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Partnership Contract Template with Shares - PowerPoint

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									Andy Green
Chief Executive Officer


January 13th 2003
Forward-looking statements – caution
Certain statements in this presentation are forward-looking and are made in reliance on the safe harbour provisions of
the US Private Securities Litigation Reform Act of 1995. These statements include, without limitation, those concerning:
revenue, market share, margins, working capital and capital expenditure control, cash management, earnings per share,
cash-flow and debt reduction targets; growth opportunities by BT business, including broadband growth in the UK; BT
Retail, BT Wholesale and BT Ignite cost control and savings; break-even and cash flow targets for BT Ignite‟s loss-
making and ex-Concert businesses; revenue targets for BT Ignite‟s businesses; broadband growth and customer targets;
reductions in costs, and prices for customers, and increased access to broadband.
Although BT Group believes that the expectations reflected in these forward-looking statements are reasonable, it can
give no assurance that these expectations will prove to have been correct. Because these statements involve risks and
uncertainties, actual results may differ materially from those expressed or implied by these forward-looking statements.
Factors that could cause differences between actual results and those implied by the forward-looking statements include,
but are not limited to: material adverse changes in economic conditions in the markets served by BT and its lines of
business; future regulatory actions and conditions in BT‟s operating areas, including competition from others in
communications markets; selection by BT and its lines of business of the appropriate trading and marketing models for
its products and services; technological innovations, including the cost of developing new products and the need to
increase expenditures for improving the quality of service; the anticipated benefits and advantages of new technologies
not being realised; developments in the convergence of technologies; prolonged adverse weather conditions resulting in
a material increase in overtime, staff or other costs; the anticipated benefits and advantages of new technologies,
products and services, including broadband, not being realised; the timing of entry and profitability of BT and its lines of
business in certain communication markets; significant changes in market shares for BT, its lines of business and its
principal products and services; fluctuations in foreign currency exchange rates and interest rates; general financial
market conditions affecting BT‟s performance; factors not within BT‟s control which may affect the ability of BT‟s lines
of business to reduce costs, grow revenue, improve quality and maximise return on capital employed; and the
reintegration of Concert.
Agenda


   Who are we?

   Our global position

   Our performance against strategy
Our core focus
    Build on existing corporate
     relationships in the UK
      – Providing European and
          international reach           Focused on
      – Offer complete ICT           managed services
          solutions and services
                                     and solutions for
    Expand European MSC
     client base                    multi-site corporates
    European focus; global         operating in Europe
     reach through partnerships
    Roll out strong UK Solutions
     business into Europe
    Driving for cost and capital
     efficiency
What is BT Ignite?


                        Global
    Global Carrier                            Solutions                 Syntegra
                       Products



        Connectivity    Outsourcing, Managed Network          Systems Integration
         & Access          Services & Applications               & Consulting



   Backbone access       LAN/WAN/IP-VPN                     Consulting and
   International          services                            professional services
    connectivity          Network integration                Systems integration
   Carrier               Storage & security                 Outsourcing / training
                          Applications Hosting
Our existing strengths

                            Existing strength in
                             target segment



 BT brand and financial                                Built on a deep and
                                                       broad retail network
       strength




                          Unique market positioning
                                                          Delivering next
   Global account and                                 generation IP products
  service management                                    to customers now


                             Leading provider of
                            solutions and systems
                                  integration
   Based on a market leading performance
               EBITDA pre Leavers *                                Operating FCF pre Leavers *
 £60m                                                     £0m

                                                        (£50m)
 £40m

                                                       (£100m)
 £20m
                                                       (£150m)
  £0m
                                                       (£200m)

(£20m)                                                 (£250m)
         Q1    Q2        Q3      Q4     Q1     Q2                 Q1     Q2        Q3   Q4   Q1     Q2
          2001/02                       2002/03                    2001/02                   2002/03




  „Underlying‟ adjusted for acquisitions / disposals, including Concert, and the
  transfer of an account to Wholesale
BT brand and financial strength

