3rd Qrtr&9 Mths Rslts-Pt. 2

British Telecommunications PLC 8 February 2001 PART 2 NOTES 1 Basis of preparation The unaudited interim results of the group, which are not statutory accounts, have been prepared on the basis of the accounting policies as set out in the report and accounts for the year ended March 31, 2000, except that loans and other borrowings are now stated as adjusted for the effect of currency swaps acting as hedges. The comparative figures have not been restated as the impact is not material. Figures for the year ended March 31, 2000 are extracts from the group accounts for that year. The group accounts for the year ended March 31, 2000, on which the auditors made an unqualified report which did not contain a statement under Section 237(2) or (3) of the Companies Act 1985, have been delivered to the Registrar of Companies. 2 Results of businesses The tables below show the results of BT's new business organisation, which has been implemented during the year ending March 31, 2001, for the quarter and nine months ended December 31, 2000. Elements of the information are a restatement of the actual results and net assets of the group to show the businesses as if they had traded as separate units throughout the relevant period. The information includes allocations and apportionments of turnover and costs. These allocations and apportionments in some cases are estimated and, as such, are subject to review and may change. There is extensive trading between many of the business units and profitability is dependent on the transfer price levels. These intra-group trading arrangements are also subject to review and may change. 2 Results of businesses continued (a) Operating results EBITDA (ii) Total operating before profit (loss) exceptional items before £m goodwill amortisation and Total turnover exceptional items £m £m Third quarter ended December 31, 2000 BT Retail and 3,736 1,436 1,027 Wholesale BT Wireless 2,498 394 72 BT Ignite 1,145 35 (130) Concert 541 50 2 Yell 178 33 30 BTopenworld 68 (92) (107) Eliminations and (641) 82 (58) other (i) Total before 7,525 1,938 836 exceptional items Exceptional items - 109 (237) and goodwill amortisation Total after 7,525 2,047 599 exceptional items Nine months ended December 31, 2000 BT Retail and 10,820 4,194 2,786 Wholesale BT Wireless 6,922 1,118 355 BT Ignite 3,275 (26) (399) Concert 1,971 218 108 Yell 542 156 147 BTopenworld 195 (267) (295) Eliminations and (1,806) 228 (32) other (i) Total before 21,919 5,621 2,670 exceptional items Exceptional items - 54 (551) and goodwill amortisation Total after 21,919 5,675 2,119 exceptional items (i) Includes elimination of turnover between businesses which is included in total turnover of the originating business. (ii) Includes proportionate EBITDA of associates and joint ventures. 2 Results of businesses continued Analysis of operating results of certain lines of business EBITDA Operating before exceptional profit (loss) before items goodwill £m amortisation and exceptional items Turnover £m £m Three months ended December 31, 2000 BT Wireless Group 900 35 (35) Share of ventures 1,598 359 107 Total 2,498 394 72 BT Ignite Group 882 23 (88) Share of ventures 263 12 (42) Total 1,145 35 (130) Btopenworld Group 39 (82) (92) Share of ventures 29 (10) (15) Total 68 (92) (107) Nine months ended December 31, 2000 BT Wireless Group 2,456 305 89 Share of ventures 4,466 813 266 Total 6,922 1,118 355 BT Ignite Group 2,381 (56) (306) Share of ventures 894 30 (93) Total 3,275 (26) (399) Btopenworld Group 119 (206) (223) Share of ventures 76 (61) (72) Total 195 (267) (295) 2 Results of businesses continued (b) Capital expenditure on plant, equipment and property Third quarter ended 9 months ended December 31, 2000 December 31, 2000 £m £m BT Retail and Wholesale 564 1,651 BT Wireless 224 578 BT Ignite 244 579 Yell 4 13 Btopenworld 23 76 Other 102 309 Total 1,161 3,206 (c) Net assets Net operating Associates and joint ventures assets (i) £m £m At December 31, 2000 BT Retail and Wholesale 13,460 - BT Wireless 10,306 5,070 BT Ignite 