BT Group plc

Good morning everyone and welcome to BT Group's results presentation for the year ended 31st of March 2023. Presenting today is Philip Janssen, Chief Executive and Simon Louth, Chief Financial Officer. The presentation today will be followed by a Q&A session. I'd like to also make everyone aware that this event is being recorded for replay purposes. Before we start, I'd like to draw your attention to the usual forward-looking statements in our press release and our latest annual report for examples of the factors that could cause actual results to differ from any forward-looking statements we may make. Both the press release and the annual report can be found on our website. And with that, I'll now hand over to Philip.

Thank you, Mark. Good morning, everyone, and thank you for joining us today. By way of agenda, I'll make some brief introductory comments highlighting some of the great progress we've made through the year. And then Simon will talk through the results themselves and our forward guidance. And then I'm going to share some details on how we see the transformation of BT Group shaping up over the longer term before obviously opening up for your questions. So starting with the highlights on slide four. Overall, the business had a strong year and met its financial guidance, despite some significant cost inflation, including increased energy and labor costs. We delivered growth in revenue on a performer basis, more than 7.9 billion pounds of EBITDA and around 5 billion of capital expenditure and 1.3 billion pounds of normalized free cash flow. This performance means that despite investing at unprecedented levels, we're able to maintain our total dividend for the year of 7.7p per share. I'd like to put on record my thanks for the dedication and commitment of my colleagues right across the business, which has underpinned and delivered this fantastic achievement. The world was quite different when we set the 7.9 billion pound EBITDA target and our people have repeatedly risen to the challenges we've encountered along the way. Last year saw some significant progress against our strategy. To give you just a few of the many examples, our FTTP build is up 43% to over 10 million premises with take up of 3.1 million. Customer demand is really strong with consumer FTTP customers up 50% to 1.7 million. That is more than half a million households moving to FTTP in the year. Our leading 5G network now covers 68% of the UK population with 8.6 million 5G connections on the network. Now we continue to transform and simplify the company with the completion of the BT Sport joint venture and by integrating the former enterprise and global divisions into a single CFU business. And we remain laser focused on efficiency and are now more than two thirds of the way towards reaching our target of three billion pounds of gross annualized cost savings by 2025. But we're not stopping there and we are raising the bar again. Looking forward, we will step up the pace of FTTP connections, supported by the introduction of full expensing for qualifying capital expenditure announced in the spring budget. We will continue at pace to move from legacy to next generation networks, delivering better customer experiences and lower costs. We will continue to drive in transformation of BT Group into a lean and agile organization with superior digital, AI and automation capabilities. And we will do all of this whilst remaining a responsible, inclusive and sustainable business. Future BT Group will be a leaner business with a brighter future, delivering sustainable growth and value. Now, more on all of this later, but let me now hand over to Simon, who will take you through the results in a bit more detail.

Thank you, Philip, and good morning to everyone. So starting with our financial performance on slide six, which I'm going to talk to on a pro forma basis, assuming that the sports joint venture had been in place since the beginning of last year. So I'm really pleased to say that despite all of the known headwinds, we have grown both revenue and EBITDA for the first time in six years. This has been a great effort by everybody in the company, and I'd really like to reiterate Philip's comments and thank everybody who contributed to this result. We've achieved our FY23 guidance for revenue and for EBITDA. And as we guided at H1, we delivered normalized free cash flow in the lower end of our range with higher capex in FTTP build, including work in progress, and FTTP provisioning, only partially offset by the tax refund. Moving to the details. Adjusted revenue for the year was 20.4 billion pounds. That's up 1%. There's growth in open reach and consumer. It was offset by declines in our enterprise businesses. Adjusted operating costs before depreciation were down 1%. Cost savings generated through our cost transformation program more than offset inflationary impacts, including inflation of wages and of energy. We're well on our way to achieving our 3 billion pound gross annualized cost savings target by the end of FY25, with 2.1 billion pounds achieved to date at a cost of 1.1 billion pounds. Increased revenue and lower costs led to adjusted EBITDA for the year of 8 billion pounds, that's up 3%. CapEx, excluding spectrum costs, came in at 5.1 billion pounds for the year, up 5%, primarily reflecting the ongoing investment in our FTTP program and the 5G network build. Now, this was slightly above our updated 5 billion pound outlook due to the accelerated FTTP provisioning, which grew by over 70% to 3.1 million. CapEx in the final quarter was down 23% year-on-year, driven by the unwind of the FDTP work in progress. Cash CapEx for the full year was £5.3 billion, higher than reported CapEx due to a reduction in the capital creditors' balance over the year. Normalised free cash flow was down 5% on last year. This was due to the increased cash capex, some adverse working capital movements, offset by the EBITDA growth, the tax refund and low interest due to timing. We expect our interest costs to normalize