BT Group plc Q1 2018/19 - investor meeting slide pack - August and September 2018
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
BT Group plc Q1 2018/19 - investor meeting slide pack August and September 2018 1 British Telecommunications plc 2018
Contents
Page Page
1. Overview and Strategy 3 6. Openreach 25
2. Consumer 13 7. Appendix 30
3. Business and Public Sector 16 8. IR contact details; cautionary statement 45
4. Wholesale and Ventures 19
5. Global Services 22
Overview Business Global Wholesale
Consumer Openreach Appendix
and Strategy and Public Sector Services and Ventures
2 British Telecommunications plc 2018
Overview and Strategy
Who we are, what we sell to our customers
BT Group
Fixed network
B2C B2B
infrastructure
Business and Wholesale and
Divisions Consumer EE Global Services Openreach
Public Sector Ventures
Revenue1 £5.0bn £5.3bn £4.6bn £2.0bn £5.0bn £5.1bn
EBITDA1 £1.0bn £1.4bn £1.4bn £0.8bn £0.4bn £2.6bn
FCF1 £0.6bn £0.8bn £1.1bn £0.5bn £0.1bn £1.0bn
Customers UK Consumers UK Consumers UK SMEs2, Communications Global MNCs3 Communications
Corporates, Providers Providers
Public Sector
Mobile Broadband, Broadband, Fibre and
Products Lines, broadband, broadband, networking, Ethernet, voice, Managed network copper broadband,
TV, BT Sport lines, voice, mobile, IT mobile, IT services Ethernet
mobile TV services ventures services
1 FY 2017/18 reported numbers 2 Small-medium enterprises 3 Multi-national corporations
Overview Business Global Wholesale
Consumer Openreach Appendix
and Strategy and Public Sector Services and Ventures
4 British Telecommunications plc 2018
We have evolved our strategy to focus on convergence
Our purpose To use the power of communications to make a better world
Our vision Leadership in converged connectivity and services, brilliantly delivered
Our goal Drive sustainable growth in value
Converged Services for UK
Consumer and Enterprise Deliver Invest
Transform
differentiated in
our
Digital Global Services for MNCs1 customer integrated
operating
Our strategy experiences network
model
Unmatched UK-wide Fixed Access leadership
for all CPs2
Renew our capabilities and culture
Our values Personal Simple Brilliant
1 Multi-NationalCorporations
2 Communications Providers
Overview Business Global Wholesale
Consumer Openreach Appendix
and Strategy and Public Sector Services and Ventures
5 British Telecommunications plc 2018BT is uniquely positioned to lead in network, product and service convergence
One converged network Convergence in Europe
Always connected
34%
Best performance
25% 23%
Best value 12%
6% 5% 4%
Delivers fully converged services
- Fixed Source: McKinsey – based on quad-play penetration
Voice - Mobile
• Shared allowances
• Increasing trend towards convergence in Europe
Data
- Office/home • Services across multiple
- On the go
devices • Lower churn, driving loyalty in the base
- Any
Content platform • Personalised experience • Low UK penetration and strong latent demand
Overview Business Global Wholesale
Consumer Openreach Appendix
and Strategy and Public Sector Services and Ventures
6 British Telecommunications plc 2018Deliver differentiated customer experiences – Service
Movement in Group Net Promoter Score
1 • Group NPS and RFT continue to improve
20 • Service quality:
15
– best ever Openreach performance for voice and broadband
10
– ahead on all 60 copper minimum service levels
5
0 – service calls to our contact centres down 10% YoY
-5 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
– average BT Consumer call waiting time down to 34 seconds
2016/17 2017/18 2018/19
2 • Increased use of digital channels:
Movement in Group Right First Time
15% – 8% increase in eChat
12% – c.2.5m downloads of My BT; c.11m downloads of My EE
9%
6% • Ofcom complaints:
3% – down 25% YoY at a record low, for EE mobile
0%
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 – down 32% YoY for BT Consumer broadband
2016/17 2017/18 2018/19
1 Group 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.
2 Group RFT is our key measure of customer service and shows the cumulative movement since April 2016. It tracks how often we keep our promises to customers (e.g. completing orders/fixing faults on time).
The scope of NPS and RFT are re-baselined at the start of the financial year.
