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British Telecommunications Plc Annual Report

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British Telecommunications Plc Annual Report wholly-owned subsidiary of BT Group plc, British Telecommunications plc meets the conditions set forth in General set the conditions plc meets Telecommunications plc, British Group subsidiary wholly-owned of BT a As Form 20-F with filing this 20-F and is therefore reports on Form 10-K as applied to of Form Instruction (I) (1)(a) and (b) format. disclosure the reduced 2018 Form 20-F Form Report & Report Annual BRITISH TELECOMMUNICATIONS plc BRITISH TELECOMMUNICATIONS BRITISH TELECOMMUNICATIONS plc 2018 THE StratEGIC REPOrt GOVERNANCE FINANCIAL statEMENts ADDITIONAL INFORMatION Contents The Strategic Report Our strategy Our strategy in a nutshell How we’re doing – Delivering great customer experience 3 – Investing for growth 4 – Transforming our costs 5 Key performance indicators 6 Our non-financial performance 8 Our evolving strategy 10 Our business model Our business model 12 What we do 14 Our resources and culture Financial strength 16 Our networks and physical assets 16 Properties 17 Research and development 17 Brand and reputation 19 Our culture / The BT Way 20 Respecting human rights 21 Our stakeholders Our people 22 Customers 25 Communities and society 25 Lenders 26 Pension schemes 26 Suppliers 27 HM Government 27 Regulators 28 The environment 31 Our risks Our approach to risk management 33 Our principal risks and uncertainties 34 Operating review BT Consumer 48 EE 55 Business and Public Sector 59 Global Services 64 Wholesale and Ventures 69 Openreach 73 Technology, Service and Operations 79 Group performance Group performance 82 Governance 89 Financial statements 95 Additional information 208 Overview British Telecommunications plc (‘the group’ or ‘the company’ ) is the principal operating subsidiary of BT Group plc. We’re a wholly-owned subsidiary of BT Group plc. The BT Group plc Board has ultimate responsibility for the management of the group while the Executive Committee of BT Group plc is our key management committee. It monitors the group’s financial, operational and customer service performance and has cross-business oversight of BT’s customer-facing units. It also reviews the group’s key risks and considers potential threats and opportunities facing the business. British Telecommunications plc leverages the governance structure and processes of BT Group plc, including: – BT Group plc Board – Governance Committee – Executive Committee – Investment Committee – Audit & Risk Committee Key management personnel comprise executive and non-executive directors of the BT Group plc Executive Committee, as well as members of the BT plc Board. Our strategy Our strategy in the year had three Looking ahead, we’re evolving our pillars: deliver great customer strategy to build on our strengths experience, invest for growth and and allow us to respond to market transform our costs. opportunities and challenges. You can They work together: the better our customers’ experience, the more find more detail on page 10 we sell and the less time and money we spend putting things right. And the better we manage our costs, the more we can invest in improving our customers’ experience and in products and services that will create growth. Pages 3 to 7 describe our performance against the strategy. The graphic below shows the main elements of our strategy in the year. You’ll find more details on our purpose and goal, in the context of our business model, on page 12. Our purpose To use the power of communications to make a better world Our goal Growth – to deliver sustainable profitable revenue growth Broaden and deepen our customer relationships Our strategy Deliver great Invest for Transform customer experience growth our costs Focus on Differentiated Market Best network in Fully converged multinational content, services leadership in all the UK service provider companies and applications UK segments globally A healthy organisation Best place to work 2 British Telecommunications plc Annual Report & Form 20-F 2018 THE StratEGIC REPOrt GOVERNANCE FINANCIAL statEMENts ADDITIONAL INFORMatION Our strategy - how we performed Deliver a consistent and reliable service – On average we answered calls from BT Consumer customers in 41 Delivering great customer seconds, a minute quicker than last year. – EE won the What Mobile award for Best Customer Support for the third year running. experience – We now have more than 600 EE shops including five new Customer experience remains central to our strategy ‘showcase’ stores offering face-to-face chats with advisers and and long-term growth – whether that’s improving highlighting the best of our network and technology partners. our service levels, providing a more reliable network – Our customers are using our digital channels more, with online chat or introducing new products. We’re making good up 20% this year and more than 2m downloads of the ‘My BT’ app. progress but we know there is still much more to do. – Openreach