btwbriefingnovember2011-1
TRANSCRIPT
IndustryIndustry AnalystAnalyst Briefingg
7th floor BoardroomFaraday Building
18 November 201018 November 2010
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IndustryIndustry AnalystAnalyst Briefingg
SallySally
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BT in the wholesale market
A global segment
Europe’s largest Wholesale OperatorLe eraging BT’s assets and
BT Ireland Global TelecomsMarkets
Leveraging BT’s assets and economies of scale worldwideAddressing the market as a global segment through collaborationSupporting local and multinational operators
Supported by BT Operate and BTID
pMoving towards a global portfolioLeveraging IP as a global platform
Supported by BT Operate and BTID
33
BT Wholesale
£1,284m EBITDA in 2009/10
Reversed decline; underlying business stable
S i ll t f th i d t i l di
YoY EBITDA growth
underlying%
Serving all segments of the industry, including broadcasters and content businesses
£1.8bn of MNS contracts signed 09/10 (£1.2bn in 08/9) £1 billion+ signed H1 10/11
reported
in 08/9). £1 billion+ signed H1 10/11
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 i d i f i
FY 2009/10 revenue by product (£3.2bn)experience and satisfaction
Achieving sustainable cost reduction14
23
4Voice
Transit
Broadband
29
18
12Data
MNS
Other%
4
Global Telecoms Markets BT Ireland wholesale
Key factsOne island strategyBroad portfolio of voice, broadband and
Key facts
C. 1,000 customers
L i BT i l l i data and managed servicesLargest fibre network in IrelandFirst to market with Next gen Ethernet
Leveraging BT assets, particularly in Europe
Mainly providing voice and bandwidth: b d i f li i h IP b d Delivering two key State-supported
network projects:DETI NGA Project in N Ireland
broadening portfolio with IP based services
Opportunity to export successful UK S National Broadband Scheme in Republic of
IrelandsNetworks managed for three/four MNOs in Republic of Ireland
MNS strategy
200 people supporting customers across 170+ countries worldwide p
Key Customers02 Ireland, Vodafone Ireland, 3 IrelandCarriers eg C&W COLT AT&T Sprint
Telconsult - a consultancy business of c. 25 people providing specialist Telecom advice in emerging markets Carriers, eg C&W, COLT, AT&T, Sprint
UTV, IFA (White label) and UPC, (Ethernet Backhaul)
and project delivery
5
BT Wholesale Q2 2010/11 financial performance
Q2 2010/11 ChangeAdjusted revenue £1 054m (5)%
1Adjusted revenue £1,054m (5)%
EBITDA £326m (5)%2
Operating cash flow £222m £10m2
Operating cash flow £222m £10m
Adjusted revenue down 5% Revenue and EBITDA trend
down 2% excluding transit and regulatory charge
managed network services 23% 1.0%
2.0%
Wholesale revenue exmanaged network services 23%
of external revenue
Net operating costs down 5% -2.0%
-1.0%
0.0%Q1 Q2 Q3 Q4 Q1 Q2
revenue ex transit and one-of fs
Wholesale EBITDA exRevenue and EBITDA excluding transit and
one-off broadly stable -4.0%
-3.0%EBITDA ex one-of fs
2009/10 2010/11
1 prior year restated for impact of customer account moves and adjusted for changes to internal trading model2 prior year restated for customer account moves6
BT Wholesale customersBTW Revenue by Sector
20
29
18
8 3 Mobile
Transit
Fixed
ISP29
23 Reseller
Broadcast%
Mobile Network
Operators
Internet Service
Providers
Broadcasters& Content Owners
BrandExtenders
Fixed Line Service
Providers
7
BT Wholesale what we sell
VoiceVoice DataData BroadbandBroadband TransitTransit MNSMNS OtherOther
Mobile Network
Operators ✔✔ ✔✔✔✔✔✔✔✔ ✔✔Internet Service
Providers ✔✔ ✔✔✔✔✔✔ ✔✔
B d
Fixed Line Service
Providers ✔✔ ✔✔✔✔✔✔✔✔ ✔✔
Broadcasters
BrandExtenders ✔✔ ✔✔✔✔✔✔✔✔ ✔✔
Broadcasters& Content Owners ✔✔✔✔✔✔ ✔✔
Leveraging reuse and economies of scale across our portfolioLeveraging reuse and economies of scale across our portfolio
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Wholesale key market trends
Ongoing
Decline in legacy voice and conveyanceconveyance
transit
analogue circuits
Consolidation
Convergenceanalogue circuits
Capex optimisation
GrowthAccelerating growth in bandwidth for digital contentg
IP platform services
Managed Network Servicesg
9
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► Managed network services– revenue growing– providing sustainable long term
margins
► IP platform services– revenue growing– healthy marginsy g
Scope of MNS contracts widening across revenue base
