email: ir@bt.com LSE: BT.A
web: www.bt.com/ir
This presentation contains certain forward-looking statements which are made in reliance on the safe harbour provisions of the US Private Securities Litigation Reform Act of 1995. These statements relate to analyses and other
information which are based on forecasts of future results and estimates of amounts not yet determinable. These statements include, without limitation, those concerning: the potential impact of Covid-19 on our people, operations,
suppliers and customers; current and future years’ outlook; revenue and revenue trends; EBITDA and profitability; free cash flow; capital expenditure; return on capital employed; shareholder returns including dividends and share
buyback; net debt; credit ratings; our group-wide transformation and restructuring programme, cost transformation plans and restructuring costs; investment in and roll out of our fibre network and its reach, innovations, increased
speeds and speed availability; our broadband-based service and strategy; investment in and rollout of 5G; the investment in converged network; improvements to the customer experience; our investment in TV, enhancing our TV
service and BT Sport; the recovery plan, operating charge, regular cash contributions and interest expense for our defined benefit pension schemes; effective tax rate; growth opportunities in networked IT services, the pay-TV services
market, broadband, artificial intelligence and mobility and future voice; growth of, and opportunities available in, the communications industry and BT’s positioning to take advantage of those opportunities; expectations regarding
competition, market shares, prices and growth; expectations regarding the convergence of technologies; plans for the launch of new products and services; network performance and quality; the impact of regulatory initiatives,
decisions and outcomes on operations; BT’s possible or assumed future results of operations and/or those of its associates and joint ventures; investment plans; adequacy of capital; financing plans and refinancing requirements;
demand for and access to broadband and the promotion of broadband by third-party service providers; improvements to the control environment; and those statements preceded by, followed by, or that include the words ‘aims’,
‘believes’, ‘expects’, ‘anticipates’, ‘intends’, ‘will’, ‘should’, ‘plans’, ‘strategy’, ‘future’, ‘likely’, ‘seeks’, ‘projects’, ‘estimates’ or similar expressions.
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: the duration and severity of Covid-19 impacts on our people, operations, suppliers and customers; failure to respond effectively to intensifying competition and technology developments; failure to
address the lingering perception of slow pace and connectivity in broadband and mobile coverage, which continues to be raised at a UK parliamentary level; undermining of our strategy and investor confidence caused by an
adversarial political environment; challenges presented by Covid-19 around network resilience, support for staff and customers, data sharing and cyber security defence; unfavourable regulatory changes; attacks on our infrastructure
and assets by people inside BT or by external sources like hacktivists, criminals, terrorists or nation states; a failure in the supplier selection process or in the ongoing management of a third-party supplier in our supply chain, including
failures arising as a result of Covid-19; risks relating to our BT transformation plan; failure to successfully manage our large, complex and high-value national and multinational customer contracts (including the Emergency Services
Network and the Building Digital UK (BDUK) programme) and deliver the anticipated benefits; changes to our customers’ needs, budgets or strategies that adversely affect our ability to meet contractual commitments or realise
expected revenues, profitability or cash generation; customer experiences that are not brand enhancing nor drive sustainable profitable revenue growth; pandemics, natural perils, network and system faults, malicious acts, supply
chain failure, software changes or infrastructure outages that could cause disruptions or otherwise damage the continuity of end to end customer services including network connectivity, network performance, IT systems and service
platforms; insufficient engagement from our people; adverse developments in respect of our defined benefit pension schemes; risks related to funding and liquidity, interest rates, foreign exchange, counterparties and tax; failures in
the protection of the health, safety and wellbeing of our employees or members of the public or breaches of health and safety law and regulations; financial controls that may not prevent or detect fraud, financial misstatement or
other financial loss; security breaches relating to our customers’ and employees’ data or breaches of data privacy laws; failure to recognise or promptly report wrongdoing by our people or those working for us or on our behalf
(including a failure to comply with our internal policies and procedures or the laws to which we are subject); and the potential impacts of climate change on our business. BT undertakes no obligation to update any forward-looking
statements whether written or oral that may be made from time to time, whether as a result of new information, future events or otherwise.
Overview
43 Consumer Enterprise Global Openreach Appendix
and Strategy© British Telecommunications plc
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