3rd Qrtr&9 Mths Rslts-Pt. 1

British Telecommunications PLC 8 February 2001 PART 1 February 8, 2001 THIRD QUARTER AND NINE MONTHS RESULTS TO DECEMBER 31, 2000 BT's results for the third quarter and nine months to December 31, 2000 are summarised in the following table. Third Nine Months Quarter 2000 1999 2000 1999 £m £m £m £m Group turnover 5,253 4,740 15,005 13,972 EBITDA 1,771 1,581 4,862 4,857 Total operating profit before goodwill amortisation and exceptional items 836 832 2,670 2,600 Profit on sale of fixed 500 - 565 90 asset investments Profit before taxation 760 651 1,792 2,313 Profit after taxation 573 453 1,236 1,608 Earnings per share 8.1p 7.0p 17.2p 24.9p Earnings per share before exceptional items and goodwill amortisation 4.3p 8.0p 17.5p 25.8p Financial highlights for the third quarter * Underlying EBITDA broadly maintained. Underlying EBITDA is determined before exceptional items and the impact of acquisitions and disposals * Group turnover rose by 10.8 per cent to £5,253 million * Total operating profit before goodwill amortisation and exceptional items maintained * Disposal programme contributes £500 million to profit before tax * Capital expenditure on property, plant and equipment rises by 37 per cent to £1,161 million in line with expectations * Successful US $10 billion global bond issued * Balance sheet gearing at 109 per cent with net debt at £19.1 billion at end of quarter Business highlights * Radical restructuring announced on November 9, 2000 * ADSL roll out extends to 720 exchanges, currently * Agreement with Crown Castle to develop cellsites jointly * New BT Together packages launched with sales to over 1 million customers in first seven weeks * BT Cellnet's customer base up 1.5 million in the third quarter to 10.2 million at December 31, 2000 * Viag Interkom's customer base rises to 3.2 million at December 31, 2000 - up nearly 3.5 times in 12 months * BT Ignite's integrated broadband enabled IP network covers more than 50,000 km in 11 countries * BTopenworld achieved 2.5 million Genie portal registrations world-wide Restructuring In April 2000, we announced a restructuring whereby the group and its ventures would be managed through four international businesses together with the UK operations and the Concert global venture. The four international businesses, BT Wireless, BT Ignite, BTopenworld and Yell began operations on July 1, 2000, as planned. Financial information on the international businesses is published in this release for the third quarter and nine month periods ended December 31, 2000. On November 9, 2000, we announced that we intended to set up a new company, NetCo, to operate BT's UK fixed network. Additionally, we aim to dispose of non-core holdings and partially sell some of BT's international businesses. We projected borrowings of £30 billion at our financial year end and plan to achieve a reduction of around £10 billion. In the following discussion, we deal first with the results at a group level before turning to highlight the performance of our new lines of business. GROUP RESULTS Results BT's earnings per share for the third quarter ended December 31, 2000 were 8.1 pence. These earnings included the net benefit of the following exceptional items: * Profit of £500 million from the disposal of fixed asset investments and group undertakings * Rates refunds of £248 million on BT's infrastructure and associated interest credit of £25 million * A non-cash impairment of goodwill in ventures of £200 million * Write off of subscriber acquisition costs of £139 million on aligning the accounting of the BT Wireless non-UK operations Earnings before these items and goodwill amortisation were 4.3 pence per share compared with 8.0 pence per share in the corresponding quarter of the previous financial year. The lower earnings in the current period were mainly due to higher interest charges following BT's acquisition of businesses and third generation mobile licences over the year. Total operating profit before goodwill amortisation and exceptional items increased by 0.5 per cent to £836 million on a total turnover increase of 35 per cent (£1,940 million). Of the total turnover increase, 74 per cent was due to net acquisitions. BT's earnings per share for the nine months ended December 31, 2000 were 17.2 pence. These earnings include net exceptional charges and goodwill amortisation of 0.3 pence per share. Earnings before these items were 17.5 pence per share compared with 25.8 pence per share in the corresponding period of the previous financial