BT ANNUAL REPORT AND FORM 20-F 2013 USER GUIDE Overview OVERVIEW Welcome to the BT Annual Report and Form 20– F 2013 . In this interactive pdf you can do many things to help you easily access the information that you want, whether that’s printing, searching for a section or website. These are explained below. Strategy 1. Document controls BUSINESS REVIEW Use the document controls located in the top right corner to help you navigate through this report. Search Print Go to Back/forward Fast link to contents one page previous page viewed Business 2. Links within this document Examples Throughout this report there are links to pages, other For further discussion of these items see pages 33 and 47 to 48. sections and web addresses for additional information. by line of business, and for the group, is provided in the table at the foot of pages 34 to 35. FINANCIAL REVIEW 3. Navigating with tabs Use the tabs to quickly go to the start of a Performance different section. Performance Governance Governance Financial statements Financial statements Additional information BT Group plc Annual Report & Form 20-F 2013 view VIEW BT Group plc Over Annual Report & OVER Form 20-F 2013 Strategy BUSINESS REVIEW Business FINANCIAL REVIEW Performance Governance BT Group plc Registered office: 81 Newgate Street, London EC1A 7AJ Registered in England and Wales No. 4190816 Produced by BT Group www.bt.com Financial statements PHME 67064 Printed in England by Pindar Scarborough Ltd Design by saslondon.com Typeset by RR Donnelley Printed on Amadeus 50 Silk which is made from 50% de-inked, post-consumer waste and 50% virgin fibre. London 2012: The BT Tower was used to celebrate British medal winners in the Olympic Please recycle and Paralympic Games Additional information London 2012 – the most connected Games ever Overview As official communications services partner of the London 2012 Olympic London staged one of the OVERVIEW and Paralympic Games, we shouldered a tremendous responsibility. Our greatest Olympic and Paralympic communications services had to meet the needs of the event organisers, competing athletes, the global media and billions of spectators worldwide. Games ever. Beyond the statistics, technology had a Our single communications network took in 94 locations across the UK. profound effect on how people It carried every official photograph and sports report and every visit to the London 2012 Games website and supported millions of calls, emails, interacted with the Games, and text messages and tweets. none of that would have been possible without BT, whose A BT fibre-based network delivered 5,000 hours of live TV coverage of the Strategy Games to the International Broadcast Centre for onward transmission to commitment to these Games broadcasters. was quite simply spectacular. During London 2012, a 1,000-strong BT team guaranteed flawless communications for the Games. Nothing in our history has been a stronger test of our ability to manage and deliver large and complex projects. Gerry Pennell BUSINESS REVIEW We delivered with the eyes of the world upon us. Chief Information Officer, London Organising Committee of the Olympic and Paralympic Watch the video at www.btplc.com/2012highlights Games (LOCOG) Business FINANCIAL REVIEW Performance Governance Financial statements Additional information Welcome to BT Group plc’s Annual Report & Form 20-F 2013 Overview Overview In this report you will find information on: our strategy; how we deliver OVERVIEW our strategy; how we have performed; and how we govern our business. Strategy 2 Chairman’s introduction Governance 64 Chairman’s governance report Strategy Overview 65 Board of Directors 3 Our purpose 67 How we govern the company 3 Who we are and what we do 71 Reports of the Board Committees 4 Our strategy 93 Directors’ information BUSINESS REVIEW 5 Our business model 94 General information BUSINESS REVIEW 6 Financial highlights 97 Shareholders and Annual 7 Our progress against our strategic General Meeting priorities Financial statements Strategy 100 Report of the independent auditors Online Annual Report Business 12 Chief Executive’s introduction Consolidated financial statements www.bt.com/annualreport Business 13 Our strategy 102 Consolidated financial statements 14 Our strategic priorities 107 Notes to the consolidated financial 17 Our business model statements 18 Our people 163 Report of the independent auditors 20 Our assets and resources Parent company financial statements 22 How we measure our progress 164 Financial statements of BT Group plc 23 Our risks 167 Subsidiary undertakings Business Additional information FINANCIAL REVIEW 30 Operating Committee 170 Alternative performance measures 31 How we deliver our strategy 173 Selected financial data 36 Our customers and markets 175 Financial and operational statistics Performance 38 Regulation 177 Information for shareholders Online Better Future Report Performance 191 Cross reference to Form 20-F