   Corporate customers need a trusted, long-term
    business partner
   BT is one of the most recognised brands in the
    marketplace:
    –   In Europe
    –   By corporates
   BT brand attributes important to corporates
    –   Trust, reach, stability, security
   BT Group on „sound‟ financial footing
    –   Healthy balance sheet
    –   Cash generating businesses
    –   Flexibility to pursue growth strategies
Existing strength in target segment
In the UK:
 80 of FTSE 100
 19 of top 20 UK headquartered financial institutions
And internationally, customer examples include:
Major strength in global account
and service management
   Heritage across BT

   Single interface support to customers

   17 years experience

   Concert Global Accounts back in BT Group

   Continuous improvement from customer
    feedback
Global Position

                                                Western Europe
                                                   Austria        Luxembourg
Asia Pacific          North America                Belgium        Netherlands
   Australia              Canada                   Denmark        Norway
   China                  Mexico                   Finland        Portugal
   Hong Kong              US                       France         Spain
   India                                           Germany        Sweden
   Indonesia                                       Greece         Switzerland
   Japan                                           Ireland        UK
   Malaysia      Central & South America
                                                   Italy
   New Zealand      Argentina
   Philippines      Brazil
                    Chile                  Eastern Europe, Middle East, Africa
   Singapore
                    Columbia                  Czech Republic           Romania
   South Korea
                    Venezuela                 Slovak Republic          Russia
   Taiwan
                                              Egypt                    South Africa
   Thailand
                                              Hungary
                                              Israel
                                              Poland
Global Position - BT in Asia Pacific
   BT is committed to Asia Pacific. We will:-

    –   Expand the BT regional, post Concert product
        footprint where it supports our customers
    –   Proactively expand the product portfolio
    –   Provide price competitive products based on
        market rates
    –   Offer in-region customer support
    –   Challenge regulatory barriers to enhance product
        propositions and service levels
    –   Continue to focus on Asia Pacific as a key
        component of BT‟s global MNC strategy
Global Position - BT in the US – Assets

   1,400 professionals on the ground
   Comprehensive ICT portfolio with continent-wide coverage
   Operate and manage US network infrastructure
   Regional customer service center of excellence in Atlanta
   Own and operate media centers in Washington, DC and
    Los Angeles offering a wide range of global broadcast
    solutions
   Sales offices in more than a dozen key US business cities
   Boston-based 24-hour operations center for conferencing
   On-the-ground in the US since 1988
BT in the US – Depth of capabilities
   Already have 1200 business customers in the Americas
   Global sales & service
   Customized solutions/outsourcing
   Broadcast services
   Carrier services
   Conferencing
         –   # 1 in the UK; rapid growth in the US
   Consultancy/systems integration (Syntegra)
         –   Specialist Financial/Banking applications, trading floors
   BTexact
    –   R&D relationship with MIT Labs
    –   US venturing operation on the West Coast
How are we delivering against strategy?

                          European path to
                             profitability
                                                  Solutions
 Customer satisfaction




                                                                 Corporates
                            Realising the




                                                                  Multi-Site
 Clear strategy for      benefits of Concert
  each customer group        integration          Syntegra
  - including new
  services and brand
                           Accelerating
  extension in ICT
                          Solutions growth         Global
 Financial discipline
                                                  Products
 Broadband - the
                            Driving down
  heart of BT                  customer
 New focus for BT          dissatisfaction     Global Carrier
  Ignite
 Clear network             Motivating our
  strategy - including         people
  one management for
  all UK networks
 Motivated people
BT in Europe - Built on a deep and broad
retail network
In-country strength   Pan-Europe strength

 Example:             Ubiquitous UK network
 Germany              BT Ignite European network covers:
                       More than 300 towns and cities
                       16 countries
                       Across the world with the integration
                         of Concert, BT Ignite has:
                       Frame Relay in 62 countries, with
                         470 PoPs and 65,000 ports
                       ATM in 18 countries, with 180 PoPs
                         and 4,230 ports
                       MPLS in 61 countries, with 500
                         PoPs and 16,000 ports
Ignite Europe - Strategy

