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business review
Despite increasingly tough
regulatory controls, the growing reality of competition and the
effects of the UK economic recession, BT has completed another year
in which further significant progress has been made.
Customers have enjoyed a wide range
of new products and services, and a choice of call discount schemes,
while continuing investment in modernisation and tighter cost controls
have helped move the company closer towards achieving its vision
of becoming the most successful worldwide telecommunications group.
The Government has announced that in 1993/94 it intends to sell
some or all of the 22 per cent stake that it still holds in the
company and that it intends, subject to market conditions, to complete
the share offer in mid July 1993.
VALUE FOR MONEY
CUSTOMER CHOICE
BT COMMITMENT
COST CONTROL
INVESTMENT
PAYPHONES
THE VIDEOPHONE
MALICIOUS CALLS
SERVING BUSINESS
GLOBAL STRATEGY
DISPOSALS
DEVELOPMENT
COMPETITION
REGULATION
BT PEOPLE
IN THE COMMUNITY
DISABILITIES
THE ENVIRONMENT
VALUE FOR MONEY
As part of its determination to provide customers with value for
money products and services, last December BT announced a freeze
on price rises on all UK and international directlydialled calls
and on connection charges. Residential telephone line rentals were
increased by the equivalent of about ten pence a week, and business
line rentals by just under 16 pence. From January this year, there
has been a reduction in prices for most daytime weekday calls to
the USA and Canada.
Also in January, BT revised its standard schemes for both residential
and business customers, which improved the discounts on all directlydialled
calls made per quarter over and above the equivalent of a £75
call bill.
Customers have benefited too from the introduction of an innovative
series of short term special offers allowing substantial savings.
Aimed mainly at the residential market, the first of these, Sunday
Special, began on 1 November and lasted
until the end of December. On each Sunday after 3pm during that
period, most BT directly dialled calls within the UK were charged
at local cheap rate.
This offer proved highly popular and was followed in January with
a scheme allowing cheaper calls from the UK to all other countries
in the European Community. On Saturdays in March, the cost of phone
calls to Australia and New Zealand was cut to approximately 50 pence
a minute; and this June customers making local cheap rate calls
will receive up to double the time for the same money.
CUSTOMER CHOICE
But pricing is not the only element in an overall value for money
package. Choice is also an important factor and the last 12 months
have seen BT develop a range of discount schemes aimed at all customers.
Residential customers who make a lot of calls, for instance, can
choose Option 15,
which offers a ten per cent discount on all directly dialled calls
in return for a £4 quarterly charge. Those who make few calls
typically the elderly or those living alone for whom the phone is
a vital link can benefit from BT's Supportline scheme, which offers
half price line rental including a limited number of call units
per quarter, after which higher call charges apply.
In response to customer needs, volume discounts for business customers
have been simplified and improved, and there are now several schemes
from which customers can choose the one that affords them maximum
benefit. In particular, Option
2000, which provides discounts on
the total telephony call bill, has been designed to appeal to large
customers with many sites.
BT COMMITMENT
The BT Commitment, launched in September 1991, sets out BT's determination
to provide its customers with first class service. Now well established,
its customer benefits can be seen in many aspects of the company's
activities, and nowhere to better effect than in the most recently
published quality of service results. These show that almost 90
per cent of residential customers surveyed gave a satisfaction rating
of at least seven out of a possible maximum ten. The results for
business customers were almost as high. BT is now concentrating
on reducing the number of instances where service targets are not
met.
COST CONTROL
An important element of BT's strategy is the containment of costs
and this continues to be a matter to which close attention is paid.
One of the biggest factors bearing on costs is the number of people
employed by the company. Due to the combination of new technologies,
improved efficiency and increasing competitive pressure on BT's
market share, fewer people will be needed in the years ahead and
new programmes have been introduced offering voluntary redundancy
terms to those willing to leave and able to be released. During
the year, 31,700
people left BT on voluntary redundancy terms. The company expects
about 15,000 more people to leave in each of the next two years.
INVESTMENT
The company is investing about £8 million every working day
in the UK, mainly on network renewal, modernisation and expansion.
More than 2.3 million kilometres of optical fibre hair thin strands
of ultra pure glass which can carry voice, data, text and pictures
have now been installed in BT's network and, on average, 13 new
digital local exchanges are coming on stream every week.
During the year, London's telephone network became one of the most
advanced of all major European cities when the last old style electromechanical
exchange was closed down. The capital is now served by more than
500 exchanges, of which over 70 per cent are digital and the rest
of the modern electronic type.