Overview Business Global Wholesale
Consumer Openreach Appendix
7 and Strategy and Public Sector Services and Ventures
British Telecommunications plc 2018Deliver differentiated customer experiences – Products
• Converged products launched:
– BT Plus >100k customers in the quarter
– EE smart number technology
– Broadband 4G Assure for business customers
1
– BTNet for SME and Corporate clients
– BT Connect CISCO SD-WAN
– Cloud solution collaboration with Microsoft Azure
1 Small and Medium Enterprises
Overview Business Global Wholesale
Consumer Openreach Appendix
and Strategy and Public Sector Services and Ventures
8 British Telecommunications plc 2018Invest in integrated network leadership
Fixed Mobile
1
• Accelerated FTTP deployment to c.10k • 40MHz of 3.4 GHz spectrum acquired for £304m
premises/week
• Plans to launch “live” 5G trial in October
• FTTP costs at lower end of expectations
• Improving 4G geographic coverage
• Openreach wholesale price discounts for volume
commitments on superfast and ultrafast speeds • EE ranked number 1 in all areas by RootMetrics
• Positive progress on regulation • EE won ‘Best Consumer Network’ and ‘Best Business
Network’ in Mobile Today’s industry awards
2
– DCMS Future Telecoms Infrastructure Review
– Ofcom’s Full Fibre Implementation Plan
1 Fibre-to-the-Premises
2 The Department for Digital, Culture, Media and Sport
Overview Business Global Wholesale
Consumer Openreach Appendix
and Strategy and Public Sector Services and Ventures
9 British Telecommunications plc 2018Transform our operating model
• New ‘Enterprise’ unit – leadership team appointed
1
• Openreach – positive DCR Implementation Report
2
• Openreach TUPE consultation process commenced:
– impacting c.31k employees
– planned transfer to Openreach Limited on 1 October 2018
• Group Business Services to help drive business growth and
optimise costs
• Gross reduction of c.900 roles
• Agreement to sell BT Cables Limited
1 Digital Communications Review
2 Transfer of Undertakings (Protection of Employment)
Overview Business Global Wholesale
Consumer Openreach Appendix
and Strategy and Public Sector Services and Ventures
10 British Telecommunications plc 2018Openreach regulated returns declining to allowed return on capital
Trend of Openreach returns • Price cuts on Ethernet (BCMR) services are starting to erode the
1
Openreach ROCE
Openreach Returns - actuals
Openreach Returns - including possible indirect effects
2
•
5
Openreach regulatory allowed return Price cuts in WLA (especially GEA services) over the next three
years to accelerate this trend
20.0%
15.0% • Openreach returns in regulated markets to be much closer to the
3
Ofcom “WACC ” by 2020/21
10.0%
5.0% • Impact of regulation should reduce in the longer-term
2014/15 2015/16 2016/17 2017/18 E 2018/19 E 2019/20 E 2020/21 E
Total impact on BT Group
Last 3 years Next 3 years
4
Regulatory price impact Estimated regulatory price impact
> £500m ≥ £1bn
1 Return on Capital Employed
2 Generic Ethernet Access
3 Weighted Average Cost of Capital
4 assumes direct and indirect impact
5 extrapolating WACC used in Ofcom’s charge control models across all Openreach services
Overview Business Global Wholesale
Consumer Openreach Appendix
and Strategy and Public Sector Services and Ventures
11 British Telecommunications plc 2018Transformation offsets regulation impact in short term
£m
8,000
7,500
7,000
6,500
7,505
6,000
5,500
5,000
FY 2017/18 Regulatory Price Cost Inflation Trading Cost Transformation FY 2018/19 FY 2020/21
Transformation drives medium term EBITDA growth
Overview Business Global Wholesale
Consumer Openreach Appendix
and Strategy and Public Sector Services and Ventures
12 British Telecommunications plc 2018Consumer
Consumer – strategy to become UK market leader in convergence has 6 enablers
Our
To use the power of communications to make a better world purpose
Our
Become the UK market leader in convergence, to drive sustainable growth in value
vision 5m
5m 13m
13m
(BT homes
(BT homes (homes with
(homes with no
no
1 2 3 4 5 6 with no
with no EE
EE relationship with
relationship with
relationship) ++
relationship) Consumer brands)
Consumer brands)
Best personal Personalisation
Three One smart Best for Open, super-