next year. Significant growth in Q4 normalized free cash flow was, as expected, driven by improved EBITDA, the timing of receivables and lower cash capex. We're proposing a final dividend of 5.39 pence, bringing the FY23 full year dividend to 7.7 pence per share. This is flat year on year, given our current elevated level of capex, but it is in line with our progressive dividend policy to maintain or grow future dividends. Moving to slide seven for our individual unit results and starting with consumer, revenue was up 2% for the year. Service revenue grew by 3% driven by the 2022 annual contractual price rise and supported by a higher FTTP base and higher roaming. Increased service revenue and tight cost management, including lower indirect mobile commissions, drove strong EBITDA growth, was up 9%. In our enterprise division, revenue was down 4% as continued declines in legacy products and the ending of some legacy contracts, including the migration of a large MVNO customer, offset continued growth in SME and SOHO. EBITDA declined by 15% for the year, reflecting the lower revenue, the lower legacy product mix, only partly offset by the benefits from our cost transformation program. Moving on to global. Revenue declined 1% in the year due to lower equipment sales and the impact of prior year divestments, offset by a £131 million positive foreign exchange movement. EBITDA was flat, driven by ongoing cost transformation and rigorous cost control, offset by lower revenue and inflation. Excluding divestments, one-offs and foreign exchange, EBITDA was flat. In both enterprise and global, we signed some significant new customer and partner contracts in the final quarter, including a global networking contract with Rio Tinto, the SWAN contract to provide connectivity to the public sector in Scotland, and a partnership with AWS to bring edge computing to our customers. These contracts provide early momentum to our new business division. Lastly, Openreach grew revenue 4% in the year, driven by growing sales of fibre-enabled products and ethernet, and by increased price. This was partially offset by declines in legacy copper products and an expected decrease in chargeable repairs due to the lower repair volumes. EBITDA grew 8%, driven by the revenue flow-through, low repair costs, and by efficiency programs that were partially offset by inflation. I should note that broadband line losses did increase in the fourth quarter to 68,000, bringing the full year total to 210,000. We've not yet seen any meaningful recovery in the UK broadband market or the rate of new home construction. And as you'd expect, we have seen modest growth in competitor losses. And we do expect losses to peak this year at around 400,000. We're not expecting any change in the overall market environment, but as we move to FTTP, we are aware of a small number of NPF lines that have been used by CPs for voice services alongside an FTTP line ahead of implementing a voice over IP solution. So these are likely to be removed from our base over the next 12 months or so, artificially accelerating the losses. This makes up around half of the 400,000 broadband line losses. But don't forget, our strategy is all about building and upgrading customers to FTTP to benefit from increased ARPU and margins whilst reducing churn. And this strategy is working. with ARPU up around 8% in the year, well ahead of the average 4% price increase in open reach and far offsetting the 1% reduction in broadband lines over the year. Moving to slide eight on our outlook for FY24 and beyond. As context for our outlook, we expect to be a significant beneficiary of the government's full expensing scheme from FY24 to FY26, and we expect to pay no UK cash tax for the next three years. Now, this means that our normalised cash tax will reflect just our overseas tax as it has done for the past couple of years. With demand for full fibre well ahead of our expectations, We will reinvest this benefit into further accelerating our FTTP connections and absorbing inflation while remaining committed to our target of building to 25 million premises by December 2026. So this brings our CapEx outlook to 5 to 5.1 billion pounds for each of the next three years from our previous guidance of 4.8 billion pounds. We do expect take-up to accelerate beyond 30% while maintaining our build cost envelope of £250 to £350 per premise. So turning then to our guidance for FY24, we continue to expect both adjusted revenue and adjusted EBITDA growth on a pro forma basis, with the growth driven by CPI-linked pricing on around two-thirds of our revenue before eliminations. That's primarily in consumer open reach and by the impacts from our cost transformation program. This is despite headwinds from cost of living pressures, cost inflation, including energy. Normalised free cash flow for FY24 is expected to be between £1 billion and £1.2 billion as the tax benefit from full expensing will be offset by the higher capex. Cash capex in FY24 may be up to £200 billion higher than reported CapEx of five to 5.1 billion pounds due to the repayment of government grants resulting from higher than expected fiber take up on the BDUK programs. Beyond FY24, we continue to expect consistent and predictable revenue in EBITDA growth driven by CPI link pricing and by cost transformation. We remain confident in expanding normalized free cash flow by at least 1.5 billion pounds when compared with FY22 by the end of the decade. This comes from lower capex and lower opex as we move past peak capex and towards an all-fiber, all-IP network. Before I conclude, following the formation of business, we will provide pro forma figures for the new entity in the coming months. At the same time, we're taking the opportunity to refresh and improve our KPIs and to revise some central cost allocations to better reflect usage across the group. Finally, we will also be simplifying our quarterly disclosures from Q1 FY24 onwards, including the removal of our quarterly KPIs. And on that note, I'll hand back to Philip.