3,391 686 Concert - 1,294 Yell 638 2 Btopenworld 39 34 Other 1,037 7 Total 28,871 7,093 (i) Net operating assets comprise tangible and intangible fixed assets, stocks, debtors less creditors, excluding loans and other borrowings, and provisions for liabilities and charges, excluding deferred tax. 3 Turnover Third quarter 9 months ended December 31 ended December 31 2000 1999 2000 1999 £m £m £m £m Fixed network calls 1,423 1,472 4,272 4,468 Exchange lines 927 894 2,704 2,628 Receipts from other 739 477 2,009 1,402 operators (a) Mobile communications (b) 743 570 2,008 1,613 Private services 283 297 814 879 Solutions 249 236 734 679 Customer premises 186 224 548 650 equipment supply Yellow Pages and 183 166 518 444 other directories Other sales and 520 404 1,398 1,209 services Group turnover 5,253 4,740 15,005 13,972 Share of associates 2,442 845 7,425 1,929 and joint ventures turnover (note 19) Group trading with (170) - (511) - principal joint venture Total turnover 7,525 5,585 21,919 15,901 3 Turnover continued Third quarter 9 months ended December 31 ended December 31 2000 1999 2000 1999 £m £m £m £m (a) Receipts from other operators Concert global venture 224 - 600 - International - 132 - 483 operators for incoming and transit international calls to or through the UK UK operators and other 515 345 1,409 919 Total 739 477 2,009 1,402 (b) Mobile communications UK 634 570 1,732 1,613 Non UK 109 - 276 - Total 743 570 2,008 1,613 4 Other operating income Third quarter 9 months ended December 31 ended December 31 2000 1999 2000 1999 £m £m £m £m Provision of 42 - 131 - administration services to the Concert global venture Other 59 31 123 110 Total 101 31 254 110 5 Operating costs Third quarter 9 months ended December 31 ended December 31 2000 1999 2000 1999 £m £m £m £m Staff costs 1,169 1,132 3,438 3,192 Own work capitalised (181) (125) (520) (348) Depreciation 740 686 2,152 2,023 Amortisation of 95 26 266 37 goodwill and other intangibles (a) Payments to 1,005 815 2,808 2,235 telecommunication operators (b) Other operating costs (c) 1,590 1,368 4,671 4,146 Total operating costs (d) 4,418 3,902 12,815 11,285 (a) Amortisation of goodwill and other intangibles Goodwill 91 26 258 37 Other intangibles 4 - 8 - Total 95 26 266 37 (b) Payments to telecommunication operators UK fixed network payments to UK operators 617 438 1,743 1,167 UK fixed network payments to Concert 160 140 479 488 global venture or non-UK operators for international calls BT Cellnet payments to other operators 86 148 224 265 Non UK operations 142 89 362 315 Total 1,005 815 2,808 2,235 (c) Other operating costs UK fixed network and other costs 819 895 2,668 2,657 Mobile communications 536 288 1,280 998 Non-UK fixed network operations 143 108 416 289 Yellow Pages and other directories 74 71 212 183 Total before redundancy costs 1,572 1,362 4,576 4,127 Redundancy costs 18 6 95 19 Total 1,590 1,368 4,671 4,146 (d) Includes exceptional credits of £248m for the three months ended December 31, 2000 and £193m for the nine months ended December 31, 2000, relating to rates refunds and exceptional costs of £7m in both periods for the write off of subscriber acquisition costs. Also includes exceptional costs of £14m for the three months ended December 31, 1999 and £42m for the nine months ended December 31, 1999, relating to the group's disengagement from MCI. 6 Group's share of losses of associates and joint ventures The results include goodwill amortisation of £55m for the three months ended December 31, 2000 (1999 - £31m) and £147m (1999 - £56m) for the nine months ended December 31, 2000. Also included in the three months and nine months ended December 31, 2000 is a charge of £200m for the impairment of goodwill in ventures, and £132m for the write off of subscriber acquisition costs. 