and local through data Our
great brands network partnerships aggregator TV
service and digital strategy
& 3m
3m
enablers (homes with
(homes with aa
relationship with
relationship with 5m
5m
Best place to work both BT
both BT &
& EE)
EE) ++
(EE homes
(EE homes with
with
no BT
no BT relationship)
relationship) ++
Our
Personal Simple Brilliant
values 1m
Overview Business Global Wholesale
Consumer Openreach Appendix
and Strategy and Public Sector Services and Ventures
14 British Telecommunications plc 2018Consumer – continued momentum, delivering strategy
• Revenue up 2% due to:
Q1 Q1
Change
– growth in high end smartphones and SIM only 2018/19 2017/18
– increased BT Sport revenues
Revenue £2,591m £2,540m 2%
– offset by Solus voice price reductions
– 66% of broadband customers now on fibre EBITDA £610m £556m 10%
– fixed and mobile churn remained low
12 launches from the 24 announcements in May
• EBITDA up 10%, driven by revenue growth and flat opex: Best Personalisation
Three great One smart Best for Open, super
personal and through data
– increased sports rights and device costs later in the year brands network
local service and digital
partnerships aggregator TV
95% of
• Further investments in customer experience: Launch BT Plus
>98% time on customers 360O customer
Creation of the
partnership
Now TV on BT
4G within 20 mins view TV
unit
– Amazon Prime Video added to BT TV of a store
= launched
100% UK call
Reposition BT Accelerate Re-launch Nest & Hive Enhanced BT
– encouraging start for BT Plus convergence products brand
Ultrafast
centres
for all brands
BT.com
partnerships
Sport for EE
– EE smart number launched Data sharing
plans
Integrate BT
Wi-Fi
BT return to
high street
Remote virtual
support
Smart home
assistants
Amazon Video
on BT TV
1
1 Over-the-Top New OTT TV
Stay connected New converged New service in Plusnet self- Buy devices on
service
promise hub the home service app EE plans
from EE
Overview Business Global Wholesale
Consumer Openreach Appendix
and Strategy and Public Sector Services and Ventures
15 British Telecommunications plc 2018Business and Public Sector
Business and Public Sector – at a glance
• Addressable market for core telecoms and IT services is £23bn1
Our revenues are derived from voice and data services
• Market moving to new IP and cloud services: Revenue split by products2
− traditional voice lines declining 10% pa3 whilst IP growing 42% Voice
pa3 Broadband
WAN
− mobile market is growing 1% pa4
Managed Services (contract)
− growth in IT services from move to the cloud 2% pa4 Mobile
• Fragmented market - 100s of competitors but few compete across Ireland and Other
the whole market
• Investing in capability to exploit convergence over best network: There is opportunity to grow in all our markets
− clear propositions for all segments, strong integrated portfolio
Business and Public Sector market share5
− improving customer experience, NPS +22 points over 7 quarters 100%
− increasing sales effectiveness and coverage, targeted marketing 75%
− lower operating costs from automation, less failure 50%
1 IDC 2014/15 – 2015/16
25%
2 Business and Public Sector revenue, 2017/18 full year
29% 19% 17%
3 FY 2017/18 0%
4 2015/16 – 2016/17 SME Corp Major & Public Sector
5 as at May 2016 B&PS Rest of market
Overview Business Global Wholesale
Consumer Openreach Appendix
and Strategy and Public Sector Services and Ventures
17 British Telecommunications plc 2018BPS – Public Sector headwinds now largely behind, legacy pressures continue
• Revenue down 4%:
Q1 Q1
Change
– continued decline in traditional voice, lower equipment sales 2018/19 2017/18
1
and EU roaming impact partly offset by growth in VoIP
Revenue £1,085m £1,132m (4%)
– fixed down 4%, mobile down 1%
• EBITDA up 2%: EBITDA £350m £342m 2%
– reflects diminished Public Sector contract drag
BPS networking revenue
– broadly flat, excluding one-offs £m New Legacy
70
50
30
Q1 Q2 Q3 Q4 Q1
1 Voice over Internet Protocol
2017/18 2018/19
Overview Business Global Wholesale
Consumer Openreach Appendix
and Strategy and Public Sector Services and Ventures
18 British Telecommunications plc 2018Wholesale and Ventures
Wholesale and Ventures – at a glance