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BT Wholesale Customer experience
Sustained focus on RFTImprovingh
service faults reduced by 2/3 in 3 yearsData circuit reliability doubled
theCustomer
Experience
2/3 of broadband faults eliminated
‘Right First Time’ reduces costs
12 point improvement in RFT12 point improvement in RFT
Customers define our priorities
Reducedcosts &
complexity
Improved Customer
Satisfaction& Loyalty
Putting control in customers’ hands
DLM, knowledge-based Growthth h t t , g
diagnostics
Key strategy for Growth
through trust and an engaged
workforce
11
BT Wholesale cost reduction
RFT - the foundation of sustainable cost reduction
£
Total Operating Costs
BTW Net operating costs down 19% in 3 yrs
cost of sales reflects declining revenue
£m
profile and sales mixdirect costs down 47% over 3 years
BTW Headcount reduced by 40% over three years
13% reduction between Q2 2009 and Q2 2010
2/3 direct; 1/3 indirect£m
Direct Costs (Service + SG&A)
2/3 direct; 1/3 indirect
Tight control of discretionary spend
12
BT Wholesale strategy
No 1 for customer experience
DrivingsustainableGrowth in Grow the business
Reduce costs; i i Growth in
profitsGrow the businessimprove margins
Performance throughPerformance through Engagement
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IndustryIndustry AnalystAnalyst Briefingg
Brian FitzpatrickBrian Fitzpatrick
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BT Wholesale customers
FocusFocus FocusFocusMobile
Network Operators
Internet Service
Providers
Broadcasters& Content Owners
BrandExtenders
Fixed Line Service
Providers
15
BT Wholesale customers - MNOs
Mobile Network
Operators
A market that is consolidatingEverything Everywhere; Vodafone & O2
Data (video) growth is a huge challengeAccelerating through smart phones, tablets and dongles
Managed Ethernet Access ServicesManaged Ethernet Access Services
WiFi and IP Offload
Entry into fixed line servicesOrange UK MNS contract for fixed line services
Vodafone and O2 White Label fixed line for SME customers
Journey to Long Term Evolutiony gIP Core (O2)
Operator-neutral infrastructure?
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BT Wholesale customers - Broadcast
Broadcasters& Content Owners
50 years of experience in supporting the broadcast and digital content marketN f ll i t t d ithi BT Wh l l fl tiNow fully integrated within BT Wholesale reflecting converging industriesMedia Distribution over our dedicated, MPLS-based Global Media Network to over 170 countries worldwideDigital Media Management, Production and Post g a ed a a age e , oduc o a d osProduction. Connectivity to fully managed solutionsChannel strategy launched this year to expand global sales capabilitysales capability. RRSat and Telstra resale agreements signed 2010.
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BT Wholesale Global Media NetworkPinewood
UK
ITVT h i l
London Teleport
Grays Inn Road
Chiswick Park
BBCSkyStudios
B ll
ITVTechnicolor
Sky Italia
Rogers
Echostar
ComcastTechnicolor
ATN
ReutersSky Logic
CETDMCCanal
SatTelefonica
Bell Canada
Fox Hallmark NBC
N D lhi TVTV 5 France
Aastha TV
DirecTVArqiva Teleport
Reuters
CNBCSun TV
Zee TV
Astro
Star TV
Bharti
TVBi
New Delhi TV
21C Nigeria Technicolor
Essel Shyam
CNBC
CNBC
N t kNetwork 7
ST Teleport
Astro Teleport
NigeriaStarhub
Technicolor
Network Nine
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BT Wholesale an established managed services business
Majority of largest accounts now MNS customers
Revenue under long term contract
Solutions for multiple CP models
infrastructure-free (white label)10%
32%40%
managed services
full or partial outsourcing
R i l NGA bid d b d k
10%
2007/8 2008/9 2009/10
Regional NGA bids and broadcast market create new opportunities
Based around core portfolioValue of MNS contracts signed
high % of standard products embedded
well established operational capabilities
low capital intensive contracts
Opportunity to export the model internationally
£1.2
bn
£1.1
bn
£1.8
bn
internationally
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2007/8 2008/9 2009/10
MNS in action KCOM
CUSTOMER BENEFITS:Extended reach across the UK via BT’ ti l t k
“18 months in, and the BT Wholesale managed services contract is providing great value and
BT’s national network
Significantly lower fixed costs and cap-ex
competitive advantage for the Group.”