achieved all 60 of Ofcom’s copper Minimum Service Levels. We believe that continuously improving customer experience drives – Ethernet performance keeps improving – with delivery times cut by growth. That’s why progress on customer experience is central to a third since last year. judging the group’s performance. We have two main measures of – We’re continuing our transparent approach to performance by customer experience: customer perception (based on Net Promoter publishing quarterly updates on service levels via bt.com and Score) and doing things Right First Time. ee.co.uk. How we did in the year Great customer experience from our network We’ve built on earlier progress and have delivered seven quarters – We’ve hired almost 2,400 more engineers into Openreach. We’ve of continuous growth in customer perception. This year we saw an also improved our resource planning so that we meet network repair 8.3 point improvement on last year’s results. targets more than 80% of the time. – We’ve continued to weatherproof our networks leading to 3.7% Right First Time performance has improved by 4.3%, helped by fewer network faults this year. better planning and resourcing. This means our network has had – BT Consumer customers are now getting faster broadband speeds fewer faults and we’ve delivered high levels of service despite some with average download speeds improving by 20% to 43Mbps. terrible weather. Everyone in BT has a role to play in delivering these results and every Products that fit our customers’ lives CFU has improved its customer perception and Right First Time – BT Consumer launched ultrafast products at 152Mbps and scores. 314Mbps with minimum speed guarantees. – EE launched a new 4G antenna service that brings superfast We’ve also seen a drop in complaints made to Ofcom over the last broadband speeds to rural areas where fixed broadband is slow or year. EE saw complaints fall to their lowest level while complaints not available. about BT Consumer broadband have fallen by 18%. – A year after the launch of our BT Call Protect service we’ve protected 2.5m customers by diverting more than 90m nuisance calls. What difference did our customers see? – And we’ve launched a new ‘BT Business’ app for business customers Our customers tell us they expect a reliable service, great networks who want to interact with us digitally. and products that fit their digital, mobile and ‘always-on’ lives. We‘ve made progress in all of these areas: British Telecommunications plc Annual Report & Form 20-F 2018 3 Our strategy - How we performed continued Investing for growth We’ve been putting money and resources into five strategic areas. Together, they underpin our strategy and our operational and financial performance, which in turn contribute to our KPIs (on page 6). With good progress on the integration of EE within the group and with a fast-paced digitisation of the UK economy, we’ve placed a particular focus this year on enabling convergence and on infrastructure leadership as key drivers of future growth. Differentiated Best network content, services in the UK and applications 27.5m BT TV / BT Sport premises Whole Home Wi-Fi passed with fibre P49-50 P76 Best network Best network in the UK in the UK 1.5m 90% premises 4G geographic passed with coverage ultrafast P76 P57 Fully converged Market leadership Market leadership service provider in all UK segments in all UK segments BT/EE 36% 28% cross-selling Share of retail Share of broadband mobile market (by subscriber) P48 P55 Focus on multinational Market leadership companies globally in all UK segments 180 Around 30m Countries consumer and 1m business customer billing relationships P64 P10 4 British Telecommunications plc Annual Report & Form 20-F 2018 THE StratEGIC REPOrt GOVERNANCE FINANCIAL statEMENts ADDITIONAL INFORMatION Looking ahead Transforming our costs We will continue to deliver against our EE integration and first phase Our approach restructuring commitments. Rigorous analysis, leadership and strong governance We’re also launching new cost transformation initiatives within each help us stay focused on both transforming costs and business unit, as well as some larger cross-business programmes. improving customer experience. The combination of new and existing initiatives will ensure we We benchmark the costs of doing business against other companies deliver against our new strategic target of £1.5bn gross cost inside and outside our sector to see where we can do even better. reduction over the next three years. Most improvement initiatives are owned and run within individual business units. Our largest programmes span multiple business units or drive complex changes in a single business unit and often need central co-ordination. How we did in the year This year we’ve increased the cumulative EE integration savings to £290m and we’re on track to deliver on our £400m commitment by the end of 2019/20. The first phase of our restructuring activities has produced £180m of savings against our commitment to deliver £300m over two years.
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