Wholesale – Fixed network services Ventures
Fixed network Mobile network Overseas Media and
Resellers
operators operators operators Broadcast
Wholesale – Mobile network services c.£2.0bn revenue1
Mobile Virtual Network Operators IoT/Machine to Machine
Wholesale
Ventures
Mobile
1 2017/18
Overview Business Global Wholesale
Consumer Openreach Appendix
and Strategy and Public Sector Services and Ventures
20 British Telecommunications plc 2018Wholesale and Ventures – continued legacy product declines
• Revenue down 8%:
Q1 Q1
Change
– Managed services down 15%, Broadband down 14%, Voice 2018/19 2017/18
down 14%
Revenue £459m £497m (8)%
– Mobile revenue down 11%
– Ventures revenue up 16% - continued growth in EBITDA £154m £174m (11)%
messaging
– 180 InLinkUK units installed at end of Q1 Messaging volumes (m)
• EBITDA down 11% in Q1: 1,000
– reflecting declines in legacy revenue 800
600
400
200
0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
2016/17 2017/18 2018/19
Overview Business Global Wholesale
Consumer Openreach Appendix
and Strategy and Public Sector Services and Ventures
21 British Telecommunications plc 2018Global Services
Global Services – moving to a more focused operating model
Strategic way forward: Reposition as a focused digital business: Accelerating restructuring and transformation
• Focus on 800 global multi national • Prioritise platform based solutions such of operating model:
corporations as cloud based services, and SDN e.g. • Two-year restructuring of operations to
• Focus on strong customer relationships – launch of BT Connect SD-WAN reduce costs
NPS continues to improve • Cloud of clouds ecosystem continues to • Simplification and streaming of core
develop e.g. IBM cloud connected processes underway
• Market focus where we have strong • New organisational structure with focus
leadership and we deliver repeatable • Strategic collaborations with AWS, IBM,
Cisco and MS Azure on MNCs
solutions
• Emphasis on growing cyber security
• Technology trends mean less dependent • BT’s MPLS global network remains at
on owning physical local network the core
Improve financials, risk profile, and long-term value to BT
Overview Business Global Wholesale
Consumer Openreach Appendix
and Strategy and Public Sector Services and Ventures
23 British Telecommunications plc 2018Global Services – improving cost performance
• Revenue down 8% mostly due to strategic decision to reduce low
Q1 Q1
margin business Change
2018/19 2017/18
• EBITDA up 30%, reflecting prior year bonus true-up and lower
labour costs Revenue £1,147m £1,246m (8)%
• Transformation initiatives on track: EBITDA £95m £73m 30%
– first phase of new organisational structure implemented
Global Services’ revenue and EBITDA movements
£m £m
GS Q1 YoY Revenue 120 GS Q1 EBITDA after recharges
1,300
110
100
1,200
90
80
1,100 70
1 Global Wholesale Voice
Overview Business Global Wholesale
Consumer Openreach Appendix
and Strategy and Public Sector Services and Ventures
24 British Telecommunications plc 2018Openreach
Openreach – at a glance
• Maintains and builds access network between homes and business Openreach serves c.26m customers through CPs
and exchanges; huge engineering operation
Consumer / Residential Business and Corporate Infrastructure
• c.27.1m premises passed with superfast fibre broadband network c.5m • Fibre
c.21m business
• New sites
end customers connections • Data centres
• ‘Fibre First’ commitment to deliver FTTP to 3m premises by end
2020, ambition for 10m by mid-2020s, if conditions are right
• Commitment to serving >600 CPs nationwide on equal access terms
• Supplies copper and fibre access products, Ethernet and backhaul
• Ofcom regulates >90% revenue; charge controls c.75%
OPENREACH
>590 Communications Providers with access to c.30m end customers
Access products, eg copper, Fibre, ISDN Ethernet and backhaul products
Overview Business Global Wholesale
Consumer Openreach Appendix
and Strategy and Public Sector Services and Ventures
26 British Telecommunications plc 2018New Openreach wholesale pricing structure
• CPs incentivised to encourage more of their customers onto
better and faster services of superfast and ultrafast:
– more than 17.5 million homes and businesses could order
