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  1. 1. Industry Analyst Briefing g 7th floor Boardroom Faraday Building 18 November 20101
  2. 2. Industry Analyst Briefing g Sally2
  3. 3. BT in the wholesale market A global segment Europe’s largest Wholesale Operator Leveraging Le eraging BT’s assets and economies of scale worldwide Global TelecomsBT Ireland Markets Addressing the market as a global segment through collaboration Supporting local and multinational p operators Moving towards a global portfolio Leveraging IP as a global platform Supported by BT Operate and BTID3
  4. 4. BT Wholesale £1,284m EBITDA in 2009/10 YoY EBITDA growth Reversed decline; underlying business stable underlying % Serving ll S i all segments of th i d t i l di t f the industry, including broadcasters and content businesses £1.8bn of MNS contracts signed 09/10 (£1.2bn reported in 08/9) £1 billion+ signed H1 10/11 08/9). Simplifying and reinventing portfolio for global, IP market. IPX growing, UK and international Enhancing our capabilities; expanding our addressable markets Driving sustainable improvements in customer FY 2009/10 revenue by product (£3.2bn) experience and satisfaction i d i f i Voice 4 14 Achieving sustainable cost reduction Transit 23 Broadband Data 29 MNS 12 % Other 184
  5. 5. Global Telecoms Markets BT Ireland wholesale Key facts Key facts One island strategy C. 1,000 customers Broad portfolio of voice, broadband and Leveraging BT assets, particularly i L i i l l in data and managed services Europe Largest fibre network in Ireland Mainly providing voice and bandwidth: First to market with Next gen Ethernet broadening b d i portfolio with IP b f li i h basedd Delivering two key State-supported services network projects: Opportunity to export successful UK DETI NGA Project in N Ireland MNS strategy S National Broadband Scheme in Republic of Irelands 200 people supporting customers Networks managed for three/four MNOs in across 170+ countries worldwide Republic of Ireland p Telconsult - a consultancy business of Key Customers c. 25 people providing specialist 02 Ireland, Vodafone Ireland, 3 Ireland Telecom advice in emerging markets Carriers, Carriers eg C&W COLT AT&T Sprint C&W, COLT, AT&T, and project delivery UTV, IFA (White label) and UPC, (Ethernet Backhaul)5
  6. 6. BT Wholesale Q2 2010/11 financial performance Q2 2010/11 Change 1 Adjusted revenue £1,054m £1 054m (5)% 2 EBITDA £326m (5)% 2 Operating cash flow £222m £10m Adjusted revenue down 5% Revenue and EBITDA trend down 2% excluding transit and regulatory charge 2.0% 1.0% Wholesale managed network services 23% revenue ex 0.0% of external revenue transit and one-of f s Q1 Q2 Q3 Q4 Q1 Q2 -1.0% Net operating costs down 5% -2.0% Wholesale EBITDA ex Revenue and EBITDA excluding transit and -3.0% one-of f s one-off broadly stable -4.0% 2010/11 2009/10 1 prior year restated for impact of customer account moves and adjusted for changes to internal trading model6 2 prior year restated for customer account moves
  7. 7. BT Wholesale customers BTW Revenue by Sector 8 3 Mobile 20 Transit 18 Fixed ISP 29 23 Reseller % Broadcast Mobile Internet Fixed Line Brand Broadcasters Network Service Service Extenders & Content Operators Providers Providers Owners7
  8. 8. BT Wholesale what we sell Voice Data Broadband Transit MNS Other ✔ ✔ ✔ ✔ ✔ ✔ Mobile Network Operators ✔ ✔ ✔ ✔ ✔ Internet Service Providers Fixed Line Service Providers ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ Brand B d Extenders ✔ ✔ ✔ ✔ Broadcasters & Content Owners Leveraging reuse and economies of scale across our portfolio8
  9. 9. Wholesale key market trends Ongoing Decline in legacy voice and conveyance Consolidation transit Convergence analogue circuits Capex optimisation Growth Accelerating growth in bandwidth for digital content g IP platform services Managed Network Services g9
