AGM Statement
British Telecommunications PLC
18 July 2001
ANNUAL GENERAL MEETING
Wednesday 18 July, 2001
Sir Christopher Bland
Chairman
Welcome to BT's seventeenth Annual General Meeting. We have a tradition of
holding BT's AGM in different areas of the country, to give as many
shareholders as possible an opportunity to hear about the Company first hand.
So I am delighted that this year, after a ten-year gap, we are back in
Nottingham and that so many of you have been able to join us.
I am also delighted to be here at my first AGM as your Chairman. It is a great
honour to step into this role, one that was performed with great distinction
for many years by Sir Iain Vallance.
He steered the Company through many changes and oversaw its
transformation from a public monopoly to a competitive private sector company
focused on the interests of its customers and shareholders. He was a devoted
servant of BT - indeed, he has been described as having BT written through him
like a 'stick of rock'!
It has been a challenging year for BT and for the entire
telecommunications industry. When I joined your Company as Chairman on 1 May,
there was a pressing need to secure your Company's financial stability and to
build a platform for shareholder value.
We announced a plan of action on 10 May. In the ten weeks since then, much of
it has already been implemented. We have acted to reduce the company's debt.
We have successfully delivered the UK's largest-ever rights issue and raised £
5.9 billion. Many of you will have participated in this and I am delighted
that you delivered this major vote of confidence in BT.
At the same time, we had to take the unwelcome but necessary step of halting
dividends for the time being. But it would not have been logical or prudent to
ask shareholders for a substantial injection of funds from the rights issue
only to hand some of that money back again via dividend payments. It is,
however, our intention that FutureBT will return to the dividend list next
year. BT wireless, when it becomes an independent company, will determine its
own dividend policy.
We have acted to accelerate the disposal of non-core assets. During the past
year, we have sold, or agreed to sell, assets in Japan, Malaysia, Spain,
Switzerland, Canada and India. We have also sold various UK holdings,
including those in British Interactive Broadcasting and LineOne. We have
arranged the sale and leaseback of most of our property portfolio. And we have
sold our directories business, Yell. The success of these investments for our
shareholders is demonstrated by the significant profit realised from this
programme of disposals.
We are acting to transform the structure of BT through the demerger of BT
wireless. David Varney has been appointed as the first Chairman of BT
wireless. His experience at BG Group, where he steered the group through a
successful demerger, will prove extremely valuable. I am delighted that he is
able to join us today. He and Peter Erskine, BT wireless's CEO, are now
working on the plans for the demerger and for the creation of a substantial
new player in the European mobile market. BT wireless has a new finance
director, David Finch, and two strong non-executive directors have also been
appointed - Andrew Sukawaty and Paul Myners.
The demerger will give you stakes in two substantial European businesses -
BT wireless and Future BT - both of which are expected to be major components
of the FTSE 100. Within Future BT, there will be an increasing degree of
structural separation between the businesses of BT Retail, BT Wholesale, BT
Ignite and BTopenworld. These businesses are already benefiting from being
individually managed, each with a clear focus on its own marketplace. This
process of separation gives our people the freedom to make best use of their
skills, and it gives our customers a service clearly dedicated to their
particular needs.
We are regaining financial stability and retain formidable assets and reach in
both traditional and new-wave communications markets. The Company is returning
to health. Sir Peter, who is playing a major role in BT's transformation, will
expand on this in a moment.
I will simply record that our results reflected satisfactory operating
performance from the UK business and that - at the group level - earnings
before interest, taxation, depreciation and amortisation showed a small
increase.
Your Board has undergone a number of changes over the past year. As well as my
arrival, we have welcomed in an executive capacity Philip Hampton - who was
appointed to the Board on 1 November last year as Group Finance Director.
Philip is now in the thick of the action - playing an important role in the
transformation of BT, particularly in the stabilisation of the balance sheet
and in the recent rights issue. We also welcomed as non-executive directors
Sir Anthony Greener, formerly Chairman of Diageo, and Maarten van den Bergh,
who is Chairman of Lloyds TSB Group. Both bring valuable experience to the
boardroom.