better broadband over the Openreach network
• Multi-year special offer with volume, mix and forecasting
commitments for long-term discounts:
– tier structure covering 3 and 5 year take-up commitments
– qualification criteria based on current take-up of fibre with
Openreach
– discounts go beyond Ofcom’s pricing controls, some as much
as 40% below current pricing
– key clauses include CP-CP migration threshold and volume
protection for small competing alt nets
• No change to Group financial outlook for 2018/19:
– adverse impact in the order of high tens of millions of pounds
on Openreach’s revenue and EBITDA in 2018/19
– final net impact at Group level will depend on retail market
dynamics
1 Wholesale Line Rental
Overview Business Global Wholesale
Consumer Openreach Appendix
and Strategy and Public Sector Services and Ventures
27 British Telecommunications plc 2018Openreach – access network
c.27.6m premises can
access superfast fibre
Core
Network
c.101,000 cabinet
c.5,500 exchanges c.4.7m DPs c.30m premises
locations
Overview Business Global Wholesale
Consumer Openreach Appendix
and Strategy and Public Sector Services and Ventures
28 British Telecommunications plc 2018Openreach – accelerating FTTP deployment
• Revenue down 2% in the quarter:
Q1 Q1
Change
– regulation and physical line losses offset by continued 2018/19 2017/18
strong growth in fibre broadband and Ethernet
Revenue £1,217m £1,248m (2)%
• EBITDA down 9%:
– revenue decline, increased business rates, wage inflation,
EBITDA £567m £621m (9)%
higher training costs, recruitment of new engineers
– partially offset by savings from reduced repair visits
Openreach broadband connections
• ‘Fibre First’ programme on track: m Fibre Non Fibre
25
– c.10,000 weekly build rate reached
20
– build costs at lower end of £300-400 range 15
– Exeter announced as ninth city 10
5
0
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 Q4 Q1
2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19
Overview Business Global Wholesale
Consumer Openreach Appendix
and Strategy and Public Sector Services and Ventures
29 British Telecommunications plc 2018Appendix
BT – strong market position, uniquely positioned for sustained growth
BT is a clear market leader BT has a portfolio of strong brands
30m 1m+ 1,500 1
B2C B2B MNCs
relationships relationships
Positioned across fixed, mobile and strategic partnerships Multi channel sales and service
Fixed
• Superfast speeds: c.90% coverage
infrastructure
Mobile
• 4G: 90% geographic coverage UK Over
infrastructure Digital Partnership
call 600
channels
Strategic • Content, technology, device and centres stores
partnerships service vendors
1 Multi-National Corporations
Overview
Overview Business Business Global Global Wholesale Wholesale
GroupConsumer Consumer Openreach
Openreach Appendix
Appendix
and
and
Strategy
Strategy and Public Sector and Public Sector Services Services and Venturesand Ventures
31 British Telecommunications plc 2018Priorities for cash flow
Drive sustainable growth in value
Grow EBITDA
Grow free cash flow
Maintain
Invest for Support Progressive
strong balance
growth pension fund dividends
sheet
Invest for Support Progressive Maintain strong
growth pension funds dividends balance sheet
Overview
Overview Business Business Global Global Wholesale Wholesale
GroupConsumer Consumer Openreach
Openreach Appendix
Appendix
and
and
Strategy
Strategy and Public Sector and Public Sector Services Services and Venturesand Ventures
32 British Telecommunications plc 20182018/19 financial and dividend outlook – Q1 in line
2017/18 Actual 2018/19 Outlook
1
Underlying revenue (1.0)% c.(2)%
2
EBITDA £7.5bn £7.3bn - £7.4bn
Capital expenditure £3.5bn c.£3.7bn (and 2019/20)
3
Normalised free cash flow £3.0bn £2.3bn - £2.5bn
• Full year 2017/18 dividend unchanged at 15.40 pence per share. Final dividend unchanged at 10.55 pence per share.
• Dividend policy unchanged: to maintain or grow the dividend each year whilst reflecting a number of factors, including underlying medium term
earnings expectations and levels of business reinvestment.
• We will look to maintain an unchanged dividend over the next two years, given our outlook for earnings and cash flow over this period.