Bill Halbert, Executive Chairman, KCOM Group
Helping KCOM Group to create new market opportunities
Supported introduction of new IP-b d i
• Network • Full network • BT and Kcom • Introduction of
March 2010June 2009 Nov 2010Sept 2009
based services
BENEFITS FOR BTW:Long term customer relationship
management, maintenance & operational enhancement
M f
transition to BT complete
• 130 KCOM employees join BT
networks interconnected
• National Network transformation l l t
new Kcom IP voice services
• Dedicated Internet Access dd d K
Incremental business on the BT network - improves scale economies
• Management of vendors and 3rd
party contracts
BT
• 3rd party contract novation strategy implemented
plans complete
• Day to day operations management of national network
added to Kcomportfolio
• Enhanced Services propositionsnational network
• Future network investment strategy
propositions developed
• Spring launch of Hosted IPT servicesservices
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MNS in action Virgin Media
CUSTOMER BENEFITS:£7m PA TDM network management savings
“BT Wholesale continues to work on several strategic initiatives to support Virgin Media's growth outside our network footprint ” g
International network reach across 170 countries without the need for capital investment
April 2010Dec 2007 In progressJ ne 2009
growth outside our network footprint. Vito Morawetz, Director of Interconnection, Virgin Media
Portfolio extended - international voice, video and data solutions for UK business customers
• Take over management, operation and
• BT’s global MPLS network underpins VM’s
• CRM systems integration programme
• Management of all power installations
April 2010Dec 2007 In progressJune 2009
Cost efficiencies through simplification of power supply chain; consolidation of external suppliers
pmaintenance of UK fixed TDM voice network
• 156 switches
pinternational IP VPN service
• Supporting sale of international
p g
• IVR, ‘screen-popping’ and mobility
• Supporting
• Across VM estate - 700 sites
• Data centres, switching sites Enables first VM self-care services
to consumer base
BENEFITS FOR BTW:
• 140 people TUPE into BT MSL
• Management of key digital TV
MPLS circuits
• 30 circuits delivered to multinational
t
Supporting delivery of Consumer ‘self-care’ service
• Largest BTW IVR
switching sites and branch offices
• Installation of generators, UPS
Incremental growth of customer business
Diverse managed services revenue
key digital TV service provider relationships
customers platform deployment in UK
generators, UPS and DC batteries
• Management of Major Works programme e se a aged se ces e e ue
– beyond network management
21
p g
MNS in action MBNL
Greater 3G coverage depth and capacity in towns and cities
CUSTOMER BENEFITS:“Special thanks go to our key partners who are rightly proud of their roles in this project.”
capacity in towns and citiesExtended rural coverage to new and remote locationsSignificant cost efficiencies
Graham Payne, managing director, MBNL
gacross shared mobile network infrastructureRevenue growth without pressures of major
• MEAS delivery programme begins
• Over 4,000 MEAS sites delivered
Aug 2010Oct 2008 Nov 2010June 2009
• Appointed to deliver MEAS Ethernet
• Ramp up in volume of 100Mb Ethernet delivery pressures of major
infrastructure investment Enormous capacity uplift to support mobile data tsunami
begins
• Site surveys, network design and engineering
P j t
delivered• 12,000 shared
3G site target completed
• All 3G sites,
Ethernet backhaul service
• Target of 7,500 base sites on consolidated 3G
Ethernet delivery (Oct 09)
• Targeted increase of bandwidth at
Uplift in speed at the newly consolidated cell sites
BENEFITS FOR BTW
• Project management
• Service development and provisioning
,transmitters, base station kit and backhaul connected to core networks
consolidated 3G network
• BT trebles bandwidth at 4,100 sites using
bandwidth at critical sites
• Bandwidth trebled at 2,000 sites
Extension of our existing long term relationshipsShowcases benefits and value of BT’s MEAS Ethernet service