 Growth opportunities exist
                               Benefiting from market consolidation
 in times of unparallel        Leading convergence of IT & Telecoms
 uncertainty                   Implementing a growth strategy for Italy & France

                               Delivering against our financial commitments - EBITDA
 Establishing financial
                              positive in 2002/3 and cashflow positive in 2004/5
 stability


 Focusing on specific
                               Multi-site corporates & government
 customer segments             Core data & voice network service and value-
 & services                   added solutions



 Operational efficiency is     Customer focus and satisfaction
 the foundation for            Product harmonisation
 profitable growth             Single operating environment
                               Sales Excellence
                               Key management appointments
European Path to Profitability


   Spain and Ireland already reached EBITDA
    breakeven

   All other countries currently on target for end of
    March 2003
Standard Operating Environment


The Proposition

     To Create Cost Competitiveness with
   Consistency requires a Common Portfolio
Supported by Common Processes and Systems.
Standard Operating Environment - Areas of
Focus
   Product Harmonisation
        Reduced size of portfolio
        Consistent portfolio across BT Ignite
        Minimise local products
        Common management processes
   Sales
        Upskilling
        Underpinned by Common Process Tools and Systems
        Single approach to management and targeting
   Customer Service
        Defined Portfolio of service products available everywhere
        Global Processes and Systems to deliver service excellence
        Consolidated Service Centres
Standard Operating Environment - Areas of
Focus

   Network Automation
        Centralised management
        Automated Delivery of Bandwidth; Frame and IP/MPLS
   Centralised Billing
        Rationalised Billing Operations
        Common Processes and Systems (52 systems today)
        Enhanced Billing Capability (single bills, currencies etc)
   Running the Business
        Integrated Processes for HR, Finance
        Simplified Commercial Models and Decision Making
        Common internal infrastructure
    Standard Operating Environment in Action

Recent Examples

    Network Control Centre opened in Brussels centralises network
     management across 16 countries
    Web based access pricing tool across all major markets speeds up
     revised bid process
    Common customer contracts to be launched 1st February
    Single HR system across BT Ignite available by March as first phase of
     wider systems consolidation programme (sales, service, billing etc)
    Single functional leadership of Customer Service implemented
    Process rationalisation work underway
    First phase of data consolidation underway
    Realising the benefits of Concert
    Integration

   Physical network infrastructure split and network operation
    centres hand-over completed
   2361 employees transferred to BT Group entities
   Customer accounts successfully split between parents and
    ongoing commercial contracts transferred
   £140m annualised synergies on track to be achieved by
    December 2003
   Total synergies likely to exceed £140m target
Next generation IP products

   Some examples:

    –   Global MPLS - based IP VPNs

    –   Gigabit Ethernet

    –   Wireless LAN

    –   Transform

    –   Data Storage
BT‟s MPLS Services - The Brief History

   BT has been working with Cisco on MPLS since 1997

   BT launched world‟s first QoS MPLS offer at Telecom „99

   First BT customers were brought into service in mid 2000.

   BT has invested £45M to date in design and systems

   Constructed a testbed at Adastral Park that is larger than
    many production networks
BT‟s MPLS Services - Current Facts

   We manage about 17,000 MPLS ports, in about 800 VPNs

   Most are in the UK - we have about 2000 non-UK ports

   Adding 1,000 ports per month in UK, 200 per month RoW
   Recently received orders for a 6,000 site deal in the UK, a
    1,000 site deal in NL, and 500 site deal in Germany
   Domestic MPLS services now available in UK, Nordics,
    Germany, Ireland, Netherlands, Belgium and Spain
   60 countries of seamless global reach
Why MPLS? Why BT? Why Now?