year. Turnover Group turnover grew by 10.8 per cent to £5,253 million in the third quarter to December 31, 2000. The principal areas of growth were through the acquisition of interests in Europe and from interconnect with other UK operators. The transfer of certain BT businesses to the Concert global venture in January 2000 has had the effect of reducing group turnover by approximately 3 per cent (£140 million) in the quarter. In the nine months to December 31, 2000, group turnover grew by 7.4 per cent to £15,005 million. Fixed network call turnover in the UK declined by £49 million to £1,423 million in the quarter. Significant factors in this change were: * Price reductions had the effect of reducing turnover by approximately £ 50 million. * Call volume growth on a 12 months moving average basis was 4 per cent to December 31, 2000 compared with 8 per cent a year earlier. * Strong fixed to mobile and internet-related non-geographic call growth was offset by declining higher margin local, national and international geographic call volumes. This trend in fixed network call volumes is illustrated in the table below. Fixed network calls volume growth 12 months moving average volume growth (decline) Dec 00 Sep 00 Jun 00 Mar 00 Dec 99 Sep 99 Jun 99 Mar 99 % % % % % % % % Non-geographic calls: Local 57 69 87 95 112 126 119 118 National 30 36 45 48 54 58 51 44 Fixed to mobile 36 42 46 48 49 47 42 38 Geographic calls: Local (12) (11) (10) (9) (8) (6) (5) (4) National (8) (7) (6) (4) (3) (1) (1) 0 International (5) (6) (5) (3) (2) 0 0 0 Overall 4 5 6 7 8 9 8 7 Turnover from UK exchange line rental and connection charges grew by 3.7 per cent in the third quarter and by 2.9 per cent in the nine months. Business lines have grown by 5.5 per cent over the 12 months to December 31, 2000 while BT's residential line customer base has remained almost stable in that period despite some mobile phone substitution and competition from other fixed line providers. Mobile communication turnover rose by 30 per cent in the third quarter as a result of BT's acquisition of Esat Digifone in March 2000 and Telfort in June 2000, as well as growth in BT Cellnet. The acquisitions contributed £117 million growth in turnover in the third quarter out of a total of £173 million. Receipts from other operators increased by 55 per cent in the third quarter primarily from the growth in transit traffic handled by BT for other UK operators. Total turnover, including BT's proportionate share of its ventures, grew by 35 per cent to £7,525 million in the third quarter. The increase in BT's proportional share of its ventures' turnover from £845 million to £2,442 million in the quarter is principally due to its investments in Japan and in the Concert global venture with AT&T which was launched in early January 2000. Other operating income BT provides administrative and other services to Concert drawing on BT people and resources. The income from this totalled £42 million in the third quarter. Operating costs Total operating costs, excluding exceptional items, rose by 19.8 per cent in the third quarter. Underlying operating costs, excluding goodwill amortisation and the effects of acquisitions and disposals, rose by about 13 per cent. The principal reasons for the underlying increase in the third quarter were: * Higher payments to other operators for interconnect. Payments to operators increased by 23 per cent to £1,005 million. * Higher subscriber acquisition costs of approximately £80 million reflecting the increase in BT Cellnet's pre-paid customer base in the quarter. Redundancy direct costs for the nine months were £76 million higher at £ 95 million due to over 5,000 people leaving BT in the period. In addition, the leavers caused approximately £450 million of incremental liabilities in the BT Pension Scheme. These costs are not charged in the group profit and loss account in the period, in accordance with UK accounting standards, because there is currently an adequate pension surplus, for accounting purposes, to absorb these costs. We anticipate that this surplus will be fully utilised during the next financial year. At that time we will recommence charging the cost of the incremental liabilities of leavers against group profit. Share of results of ventures BT's share of its ventures' operating results before goodwill amortisation and exceptional items improved to a profit of £50 million in the third quarter from a loss of £77 million in the corresponding period of last year. This improvement is largely due to the