provisioning
• Trial migrations carrying live traffic (July 09)
core networks
• c.5,000 sites switched off
• 2,000 sites fully decommissioned
legacy TDM circuits • Availability of
Native Ethernet
of BT s MEAS Ethernet service
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decommissioned
BT Wholesale our latest MNS win
Landmark contract building on BT’s plans to bring fibre to two-thirds of the UK by 2015
INNOVATIVE APPROACHBringing fibre services to areas of the UK faster than commercially viable2015
Aim for 80-90% of Cornish businesses to have access to fibre broadband by 2014Tens of thousands of local businesses to
yAvoiding infrastructure duplicationEnsuring services are available on an open, wholesale basisTens of thousands of local businesses to
benefit, creating 4000 and protecting 2000 local jobsHalf local businesses expected to receive
p
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
Other CPS Other CPOther CP
Other CP
Satellite
Mobility
23
Other CPy
BT Wholesale transforming our sales force
Sales Productivity How we’re doing it
Skills and capability
103% 101%
Skills and capability assessmentSkills development and coachingcoachingSales leadership strengthening and refreshGlobal Account Management
87% 116%
gProposition developmentCost reductions/ P t hi ( TATA)Partnership (eg TATA)Customer Accreditation
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IndustryIndustry AnalystAnalyst Briefingg
Cameron RejaliCameron Rejali
25
BT Wholesale products
Mobile Network
Operators
Internet Service
Providers
Broadcasters& Content Owners
BrandExtenders
Fixed Line Service
Providers
26
BT Wholesale Broadband
BT Wholesale offers a choice to meet every BT Wholesale offers a choice to meet every customer’s needs
Underpinned by service reliability
100Mb/sWholesale
B
Underpinned by service reliability
ds ent
40Mb/s
24Mb/s
Broadband Connect- Copper
- Fibre
Wholesale Managed Broadband Connect
Mag
aged
BB
Managednetworkservices
ice
of sp
eed
oles
ale
Cont
eCo
nnec
t
24Mb/s
2Mb/sDIY White Managed
Datastream IPstream
Choi
Who
Label Service
Choice of QoS options
Mar 09: Up to 8M - 99%+ of EUsMar 10: Up to 24M - 55% of EUs
Mar 09: Up to 8M - 99%+ of EUsMar 11: Up to 24M - 70% of EUsJan 11: 4million passes on FTTC
Mar 09: Up to 8M - 99%+ of EUsMar 11: Up to 24M – 70+% of EUsJan 12: 10m premises passed on FTTC
27
2009/10 2010/11 2011/12
BT Wholesale Digital Content Homes/businesses
Data CentreContent Service ProviderIcon
Wholesale Content
Copper
Up to 8Mbit/s
W
Icon
Wholesale Content C t
ConnectStandard & Premium
Copper
Fibre
Exchange
Wholesale BCopper
Up to 24Mbit/s
IconConnectBasic
Fibre roadband C
ISP
Up to 40Mbit/swith improved upstream rates Cable
Icon
Connect
Reducing content distribution costs by up to 65%
networkLLU
network
Mobile
Icon
Up to 7Mbit/sand beyond
Up to 100Mbit/swith improved upstream rates
NetworkIcon Icon
28
BT Wholesale Data Connectivity
10Gb
1Gb
WavestreamHigh speed
Ethernet1Gb
622Mb/s
Wholesale
Managed network services
155Mb/sPrivate Circuits &
Partial PrivateCircuits
Ethernet (incl mobile)
Circuits2Mb/s
Providing customer choice
DIY Managed Services
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 Nodes1Mbpc – 1Gbps on Ethernet22 mobile circuits delivered908 fixed circuits delivered
(incl. RBS, PPCs, SiteConnect)Oct 10: 900 Ethernet Nodesc. 7500+ MEAS circuits deliveredc. 4500 fixed circuits delivered
Speed extended to 100GbpsMarch 11: >10,000 mobile circuits will be delivered (estimated)c.10,400 fixed circuits delivered
292009/10 2010/11 2011/12
BT Wholesale Voice
TDM and IP voice capabilitiesWholesale Calls and line rentalB dl ith B db dBundles with BroadbandIP Exchange and Hosted IP VoiceBridging between the TDM and IP worlds
Wholesale Calls: 100 customers
Wholesale Calls TDM Transit and ConveyanceIPX volumes x 2. 125 customers; further 20 in
TDM Transit and ConveyanceHosted IP Voice trials startIPX launchedFirst SIP I Interconnect launched
Sandbox testingIPX Global LaunchedIPX Pre paid launchedHosted IP voice launched
Wholesale CallsTDM Transit and ConveyanceIPX – key global growth platform.
