BT Group plc (trading as BT) (LSE: BT.A, NYSE: BT) is a British multinational telecommunications services company headquartered in London, United Kingdom. It is one of the largest telecommunications services companies in the world and has operations in over 170 countries.^[2] Through its BT Global Services division it is a major supplier of telecoms services to corporate and government customers worldwide.^[3] Its BT Retail division is a leading supplier of telephony, broadband and subscription television services in the UK, with over 18 million customers.^[4]

BT's origins date back to the founding of the Electric Telegraph Company in 1846, the first company in the world to develop a nationwide communications network. In 1912, the GPO, a government department, became the monopoly telecoms supplier in the UK. The Post Office Act of 1969 led to the GPO becoming a public corporation. British Telecom was formed in 1980, and became independent of the Post Office in 1981. British Telecom was privatised in 1984, with more than 50 per cent of its shares sold to investors. The Government sold its remaining stake in further share sales in 1991 and 1993.

BT has a primary listing on the London Stock Exchange and is a constituent of the FTSE 100 Index. It had a market capitalisation of approximately £15 billion as of 23 December 2011, the 27th-largest of any company with a primary listing on the London Stock Exchange.^[5] It has a secondary listing on the New York Stock Exchange.

History[link]

BT is the world’s oldest telecommunications company. The company's origins date back to the establishment of the first telecommunications companies in the United Kingdom. Among them was the first commercial telegraph service, the Electric Telegraph Company, established in 1846. As these companies amalgamated and were taken over or collapsed, the remaining companies were transferred to state control under the Post Office. These companies were merged and rebranded as British Telecommunications.^[6]

1878 to 1969[link]

The BT Tower, constructed between 1961 and 1964.

From 1878, the telephone service in the United Kingdom was provided by private sector companies such as the National Telephone Company, and later by the General Post Office. In 1896, the National Telephone Company was taken over by the General Post Office. In 1912, it became the primary supplier of telecommunications services, after the Post Office took over the private sector telephone service in the UK, except for a few local authority services. Those services all folded within a few years, the sole exception being Kingston upon Hull, where the telephone department became present day KCOM Group.^[6] Telegraph and Telephone services became the exclusive responsibility of the Post Office Engineering department.

Converting the Post Office into a nationalised industry, as opposed to a governmental department, was first discussed in 1932 by Lord Wolmer. His ideas were recorded in the book Post Office Reform. In 1932, the Bridgeman Committee was formed, "to enquire and report as to whether any changes to the constitution, status or system of organisation of the Post Office would be in the public interest". The Committee's report was rejected. In 1961, the subject received further attention, the proposals were ignored. The Post Office remained a department of central government, with the Postmaster General sitting in Cabinet as a Secretary of State.^[6]

In March 1965, Tony Benn, the acting Postmaster General, wrote to the Prime Minister, Harold Wilson, proposing that studies be undertaken aimed at converting the Post Office into a nationalised industry. A party was established to look into the advantages and disadvantages of the proposal, and its findings were found to be favourable enough for the Government to re-establish a Steering Group on the Organisation of the Post Office. After some initial deliberations that the business should be divided into five divisions; Post, Telecommunications, Savings, Giro and National Data Processing Services, it was decided that there should be two: Post and Telecommunications. These events finally resulted in the introduction of the Post Office Act, 1969.^[6]

On 1 October 1969, under the Post Office Act, 1969, the Post Office ceased to be a government department and it became established as a public corporation. The Act gave the Post Office the exclusive privilege of operating telecommunications systems with listed powers to authorise others to run such systems. Effectively, the General Post Office retained its telecommunications monopoly.^[6]

1969 to 1982[link]

In 1977, the Carter Committee Report recommended a further division of the two main services and for their relocation under two individual corporations. The findings contained in the report led to the renaming of Post Office Telecommunications as British Telecom in 1980, although it remained part of the Post Office.

The British Telecommunications Act, 1981 transferred the responsibility for telecommunications services from the Post Office, creating two separate corporations, Post Office Ltd. and British Telecom. At this time the first steps were taken to introduce competition into the UK telecommunications industry. In particular, the Act empowered the Secretary of State for Trade and Industry, as well as British Telecom, to license other operators to run public telecommunications systems. Additionally, a framework was established which enabled the Secretary of State to set standards with the British Standards Institution (BSI) for apparatus supplied to the public by third parties, and had the effect of requiring British Telecom to connect approved apparatus to its systems.

