BT Group plc

Good morning everyone and welcome to BT Group's results presentation for the half year ended 30th of September 2023. Presenting today is Philip Janssen, BT Group's Chief Executive. Simon Louth, BT Group CFO, will join Philip for a Q&A session following the presentation. I would like to 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.

Thanks, Mark. Good morning, everybody, and thank you for joining today's call. Before I get into the detail of today's results, I just want to pick up the theme of our full year results. Much done, much more to do and give you an overview of how we are tracking against our long term ambition as well as progress this half. First, we delivered a strong financial and operating performance with both adjusted revenue and EBITDA growth in H1. At the same time, we are strengthening our competitive position and accelerating progress through improving our products, propositions and service, whilst investing heavily in our digitalization and next generation networks. we remain absolutely focused on cost and efficiency. Our transformation program is ahead of plan and now has delivered the original FY25 target of £2.5 billion of gross annualized savings with, as expected, a cost to achieve of just under £1.3 billion. Third, we remain on track to achieve our revenue and EBITDA outlook for the full year. As a result of build efficiencies, primarily in open reach, we are lowering our full-year capex outlook to around £5 billion. This will flow through to normalised free cash flow, which we now expect to outturn towards the top end of the £1 to £1.2 billion range. And finally, we are reaffirming our long-term ambition and continue to expect that by the end of the decade, following the peak of our full fibre build, we'll generate at least £1.5 billion more normalised free cash flow a year. This cash uplift is before any contribution from revenue growth or cost savings, net of tax, and underpins both our progressive dividend policy and our BBB Plus through cycle credit rating target. Moving now to the half year pro forma results on slide five. We delivered another strong financial and operational performance. Revenue for the half was up 3% with good trading in consumer and open reach, along with increased lower margin sales in business, partially offset by legacy product declines and continued pressure on large corporate customers. EBITDA was up 4%, reflecting the revenue flow through and strong cost control, which more than offset the impact of cost inflation and one-off items in the prior year. CapEx in the first half was down 11% to £2.3 billion, mainly reflecting unit cost efficiencies in open reach, which have more than offset the impact of more FTTP bills, connections, and of course, inflation. H1 normalised free cash flow was strong at £456 million, primarily due to the higher EBITDA and lower CapEx, partly offset by working capital movements. And finally, and as expected, we are announcing our interim dividend of 2.31 pence per share in line with our policy for it to be set at 30% of the prior year's full year dividend. Let's now take a look at the pro forma financials by customer facing unit. Turning to slide six, I'll start with consumer, which delivered another strong performance with revenue up 3% in H1, driven by service revenue from contractual price increases, increased roaming, and more FTTP connections. EBITDA grew 4%, supported by tight cost management and the annualizing of some prior year one-offs. We're also encouraged by churn staying low for the half year, while ARPU has remained robust. And this is a tricky balance to get right in the current economic environment. We have worked really hard to offer additional value so the vast majority of re-contracting customers stay with us. As I've always said, you may be able to buy cheaper, but you definitely can't buy better with BT. And with new EE's leading edge propositions, that has never been more true. Moving to business, in a challenging environment, revenue was up 1% in the half, driven by lower margin sales and good trading momentum in our small and medium business segment, supported by inflation-linked price rises. This was, however, partly offset by legacy-managed contract exits and declines. EBITDA was lower for the half, driven by high input costs and revenue flow-through, along with some one-off items in the prior year, leading to a tougher comparator. Businesses' new wins include a new five-year contract with the Army, which demonstrate that our public sector business remains a key partner across many areas of government and the country's public services. Finally, open reach, which has again shown strong operational and trading momentum, resulting in revenue up 8% in the half, driven by price increases and growth in FDTP and Ethernet bases. EBITDA was 12% higher due to the revenue flow through and lower staff numbers, partially offset by pay and energy cost inflation, along with higher FTTP provision volumes. Moving now to our operating performance on slide seven. Despite the tough economic climate, demand for our next generation products and services has never been higher and is projected to keep increasing. For example, take-up on Openreach's leading FTTP network has grown to 33%, while in our downstream units we added another 350,000 full-fibre retail customers in the half-year. 5G2 has demonstrated consistent take-up, with almost 1.3 million connections in the half. In business, the hostile threat environment has clearly left customers motivated to seek protection from cyber attack. And this has driven BT's security revenue up 14% in the first half. This vote of confidence from our customers is the result of a consistent focus on customer experience right across the business. And I'm pleased to see BT's group's net promoter score has risen again, 1.8 percentage points year on year to 22.7. Of course, to retain our customers' confidence, we need to hold on to our lead in next-generation networks. I'm more than confident than ever that we are doing just that as our investment strategy continues to work. The £15 billion investment in FTTP is delivering ahead of expectations, with a record quarter of build extending the current reach of our full-fibre network to 12 million homes and businesses. Furthermore, we maintain the level of work in progress for infrastructure that underpins the next 6 million premises, meaning the build is either complete or underway for around 18 million premises. That's approximately 56% coverage across the whole of the UK. Openreach has delivered this with unit costs for H1 in the lower half of our £250 to £350 build range. And we have the capacity to go faster still. We expect to build to more than 900,000 premises in quarter three and even more in quarter four. We've also seen strong demand, with the fibre base standing now at 4 million, and we expect take-up to grow modestly over the remainder of this year, despite the accelerating rate of build. We are determined to remain the partner of choice for our CPs in a competitive marketplace, and we're delighted that now over one million Sky customers are FTTP customers and can benefit from faster speeds and a more reliable broadband network across the Openreach FTTP platform. At the same time as this unprecedented pace of fibre delivery, we've made fantastic progress upgrading the nation's mobile connectivity. and currently have 5G within reach of 72% of the UK's population. We are also investing to transform and digitize to improve customer experience and lower our cost base. Through our modernization program and tight cost control, we've seen the cost base continue to come down and have already delivered £2.5 billion towards our total target of £3 billion of gross annualised cost savings by fiscal year 2025. However, our simplification journey is about more than just cost savings. The launch last month of new EE marks the go-live of an entirely new platform. It builds the foundations of how we'll interact with our consumer customers and the new single ID to enhance that relationship. as well as a flagship customer facing brand, the systems on which EE's products will be sold are more integrated, they are more efficient, and they are much easier for our customers and our people to use. In business, the new global fabric will be a game changer for our corporate customers as they become increasingly digital. It will simplify global connectivity in an ever more complicated multi-cloud, multi-SaaS environment. This will be the world's largest cloud-centric, feature-rich network with inbuilt security and multi-cloud management, all as a service. Our accelerated delivery, significant network and systems investments, and relentless focus on our cost base