bt group plc investor meeting slide pack · 2020-05-21 · 8 fttp –future proof network...

BT Group plcInvestor meeting slide pack

1

May 2020

Contents

2

Overview and Strategy

Consumer 16

Enterprise 20

Openreach 27

Appendix 31

Global 23

Overviewand Strategy

Consumer Enterprise Global Openreach Appendix

3 24

28

32

Overview and Strategy

3

Who we are and what we sell to our customers

4

B2C Fixed Access Network

Revenue

Products

Customers

EBITDA

Divisions

All FY 2019/20 financials; both Revenue and EBITDA adjusted for specific items. 1 Small-medium enterprises

Consumer

£10.4bn

UK consumers

Mobile, voice lines,

broadband,

TV, BT Sport

£2.4bn

£1.1bn

Enterprise

£6.1bn

UK SMEs1, Corporates, Public

Sector, Communications

Providers

Broadband, networking, voice,

mobile, IT services, Ethernet,

Ventures services

£2.0bn

£1.4bn

Global

£4.4bn

Multi-National Customers

Managed network,

IT services, Security products

£0.6bn

£0.3bn

Openreach

£5.1bn

Communications Providers

Fibre and copper broadband,

voice, Ethernet

£2.9bn

£0.6bnNormalised FCF

UK B2B Global B2B

EBITDA: £7.9bn Normalised free cash flow: £2.0bnRevenue: £22.8bnBT Group



Our strategy – building a better BT for the future

5Overview

and StrategyConsumer Enterprise Global Openreach Appendix

Our

strategy

Drive sustainable growth in valueLead in converged connectivity and services, seize new business opportunities and deliver industry leadinefficiency

Our Goal

Simplified, Lean & Agile

Business

Differentiated

Customer ExperienceBest Converged Network

Our Purpose

Our Values

A valued partner helping build better digital lives

SimplePersonal Brilliant

To use the power of communications to make a better world

A brilliant place to work

Customer

Colleagues

Community

BT – strong market position, uniquely positioned

6Overview


BT is a clear market leader

28mB2C

relationships

1m+B2B

relationships

BT has a portfolio of strong brands

Fixed

infrastructure

• Superfast speeds: c.90% coverage

• Ultrafast speeds: 5.4m premises passed

Mobile

infrastructure

• Award-winning 4G and 5G network

• 5G now in over 80 locations

Strategic

partnerships

• Content, technology, device and service

vendors

Multi-channel sales and servicePositioned across fixed, mobile and strategic partnerships

100% UK & Irelandcontact centres

from January 2020

Over 500 BT/EE dual-branded

stores

800MNC1

relationships

1 Multi-national customers

Launched a teamof Home Tech

Experts to help install

the latestBT technology

Apps: MyBT (4.4m subs.)

MyEE (12.6m subs.)Plusnet Mobile

Business mobile

FY 2019/20 Highlights – Building a better BT for the future

• Results in line with expectations

• Growing converged and new product offerings

• Improving customer experience and NPS1

• Step change on fairness agenda

• Phase one transformation largely complete

• Streamlining the business through asset sales

• Leadership maintained on FTTP2

and 5G - deploying at pace

7

Short-term focus to maintain critical connectivity for the

nation

1 Net promoter score

2 Group net promoter score (NPS) shows the cumulative movement in our customers’ perception of BT since April 2016. It’s a combined measure of ‘promoters’ minus ‘detractors’ across our business units

Group NPS Improvement2

-5

0

5

10

15

20

25

30

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

2016/17 2017/18 2018/19 2019/20

Gro

up

Pe

rce

ptio

n M

ove

me

nt



8

FTTP – future proof network technologyBuilding across UK, at high quality and competitive cost

• Almost 2.6m premises passed

• Min 2m premises build in 2020/21, 4.5m by March 2021

• Target increasing to pass 20m by mid- to late-2020s

• Average build cost of £300-£400 per premises passed1 across 20m

• Currently passing c.32,000 premises per week

Driving customers onto the FTTP network

• Constructive discussions with major CPs2

Enablers to support a fair return on investment

• WFTMR3 a significant step forward

• Constructive discussions with Ofcom and Government

• Critical that regulation implemented as expected

Estimated mid-case project returns4

estimated 10%-12%0.6

1.2

2.6

c.4.5

20.0

0

4

8

12

16

20

2017/18 2018/19 2019/20 2020/21 Mid-late

2020's

2-3m p.a.