7 Profit on sale of fixed asset investments and group undertakings The profit in the three months and nine months ended December 31, 2000 is mainly attributable to the profit of £454m on the sale of BT's interest in Sunrise Communications in November 2000. In addition, a profit has been realised on the sale of BT's aeronautical and maritime business in December 2000 and a profit was realised in the initial public offering of I.Net SpA in April 2000. The profit on sale in the nine months ended December 31, 1999 was mainly attributable to the sale of BT Communications Services KK to Japan Telecom in August 1999. 8 Interest payable Third quarter 9 months ended December 31 ended December 31 2000 1999 2000 1999 £m £m £m £m Group 386 137 944 334 Joint ventures and 94 23 216 51 associates Total interest 480 160 1,160 385 payable Interest receivable (a) (141) (50) (268) (143) Net interest payable 339 110 892 242 (a) Includes an exceptional credit of £25m in the three and nine months ended December 31, 2000, relating to interest on the rates refund. 9 Earnings per share The basic earnings per share are calculated by dividing the profit attributable to shareholders by the average number of shares in issue after deducting the company's shares held by employee share ownership trusts. In calculating the diluted earnings per share, share options outstanding and other potential ordinary shares have been taken into account. 9 Earnings per share continued The average number of shares in the periods were: Third quarter 9 months ended December 31 ended December 31 2000 1999 2000 1999 million of shares million of shares Basic 6,538 6,497 6,521 6,485 Diluted 6,617 6,659 6,624 6,643 The items in the calculation of the earnings per share before exceptional items and goodwill amortisation are: Third quarter 9 months ended December 31 ended December 31 2000 1999 2000 1999 £m £m £m £m Profit on sale of 500 - 565 90 group undertakings Rates refunds relating 248 - 193 - to prior periods Goodwill impairment (200) - (200) - Write off of (139) - (139) - subscriber acquisition costs Interest receivable on 25 - 25 - rates refunds Costs relating to the - (14) - (42) disengagement from MCI Goodwill amortisation (146) (57) (405) (93) 288 (71) 39 (45) Tax credit (charge) (38) 4 (35) (15) attributable Minority interests - - (21) - attributable Net credit (charge) 250 (67) (17) (60) 10 Reconciliation of operating profit to operating cash flow Third quarter 9 months ended December 31 ended December 31 2000 1999 2000 1999 £m £m £m £m Group operating 936 869 2,444 2,797 profit Depreciation and 835 712 2,418 2,060 amortisation Changes in working (656) (107) (1,008) (482) capital Provision movements (177) 6 (153) (43) and other Net cash inflow from 938 1,480 3,701 4,332 operating activities 11 Expenditure on tangible fixed assets Third quarter 9 months ended December 31 ended December 31 2000 1999 2000 1999 £m £m £m £m Plant and equipment: Transmission equipment 508 397 1,485 1,099 Exchange equipment 142 127 342 300 Other network 265 143 706 442 equipment Computers and office 120 87 352 316 equipment Motor vehicles and 73 42 182 194 other Land and buildings 53 50 139 169 Total expenditure 1,161 846 3,206 2,520 12 Intangible assets At December 31 At March 31 2000 1999 2000 £m £m £m Goodwill 6,809 4,416 5,775 Mobile licences and other 4,474 - 2 11,283 4,416 5,777 In June 2000, the group completed the acquisition of the Dutch railways' 50% interest in Telfort for £1,207m, including expenses. Goodwill of £982m arose on this transaction which is being amortised over a period of 20 years. In April 2000, the group won a third generation mobile licence in the UK government's auction. The licence, which cost £4,030m, will be amortised over its remaining 20-year term from the date of launch of services using the licensed radio spectrum. 