culminate in the strengthening of our competitive position. This will result in continued network leadership through our best-in-class FTTP and 5G networks, more customers on our next-generation platforms at an accelerating rate, and a lower cost base with a simpler, modernized operating model. This will put us in really strong competitive position with a strong balance sheet and strong cash flow. And I want to take a few moments to remind you how we see BT Group looking in the future before reviewing progress against the key metrics underpinning our five clear priorities. So turn to slide eight. As I pointed out at our full year results in May, in the future, BT Group will be a much simpler and more digitized business than the one we have today, with leading networks and great customer experiences powered by a lean and efficient organization and utilizing the very latest technology, all of which will ultimately help to fulfill our purpose. We connect for good. So how are we progressing towards this? I'll take each of our priorities in turn, starting with consumer on slide nine. In consumer, we remain well positioned to continue driving growth. As you can see, we've continued our momentum on FTTP additions, winning 335,000 customers in the first half. That's a 40% year-on-year acceleration in the rate of net ads. At the same time, we have grown our 5G connections to 9 million. Although the proportion of converged households was flat, we do expect to start driving growth through new EE with our single brand focus and advanced converged propositions. Strong sales of game consoles, for example, in the half give us confidence that we can stretch the brand into new areas, and it is testament to the relationship we have with our customers and partners. Moving on to our second priority on slide 10, to capitalize on our unrivaled assets in business. Managed services revenue is broadly flat for the past rolling 12 months and the market remains challenging. However, as I said earlier, strong trading and security and the recent launch of our innovative global fabric will support growth and form the basis of future managed services contracts. Alongside this, we continue to see positive trading momentum with our small and medium business customers supported by index linked pricing. Turning to slide 11, OpenReach delivered another record quarter of FTTP's build, taking the base 12 million premises past, of which 3.5 million are in area three. Connections were also robust at 364,000 in the second quarter. And in some ways, more importantly, FTTP orders in September were at a record high, setting us up for a strong quarter of net ads in quarter three. Openreach delivered this whilst maintaining a premium build quality and at a cost in H1 in the lower half of our £250 to £350 per premises build range, with ongoing engineering efficiencies and scale economies more than offsetting inflationary pressures. Of course, we're not alone in recognising the benefits of FTTP. We know others are building too, but only Openreach is connecting customers to full fibre at real pace and scale, driving ARPU up and costs down. Our proposition remains incredibly successful, with more than 70% of sales for products offering ultra-fast speeds. The challenging macro environment certainly contributed to Openreach's 255,000 broadband line losses in H1. The downturn in house building and softness in new broadband adoption has meant that we have again had limited offset to competitive losses that were broadly flat against the second half of last year. I think it's worth noting that our broadband-based decline has occurred where we do not have FTTP. we have grown the broadband base within our FDTP footprint over the past 12 months. We were also pleased to see Openreach broadband ARPU increased by 10% year on year, providing a benefit to revenue that far outweighs the drag from the loss of copper broadband lines. Moreover, quarter three is usually seasonally stronger in volume terms. So we're continuing to target around 400,000 losses over the fiscal year as a whole. But in saying that, a weaker than expected market, including slower new home build, increases the risk that we will exceed this level. However, let's be clear. The lines we are losing are primarily low value copper lines. This is about a slow broadband market. And as just mentioned, we are growing in open reach FTTP areas. So, our best defence to line losses is to build FTTP as fast as possible, which I hope you agree we are doing. Turning to slide 12, we've moved fast on our fourth priority to digitise, automate and reskill to transform our cost base and improve productivity. Our strong delivery in H1 against this priority has seen total labour resource in the business fall by nearly 7,000 people. Some examples of our transformation improvements include consolidating 17 financial systems into a single standard version, saving around £70 million in annual running costs, more than halving the number of products in our business portfolio to around 150. And a significant proportion of the code our BT colleagues add to our IT estate is now written using generative AI, allowing us to boost productivity considerably. Work in our digital division is also delivering genuine business transformation. We have now moved 80% of our data from multiple locations into Google's cloud platform from a standing start two years ago. All this data is enabled for the use of AI and analytics applications, providing the basis for further savings and customer opportunities in the future. On slide 13, as I said at the full year, are the key metrics to measure successful delivery of our strategy, which we have updated for this half year, further demonstrating our track record as we work towards delivering future BT Group. So in summary on slide 14, we are driving our growth strategy, investing heavily in our next generation networks while improving our operational and cost efficiency, leading to a strengthening of our competitive position. We have a robust strategy, a strong plan that we are executing well, and we are reiterating our long-term growth ambition, supporting our customers, underpinning economic growth in the UK, and delivering for our shareholders. Build efficiencies, primarily in overreach, mean we have been able to reduce this year's capex outlook to around £5 billion, while still accelerating the fibre build and increasing take-up. This reduced capex will flow through to normalised free cash flow, which we now expect to outturn towards the top end of the £1 to £1.2 billion range. Beyond the peak fibre build, we continue to expect at least a £1 billion reduction in capex flowing through to normalised free cash flow, with an additional £0.5 billion uplift by the end of the decade as we benefit from an all-IP, all-FTTP network. This is a clear route to more than double our fiscal year 22 normalised free cash flow by the end of the decade. All of this combined to underpin our progressive dividend policy with the interim dividend of 2.31 pence per share confirmed today. Now, it would be remiss of me not to recognise that this is my last results presentation as BT Group's Chief Executive and to say a few words about the last five years, and in particular, to thank all of my brilliant BT Group colleagues and teams who have allowed us to deliver some outstanding outcomes for our stakeholders. For example, providing the network resilience during and after the pandemic to support changing working patterns across the nation. By the time I hand over to Alison, bringing 40% of the UK premises within reach of our FTTP network. Launching the UK's first and leading 5G service, which now supports almost 10 million customers. Reducing our energy consumption over the last six years by a cumulative 259 gigawatts, equivalent to a city the size of Durham. Blocking around 280 million techs since deploying our new anti-scam technology in 2021. And finally, consolidating the 440 locations where our UK desk based colleagues used to work to just 97. BT Group is on the right track and in much better shape than when I joined it in early 2019. And I'm really pleased to be handing the baton to Alison, who knows the sector, she knows the company and knows what's needed for the next phase of our journey. And I wish her all the best. And finally, thanks to everyone on the call today. Your scrutiny may not always make for an easy ride, but we appreciate that it reflects the degree to which BT Group matters to people across the UK and beyond. So thank you for your scrutiny, your challenge, and your interest in BT. So could we open up to Q&A, please? And could I ask you to be as succinct as possible and ask one question each? Ben, could you open the line, please?

