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British Telecommunications Group plc
Company typePublic (LSE: BT.A
NYSE: BT)
IndustryTelecommunications
Founded1 October 1981
HeadquartersLondon, England, UK
Area served
United Kingdom United Kingdom
Key people
Sir Michael Rake, Chairman
Ian Livingston, Chief Executive
ProductsRetail and Wholesale local, national and international telecommunications products and services,
broadband and internet products and services,
IT and Network Solutions,
Mobile service as a Molo
Revenue£ 21.390 Billion (2009)[1]
£ 819 million (2009)[1]
£ 248 million (2009)[1]
Number of employees
108,500 (2008)
Websitewww.bt.com

BT Group plc (formerly known as British Telecom and still occasionally referred to by that name), is the privatised UK state telecommunications operator. It is the dominant fixed line telecommunications and broadband Internet provider in the United Kingdom. BT operates in more than 170 countries[2] and over a third of its revenue now comes from its Global Services division.[3]

BT Group is the largest communications service provider in the United Kingdom. It is also one of the largest communication companies in the world. The Company is listed on the London Stock Exchange and is a constituent of the FTSE 100 Index.

History

Early years

File:GPO badge.png
Prior to the formation of British Telecom, telecommunications were handled by the General Post Office
File:BT (old T).png
British Telecom "T" symbol, 1980–1991
File:BT (old) logo.png
British Telecom logotype, 1980–1991
File:BT old logo.svg
BT "piper" logo, 1991–2003. This logo can still be seen on some public telephone boxes in the UK
BT "Connected World" logo, 2003–present

A number of privately owned telegraph companies operated in Britain from 1846 onwards. Among them were

  • The Electric Telegraph Company,
  • British and Irish Magnetic Telegraph Company,
  • British Telegraph Company,
  • London District Telegraph Company,
  • and the United Kingdom Telegraph Company

The Telegraph Act 1868 passed the control of all these to the newly formed GPO (General Post Office)'s "Postal Telegraphs Department"

With the invention of the telephone by Alexander Graham Bell in 1876 the GPO began to provide telephone services from some of its telegraph exchanges. However in 1882 the Postmaster-General, Henry Fawcett started to issue licences to operate a telephone service to private businesses and the telephone system grew under the GPO in some areas and private ownership in others. The GPO's main competitor the National Telephone Company emerged in this market by absorbing other private telephone companies, prior to its absorption into the GPO in 1912.

The trunk network was unified under GPO control in 1896 and the local distribution network in 1912. A few municipally-owned services remained outside of GPO control. These were Kingston upon Hull, Portsmouth and Guernsey. Hull still retains an independent operator, Kingston Communications, though it is no longer municipally controlled.

In 1969 the GPO, a government department, became the Post Office, a nationalised industry separate from government. Post Office Telecommunications was one of the divisions.

Formation of British Telecom

The British Telecom brand was introduced in 1980. On 1 October 1981, this became the official name of Post Office Telecommunications, which became a state-owned corporation independent of the Post Office. In 1982 BT's monopoly on telecommunications was broken, with the granting of a licence to Mercury Communications.

Privatisation

The privatisation took place in 1984, with the sale of 50.2% of the shares in the company (incorporated in 1984 as British Telecommunications plc) to the public in November.

The company changed its trading name to "BT" on 2 April 1991. The remaining state holdings in the company were sold in 1991 and 1993. In 1996 Peter Bonfield was appointed CEO and Chairman of the Executive Committee, promising a "rollercoaster ride".[4]

On 18 June 1992 BT registered its domain name BT.com — today it is one of the few companies to own a two letter domain name.[5]

In the 1990s, BT entered the Irish telecommunications market through a joint venture with the Electricity Supply Board, the Irish state owned power provider. This venture, entitled Ocean, found its main success through the launch of Ireland's first subscription-free dial-up ISP, oceanfree.net. As a telecoms company it found much less success, mainly targeting corporate customers. BT acquired 100% of this venture in 1999.

BT’s attempted global alliances

MCI

In June 1994 BT and MCI launched Concert Communications Services which was a $1 billion joint venture between the two companies. Its aim was to build a network which would provide easy global connectivity to multinational corporations.