acquisition of interests in Japan Telecom and the J-Phone mobile companies as shown in the table below. BT's share of operating profit (loss) before goodwill amortisation and exceptional items Third quarter Nine months ended December 31, ended December 31, 2000 1999 2000 1999 £m £m £m £m Japanese investments and other 110 (36) 183 (147) Concert global venture 2 n/a 108 n/a Cegetel 22 4 46 31 Viag Interkom (89) (51) (223) (186) Airtel 5 6 40 26 Total 50 (77) 154 (276) Goodwill amortisation attributable to the ventures rose from £31 million to £ 55 million before exceptional items in the third quarter. Profit on sale of fixed asset investments and group undertakings We sold our 34 per cent interest in Sunrise, our telecommunications joint venture in Switzerland, to another partner for £464 million in the third quarter. This was the first major sale in our disposal programme of non-core businesses which we announced last November. The profit of £454 million on this sale is the main item in the total profit of £500 million for the third quarter. Interest Net interest, including BT's share of its ventures' interest charge, rose by £229 million to £339 million in the third quarter. Of the total charge, £252 million arose in the BT group and £87 million relates to ventures. Net interest includes a one-off benefit of £25 million interest receivable on the infrastructure rates refund. The increase in the group's interest charge is a consequence of the debt incurred by the group to finance its recent acquisitions and the third generation mobile licences. Exceptional items The third quarter's results include several exceptional items. These are summarised in the following table and compared with the exceptional items in the corresponding period. Exceptional items Third quarter ended December 31, 2000 1999 £m £m Infrastructure rates refunds 248 - Write off of cellular subscriber acquisition costs (139) - Impairment of goodwill in ventures (200) - Costs relating to the disengagement from MCI - (14) Adverse impact on total operating profit (91) (14) Profit on sale of group undertakings 500 - Interest receivable on rates refunds 25 - Beneficial (adverse) impact on profit before tax 434 (14) The exceptional credit of £248 million for the refund of rates on BT's UK infrastructure follows the successful legal action taken by BT earlier in 2000. BT reached agreement with the UK Government after challenging the rateable valuations on which it was charged for its network assets. The results also include £139 million relating to the write off of deferred subscriber acquisition costs. We have aligned the accounting of all the BT Wireless operating units; this has resulted in a write off of previously capitalised costs in certain non-UK operations. We have recognised an impairment in goodwill arising in non-UK ventures amounting to £200 million. Taxation and minority interests The tax charge of £187 million represents an effective rate of 28.5 per cent of profit before tax, goodwill amortisation and the profit on disposal of the Sunrise investment, for the third quarter. The minority interests in the results of the third quarter of £41 million are primarily attributable to outside interests in the J-Phone mobile companies and Cegetel subsidiaries. Cash flow and net debt Cash inflow from operating activities amounted to £938 million in the third quarter. We made a special contribution to the BT Pension Scheme of £200 million in December 2000 as a partial funding of the fund's deficit disclosed at the most recent actuarial valuation at December 31, 1999. The payment has been charged against the group's existing pension provision and not the profit and loss account. The group's significant cash flows in the third quarter and nine months are summarised in the following table. Cash flows Third Nine quarter months ended ended December December 31, 31, 2000 2000 £m £m Net cash outflow from capital expenditure on property, plant and equipment, and interest, tax and dividend payments, less cash inflow from operating activities 633 1,342 Acquisitions of businesses and funding of ventures 313 5,612 Mobile licences and other intangible assets acquired - 4,196 Disposals of businesses (498) (590) Fixed asset disposals (99) (114) Net cash outflow before financing 349 10,446 The cash outflow on acquisitions of £5,612 million in the nine months consisted mainly of the further funding of Viag Interkom, including its third generation licence, and the Esat and Telfort acquisitions. The mobile licences acquired relates