Certainly. Thank you. Allow me to inform our audience. If you wish to ask a question, please click on the raise hand icon next to your name. If you would like to withdraw your question, please click on the hand icon again. In case you joined using a telephone line, please key star three. And with that, our first question today comes from Akhil Dattani from JP Morgan. Akhil, please go ahead. You are now unmuted.

Hi, Akhil.

Hello. You can hear me. I can hear you now. Okay. Hi. Hi. Well, first of all, just given your concluding remarks, obviously, thanks very much for the last five years and all the best for the future. Maybe if I can start with my question, which really is in regards to open reach trends in H1. We've obviously seen very impressive growth rates, both at revenue and EBITDA, about 8% revenue growth, 12% EBITDA growth. And that's despite with Equinox 2, you haven't pushed through the price hikes that you could have done. Could you help us maybe understand what supported the acceleration? And I guess just to sort of preempt the answer, when I look at the divisional trends, it looks like your core broadband business is doing really well, but the incremental acceleration is from Ethernet and other. So just trying to understand exactly what's going on in the mix. And maybe you can help us understand. You sound like you're quite constructive around Q2 and Q4. of these trends thanks okay we couldn't hear that we could hear the end of it again yeah sorry i was just saying that um obviously the first bit was just color around the mix of what's driving the acceleration and then the second piece of it was just you made a number of interesting comments around Uh, Q3 and your confidence on Q3 Q4, it was just to understand the sustainability of the growth trends we've seen in H1.

Yeah, okay. Got it. Yeah, I got it. Got it. Okay. So, I mean, let's do it in reversal. I think look. On the build and connection rate, you know, you can see what's happening here. We've had a record quarter. We're signaling that we're going to increase the quarter three and quarter four, right? So we're heading to that target. You know, we're trying to get to a build rate of can we get to four million a year? So you can see an accelerating profile as we head towards that sort of notary target. So I think that's really encouraging. What I think is probably even more encouraging is that the build cost is coming down. So despite all this huge inflationary pressures, the team at Openreach are beginning to get a sense where the costs are coming down right now. What that means for the future is really encouraging. So we build more. We've got very big operational efficiency in Openreach, which we know about, which is what the landing zone in the future is exactly that. So I think you're beginning to see the early signs of what a new Openreach could look like, which is it's a fiber company. The fibre company will generate a lot of cash when it's finished building, and you're beginning to see the signs of that. So you've got 8% revenue growth, 12% EBITDA growth, 10% ARPU growth. Within that, obviously, these cost efficiencies, we said as a group level, 7,000 people less. It's a significant reduction in headcount. Big chunk of that's in open reach. So, you know, they're getting more efficient, building more, connecting more with less cost. And the less cost is, yes, on build. Yes, it's on the whole network management. But actually, as we have less copper, it falls less with less service repair. So you can see that on the number of truck rolls is going down. Repair volumes are going down. So it's a little window into the future. So I think, you know, all of those metrics are hugely exciting. Simon, do you want to add anything to that? No, that's fine. And on the mix, by the way, Ethernet continues to perform really strongly, to your point. So everything in Openreach is firing on all cylinders.

I mean, Philip, I might just add, and I think, Akhil, we couldn't quite hear the question, but if you think about the dynamics in Openreach in the first half of the year, we have seen broadband and lines, so the broadband part of the business, basically growing its revenue at about 8%, which is broadly in line with the overall open reach. Ethernet a bit faster, we're pleased about that, 12% up. The Ethernet business, very important contributor, you know, remains strong and we're seeking to remain price competitive there at the same time. I think the other point is that the costs, and I think Philip called this out, remain flat. And that's a function you're seeing here, the migration onto fibre, the relief on the The only final point I would make, do remember as we go into the second half of the year, we did have a pay rise in September, so we have a little bit of upward pressure on our labour cost as we go into the second half of the year across all of the units in the group.

Thanks a lot.

Thanks, Kiel.

Our second question comes from Adam Fox-Romley from HSBC. Adam, please go ahead.

Hello, Adam.

We'll move on to our next question. Jacob Bluestone from Exane BNPP. Jacob, please go ahead.

I had a question around your cash flow. I think your working capital included around $360 million relating to mobile handsets. So I was hoping you could help us understand what was that a year ago and how much do you see that

Simon, give me that.

Jacob, thanks for the question. The cash flow for the half year, you know, was up almost 400 million year on year. So pleased with the cash flow performance. The real driver of that, Jacob, is that we grew EBITDA by about 150 and our cash capex came down by 300. That's a 450 growth. And of course, that's as Philip mentioned earlier, that's a bit of a preview into you know, the leverage that we get as we develop this strategy out into the future, the combination of EBITDA growth and then being able to reduce CapEx post our peak, you can see the sort of expansion of cash flow that could flow. So a little snippet of that in H1. In terms of working capital specifically, Year on year was an increase in an outflow of about 50Million. Remember H1 is always a working capital outflow half for us. We had a 50Million increase in that outflow. Um, yes, we did, um, have a, um, program of, um. monetization of mobile handsets that's actually part of an integrated strategy as we move from just two-year contracts to three-year contracts in order to normalize the working capital impact of that we've introduced that scheme but do bear in mind and we make this clear we had another handset financing program which dropped by about 20 million so the net effect of those two is pretty modest so hope that helps you Jacob

So thank you to Philip and best wishes for the future.

Thanks Jacob.

Our next question comes from Georgios Irodikouni from Citi. Please go ahead.

Thank you for taking my question. It's around the comments you made on open reach and the broadband share remaining strong and growing where fiber has been upgraded versus the other areas. I was wondering if you can share some information whether there are maybe differences in the overbuilt from others within the areas who are present with Fiverr versus others or whether this is like for like. And then maybe I'm squeezing a second question because it's linked. There's been a very good improvement in NPS in the last five years as you highlighted. And I just wanted to understand if there is a significant difference Between the 1011Million homes, you are already servicing with fiber a few months ago versus the rest. Thank you.

Um, let me do the 1st, maybe some, you can do the 2nd 1. um, uh, because it's a, it's an important question. And I think it's relatively simple, you know, the. When we build fiber. in almost all circumstances, and remember we've got lots of different cohorts of build, we grow our market share full stop. I think that's sort of the main headline. However, of course, If you are a customer, for example, in a rural area and you're in ADSL and you're getting 10 megabits per second and a new fibre provider gets there before open reach, there's a very good chance we'll lose that line. And that happens a bit. of course and that's in the numbers so but of course as we get to 12 million built on the track to 18 going to 25 that is going to happen far less so i think you know we're very very comfortable with what's happening on the ground in build and connections and the prospects and how the future should play out for bt And it's about delivering for our customers, but also making sure that the investment case that's anchored into the fiber business case is rock solid. And again, 12 million, 4 million connections, 33% at the build rate and the build cost we've shown today. I don't think anyone should be questioning the 15 billion pound investment. You know, we're going to get a good return for that. We just want to make sure we do as best we possibly can as quickly for all our customers and get that digital infrastructure in the ground as quickly as possible. Simon, do you want to do the second one?