This alliance progressed further on 3 November 1996 when the two companies announcement that they had entered into a full merger agreement to create a global telecommunications company to be called Concert plc, which would be incorporated in the UK with headquarters in both London and Washington DC. This would have given BT an entry into the US market and MCI a global reach. The merger proposition gained approval from the European Commission, the US Department of Justice and the US Federal Communications Commission and looked set to proceed.

However, in light of pressure from investors reacting to the slide in BT's share price on the London Stock Exchange, BT reduced its bid price for MCI, releasing MCI from its exclusivity clause and allowing it to speak to other interested parties.[6] On 1 October 1997, Worldcom made a rival bid for MCI which was followed by a counter-bid from GTE[7]. Because Worldcom used its stock to leverage its purchase, as opposed to cash (used by BT), it was able to outbid BT. MCI accepted the Worldcom bid and BT pulled out of its deal with a generous severance fee of $465 million.

BT made even more money when it sold its stake in MCI to Worldcom in 1998 for £4,159 million on which it made an exceptional pre-tax profit of £1,133 million. As part of the deal, BT also bought out from MCI its 24.9% interest in Concert Communications, thereby making Concert a wholly-owned part of BT.

The reaction to the failure of the deal in the City of London was critical to the future of then Chairman Iain Vallance and CEO Peter Bonfield, and the lack of confidence from the failed merger would ultimately lead to their removal.[8]

AT&T

As BT now owned Concert, and still wanted access to the North American market, it needed a new partner. An AT&T/BT option had been mooted in the past, but stopped on regulatory grounds due to their individual virtual monopolies in their home markets. By 1996, this had receded to the point where a deal was possible. However, the former monopolies clashed in management and culture – and the alliance never really worked from the start. Also, during the proposed MCI merger position, BT/MCI had placed a series of nominated customers inside Concert to overcome regulatory issues, leaving Concert with a sales force. On merger with AT&T, it was reversion to delivery of a series of Global products, and two competing owners – which robbed Concert of revenues and left its management disillusioned.

At its height, the Concert managed network directly reached more than 800 cities in 52 countries, and interlinked to about 240 other networks to extend access to 1,300 cities in 130 countries. Although Concert continued signing customers, its rate of revenue growth slowed, so that in 1999 David Dorman was made CEO with a brief to revive it.

In late 2000 the BT and AT&T boards fell-out – partly due to each partner's excess debt, and the resulting board room clear-outs – partly due to Concert's $800 million annual losses. AT&T recognized that Concert was a threat to its ambitions if left intact, and so negotiated a deal where Concert was split in two in 2001: North America and Eastern Asia went to AT&T, the rest of the world and $400M to BT. BT's remaining Concert assets were merged into its BT Ignite, later BT Global Solutions group [9].

BT Ireland

In 2000, BT acquired Esat Telecom Group plc, and all its subsidiary companies, and Ireland On Line.[10] It also purchased Telenor's minority shareholding in Esat Digifone. The Esat Telecom Group was split in two: the landline and internet operations were combined with Ocean and became part of BT Ignite. Esat Group was renamed Esat BT in July 2002, and eventually BT Ireland in April 2005. Esat Digifone became part of BT Wireless before being spun off into a separate independent company mmo2 plc (now Telefónica Europe). EsatBT installed the first DSL lines in Ireland, to try and compete heavily with former state telecoms company Eircom and operate one exchange, in Limerick. They are the second largest fixed line telecommunications company in Ireland behind incumbent Eircom. BT Irelands CEO is Chris Clark, known for his indepth speeches and penchant for the Young Scientist Competition.

2001 debt crisis

By 2001, BT had a debt of £30 billion, much of which was acquired during the bidding round for the 3rd generation mobile telephony (commonly known as 3G) licences.[11] It had also failed in its series of proposed global mergers, and the funds flowing from its then virtual monopoly of the UK market place had been largely removed. It was also headed by two executives who had little support from the London Stock Exchange, particularly in light of a 60% drop in share price in sixteen months.[12]

The first manoeuvre was to create confidence in the management team. Philip Hampton joined as CFO, and in April 2001 Sir Iain Vallance was replaced as Chairman by recognised turn around expert Sir Christopher Bland. The company then began to sell off or sell and lease back a large part of its assets.