Thanks, Simon. Now I'm going to lay out the shape of the BT Group in the future and how this helps drive significant growth and value for shareholders. Slide 10 shows the ongoing market opportunity that will support our growth. Demand for our products and services has never been higher and is projected to keep on increasing. As our customers focus more on a combination of capacity, speed, reliability and security, it's value for money, not just price, that is the key input to buying behaviour. Coverage and adoption of next generation networks are increasing fast in the UK. However, penetration of converged products remains behind European market peers. Combined with strong demand, this leads us to forecast significant growth in next generation products and services over the coming years. Now given our network leadership in the UK, this does represent a huge opportunity for BT Group. In addition, the move to FTTP will enable us to recover copper from our legacy network and sell it forward. We remain confident in our early estimates that around 200,000 tons could be recoverable through the 2030s. While our retail markets remain extremely competitive, we believe our move to inflation-linked pricing has created a more constructive, fair and transparent pricing model for BT Group. Consumers receive complete transparency and I'll say it again, great value for money with fixed broadband at around a pound a day and mobile at around 50 pence a day, buying access to future-proofed and reliable networks for relatively small increases in their bills. Building on our next generation networks, we also see significant growth in value-added services over the coming years, both in consumer and enterprise markets. This represents a major opportunity for BT Group to capitalize on a number of growing adjacencies. And really importantly, we're also operating in a pro-investment and stable regulatory environment underpinned by Ofcom's WFTMR and recent investment incentives from government that Simon mentioned. Moving on, slide 11 lays out the unique assets which support the transformation to future BT Group. As you know, Openreach is by far and away the leading fixed access wholesaler, underpinned by the largest superfast network in the UK. Having built more than 10 million premises and connected more than 3 million premises, Openreach has established a track record of FTTP rollout at the fastest rate, the lowest cost and the highest quality. An engineering powerhouse, they are continually outperforming their plans. Now, not only does this enable Openreach to strengthen their existing CP relationships, it also makes them an employer of choice in what is a very competitive labor market. we continue to see our in-house FDTP engineering capability as a key advantage, particularly when allied to strong long-term and nationwide contractor relationships. At a retail level, our strengths lie in the fact that we have a relationship with 14 million UK households through 25 million subscriptions and over a million business customers. This gives us the number one share across mobile and broadband combined. These customer relationships are underpinned by our market-leading networks. This includes 5G, currently leading the pack at 68% population coverage, and our new converged core, designed to manage peak network growth. We have the broadest portfolio of next generation products, all supported by our superior security and cloud access propositions. And we have a head start on converged products with a strong pipeline of truly differentiated propositions to maintain our edge. As you know, we have worked really hard to improve our customer service and as a result, I'm delighted to say that BE, BT and EE are now regularly ranking amongst the best in the industry. We have unrivalled geographical sales, marketing and service reach with a growing digital presence, more than 450 consumer stores in the UK and over 3,000 salespeople in business. And also, we have the ability to serve multinational customers in around 180 countries worldwide. I've spoken before about using digital capabilities to modernize BT with a relentless focus on simplifying our product portfolio, our processes, and our systems. Over time, this will enable us to shut down costly, complex legacy networks and IT systems, transforming productivity and further improving our ability to deliver for our customers. Lastly, but importantly, we have a balance sheet and capital allocation framework that appropriately prioritizes investment in value enhancing growth while supporting the pension fund, maintaining our commitment to our BBB plus through cycle credit rating target and rewarding our investors through our progressive dividend policy. We of course remain committed to becoming a more responsible, inclusive and sustainable company. We will be circular by 2030 and reach net zero by the end of fiscal year 31. These five priorities outlined on slide 12 will be familiar to you from last year. Doing them will enable us to deliver our strategy and long-term growth and value. Across each of these priorities, we genuinely have unique strengths. We also have a clear plan to accelerate growth with key metrics that will demonstrate success over time. The foundations are increasingly being put in place. It's now all about execution and delivery. I'll look at each of these in a bit more detail, starting with consumer on slide 13. With EE as our flagship consumer brand and with its leading brand consideration, we will demonstrate measurable growth through metrics which illustrate further penetration of FTTP, 5G, and convergence. These metrics will be underpinned by key characteristics of the division, such as low churn, high MPS, a new digital platform from which to deliver related products and services, and superior multi-channel customer experience. All of this will allow our consumer to offer profitable propositions at prices that continue to deliver outstanding value for money for our customers. And we're already on that journey with a 50% increase in our FTTP base last year, alongside a 58% increase in 5G connections. Our share of converged households was flat last year, and this is going to change. Progress has been slower than we would have liked, but we expect this KPI to accelerate as we launch our new consumer IP platform in a few months' time. Future successes will be measured against the stretching but achievable goals you can see on the slide. Moving to slide 14, business, with BT as the lead brand, will be the most trusted partner for small, medium, and large enterprises, helping its 1 million plus customers thrive using the best secure connectivity and solutions. Business' success will be measurable through growth in UK revenue generating units, which aims to increase by almost 40% by the end of the decade. Business will also address the long-standing challenges in its large customer segments and pivot these to growth. Improving customer experience will be essential to achieve both these metrics, helping to drive low churn and high NPS. Business will have an outstanding base of converged products. added to which a focus on next generation propositions means the growth in its already leading security business will outpace the market. Baz and the team will tell you a bit more about the updated strategy and how things are progressing later in the year. Turning to slide 15, Openreach continues to go from strength to strength, as I said earlier, maintaining an annual build run rate of over 3 million premises in fiscal year 23. And despite increased cost inflation, all still within our 250 to 350 pounds per premise build cost. Furthermore, by honing our provisioning capability, we will build on the great progress last year and accelerate migrations to the best and largest FDTP network in the UK. As we move customers to FDTP, full rates obviously reduce and so do repair volumes, resulting in significant cost savings. Towards the end of the decade, repair volumes are approaching half of today's levels. Underpinning Openreach products are excellent service standards and a best-in-class provision and repair, which together lead to strong NPS. Openreach's fair and transparent pricing coupled with an ever-improving mix of FDTP underpins its ARPU growth over time. Moving to slide 16 and our fourth priority, enabling growth by transferring productivity and customer outcomes through digitizing, automating, and the reskilling of our workforce. We will show measurable progress through fewer business applications and reduce reliance on legacy networks, both to a tiny fraction of today's level by the end of the decade. Future BT will be more efficient and need fewer people. Today, we have around 130,000 employees and subcontractors. But as we complete our peak FTP build, stop the dual running of networks, automate and digitize our systems and processes, and continue to restructure the business, we will move to a total workforce of between 75,000 and 90,000 people. Now clearly, this is a big reduction, but through natural attrition, reskilling, and less need for contractors, we can work with our union partners to deliver this outcome. Slide 17 presents a one-page visual of Future BT Group, setting out our three CFUs with their characteristics shown in three activity drivers, networks, customer, and efficiency. When it comes down to it, Future BT Group is a much simpler business than the one we have today. Leading networks, great customer experiences, powered by lean and efficient organization. All of which ultimately help to fulfill our purpose. We connect for good. Slide 18 shows some of the key strategic metrics to measure the successful delivery of our strategy. Importantly, it also shows the significance of our achievements over the past four years. This isn't the start of a journey, but one where we have already demonstrated our track record, providing much more confidence in the delivery of the final outcome. Now we've grouped the metrics into the same three activity drivers used on the last slide. I've already touched on many of these points, but needless to say, there's much more to do as we continue to build on the strong foundations we have laid. And we're confident that the best is yet to come. Slide 19 brings all this together, reminding us that successful execution and transformation of the business will result in consistent and predictable revenue and EBITDA growth from today. This alone will translate to an uplift in normalized free cash flow. And as we complete the FTTP build and move to an all-IP, all-FTTP network, normalized free cash flow growth will accelerate from fiscal year 28. with an expansion, as Simon said, of at least 1.5 billion pounds by the end of the decade compared with fiscal year 22. To be clear, this is a structural upside as the business changes and is before any benefit from copper recovery, organic growth in revenue, and before the benefit of further transformation efficiencies net of tax. The cash flow generated will be used in line with our capital allocation policy. First, to continue to invest in value-enhancing growth opportunities. Second, to support our commitment to the pension fund that should be close to fully funded by the end of the decade. Third, to support our through cycle BBB plus credit rating target. And finally, to underpin our progressive dividend policy to reward shareholders for their investment in BT Group. So to conclude on slide 20, the business had a strong year of delivery. And despite some material headwinds, we delivered our financial guidance. This has underpinned a final dividend which maintains the full year payout at 7.7 pence per share. We've stayed focused on operational delivery and will step up the pace once again. We will utilise full expensing for qualifying CAPEX to connect more premises to FTTP, while remaining committed to our target of reaching 25 million premises by December 2026. As BT Group transitions towards its next generation infrastructure, these networks will serve as an enabler to delivering industry leading customer experiences. So by the end of the 2020s, future BT Group will be a more efficient next generation connectivity provider with a much smaller workforce and a significantly reduced cost base. A leaner business with a much brighter future. Thanks for listening. We'll now move to Q&A. So given the number of people in the room, but also online, can I ask you to ask one question? And could you all do me a favor? When you're asking your question, could you say who you are so other people know who's asking the question? Simon and I are going to go and sit over here and take questions. We're going to sort of, if you're okay, why don't we just move, let's then see if you put your hand up, everything. We'll do the room first, move left to right, you can pass the mic over. Say who you are, please, pass the mic, and then we'll go to the people online later on.