During the course of the year, we bade farewell to Bill Cockburn, formerly our
Group Managing Director, to Robert Brace, our former Group Finance Director,
and to Keith Oates, a non-executive director.
And today marks Lord Marshall's last day as a Board member and Joint Deputy
Chairman. Colin Marshall joined the Board in 1995. His contribution since that
time cannot be overestimated. In particular, he has chaired the Remuneration
Committee - a thankless task in a modern PLC - with skill and wisdom. We thank
him and wish him well for the future. Following Colin's retirement from the
Board, Tony becomes sole Deputy Chairman.
Let me conclude this introduction to today's proceedings by assuring you of my
commitment to BT, to its customers and to its shareholders as we take forward
these profound changes to the Company.
Thank you for keeping faith with us through a difficult year. On May 10, I
said that it would require determined and rapid action by management to
achieve the transformation of BT. We have made a good start. The culture is
changing and I am confident that we will complete this process to the
satisfaction of our customers, employees and shareholders. Thank you for your
continued support.
Sir Peter Bonfield
Chief Executive
At last year's AGM, I spoke about the transformation that the communications
industry was going through.
The general feeling at that time was one of optimism. The entire telecoms
sector was looking forward to continuing high levels of growth. We were
expecting rapid advances as we moved from narrowband to broadband. We were
anticipating the arrival of new and potentially disruptive technologies, such
as voice over the internet. And, in BT, we concluded that it was the right
time for a radical restructuring of the company.
And we weren't entirely wrong. We have continued to see growth, although
perhaps not at quite the levels we were expecting. And we are pushing ahead
with our restructuring plans.
But, in many other ways, the communications sector is now facing a totally
different scenario. The industry as a whole is probably over-invested. Add to
this the high cost of 3G licences and it is not surprising that the general
outlook has been uncertain. I believe that this is a difficult but a passing
phase. We are currently in a situation:
- where many smaller companies may cease to exist;
- where new technologies may not overwhelm us as soon as we thought;
- where short-term operational performance is absolutely critical;
- and, above all, where cash is king.
All around the world, telecoms, media and technology share prices have been
under pressure. As part of this general situation, BT's share price has
fallen. However, over the past year, we have outperformed all our major UK
competitors. Vodafone, Energis, Telewest, C&W, Kingston, Colt and Thus have
all seen larger falls than BT. And by a considerable margin in some cases.
We've also done better than most of our main European rivals - in Spain,
Germany, France and the Netherlands. The real share price misery is currently
being felt by equipment suppliers such as Nortel, Marconi and Lucent - down to
about a tenth of what they were worth last year. But, despite a tough year, BT
was ranked 37th in the FTSE 100 for total shareholder return over the last
five years.
BT has moved forward strongly over the past year:
- we have continued to introduce innovative products and services, such as
Genie, our mobile internet portal;
- we have continued to develop our high-speed broadband network;
- we have continued to compete vigorously;
- we have continued with our radical restructuring plans and achieved our debt
reduction programmes.
As Sir Christopher said, our intention is to create two substantial listed
companies - BT wireless and Future BT. We are keeping both companies focused
on growth opportunities. And we are building on our commitment to customer
service. Let me bring you up-to-date with our plans.
The separation of BT wireless and Future BT, brought about by the demerger of
BT wireless, is scheduled to take place towards the end of the year, following
the necessary approvals. This will help us focus even more clearly on our
customers' needs. And it will help us to make even better connections with our
customers. Because, as our new advertising campaign says, 'More connections -
more possibilities'.
So let me tell you about our businesses. About how they connect with our
customers - and about the possibilities this gives us.
BT wireless is strongly positioned to develop 3G services by taking advantage
of its leading position in mobile data. It consists of our wireless operations
in the UK, Germany, the Netherlands and Ireland, and it includes Genie, one of
Europe's leading mobile internet portals, which has operations in six European
countries.
At the end of June, BT wireless had more than 16 million active customers, and
Genie had around 5.5 million registered customer accounts - up 41 per cent in
the first three months of this financial year.