FTTP Premises Passed (millions)

1 The gross build costs in schemes supported by public subsidy which we also expect to contribute to the 20m plan are significantly higher than this range; the build cost of FTTP deployed at new housing sites which also contributes to the 20m is also higher since the build and provision stages are typically collapsed into one phase and there is less existing passive infrastructure available to use2 Communications Providers

3 Wholesale Fixed Telecoms Market Review

4 Pre-tax nominal rate of return



c.9,000

gross

role

reduction

£1.6 bn

pa gross

cost

reduction

£670m

cost to

achieve

Progress today:

largely complete

c.13,000

gross

role

reduction

c.£1.5bn

pa gross

cost

reduction

c.£800m

cost to

achieve

March 2021

targets

9

Existing transformation ahead of schedule, and the modernisation of BT

• Phase one transformation programme delivered a year ahead

of schedule

• Next phase of transformation: the modernisation of BT

– annualised gross cost savings of £1 billion pa by March 2023,

£2 billion pa by March 2025

– to be realised through reductions in total labour costs and

spend with external suppliers

• Taking actions to mitigate impact of Covid-19

• Disposals made to better focus on core business

– sale agreed of selected domestic operations and

infrastructure in Latin America

– sale agreed of Spanish managed ICT services business

– entered exclusive negotiations on the sale of domestic

operations in France

– sale of BT Fleet Solutions completed, and sale of Tikit

announced in fourth quarter

Phase one transformation Modernisation of BT

£2bn pagross costreduction

£1.3bncost to

achieve

March 2025

targets

£1bn pagross costreduction

£0.9bncost to

achieve

March 2023

targets



10

Embarking on the next phase of modernisation

Learn Buy Get Use Pay Support

New outcomes … … realised by end-to-end value streams … … focused on four missions

Consumer

SME

Multi National Customers

Corporate and public sector

Wholesale

Value

streams

Customer journeys

Industryleading

Customer Experience

Best place to

work

Colleague Experience

Industry top

quartile

Productivity Migrate customers from and decommission legacy networks

Accelerate modernisation of digital and IT architecture

Transform end-to-end customer journeys

Simplify product portfolio



Continuing to build a better BT for the future

• Results in-line with expectations

• Delivered positive progress in all strategic focus areas

• Critical decision areas:

– revising dividend policy to:

– create capacity for value enhancing investments

– manage confidently through the Covid-19 crisis

– accelerating FTTP with 20m premises passed target by

mid- to late-2020s

– modernisation delivers gross annualised savings of £2bn

over five years

– supporting the nation through the Covid-19 crisis

11

Short term focus to maintain critical connectivity for the

nation



Q4 and FY 2019/20 results – financial overview

Q4 2019/20 Change YoY FY 2019/20 Change YoY

Adjusted Revenue1

£5,632m (4)% £22,824m (3)%

Adjusted EBITDA2 £2,007m (1)% £7,907m (3)%

Capital Expenditure (excluding BDUK clawback) £3,943m 5%

Normalised Free Cash Flow £2,011m (18)%

Dividend

• FY 2019/20 – final dividend suspended

• FY 2020/21 – all dividends suspended

• FY 2021/22 – expected dividend 7.7 pence per share

progressive policy for future dividends

12

Prior year comparatives on IFRS 16 pro forma basis

1Before specific items

2 EBITDA before specific items, share of post tax profits/losses of associates and joint ventures and net non -interest related finance expense



Dividend – creating capacity for value creative investments

13

• Suspended the final dividend for 2019/20 and all dividends for

2020/21

– To be reinstated at 7.7pps in 2021/22 with a progressive

dividend policy beyond this

– c.£2.5bn from suspended dividends over next 18 months

and c.£750m pa beyond this

• Creates capacity for investment and enables the Group to

deal confidently through the Covid-19 crisis

• Provides clarity on our dividend intentions

• Reinstated level more sustainable allowing for future growth

• Commitment to BBB+ through cycle and minimum BBB credit

rating ensures financial strength and flexibility, gives customers

confidence and supports a stronger covenant for the pension



Adjusted Revenue1

Adjusted EBITDA2

Full Year to 31 March 2019/20(IFRS 16)

Change YoY2019/20(IFRS 16)

Change YoY

Consumer £10,388m (2)% £2,426m (5)%

Enterprise £6,093m (5)%3

£1,965m (3)%3

Global £4,361m (8)% £634m 5%

Openreach £5,112m 1% £2,858m (3)%

Other £1m n/m £24m n/m

Intra-group £(3,131)m 6%

Total £22,824m (3)% £7,907m (3)%

14

Customer facing units results summary

1Before specific items.