Yeah, on NPS, I mean, we're pleased clearly with just the continued custom satisfaction across the business. And I think that's a particular achievement given, you know, we are in an environment where in many parts of business we're putting through price rises reflecting inflation. But you can see that that's flowing through into lower churn. How have we done this? This is just a relentless focus on MPS over, you know, five plus years. It's something that the whole organization's focused on. It goes into customers. Three, we've continued to really drive process improvement, both in our contact centers and in our engineering workforce. And finally, of course, we've achieved all of this, even though we're only in the early part of replacing what is relatively now old IT with modern IT. So there's more opportunity to come and that remains a clear focus for us.

George, can I just add to that? You know, I'm a member of a very little known club called the Coob Club, and it looks after its members in a very unique way. And I guess for me, it's been a key learning for me of how we look after our customers. And over the past five years, I think, you know, the overall customer focus has been completely revolutionized. So I hope Almost everybody in BT, 130,000 odd people, think much more deeply about looking after customers in the broadest possible sense. And to Simon's point, I am actually delighted that in the five years, the NPS has more than doubled. I mean, that is really important. We've got more to do, by the way. You know what the targets are. So if you're a customer of BT Group, we've got 30 million. Now, in general, The things have moved forward dramatically for the, for the good. I think there's loads more to this. Not just about the networks obviously give a significant boost by themselves. When you get onto new modern networks and get off the legacy that by itself is a fundamental shift. But also new propositions, new services that we're beginning to launch both in consumer and in business are going to make a big difference. And then if you are really, really, really good at digital and thinking about how you use new technology, the way we interact, the way we service customers, the way we look after customers is going to be transformed in the next few years. And therefore, I'm, I'm, it's 1 of the things that most important thing, uh, to me, and I guess. You know, when I 1st arrived, you know, we had loads of call centers, um, outside of of the UK, a lot of feedback on that was 1 of the 1st things I took was to bring it all back. From from that moment, we've. been on a journey to transform the way we should think about our customers, the way we treat them, the way they interact with us. And for me, it's one of the biggest things that has happened here because we've now got a business that is doing the two things that you can't be successful without. It's growing and the customers like what we're doing. If you are not growing and your customers don't like what you're doing, you're going to have a tough time. And I feel both those things are heading in the right direction. Thanks, Georges.

Up next is Carl Murdoch-Smith from Barenburg.

Carl, you may proceed. Firstly, Philip, I just wanted to wish you all the best for the future.

And my question is about H1H2 EBITDA phasing in the business division. So after H1 EBITDA of 806 million, and looking at where consensus is for the full year at above 1.7 billion, that would mean that H2, would need to be 53% of full year EBITDA. So that's quite an H2 ramp. Last year we did see that kind of phasing in H2, but in the year before, the year ending March 22, we didn't, and H1 and H2 were much more even. So I guess my question is, what do you expect this year's EBITDA phasing to be like in business? And are you comfortable that there are good reasons to justify the significant H2 profitability ramp up expected by consensus, particularly in the face of the current macro challenges and the salary phasing headwinds that we flagged earlier. Thank you.

Yeah, Carl, I'll let Simon give you his perspective on that. Obviously, we don't do loads of breakdowns on individual units for individual half years. So I hear what you're saying, Carl. So thank you for your original comment. I appreciate that. Business is obviously a challenging environment for the reasons you know. What's happened historically in this first half is a continuation of the trend for a little while. Yes, there's a change out from old to new, which we're just working our way through. Chunk of business that actually is performing extremely well is the index link part. So not just in terms of financials, but it's customer base, it's performance, it's NPS, it's revenue EBITDA are all heading in the right direction. And of course, their prices have moved up as inflation has come through. In a big chunk of the rest of the business area, we've got long-term contracts, which are a lot on the legacy. We've been unable to pass through some of the the costs that are associated with the inflation and pressures we're all experiencing. So clearly that is the headwind you're referring to in the first half, and obviously there's not going to be an immediate bounce back in the second half. There's a lot of work that Baz and his team are working on. I have to say that the strategy that BT Business has now makes a lot of sense. And you're going to see in detail, Baz is going to spend some time with you in the not too distant future explaining that. So I think you should wait until you see that because there will be a much stronger proposition for our customers. And as we scale the new stuff, it will make a material difference. It's just that we're stuck between the old and the new and not enough new. But at some stage, that will change. And I think Baz is going to give you a sense of that when he meets with you. Simon, do you want to make any further comments on phasing?

Sure. No, Carl, thanks for the question. I mean, the B2B business does typically see a little bit of a ramp up in H2 versus H1. But I think this year, and possibly before why is that well first of all do remember as I said earlier we had a pay rise in September halfway through the year in the index part of our business you do get this some attenuation of the price rise in the volume part of the business and of course you know it's a pretty tough macro particularly for sort of you particularly public sector ones, and which have benefited a bit from FX last year. So I think it's going to be a bit of a ramp up, but flatter than prior years. Do bear in mind, of course, Carl, that Openreach, I think, strongly performed in the first half of the year. And I suspect that the market will see that. So perhaps a bit weaker on business, but stronger on Openreach.

The following question comes from Nick Delfas from Red Bear.

Nick, please go ahead. Hello, Nick.

Nick's device has just disconnected. Let me proceed to Paolo Tang from UBS. Paolo, please go ahead.

Hi. Firstly, Philip, best wishes for the future, for life after BT Group. In terms of my question, it's on open reach. So the minimum volume deals on FTTC or the open reach 112 deals that you had with the largest ISPs has recently expired. However, are you seeing any change in terms of how these ISPs are behaving and the number of lines that they're delivering to open reach? Also, if we look at some of the largest ISPs, Sky is exclusively with open reach. that he recently signed a wholesale deal with Virgin Media in Ireland. Therefore, are you worried about the risk of Sky shifting some of its business away from Openreach to other players in the UK? Also, how do you think about the risks to Openreach from Virgin Media revisiting M&A discussions with TalkTalk? Thanks.