Okay. Morning, everyone. It's Andrew Lee from Goldman Sachs. I say the big kind of feedback we've had from investors this morning is you've shown good operational trends in the fourth quarter, and you've announced you're investing more in the networks. But what they can't see explicitly, at least, partly given the nature of your guidance, is the fruits of that greater investment. They can't really see that in the kind of EBITDA growth broad guidance they can't really see it in fy 24 free cash flow which is below where some people were and they they haven't seen an uptick in that one and a half billion or more increase in fy 30. so many investors are questioning that you just haven't spent more to achieve the same outcome what could you give investors in terms of explicit um better performance or Outlook that would reassure them that this isn't classic telco spending more to prop up a sinking ship and is actually supporting Improving returns.

Yeah. No, it's a good question. Let me give you my answer. There's something chip I mean first I just step back and say look up we are we're actually really pleased with what we've announced today first time for six years revenue and EBIT are growing and that's a really important milestone and we're saying that we are now on the growth trajectory. So that's number one. Number two, it's obviously been a challenging environment for us, like everybody. So you've had inflation, cost of living crisis, energy crisis, all the things you know about. And I think we've navigated that really well. And so what we've got, we're delivering our strategy, delivering our plan, and we're on track. Now that we have sort of got a plan for the next five to seven years, and we've got a lot more things under our belt, the Bill specifically, but also a lot of the digitization and investment in IT. We've got a clearer picture of where we're going. So I think the one thing that I point out in terms of it's not more for the same outcome. The connection rate is much higher than anyone expected. And so what Simon said is the extra... benefit from the tax is helping us drive connection rates even harder. And obviously, it is offsetting some of the inflationary pressures that we had on the build. So of course, that's happened to us. So I look at it and go, the future's got even brighter because the success is more obvious. And I think I said before, in terms of our investment in FCTP, I hope that today people can see that that is now going to be a successful endeavor for the BT Group, and we're going to get nice returns from it. And if you've got a growing company with growing EBITDA, with a cost that's coming down dramatically structurally, that's a pretty good picture. Do you want to do the cash flow?

No, just to add, I mean, for FY24 specifically, you know, we've been very clear that we will be delivering growth in pro forma revenue in EBITDA. I think the market expected that and we're, you know, comfortable the market understands the trajectory on revenue in EBITDA for FY24. On normalised free cash flow, you know, if you go back to the prior to the budget announcement, our guidance for this year is pretty much bang on with what the market was expecting at that point. Since then, we've obviously seen significant cash tax benefit. And as I said, we'll only be paying zero UK cash tax for the next three years. We've made the decision to put that into reinvestment to drive this much faster take up we're getting. and at the same time be able to sustain the build. That gives us even greater confidence, as Philip said, that we'll be able to continue to drive predictable revenue and EBITDA growth because we're provisioning even faster than we'd anticipated. That does mean, of course, that we're reinvesting pretty much the majority of the cash tax benefit. And so the overall normalized cash flow is pretty much in line with where we were pre the budget announcement. We feel that's exactly the right thing to do for the business. If you then look longer term, we've underpinned the one and a half billion pound improvement in free cash flow once we complete the peak build, which will still be in December 26th. But there's significant further potential for us, a couple of reasons. I mean, firstly, as we've built the new networks, moved on to strategic IT, as we've said today, we can see a much lower cost BT. That will provide some further momentum to improving cash flow in those outer years. Clearly, as we develop the plans, we have to quantify that better in terms of timing. And that would be more than enough to offset the fact that there will be some additional tax costs at that time because essentially we brought forward some of the tax benefit. So I think it really gives us greater confidence in delivery of that one and a half. We've always said it's at least one and a half billion.

I mean, that's the key thing, Andrew. I think what the message we're trying to say today is we're even more confident in delivering the future because we've got real evidence and we've got a plan that's fully funded and we can see all the detail of it and you can see the costs structurally coming down. There is no doubt they're coming down. No one can debate those. The question is when are they going to happen? That's why we put some broad ranges on it. Towards the end of the decade, this is a totally different company and it's positioned for future growth and can take advantage of new opportunities because it's not looking to the past. That's why you get the tone, hopefully, which is it's really genuinely positive for all the reasons I said in my remarks earlier on. Thanks, Andrew. We'll do this and we'll work backwards.

Is that okay? Perfect. Sam McHugh from Ex-Am. I think the new occupational pension scheme regulations are coming into force at the end of this year. So just a two-part question on it. Firstly, do you expect to have to abide by those new regulations for your June deficit calculations? And then I think, if I'm not wrong, the intention is to get deficits repaired on a shorter time horizon than before, with a bit more scrutiny on investment and dividend plans of the sponsoring employee. And the trustees have also talked about relying more heavily on you post the LDI blow up. Can you give us a bit of a sense of how you expect all this to impact you and the pension deficit in the shape of repayments?

Well, we of course have to comply with, you know, requirements and regulations on pensions. Coming to the specific point about the BTPS and the scheme. We have got a very constructive relationship with the trustee. We have a very clear investment strategy which de-risks the investments over time to reach maturity in 2034, being very clear about that. We put in place a funding plan to get us to fully funded. That plan remains. We're firmly on track with that. We've got a valuation coming coming up in 2023. And the pension fund navigated the LDI issues of last September, October well. So we're firmly on track with the plan we put in place. We'll obviously be able to update you once we've been through that valuation process. Thanks, Sam.

Hi, it's Morris Patrick from Barclays. Can I ask a question on the Openreach momentum? So if I'm not wrong, you just marked that minus 70,000 ads in the quarter, and you talked about 200 losses for this year going to 400 next year. I understand the point you made about half of the 400 losses being NPFCs. Was that a tailwind in the market of 23 years? Of the 200 you lost, was that actually a benefit from that, or was it a drag? And I guess... Do you see that 200 increasing in the next 12 months, really to understand how much of your line loss really is to altnets rather than just a temporary shift in direction of NPFCs?

I think there has been a modest tailwind where some customers have been taking FTTP and have not been enabled to carry voice over FTTP. In some cases, however, this has been a a customer that might have moved on FTTP to an altnet, so another provider, in which case it's not. But I think as we made clear, there is a specific headwind that we face over the next sort of 12 months or so. Once we travel through that, we think we'll be back into a much more steady state situation. So we see next year as probably being the sort of peak period for losses because of that double run.