   MPLS VPNs are forward looking and mix the flexibility of IP
    with the security and stability of services like ATM
   They make management of VPNs more simple in many
    ways - moves, changes, scaling, application mix
   Of course, price points are more keen than Layer 2 services
   New customers choose us primarily because of our
    experience, credibility, stability and breadth of vision
   Existing customers like our “Technology Refresh” vision that
    Transforms them seamlessly from layer 2 to Agile IP
Global Proposition
   Global Proposition: Ignite & Concert networks aligned, integrated
    Global MPLS product
     – other Ignite product harmonisation underway Germany, NL, Spain
       target completion all european countries April 2003
   Extensive Global IPVPN Footprint
     – Connectivity in 60+ countries from 500+ PoPs
     – 400+ cities/towns in Europe (inc UK), 130 cities outside Europe
   MPLS connections growing at +6% month on month (5.6% UK,12.5%
    outside UK)
   EVUA report in November recommends BT: IP VPN BT price at
    competitive level with Infonet and Equant
   Global Products like for like revenue growth 10% year on year
Leading supplier of solutions

   Track record in UK                      BT Ignite Solutions
                                    – Sales Order Value by Sector 2002

                                         Telecoms
£m             Q2 02/03                    11%
                                                                   Banking /
Revenue          475                                                Finance
EBITDA             45                                                37%
                                 Govt.
                                 22%

   Strength across
    industry sectors            BT.SME
   Expansion of solutions        2%
    capability in Europe core                                 Energy /
    to BT Ignite‟s strategy       Tech /      Retail /
                                  Cons                        Industry
                                              Leisure           8%
                                   4%          16%
Accelerating solutions growth

                                         BT Ignite Solutions Tomorrow

      BT Ignite Solutions Today             To become a top 5 European ICT
                                             player in 3 years
    11 years of experience                 Client centric approach
    £1.9bn revenue 2001/02                 Loading BT Ignite‟s network
    UK market leader                       Growing European order book
    Growing international business         Providing turn-key to outsourced
    Loads BT‟s UK network                   solutions
    1st major Outsource win in Europe


                                               Driving UK ICT growth
Unilever - Key Facts

   Contract signed 4 November 2002 - one of the largest
    ever outsourcing contracts in UK corporate history
   Worth 1 billion Euros over 7 years to manage and
    develop the company's entire global communications
    infrastructure
   Unilever appointed BT as their exclusive network provider
    for 5 years and preferred supplier for a further 2 years
   BT will acquire 20 million Euros of assets, up to 250
    people and all the existing supplier contracts (circa 200)
   BT will provide Unilever with all voice, data and mobile
    communications in 90 countries
Unilever - why BT
• The shortlist of bidders for the mega contract was AT&T, BT, Deutsche
  Telekom, France Telecom and Sprint. Unilever said BT had the best owned
  coverage; and partnerships in areas where its network does not reach.

• Previously, Unilever had individual voice and mobile service contracts for every
  country in which it has a presence. Data networking was handled by operators
  in different regions. Unilever's primary cost savings will come from not having
  to manage all of these supplier relationships. "We believe someone like BT
  would be far better optimising these quality and cost concerns than we would,"
  said Martin Armitage, head of Unilever's Global Infrastructure Organisation
  (GIO).

• Armitage said: "To achieve our path to growth strategic objectives it is essential
  that Unilever has a high quality and cost effective global network. We look
  forward to working with BT as it uses its technical expertise and global
  knowledge to oversee our existing network and introduce appropriate new
  technology, while driving down costs."
Unilever - Rollout Plan
  500 service blocks supporting 270,000 Unilever
 staff in 180 countries
  2,200 routers, 600 PBXs, 27,000 mobile, 4,000

 data connections in 96 countries
  Country by country “take-on” approach agreed

  Truly collaborative rollout between BT and

 Unilever
We are driving ICT growth in the UK
with BT Retail
ICT proposals based on detailed market analysis
                                                   2004/5
                                                                                                                               Market Attractiveness
                                  1,000   £ 300M
                                                   Profit Pool
                                                                                                  Outsourcing               Market size, growth & profit pool
                                                                                                                            BT Market Share/Revenue
    Market Attractiveness Index