2 EBITDA before specific items, share of post tax profits/losses of associates and joint ventures and net non-interest related finance expense.

3 Year-on-year percentage change figures include the impact of divestments. Excluding the impact of divestments FY2019/20 revenue decreased 2% and EBITDA decreased 1%.



Focused on sustainable growth in value

15Overview


Drive sustainable growth in value

Grow EBITDA

Grow free cash flow

Invest for growth

Support pension fund

Progressive dividends

Maintain strong balance sheet

1 BT pension scheme

• Smooth long-dated debt

maturity profile

• Commitment to BBB+

through cycle and

minimum BBB credit rating

• Suspended final dividend

for 2019/20 and all

dividends for 2020/21

• To be reinstated at 7.7pps

in FY2021/22 with a

progressive dividend policy

beyond this

• Fair and affordable

recovery plan

• £2bn bonds issued to BTPS1

in 2018/19

• £900m payment to BTPS1 in

2020/21

• Target 4.5m FTTP by end

2020/21, 20m by mid- to

late- 2020s

• Aim to double 5G footprint

by end 2020/21

• Modernisation

programmes

Consumer

16

Consumer – at a glance

17Overview


#1 value brand

High NPS

Broadband and mobile

Seek value, honest service

Less interested in convergence

EE and BT Consumer brought together from 1 April 2018 with three distinct brands

#1 for ultrafast fibre

Convergence ready

Premium content

Reliability and peace of mind

Connectivity for the whole family

#1 UK mobile brand

#1 mobile network

Digital savvy, data hungry, younger

audience

Mobile handset most important device

31%of BT Group EBITDA

in FY 2019/20

>14mhomes with

30m relationships

>1bnyearly customer

touchpoints

46%of BT Group revenue

in FY 2019/20

Home-centric Mobile-centric Value-focus

Consumer – strategy to become UK market leader in convergence

18Overview


1m

13m(homes with no

relationship with Consumer brands)

5m(BT homes with no EE

relationship) +

5m(EE homes with

no BT relationship) +

3m(homes with a

relationship withboth BT & EE) +

13m(homes with no relationship with

Consumer brands)

5m(BT homes with no EE

relationship)1

5m(EE homes with

no BT relationship)1

3m(homes with a

relationship withboth BT & EE)1

Become the UK market leader in convergence, to drive sustainable growth in value

Personal Simple Brilliant

To use the power of communications to make a better world

Three

great brands

1

One smart

network

2

Best personal and local

service

3

Personalisation through

data and digital

4

Best for

partnerships

5

Open, super-

aggregator TV

6

Best place to work

Our vision

Our strategy& enablers

Our values

Our purpose

1As of May 2018 excludes EE prepaid customers

• Covid-19 response:

– removing all data usage caps on home broadband

– unlimited mobile data for all NHS workers

– BT Sport customers offered two months of bill credit

– landline-only customers charge cap of £5

– tech skills partnership with ITV

– UK-based call centres maintaining customer support

• Covid-19 impact:

– lower BT Sport revenue

– lower roaming volumes

– lower transaction volumes

– £9m Covid-19 specific item charge

19

Consumer – standing by our customers

Q4 2019/20

Change YoY

FY2019/20

Change YoY

Revenue £2,493m (4)% £10,388m (2)%

EBITDA £626m (7)% £2,426m (5)%

Capex £948m 0%

BT & ITV Tech Tips Helping NHS workers



Enterprise

20

Public Sector &

Major Business

(exc. ROI)

29%

Wholesale

(inc. MVNO

and M&B)

26%

Ventures

8%

SME

27%

Corporate

10%

Enterprise – customers include over half the FTSE 350

21Overview

and StrategyFinancials Consumer Enterprise Global Openreach Appendix

1 FY 2019/20

Revenue by sales channel1 and customers

Products:

Broadband, Mobile, Networking, IT

services, Business apps and Phone

Systems including cloud-based and

on premise

Broadband with built-in 4G Assure backup

5G mobile on the UK’s no.1 network

Enterprise – at a glance

22Overview


Enterprise operating costs

5%

Voice lines – 000s lines/seats

-

500

1,000

1,500

2,000

2,500

3,000

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

2017/18 2018/19 2019/20

Traditional voice lines VoIP seats

Enterprise Priorities

6

1

2

5 3Innovate in converged

products and new

propositions

Lead the migration to

IP

Simplify operations and optimise sales

Leverage the UK’s best networks

Maximise our market reach

Provide

straightforward

and reliable

customer

experience

27% of

group revenue in FY 2019/20

25%of

group EBITDAin FY 2018/19

1.2m Customers

4

900

950

1,000

1,050

1,100

1,150

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

2018/19 2019/20

£m


– ensured businesses can access the best remote working

tools

– enhanced monitoring capability for all critical services,

prioritising faults as they may arise

– maximised 999 capacity

– providing the justice system with more conference solutions

and facilities

– enabled hospitals across the country to provide electronic

tablets to patients in intensive care


– £51m charge taken in Q4 2019/20, mainly for expected

credit losses against trade receivables

– expect further impact on roaming revenue and from

company insolvencies

– anticipate lower volumes compared with previous

forecasts

23

Enterprise – supporting customers more than ever before

Q42019/20

Change YoY

FY2019/20

Change YoY

Revenue £1,543m (3)%1

£6,093m (5)%1

EBITDA £507m (2)%1

£1,965m (3)%1

Capex £501m (9)%

999 workload2

1Year-on-year percentage change figures include the impact of divestments. Excluding the impact of divestments FY 2019/20 revenue decreased 2% and EBITDA decreased 1%.

2 Workload is derived from volume of calls x average length of call

500

600

700

800

900

1,000

1,100

1,200

Actual Workload Typical Workload

Workload (Hours)



Global

24

Global – repositioning, focusing on core MNCs, differentiating

25Overview


We are radically

repositioning our

business around our

core markets

We are

future-proofing

Global by building

value in strategically

selected areas of

growth

We are moving at

pace to reduce risk

and deliver higher

returns

Globally Managed

MNCs 200

customers

Other Focus MNCs

600 customers

Regional Enterprise

4,400 customers

Industry Verticals

Resources, Manufacturing & Logistics

Banking

& Financial

Services

Technology,Life Sciences & Business Services

£4.4bn

Revenue

FY 2019/20

c.5,200

Total

customers

served

800

Core MNC

customers

>180

Countries we

deliver

services in

c.3,000

Security

professionals

16

Security

Operation

Centres

(SOCs)

125,000

Protect BT

from over

125,000

cyber

attacks each

month

Global – increasing asset-light operation with improved returns

26Overview


1 Return on capital employed

Improving

ROCE1


– enabled 130,000 employees to work remotely across 170 countries for one MNC

1

– sold 40,000 VPN connections in one week in Spain to facilitate homeworking

– provided security solutions for trading floors now operating remotely

– providing IT support for multiple public hospitals in Northern Italy

– provided remote access for 45,000 Lloyds Banking Group employees


– Q4 trading results not materially impacted

– additional loss provision of £35m taken against trade receivables and contracts at 31 March 2020

27

Global – delivering secure, remote working for global businesses

Q4 2019/20

Change YoY

FY2019/20

Change YoY

Revenue £1,081m (10)% £4,361m (8)%

EBITDA £175m (1)% £634m 5%

Capex £223m (9)%

Conference call and voice volumes (selected products)

Million minutes per week

0

50

100

150

200

12-Jan 26-Jan 09-Feb 23-Feb 08-Mar 22-Mar

0

100

200

300

400

Conference calls (LHS) Voice (RHS)

1Multi-national customer



Openreach

28

Openreach – at a glance

29Overview


• Independent, wholly owned subsidiary of BT Group plc

• Maintains and builds an access network between homes and business and exchanges; huge engineering operation

• Ofcom regulates >90% of Openreach revenue

• Commitment to serving >600 CPs nationwide on equal access

terms

• >28m premises passed with superfast fibre broadband network, maximising the value of the network

• 5.4m premises passed with ultrafast broadband network, including 2.6m FTTP

Core Network

Openreach – Full Fibre ambition

30Overview


• Continue to raise service levels, eliminating failure costs

• Maximise value of the FTTC platform:

– multi-year offers with volume, mix and forecasting commitments for long-term discounts to drive superfast and ultrafast take-up launched in August 2018

• Build FTTP infrastructure faster, cheaper and to high quality

• Work with Communications Provider customers to drive rapid FTTP take-up

• ‘Fibre First’ target to deliver FTTP to 4.5m premises by March 2021 and for 20m by mid-to late-2020s, on the assumptions we get the critical enablers

• Work hard to secure critical fibre ‘enablers’ from Regulator and Government

1 Internal estimate (Dec. ‘19), based in part on independent (Point Topic) coverage estimates and company reports.2 Company statement (Oct. ‘19). Build rate is internal estimate based on this statement. 3 Internal estimate (Apr. ’20), based on independent (ThinkBroadband) coverage estimates plus FibreNation press release (Jan. ‘20). 4 Company statement (Jan. ‘20). 5 Company statement (Sep. ’19).

Openreac

h

Virgin

Media

CityFibre

Hyperoptic OpenreachVirgin MediaCityFibreHyperoptic

100,000+3

<25,0002

Openreach Virgin MediaHyperoptic CityFibreCommunity Fibre GigaclearOthers

1

45

Build rate/quarter Current FTTP footprint

Alt-net total: c.2.3mOR vs. major altnets

c.125,0001

FTTP only

416,000

2

3


– focus on service and maintenance to keep customers connected

– national champion ensuring connectivity for all NHS Nightingale Hospitals and selected food depots and PPE manufacturers

– network performing well so far with no major outages or technical issues despite huge increase in demand


– restrictions on the range of products we can supply

– fewer new orders

– some SMEs temporarily ceasing some of their lines

– reduction in chargeable repair

– declared MBORC1, giving relief on normal service

guarantees, reflecting inability to deliver normal high standards

31

Openreach – keeping the fixed access network running

Q4 2019/20

Change YoY

FY2019/20

Change YoY

Revenue £1,295m 2% £5,112m 1%

EBITDA £719m (1)% £2,858m (3)%

Capex £2,108m 1%

Completions have fallen during stay at home order2

1 Matters Beyond Openreach’s Reasonable Control

2 Number of premises completed on a normalised scale

0

200

400

600

800

1,000

1,200

1,400

1,600

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

28-Feb 06-Mar 13-Mar 20-Mar 27-Mar 03-Apr 10-Apr 17-Apr 24-Apr

2019/20 2020/21

Fibre weekly completions Ethernet weekly completions



Appendix

32

FY 2019/20 results in line with expectations

33

2019/20(IFRS 16)

Adjusted EBITDA1

£7,907m

Depreciation and amortisation1 £(4,296)m

Net finance expense1

£(757)m

Tax1

£(536)m

Adjusted profit after tax1

£2,324m

Specific items £(590)m

Reported profit for the period £1,734m

Adjusted earnings per share 23.5p

1 before specific items



FY 2019/20 normalised cash flow in line with expectations

34

1 Before specific items2 After net interest paid, before pension deficit payments (including the cash tax benefit of pension deficit payments) and specific items

2019/20

(IFRS 16)

2018/19(IFRS 16

pro forma)