Yeah, I just said, honestly, we're doing that now. I mean, you know, it's modest losses to other people. And this, you know, we're not worried about this at all. So we've been transparent what we think the year is going to be 400,000. This MPF, this multipath facility, they're just basic copper pairs, right? So and they are There's a big number here, and these are basic ADSL, low speeds, low prices that have to go. And there's this complication as we move to all IP and digital voice. People have got landlines and broadband. So that is a technical issue. reporting issue, which frankly will lead to 400,000 losses this year. We're not troubled by that at all. And what you will probably recognise as we step up the build even further, you know, we're entering more places where FDTP is available. And in the last 18 months, two years, of course, there's certain places where open reach wasn't available, and therefore we might have lost those lines. That's going to happen less often. Let's do this table, then we'll go to that next. Go ahead.

Just on the price rise side, so we know they're supposedly developing sustainable growth. How sustainable is that? The Labour Party's made some quite aggressive comments about getting rid of CPI links, for example. So what have your latest conversations with them told you? And can I just take a point of clarity, Sam? Also, you mentioned on the dividend. no divvy rise because of the high capex level. It's high for a couple of years. I mean, does that restrict your dividend growth over the next couple of years because of the continued high capex levels as well?

Do you want to do that one and I'll do the part? That sounded like two questions to me. What do you think? Go on. One and a half. So, I mean, the dividend, I've been very clear that our dividend, progressive dividend policy is that we will maintain or grow our dividend taking full account of, you know, the investment and the cash flows at the time. We're clearly traveling through a period of elevated capex. We've said we're going to stay at 5 to 5.1 for the three years while full tax expensing is in place. We've clearly said that for this year the dividend has remained flat. We will take those decisions each year as they come.

Yeah, on the price rise, look, obviously it's a really important topic. As I've said before, we watch this and measure this and monitor it extremely carefully and researching the dynamics of what's happening in the marketplace, both back book, front book, competition, but also general value for money and where we sit in the overall bundle of someone's bill. for the whole household. So I go back to what I said earlier. We're investing in these new technologies. It's a pound a day for fix, 50p a day on average for mobile. Those are exceptional value for money numbers, and they compare really well with America, extremely well, but across the world, right? So we're in good shape on that point. No one knows what's going to happen to inflation. We know that the plan is to halve it. And all I'd say to you is, our game is to deliver for our customers, look after them. We've always said we will keep our customer base. And pricing is an important part of that. But the way we put together... the services and the end proposition for our customers delivers the nps and the customer satisfaction and the value for money so you can see and we've talked about it before not all that pricing flows through to the bottom line because we are reinvesting in our customer base to make sure they have the very best proposition from us so it's too simplistic to say prices go up by inflation plus four percent Period. That's not the way it operates. And you know that. So it's a very competitive market. It averages down significantly. And we choose very carefully to invest in certain areas to make sure the value for money and customer service and satisfaction levels are what they need to be. So it's just not one thing. But we're alert to it. We look at it all the time to reassure you. I think the microphone's made its way to the back and might have come back here.

Yeah, hi, it's James Ratzer from New Street Research. I was wondering if I could come back to the free cash flow guidance you've given for this year because you're talking about what had moved relative to consensus. I think the one big thing that wasn't in anyone's numbers really was the BDUK grant. and that makes up about 15% of your free cash flow for this year. So can you just kind of talk to us about is this just a one-year effect only? Should we expect cash capex into like FY25, 26 is going to continue to be higher than the accrued level of 5 to 5.1? You know, if you really get more successful FTTP take-up, Is there more gain share that goes back to the government on this? It would just be great to understand the kind of movement on the cash capex around this.

Sure. So, I mean, there are two main drives to the difference between the reported capex and our cash capex. The first of those, obviously, is the capital creditors. That's mainly a function of timing. So we had quite a high capital creditor balance as we came into this year, or into FY23, because you'll recall we had a very high level of build in capex. in the tail two months of FY22. So that's been one of the factors that has driven elevated cash capex for this year. Once you hit a sort of constant rate of capex, which we're now traveling at about five to 5.1, we shouldn't see the same drag from capital creditors. To your specific point about BDUK, so we invested over the past sort of seven, eight years in a set of government-funded schemes to provide FTTC and FTTP to rural communities. The way that works is we bid. We bid against a certain set of assumptions, particularly take-up. And if take-up exceeds the bid level, then we are required to share the benefit of that with the grant funding. And so we put a quantum on our balance sheet, and it's in the sort of mid 400s, 400 to 500. And then we have to start repaying that. FY24 happens to be a year where quite a lot of contracts came up for, you know, if you think about the time of the contract, this is the year when we have to start repaying that gain share. That's a significant outflow for this year. Bear in mind, It's giving us a return because it means the investment we made on those contracts is higher than we'd anticipated because we got higher take-up and it's another manifestation of this very strong demand for FTTP and higher speed FTTC. It will continue to be an additional cash outflow for the next two or three years as we run through that gainshare. It will be clear each year as to what the quantum will be. It will depend upon the take-up at the time.

Thank you. Who's next? Hi, morning. It's from JP Morgan. Can I just come back to your guidance, please, just to better understand some of the comments you've made? I guess at the high level, your guiding to growth for revenues in EBITDA, that's maybe less granular than you've been in prior years. And I guess I was keen to understand what the motivation was. You mentioned in your opening comments that visibility stronger two-thirds of your revenues are contracted with price increases so it sort of feels the tailwinds are stronger but clearly that's not reflecting the way you're guiding so i'd love to understand you know what are the puts and takes why is that particularly having grown three percent ebitda last year the momentum is clearly building well and i guess very similar to that on the um OPEX and CAPEX reduction message? You've said one and a half billion, which obviously is a nice mid-term number, but you're also pulling forward CAPEX at the moment, and equally you are announcing some very bold headcount reduction plans. So I guess the same question applies there. There are strong tailwinds. Yeah, that doesn't seem reflected, so color on that would be helpful. Thanks.

Yeah, I mean, look, it's a good question. What we've outlined today is a future BT, which, you know, whilst in years looks, you know, it's a few years out, I think looks much more certain. I hope people can see that. And yes, you're right. Our general guidance is we're now growing. It's no more complicated than that. You're right. We absolutely know we can deliver a fantastic future state BT. And I think we've laid that out. And that is a great place to be because once we're into the new world of new technology and you've got this fantastic next generation networks on a digitized, virtualized cloud network. native type activity. All the new products and services that haven't been invented yet are going to fit perfectly onto our network in a seamless fashion. So that's in a nutshell the strategy, which is brilliant networking, associated services, allowing other people to plug into that network and deliver outstanding stuff for customers on a very low cost base. But it's a really competitive market, and what we're not going to do is box ourselves into some short-term targets that will avoid us having to take the decisions we've been able to do so far, which is make sure we land in the zone in 2030, which you see, which is a brilliant BT with a bright future. And that's why we've stuck with some general guidance of we're growing. Isn't that good after six years of not?

