BT Group plc (BTA) Earnings Call Transcript & Summary

Well, good afternoon, everybody, and a very warm welcome to briefing. The last time we did a business briefing was in 2020, and it was very different then. I remember being in BT Centre, having to socially distance from a couple of my colleagues, and nobody was allowed in, and it was all done online. So I think it's fantastic that there's so many of you here, and also a warm welcome to everybody watching online. I know you're all very busy people. So I really appreciate you taking time out of a very busy schedule to come and understand a bit more about the consumer business, which I'm going to be sharing with you and also, we can have questions and answers after. I'm joined by a number of my team, and of course, the Investor Relations team from the group as well. So what we're going to cover today, I think it's really important that I take the time to show you all the progress that we've made since the last time we were together on the Consumer Business Briefing. I think it's also incredibly important that I help you understand where we're going. So I'm going to share a lot more than we have done previously about where we see the future for the Consumer business as we transition to what is a new chapter in our journey. And I think it's a very exciting chapter ahead. Stephen Harris, our CFO, is going to bring to life our financial metrics. And then, as I said, there will be opportunity for Q&A at the end. I think about the transformation for the Consumer division in 3 distinct chapters. And I think it's really important. I know we're all so busy that we get a chance to just pause and reflect on where we come from and where we're going. In 2016, EE joined BT Group, and we were run as a separate, completely separate division. It was not a joined-up consumer business. That was created in around 2018, and it really started getting going in '19. We've obviously had the quite disruptive COVID period in between them. And in 2023, a new chapter is going to begin for the Consumer division. And this is the chapter where we really start to accelerate towards the vision of putting EE as our flagship brand to concentrate all our efforts in the Consumer division. So a new chapter about to begin. I also find it really helpful just thinking about the contribution that we make to BT Group. I'm sure the revenue and EBITDA contribution that we make is well understood and appreciated. But our contribution is hugely significant to the broadband and mobile business at BT Group. And you can see on this chart how much of a contribution Consumer division makes over 80% of the company's broadband base and mobile revenues are generated by consumers. So a massive contribution by the Consumer division to BT Group. So let me get into the progress that we've made since the last briefing. And my team have worked incredibly hard delivering these results, and I'm really proud of them, and I know they are, too. So I've tried to pick out just some of the key highlights that we've been busy working on. I think this is one of the charts that I'm most proud of. We update this and all of you every quarter. But when you take a step back and look at the progress that we've made on NPS, where BT had a negative NPS a few years ago, I think we had the weakest brand position in the market on BT. And we've totally turned that picture around from a brand strength NPS point of view, whilst keeping momentum going on the EE brand as well. We really wanted to focus on churn. As the U.K.'s market leader with the largest customer base, we felt it was really important. We prioritized that, particularly on broadband, and we've made massive inroads on broadband churn over the years. We have onshored all of our service. We've moved quickly there. We've put all of our brands in our retail stores. We've invested in digital. We've created new propositions and pricing strategies and brand communication that has delivered all of these results. And I think the testament, as I say, to the team's hard work. But I think the thing that's really impressive is that we've delivered all of those market-leading customer experience metrics whilst delivering efficiencies. And this is something we work on every single day. And anyone that thinks that onshoring and investing in customers cost you more should be looking at these charts. We think end to end, there's a much better way to structure a consumer business, and that's what we've been working on over the years. And what we've been doing is simplifying our business, not just for our people but also for our customers, and everybody is feeling the benefits of that. And I'm often asked, what's the one thing that you've done and the team have done to deliver the customer experience improvements over the years? It isn't one thing. It is so many things and all lots of little things that all add up over time. Our processes, our policies, the gates that we've now introduced before we launch new products and services, the collective responsibility across the team for customer experience and a real culture of accountability across the team that the customer is at the heart of everything we do. So I think those results are really impressive, and Stephen is going to talk to them in a little bit more detail later on. We have continued the leadership journey we've been taking on pricing mechanics to restore value. We pioneered inflation linking back in 2014 on the mobile business. And we've expanded this mechanic across our products and brands over the last few years as well as introduced or reintroduced roaming charges. This mechanic helps us deal with inflation, helps us deal with the huge increases that we see on our cost base like every business is grappling with right now and is really necessary. What it is not is it's not our pricing strategy, it is a pricing mechanic. And I'm going