The investments that we have made in mobile data are really beginning to pay
off in terms of market presence. BT wireless has already launched GPRS
services in three of its four markets, with Esat Digifone planning to launch
later this year. And it has 3G licences in the UK, Germany and the
Netherlands. Licences in Ireland are due to be awarded very soon.
BT wireless intends to grow profitable market share by targeting high-value
users in the business and consumer markets. And also by building our mobile
data markets.
Let's look now at Future BT, which includes BT Retail, BTopenworld, BT
Wholesale and BT Ignite.
Our commitment here is to create value from our acknowledged assets:
- our excellent service capability;
- our strong brand;
- our large-scale networks;
- our relationships with 21 million customers in the UK and Europe.
BT Retail is the UK's leading communications service provider - with
formidable assets and reach. Just look at some of the facts:
- BT is one of Britain's biggest brands - ranked highly for reliability, trust
and innovation;
- BT has the largest customer service operation in the UK, with more than
22,000 people and one of the largest and most advanced call centre operations
in the country;
- Businesses of all sizes rank BT as their top business partner;
- bt.com is Britain's third largest 'clicks and mortar' site, with more than
one and a half million registered users.
We are competing vigorously. Independent research continues to show that BT is
the UK's cheapest national provider for most phone calls. We have almost 10
million customers on BT Together call packages. And two million of them no
longer pay for local off-peak calls.
The recent deal under which BT Retail will market entertainment services from
BskyB and ITV Digital is a prime example of what we are doing to increase
customer choice and value. People sometimes mistakenly believe that they need
to move their phone service to cable to get digital TV. Obviously, that's not
the case - and that's the message we'll be pushing strongly in the weeks to
come.
Our main objective for BT Retail is that it becomes the industry's customer
service 'champion' within two years and delivers growth through the sale of IT
solutions, in association with BT Ignite and other partners.
BTopenworld is focused on mass-market internet access in the UK.
And on the tools that people use to make full use of the net. These are
services that customers value and which use BT's capabilities. BT is Britain's
best known ISP - internet service provider - and the number one expected
choice when internet users change ISP.
BTopenworld is building new revenue streams. It has quickly built a leading
position in unmetered internet access and in providing internet services to
small and medium-sized businesses. Looking ahead, BTopenworld is exploring new
services, such as video-on-demand and Pay TV.
Let's move on to BT Wholesale, which provides network services to
communications companies, network operators and service providers. The
large-scale networks in this business will be a major source of long-term
strength and high-level cash generation for BT.
Not only does BT Wholesale have massive networks - five million kilometres of
optical fibre and 115 million kilometres of copper - but it also has
state-of-the-art network management and value-added services.
BT Wholesale's turnover is around £11 billion. We aim to expand our sales in
the external, or 'non-BT', market substantially. There are plenty of new
network operators who will choose not to build their own networks, but to use
our facilities, our technology and our products instead. BT Wholesale's
objective is to be the carrier of choice for the whole communications
industry, not just BT, based on its products and services, as well as its
network.
And then there's BT Ignite. BT Ignite is a substantial international business,
with more than 400,000 major customers throughout Europe - and it's a growth
business too. BT Ignite focuses on releasing the potential of new and existing
technologies to transform the way its customers operate. The products and
services it offers are based around internet protocol technology - the
communications technology of the future.
Whether it's e-commerce consultancy, or providing internet services, or
delivering business software online, or running websites for customers, BT
Ignite has the answer - and that's just some of what they can do. This is all
backed up with a highly impressive optical fibre network that connects more
than 250 European cities, including the top 100 commercial centres.
To sum up - BT is continuing to move forward strongly. We're tackling the
issues that need to be tackled - such as reducing our debt. Our radical
restructuring positions us well for the future. Each of our businesses is
building on BT's past achievements and has the potential to succeed. We're
building on our strengths and we're keeping our focus on growth.
Above all, we are positioning ourselves to deliver value to our customers and
to you - our shareholders. With your continued support, I'm confident that we
will succeed.