  10. 10. BT Wholesale revenue evolution ► Transit – revenue declining as a result of direct connection, MTR reduction – no or low EBITDA impact ► Broadband/data – revenue declining – mostly regulated returns ► Managed network services – revenue growing – providing sustainable long term margins ► IP platform services – revenue growing – healthy margins y g Scope of MNS contracts widening across revenue base10
  11. 11. BT Wholesale Customer experience Improving Sustained focus on RFT the h Customer service faults reduced by 2/3 Experience in 3 years Data circuit reliability doubled 2/3 of broadband faults eliminated ‘Right First Time’ reduces costs Reduced 12 point improvement in RFT Improved costs & Customer Customers define our complexity Satisfaction & Loyalty priorities Putting control in customers’ hands Growth DLM, knowledge-based , g th through t t h trust diagnostics and an engaged workforce Key strategy for Growth11
  12. 12. BT Wholesale cost reduction RFT - the foundation of sustainable cost Total Operating Costs reduction £m £ BTW Net operating costs down 19% in 3 yrs cost of sales reflects declining revenue profile and sales mix direct costs down 47% over 3 years BTW Headcount reduced by 40% over three years Direct Costs (Service + SG&A) 13% reduction between Q2 2009 and Q2 2010 £m 2/3 direct; 1/3 indirect Tight control of discretionary spend12
  13. 13. BT Wholesale strategy No 1 for customer experience Driving Reduce costs; sustainable improve margins i i Growth in Grow the business profits Performance through Engagement13
  14. 14. Industry Analyst Briefing g Brian Fitzpatrick14
  15. 15. BT Wholesale customers Focus Focus Mobile Internet Fixed Line Brand Broadcasters Network Service Service Extenders & Content Operators Providers Providers Owners15
  16. 16. BT Wholesale customers - MNOs Mobile A market that is consolidating Network Operators Everything Everywhere; Vodafone & O2 Data (video) growth is a huge challenge Accelerating through smart phones, tablets and dongles Managed Ethernet Access Services WiFi and IP Offload Entry into fixed line services Orange UK MNS contract for fixed line services Vodafone and O2 White Label fixed line for SME customers Journey to Long Term Evolution y g IP Core (O2) Operator-neutral infrastructure?16
  17. 17. BT Wholesale customers - Broadcast Broadcasters 50 years of experience in supporting the broadcast & Content and digital content market Owners Now f ll i t N fully integrated within BT Wh l t d ithi Wholesale reflecting l fl ti converging industries Media Distribution over our dedicated, MPLS-based Global Media Network to over 170 countries worldwide Digital Media Management, Production a d Post g a ed a a age e , oduc o and os Production. Connectivity to fully managed solutions Channel strategy launched this year to expand global sales capability capability. RRSat and Telstra resale agreements signed 2010.17
  18. 18. BT Wholesale Global Media Network UK Pinewood Studios Sky BBC London Teleport Chiswick Grays Inn Park Road Technicolor T h i l ITV Bell B ll Canada Rogers ATN Canal DMC Echostar Sat CET Fox NBC Telefonica Sky Italia Hallmark Technicolor Comcast TV 5 France Sky Logic Reuters New D lhi TV N Delhi DirecTV Arqiva Bharti Teleport Essel Aastha TV Shyam Star TV Zee TV TVBi 21C Sun TV Nigeria Technicolor CNBC Astro Starhub Teleport ST Teleport Network 7 CNBC Network N t k Nine18
  19. 19. BT Wholesale an established managed services business Majority of largest accounts now MNS Revenue under long term contract customers 40% Solutions for multiple CP models 32% infrastructure-free (white label) 10% managed services full or partial outsourcing 2007/8 2008/9 2009/10 Regional NGA bid and broadcast market R i l bids d b d k create new opportunities Value of MNS contracts signed Based around core portfolio high % of standard products embedded well established operational capabilities £1.8bn £1.2bn £1.1bn low capital intensive contracts Opportunity to export the model internationally 2007/8 2008/9 2009/1019
