BTWbriefingNovember2011-1

IndustryIndustry AnalystAnalyst Briefingg

7th floor BoardroomFaraday Building

18 November 201018 November 2010

1


SallySally

2

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

8

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

10

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

13


Brian FitzpatrickBrian Fitzpatrick

14

BT Wholesale customers

FocusFocus FocusFocusMobile

Network Operators

Internet Service

Providers


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?

16

BT Wholesale customers - Broadcast


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.

17

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

18

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

19

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

20

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

22

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

24


Cameron RejaliCameron Rejali

25

BT Wholesale products

Mobile Network

Operators

Internet Service

Providers


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

31

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


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

BTWbriefingNovember2011-1

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