to talk later on about what is that -- what our pricing strategy is. This is a mechanic to deal with the costs that we incur with inflation and helps us invest for the future. And it helps us invest in areas like this, Loyalty Gap and proactive moves in investing in our customer base, we've been proactively addressing the Loyalty Gap over the years, reducing the front book to back book exposure that we have, upgrading customers to new technologies, reducing out of contract, charges for customers. If you look at the Halo customer base, 3 million customers now with no out of contract charge when they come out of contract. And you can see in the chart in the middle, the average out of contract price that we charge now for customers was back at GBP 13 in 2019, now down to GBP 5. And I believe if you look at how we're placed against our competition and certainly some of them you can look at there, as a result of implementing these caps to reduce the end of contract shocks and the revenue dilution you often get when you increase the customer's bill by these amounts. I think that's important, and it's always been important. It's even more important in a cost of living crisis to have your customer base, not experience these big out of contract price increases. And you can see on the chart on the left, the real progress we've made on the Loyalty Gap. It was a large amount back in 2017. It is a significantly lower and much more manageable amount than it is today and as I say, I'll come back on to pricing strategy. The other big thing we've been doing, and I'm delighted that we've managed to execute on our strategy to ensure that every single one of our transactions now are done through direct channels on mobile with no reliance on third parties, and we are following a similar path in broadband. And what we see on the chart on the right, you can see that customers are happier when they buy through a direct channel. They are significantly less likely to churn. We create significantly more value and also their propensity to take other converged products and services is much higher. And so we're really happy not to be paying expensive commissions out now for a poor performing customer base versus the ones we acquire direct. This is very significant progress. We've also been investing in our digital channels significantly. We know for sales and service. It's key for our future growth. It's really important in terms of what customers expect from us. And we're seeing really encouraging growth because we've been investing in this new capability and creating more and more reasons for our customers to use our app from new features like rewards and data gifting tools. And we're really driving digital engagement, as you can see here. There's a long way for us to go still and creating more reasons to visit more frequently is absolutely core to our future strategy, and I'll be sharing more on a little bit later on. I think for the market leader in the industry, it's been so important for the consumer business to be driving and pioneering the adoption of new network technologies. We've been driving full fiber. This is the network, as you all know, for the next generation and we've been pioneering and we are already nearly touching 1.5 million homes, and the Openreach rollout continues at scale, giving us so much opportunity in the future. So the rollout has been going at real pace. I think the thing that's encouraging is, whilst we're still relatively early in the journey of full fiber, we're starting to see the signs and the benefits that the new network technology can bring. We can see the NPS being higher than the other older network technologies. We're seeing the propensity for customers to upgrade and spend a little bit more on full fiber versus FTTC. It looks encouraging. And we're seeing growth in the mix of customers adopting those faster speeds, and therefore, giving us more opportunities to sell up the ARPU bands as well. And those demand for faster speeds, you can see on the chart on the right, also really encouraging. Meanwhile, in mobile, we've been pioneers in 4G. As you know, we were pioneers in 5G, the first network to launch and we are continuing to be recognized as the market-leading network by so many independent external benchmarks and the growth that we're seeing in the 5G base is -- and the 5G ready base is also significant. And similar to FTTP, I think the thing that's encouraging again, still relatively early in the journey though, is the NPS is higher, the ARPU uplift we do see from 5G to 4G and the propensity for customers to take more-for-more style plans on 5G devices and 5G tariffs is also greater than 4G as well. So some encouraging signs on both 5G and full fiber when we think about those next-generation networks. The other thing we've been quietly doing in the background is simplifying our portfolio. And I think a great example of this is the stop sell of BT Mobile. So we've stopped selling BT Mobile to new customers. We've shifted all of that capability across to EE and often our BT customer base, everything on SIM-only and handset that EE customers can get. And you can see on the chart on the right, we had two risks when implementing this strategy and so far off to a really good start. Will the volume drop? And you can see we're actually selling more after stopping selling BT Mobile as we've offered a broader portfolio on EE. But also the ARPUs we're seeing from most customers is greater than the ARPUs that we had before. So key benefits here. We've simplified the portfolio. It's easier for our people. It means we're much more efficient because we're not splitting CapEx and product development and management across two brands. We're actually getting slightly more volume and the customers are spending a bit more with us as well. So I think great progress there. One of the most asked questions at business