13 Net debt (a) Analysis At December 31 At March 31 2000 1999 2000 £m £m £m Long-term loans and other 13,134 4,833 5,354 borrowings falling due after more than one year Short-term borrowings and long-term loans and other 13,357 4,801 5,650 borrowings falling due within one year Total debt 26,491 9,634 11,004 Short-term investments (7,095) (2,507) (2,051) Cash at bank (346) (140) (253) Net debt at end of period 19,050 6,987 8,700 (b) Reconciliation of net cash flow to movement in net debt Third quarter 9 months ended December 31 ended December 31 2000 1999 2000 1999 £m £m £m £m Net debt at 18,739 3,841 8,700 953 beginning of period Increase in net debt 324 2,812 10,264 5,657 resulting from cash flows Net debt assumed or - 160 46 239 issued on acquisitions Currency movements 51 122 21 66 Other non-cash (64) 52 19 72 movements Net debt at end of 19,050 6,987 19,050 6,987 period 14 Provisions for liabilities and charges At December 31 At March 31 2000 1999 2 2000 £m £m £m Pension provisions 494 904 629 Deferred taxation 466 646 354 Other provisions 91 91 73 1,051 1,641 1,056 15 Reserves £m Balance at April 1, 2000 14,168 Profit attributable to shareholders for the nine months ended 1,124 December 31, 2000 Interim dividend - payable February 12, 2001 (571) Currency movements (a) 378 Premium on allotment of ordinary shares 615 Movement relating to BT's employee share ownership trust (363) Other movements (6) Balance at December 31, 2000 15,345 (a) Including £13m movement on the retranslation of foreign borrowings and other hedging instruments. 16 Esat Telecom Group On March 30, 2000, BT obtained control of the Esat Telecom Group for approximately £1.5bn. Esat operates a fixed line telecommunications network in Ireland. BT also gained control over Esat Digifone, Ireland's second mobile operator, through Esat's 49.5 per cent interest in the company and an additional 1.0 per cent interest acquired by the BT group in January 2000. The majority of the consideration for the Esat Telecom Group was paid in April 2000. In February 2001, Telenor, the owner of the remaining 49.5 per cent interest in Esat Digifone, decided to sell this interest to BT for approximately US$1,238m under an agreement made in January 2000. Completion is expected in March 2001, subject to regulatory clearances. 17 Contingencies BT has provided guarantees amounting to £1,208m in respect of bank loans provided to J-Phone Communications. 18 Earnings before interest, taxation, depreciation and amortisation (EBITDA) Third quarter 9 months ended December 31 ended December 31 2000 1999 2000 1999 £m £m £m £m Group operating 936 869 2,444 2,797 profit Depreciation 740 686 2,152 2,023 Amortisation 95 26 266 37 EBITDA 1,771 1,581 4,862 4,857 Exceptional items (241) 10 (186) 33 Estimated impact of - (64) - (191) the Concert global venture Impact of 12 - 41 - acquisitions EBITDA before exceptional items, 1,542 1,527 4,717 4,699 the impact of the Concert global venture and acquisitions 19 Results of associates and joint ventures EBITDA Total operating before profit (loss) before exceptional items goodwill amortisation £m and exceptional items Group's share Turnover £m £m Third quarter ended December 31, 2000 Japanese investments 1,430 361 110 and other Concert global 541 50 2 venture Cegetel 276 46 22 Viag Interkom 126 (61) (89) Airtel 69 12 5 Total 2,442 408 50 Nine months ended December 31, 2000 Japanese investments 4,218 696 183 and other (a) Concert global 1,971 218 108 venture Cegetel 682 119 46 Viag Interkom 343 (149) (223) Airtel 211 61 40 Total 7,425 945 154 (a) In the six months to September 30, 2000, BT's share of Japan Telecom's and J-Phone's results were EBITDA of £498m, operating profit of £253m before goodwill amortisation on turnover of £2,180m. After interest, tax and minority interests, the profit attributable to BT's shareholders from these investments was £22m. 20 Results of certain subsidiaries EBITDA Total operating before profit (loss) before exceptional items goodwill amortisation £m and exceptional items Turnover £m £m Third quarter ended December 31, 2000 BT Cellnet group 776 82 40 Telfort 77 (34) (53) Esat Digifone 78 10 (3) Esat Telecom 32 10 - Nine months ended December 31, 2000 BT Cellnet group 2,121 370 203 Telfort (six months) 147 (69) (104) Esat Digifone 220 42 7 Esat Telecom 89 (10) (37) 21 United States Generally Accepted Accounting Principles The results set out above have been prepared in accordance with accounting principles generally accepted in the United Kingdom. The table below sets out the results calculated in