1 excludes specific items, foreign exchange movements and disposals
2 before specific items
3 before specific items, pension deficit payments and the cash tax benefit of pension deficit payments
Overview
Overview Business Business Global Global Wholesale Wholesale
GroupConsumer Consumer Openreach
Openreach Appendix
Appendix
and
and
Strategy
Strategy and Public Sector and Public Sector Services Services and Venturesand Ventures
33 British Telecommunications plc 2018All-IP/fibre delivers performance, efficiency and service
Current network Future state
11 primary access products 3 primary access products
5,600 exchanges incl. 1,100 Fibre Retirement of exchanges: 1,100 fibre
points of handover points of handover
Engineering intervention for 90% of Near zero touch network, managed by
customer moves/changes software
1
Complex PSTN & LLU environment Simplified all-IP/fibre
1 Local Loop Unbundled
Overview
Overview Business Business Global Global Wholesale Wholesale
GroupConsumer Consumer Openreach
Openreach Appendix
Appendix
and
and
Strategy
Strategy and Public Sector and Public Sector Services Services and Venturesand Ventures
34 British Telecommunications plc 2018Transform our operating model
Simplify operating model
Simplify and delayer our management structures
Sustained improvement in
customer experiences
Drive productivity improvement in our core UK operations
Lean and simple
Accelerate delivery of digital GS
organisation
Consolidate our sites to c.30 modern, fit-for-purpose strategic sites
Sustained improvement in
costs and productivity
Move from buying to strategic sourcing
Digitalise processes
Overview
Overview Business Business Global Global Wholesale Wholesale
GroupConsumer Consumer Openreach
Openreach Appendix
Appendix
and
and
Strategy
Strategy and Public Sector and Public Sector Services Services and Venturesand Ventures
35 British Telecommunications plc 2018Transformation drives long-term growth1
Deliver
differentiated Increased Improved Increased Increased
customer ARPUs and Customer FMC product Digital
experiences RGUs experience penetration interaction
Transform c.13,000 c.£1.5bn c.£800m
Cost to
our Gross Gross
achieve with
operating role cost
2 year
model reduction reduction
payback
1 3-year targets
Overview
Overview Business Business Global Global Wholesale Wholesale
GroupConsumer Consumer Openreach
Openreach Appendix
Appendix
and
and
Strategy
Strategy and Public Sector and Public Sector Services Services and Venturesand Ventures
36 British Telecommunications plc 2018Increased capex to support network investment
Capital expenditure year ended 31 March 2018
£m
c.3.7bn
4,000
3,522
3,454
3,500
3,000
2,622
2,500 2,317
2,000
1,500
1,000
500
0
1 1 1 1 2
2014/15 2015/16 2016/17 2017/18 Next 32 years
Capacity/Network Customer Driven Systems/IT Non-network Infrastructure
1 gross BDUK grant funding deferral (claw-back) included in capacity/network: 2014/15: £29m; 2015/16:£229m; 2016/17: £188m; 2017/18: £122m
2 excluding BDUK claw-back
Overview
Overview Business Business Global Global Wholesale Wholesale
Consumer
GroupConsumer Consumer
EE Openreach
Openreach Appendix
Appendix
and
and
Strategy
Strategy and Public Sector and Public Sector Services Services and Venturesand Ventures
37 British Telecommunications plc 2018Market growth is slowing with demand for higher value products increasing
UK broadband growth has slowed, but fibre is steadily increasing UK mobile subscriptions broadly flat, but pay monthly is growing
UK broadband subscriptions (m) UK mobile subscriptions (m)
30 100
CAGR CAGR
25 80
20
(4.4)% 60
5.1%
15
40
10 28.0%
5 20
(4.7)%
3.0%
0 0
2013 2014 2015 2016 2017* 2013 2014 2015 2016 2017*
Cable Fibre Copper Prepaid Postpaid
Intensifying competition – clear differentiation needed for premium pricing
*to Q3 2017
Source: Ofcom CMR & Connected Nations report
Overview
Overview Business Business Global Global Wholesale Wholesale
Consumer
GroupConsumer Consumer
EE Openreach
Openreach Appendix
Appendix
and
and
Strategy
Strategy and Public Sector and Public Sector Services Services and Venturesand Ventures
British Telecommunications plc 2018Partnerships will broaden choice for our TV customers
Today: Tomorrow:
Lack of key pay-TV Embracing content trends and partnership opportunities,
content to drive switching to offer an unrivalled choice of content across the pay-TV providers
All the must-have content
SVoD providers
Primary central set-top-box experience
All premium Sky content Multi-screen, multi-platform access
Home-
centric
OTT and digital first
Fully flexible mobile & app centric
Mobile-
Pay channels centric
Overview Business Global Wholesale
Consumer Openreach Appendix