briefings like this or quarterly results is what we were going to do with BT Sports. And I'm really pleased to say that we created this joint venture. We're a couple of months in now, and we've created it with a global media company that's got real scale. And we're a couple of months in. And as I say, so far, I think a really smooth transition and everything that I see shows me that we've made the right choice with the right partner, and our customers are going to get access to more content and more innovation as a result of this fantastic partnership and there's more to come in 2023. We've also been leading the way on the Fairness Agenda. And I think a lot of people think about this as a COVID thing. This started pre-COVID. It was a key focus, of course, during the pandemic and continues to be in the current cost of living crisis. And there are so many elements to it from the pricing approach, the proactive approach to our customer base. And of course, we recognize the responsibility that we have to support those customers who are most in need. And we have the vast majority of customers on social tariffs in the market. And I'm really pleased now that others have recognized the need to lean in and reduce our disproportionate share of the cost burden that we bear today. We've also put purpose at the heart of our business, and it continues to drive everything we do when we think about our brands from digital skills, using our platform to fight online hate and discrimination. The work we do on reducing our impact and our customers' impact on climate, the work we're doing on diversity and inclusion, everything that is in the BT manifesto is integrated as part of the consumer business, and we're really serious about delivering on our commitments and our really important goals in the manifesto. So when I reflect back on the progress that we've made since we were last together in our consumer briefing that I've taken you through, I'm really proud of the progress and proud of the momentum that we're building across customer experience, fairness and pricing, the foundations we've been building for convergence. The big decisions and items on business transformation that we're moving forward like sports and what we're doing on branding. So we're in great shape, we've got very solid foundations. And now it is time for us to look forward to our next chapter. And I think in a business like ours that is so close to the consumer and in a market that is moving so fast, I think it's so important to keep evaluating and reevaluating our plans and approach to stay relevant and to become more relevant. And I think that's even more important now than ever before. So whilst we've been delivering the transformation and the successes that I've just taken you through, we've also been working in parallel on the creation of a new EE that is ready for this next chapter. And we call it a new EE because we wanted to feel like a new brand. It will have a new identity. It will have a new brand platform. It will have a new business model. New areas that we move into, new approaches to the market. So everything about it is changing apart from the two letters. And it's become clear to me since running the integrated consumer business that we cannot deliver a joined-up convergence experience for consumers and respond to their needs across multiple brands and multiple accounts and multiple bills and multiple experiences. So we took a very important decision to move to a flagship brand to address all of those things. This is going to be better for customers. It will make life better for our colleagues who are dealing with this complexity today. It will reduce our cost base. And I think really importantly, increase our management focus around one brand and allow us to consolidate our spend and our energy around a real flagship. I just want to share with you just some. I mean we looked at so many decision points, we're making this really important decision. But the key ones that I always come back to our brand strength, in terms of NPS. We look at return on marketing investment and GBP 1 spent on EE versus BT is more effective, yields better results. Where are all of our customers and where do we have the highest number of customers and so many consumers across the U.K. live in cities, there's such a big opportunity for us to retain and grow market share in cities. EE has got almost twice as many customers in most cities than BT and millions more conversations and transactions happening. But also think about the customer base demographic, as you can see bottom right, and EE has got much more even spread across every single age group that I think sets us up really well for the future. And when I talked to you a little bit about where we're going next, I think the ability for the EE brand to stretch into new areas and become a more modern, more digital brand also EE has the attributes to stretch further to a more modern, more digital brand. Now we haven't yet launched new EE, but what we have been doing is working really hard on starting to strengthen the brand and build its momentum. You'll have seen on most of our advertising now, EE and BT. We're making it much clearer to customers and noncustomers that the two brands are working together and are in partnership and are part of the same house. You can see that a lot of the work we've been doing with our customer bases has really helped drive consideration. So the consideration of EE broadband in the BT customer base has grown 60% since we've started doing this work. We're also seeing growth in EE broadband consideration amongst the EE base as we've been advertising broadband a lot more than we previously have. And I think really encouragingly, we're also seeing real growth, 2.5x the volume and mix of EE broadband within our overall sales mix. So momentum is building. All of this is in advance of