The investment forms part of BT’s wider strategy of delivering next generation broadband services nationwide. The UK already has world leading broadband availability and this investment programme offers the prospect of joining the world super league for broadband speeds as well.
BT chief executive Ian Livingston said: “Broadband has boosted the UK economy and is now an essential part of our customers’ lives. We now want to make a step-change in broadband provision which will offer faster speeds than ever before. This marks the beginning of a new chapter in Britain’s broadband story.
“This is a bold step by BT and we need others to be just as bold. We are keen to partner with people who share our vision for the next phase of the broadband revolution. We want to work with local and regional bodies to decide where and when we should focus the deployment. Our aim is that urban and rural areas alike will benefit from our investment”.
A supportive and enduring regulatory environment is essential if this investment is to take place. Given this, BT will be discussing with Ofcom the conditions that would be necessary to enable this programme to progress. These include removing current barriers to investment and making sure that anyone who chooses to invest in fibre can earn a fair rate of return for their shareholders.
Fibre-based super-fast broadband will give customers enough speed to run multiple bandwidth-hungry applications. So, for example, some members of a family could be watching different high definition movies while others were gaming or working on complex graphics or video projects. The new services will also offer substantially improved “upstream” speeds allowing customers to post videos, use hi-def video conferencing and enjoy interactive hi-def gaming to the full.
BT already provides fibre to the premises of more than 120,000 businesses, and has deployed more than 10 million kilometres of fibre in the network.
BT is committed to wholesaling its new services – unlike many other companies and countries – thereby ensuring Britain remains the most competitive broadband market in the world. BT will also be pressing for any other next generation access network in the UK to be open to other companies.
BT plans to invest around £1.5 billion in total on the programme, of which around £1 billion is incremental to BT’s existing expenditure plans for fibre deployment.
BT expects its initial investment in the programme will result in around £100 million of incremental capital expenditure in each of the 2008/09 and 2009/10 financial years, taking the total expected capital expenditure in those years to around £3.2 billion and £3.1 billion, respectively. The remaining incremental spend of £800 million will be spread over the following three financial years.
Given the strategic priority of this planned investment, the Board has decided it would be appropriate to suspend the current share buyback programme with effect from July 31, 2008. By that date BT will have returned in excess of £1.8 billion of the planned £2.5 billion buyback programme.
The Board of BT remains committed to the dividend and expects to grow dividends per share in the 2008/09 financial year.