primarily to the UK third generation licence. During the current financial year we have been raising significant long-term finance to match our long-term investments in third generation licences and new acquisitions in Germany and Ireland. In December 2000, BT issued a US$10 billion global bond with maturities between 2003 and 2030. In January 2001, we launched the issue of a Euro9.7 billion bond with maturities between 2003 and 2016 and we expect to receive the proceeds of this issue in mid February 2001. We have financed the majority of our other requirements during the nine months by drawing on commercial paper and medium-term note programmes under which approximately £12.7 billion was outstanding at December 31, 2000, an increase of £7.8 billion since March 31, 2000. After the issuance of the US dollar global bond and the eurobond to be issued in 2001, BT's fixed rate debt will carry interest at an average rate of 7 per cent. Both these bonds have terms under which BT has to pay higher interest rates at lower credit ratings. Gearing at December 31, 2000 stood at 109 per cent with net debt of £19.1 billion compared with £8.7 billion at March 31, 2000. Net debt will increase during the fourth quarter, following our acquisition of Viag Interkom, and we expect net debt to total around £30 billion at the end of the current financial year. Capital expenditure Capital expenditure on plant, equipment and property totalled £1,161 million in the third quarter compared with £846 million in the corresponding period of the previous year. Cumulative capital expenditure for the nine months was £3,206 million which is in line with our plan to spend around £4.7 billion for the full financial year. The expenditure in the nine months includes £259 million spent by our newly acquired subsidiaries in Ireland and the Netherlands. Work continues on enhancing the UK fixed network to enable customers to benefit from new wave communications technologies, including ADSL. Acquisitions During the nine months ended December 31, 2000, BT completed the acquisition of a significant indirect interest in regional Japanese wireless companies (the J-Phone companies), acquired the 50 per cent interest in Telfort owned by its venture partner, and gained a further 17 per cent interest in Telenordia. We also announced the acquisition from our two partners of the remaining 55 per cent interest in Viag Interkom which we did not already own. We expect to complete this acquisition in late February 2001, subject to regulatory clearances. J-Phone companies BT's indirect interests in the J-Phone cellular companies are mainly through J-Phone Communications Co Limited which holds more than 50 per cent of the equity in these companies following a share issue in early May 2000. BT and Japan Telecom together own 74 per cent of J-Phone Communications Co Limited. BT's overall economic interest in its Japanese investments is around 20 per cent. Telfort In June 2000, BT acquired the 50 per cent of Telfort it did not already own from the Dutch railways, for £1.2 billion. The consideration was paid on July 5, 2000. A third generation mobile licence in the Netherlands was awarded to Telfort in July 2000 for £267 million. Telenordia In September 2000, BT increased its existing 33 per cent interest in Telenordia to 50 per cent for £94 million. Telenor similarly increased its stake to 50 per cent. BT and Telenor are considering the listing of Telenordia which is based in Sweden. UK third generation licence In April 2000, BT won a third generation mobile licence in the UK auction. The payment of £4.03 billion for the licence was substantially made in May 2000. Viag Interkom Subject to regulatory clearances, BT will take full control of Viag Interkom during the fourth quarter of the current financial year. Under an agreement announced in August 2000, BT will buy from E.ON its 45 per cent interest in Viag Interkom by means of a put option priced at Euro7.25 billion (£4.6 billion). BT has already acquired the 10 per cent interest in the company previously owned by Telenor; this was completed in January 2001 for Euro1.6 billion (£1.0 billion). Viag Interkom was awarded a third generation mobile licence in Germany for DM 16.5 billion (£5.13 billion). The licence is for two 10 MHz blocks of spectrum. BT funded its original 45 per cent share of the licence fee, amounting to £2,324 million, in early September 2000. We take on the obligation to fund the remaining 55 per cent share of the licence fee at the same time as we acquire E.ON and