Yeah, I'll let Simon talk about 112 and the effect on Openreach. And maybe I'll take the question on Sky and VMO2 and TGG. I think clearly it's really important. I think what I point to is we've built the 12 million, connected four. Of the four million, Sky are one million. So the market is moving pretty rapidly, obviously. And so for me, one of the things that Clive and the OpenEach team have done really, really well, they run it as a independent company that, like any great company, thinks really carefully about its customers. And Sky is one of the biggest customers, as is TalkTalk Group. So the question is always, how do we make sure that our large customers for open reach feel comfortable with what are being offered what was being offered to them so you know we've had equinox one you know there's equinox two those things have worked for our customers and for open reach and i think it's working for for everybody all stakeholders you know the country at large getting more digital infrastructure so this is a scale business and i think our customers understand that they understand the scale um is required to be successful um and you know networks is is complicated at one level, but actually it's very simple. You know, it's heavy investment, massive capex, and you need to fill the network and it's a scale business. So I think that allows us to be very competitive across the board. I don't just mean price, but of course I do include price in that, but making sure that, you know, we get people onto FTTP quickly, early, with a great product, with great service, at very attractive pricing. And as the open reach initiative continues to roll out, the financial picture for everybody should work. And what I'm hoping for is that both Openreach makes a great return, it deserves to, on a £15 billion investment, but also our big customers like Sky and TalkTalk and Vodafone and many others, by the way, get not only exceptional value and great things for their customers, but they get a chance to make a very fair return too. And that is the way it's set up. And that is the fair bet, by the way. So that's what we're doing. And I think there's every chance that our large customers will retain confidence in what we're doing if we can keep delivering in the way that we are. And that's why we're going so fast. And again, I would say, just as you raise it on VMO2 and others, I think it's really good that we have strong competition and having another very big player building fibre, competing hard, I think is a good dynamic in the country. And again, as I say, we are, I think, leading in the race for fibre. I hope we're comparing well to others. I think we are. And that's the way it's going to continue for the foreseeable future, I really do believe. Simon, do you want to think about the 112 deals and the effect of that coming to an end?

Yeah, really quick. I mean, ahead of its expiry, we took the decision to provide our CPs with, you know, two years advance notice of pricing. And so essentially we're rolling forward those offers on the FTTC products with a sort of two year advance window. These are not, and that's at our election clearly, these are not subject to volume commitments. It's worked very effectively in helping CPs continue to run the FTTC platform, but it also means that the FTTP platform is very competitive for them, particularly with Equinox. So it's a big driver of support from CPs and also why we're getting such strong take up on the FTTP platform. Thanks.

The following question comes from Robert Grindle from Deutsche Bank. Robert, please proceed.

Thank you. Can you hear me okay?

Robert, we can hear you loud and clear.

Great. Philip, thanks for your humor and punching us with this on these calls. Much appreciated. My question is about one-touch switching, which was delayed until March. Does this improve your ability to take share from VM02? Is this something you're looking forward to? After all, you're doing quite well already with fiber. And I might just jam one in to Simon. You've put in a significant summary on the class action suit, but you haven't taken a provision. Why the profile given to it now? Is it because it's so close or is there a change in thinking on the outcome risk?

I'll do the 1st 1 and let Simon do the 2nd. Thank you. By the way, if your comments, I've really enjoyed all our conversations. So, um, the short answer is a short answer. So the 1 touch switching is yes. You're absolutely right. You understand what's happening there. That does make a difference. Um, and again, I support that, by the way, you know, you want to. In this kind of market, we want to make sure that our customers get the opportunity to buy the best services and encourage people to compete like fury. So, yeah, that one touch switching is going to make a difference and let the best man win, as they say. Simon, second part of the question.

Yes, I mean, we simply updated our disclosure on that matter, Robert. You know, I think as you've seen, you know, we continue to believe that the claim is without merit and on that basis, you know, the accounting standards don't require a provision, don't deem it sensible or required at this point, but we've provided you with full disclosure of where we are.

Thanks, Robert.

Thank you. Up next is David Wright from Bank of America. David, please go ahead.

Hello Hello, can you hear me guys? Yeah, great stuff. Okay. So a very simple question and then a question for yourself, Philip, just on the unit cost efficiencies of open reach. Just trying to understand to what extent we can extrapolate those. If anything. I might have thought that the unit cost would trend higher as you start to move a little bit more rural, perhaps with the build and then just my question to Philip. Again, you know, you've done your time now with BT, and you arrived promising to be braver and bolder, and I think you should be congratulated for your success there. And there have been many, many achievements. I guess one thing that stands out a little, though, is despite all of this, the share price has not really performed so well. So I guess my sort of parting question to you is, why do you think that really is. What do you think are the headwinds to some very obvious advantages that can be understood in BT in terms of the share price? And I know you mentioned before about Clive running Openreach as an independent company. Do you think it needs to be more independent to really realize value in the wider BT group? So just any perspectives on that would be appreciated.

Yeah, sure. Simon, I'll say a couple of things on unit cost efficiencies first, and then Simon may want to speak to that. Obviously, it's the first half, right? It's six months. This is a multi-year program. There are lots of moving parts. We started and then we had the COVID crisis and supply chain challenges and then inflation and a tight labor market, which we all had to sort of really deal with in what was a very challenging environment. I think things have obviously progressed, and these first six months on Openreach of this year are hugely encouraging. Literally, I think you're driving it. It is a window to future Openreach. It is a little vignette of what it is, and it's the leverage in that company and the cash flow implications of a company that's growing like it is based on new FDTP. On the costs, You know, the 12M includes 3.5M in Area 3. That's why we reiterated that. So we've got a blend here of all types of bills. So they've done a fantastic job on that. I would say to you that the provisioning has stubbornly stayed the same. And I'm determined, and Clive is too, to try and find a way of bringing that down, which we hope we'll be able to do over time. So if it's still early days on that, because things are stabilizing a little bit, to my point on the macro, supply chain is much easier than it was before. The chip shortage thing is not... that's pretty much gone away. So look, I think we need a bit more time to make sure that we're comfortable that there's a new normal on this, and we'll have to wait and see. But it's hugely encouraging, I think. But let's just give it a bit more time for Clive to bed in the processes that are at this level. I mean, Simon, do you want to add anything on that?

I mean, I think you've captured it, Philip, and we set out 250 to 350, goodness, about three years ago now. And the fact that we're operating within that range, given the inflation we've they've done, particularly as we've heard, as you said, a pretty broad mix. This year, it's important to say we have benefited. The supply chain is, there's a bit more capacity in it. Do remember, you know, you can get an improvement by some tilt in the mix in the first half. a whip at the beginning of last year. But anyway, this year, lower end of that range, we've brought our capex down to 5 billion and that's given us the cash flow uplift. But I think as we look forward, we're going to stay firmly within that range exactly where we'll depend upon mix. We'll keep driving efficiencies to stay within it. And we've reiterated peak capex between 5 and 5.1. But clearly, Clive is always driving to see if we can do better than that. Watch the future.