30
2009/10 2010/11 2011/12
BT Wholesale global Interoperability with IPExchange
What is it?
IP i t bilit l i h
Callmanager
Numbertranslation
Billing&
charging
Managementinformation
IP interoperability – a clearing house for IP traffic connecting:
VoIP to VoIP or TDMvideo and data IP traffic to 3G mobilesvideo and data IP traffic to 3G mobiles
It supports:
wide range of standards
CP BBVCP BBVnetworknetwork
CP BBVCP BBVnetworknetwork
BT communications BT communications clearing houseclearing house
IP IP
wide range of standardslow latencyvoice features from TDM worldGSM signalling over IP PSTNPSTN
networknetworkMobileMobile
networknetwork
SS7SS7/IP
What’s in it for customers?
Number management, portability and least cost routing
networknetwork
at s t o custo e sIt’s simpler and cheaper to buy from BT than to do it themselvesWe offer expertise, economies of scale and act as a trusted partnerA roadmap to offer value added services to support customer innovation
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BT Wholesale M&B
ManCreate Manage Distributenaged cu
Value Chain Management
ContentProcessing
Distribution
stomer s
Edit &Manage. Schedule &
Syndicate StoreBroadband, Mobile,
Content Creation Content Flow
olutions
Edit &Collaborate
Syndicate, Store,Protect
Pay TV
Production Broadcast Management Customer Delivery
Content creation Content monetisation
Production Broadcast Management Customer Delivery
Content creation (contribution services)
Content monetisation (distribution services)
32
BT Wholesale agile media
Broadcast event
Broadcasters& Content Owners
RIDE – the UK’s leading mass call vote termination platform BT Agilemedia
Portal
Channels Platforms management
090x premium rate
WAVE – mass call handlingIVR platform for competition
entry and compliant card payments
Portal
Winner Selector
Vote Aggregator
08 & 03 non geographic
entry and compliant card paymentsStudio Manager
Reporting
Premium rate SMS
Online payments
MAP Mobile application platform
SMS and MMSp y SMS and MMS
33
BT Wholesale products
VoiceVoice DataData BroadbandBroadband TransitTransit MNSMNS OtherOther
Mobile Network
Operators ✔✔ ✔✔✔✔✔✔✔✔ ✔✔Internet Service
Providers ✔✔ ✔✔✔✔✔✔ ✔✔Fixed Line
Service Providers ✔✔ ✔✔✔✔✔✔✔✔ ✔✔
Broadcasters
BrandExtenders ✔✔ ✔✔✔✔✔✔✔✔ ✔✔
Broadcasters& Content Owners ✔✔✔✔✔✔ ✔✔
34
BT Wholesale growth in new and adjacent markets
ISPFixed operators MNOs ResellerBroadcast
Mobility ✔✔Global
Interoperability ✔✔ ✔✔✔✔✔✔
✔✔ ✔✔✔✔✔✔✔✔Digital content ✔✔ ✔✔✔✔✔✔✔✔Publicly-funded
NGA ✔✔✔✔✔✔✔✔NGA ✔✔✔✔✔✔✔✔IP Platform
services ✔✔ ✔✔✔✔✔✔✔✔Managed Services ✔✔✔✔✔✔
35
and
36
BACK UP
3737
BT Wholesale customers – Internet Service Providers
Internet Service
Providers
The largest broadband provider in the UKCommitted to competition-ready platformsA mixed economy for broadband (copper/Fibre)ADSL. ADSL2+. FTTC. FTTP.U i ti l hUnique national reachProducts, Managed Products or fully managed solutionsEmerging Content Delivery capabilityEmerging Content Delivery capability
38
BT Wholesale customers – fixed line operators
Fixed Line Service
Providers
BT Wholesale’s traditional heartland businessCompetition and cost reduction driving market consolidationDominated by larger, typically multinational OperatorsTypically asset-rich organisations. K M d N t k S i k t t itKey Managed Network Services market opportunityKey Market for data connectivity (Private Circuit and Wholesale Ethernet).Customers can also be Wholesale competitors
39
BT Wholesale customers
BrandExtenders
Evolving market based on BTW’s White Label platform capabilitiesSome or all of broadband, calls, customer services, end user billing, logisticsOffering rapid, low risk, low capital intensity entry into the UK g p , , p y ytelecoms marketAdding Fibre and Digital Content Distribution capabilities.4 illi UK h d b i Whit L b l l tf4 million + UK homes and businesses on White Label platforms today
40