Telenor's interests. BT's total investment in Viag Interkom will approximate £12 billion once all these transactions are completed. Viag Interkom's turnover has grown by over 50 per cent to £762 million and its operating losses have risen to £496 million (1999 - £413 million) before the exceptional item in the nine months. LINES OF BUSINESS BT's new lines of business were established earlier in the current financial year. The business structure did not exist in the previous financial year and it has not been practical to provide comparative financial figures. The results discussed below include our proportionate share of the results of the ventures. BT Retail and Wholesale BT Retail and Wholesale achieved an operating profit of £1,027 million, before exceptional items, in the third quarter on turnover of £3,736 million. BT Retail's turnover is mainly derived from BT's UK fixed network customers through the provision of fixed network call services, exchange lines and private services. BT Wholesale's external turnover is derived from other operators inter-connecting with BT's UK fixed network, including Concert. BT Retail is benefiting from growing internet and fixed to mobile non-geographic call volumes. During the autumn, BT Retail focused its energies on the development of the BT Together range and withdrew a number of older and more complex pricing structures. Recent independent reports have confirmed the competitiveness of BT Together pricing against those of cable and other operators. On December 1, 2000, we launched the new choices package from BT Together, which offered unlimited off-peak voice and/or internet calls for a fixed monthly fee. Over 1 million of the new packages were sold in the first seven weeks. In total we have over 8 million customers benefiting from one of the choices from BT Together, and these customers account for more than half of our total call traffic. BT Retail's telemarketing strategy has been redefined with a switch in focus from outbound to inbound call handling. This has led to substantial improvements in customer satisfaction and significant cost savings, including the closure of one of our five call centres. SurfTime, BT's low cost internet access service, launched in June 2000, is now available throughout the UK. All of BT's digital local exchanges have been upgraded to 'groom' SurfTime traffic directly onto Colossus, the company's new internet backbone network. More than 500,000 customers are now benefiting from SurfTime's flat rate charge. SurfTime has been incorporated into the BT Together packages giving our customers even greater savings and flexibility. In November, BT Wholesale and Crown Castle UK entered into an agreement to provide fast-track site solutions and infrastructure to 3G mobile and wireless operators. BT and Crown Castle will jointly develop cellsites enabling mobile operators to access BT Wholesale's fixed network both from BT sites and from Crown Castle properties. This should enable BT to unlock significant value through the development of roof-space and surroundings of 4,000 of its exchange buildings. Growth in UK core network traffic was met in the nine months to December 31, 2000 by the cut-over of 38 trunk exchanges to Next Generation Switches (NGS) which have double the capacity of the earlier exchanges. In the third quarter, 15 switches were cut-over bringing the total NGSs in service to 49 at the end of December. In less than a year we have replaced nearly half of the trunk switches. Plans are in place for a further 19 cut-overs and the upgrade and expansion of seven of the switches to include core Asynchronous Transfer Mode (ATM) switching by December 2001, which again potentially doubles the port capacity of each switch. Growth in demand for network bandwidth was met by fast deployment of SDH technology with coverage from 1980 nodes across the UK and 17 Terabit/s capacity. We believe that BT is ahead of similar European operators in large scale deployment of leading edge, high capacity, Synchronous Digital Hierarchy (SDH) and Wavelength Division Multiplexing (WDM) technology. More than 500 nodes across the UK are already enabled with 10 Gigabit/s systems. (10 Gigabit /s is the equivalent of more than 120,000 simultaneous voice / data calls). BT Wholesale's ADSL rollout programme is progressing well. By the end of December, we had enabled 681 exchanges; currently we have 720 exchanges enabled around the UK to deliver ADSL services, with a March 2001 target of over 800 exchanges. We are also enhancing our node