I don't know if you want to add anything to that. No, I mean, clearly, you know, I think, you know, we've got confidence in predictable pro forma revenue in EBITDA growth. Clearly, if we thought the market didn't understand what that meant, we'd have provided some more guidance. But we're comfortable that markets got a better understanding of the consistent predictable growth we're seeing in consumer and open reach. They understand the dynamics. That's reflected well. as we see it in what investors are expecting. And I think, again, I think there's a sense that we're seeing some stabilisation on the business side that's also flowing through.

And again, just to pick up on that, Akhil, but others as well. I think the challenge for BET has always been how to balance all the different competing pressures and stakeholders. And hopefully you sense it from us. We feel we've struck the right balance in difficult circumstances. Obviously, you've had COVID and then you've had all the economic crisis we know about. we've made it through we had a clear strategy you had a clear plan it is working unequivocal you can't deny that and what we're saying is we're going to stick the course now and therefore we think we want to we've got the right balance it's not perfect what we don't want to do is destabilize a ship by by pushing one area too much too soon but But there's upside in this plan as we go forward. If we execute well, we've got to execute really well. And it's not easy, particularly in some of the technology and IT areas, which I've talked about before. That's tough stuff. And it's a really competitive market. I mean, you all know that. It's really, really competitive. And we are competing like fury, right? We have to. And I think we're doing okay. But we can't take anything for granted.

Any other thing, Philip, I'd say? Just one quick point. Last year, actually, we said we would provide EBITDA of at least 7.9%. What we've said this year is we're going to deliver EBITDA of at least the pro forma of last year.

I've got the mic. Robert Grindle from Deutsche Bank. Hi, Robert. Yeah, thanks very much for the long-term end-of-decade targets. Less so on your near-term KPI plans. That's my view. But my question is on the open reach target. I think I saw 55% FDTP penetration up a lot from current levels. I think open reach's wholesale share is slightly north of 75% at the moment. So you're looking at a 20% share loss there, more in rural, less in urban. Is that how to think about it?

Not really, no. No, I'm joking. Look, I mean, that is not the landing zone, right? If you look at the variations there, there's a lot of moving parts, deliberately, right? Because we don't know exactly how it's going to play out. You know, we will build somewhere between 25 and 30 million. And in that time frame, we think the take-up will be somewhere between 40 at the low end, hopefully not, 55, right? But then, obviously, there's more take-up post that period of time, by definition. And the take-up will depend on a load of factors. We look at that and go, we want to get to 40% as quickly as possible. And I don't mind sharing with you, next year, our target is mid-30s. So we want to get to 40% as quickly as possible for all the obvious reasons. So the machine is working really, really well in OpenReach in terms of the connections, but also the build. We need to carry on doing that. So landing in that zone is a great place. But it's not finished, right? We keep going. And in the 2030s, that's my point. You've then just got huge momentum. You've built a network. You've proved the situation and delivering great things for customers. And our CP providers for open reach will then benefit from the scale that we've got.

And just a quick point of clarification, the obvious point, I guess, but Even by FY28 to 30, we'll still be double running some portion of our copper network with FDTP. So the take up on FDTP isn't the open region market share, just to be clear. Very important point, Simon.

Hello. I think I'm over here actually, Philip. It's David Wright from Bank of America. I'm going to disagree with Robert. I say strip the quarterlies down a little and let's not have 20 questions on MPF lines. Thank you, David. Thank you. Standing back a little, artificial intelligence is the buzzword across the markets at the moment. And this is an industry that is very consumer-focused, a lot of consumer interaction. You have a lot of consumer data. And also you absorb massive amounts of energy in the networks There's an awful lot. I assume that could be done Could you give us a few indications of what you are doing and what you plan to do?

Thank you Yeah, David. Thank you. I know you're you're particularly interested in an AI that you've written stuff on the avenue Can I just step back again? I think if it's a good question Let me just step back a little because I think on our head count, you know and and We've announced today some significant reductions, and I think it might be worth me just providing some perspective on that, and then we can talk a bit about AI in that context. Of the 130 down to 90, it's 40,000 roles that we don't think we're gonna need, right? these are rough numbers remember we've got 30,000 contractors in there too but I want to give you this sort of the way we're thinking about we've done a lot of work and obviously and it's not just happened this has been we're now announcing it and we've been working this with our partners for ages 15,000 roles roughly it's about building networks gone right when it's finished it's built you only build it once right fiber There's another 10,000 which is about service and repair. And basically a fiber network, a 5G network, the new networks just need less servicing and repair. They go wrong less often and you can fix things much more easily without truck rolls, without people. There is a bit of, I'll come back to this, a bit of AI inherently in that by definition. Then there's another circa bucket of 10,000, which is all about digitization, automation, and a bit of AI in there. And that is using technology to do things much more efficiently. And the final block of five is sort of what I'd call conventional restructuring, most of which we've already announced, which is involved in the BT business. creation, which is enterprise and global coming together, where we're taking out layers and duplication. That's why these are structural things and they're triggered by other things. The AI part is really interesting because we will be a beneficiary of AI unequivocally because we're a volume business. We've got 30 million customers. We've got lots of people. We've got lots of activity. AI can help us do that more efficiently. If I give you some examples, for interest, we filed more AI patents than anybody else in the UK. Any other UK-based company, more patents on AI than anybody else. So we're not doing it everywhere, and we're being very thoughtful, but if I were to tell you that our chatbot called Amy deals with lots of customer queries already, NPS plus 65. Now does everyone know that it's a chatbot? Of course they don't. But it delivers great outcomes. So when we look at the network side, the dark knock, it exists. No people. And so the network planning, for example, can be done automatically with AI in a way that couldn't happen two or three years ago. It's people intensive. Managing traffic, predicting traffic more accurately, it's people intensive. You won't need it anymore. So router traffic, knowing when routers start flicking, and we got 5,000 exchanges plus loads of network operating centers. We're going down to 1,100 exchanges and all the equipment's simpler and newer and more flexible, more nimble. And we've got AI and all the data that can help create self-healing networks. So we're going to be a massive beneficiary on efficiency and cost, which is why we know we won't need all these roles in the future. My plan is to manage it really professionally, really carefully, and take great care with our people So we don't have to do mass restructurings and compulsory redundancies because we've got attrition, we've got reskilling, and we've got plenty of time to do this over the next five to seven years. We've been taking out roles about 5,000 years already. It's masked by the growth in the build, obviously. So I think we're in really good shape there. So the AI will help us enormously... be more efficient and deliver things for our customers in a more seamless way. There's another opportunity which we've not even talked about yet, which is what are the new services and products that might come from artificial intelligence, specifically generative AI and large language models AI, which we all know has enormous potential. We've got a few ideas, but it's very early days, and that needs to be treated with great care, and that's what we're doing. Great question, David. Thank you.