Europe’s largest rights issue

In May 2001 BT carried out corporate Europe’s largest ever rights issue, allowing it to raise £5.9 billion.[13] A few days before, it also sold stakes in Japan Telecom, in mobile operator J-Phone Communications, and in Airtel of India to Vodafone.[14]

Sale of Yell Group, and the demerger of O2

In June 2001 BT's directory business was sold as Yell Group to a combination of private equity firms Apax Partners and Hicks, Muse, Tate & Furst for £2.1 billion.[15]

A large demerger followed in November 2001, when the former mobile telecommunications business of BT, BT Cellnet, was hived off as a separate business named "mmO2".[16] This included BT owned or operated networks in other countries, including BT Cellnet (UK), Esat Digifone (Ireland), and Viag Interkom (Germany). All networks now owned or operated by mmO2 (except Manx Telecom) were renamed as O2. The de-merger was accomplished via a share-swap, all British Telecommunications plc shareholders received one mmO2 plc and one BT Group plc (of which British Telecommunications is now a wholly owned subsidiary) share for each share they owned. British Telecommunications plc was de-listed on 16 November, and the two new companies started trading on 19 November.

Aftermath

At the end of the series of sales, in October 2001 Sir Peter Bonfield resigned,[17] and was replaced by former Lucent CEO Ben Verwaayen[18].

Having promised a "rollercoaster ride", during Bonfield's tenure the share price went from £4 to £15, and back again to £5.[4] Bonfield's salary to 31 March 2001, was a basic of £780,000 (increasing to £820,000) plus a £481,000 bonus and £50,000 of other benefits including pension. He also received a deferred bonus, payable in shares three years' later, of £481,000, and additional bonuses of £3.3 million.[19] Andreas Whittam Smith writing in The Independent newspaper called Bonfield, Chairman Vallance and Deputy Chairman Lord King "The men who broke the bank at British Telecom".[20]

mmO2 plc was replaced by O2 plc in a further share-swap in 2005, and subsequently bought in an agreed takeover by Telefónica for £18 billion and delisted.[21]

BT's recent developments

In February 2005, BT acquired El Segundo, California-based telecoms giant Infonet (now re-branded BT Infonet), giving BT access to new geographies. In April 2005, it bought Radianz (now rebranded as BT Radianz), which expanded BT's coverage, provided BT with more buying power in certain countries and importantly gave access to the financial markets.[22]

Openreach was announced in September 2005 at the instigation of Ofcom to provide an open and equal service of provision and repair in the "last mile" of copper wire. This business was formed from 25,000 engineers previously employed by BT's Retail and Wholesale divisions. It is designed to ensure that other communications providers (CPs) have exactly the same operational conditions as parts of the BT group. It opened for business on 11 January 2006.[23]

In August 2006 BT acquired online electrical retailer Dabs.com for £30.6 million.[24] The BT Home Hub was also launched in June 2006.[25]

In October 2006 BT confirmed that it would be investing 75% of its total capital spending, put at £10 billion over five years, in its new Internet Protocol (IP) based 21st century network (21CN). Annual savings of £1 billion per annum are expected when the transition to the new network is complete in 2010, with over 50% of its customers transferred by 2008. That month BT took a major step forward when the actual process that will be used to transfer the first customers on to 21CN was successfully tested at Adastral Park in Suffolk.[26]

In January 2007, BT acquired Sheffield based ISP, PlusNet plc, adding an additional 200,000 customers. BT have stated that PlusNet will continue to operate separately out of their Sheffield head-office.[27]

On 1 February 2007 BT announced it had agreed terms to acquire International Network Services Inc. (“INS”), a leading global provider of IT consulting and software solutions. This professional services acquisition will increase BT's presence in North America and will significantly enhance BT's consulting capabilities.[28]

On 20 February 2007 BT announced that Sir Michael Rake, then chairman of accountancy firm KPMG International, would succeed Sir Christopher Bland, who stepped down in September of that year.[29]

On 20 April 2007 BT announced the acquisition of Comsat International which provides network services to the South American corporate market.[30]