capacity to support video service provider offerings within the M25 area around London. BT Wireless BT Wireless achieved an operating profit of £72 million before goodwill amortisation and exceptional items on turnover of £2,498 million in the third quarter. BT Wireless has 20.7 million proportional mobile subscribers of which 10.2 million are BT Cellnet's. BT Wireless continues to lead in the sale of mobile internet phones with 2.4 million proportionate equity customers in total, of which over 1 million are in the UK. The results are before an exceptional charge of £139 million relating to the write off of deferred subscriber acquisition costs as we have aligned the method of accounting for these in all group operations. The profits, principally contributed by BT Cellnet, the Japanese companies and Airtel are partially offset by losses incurred mainly by Viag Interkom and Telfort. BT Cellnet, the Japanese companies and Cegetel are the prime contributors to BT Wireless' turnover. BT Cellnet's customer base increased by 47 per cent over the year to December 31, 2000 with over 1.5 million new customers added in the third quarter. BT Cellnet's turnover grew by 12 per cent to £2,121 million for the nine months. Its operating profit before exceptional items was £203 million and its EBITDA was £370 million in the nine months to December 31, 2000. BT Cellnet remains the UK's leading network on international roaming coverage with agreements with operators in 122 countries. Viag Interkom had a 3.2 million mobile customer base at December 31, 2000, with 1.9 million net additions in the nine months. The results continue to be affected by the costs associated with the higher number of mobile customers and aggressive handset subsidies resulting in a loss of hardware margin. The mobile business is also suffering from a massive shift to pre-paid customers, leading to less revenue being generated from each customer. Viag Interkom has around 7 per cent of the German mobile market. BT Ignite BT's Ignite's activity is principally in the fast growing new wave data and internet area throughout Europe. Turnover in BT Ignite was £1,145 million for the third quarter with an operating loss before goodwill amortisation of £130 million. Approximately 50 per cent of BT Ignite's turnover is derived from the high end value add businesses of solutions (systems integration and outsourcing), content hosting and application service provision (ASP). Outsourcing (Syncordia) and systems integration (Syntegra) have together grown at more than 24 per cent per annum and contributed operating profits of £43 million and £23 million, respectively, before goodwill amortisation in the nine months. Content hosting and application services have grown at a rate of approximately 200 per cent per annum. BT Ignite has a total of 21 content hosting centres in Europe and Japan serviced by an integrated broadband enabled IP network covering more than 50,000 km in 11 countries and connecting over 200 cities. This combined with a 4,000 strong sales force, including 2,000 solutions consultants, gives BT Ignite unparalleled reach, scale and capability in Europe. BTopenworld BTopenworld incurred an operating loss of £107 million on turnover of £68 million in the third quarter. Its turnover is derived principally from its UK and continental European narrowband internet access products. A new broadband internet portal and Genie (BTopenworld's global mobile internet portal), two major new lines of business, made a small contribution to turnover. Genie experienced losses in its start up phase with an operating loss of £79 million on turnover of £9 million in the nine months. A significant proportion of BTopenworld's losses were incurred in the development and launch of its UK broadband product range and the continuing international roll out of Genie. The total number of equity internet service provider customers of BTopenworld at December 31, 2000 was approximately 2.3 million, representing growth of over 40 per cent since April 1, 2000. With over 500,000 customers on unmetered packages at December 31, 2000, BTopenworld is a leading UK unmetered internet access provider. At December 31, 2000, Genie had over 2.5 million registrations world-wide, more than doubling its registrations since April 1, 2000. Yell Yell contributed an operating profit before goodwill amortisation of £30 million on turnover of £178 million in the third quarter. The growth enjoyed in the directory business, including the US operations in its first full year, has been