  20. 20. MNS in action KCOM “18 months in, and the BT Wholesale managed CUSTOMER BENEFITS: services contract is providing great value and Extended reach across the UK via competitive advantage for the Group.” BT’s ti BT’ national network l t k Significantly lower fixed costs and Bill Halbert, Executive Chairman, KCOM Group cap-ex Helping KCOM Group to create new market opportunities June 2009 Sept 2009 March 2010 Nov 2010 • Network • Full network • BT and Kcom • Introduction of Supported introduction of new IP- management, transition to BT networks new Kcom IP based services b d i maintenance & complete interconnected voice services operational BENEFITS FOR BTW: • 130 KCOM • National Network • Dedicated enhancement Long term customer relationship employees join transformation Internet Access •M Management of f BT plans complete l l t added to K dd d Kcom vendors and 3rd portfolio Incremental business on the BT • 3rd party contract • Day to day party contracts operations network - improves scale novation strategy • Enhanced implemented management of Services economies national network propositions • Future network developed investment • Spring launch of strategy Hosted IPT services20
  21. 21. MNS in action Virgin Media “BT Wholesale continues to work on several CUSTOMER BENEFITS: strategic initiatives to support Virgin Medias £7m PA TDM network management growth outside our network footprint.” footprint savings g Vito Morawetz, Director of Interconnection, Virgin Media International network reach across 170 countries without the need for capital investment Dec 2007 J ne 2009 June April 2010 In progress Portfolio extended - international • Take over • BT’s global • Management of • CRM systems voice, video and data solutions for management, MPLS network all power integration UK business customers operation and p underpins VM’s p installations p g programme maintenance of international IP Cost efficiencies through • Across VM estate • IVR, ‘screen- UK fixed TDM VPN service - 700 sites popping’ and simplification of power supply chain; voice network • Supporting sale mobility consolidation of external suppliers • Data centres, • 156 switches of international • Supporting switching sites MPLS circuits delivery of Enables first VM self-care services • 140 people TUPE and branch into BT MSL • 30 circuits offices Consumer ‘self- to consumer base delivered to care’ service • Management of • Installation of key digital TV multinational generators, UPS • Largest BTW IVR BENEFITS FOR BTW: customers t platform service provider and DC batteries deployment in UK Incremental growth of customer relationships • Management of business Major Works p g programme Diverse managed se ces revenue e se a aged services e e ue – beyond network management21
  22. 22. MNS in action MBNL “Special thanks go to our key partners who CUSTOMER BENEFITS: are rightly proud of their roles in this project.” Greater 3G coverage depth and capacity in towns and cities Graham Payne, managing director, MBNL Extended rural coverage to new and remote locations Significant cost efficiencies g Oct 2008 June 2009 Aug 2010 Nov 2010 across shared mobile network infrastructure • Appointed to • MEAS delivery • Ramp up in • Over 4,000 deliver MEAS programme volume of 100Mb MEAS sites Revenue growth without Ethernet begins Ethernet delivery delivered pressures of major backhaul service (Oct 09) • 12,000 shared infrastructure investment • Site surveys, 3G site target • Target of 7,500 network design • Targeted Enormous capacity uplift to completed base sites on and engineering increase of • All 3G sites, , support mobile data tsunami consolidated 3G bandwidth at •P j t Project network critical sites transmitters, Uplift in speed at the newly management base station kit consolidated cell sites • BT trebles • Bandwidth • Service and backhaul bandwidth at trebled at 2,000 4,100 sites using development and sites connected to BENEFITS FOR BTW provisioning core networks legacy TDM • Availability of Extension of our existing long circuits • Trial migrations • c.5,000 sites term relationships Native Ethernet switched off carrying live traffic (July 09) • 2,000 sites fully Showcases benefits and value decommissioned of BT’s MEAS Ethernet service BT s22