Yeah, I look so hugely positive. Let's see how it evolves. But I think you can sense things are well under control and operation. And it's really encouraging. I mean, David, on your bigger question. Thank you. Appreciate it. I hope I hope I've been as bold as one can be in this job and maybe brave. I don't know. I hope not foolish. I'm pretty sure not. I guess. What do I think? I think that I'm pleased that we have the right strategy and we've been able to invest and stick the course despite all these very difficult challenges that have been thrown at us. I won't reel them off again, but you know what they are. Life, the last five years, have experienced hugely challenging situations that no one expected is the truth. And so despite that, we've had the courage and conviction to stick the course because we believe in the strategy and the strategy is the right one, investing heavily to create a business that is better for customers and stronger for the future. So I think we've done that. I look at it and go, you know, the company is growing. the first time in six years revenue and ebitda and i think you can see that's pretty stable and we talk about ftp and 5g and customer experience way better the relationship with the regulator and indeed the whole public sector the government policy makers i think we've got that balance right we're getting off legacy really quickly we've built all the new tech now we've got to make the most of it the digital capability is really much stronger 80 of our data is in the cloud and i think you know as i said i'm pleased that we've helped keep the nation connected through difficult times. And we're building the network that people will need as these new technologies take off, you know, AI and virtual reality, augmented reality, and they come with these new headsets. You're going to need all these devices that will be connected are going to need great networking. And I think we're going to have that. So, you know, and all the stuff we've done across the ESG agenda, I look at that and go, That's important, too, and I mentioned it in my remarks, you know, significant changes on sustainability and power usage and, you know, getting electric vehicles really going at scale and more to do, obviously. But so bringing the power consumption down, making sure that we're trying to do the right thing in society with all our digital skills activity, but also, you know, focus on diversity and inclusion, really believing in it. We're not perfect. We've got more to do. the purpose of we connect for good is is alive and well and kicking and it's really really strong in the bt group so i i i think about all those things and then i look at the share price and i go that's very disappointing and you know i rather hope that i always expected it to be difficult you know knowing that we were going to have to invest heavily i knew that when i came in i always expected it to be challenging i rather hope the share price i would have had the question philip you've been here five years you've achieved a lot but the share price hasn't moved forward at all unfortunately i can't even achieve that so i just have to take that on the chin which i do because i believe in the end the market will recognize a good strong company that is more competitive structure advantage the market leader and has bright prospects and that's the bit that i i think is absolutely self-evident in these results and over the course of the the last few results is you know bt is a Stronger, better business, more competitive, structurally improving its advantages and therefore having brighter prospects. I hope. The reason why it's a share price down is because our cash flow is down. I mean, at the end of the day, you know, you can't have it both ways. We're investing at an all time high in stuff that really matters that I think no one's debating whether it's right or wrong. We're not doing blue sky stuff. So I hope it will come back. There are not enough people willing to buy the shares today. I hope as the structural cash flow step change Uh, becomes near and near, I hope more people who can see that and will be convinced of it. I don't think necessarily by the way that. Making outreach more independent is the answer. I think. What you've seen today that the window to the future of open reach. Has been opened. And I don't think anyone can doubt, hopefully, the success of that proposition. And again, as that builds and becomes a bigger picture, I suspect and hope that more investors will join the bandwagon because it's going to be a good return on a massive investment.

Okay, very much appreciated. Thank you, Philip. Good luck.

Thanks, David. Appreciate it.

Our next question comes from Nick Dalfas from Redburn. Nick, please go ahead.

Thanks very much. Hopefully you can hear me this time. Can hear you loud and clear. Best of luck for the future. And I just had a question on what the regime is likely to look like in the UK for an operator of last resort as and when stressed competitors go out of business. Obviously, one can look at various people's quoted bonds or what's going on in the alternative fiber network. So what's your understanding of how consumers will be protected and transitioned to a new, more secure operator? Thanks very much.

Nick, thanks for the question. And look, thank you for your sentiments to me personally. I appreciate it. Look, I personally, I'd say, you know, you're pushing a subject which obviously is hugely challenging lots of people i mean inevitably you know in this environment when you've got inflation running at the level it is and interest rates where they are and you've got the dynamic in our industry um which obviously you're poking at that there are implications of that and therefore i think certainly from what i understand there's a lot of thinking going through about how the market plays out in the future and how do we make sure that overall The whole country gets digital infrastructure and customers are not in any way put at risk for having access to what is a fundamentally important service. People can't do without it. We know how people rate connectivity, both mobile and fixed. It's very, very high up on the list. So, look, I know there's a lot of thought on that. Clearly, there are going to be some changes in the industry over the next few years. All I can say is BT is... perfectly positioned, and I mean in every regard, you know, financially, build-wise, technology-wise, footprint-wise, to make sure that if any customers, you know, have a challenge in getting the connectivity they need, we'll be there for them.

But there isn't a formal booklet we could refer to on what happens when it's 100,000 or 3 million customers who suddenly need a new home.

No, look, that's just... That's true. It's probably, you know, it's more a question for other people. But what I would just say to you is, you know, BT is a company, you know, we've built 800,000 new homes on FDTP. We're going to build more than 900,000 in the next quarter and so on. We're connecting at a massive rate. So if there are a few hundreds of thousands of customers that need to be moved at some stage, we can do that and we can do more as well. So, look, we're ready and waiting if ever required.

Okay. Thanks very much indeed. The following question comes from James Ratzer from New Street.

James, please go ahead. Hello, James. You're cutting up a bit.

Yes, can you hear me okay? Yeah. Yeah, yeah. Good morning, Philip. Yes. And just to echo the sentiments from others as well, very best of luck for everything in the future. So it's maybe kind of a bit banal when we have to only ask one question to bring it down to just one simple question, please. But just on your energy costs, that's obviously been a headwind that you have been having to face over the past few years, you know, a couple of years ago. that was running at around just over a billion pounds a year the current run rate it's nearer 1.3 billion pounds a year that's your property and energy cost line in aggregate how can you what guidance can you give us on what tailwind if any you might get over the next six 24 months on that cost line and the potential magnitude of the savings you could get. Thank you.

James, thanks for your kind comments. Appreciate it. Simon, do you want to give James the energy situation?