                                   800
                                                                                                                            BT Profitability

                                   600                                                   IP Infrastructure


                                                     Applications                                                              Market Serviceability
                                                    Management
                                   400
                                                       & Hosting                                                            Probability of success
                                                                                               Contact Centre/              Delivery Capabilities
                                                                                               CRM
                                                                    Mobile
                                   200                                                                                      Channel Capabilities
                                                                 Managed
                                                                 Desktop


                                                   200              400           600            800             1,000

                                                                 Market Serviceability Index

   4 primary areas identified: Outsourcing, CRM, IP Infrastructure & Mobile
   2 secondary areas for selective action: Desktop & Applications Management
BT ICT Strategy in the UK
ICT Market                           Market Value

   A £38bn market                                                    £ 45bn    CAGR
                                                            £ 38bn               6%
   Growing at 6%
   Highly fragmented




                                            Total Revenue
   BT market leader at 11%
   Twice the size of IBM overall, bigger
    even if connectivity
    and transport excluded                                  2001/02    2004/5

   Network and voice skills becoming
    more important:
     – - Blurring of LAN/WAN boundaries
     – - Voice and data convergence
     – - Networked storage
     – - Migration to IP
BT ICT strategy in Western Europe

   £76bn market growing at c10% CAGR
   Top Level Business Plan
    –   Grow BT market share faster than market CAGR
    –   Primary focus on IP Infrastructure, Outsourcing and
        Applications Management
    –   Build strong customer base (e.g, €1bn Unilever contract)
   Enablers
    –   Leverage BT assets and strengths
    –   Build on existing European businesses
    –   Extend and build partnerships
    –   Leverage pan-European IP network
Syntegra provides systems integration
and consulting services
   Leading global business
                                 Addressing multi-site
£m        Q2 02/03                corporates and their
Revenue     143                   extended enterprises
EBITDA         5                  –   Exploiting latest
                                      convergent technologies
                                  –   Business transformation
                                  –   Systems to enable
                                      businesses to interact
                                      and inter-operate
Driving down customer dissatisfaction
               Root Causes                                 Addressed by
                                               Account Management
    Customer Focus - Account Mgt               – Major Sales upskilling
    Communications                            System Strategy
     – Keeping the customer informed            –   Unified CRM system
     – Accurate real time information           –   End to end order tracking systems
    Delivery                                   –   Common data warehouse
    Customer Support                           –   Pan Europe complaint handling process
    Billing                                    –   E-service
                                               Service Review
                                                – Single point of contact
                                                – Consolidated service centres
                                                – improved cycles of service
                                               Supplier management
                                               Consolidated billing programme




                        Customer Dissatisfaction down by 25%
    BT‟s investment in customer service
   Increased resources on areas that surround the customer
   Global network of service and network management
   Service and reliability backed by competitive SLAs, SLGs
    which reflect the customer‟s experience
     – access included, where supplied by BT; site-level
       measurement
   Flexible global billing services in multiple currencies,
    accounting options and management reports
   State-of-the-art e-Business tools
BT investment in customer service

   Global reach, local touch
    –   Single point of contact for account management and
        customer service worldwide – with access to global
        resources
    –   Global ownership & co-ordination of order, repair,
        reporting and support
    –   Multilingual support
 20 years managing customers‟ global networks.
 Extensive experience working with large
  organizations to deliver value-added services
  and custom solutions.
Motivating our people

   Leadership and change
    –   „One company in many countries‟ organisation
    –   Key appointments at senior level across Europe
    –   Rebalancing and rightsizing
    –   Organisational realignment
    –   Integration of Concert people

   Inspiring our people
    –   Performance orientation
    –   Growing the skills base
    –   Diversity mix
    –   Culture - „Inspire‟ programme
Summary

   Leader in Solutions for Multi-Site Corporates

   European focus; global reach through
    partnership

   Rigorous financial discipline

   Challenging but achievable targets

    and …
One brand everywhere




        A new symbol of European unity
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