The Secretary of State made use of these new powers and began the process of opening up the apparatus supply market, where a phased programme of liberalisation was started in 1981. In 1982, a licence was granted to Cable & Wireless to run a public telecommunications network through its subsidiary, Mercury Communications.

1982 to 1991[link]

On 19 July 1982, the Government formally announced its intention to privatise British Telecom with the sale of up to 51 per cent of the company's shares to private investors. This intention was confirmed by the passing of the Telecommunications Act, 1984, which received Royal Assent on 12 April that year. The transfer to British Telecommunications plc of the business of British Telecom, the statutory corporation, took place on 6 August 1984 and, on 20 November 1984, more than 50 per cent of British Telecom shares were sold to the public. At the time, this was the largest share issue in the world.^[7]

The new legislation had to enable British Telecom to become more responsive to competition in the UK and to expand its operations globally. Commercial freedom granted to British Telecom allowed it to enter into new joint ventures and, if it so decided, to engage in the manufacture of its own apparatus.

The company's transfer into the private sector continued in December 1991 when the Government sold around half its remaining holding of 47.6 per cent of shares, reducing its stake to 21.8 per cent. Substantially all the government's remaining shares were sold in a third flotation in July 1993, raising £5 billion for the Treasury and introducing 750,000 new shareholders to the company.

The 1984 Act also abolished British Telecom’s exclusive privilege of running telecommunications systems and established a framework to safeguard the workings of competition. This meant that British Telecom finally lost its monopoly in running telecommunications systems, which it had technically retained under the 1981 Act despite the Secretary of State's licensing powers. It now required a licence in the same way as any other telecommunications operator. The principal licence granted to British Telecom laid down strict and extensive conditions affecting the range of its activities, including those of manufacture and supply of apparatus.

The BT Centre, completed in 1985.

The next major development for British Telecom, and a move towards a more open market in telecommunications, occurred in 1991. On 5 March, the Government's White Paper, Competition and Choice: Telecommunications Policy for the 1990s, was issued. In effect, it ended the duopoly which had been shared by British Telecom and Mercury Communications in the UK since November 1983 and the build up to privatisation. The new, more open and fairer policy, enabled customers to acquire telecommunications services from competing providers using a variety of technologies. Independent 'retail' companies were permitted to bulk-buy telecommunications capacity and sell it in packages to business and domestic users. The White Paper was endorsed by British Telecom, the new policy enabling the company to compete freely and more effectively by offering flexible pricing packages to meet the needs of different types of customer.

1991 to 2001[link]

On 2 April 1991, the company unveiled a new trading name, BT, a new corporate identity and a new organisational structure. This structure focused on specific market sectors, reflecting the needs of different customers – the individual, the small business or the multinational corporation. The reorganisation was named Project Sovereign to reflect the company’s commitment to meetings customers’ needs – ‘the customer is King’. Together with a succession of strategic alliances with telecommunications companies worldwide, these changes gave BT the means to expand into overseas markets.

In December 2000, following modifications to BT’s licence in April 2000, BT offered local loop unbundling (LLU) to other telecommunications operators, enabling them to use BT’s copper local loops (the connection between the customer’s premises and the exchange) to connect directly with their customers. By the end of August 2005, 105,055 lines had been unbundled.

Concert[link]

In June 1994, BT and MCI Communication Corporation, the second largest carrier of long distance telecommunications services in the US, launched Concert Communications Services, a $1 billion joint venture company. This alliance gave BT and MCI a global network for providing end-to-end connectivity for advanced business services. Concert was the first company to provide a single source, broad portfolio of global communications services for multinational customers. On 3 November 1996, BT and MCI announced they had entered into a merger agreement to create a global telecommunications company called Concert plc, to be incorporated in the UK, with headquarters in both London and Washington DC. As part of the alliance BT acquired a 20 per cent holding in MCI. Nevertheless, following US carrier WorldCom's rival bid for MCI on 1 October 1997, BT ultimately decided in November, to sell its stake in MCI to WorldCom for $7 billion. The deal with WorldCom resulted in a profit of more than $2 billion on BT's original investment in MCI, with an additional $465 million severance fee for the break-up of the proposed merger.

In it was announced that BT and AT&T were to unwind Concert, returning its businesses, customer accounts and networks to the two parent companies (this was completed in April 2002).

O2[link]

In 1985, Cellnet was launched as a subsidiary of Telecom Securicor Cellular Radio Limited, a 60:40 venture between British Telecommunications and Securicor respectively.