accordance with United States Generally Accepted Accounting Principles. Third quarter 9 months ended December 31 ended December 31 2000 1999 2000 1999 £m £m £m £m Net income 186 395 356 1,385 attributable to shareholders Earnings per ADS (£) 0.28 0.61 0.55 2.14 Each American Depositary Share (ADS) represents 10 ordinary shares of 25p each. Shareholders' equity, calculated in accordance with United States Generally Accepted Accounting Principles, was £13,082m at December 31, 2000 (December 31, 1999 - £13,716m, March 31, 2000 - £13,634m). ___________________________________________________________________________ Non-financial statistics As at December 31, 2000, unless otherwise stated BT Wireless - selected operations BT Cellnet: Pre-pay customer base (000s) 6,690 Post-pay customer base (000s) 3,554 Total customer base (000s) 10,244 21/2 generation and WAP customers (000s) 1,010 Pre-pay ARPU (£ per year) 103 Post-pay ARPU (£ per year) 515 Blended ARPU (£ per year) 284 Viag Interkom: Pre-pay customer base (000s) 1,626 Post-pay customer base (000s) 1,544 Total customer base (000s) 3,170 21/2 generation and WAP customers (000s) 75 Pre-pay ARPU (£ per year) 90 Post-pay ARPU (£ per year) 338 Blended ARPU (£ per year) 236 Esat Digifone: Pre-pay customer base (000s) 665 Post-pay customer base (000s) 323 Total customer base (000s) 988 21/2 generation and WAP customers (000s) 23 Pre-pay ARPU (£ per year) 217 Post-pay ARPU (£ per year) 608 Blended ARPU (£ per year) 367 Telfort: Pre-pay customer base (000s) 720 Post-pay customer base (000s) 137 Total customer base (000s) 857 21/2 generation and WAP customers (000s) 2 Pre-pay ARPU (£ per year) 64 Post-pay ARPU (£ per year) 455 Blended ARPU (£ per year) 127 Note: ARPU is the annual average revenue per user Non-financial statistics continued As at December 31, 2000, unless otherwise stated BT Retail and Wholesale Exchange lines: Business, including wholesale (000s) 8,867 Residential, including service providers (000s) 20,010 Optical fibre in network (km millions) 5.0 SDH nodes 1,980 Next generation trunk switches 49 Digital local exchanges with IP grooming (a) 780 BT Dial IP ports connected to groomed local exchanges (000s) 260 ADSL enabled exchanges 681 (a) Grooming applies to internet type calls originating from BT customers. These calls are grouped together and then routed directly to BT's Dial IP platform or other operators' networks. BT Ignite Inter-city fibre network (kms) 50,000 Net hosting centres 21 BTopenworld Fixed ISP customers: Through wholly owned subsidiaries (000s) 1,539 Through ventures (000s) 2,636 Equity customers (000s) 2,307 ADSL customers (000s) 12 Genie registrations (000s) 2,546 ___________________________________________________________________________ Forward-looking statements - caution advised Certain statements in this results release 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: expectations regarding turnover, costs, growth and the communications industry; the possible or assumed future results of operations of BT and/or its associates and joint ventures; the impact on BT of Concert, the global venture with AT&T; expectations regarding capital expenditure and investment plans; expectations regarding the disposal of non-core businesses and the level of BT's borrowings. 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 and its new businesses; future regulatory actions and conditions in BT's operating areas, including competition from others in the UK and other international communications markets; technological innovations, including the cost of developing new products and the need to increase expenditure improving the quality of service; prolonged adverse weather conditions resulting in a material increase in overtime, staff or other costs; developments in the convergence of technologies; the timing of entry and profitability of BT, its new businesses and Concert in certain national and international markets and fluctuations in foreign currency exchange rates and interest rates.

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