BT acquired Wire One Communications in June 2008 and folded them into BT Conferencing, their existing conferencing unit as a new video business unit. BT Conferencing is now the global leader in video conferencing services and solutions.[31]

On 28 July 2008, BT announced the acquisition of Ribbit, of Mountain View, California, "Silicon Valley's First Phone Company." Ribbit provides Adobe Flash/Flex APIs, allowing web developers to incorporate telephony features into their Software as a Service (SaaS) applications.[32]

On 14 May 2009 BT said it was cutting up to 15,000 jobs in the coming year after it announced its results for the year to 31 March 2009.[33]

Operations

British Telecommunications plc (BT) is a wholly-owned subsidiary of BT Group plc and encompasses virtually all businesses and assets of the BT Group.[34] BT Group plc is listed on stock exchanges in London and New York.

BT runs the telephone exchanges, trunk network and local loop connections for the vast majority of British fixed-line telephones. Currently BT is responsible for approximately 28 million telephone lines in the UK. Apart from Kingston Communications, which serves Kingston-upon-Hull, BT is the only UK telecoms operator to have a Universal Service Obligation (USO) which means it must provide a fixed telephone line to any address in the UK. It is also obliged to provide public call boxes.

BT's businesses are operated under special government regulation by the British telecoms regulator Ofcom (formerly Oftel). BT has been found to have Significant Market Power in some markets following Market Reviews by Ofcom. In these markets, BT is required to comply with additional obligations such as meeting reasonable requests to supply services and not to discriminate.

As well as continuing to provide service in those traditional areas in which BT has an obligation to provide services or is closely regulated, BT has expanded into more profitable products and services where there is less regulation. These are principally, broadband internet service and bespoke solutions in telecommunications and information technology.

BT Group is organised into the following business divisions:

  • BT Retail: Retail telecoms services to consumers
  • BT Wholesale: Wholesale telecoms core trunk network
  • Openreach: fenced-off wholesale division, tasked with ensuring that all rival operators have equality of access to BT's own local network
  • BT Global Services: Business services and solutions (formerly BT Ignite and BT Syntegra)
  • BT Exact / One IT: used to handle consultancy and internal IT. Now been replaced by BT Design.
  • Group operations: handles security, research and development, and other functions for BT Group Plc such as legal services

From 1 July 2007 two additional divisions were put in place:-

  • BT Operate took responsibility from BT Wholesale for the roll-out and maintenance of the group's new IP based fixed-line network, known as 21st Century Network (21C).
  • BT Design pulled together IT designers from BT Retail, BT Wholesale, BT Global Services and OneIT to design services on the 21C network.[35]

Financial performance

Year ended Turnover (£m) Profit/(loss) before tax (£m) Net profit/(loss) (£m) Basic eps (p)
31 March 2009 21,390 (134) (81) 3.2
31 March 2008 20,704 1,976 1,738 21.5
31 March 2007 20,223 2,484 2,852 34.4
31 March 2006 19,514 2,633 1,644 19.5
31 March 2005 18,429 2,693 1,539 18.1
31 March 2004 18,519 1,945 1,414 16.4
31 March 2003 18,727 3,157 2,702 31.4
31 March 2002 18,447 1,461 1,008 12.1
31 March 2001 17,141 (1,031) (1,875) (25.8)
31 March 2000 18,715 2,942 2,055 31.7
31 March 1999 16,953 4,295 2,983 46.3
31 March 1998 15,640 3,214 1,702 26.6
31 March 1997 14,935 3,203 2,077 32.8
31 March 1996 14,446 3,019 1,986 31.6
31 March 1995 13,893 2,662 1,731 27.8
31 March 1994 13,675 2,756 1,767 28.5
31 March 1993 13,242 1,972 1,220 19.8
31 March 1992 13,337 3,073 2,044 33.2

Analysis of figures

After a pay rise of over 40%, BT's chief financial officer, Hanif Lalani, became one of the very few UK financial directors whose annual remuneration exceeds £1 million. He became CEO of BT Global Services in October 2008 and was replaced as BT Group CFO by Tony Chanmugam on 1 December 2008.