largely offset by the increased development costs in Yell.com. Concert Concert's operating profit before goodwill amortisation and exceptional items attributable to BT for the three months ended December 31, 2000 was £2 million. Concert is operating in a highly competitive international market. BT and AT&T are actively discussing ways to improve the performance of the business and strengthen the alliance. ______________________________________________________________________ The preliminary announcement of BT's results for the year ending March 31, 2001 is expected to be made on May 17, 2001. GROUP PROFIT AND LOSS ACCOUNT for the three months and nine months ended December 31, 2000 Third quarter 9 months ended December 31 ended December 31 2000 1999 2000 1999 (unaudited) Notes £m £m £m £m Total turnover 3 7,525 5,585 21,919 15,901 Group's share of associates and 3 (2,442) (845) (7,425) (1,929) joint ventures turnover Trading between group and 170 - 511 - principal joint venture Group turnover 5,253 4,740 15,005 13,972 Other operating income 4 101 31 254 110 Operating costs 5 (4,418) (3,902) (12,815) (11,285) Group operating profit 936 869 2,444 2,797 Group's share of operating 6 (337) (108) (325) (332) losses of associates and joint ventures Total operating profit 599 761 2,119 2,465 Total operating profit before goodwill amortisation and exceptional items 9 836 832 2,670 2,600 Profit on sale of fixed asset 7 500 - 565 90 investments and group undertakings Net interest payable 8 (339) (110) (892) (242) Profit before taxation 760 651 1,792 2,313 Taxation (187) (198) (556) (705) Profit after taxation 573 453 1,236 1,608 Minority interests (41) - (112) 4 Profit attributable to 532 453 1,124 1,612 shareholders Earnings per share 9 - basic 8.1p 7.0p 17.2p 24.9p - diluted 8.0p 6.8p 17.0p 24.3p Earnings per share before exceptional items and goodwill amortisation 9 - basic 4.3p 8.0p 17.5p 25.8p - diluted 4.3p 7.8p 17.2p 25.2p GROUP CASH FLOW STATEMENT for the three months and nine months ended December 31, 2000 Third quarter 9 months ended December 31 ended December 31 2000 1999 2000 1999 (unaudited) (unaudited) £m £m £m £m 938 1,480 3,701 4,332 Net cash inflow from operating activities (note 10) Dividends from associates and 4 2 9 4 joint ventures Net cash inflow (outflow) for (205) 13 (615) (173) returns on investments and servicing of finance Taxation paid (106) (163) (246) (413) Purchase of intangible fixed assets - - (4,196) - Purchase of tangible fixed assets (1,264) (874) (3,328) (2,648) Net sale (purchase) of fixed 61 (20) 39 (162) asset investments Sale of tangible fixed assets 38 27 75 84 Net cash outflow for capital (1,165) (867) (7,410) (2,726) expenditure and financial investment Acquisitions (313) (3,282) (5,612) (6,617) Disposals 498 - 590 179 Net cash inflow (outflow) for 185 (3,282) (5,022) (6,438) acquisitions and disposals Equity dividends paid - - (863) (799) Cash outflow before use of liquid (349) (2,817) (10,446) (6,213) resources and financing Management of liquid resources (4,964) (591) (4,969) 773 Issue of ordinary share capital 8 5 146 124 Issue of shares to minorities 17 - 36 432 New loans 6,895 605 8,522 1,473 Repayment of loans (8) (29) (223) (383) Net movement on short-term borrowings (1,517) 2,704 7,190 3,844 Net cash inflow from financing 5,395 3,285 15,671 5,490 Increase (decrease) in cash 82 (123) 256 50 Increase in net debt (note 13) (324) (2,812) (10,264) (5,657) GROUP BALANCE SHEET at December 31, 2000 December 31 March 31 2000 1999 2000 (unaudited) (note 1) £m £m £m Fixed assets Intangible assets (note 12) 11,283 4,416 5,777 Tangible assets 19,470 18,391 18,163 Investments 8,160 4,451 5,878 38,913 27,258 29,818 Current assets Stocks 346 211 225 Debtors 6,345 4,642 5,241 Investments 7,095 2,507 2,051 Cash at bank and in hand 346 140 253 14,132 7,500 7,770 Creditors: amounts falling due within one year Loans and other borrowings 13,357 4,801 5,650 Other creditors 7,988 6,917 9,235 21,345 11,718 14,885 Net current liabilities (7,213) (4,218) (7,115) Total assets less current liabilities 31,700 23,040 22,703 Creditors: amounts falling due after more than one year Loans and other borrowings 13,134 4,833 5,354 Provisions for liabilities and charges 1,051 1,641 1,056 (note 14) Minority interests 524 487 498 Capital and reserves Called up share capital 1,646 1,627 1,627 Reserves (note 15) 15,345 14,452 14,168 Total equity shareholders' funds 16,991 16,079 15,795 31,700 23,040 22,703 MORE TO FOLLOW

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