In 1999, BT purchased Securicor's shares in Cellnet for £3.15 billion, Securicor originally invested £4 million in Cellnet in 1983, the company was later rebranded as BT Cellnet, and it became a part of BT Wireless, a group of subsidiary companies owned by BT.^[8]

In October 2001, at a general meeting held in Birmingham, 4.297 billion British Telecommunications shares voted in favour of the demerger, and 0.67 million voted against.^[9] In 2001 (2001), BT Cellnet demerged from BT and was relaunched on 1 May 2002 (2002-05-01) as O2.

In February 2004, the company was subject to rumours of take-over bids from KPN, the Dutch telecommunications group though these never came to fruition. In 2005 rumours of KPN (and several other international network operators) bidding for the various branches of O2 persisted, though following the company's posting of better than expected results so soon after demerging some speculation shifted to O2 itself making bids for other businesses.

In March 2005, the company underwent a corporate reorganisation, that saw mmO2 plc being de-listed from the London Stock Exchange and acquired (via a share swap) by a new company, O2 plc, which was listed on the London Stock Exchange in its place. The summer of 2005 saw the company under threat of crippling strike action by Communication Workers Union members following disputes over pay and remuneration, though unrelated to earlier job losses as part of the reorganisation. This was resolved without strikes taking place after several months of negotiations between the company and the trade union.

2001 to 2006[link]

Following the global stock market based dot com crash, the group undertook a major board restructuring and asset sale to address its debt pile. In May 2001, BT announced a three for ten rights issue to raise £5.9 billion – still the UK's largest ever rights issue – and the sale of Yell Group, the international directories and associated e-commerce business for £2.14 billion. Both activities were completed in June 2001. The group also sold its property portfolio to JV property company Telereal.

In April 2003, BT unveiled its current corporate identity and brand values. Reflecting the aspirations of a technologically innovative future, the connected world is designed to embody BT’s five corporate values: trustworthy, helpful, inspiring, straightforward, heart.

The Communications Act, 2003 which came into force on 25 July 2003 introduced a new industry regulator, the Office of Communications (Ofcom), to replace the Office of Telecommunications (Oftel). It also introduced a new regulatory framework. The licensing regime was replaced by a general authorisation for companies to provide telecommunications services subject to general conditions of entitlement and, in some instances, specific conditions. Under a specific condition BT retained its universal service obligation (USO) for the UK, excluding the Hull area. The USO included connecting consumers to the fixed telephone network, schemes for consumers with special social needs, and the provision of call box services.

In the summer of 2004, BT launched Consult 21, an industry consultation for BT’s 21st century network (21CN) programme. 21CN is a next generation network transformation, that, at one time, was due for completion by the end of 2010. Using internet protocol technology, 21CN will replace the existing networks and communications from any device such as mobile phone, PC, PDA or home phone, to any other device.

Openreach[link]

A BT Openreach van.

Following the Telecommunications Strategic Review (TSR), in September 2005 BT signed legally binding Undertakings with Ofcom to help create a new regulatory framework for BT and the UK telecoms industry generally.

Openreach provides provision and repair in the "last mile" of copper wire. Formed from 25,000 engineers previously employed by BT's Retail and Wholesale divisions. It is designed to ensure that other communications providers (CPs) have exactly the same operational conditions as parts of the BT group. Opened for business on 11 January 2006, it reports directly into the BT chief executive.^[10]

Acquisitions[link]

In 2005, BT made a number of important acquisitions.

In February 2005, BT acquired El Segundo, California-based telecoms giant Infonet (now re-branded BT Infonet), giving BT access to new geographies.

It also acquired the second largest telecoms operator in the Italian business market, Albacom.

In April 2005, it bought Radianz from Reuters (now rebranded as BT Radianz), which expanded BT's coverage, provided BT with more buying power in certain countries.^[11]

2006 to present[link]

In August 2006 BT acquired online electrical retailer Dabs.com for £30.6 million.^[12] The BT Home Hub manufactured by Inventel was also launched in June 2006.^[13]

In October 2006 BT confirmed that it would be investing 75% of its total capital spending, put at £10 billion over five years, in its new Internet Protocol (IP) based 21st century network (21CN). Annual savings of £1 billion per annum were expected when the transition to the new network was to have been completed in 2010, with over 50% of its customers to have been transferred by 2008. (For actual progress see BT 21CN). That month the first customers on to 21CN was successfully tested at Adastral Park in Suffolk.^[14]

In January 2007, BT acquired Sheffield based ISP, PlusNet plc, adding an additional 200,000 customers. BT stated that PlusNet will continue to operate separately out of its Sheffield head-office.^[15]