www.bt.com/betterfuture Performance 195 Glossary of terms 42 Group Finance Director’s introduction 43 Group financial performance Look out for… 53 Line of business performance 17 Page number icons 61 Our performance as a responsible and sustainable business Video content online Further reading online Governance Sustainability material Governance in our report This is the BT Annual Report for the year ended 31 March 2013. It complies with UK regulations and comprises part of the Annual Report on Form 20-F for the US Securities and Exchange Commission to meet US regulations. This annual report has been sent to shareholders who have elected to receive a copy. The separate Summary financial statement & Financial statements notice of meeting 2013 has been issued to shareholders who have elected to receive a shorter document. Financial statements Please see cautionary statement regarding forward-looking statements on page 177. In this document, references to ‘BT Group’, ‘BT’, ‘the group’, ‘the company’, ‘we’ or ‘our’ are to BT Group plc (which includes the activities of British Telecommunications plc) and its subsidiaries and lines of business, internal service unit, or any of them as the context may require. A reference to a year expressed as 2012/13 is to the financial year ended 31 March 2013 and a reference to a year expressed as 2013 is to the calendar year. This convention applies similarly to any reference to a previous or subsequent year. References to ‘this year’, ‘the year’ and ‘the current year’ are to the financial year ended 31 March 2013. References to ‘last year’ and ‘the prior year’ are to the financial year ended 31 March 2012. Additional information Additional information 2 view VIEW Over OVER Chairman’s introduction Our shareholders Our global presence We have made good progress this year in a We aim to support our multinational Strategy number of areas and delivered strong financial customers wherever they are. But to do results. For 2012/13 the Board is proposing a this most effectively we need fair access to final dividend of 6.5p, up 14%. This gives a full telecoms networks around the world. We year dividend of 9.5p, also up 14% reflecting continue to lobby to reduce trade barriers our performance this year. We continue to and press for policy and regulatory change BUSINESS REVIEW pursue a prudent financial strategy. As well to ensure a more level competitive playing as investing in the future of our business, we field. This includes working with the European will continue to reduce net debt, support our Commission on current initiatives to complete pension fund and pay progressive dividends to the digital Single Market, and on bilateral trade you, our shareholders. We expect dividends to liberalisation negotiations. We hope the EU-US grow by 10%-15% per year for the next two trade talks will deepen transatlantic economic Business Sir Michael Rake years. integration, reduce non-tariff barriers and ensure fair access to the US telecoms market. Chairman Our contribution Truly competitive telecoms markets will boost In the current uncertain environment, it is trade in all business sectors and support tempting for companies to focus on short- growth, innovation and jobs. term targets rather than the long-term health of their business. At BT, we have continued Our people to make strategic investments that position Our performance in the year reflects the We are making us well for the future. In the last four years, expertise, hard work and commitment of our FINANCIAL REVIEW we have invested over £10bn in our capital people. I am delighted that around 20,000 long-term investments investment programmes, with much of this of them were able to benefit from employee in our future, and that supporting the national infrastructure upon share option plans, each making a gain of which the UK relies. around £8,400 on average. We are investing more than ever in our people, making sure they Performance of the UK. Our fibre broadband network will bring have the skills and support they need to better significant economic benefits to the UK. The serve our customers. investments we are making in TV and mobile will bring new and innovative services for The Board people to enjoy. We are creating jobs at the The Board has a key role in setting the strategic same time. This year we hired around 1,600 direction of the company and played a full engineers to help with our fibre programme part in assessing and approving the major and we insourced around 4,000 jobs. investments we made this year. You can read We played a vital role in making London 2012 about the Board’s activities in the Governance the most connected Olympic and Paralympic section. Games ever and are supporting the British Governance Paralympic team as they prepare for the next Our future Games. During the year we also set ourselves Our aim remains to drive profitable revenue three stretching Better Future goals to achieve growth.