a real launch, but is encouraging momentum. So I want to talk about new EE and what we are building. I think this is a really important chart that brings to life what we're creating, what we're shaping. And I think it's really exciting to me where I believe EE can go and what we can create. And I now think of us, and I want all of you to think of us as the largest subscription business in the U.K. 24 million subscriptions, yes, most of them today are mostly for Internet access. We've got a brand and a platform that has got unrivaled scale. And we're thinking about launching new verticals with everything as a service, and I'll touch on some of those later on. Every single one of them through partnerships. We've got unique assets that we're working together much more effectively now. And we've got a new EE account that we're creating that is at the core of our vision for this new business. It lifts us above being a product-led business to putting the customer at the center, and it's going to help us unlock convergence and growth in both connectivity and new services. So let me talk about the new EE account, and this will be launching in '23. This is going to put everything a customer needs in one place to make it really easy to add new services, which will drive convergence. Now powering this is the investment that we've been making in our data platform. And we're now getting access to data and insights as a result of the investments that we've been making during this integration phase. We can see how many devices are in a customer's home, are they connected? What speeds are they getting? Are they protected? Are they insured? Are they on our network or someone else's network? Are they eligible for upgrade? What types of network are available to that customer? So we now can be much more targeted, much more personal and much more relevant when we execute with the new EE account. So I want to now talk about convergence and how we think about convergence and how we're approaching the market. And I've talked about the account being at the center of the relationship with the customer. But the convergent strategy for new EE is very simple to explain. Of course, it's all about execution. But firstly, driving full fiber. This is going to be the platform for decades to come. and there's millions more homes for us, still to connect, such a big opportunity. Secondly, we see a huge opportunity still in mobile and other connected devices. And we see real opportunity in the growth in new subscription services all through partnerships. And when we take a step back and look at our households, the highest value households that we have today show us the opportunity that we have. And we can see here that the highest value households and the delta between the lowest value households is that growth in connected devices, which are largely mobile but also include tablets and connected PCs and smart watches and other connected devices. And when I look at the road map of devices and talk to vendors and chip manufacturers about what's coming over the years, we're going to see an explosion of devices that have got connectivity integrated into them. So connected PC, connected tablets, every device will be connectable. And I think there's so many devices being shipped today with a suboptimal experience for consumers being WiFi-only or even with a connected SIM and customers struggling away on a train WiFi connection when they could be on 5G when they're mobile. So we see a massive growth opportunity in connected devices as well as smartphones. And of course, new services, we've launched them, and I'll touch on them. We're just getting started, but there's really encouraging signs and there's a lot more for us to come there as well. So let's start with Full Fibre. As I said, a massive opportunity. We feel really proud that we've got over 1.4 million customers connected, but the Openreach rollout is significantly greater than that. And we know their plans in subsequent years, there's millions more homes. So we are trying to connect and match that rollout as fast as we can, and we will be enhancing our Full Fibre offering, making it better for customers. There'll be new devices, new network capability coming, new features, new features in our app, which will become a remote control for the customer's home, and all of this will be enhanced by key data capabilities that will allow us to be much more targeted to connect those homes even faster than ever when Openreach passes them. In mobile, the opportunity for us is to drive connectivity in the household. We've made really good progress. Whilst our converged homes have been pretty stable over the years, the progress we're making -- we've been making on numbers of SIMs per household is really encouraging. And this is before we've reshaped our portfolio, adding new speed tiers to help us monetize an increasingly unlimited base and creating propositions that will incentivize take of SIMs per household. We also know TV is really important for customers, about 50% of customers when considering broadband, say, a good TV offer is something that is important to them. And when I think back to the TV portfolio we had in 2018 with very little content, one set-top box offering and need for an aerial and no multiroom solution, I think it was hard yards for us trying to sell that proposition where we are now is a really, really strong portfolio in terms of content, in terms of box flexibility, in terms of multiroom solutions, no need for an aerial. And next year, we've got an enhancement to that portfolio with a new EE TV portfolio coming, which will give customers more choice and more flexibility and drive that consideration on broadband as well. We have started the journey on new services. In October, we announced that we've launched into gaming and into security. And I'm really pleased to say those launches