and Strategy and Public Sector Services and Ventures
39 British Telecommunications plc 2018Pension – IAS19 measure of deficit estimated to have fallen in Q1
IAS 19 Actuarial
Q1 IAS 19 deficit estimated to be £3.9bn net of tax (Q4 £5.7bn*) Measure Accounting measure Actuarial measure
Frequency Quarterly Triennial
• Decrease due to: issue of £2bn bonds to BTPS, 0.1% increase in discount rate leading Purpose Regular updates Sets cash deficit payments
Discount Yield curve for AA corporate Prudent expected return (BTPS
to £0.7bn fall in liabilities, £0.5bn reduction in asset values, £0.5bn actuarial error rate bonds assets)
• 2018-19 operating charge expected to be slightly lower than in 2017-18 (£641m) Longevity Future expectations Prudent overall approach
Inflation Future expectations Prudent overall approach
Assets Market value Market value
0
2017/18 BT Pension Scheme sensitivity analysis1
-2
Increase in liabilities Increase in deficit
Pension valuation, £bn
£bn
-4 -3.9 12 10.6
10
-6 8
-7 6 4.9
-8 2.9
4 2.8
-9 2.1
1.3
2
-10
0
-11.3 1.1 percentage point fall 0.7 percentage point 1.35 year increase to life
-12
in discount rate increase to inflation rate expectancy
Dec-08
Jun-09
Dec-09
Jun-10
Dec-10
Jun-11
Dec-11
Sep 12
Sep 13
Sep 14
Sep 15
Sep 16
Sep 17
Jun 12
Mar 13
Jun 13
Mar 14
Jun 14
Mar 15
Jun 15
Mar 16
Jun 16
Mar 17
Jun 17
Mar 18
Jun 18
Sep-09
Sep-10
Sep-11
Dec 12
Dec 13
Dec 14
Dec 15
Dec 16
Dec 17
Mar-09
Mar-10
Mar-11
Mar-12
1the scheme actuary has assessed the risk of these events as occurring no more than
once in 20 years; the impact shown for each scenario assumes this is the only change
IAS 19 (gross of tax) IAS 19 (net of tax) Actuarial (gross of tax) – in practice a combination of changes could arise
Source: BT Annual Report and Form 20-F 2018, p243
* restated
Overview
Overview Business Business Global Global Wholesale Wholesale
Consumer
GroupConsumer Consumer
EE Openreach
Openreach Appendix
Appendix
and
and
Strategy
Strategy and Public Sector and Public Sector Services Services and Venturesand Ventures
40 British Telecommunications plc 2018Pension – reached agreement on June 2017 triennial valuation
• Funding deficit of £11.3bn: 2017 recovery plan, £11.3bn deficit
£m
– increase mostly due to fall in long-term real rates 2,000
1 FY18 + FY20 cash payments total £2.1bn in line with prior agreement
2 Funded from issuance of bonds to the Scheme
3 13 year plan, maintains end-date.
– existing recovery plan end-date maintained 1,500
£0.4bn of FY21 payment by 30 June 2020
1,000 2,000
• Three components to deficit payments: 500 850
1,250
900 900 907 907 907 907 907 907 907 907
0
1. £2.1bn cash by March 2020, in line with prior
agreement
2. £2.0bn expected to be funded by issuing long-dated 2014 recovery plan, £7.0bn deficit
sterling BT bonds to BTPS £m
2,000
3. £0.9bn cash pa for 10 years with some payments earlier 1,500
in financial year (e.g. £400m cash by June 2020) 1,000
500
• Leads to material contributions of £4.5bn before next 688 699 711 724 670 670 670 495 495 495 495 495 289
0
triennial
• Lower level of investment risk, reducing volatility
Overview
Overview Business Business Global Global Wholesale Wholesale
GroupConsumer Consumer Openreach
Openreach Appendix
Appendix
and
and
Strategy
Strategy and Public Sector and Public Sector Services Services and Venturesand Ventures
41 British Telecommunications plc 2018Key regulatory market reviews
BCMR Apr 13 to BCMR Apr 16 to Mar 19 Post CAT lacuna BCMR Apr 19 to Mar 21
Business Connectivity
Mar 16
Appeal Post CAT Consultation
(BCMR/LLCC)
Post CAT statement
Downstream wholesale access remedies
FAMR to Mar 17 Lacuna WLA Apr 18 to Mar 21
Fibre, copper access
(FAMR and WLA)
Consultation Consultation
Final statement Final statement
NBMR Oct 13 to Sep 16 Lacuna NBMR Dec 17 to Mar 21
Narrowband markets
(WNBMR and NCC) Consultation Consultation
Final statement Final statement
2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 2021/22 2022/23
UK Policy 2.3 and 3.4GHz spectrum 700MHz spectrum
Brexit
Framework auctions 2018 auction 2020
Overview
Overview Business Business Global Global Wholesale Wholesale
Consumer
GroupConsumer Consumer
EE Openreach
Openreach Appendix
Appendix
and
and
Strategy
Strategy and Public Sector and Public Sector Services Services and Venturesand Ventures
42 British Telecommunications plc 2018Strong balance sheet
1 1
• Ample liquidity: £3.6bn cash & current investments and £2.1bn undrawn committed facilities
• Targeting BBB+ credit rating through the cycle
• Smooth, long dated maturity profile
• £2.0bn pension contribution, funded by BTPS subscribing for long-dated sterling bonds issued by BT, in June 2018
Net debt Term debt maturity profile