Nationally, over 95 per cent of UK customer lines are connected
to digital or electronic exchanges, enabling most to access a range
of advanced network services and approaching 90 per cent to receive
itemised bills. And BT's bills have themselves undergone a transformation,
with all information now set out more clearly and simply.
PAYPHONES
As BT's public payphone service continues to expand, there are now
more than 112,000 kiosks, cabinets or booths throughout the country.
In open competition with other operators, BT has recently won a
major contract to install up to 1,100 payphones at post offices
nationwide. Other newlywon contracts include the supply and maintenance
of payphones at Marks and Spencer's 290 UK stores, at all of London
Underground's 248 tube stations and on 660 of Shell UK's service
station forecourts.
As well as providing traditional, coin operated payphones, more
and more Phonecard phones are being introduced and the latest generation,
which accepts coins, BT Phonecards, BT Chargecards and commercial
credit cards, is now on trial in a number of major UK cities.
Less welcome is the fact that, in the year, coin operated payphones
increasingly became the target for organised crime, with attacks
rising almost fivefold. The company, together with local police
forces, is working to counter the problem; despite these difficulties,
about 95 per cent of public payphones were in working order at any
one time.
THE VIDEOPHONE
BT's much heralded videophone was launched as the year ended. The
idea of seeing and being seen during a telephone conversation has
long been a popular fantasy. Now it is a reality. Call charges are
the same as for an ordinary phone call.
New phones, facsimile machines and other equipment have also been
launched and can be bought or rented in any of the 90 or so BT shops
now open in High Streets throughout the UK. Customers can also use
the shops over 20 new ones were opened during the year to make service
enquiries and pay their bills.
MALICIOUS CALLS
BT is determined to stamp out the menace of malicious and obscene
phone calls. As well as using the most modern equipment to track
down the callers, the company has now established a network of bureaux
where specially trained BT people counsel distressed customers victims
of the estimated 15 million such calls made every year.
As part of a longer term strategy, BT is trialling a system known
as Caller Display,
which enables customers to see the number from which a call originates.
SERVING BUSINESS
For its business customers both large
and small BT continues to add to its comprehensive portfolio of
products and services. The applications and use of facsimile from
confirming a meeting to ordering a pizza continue to grow and a
substantial advance in technology has seen the development of a
system which enables fax services to be provided to and from in
flight aircraft anywhere in the world.
During the year, more and more business people made use of mobile
. phones, while videoconferencing was increasingly widely used.
Broadcasters also continued to make demands on BT's capabilities,
to ensure that news, sports and entertainment captured by their
cameras and microphones were reported to television and radio audiences
around the world as they happened.
The advantages of BT's Integrated Services Digital Network (ISDN)
are becoming more widely appreciated, providing a growing number
of customers with the opportunity to send and receive large amounts
of information whether in the form of voice, data, text or image
at high speed with assured quality.
GLOBAL STRATEGY
Ninety eight per cent of BT's revenues were generated from operations
in the UK and, although most of the company's business customers
operate either locally or nationally, more and more of them, like
BT itself, are beginning to explore global opportunities.
Through both its USA based subsidiary, Syncordia, and its Global
Network Services (GNS) operation, BT is pursuing a highly focused
strategy centred on providing networkbased services to customers
around the world, particularly those in Europe, North America and
the Asia Pacific region.
In addition, the company has submitted an application to the United
States regulator, the Federal Communications Commission, for authority
to resell international private line services and switched network
services from the USA, UK and other countries on an end to end basis.
If granted, this will allow BT to provide seamless international
virtual network (IVN) services. IVN offers customers the benefits
associated with private networks, but uses shared switching and
transmission facilities, enabling the provision of cheaper and more
flexible services.
During the year, BT won multimillion pound contracts variously to
design, provide and manage a range of networks in Europe, Australia
and elsewhere.
DISPOSALS
In recent years, BT has been concentrating its activities on providing
telecommunication networks and network related services. Accordingly,
during the year, it sold its interests in Mitel, the Canadian based
telecommunication equipment manufacturer, International Aeradio,
Telecom Security and Sharelink at a net loss totalling £132
million.
In the face of continued US regulatory constraints on foreign ownership,
the company has provisionally agreed, subject to a number of conditions,
to sell to American Telephone and Telegraph Company (AT&T) of
the USA for around US$1.8 billion its approximate 18 per cent shareholding
in McCaw Cellular Communications, a major US cellular telephone
operator.
DEVELOPMENT
Research and development form an important
part of BT's activities, and spending was once again well in excess
of £200 million about two per cent of turnover.