Change YoY

Adjusted EBITDA1

£7,907m £8,126m (3)%

Interest £(706)m £(508)m 39%

Tax (ex cash tax benefit of pension deficit payments) £(644)m £(704)m (9)%

Payment of lease liabilities £(651)m £(734)m (11)%

Change in working capital and other £204m £103m 98%

Cash available for investment and distribution £6,110m £6,077m 1%

Cash capital expenditure £(4,099)m £(3,637)m 13%

Normalised free cash flow2

£2,011m £2,440m (18)%

Refund on acquisition of spectrum - £21m (100)%

Net cash flow from specific items £(112)m £(598)m (81)%

Reported free cash flow £1,899m £1,863m 2%



2.35% 2.34% 2.81%2.24%

3.49%

4.43%

- 1 2 3 4 5 6 7 8 9

10

2020/21 2021/22 2022/23 2023/24 2024/25 2025/26 After 2026

Strong cash position and long-dated debt maturity profile

35

Movements in financial net debt

£ bn

• Prudent financial approach positions us well for period of

capital markets uncertainty

• Cash and current investments of £6.6bn and undrawn credit

of £2.1bn

• Smooth, long-dated term debt maturity profile

– term debt of £1.3bn and pension deficit repair payments

of £900m due in 2020/21, already pre-funded

– no short-term need to access capital markets

• Issued inaugural hybrid bond of £0.4bn, encouraged by

demand for the bond

• Remain committed to medium-term credit rating target of

BBB+, with a minimum rating of BBB

Term debt maturity profile

£ bn

Percentages are effective interest rates for debt due in each period

8

9

10

11

12

31-Mar-19 Normalised

free cash

flow

Specific

items

Dividends

paid

Share

repurchases

Net pension

deficit

payment

Other 31-Mar-20



0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

Mar-19 Jun-19 Sep-19 Dec-19 Mar-20

Reduction in IAS 19 pension deficit driven by increase in corporate bond yields

36

• IAS 19 deficit down from £6.0bn at 31 March 2019 to £1.0bn

(net of tax) at 31 March 2020, driven by:

– increase in the real discount rate

– £1.3bn deficit contributions paid over the period

– positive asset returns

• Expansion in credit spreads during Q4 reduced IAS 19 without

corresponding reduction in actuarial valuation

• Triennial actuarial valuation to take place at 30 June 2020;

aiming to conclude in first half of 2021

• Other developments:

– consultation aiming to align RPI1 with CPIH2, without any

mitigating steps, will increase the deficit

– consultation on a new statutory funding regime;

expectations for the new regime likely to feature in

upcoming discussions with the trustee

Movements in bond yields and the pension deficit

Yield

£1.26bn

IAS 19 deficit net of tax

Deficit contributions

Proxy nominal long-dated AA UK corporate bond yield

Proxy nominal long-dated UK gilt yield

£6.0bn £5.1bn £1.0bn

1 Retail Prices Index2 Consumer Prices Index including owner occupiers’ housing costs

Yields shown are indicative only and not representative of actual discount rates used



850

2,000

1,250900 900 907 907 907 907 907 907 907 907

0

500

1,000

1,500

2,000

Pension – reached agreement in May 2018 on June 2017 triennial

37Overview


IAS 19 Actuarial

Measure Accounting Actuarial

Frequency Semi-annually Triennial

Purpose Regular updates Sets cash deficit recovery payments

Discount rateYield curve for AA corporate

bonds

Prudent expected return (BTPS

assets)

Longevity Future expectations Prudent overall approach

Inflation Future expectations Prudent overall approach

Assets Market value Market value

Impact of illustrative scenarios which might occur no more than once in every 20 years. The

impact shown under each scenario looks at each event in isolation – in practice a

combination of events could arise.

Source: BT Annual Report 2020, p169-170

2019/20 BT Pension Scheme sensitivity analysis

2017 recovery plan, £11.3bn deficit

£m1

2

3

FY18 + FY20 cash payments total £2.1bn in line with prior agreement

Funded from issuance of bonds to the Scheme

13 year plan, maintains end-date.

£0.4bn of FY21 payment by 30 June 2020

-7

(7.0)

(11.3)

(15)

(10)

(5)

0

Mar 14 Mar 15 Mar 16 Mar 17 Mar 18 Mar 19 Mar 20

IAS 19 (gross of tax) IAS 19 (net of tax) Actuarial (gross of tax)

13.1 7.1 3.1 0.011.8 4.9 0.6

(3.6)

(5)

0

5

10

15

1.1 percentage point

fall in bond yields

0.7 percentage point

increase to inflation rate

1.25 year increase to

life expectancy

20% fall in growth

assets

£bnIncrease/(decrease) in actuarial liabilities from 30 June 2019

Increase/(decrease) in assets from 31 March 2020

1Assets valued using IAS 19 methodology

1

Movements in IAS 19 and actuarial pension deficits

£bn

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

2017/18 2018/19 2019/20

Capacity/network Customer driven Systems/IT Non-network infrastructure

Capex increase from investments in Fibre Cities and 5G

38

• 2019/20 reported capex excluding BDUK clawback of £3.9bn,

increase driven primarily by:

– Fibre Cities network build

– 5G rollout

– Ethernet provisioning

• Capex investment in 2020/21 will be impacted by:

– length of the lockdown period

– largely offset by acceleration in FTTP build

Capital expenditure (excluding BDUK clawback)