  23. 23. BT Wholesale our latest MNS win INNOVATIVE APPROACH Landmark contract building on BT’s plans Bringing fibre services to areas of the to bring fibre to two-thirds of the UK by UK faster than commercially viable y 2015 Avoiding infrastructure duplication Aim for 80-90% of Cornish businesses to have access to fibre broadband by 2014 Ensuring services are available on an open, wholesale basis p Tens of thousands of local businesses to benefit, creating 4000 and protecting 2000 local jobs Half local businesses expected to receive up to 100Mbit/s fibre broadband Marketing, grants, advice & support available Rollout starts immediately, first customers connected in early 2011 Satellite S Other CP Other CP Mobility y Other CP Other CP23
  24. 24. BT Wholesale transforming our sales force Sales Productivity How we’re doing it Skills and capability assessment 103% 101% Skills development and coaching Sales leadership strengthening and refresh Global Account g Management Proposition development 87% 116% Cost reductions/ Partnership ( TATA) P t hi (eg Customer Accreditation24
  25. 25. Industry Analyst Briefing g Cameron Rejali25
  26. 26. BT Wholesale products Mobile Internet Fixed Line Brand Broadcasters Network Service Service Extenders & Content Operators Providers Providers Owners26
  27. 27. BT Wholesale Broadband BT Wholesale offers a choice to meet every customer’s needs Underpinned by service reliability 100Mb/s Wholesale ent ds Choi of speed olesale Conte Magaged BB B Broadband Connect Wholesale Managed Managed Connect 40Mb/s - Copper Broadband Connect network - Fibre services ice 24Mb/s Who Datastream IPstream 2Mb/s DIY White Managed Label Service Choice of QoS options Mar 09: Up to 8M - 99%+ of EUs Mar 09: Up to 8M - 99%+ of EUs Mar 09: Up to 8M - 99%+ of EUs Mar 11: Up to 24M - 70% of EUs Mar 11: Up to 24M – 70+% of EUs Mar 10: Up to 24M - 55% of EUs Jan 11: 4million passes on FTTC Jan 12: 10m premises passed on FTTC 2009/10 2010/11 2011/1227
  28. 28. BT Wholesale Digital Content Homes/businesses Icon Content Service Provider Data Centre Wholesale Content Connect Up to 8Mbit/s Standard & Copper Wholesale Premium Content Wholesale Broadband C W Icon Connect C t Copper Basic Exchange Up to 24Mbit/s Fibre Copper ISP Icon Up to 40Mbit/s Cable with improved upstream rates Connect network Reducing content distribution LLU costs by up to 65% network Icon Mobile Icon Icon Network Up to 100Mbit/s with improved Up to 7Mbit/s upstream rates and beyond28
  29. 29. BT Wholesale Data Connectivity 10Gb High speed Wavestream Ethernet 1Gb Managed 622Mb/s network Wholesale services 155Mb/s Ethernet (incl mobile) Private Circuits & Partial Private 2Mb/s Circuits DIY Managed Services Providing customer choice 154,000 TDM PCs; c.80% @ 2M (incl. RBS, PPCs, SiteConnect) ) 156,000 TDM PCs; c.80% @ 2M March 11: 1,000 Ethernet Nodes March 09: 345 Ethernet Nodes (incl. RBS, PPCs, SiteConnect) Speed extended to 100Gbps 1Mbpc – 1Gbps on Ethernet Oct 10: 900 Ethernet Nodes March 11: >10,000 mobile circuits 22 mobile circuits delivered c. 7500+ MEAS circuits delivered will be delivered (estimated) 908 fixed circuits delivered c. 4500 fixed circuits delivered c.10,400 fixed circuits delivered 2009/10 2010/11 2011/1229