Yes, finally. Thanks very much. Karl Murdoch-Smith from Barenburg. Just looking at direct labour costs, you've kept those broadly flat H21H1, which is impressive given the £1,500 pay rise given in January to those... Thank you, Karl. So I was just wondering if there was anything else moving in the other direction to explain that. So maybe asking for a little preview of the annual report, I wanted to ask whether the bonus scorecard achievement this year was below 100% and whether there was any bonus provision unwind in Q4 to explain that flat achievement, HT versus H1.

Good question. I don't think Simon should chip in there. It's back to getting the balance right. So I think you've pointed to a number that demonstrates good performance. We're trying to keep... So we're going to announce our bonus to our staff on Monday. I mean, just so you know, and everyone knows it's not quite 100% because we didn't hit some of the metrics. They're non-financial, by the way, the financial one we did. So it's a formulaic answer. It's a good answer. It's not quite 100. In the big scheme of things, it doesn't make a big difference to the outcome of 7.9 billion EBITDA. Honestly, it doesn't. be transparent with you, where did we miss? We had very demanding NPS customer service delivery metrics. We didn't meet them because we had a big chunk of industrial action and service went lower than we would like. So we have to live with that. Simon, do you want to add anything else?

No, the only other thing I would say is, Carl, we track this through the year. So we deliver pretty consistently in our expectations through the year. So we accrue through the year against what we expect the point to be. This wasn't a Q4, you know, big issue.

Okay. Thanks, Carl. Hi, it's from UBS. Can you maybe just talk through what you're seeing in terms of competitive dynamics, both in terms of consumer and enterprise? And can you maybe just comment in terms of what's happening with consumer fixed service revenue trends? Because you put through a 9.3% price rise April last year, but if I look at the trends, It was 6% growth in the first quarter, then 4%, 1%. And then this quarter, it's gone negative. So I'm just trying to understand the mechanics. And previously, you outlined that you expected to see a 30% to 50% net benefit of the 14.4% consumer price rise. So what's your latest thinking in terms of how much drops through?

Let me do the competitive dynamics, and maybe Simon can talk about the fixed service revenue trends. I sort of said it before, it's uber competitive out there. You know, it's, as we all know, in the UK specifically, like many countries, you know, the economic squeeze on people's disposable income is causing people to reconsider everything. The good news is, again, as I inferred and I think I said it is, you know, we're in a good position in terms of our overall performance. So churn is in a good place. NPS, albeit my comments previous about NPS, below where I'd like it to be, is still in a good position. And all the value for money scores I talked about before. So I think it's hugely competitive. And again, you know... I think you know this, but in mobile specifically, it's a tough market, right? In the broadband market, front book, back book continues to be a challenge. I mean, there's been some trickle up of front book recently. But again, we have to manage that. We're used to dealing in that market, right? So we know which customers we target, and clearly we are at the premium end. And some people would argue that in these environments, premiums suffer. I don't think so, right? Because... It's such an important product, what we offer people. They really value it. We've got to make sure that we're being very nimble in how we compete, but we don't just lower our prices. So we always say within the whole of the BT group, yes, you can buy a bit cheaper, but you cannot buy better. And that is what all our people do. When you ring the call center and you talk to our people, you'll hear all our people feeling confident and being able to argue convincingly why what BT and EE offer is the best. And by the way, in most cases, it is. So that's the key part why there's confidence in the organization. It doesn't mean it's difficult when people do promotional pricing which is lower than it should be. And again, hopefully over time, more rationality will continue to appear as we've seen a bit of evidence in certain sectors and certain segments, as you know, not least the overall fixed proposition and pricing that we've seen in the marketplace over the last three years is much more rational. Do you want to do trends on fixed service revenue?

No, I think we've covered this before, really, which is that the trend in the year, obviously, is that April 1st, the prices go up across our customer base. And then as customers come to the end of their contract in year, and on average, half of them are, many of them simply travel on and renew. We get some churn at a very modest level, as you know, and others we look with those customers to get the best propositions for them. That may be additional benefits. It may be different price terms. And that does lead to some attenuation of price through the year, and that's what you see in this year. And, indeed, it's a similar pattern that you'll see in the coming year. So that's really on what's happening. It's a gradual process of working with customers to retain them on the best plan during the course of the year. In terms of the amount of drop through, we were pretty clear that in FY23 we expected you know, something like 30 to 50% of the CPI plus benefit to flow through to EBITDA. And in fact, we said probably that would be more to the top end of that range. We've equally been pretty clear that as we travel into FY24, same pricing policy, but we expect the drop through to be closer to the bottom end of that range, simply reflecting the additional pressures around cost of living and more choices that we need to help our customers make to get the right and affordable proposition for them.

My question is around the uptake assumptions that you just mentioned, the 35%, if I'm not mistaken, for this year. Maybe in two parts. What was the previous expectation? That could help us a bit understand the CapEx increase as well, if you could perhaps give us a split of the CapEx rise between normal inflation and this upgrade in take-up. And linked to that, obviously, you are in control of your own demand to a degree, but Equinox 2.0 is yet to be fully approved. I'm just curious if the assumptions are based on approval of your propositions for the discount of fiber. Perhaps one clarification on the question that James asked earlier about the 200 million BTUK outflow. Just curious if you have visibility to future years what the phasing could look like. Thank you.

Look, I think I think, again, I'd say, as I said before, that the connection rate currently at 30%, I think, stands up pretty well. At this period of time, to have built 10 million and connected 30% of those people is a pretty good number. You can obviously see that as a result of what we're offering our CP providers. On Equinox 2, Ofcom will... decide by the end of May, I believe. We're hopeful. It's important to us. But the plans I've just laid out for you show a landing zone in five to seven years. And what we're saying is we've got to get to 40% as quickly as possible. There's loads of upside above that, obviously. And I shared with you that our target for next year is to get as close to mid-30s as we possibly can. And we're not going to split it up into any more detail than that.