£m
7,000 5.11%
6,000
5,000
4,000
£11,227m
3,000
£9,627m 2,000 3.67% 2.23% 4.07%
2.33%
4.34% 2.34%
1,000
0
30 Jun Normalised Pension deficit Other 30 Jun
2017 FCF payments 2018
1 as of 31 March 2018
Overview Business Global Wholesale
Consumer Openreach Appendix
and Strategy and Public Sector Services and Ventures
43 British Telecommunications plc 2018Our purpose is to use the power of communications to make a better world
• Delivering our purpose creates measurable societal and environmental value. It also promotes sustainable revenue growth and helps with
risk mitigation
Being ethical and responsible Social impact Environment
• We're committed to respecting human • Helped 1.6m children receive better • In 2017/18 we helped customers reduce
rights and we use the UN Guiding Principles teaching in computing and tech skills since carbon by 2.2 times BT’s own end-to-end
on Business and Human Rights to inform 2014/15 (target: 5m by 2020) carbon emissions (target: 3:1 by 2020)
our approach. This includes working with • Generated £531m for good causes using • £5.3bn of 2017/18 revenue was generated
our suppliers to ensure conditions in the our skills and technology since 2012/13 from products and services that can help
work place and to combat modern slavery (target: >£1bn by 2020) our customers save carbon emissions
• We protect our customers from online • Inspired 39% of our people to volunteer
their time and skills in 2017/18 (target: • In 2017/18, our overall energy
threats. We’re co-founders of ‘Internet consumption dropped by 1.7%. We cut our
Matters’ which helps children stay safe 66% by 2020)
• Helped 4.6m people overcome social energy bill by nearly £29m, cumulatively
online saving £250m since 2009/10.
disadvantage through the benefits our
• Being ethical helps us build trust and products and services can bring since • This year, we declared a new ambition to
mitigate reputational and operational risks 2014/15 (target: 10m by 2020) reduce our carbon emissions intensity by
87% (by 2030). Also committing to reduce
supply chain emissions by 29% over the
same period
1 Machine-to-machine
Overview
Overview Business Business Global Global Wholesale Wholesale
Consumer
Group
Consumer Consumer
EE Openreach
Openreach Appendix
Appendix
and
andStrategy
Strategy and Public Sector and Public Sector Services Services and Ventures
and Ventures
44 British Telecommunications plc 2018Investor Relations - contact details
tel: +44 (0) 20 7356 4909 BTGroup
email: ir@bt.com LSE: BT.A
web: www.bt.com/ir NYSE: BT
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 outlook for 2018/19 including revenue, EBITDA and free cash flow; capital expenditure for 2018/19; the transformation of our operating model; and our increasing network investment through Openreach’s Fibre
First programme, further 4G mobile network build and the proposed 5G trial.
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 whether
as a result of the uncertainties arising from the UK’s exit from the EU or otherwise; future regulatory and legal actions, decisions, outcomes of appeal and conditions or requirements in BT’s operating areas, as well as competition
from others; consultations and market reviews including the outcome of Ofcom’s reviews of the Wholesale Broadband Access market and USO; the DCMS Future Telecoms Infrastructure review; selection by BT and its customer
facing units 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; external threats to cyber security, data or resilience; political and geo-political risks; the anticipated benefits and advantages of new technologies, products and services not
being realised, including the proposed investment in our FTTP broadband network and 4G spectrum; the timing of entry and profitability of BT in certain 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; the anticipated benefits, synergies and cost savings of the transformation of our operating model and
integration and restructuring plans not being delivered; the improvements to the control environment following the investigations into BT’s Italian business not continuing to be operated successfully, effectively and timeously across
the Group; the anticipated benefits of the evolved strategy, transformation and restructuring not being realised; the BTPS recovery plan; 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.
Overview
Overview Business Business Global Global Wholesale Wholesale
Consumer
GroupConsumer Consumer
EE Openreach
Openreach Appendix
Appendix
and
and
Strategy
Strategy and Public Sector and Public Sector Services Services and Venturesand Ventures
45 British Telecommunications plc 2018You can also read