  30. 30. BT Wholesale Voice TDM and IP voice capabilities Wholesale Calls and line rental Bundles ith Broadband B dl with B db d IP Exchange and Hosted IP Voice Bridging between the TDM and IP worlds Wholesale Calls TDM Transit and Conveyance IPX volumes x 2. Wholesale Calls: 100 customers 125 customers; further 20 in TDM Transit and Conveyance Sandbox testing Hosted IP Voice trials start IPX Global Launched Wholesale Calls IPX launched IPX Pre paid launched TDM Transit and Conveyance First SIP I Interconnect launched Hosted IP voice launched IPX – key global growth platform. 2009/10 2010/11 2011/1230
  31. 31. BT Wholesale global Interoperability with IPExchange Call Number Billing Management manager translation & information What is it? charging IP i t interoperability – a clearing house bilit l i h for IP traffic connecting: VoIP to VoIP or TDM video and data IP traffic to 3G mobiles CP BBV IP BT communications IP clearing house CP BBV It supports: network network wide range of standards low latency SS7 SS7/IP voice features from TDM world PSTN Mobile GSM signalling over IP network network Number management, portability and least cost routing What’s in it for customers? at s t o custo e s It’s simpler and cheaper to buy from BT than to do it themselves We offer expertise, economies of scale and act as a trusted partner A roadmap to offer value added services to support customer innovation31
  32. 32. BT Wholesale M&B Create Manage Distribute Man naged customer solutions Value Chain Content Distribution Management Processing Content Creation Content Flow Manage. Schedule & Broadband, Mobile, Edit & Syndicate, Store, Syndicate Store Pay TV Collaborate Protect Production Broadcast Management Customer Delivery Content creation Content monetisation (contribution services) (distribution services)32
  33. 33. BT Wholesale agile media Broadcast event Channels Platforms management Broadcasters & Content 090x premium RIDE – the UK’s leading Owners mass call vote termination platform BT Agilemedia rate Portal 08 & 03 non WAVE – mass call handling Winner Selector geographic IVR platform for competition Vote Aggregator entry and compliant card payments Premium rate Studio Manager SMS MAP Mobile application platform Reporting Online payments p y SMS and MMS33
  34. 34. BT Wholesale products Voice Data Broadband Transit MNS Other Mobile Network Operators ✔ ✔ ✔ ✔ ✔ ✔ Internet Service Providers ✔ ✔ ✔ ✔ ✔ Fixed Line Service Providers ✔ ✔ ✔ ✔ ✔ ✔ Brand Extenders ✔ ✔ ✔ ✔ ✔ ✔ Broadcasters & Content Owners ✔ ✔ ✔ ✔34
  35. 35. BT Wholesale growth in new and adjacent markets Fixed Broadcast MNOs ISP Reseller operators Mobility ✔ Global Interoperability ✔ ✔ ✔ ✔ Digital content ✔ ✔ ✔ ✔ ✔ Publicly-funded NGA ✔ ✔ ✔ ✔ IP Platform services ✔ ✔ ✔ ✔ ✔ Managed Services ✔ ✔ ✔35
  36. 36. and36
  37. 37. BACK UP37
  38. 38. BT Wholesale customers – Internet Service Providers Internet The largest broadband provider in the UK Service Providers Committed to competition-ready platforms A mixed economy for broadband (copper/Fibre) ADSL. ADSL2+. FTTC. FTTP. Unique national reach U i ti l h Products, Managed Products or fully managed solutions Emerging Content Delivery capability38
  39. 39. BT Wholesale customers – fixed line operators Fixed Line BT Wholesale’s traditional heartland business Service Providers Competition and cost reduction driving market consolidation Dominated by larger, typically multinational Operators Typically asset-rich organisations. Key M K Managed N t d Network S i k Services market opportunity k t t it Key Market for data connectivity (Private Circuit and Wholesale Ethernet). Customers can also be Wholesale competitors39
  40. 40. BT Wholesale customers Brand Evolving market based on BTW’s White Label platform Extenders capabilities Some or all of broadband, calls, customer services, end user billing, logistics Offering rapid, low risk, low capital intensity entry into the UK g p , , p y y telecoms market Adding Fibre and Digital Content Distribution capabilities. 4 million + UK h illi homes and b i d businesses on Whit L b l platforms White Label l tf today40