INTRODUCTION

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INTRODUCTION

description

INTRODUCTION. Agenda. IntroductionKeith Mitchinson HistoryKeith Mitchinson BT ObjectivesMohit Jain TimetableMohit Jain Plan & StoryboardCharles Walker Dispute ResolutionKeith Mitchinson NovationsCharles Walker Any Other Business-. History. Review Notice - PowerPoint PPT Presentation

Transcript of INTRODUCTION

Page 1: INTRODUCTION

INTRODUCTION

Page 2: INTRODUCTION

Agenda

Introduction Keith Mitchinson

History Keith Mitchinson

BT Objectives Mohit Jain

Timetable Mohit Jain

Plan & Storyboard Charles Walker

Dispute Resolution Keith Mitchinson

Novations Charles Walker

Any Other Business -

Page 3: INTRODUCTION

History

Review Notice

Industry Discussions

Offer to industry May 02

Direction February 03

Revised offer to industry group May 03

Industry discussions June-August

New Directions November 03

Storyboard revised offer to industry group March 04

Page 4: INTRODUCTION

Objectives of Credit Vetting

BT is willing to accept a degree of commercial risk

BT acknowledges competition is here to stay and does not seek to stifle it via credit vetting

Risk mitigation is essential for corporate governance and compliance with “Turnbull Report”

OFTEL acknowledged the right for BT to be able to carry out credit vets.

Page 5: INTRODUCTION

Objectives …….2

Historically Bad Debt on Interconnect has been low

Since 2000 levels of Bad Debt have increased – this year alone they amount to tens of million pounds

Ultimately bad debt costs the whole industry

Credit Vetting does NOT change the basic payment terms of 30 days

Page 6: INTRODUCTION

THE RISK

0

500

1000

1500

2000

2500

0 1 2 3 4 5 6 7 8 9 10 11 12

ABOVE NORMAL RISK

NORMAL/ACCEPTABLE RISK

CREDIT LIMIT

Months

Page 7: INTRODUCTION

ESTIMATED FINANCIAL COMMITMENT(New Operators)

Will be built into ACO Form

New Call Type Categories

Erlangs Converted into minutes

Minutes Priced at Average quarterly outturns

Turned into Estimated Invoice Values for months 1-4

Process is transparent

Page 8: INTRODUCTION

ACO SCHEMATICCALL TYPES (BOTH WAYS)

ERLANGS PER CALL TYPE

ERLANGS CONVERTED INTO GROSS MINUTES

GROSS MINUTES CONVERTED INTO NET MINUTES

NET MINUTES PRICED

X X X X X X X X X X

FORMULA-VISIBLE

G G G G G G G G G G

FORMULAE ADJUSTABLE

N N N N N N N N N N

PRICING TABLE (ACTUALS)

£ £ £ £ £ £ £ £ £ £

TOTAL “INVOICE” PERIOD 4 Σ £

EXPECTED INVOICES

P1 P2 P3 P4CALCULATION ON PRE-SETS

FORMULAE ADJUSTABLE

£#1 £#2 £#3 £#4

Page 9: INTRODUCTION

ACO SCHEMATIC (Example)CALL TYPES (BOTH WAYS)

ERLANGS PER CALL TYPE

ERLANGS CONVERTED INTO GROSS MINUTES

GROSS MINUTES CONVERTED INTO NET MINUTES

NET MINUTES PRICED

15 5

“E” X 24 (hours) X 30 (days)

10,800 3,600

35% 25%

2 ppm 15ppm

£75.60 £135.00

TOTAL “INVOICE” PERIOD 4 £210.60

EXPECTED INVOICES P1 P2 P3 P4

CALCULATION ON PRE-SETSFORMULAE ADJUSTABLE

£26 £55.00 £110.00 £210.60

35% X 10800= 3780 25% X 3600= 900

Page 10: INTRODUCTION

0 1 2 3 4 5 6 7 8 9 10 11 12

Operator A Forecast

CREDIT

LIMIT

SECURITY NEEDED

Operator B Forecast

Forecast(s) vs. Credit Limit

Page 11: INTRODUCTION

£0

£100

£200

£300

£400

£500

£600

1 2 3

CREDIT LIMITS

Operator A Forecast

Operator B Forecast Security Needed Operator A

Forecast

Operator A Forecast

Operator B Forecast

Security Needed

Operator B Forecast

Security Needed

MONTHS

CREDIT LIMIT

Page 12: INTRODUCTION

0

50

100

150

200

1 2 3 4 5 6 7 8 9

Days

Credit Limit

Profile Security

Cumulative Daily Usage, PIV vs. Credit Limit

PROFILE MONITORING

Cum’ve Actual

PIV5% Tolerance

Page 13: INTRODUCTION

Existing Operators: Credit Vetting

• 2 Payment Period Notices (or 1 PPN + 1 Security Notice) - Profile Monitoring Starts

2 Security Notices: Credit Vetting carried out Profile Monitoring Starts

• If Adverse, Credit Limit Set and possible Security

• If not Adverse, No security required

Page 14: INTRODUCTION

0

50

100

150

200

1 2 3 4 5 6 7 8 9

Days

Credit Limit

Profile Security

Cumulative Daily Usage, PIV vs. Credit Limit

PROFILE MONITORING

Cum’ve Actual

PIV5% Tolerance

Page 15: INTRODUCTION

Industry discussion Topics

• Disputes Resolution

• Requirement for 3rd Party appeal for Notices?

• Possibility of Mediation/Conciliation for Type of Security

• Adjudication – proposed by BT (with input from some of industry)

Page 16: INTRODUCTION

Novation

Working Definition:

“The transfer of the rights and obligations from one party to an Agreement to a third party with the consent of the other (second) party to the original agreement.”

Page 17: INTRODUCTION

Not a Novation

Company A contracts with Company B. Company A changes it’s name via Companies House to “Z”. This is NOT novation.

Company C takes over the equity of A, but A retains its legal identity. This is NOT novation.

Page 18: INTRODUCTION

Novation

Company A contracts with Company B. Company C wants to take over the contract from Company A. There is no legal, or shareholding link between A and C. This is a novation.

Company C takes over the equity of A, and thereafter subsumes the business of A and places A into Liquidation. This contract would have to be novated as the contract stays with the original legal entity (the contract could be terminated due to the insolvency of the original party!) This is a novation.

Company A contracts with Company B. Company A is a wholly owned subsidiary of C, who also owns D and E. Following a restructuring, D and E are merged under the identity of E and takes over the business and assets of A. A continues to trade. E wants the contract with B. A novation is required.

Page 19: INTRODUCTION

Novation Example

C

D E A B

100%

100%

100%

E

Asset

Transfe

r

Mergedcontract

Contract Novated

(with B’s

consent)

Page 20: INTRODUCTION

Timetable

4th March Story Board Circulated

9th March Industry Presentation

23rd March Comments back from Industry

26th March Briefing at Standard Contract Forum

7th April BT Response with Draft Policy and Contract Text

16th April Further Meeting with Industry Group

23rd April Circulate Final Policy and Contract Text

3rd May Publish Policy


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