are off to a great start. We've got fantastic partnerships with the biggest brands in the market in gaming, Xbox, PlayStation, Nintendo, fantastic bundles for customers that are selling brilliantly right now, and partnering with Verisure and Norton Security offering really, really encouraging offers to consumers across our stores, digital contact center estate, again, off to an encouraging start. So what it's showing me is that the customer appetite is there. Our colleague appetite is there and the volume opportunity is certainly there, and we're off to a flying start just a few weeks ago. Now I said I would talk about pricing strategy, I think this is a really important chart. So I'm going to take my time to walk through it. I'm sure you'll have some questions on it later. First thing to say -- and just to repeat, the CPI pricing mechanic is a pricing mechanic, it is not our pricing strategy. We will be implementing the CPI plus 3.9%, in line with our terms and conditions in the first quarter of next year. It's also clear to me, when I look at pricing and input costs on pretty much everything we're buying in the consumer business, from every supplier, front book price will need to go up. There is no doubt in my mind that our front book prices will be needing to go up, and we'll be executing on that over the coming months. It's also clear, though, and you've seen the progress over the last couple of years on our front book, back book, on Loyalty Gap, on customer experience and churn and complaint levels that we do reinvest significantly in our customer base. And I think it's going to be really important for us during the course of '23 and '24 with the economic climate, the levels of inflation that we will need to keep this approach going, reinvesting in the base, keeping the Loyalty Gap under control, looking at the spread of cohorts across customer groups, it will be personalized. It will be individual. We will be proactively migrating customers onto new technologies. We'll be launching differentiated propositions and products, and we've got a great road map ahead. And now we've got a really credible portfolio across mobile, voice, broadband and TV. We've got lots more solutions for customers when we think about helping them save money and deliver value for money across the whole household as well. Also part of the pricing mix, I think a really important part of what we've been doing is driving acceleration to our new networks, and you've seen the progress we've made on 5G and full fiber. But I felt it's really important for us to reduce the reliance on out-of-bundle spend across broadband, voice and mobile. And you can see the progress that we've been making and how close to 100% it's getting now. And I think this is really important for three audiences. For customers, most importantly, it makes life much more predictable for them, much less bill shock and makes them think about us as a brand that's really looking out for them and delivering value for money. It's easier for us to manage to become much less reliant on out of bundle fees, and it's much more predictable, of course, for all of you to understand our business. So I'll be back to summarize. But I think it's just important for me to summarize what I've just taken you through, which is the vision for a new EE, the U.K.'s leading subscription business and a fantastic platform for growth. And when we think about the evolution of the business in our next business briefing in 2024, all of the focus areas that we've covered today, you'll start to see consumer reshape to become a very different business. This is not a one quarter journey. There'll be a number of things that we're doing over multiple quarters. but we'll see growth from convergence. We'll see expansion in growth from the services that we offer today. We'll see the importance of the EE account really, really driving that greater shift to digital, but not just a channel shift and engagement shift. So we have customers using our services much more than they do today. And all of this will result in a much more focused business in terms of management time, a leaner business in terms of its cost and greater speed to market and greater differentiation. So a very, very exciting next chapter ahead. I'll ask Stephen to come and update us on how we're thinking about the financial metrics, and then I'll be back to summarize and take your questions.

Good afternoon, everyone. I'm going to talk about three things: revenue, costs and [ so what ] to profit effectively. Starting with revenue. FTTP connections, you've already seen have grown at a very fast rate, nearly 50% up year-on-year. That pace will absolutely continue. What it does is it drives our revenue. That is the highest ARPU broadband product that we have. It's the best broadband product that we have. It will drive top line revenue. But at the same time, we will continue our fixation on churn. It will continue around 1% -- 1.1%. There was a slight mechanical uplift. Charts aren't always at the best due to when customers come out of contract, but it will remain constant. The big thing for me and it really is embedded in that chart, go back to 2017, 2018, it was 1.4%. It wasn't much long before that. It's actually 1.6% churn on broadband per month. So getting into that low and staying there, absolutely critical. It's a relatively similar story on mobile as well. We have the largest 5G base. It is growing. That drives and underpins our ARPU growth, as you can see on the chart. It's slightly less than broadband, and there is one primary factor in that. Our movement -- the market movement from handset to SIM-only continues. If anything, it's accelerating still, hence, why there is a 3% growth rather than a 5% growth. But otherwise, everything we do on mobile, very, very similar to broadband. And you can see it in the churn numbers as well. And