The quality of this work was recognised by a fifth Queen's Award
for Technological Achievement. This was for work on the advanced
processes employed in the manufacture of lasers and photo detectors
used in optical fibre telecommunication networks.
Elsewhere, work on new and innovative network based services such
as call answering, mid call diversion and interactive speech systems
will support BT's drive for increased revenues.
Further trials, using BT developed software and videophone links,
have been undertaken to stimulate teleworking working from home
using telecommunication products and services.
BT's global operations are being supported by the development of
ever more sophisticated network management systems. In addition,
major effort is being devoted to the development of the international
virtual network services described earlier.
COMPETITION
More evident than ever during the year has been the growing reality
of competition in network services; competitors have taken around
13 per cent of the total business telephony market and are increasingly
attracting customers in the residential market. This competition
comes not only from Mercury Communications, but also from the increasing
number of cable TV companies entering the marketplace offering integrated
telephone and entertainment services.
To counter this competition, BT has set up specialist marketing
and sales teams and already a series of campaigns targeted at existing
customers has helped to stem the loss of business.
Following the opening up of the UK telecommunications market, around
60 applications have been made for new licences, about 20 of which
have been granted; the remainder are pending, including an application
from AT&T
REGULATION
In June last year, the Office of Telecommunications OFTEL tabled
proposals for accounting separation within BT's network services
business. BT is concerned about the possible effect these proposals
may have on its long term pricing policies and discussions are continuing.
Amendments, agreed with BT and taking effect in August 1993, have
now been made to BT's Licence, to implement proposals made by OFTEL
last summer. These will tighten (from 6.25 to 7.5 percentage points)
the 'X' factor in the 'Retail Price Index (RPI) minus X' formula
which requires BT to reduce in real terms its prices on a basket
of its main services. The RPI minus 7.5 percentage points formula
is designed to last for four years.
BT PEOPLE
At 31 March 1992, some 210,500 people were working for BT, while
a year later the figure had reduced to less than 171,000. Those
continuing to work in the company are being encouraged to play a
more positive role; performance related pay arrangements have been
extended throughout the management structure. The latest annual
survey of BT people's attitudes gave a clear indication of those
areas where the company needs to take action to improve morale,
and major training programmes are in place to help increase commitment
and motivation.
BT promotes the welfare, health and safety of its people, and is
committed to equal opportunities and to helping minority groups.
Training continues to be an important activity with costs estimated
at £225 million incurred in the year, including on special
courses to help women move into management. The company also encourages
the employment, and the training and career development, of disabled
people.
Regular local team meetings, supplemented by a range of wellestablished
publications, were used during the year to keep BT people fully
informed about developments, challenges and opportunities facing
the company. BT continues to consult and negotiate with recognised
trade unions.
The group's two main pension schemes were merged in January without
affecting members' benefit entitlements.
IN THE COMMUNITY
BT recognises that it has a role to play in contributing to the
health of those communities in which it conducts its business. Over
the past year, its community programme's expenditure of more than
£14.6 million has supported a range of projects, both with
cash and the provision of expertise and help in kind to charities
and similar organisations.
Support is provided across a broad spectrum. Projects ranged from
tackling unemployment and homelessness, to school telecommunications
link ups, the BTSwimathon, medical research and sporting and outdoor
activities for people with disabilities. The community programme's
expenditure included charitable donations of over £4.9 million.
BT is a major corporate sponsor of the arts with strong emphasis
placed on support for amateur activity. Principal national sponsorships
included tours by the Northern Ballet Theatre and the South Bank
Centre's National Touring Exhibitions of leading works of art.
DISABILITIES
BT provides a range of products and services for customers with
disabilities through its Action for Disabled Customers unit. The
new Converse range of stylish and attractive phones contains many
additional features relevant to the needs of disabled customers.
Typetalk, the new telephone exchange for deaf and speechimpaired
people, funded by BT and managed by the Royal National Institute
for Deaf People, now serves over 6,500 customers and is set for
further growth.
THE ENVIRONMENT
The past year has seen progress and reward for BT's environmental
initiatives. The company received a major commendation for recycling
material from old telephones and won the Chartered Association of
Certified Accountants' award for corporate environmental reporting.
The 1993 BT Environmental Performance
Report follows on from last year's
award winning publication and is available to all shareholders.
It describes progress made against the targets set last year and
outlines new targets established for 1993 and beyond. Copies are
available from the BT Shareholder Enquiry Unit (see Information
for shareholders).
©
BT Group plc 2002 
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