£ bn

Capex profile excludes BDUK clawback (within capacity/network capex)Overview


Taken significant steps towards our ambition to deliver FTTP across the UK

39

1 Consumer price index

Indexation of legacy services CPI1 indexation of legacy services in competitive and prospectively competitive areas

Cumulo business rates Requested commitment to exempt FTTP from business rates

Long-term contracts Constrained ability to sign long-term price-volume contracts, crucial to underpin investment

Barrier busting Welcome changes to wayleaves, building access and mandating FTTP to new premises

Premium for FTTPPremium of £1.50 to £1.85 per month for the 40/10 Mbps FTTP anchor product with pricing

flexibility above the anchor product

Geographic pricing flexibility Only allowed on case-by-case basis. Commercial deals subject to Ofcom approval

Fair BetCommitment to the principle but no firm commitment to a period of minimum forbearance

or guidance on an allowable return

Area 3Ofcom prepared to extend the enablers to costliest final 30% of the UK, subject to an

Openreach committed build

SwitchoverLegacy copper stop-sell at 75% ultrafast coverage by exchange area. Further two years to

withdraw legacy copper services

BT viewCurrent positionEnabler



TV – Partnerships will broaden choice for our TV customers

40Overview


Super aggregator TV strategy:

Embracing content trends and partnership opportunities, to offer an unrivalled choice of content across the pay-TV providers

✓ All the must-have content

OTT2 and digital first

Fully flexible mobile & app centric

Mobile-centric

Primary central set-top-box

experience

Multi-screen, multi-platform access

Home-centric

SVoD1 providers:

All premium Sky content:

Pay channels:

1 Subscription video on demand2 Over-the-top

1

41

Big

Entertainment

£20

Entertainment

£10

Fib

re

2

3

4

5

1 VIP

£60

Big Sport

£40

Sport

£15

Classic

Entertainment

£10

Co

pp

er

7

Essential

£5Available across

agents only 6

Non-Flexible TV Packs

Flexible Copper PacksSport

£15

Essential

£5

All fibre packs* come with a recordable TV box and 24 month contract +

*App Extra not included in Classic Entertainment pack

The new portfolio has 5 flexible TV packs which make up the core portfolioAll TV packs can be personalised with bolt-ons

Fib

re

9

Flexible Fibre Packs

Monthly Billed Bolt-ons (BT)

Monthly Billed Bolt Ons

Kids

CombiHD/4K

BTHD/4K

£8.99 £11.99

£3.99 £3

£5 £5

£5

£9.99 / £14.99 / £33.99

6MF then £5.99 £5.99

£15Extra Box

£5

£3.99

8



Bolt Ons (Classic Entertainment eligible)

KidsMore

Entertainment Channels

BTHD/4K

BT is stepping up its societal leadership

42Overview


Supported by strong foundations:

Behaving ethically Developing diverse talent Keeping our people safe & healthy

Our focus areas:

1 Measures for scopes 1 and 2 greenhouse gases, per unit of gross value added | 2 Measures for scopes 1 & 2 greenhouse gases | 3 Skills for tomorrow learning portal: https://www.bt.com/skillsfortomorrow/

• Our Skills for Tomorrow programme is aiming to empower 10 million people by giving them the

skills they need to flourish in the digital world

• 2.8 million people helped in total since 2014/15

• The Skills for Tomorrow online portal3 offers free

access to some of the best resources in one easy to navigate place

• Pivoted in response to COVID-19 to a fully online approach to help thousands of people and small

businesses with navigating a digital world

Building better

digital lives

• Steered by the UN Guiding Principles on Business and Human Rights

• We shape debate through collaborations like the

Global Network Initiative

• A founding partner of UK Modern Slavery Helpline

and Tech Against Trafficking

• We consider our impacts on people, online and

offline

• Joined World Business Council for Sustainable Development CEO call-to-action on human rights

Championing human and

digital rights

• 42% reduction in carbon intensity1 since 2016/17 as part of 1.5°C aligned goal (87% reduction by

2030)

• 92% of the electricity we consume worldwide is

renewably sourced – and we’re at 100% for

directly purchased electricity in the UK (16%

through power purchasing agreements)