On 1 February 2007 BT announced agreed terms to acquire International Network Services Inc. (“INS”), an international provider of IT consultancy and software. This increases BT presence in North America enhancing BT's consulting capabilities.^[16]

On 20 February 2007 Sir Michael Rake, then chairman of accountancy firm KPMG International, would succeed Sir Christopher Bland, who stepped down in September of that year.^[17]

On 20 April 2007 BT acquired Comsat International which provides network services to the South American corporate market.^[18]

On 1 October 2007 BT purchased Chesterfield based Lynx Technology which has been around since 1973. ^[19]

BT acquired Wire One Communications in June 2008 and folded the company into BT Conferencing, its existing conferencing unit, as a new video business unit^[20]

In July 2008, BT acquired the online business directory firm Ufindus for £20 million in order to expand its position in the local information market in the UK.^[21]

On 28 July 2008, BT acquired Ribbit, of Mountain View, California, "Silicon Valley's First Phone Company." Ribbit provides Adobe Flash/Flex APIs, allowing web developers to incorporate telephony features into their Software as a Service (SaaS) applications.^[22]

On 1 April 2009 BT Engage IT is created from the unclean merger of two previous BT acquisitions Lynx Technology and Basilica. Apart from the name change not much else changes in operations for another 12 months. ^[23]

On 14 May 2009 BT said it was cutting up to 15,000 jobs in the coming year after it announced its results for the year to 31 March 2009.^[24] In July 2009 BT offered workers a long holiday for an up front sum of 25% of their annual wage or a one-off payment of £1000 if they agree to go part time.^[25]

On 5 October 2009 Martin Balaam replaces Nick Gorringe as managing director of struggling division BT Engage IT. ^[26]

Operations[link]

The Adastral Park campus at Martlesham Heath in Suffolk, the principal site of BT Research.

British Telecommunications plc (BT) is a wholly owned subsidiary of BT Group plc and encompasses virtually all businesses and assets of the BT Group.^[27] BT Group plc is listed on stock exchanges in London and New York.

BT runs the telephone exchanges, trunk network and local loop connections for the vast majority of British fixed-line telephones. Currently BT is responsible for approximately 28 million telephone lines in the UK. Apart from Kingston Communications, which serves Kingston upon Hull, BT is the only UK telecoms operator to have a Universal Service Obligation (USO) which means it must provide a fixed telephone line to any address in the UK. It is also obliged to provide public call boxes.

BT's businesses are operated under special government regulation by the British telecoms regulator Ofcom (formerly Oftel). BT has been found to have Significant Market Power in some markets following Market Reviews by Ofcom. In these markets, BT is required to comply with additional obligations such as meeting reasonable requests to supply services and not to discriminate.

As well as continuing to provide service in those traditional areas in which BT has an obligation to provide services or is closely regulated, BT has expanded into more profitable products and services where there is less regulation. These are principally, broadband internet service and bespoke solutions in telecommunications and information technology.

Divisions[link]

BT Group is organised into the following divisions:^[28]

• Customer facing:
  • BT Global Services - provides IT and telecoms services to multinationals (formerly BT Ignite and BT Syntegra)
  • BT Retail - provides retail telecoms services to businesses and consumers
  • BT Wholesale - operates BT's networks
  • Openreach - fenced-off wholesale division, responsible for the 'last mile' of BT's access network in the UK and tasked with ensuring that rival operators have equality of access to BT's local network

• Internal service units:
  • BT Innovate and Design - pulled together IT designers from BT Retail, BT Wholesale, BT Global Services and OneIT to design services on the 21C network.^[29]
  • BT Operate - responsible for the roll-out and maintenance of BT's new IP based fixed-line network, known as 21st Century Network (21C)

Headquarters[link]

BT Group's world headquarters and registered office is the BT Centre, a 10-storey office building at 81 Newgate Street in the City of London, opposite St. Paul's tube station.

Corporate affairs[link]

Financial performance[link]

Pension fund[link]

BT has the largest defined benefit pension plan of any UK public company. The trustees valued the scheme at £36.7 billion at the end of 2010;^[30] An actuarial valuation valued the deficit of the scheme at £9.043 billion as of 31 December 2008.^[31] However following a change in the regulations governing inflation index linking, the deficit was estimated at £5.2 billion in November 2010.^[32] BT and the Trustee have agreed a 17 year recovery plan with the first three years’ payments amounting to £525mm. As of 2013 average annual payments have been estimated at £533M. The next triennial valuation is scheduled for December 2011.^[32]