Once upon a time, BT Group's rivals could have fit into one of the company's signature red phone booths. Though competition has taken a toll, the company still wears the crown as the UK's top telecommunications carrier. It offers local and long-distance phone service and provides Internet access and other data and IT services. BT Group operates through four divisions -- corporate clients are served through its BT Global Services division, while BT Retail oversees residential and small business service. The BT Wholesale and Openreach divisions are devoted to the broadband and local network needs of other carriers. BT Group generates almost 80% of its revenues in the UK.
BT Global Services, its enterprise telecommunications division, is the group's largest segment by sales, accounting for 40% of revenue in 2011. It provides voice and data communications, as well as managed network and IT services to corporate and public sector customers in more than 170 countries; the UK government is the company's largest client. BT Global Services also operates customer contact and data centers, and offers customer relationship management and managed network security. While the division's revenues declined again in 2011, BT Global Services reduced its loss for the year compared to 2010 by bringing down operational costs. Management has set a plan to return the unit to profitability in 2012.
Key European markets for BT Global Services are Italy, Germany, and Spain. It also has a presence in the Americas, and since 2010 it has been pushing in earnest for new business in the Asia Pacific region. Investments in Asia have included adding sales, marketing, and operational staff, and investing in network resources.
Notable contract wins for BT Global Services in 2011 included an extension agreement with Unilever to continue supplying managed services to the company's global operations; it also signed a deal with Swiss private banker UBS to provide voice and data telecom services worldwide. Top 2010 deals included providing voice and data services to Japanese brokerage firm Nomura and Germany's HeidelbergCement. The group also extended contracts with many government agencies in the UK, and it was chosen by the International Olympic Committee to provide communications services for the 2012 Olympic Games in London.
Consumer services offered through BT Retail accounted for 37% of the group's revenues in 2011. BT Retail serves individual and small business customers (up to 1,000 employees) in the UK with fixed-line, broadband, mobile broadband and wi-fi, and digital television service. While it holds well over half of the domestic market for residential fixed-line service, its number of access lines continues to drop as more people switch to cell phones. (Due to regulatory laws, BT is unable to offer mobile cell phone service). Its growing pay TV brand, BT Vision, is seen in 575,000 homes, up from 423,000 in 2009. BT Expedite, BT Ireland, and BT Redcare all operate as standalone businesses under BT Retail. Revenues for BT Retail dropped by 5% in 2011 (4% the previous year), while profits rose again slightly due to reduced operational costs.
BT Wholesale provides network services to more than 1,000 communications service providers in the UK. It operates the only network that covers the entire country, and many competitors pay to use its network to enable their own services. BT Wholesale manages the network infrastructure for Virgin Media and KCOM, while O2 and Vodafone use its fixed-line network for their business customers. Contracts typically run three to five years, and 40% of its customers are signed to these long-term contracts.
As established carriers face mounting competition in the high-speed Internet space from the likes of Virgin and TalkTalk, some have sought partnerships to shore up their online businesses. In 2010 BT took over management of the broadband network of France-based rival Orange's UK business, which is experiencing a declining subscriber base. BT Wholesale accounted for 16% of the group's revenues in 2011; sales dropped again for the year, while profits continued to trend upward.
Openreach is the group's smallest segment, accounting for 7% of revenues in 2011. It was created in 2006 as part of a settlement with regulatory agency Ofcom to ensure that other companies have full access to BT's network. About 500 communications service providers, including BT divisions, rely on Openreach for network communications. The unit's sales and profits rose in 2011 due to strong demand.
Overall group revenue was up in fiscal 2011, while profits rose markedly due to the company's ongoing efforts to improve operational efficiency, in part through staff reductions; it laid off almost 20% of its workforce in 2010. BT is a very expensive company to operate - those cables don't lay themselves. It pays billions in taxes and after being in business more than 100 years, it also spends a lot on pension payments.
Asset manager Invesco owns nearly 11% of BT Group's stock.