• Helped our customers save three times as much

carbon as our own end-to-end carbon emissions

– one year ahead of target

• Target to be net-zero carbon emissions by 20452

Tackling climate change and

environmental challenges

https://www.bt.com/skillsfortomorrow/

Investor Relations – contact details

43Overview


BTGroup

LSE: BT.A

tel: +44 (0) 20 7356 4909

email: [email protected]

web: www.bt.com/irThis presentation contains certain forward-looking statements which are made in reliance on the safe harbour provisions of the US Private Securities Litigation Reform Act of 1995. These statements relate to analyses and other

information which are based on forecasts of future results and estimates of amounts not yet determinable. These statements include, without limitation, those concerning: the potential impact of Covid-19 on our people, operations,

suppliers and customers; current and future years’ outlook; revenue and revenue trends; EBITDA and profitability; free cash flow; capital expenditure; return on capital employed; shareholder returns including dividends and share

buyback; net debt; credit ratings; our group-wide transformation and restructuring programme, cost transformation plans and restructuring costs; investment in and roll out of our fibre network and its reach, innovations, increased

speeds and speed availability; our broadband-based service and strategy; investment in and rollout of 5G; the investment in converged network; improvements to the customer experience; our investment in TV, enhancing our TV

service and BT Sport; the recovery plan, operating charge, regular cash contributions and interest expense for our defined benefit pension schemes; effective tax rate; growth opportunities in networked IT services, the pay-TV services

market, broadband, artificial intelligence and mobility and future voice; growth of, and opportunities available in, the communications industry and BT’s positioning to take advantage of those opportunities; expectations regarding

competition, market shares, prices and growth; expectations regarding the convergence of technologies; plans for the launch of new products and services; network performance and quality; the impact of regulatory initiatives,

decisions and outcomes on operations; BT’s possible or assumed future results of operations and/or those of its associates and joint ventures; investment plans; adequacy of capital; financing plans and refinancing requirements;

demand for and access to broadband and the promotion of broadband by third-party service providers; improvements to the control environment; and those statements preceded by, followed by, or that include the words ‘aims’,

‘believes’, ‘expects’, ‘anticipates’, ‘intends’, ‘will’, ‘should’, ‘plans’, ‘strategy’, ‘future’, ‘likely’, ‘seeks’, ‘projects’, ‘estimates’ or similar expressions.

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: the duration and severity of Covid-19 impacts on our people, operations, suppliers and customers; failure to respond effectively to intensifying competition and technology developments; failure to

address the lingering perception of slow pace and connectivity in broadband and mobile coverage, which continues to be raised at a UK parliamentary level; undermining of our strategy and investor confidence caused by an

adversarial political environment; challenges presented by Covid-19 around network resilience, support for staff and customers, data sharing and cyber security defence; unfavourable regulatory changes; attacks on our infrastructure

and assets by people inside BT or by external sources like hacktivists, criminals, terrorists or nation states; a failure in the supplier selection process or in the ongoing management of a third-party supplier in our supply chain, including

failures arising as a result of Covid-19; risks relating to our BT transformation plan; failure to successfully manage our large, complex and high-value national and multinational customer contracts (including the Emergency Services

Network and the Building Digital UK (BDUK) programme) and deliver the anticipated benefits; changes to our customers’ needs, budgets or strategies that adversely affect our ability to meet contractual commitments or realise

expected revenues, profitability or cash generation; customer experiences that are not brand enhancing nor drive sustainable profitable revenue growth; pandemics, natural perils, network and system faults, malicious acts, supply

chain failure, software changes or infrastructure outages that could cause disruptions or otherwise damage the continuity of end to end customer services including network connectivity, network performance, IT systems and service

platforms; insufficient engagement from our people; adverse developments in respect of our defined benefit pension schemes; risks related to funding and liquidity, interest rates, foreign exchange, counterparties and tax; failures in

the protection of the health, safety and wellbeing of our employees or members of the public or breaches of health and safety law and regulations; financial controls that may not prevent or detect fraud, financial misstatement or

other financial loss; security breaches relating to our customers’ and employees’ data or breaches of data privacy laws; failure to recognise or promptly report wrongdoing by our people or those working for us or on our behalf

(including a failure to comply with our internal policies and procedures or the laws to which we are subject); and the potential impacts of climate change on our business. BT undertakes no obligation to update any forward-looking

statements whether written or oral that may be made from time to time, whether as a result of new information, future events or otherwise.

bt group plc investor meeting slide pack · 2020-05-21 · 8 fttp –future proof network...

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