No, I mean, I think the other thing I would say is clearly we are seeing a higher rate of take-up than we'd anticipated. And that's manifested in the fact that we had a significantly higher level of capex in FY23. And again, you know, we're guiding to higher capex in FY24. And that's just a manifestation of the very strong demand for FDTP. Interestingly, we're also seeing somewhat higher demand on Ethernet as well. To your specific question on BDUK, I think I answered it, but just to recap, the total balance we had outstanding, and you'll be able to see this when you read, as I'm sure you will, every page of the annual report and accounts, it's in the range of 400 to 500. This year is a particularly significant outflow, and it's a function of the timing with which we entered into the contract historically. because there's a time period in which the gain share starts to get repaid. So a big, big outflow for FRI24. There will be lower outflows in subsequent years, but that will depend to some extent on the continuing take-up on those structures. So it's something they'll be able to update you as each year proceeds. But I don't anticipate as big an outflow in 2025.

Just to go back to the point, just again, I think... If you care about the future prospects of BT long term, yes, it's painful now, but all this capex is putting people into the right place for a long time. And I know I said it before, but copper has been around for more than 100 years. So, of course, it's painful to build a network to replace that when you're the market leader and you're covering all of the UK. It's expensive. And so you only connect the home once, right, at open reach. And so we want to get that cost down, by the way, so you know. It's been stubbornly higher than we would like. It's coming down, but not fast enough. So you'll recognize on the build side, we're still in the 250 to 350. That's good. Obviously, there's inflation there, so we've got efficiencies. Provisioning, we need to try and get that down. So whilst I understand short term, The cash flow is painful. It's the right thing to do for this business. And in 2030, customers and shareholders and all stakeholders will appreciate the companies in the future, not in the past. And I know it's difficult and I know it has implications. But what Simon and I determined to do with full support of the board is make the decisions that are right for the future of BT to make sure it's here for a long time doing great things for customers. And we are 100% confident we're doing the right stuff. Would I like to go faster? Of course I would. Should we take another question?

Sorry. Thanks. It's Adam Fox-Romley from HSBC. I'd like to ask a question on enterprise, please. And maybe you could update some of the comments you made last year about needing to rebase the business away from legacy connections. Cash flow was down a third year on year. So kind of are we at the bottom is basically the question. And then maybe just as a very quick follow-up, I wondered on the jobs announcement today, was that something that was already discussed with the unions earlier in the year? Thank you.

Shall I do the jobs one first? Sure. The short answer, there's no surprise on the jobs, by the way. This is not a new plan that we suddenly concocted in the last 36 hours and announced it. This is the plan that we've been working on for a long time. We haven't announced it before because we want to get some runs on the board in terms of delivery of performance, both in terms of build and provisioning, but also efficiencies. And I think we've done enough of that. So we've been talking to our union partners throughout the whole process. And if you'll remember, when we announced our pay award, the £1,500 in January, there was a very important phrase in that announcement that said, you know, we will work together with CWU in that case on the transformation and re-engineering and modernising of BT. That's this. So, you know, of course, the relationships sometimes, you know, bounce around a little bit. They're overall very good for both Prospect and CWU. So you'll see us working together and doing this really, really carefully. And I said before, this is planned and organized. So, you know, of course, it's not a welcome thing. I'm not naive. But if you do it well, and if some of the things that I talked about earlier happen, which I believe they will on AI, it's years out, there will be new jobs as a result of new technologies. We're not going to get into what those are. We don't know yet. No one does. But anytime there's been a big jump in technology, new jobs appear, new things. they will appear and we'll be able to participate in that. For now, we've just got to get those efficiencies as I described. So on the job side, just to again reiterate, CWU, Prospect, yes, we're in constant dialogue with them. I spoke to them both today and yesterday, just out of politeness. So, yeah, no, we're in good shape as we could be on that one. On enterprise, look, it's obviously a tough market. You rightly characterized it. You know, we're... We continue to be in that situation where we're stuck in both worlds of the new and the old, and there's not enough new and too much old, really, and the old is still high margin. But it is getting better, right? And so are we at the bottom? I don't know. But I think there are green shoots in global, and I think we showed that, and that's encouraging. And I think what we've done in putting enterprise and global together to create BT businesses brought us a little bit more time just to – get ourselves sorted there's 100 million pounds worth of cost savings that will come out as has made a really good start the organization is is up and running from april the first it's a big combination by the way it's complicated right so i want to give him some time to get the strategy absolutely right and get the plan right so hopefully you know we're gonna we'll be more stable um but there's a lot to do in enterprise and of course we could do with a market that's slightly firmer um and at some stage that will happen right but um It's a tough, tough, tough challenge, but Baz will give you more detail probably in October, November time. He's going to come out and do a market day with all of you.

The only other thing I'd add to that, Philip, is the volume ends, SME and SOHO, those two businesses are in top and bottom line growth and perform strongly. We think they've got a robust product portfolio, less of a legacy drag now. I think it's also worth bearing in mind the big headwind that we've had from you know, the loss of a large MVNO contract is now sort of out of the books and therefore that ceases to be a headwind. The two big areas to really focus on, obviously, is the wholesale market and the fixed side is a price competitive market. But I think we know what we need to do there and we can compete more effectively as we roll out the fiber network. And the big story in both the large sort of space in enterprise and global, the real headwind is in old traditional voice-based lines. We're now investing hard, getting those customers onto new networks and associated services. And we're starting to make progress on really taking out the fixed costs as well. So good progress has been made. A lot more to do.

Please. Nick Duffass from Redburn. Just to follow up on the long-term cost plan, I don't think you mentioned the tellurial trillium payments in 2031, slightly beyond the time that you've given. I think those are running $300 million, $400 million a year. How much of that do you think you can cut in the next decade? Samuel?

Yeah, so I think you're quite right. The 5,500 phone exchanges, they are in a contract with Telereel, so we pay rental on that. It's the sort of order you mentioned. There are opportunities for us to look at significant exchanges with significant lease costs. target our network strategy and build to see if we can liberate some of those high-value exchanges, and that could be a win-win for us and Telereel. So there is some opportunity to do that before 2031, and obviously that drives a lot of our thinking about where to build our network. But there is then clearly a very significant opportunity beyond 2031 across the entire portfolio. So some benefit to come by the end of the decade. more of it as we move into the second, into the 2030s.

Anybody else? Okay. Many thanks, everyone. Appreciate your questions as ever. Nice to see you.