In recent years, the strategy of BT plc has been to reduce its dependence on traditional voice revenues and instead obtain an increasing portion of its turnover from so-called New Wave revenues. At the heart of this strategy is BT Global Services, which has won many significant contracts in the commercial and public sectors, in part through its portrayal as a "momentum story".

There is, however, increasing disquiet among analysts that the annual growth of the Global Services business has been unimpressive, and that BT has been using prior year adjustments to achieve favourable growth figures.

Take the quarter ended 30 September 2005, for example. At the time, BT said the external revenues of its Global Services division were £1,740m. However, a year later, BT revised this figure downwards to £1,703m. This enabled BT to claim growth of 3.5%, instead of the dismal 1.3% it would have been forced to announce if it hadn't adjusted the prior year's figures.

BT has made a habit of adjusting the previous year's revenue figure every quarter. Only once in the past year has BT adjusted the figure upwards rather than downwards.

Sources

  1. Financial Director
  2. Google spreadsheet based on BT's quarterly financial reports
  3. Reuters financial data for BT for 2009

Environment

In 2004, the BT Group signed the world's largest renewable energy deal with npower and British Gas, and now all of their exchanges, satellite networks and offices are powered by renewable energy. BT is a member of the Corporate Leaders Group on Climate Change. They signed a letter urging the government to do more to tackle this problem. Janet Blake, head of global corporate social responsibility (CSR) at BT, says that she would like to see incentives that find ways of awarding those companies that focus on climate change by making investments in green business models.[36]

BT has made it clear that it has an ambitious plan to reduce carbon dioxide emissions.[37] Its strategy includes steps to reduce the customer's, supplier's, employee's, and its own footprints. BT has actually pledged to achieve an 80% reduction by the year 2016, which will require further efficiency improvements.[38]

Market position and power

In 1984 the Telecommunications Act set the framework for a competitive market for telecoms services by abolishing BT's exclusive right to provide services. In the early 1990s the market was opened up and a number of new national Public Telecommunications Operators (PTOs) were given licences. This ended the duopoly that had existed in the 1980s when only BT and Mercury were licensed to provide fixed line telecom networks in the UK.

Recent and future plans

  • BT's 21st Century Network (21CN) is a network transformation project which will see the UK's telephone network move from the present AXE 10/System X Public Switched Telephone Network (PSTN) to an IP/MPLS system. BT envisages annual savings of £1 billion when the transition to the new network is complete. Capital expenditure is put at £10 billion.[39]
  • In April 2007, BT launched a new online service called BT Tradespace. According to BT the new service is a "social media platform dedicated to small businesses."[40]
  • In December 2006, BT launched BT Vision, a broadband Television service with the ability to watch programmes from previous weeks or months. According to BT PLC Today, companies including BBC Worldwide, Paramount, Warner Music Group, Cartoon Network and the National Geographic Channel, have already signed deals with BT Vision. Microsoft announced on 9 January 2008 that BT Vision services will shortly be made available on the Xbox 360.[41]
  • In May 2008, BT launched BT Total Broadband Anywhere,[42] an all-inclusive package which offers a free, internet-capable smartphone – the BT ToGo and BT’s Total Broadband service in the home.
See also: Local loop unbundling and System X (telephony)

BT's "Web patent"

In 2001 BT discovered it owned a patent (U.S. patent 4,873,662) which it believed gave it patent rights on the use of hyperlink technology on the World Wide Web. The corresponding UK patent had already expired, but the US patent was valid until 2006. Opponents of BT's claim held that the patent had never been valid, due to prior art by both Douglas Engelbart and Ted Nelson's Project Xanadu. Nevertheless on 11 February 2002, BT began a court case relating to its claims in a U.S. federal court against the Internet service provider Prodigy Communications Corporation. The U.S. court ruled on 22 August 2002 that the BT patent was not applicable to Web technology, and granted Prodigy's request for summary judgement.[43] The issue of prior art was thus not addressed.