Sure. Obviously, we have seen a big spike in energy prices, which we hedged against last year. We're also, I think, about now 95% hedged for this year. And clearly, we had to hedge in at prices in some cases that on average higher than the price from last year because of the pace of the hedging and we've also hedged at this point according to our policy we're about 50 percent you know sorry 70 about 70 percent for FY25 and we've also got hedging in place for FY26 so I certainly think we've sort of you know at the point from a pure commodity cost standpoint and we're well protected and brought at sort of peak energy commodity costs, but do bear in mind the non-commodity costs continue with pressure as we move to a lower carbon economy. So the real pressure for it, the real focus for us actually in management of our energy cost is energy consumption. And we've made good progress in driving down energy consumption just through really tight management of it across the estate and the network. The big prize for us is obviously

Um, and so forth, so on that Simon, can I just sort of just push you a bit more a bit more quantitative on that? I mean, given you have hedge 70% for 25, and you presumably know roughly how your energy consumption is going to play out. You know, for 25, how should that energy costs then develop against the current 1.3Billion pound run rate?

I mean, I think it's going to depend upon what the energy price does on the unhedged component, which I'm not going to speculate on at this point. But certainly given our hedging, I don't think it's going to be a continued headwind for us. The key issue for us is improving consumption.

But if energy spot is flat? The 1.3 billion would come down to roughly what for next year, please?

I'm not going to give you point estimates on our energy costs for next year.

Okay. All right. Thank you. The following question comes from Nick Lyle from Societe Generale. Nick, please go ahead.

Morning, all. Hope you can hear me. See you loud and clear, Nick. All right, great. All the best from me too, Philip. Thanks. Just to come back to the consumer ARPU, please. I mean, broadband was a little bit weak, just sequentially this quarter. So you saw that attenuation effect. But postpaid mobile stayed pretty strong at about 11%. growth so could you just tell us a bit a bit surprised that broadband was the was the weaker one of the two could you tell us why that is are you seeing quite a lot of spin down in consumer broadband you're having to work hard to keep the churn down and why is it yeah nick it's good quick i'll get simon to give you the answer on consumer arpu mobile versus fixer there is a um something i want to say about that but i should just

to step back where i'm actually i think mark in the consumer group have done a fab job here right so we've obviously put some pricing through and and obviously a headline level that's quite high we all know who understand the industry how it plays out over the year so we also you know what that does that drop through to ebitda somewhere between 30 and 50 we think the lower end this year because the price was higher but what they have done so well in the consumer team is despite these big price increases, we've kept churn very low and satisfaction, you know, exactly where it needed to be. So the NPS is strong still. So I'm really pleased about that, but it's not, One size does not fit all. So we speak to our customers and understand the segmentation really, really carefully. So there's a customer segmentation and there's a financial segmentation. So what's happening in the fixed line, Simon will explain about some of those people who haven't got price increases. So I'll let Simon explain what's happened in the mobile and fixed as you are right they are different but the overall picture is exactly what we sort of expect and we're really happy with it you know although the mobile number is very different and you could argue much more positive you look in the round it's really good so Simon do you explain that yeah I mean I think both in terms of both the broadband base and the

We've obviously put through the CPI plus 3.9% price increase. That has, I think, landed as well as we could have hoped and churn remains low. The mobile business has benefited from some enhancement year on year associated with higher levels of roaming and roaming activity. We've also had reasonably strong revenues on sort of interconnect messaging business as well. you know, the ARPU expansion on mobile. On broadband, obviously, we haven't benefited from those two aspects. And the other thing to bear in mind, of course, is that there's a portion of our customer base that don't benefit from the CPI+. And about 3 million and a fair chunk of those are actually in the broadband side. Things like our Home Essentials product where we're the share leader in providing essentially customers in certain categories. So that's obviously had a bearing on the on the broadband price. So hope that gives you the drivers roaming into get enhancing mobile, you know, customers protected from the CPI plus having a slight damper on broadband.

Thank you. Thank you both. Cheers.

Our next question comes from Maurice Patrick from Barclays.

Maurice, please go ahead. Can you hear me okay? Boris, we can hear you.

Great. Always checking when on a telecom conference call. First of all, good luck for the future, Philip. I'm sure we're all looking forward to the invite to your leaving do. Maybe if I could ask just a simple question really on pricing for next year. You've got the CPI plus 3.9% in consumer, most open reach products linked to CPI. You've talked about pressure on household spending generally during the call. Maybe it's in your gift as CEO to put pricing up for next year, maybe it's Alison's job, but just to get your thoughts in terms of if you think it's right to be jamming through a 10% price increase again through next year, given where we are with the financial stresses where they are. Thank you.

Yeah, look, it's an important question. In terms of the splits into two parts, there's open reach and then there's retail. So open reach pricing, you know, will go up with CPI as agreed in the WFTMR. And by the way, that's so important to fund the the new build program, right? So that's something which is, I think, a straight line correlation, if you like, or connection, is those price increases. And if we didn't have CPI, we wouldn't be able to afford to build the network in the way that we have. So that's a longstanding agreement that lasts over multiple years at the regulatory level. And I think it's important to encourage and allow everyone to build and be encouraged to build because the financial So there's that part of it. On the consumer side, again, it's a total BT point of view. We're investing so heavily. It's the same sort of story, which is, you know, we do need to fund our investment, but also we need to get a return for our shareholders, right? And our cash flow is way down. So let's not forget that. So the cash flow has been impacted by this investment program, which is fine. but also our customers get extraordinary value for money. And I repeat, you can buy 100 megabits per second service and pay less than a pound a day. Think of all those people who are at home, you know, families who are getting fantastic connectivity and all the things they want to do on their computers, on their mobile phones. And that is our new network. That is our network providing that service. So the value for money is, you know, less than 50p a day, sometimes a mobile and a pound a day for fixed is exceptional. And the data usage continues to go up by 40%. And by the way, that's not going to slow down anytime soon. All this talk of AI and the new technologies, it's all about data. So these new devices and all these new technologies are going to consume even more data. So thank goodness we've built these new networks that can be able to deal with it relatively easily and not have incremental costs associated with it. So when you put it in the round, that's why our price increases are going to continue to go through both at retail and at the wholesale level. because we've got the balance right, right now, and the value for money for our customers is exceptional. The good news is inflation is definitely coming down, and we all hope, really hope, that we get to that 2% target as quickly as possible, and then that pricing will no longer be an issue for any of us.

Thank you. The following question comes from Adam Fox-Romley from HSBC. Adam, please go ahead.

Adam.

Hello. Thank you for giving me the second chance. Good luck with what's next, Philip. Thank you. I wanted to kind of ask about CapEx and the investment case, tying a couple of the other questions together, really. I think you've seen the share price reaction today, CapEx down, free cash flow up. I know the fibre build and the capex that's associated with that is locked in, but I wanted to ask you if you think there are opportunities for optimising the rest of the capex budget, given its scale and the fact that fibre capex is plainly going to remain high for the next three years. Thank you.

