Once, BT Group's rivals could have fit into one of the company's signature red phone booths. Though competition has taken a toll, BT 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 unit, 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, which claims to be the world's oldest communications company, is working to adapt to the age of mobile communications.
The UK is London-based BT Group's largest market, accounting for more than three-quarters of its annual sales. Key European markets for the company include Italy, Germany, and Spain. In North America, BT serves customers from offices in 25 cities. The firm also has a presence in high-growth regions in Asia Pacific, Latin America, the Middle East, and Africa.
BT Global Services, the group's enterprise telecommunications division, is its largest segment by sales, accounting for nearly 40% of revenue in fiscal 2013 (ended March). 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.
Consumer services offered through BT Retail accounted for 37% of the group's fiscal 2013 revenue. 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.
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.
Openreach is the group's smallest segment. 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.
BT Group's revenue declined 5% in fiscal 2013 (ended March) versus the prior year to £18.2 billion. (Revenue and profit figures have not been adjusted for the effects of currency translation.) The decline reflected lower revenue from calls and lines, difficult economic conditions in Europe and the financial sector, and regulatory price reductions. The 8% drop in proceeds from calls and lines was caused by the continued migration from fixed-line calls to mobile, broadband, data and IP services. The decline was partially offset by a 7% annual increase in broadband and convergence revenue. Three of BT's four operating segments posted declines in fiscal 2013, with BT Global Services, BT Retail, and BT Wholesale down 8%, 3%, and 11%, respectively. Broadband services unit Openreach, with an 8% jump in revenue, was the exception.
Net income grew 14% in fiscal 2013 versus 2012, while net cash outflow grew by £600 million over the same period.
BT is pursuing new business in Turkey, the Middle East, Africa, and high-growth areas of 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 include its selection by the International Olympic Committee to provide communications services for the 2012 Olympic Games in London; an extension agreement with Unilever to continue supplying managed services to the company's global operations; and a deal with Swiss private banker UBS to provide voice and data telecom services worldwide.
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 is a very expensive company to operate - those cables don't lay themselves. It pays billions in taxes (around £3 billion annually) to the UK Exchequer. After being in business for more than 100 years, it also spends a lot on pension payments.
Mergers and Acquisitions
In 2013 BT Group acquired the London-based technology group Tikit Group for £64.2 million ($103 million). The move was designed to strengthen BT Retail's position as a provider of ICT services to law firms in the UK. Tikit's clients include legal and accountancy firms.
Asset manager Invesco owns about 10% of BT Group's stock.