Controversy

Behavioural targeting

Main article: Data pimping

In early 2008 it was announced that BT had entered into a contract (along with Virgin Media and Talk Talk) with the spyware company Phorm (responsible under their 121Media guise for the Apropos rootkit)[44][45] to intercept and analyse their users' click-stream data, and sell the anonymised aggregate information as part of Phorm's OIX advertising service.[46][47] The practice, known as "behavioural targeting" and condemned by critics as "data pimping", came under intense fire from various internet communities and other interested-parties who believe that the interception of data without the consent of users and web site owners is illegal under UK law (RIPA).[48][49][50][51] At a more fundamental level, many have argued that the ISPs and Phorm have no right to sell a commodity (a user's data, and the copyright content of web sites) to which they have no claim of ownership. In response to questions about Phorm and the interception of data by the Webwise system Sir Tim Berners-Lee is quoted as saying:

"It's mine - you can't have it. If you want to use it for something, then you have to negotiate with me." —Sir Tim Berners-Lee, 2008[52]

See also

References

  1. ^ a b c BT: Preliminary Results 2009
  2. ^ BT around the world
  3. ^ Summary of BT results for 2008
  4. ^ a b BBC News | BUSINESS | Sir Peter Bonfield: A profile
  5. ^ List of Large Corporations that own a Two Letter Domain
  6. ^ MCI to weigh WorldCom bid as BT merger process grinds on
  7. ^ GTE Plans a $25 Billion Cash Bid to Make It a 3-Way Fight : Battle to Acquire MCI Heats Up - International Herald Tribune
  8. ^ MCI and WorldCom - How British Telecom Fell Short at Competitive Intelligence
  9. ^ Articles
  10. ^ BT beats conflict of interest by buying both sides
  11. ^ BBC News | BUSINESS | BT attacks debt mountain
  12. ^ BBC News | BUSINESS | Vallance resigns from BT
  13. ^ BT wraps up share sale
  14. ^ BT retreats from Japan and Spain
  15. ^ BT sells Yell for £2.1 billion
  16. ^ Shareholders give thumbs up to BT wireless spin-off
  17. ^ BBC News | BUSINESS | BT chief quits early
  18. ^ BBC News | BUSINESS | BT lures Lucent boss with £7m package
  19. ^ BT's Sir Peter Bonfield stands to gain extra £3.3m in share bonuses
  20. ^ Andreas Whittam Smith: The men who broke the bank at British Telecom
  21. ^ BBC NEWS | Business | Telefonica bids £18bn for UK's O2
  22. ^ BT goes home
  23. ^ BT's Openreach could have to list separately
  24. ^ BT buys on-line retailer Dabs.com
  25. ^ Thomson ships BT home hub
  26. ^ BT transfers first customer lines to 21CN network
  27. ^ Bt buys PlusNet for CRM system
  28. ^ BT buys former Lucent division INS
  29. ^ Datamonitor ComputerWire - BT Appoints New Chairman to Replace Bland
  30. ^ BT buys Comsat
  31. ^ BT buys Wire One
  32. ^ BT buys Ribbit for $105m
  33. ^ BT to shed a further 15,000 job losses BBC News, 14 May 2009
  34. ^ "2008 Annual Report Overview".
  35. ^ "Two new BT businesses after a radical shake-up". Financial Times. 25 April 2007. {{cite news}}: |access-date= requires |url= (help); Cite has empty unknown parameter: |coauthors= (help)
  36. ^ Interview: CSR delivers £2.2bn for BT - 30 Oct 2006 - IT Week
  37. ^ Climate change
  38. ^ Climate change - BT's Vision and Strategy
  39. ^ BT's 21CN website
  40. ^ BT's corporate website
  41. ^ BBC NEWS | Technology | Xbox will host BT's TV service
  42. ^ Laura Bundock (2008-05-08). "Go Online Anywhere: BT's New Service". Sky News.
  43. ^ BT’s “Hyperlinking” Patent Litigation Fails
  44. ^ F-Secure Spyware Information Pages: Apropos
  45. ^ F-Secure Spyware Information Pages: PeopleOnPage
  46. ^ ISP data deal with former 'spyware' boss triggers privacy fears
  47. ^ How Phorm plans to tap your internet connection
  48. ^ Web users angry at ISPs' spyware tie-up
  49. ^ Data pimping: surveillance expert raises illegal wiretap worries
  50. ^ Net think thank: Phorm is illegal
  51. ^ The Phorm “Webwise” System - a Legal Analysis
  52. ^ Web creator rejects net tracking

Data

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