I'll let Simon give his perspective on that. I would just say one thing before Simon gives his view on it, if I step back a little bit. Of course we understand. You're absolutely right. Of course we get that. My main view is BT needs to be as strong as possible, as competitive as possible, as structured advantage as possible. And I think if we hadn't built as fast on fibre, it could be a very, very different story. So I think that although it's painful for the reasons that we know, and it is all about the cash flow, this is the decisions we took as a board, as a company, and as Simon and I proposed are the right things for this group in the future. So we need to continue to keep that momentum, which is why we said today that we're going to increase the build in quarter three and target increase again in quarter four on build. And the connection rate is also going to tick up a little bit. So, you know, That has implications from a capex point of view, notwithstanding the huge progress we're making on the build costs that we announced today, where you can see we just lowered our capex outlook a little bit for this year. So it's trying to get that balance right, but always making sure that every pound we spend is the right pound is a programme of work here that Simon leads. So I'll let Simon give his perspective on optimising the rest of the capex budget.

Yeah, I mean, look, thanks for the question. I mean, clearly BT is investing at a very high level. And we remain very confident that as we bring down past peak FTTP bill, CapEx will drop by at least a billion pounds. The components of that capital program, of course, Don't forget, we're also investing in our 5G rollout and we've got the broadest coverage. You know, we've got 9 million customers or so And that incidentally is underpinning some of that ARPU strength that you saw. We're also investing in a converged core and that's going to become increasingly powerful for us with new EE. But we're also investing in IT. I talked earlier about the further opportunity to drive NPS, which drives the better churn. And we're in the midst of a major program to upgrade our IT. systems. And in addition to that, we obviously capitalise customer connected, some customer kit, particularly in the consumer space as we move people on to better product, new routes and so forth as a capital charge. So it's an extensive capital programme. We are very confident that it is driving quality returns for our shareholders, albeit a chunk of it in network, longer dated return. Now, we clearly challenge every year that level of capital investment in two respects. Firstly, it needs to be demonstrated that we're implementing the capital projects at ever lower unit cost. And I think we're making good strides on that across the board. And secondly, of course, we test and pressure each element of the capital program to ensure it provides a return. That underpins the strategy. We've guided to 5 to 5.1 peak capex. We're absolutely clear that will happen. If there are opportunities to deliver the same returns with lower capex in the interim, the market will be the first to hear if we arrive at that.

That's right, Adam. You're pushing, obviously, a very important topic, cash flow. And we've suffered through the years of spending so much and therefore having a depressed cash flow for a number of years before we get that billion pounds that Simon referred to. Of course, mathematically, you can reduce the build a little bit, and then we'll get another share price leap. The good news here is we've had a cash flow sort of minor change upwards, and we've built more, connected more, and we've lowered our cost of build. I mean, that's a fantastic outcome. So hopefully more of that in the future.

Thanks very much.

Thanks, Adam.

Our final question comes from Andrew Beale from Arata Research. Andrew, you may proceed.

Hi, sorry to ask another capex question, but this time on the fibre unit efficiencies. But can you give us some sense of how much of the benefit in unit costs comes from pre-building the spine and whip? How much is exceptional Covid supply chain inflation starting to unwind and how much is new techniques? And what are those new techniques? I guess what I'm really asking is if the upside risk to fibre capex from inflation is something that we need to worry about much less going forwards as you accelerate the build pace because you've got permanent unit cost reductions or is it more about a temporary benefit from pre-build?

Very good question. You're going to get a bit more detail on this in December on the new technologies that Clive and the Openreach team have developed. And we will share them at a headline level. But, you know, this is an example of the expertise that sits in BTN within Openreach, specifically in this case. So we will give you a sense of some of the new techniques and some of the activities we put in place that have delivered the results you've seen. You'll understand we can't share loads of detail because by definition, it's part of our competitive advantage to an earlier question. But you are right to probe that. The truth of it is, it's a mixture of all the things you talked about. And Clive is working really hard to sort of. embed those if you like into the way of doing things at the higher build rate and hopefully a continuing growth in connection rate so it's a combination of all those things and the environment is you're right a bit better the labor market is less problematic for us than it was obviously and i think you might see that continuing maybe You know, because many people think unemployment is going to rise and maybe it does, in which case that trend will continue. And yes, you're right. The supply chain challenges that we did experience and the combination of those two are very significant are no longer there. Now, of course, no complacency. You never know what's around the corner. We're living in a very, very difficult situation in terms of a geopolitical situation. know without even talking just just terrible situation uh from a war point of view that has unknown implications for all of us so i think we're just very cautious super careful um but we're making great progress and i have so i'm absolutely delighted with what's happening in my company, but specifically in Openreach. These are really, really strong KPIs in Openreach that, as I keep repeating, gives you hopefully a window, a picture of what the future holds. And I think it's firming up very nicely. Simon, do you want to add anything on the mix of the KPIs?

No, I think you've captured it. I mean, obviously drawdown of where supply chain capacity, you know, new techniques, in open reach, and they're continually looking at how they can build and provision better, how they can work more effectively with contractors. And so I think there's a whole set of innovations that drive and obviously mix. They've all played a role. I don't think there's any one overarching factor. I think the key point to make is that despite traveling through a very inflationary period, we have maintained our build cost at the 250 to 350 range. And, you know, we're actually operated at the first half at the lower end of that. We have a very high degree of confidence. You know, we can stay within that range. And I think given, you know, and that's a range we set three years ago. I think, you know, that should give everyone real confidence. The CapEx in open reach is completely under control.

Absolutely. And one little thing for when you're in the briefing with Clive, you know, we the topic of the day is ai obviously we will be able to use ai we are using ai network planning fiber build fiber provisioning and many other areas open reach is right for making taking advantage of some of the new technologies in in ai and we do it for a little while robotics you know so we all this money we're investing is is making sure we're delivering for our customers and at the leading edge and increasingly we're delivering more on that front so he'll give you a flavor of that But I'll make sure he doesn't give you too much detail. We don't want other people stealing that.

Okay. Thanks a lot.

So I think that's, I think we are done. Yeah. Let me look. Thank you, everybody. I think we've got all the questions that people wanted to ask and just checking on the screen. Looks like it. And I thank you all very much for today. But more importantly, thank you for all the interactions we've had over the last five years. Genuinely, I really have enjoyed the always every single part of it, of course. But the scrutiny, the challenge, the questions, the debate. I know all of you. care deeply about what's happening at BT and certainly understand a lot of the detailed moving parts within the BT group so it's a pleasure talking to people who know what they're doing thank you very much really appreciate our interaction I wish you all the best in your future careers all the best thanks very much