again, that fixation absolutely continues. Moving to costs, H1 actually had the CFO have your cake, eat it and lose weight, all at the same time because in absolute terms, our EBITDA grew more than our revenue growth for the half. It's because of our continued focus on cost, whilst also focusing on that revenue growth. So I thought I'd share and unpack a few things that probably you won't have heard from us before. On the left, you've got our top three costs. All of them underpin our revenue and revenue growth. I can actually borrow, plagiarize, actually, our group Chief Executive, mobile device cost, that is a good cost. In absolute terms, the more that is, the more we put devices into the hands of our customers, the more they can benefit from utilizing our network or networks, it drives revenue. Home network rentals. Effectively, our payment to Openreach, it is growing. But as per the previous chart, it's growing because it's FTTP. It is the best product, best ARPU we provide to our customers. And the third one, content costs is now reducing as a consequence of our JV with Warner Bros. Discovery. So we're balancing how we manage our costs with how they drive our revenue. But let me talk to the right-hand side of that chart. You've heard us reference in our trading results, financial results, our nonrenewal of Carphone Warehouse, which is now 2 years ago. That was probably the biggest cost initiative drive from consumer because we switched those transactions from a third-party to our direct channels. And our commercial and trading colleagues have done a brilliant job in making sure we've maintained the volume, absolutely reduce cost, brilliant. But what it's also done and we don't always have the opportunity to talk about so much is that experience our customers are now getting through our direct channels, the opportunity to renew and upgrade, upgrade being the key word. They buy more products and services from us. The quality of the revenue from those customers has got better. So not only have we saved money, we've improved the revenue from the same cohort of customers. I'll also talk about retail. And I'll talk about numbers of stores in a moment, but within retail, we've done a number of things. We've leveraged the estate by including our BT portfolio in all of our stores. We've reduced the average lease length from 5 years down to 3 years to give us flexibility, we are continuing, we have and will continue to reduce the size of our footprint, but we also optimize looking at footfall, looking at how customers are utilizing our stores, changing format. That is critical. And the customers appreciate the experience. They still want to go and touch and fill a handset. But it's balanced. So the bottom right, channel optimization. Going forward, that's largely the mix between digital and the rest of our direct channels, telesales and retail. And we will reduce our stores as our digital sell and serve increases, but we will strike the right balance to make sure we still have momentum. And then finally, from this chart, head office costs efficiencies. On average, we've reduced the total labor cost of our corporate colleagues by about 5% year-on-year consecutively for the last 3 or 4 years. And I'll just draw out one example of how we've done that. So Plusnet, go back 3 years, absolutely was a stand-alone business with its own corporate function. We've absorbed that into the rest of consumer, and that saving is over GBP 25 million per year. Plusnet continues to drive forward. Revenue and EBITDA wise, even stronger now. It doesn't have the overhead of a corporate function. We do that within the rest of consumer. Going forward, where do I see further improvement for costs and efficiencies, underpinning our EBITDA growth. A lot of it is around our operational support in frontline. So as we drive more digitally serving our customers, that will give us the ability to reduce our frontline cost. And what does that give us on, so the [ so what ]? So retail store numbers, first of all, financial year 2018, we had just over 600 stores. At the end of the last fiscal year, financial year '22, it was 493. At the end of this half, it was 473. So another 20 in 6 months, and that will continue to reduce, as I said, balance the gains ensuring we're getting the maximum number of transactions and they are genuinely profitable retail stores. Frontline headcount, 14%. Sounds reasonable. That's 3,000 people. and we'll continue on a similar trajectory. And what does that give us? Well, it's obvious, our EBITDA from employee constantly grows with the consequence of our total labor cost coming down, whilst also growing our EBITDA from our trading performance and other cost efficiencies. So the result is a continued improvement in EBITDA per employee. And with that, I will hand back to Mark.

Thanks, Stephen. So before we get to questions, I'd just like to summarize the key points that we've talked about today. So firstly, we see a real opportunity to drive convergence using a new EE as our flagship brand on the platform of all of the capability that we've been busy building. And there's three key areas of focus, all working together, FTTP, mobile and other connected devices and new subscription services. I want you all to think about new EE as the U.K.'s largest subscription business and a brilliant platform for growth. And we're going to put the new EE account right at the heart of our business to change the way we deal with customers and the way we think about our business. We've talked about our pricing strategy, and we've got a very clear approach and it's not just about the CPI mechanic and the shape of the consumer business in the next few years will be leaner, more direct focused and more digital. So with that, I will ask the team to bring up some of the chairs. You can all think about your questions. We've got questions online. If you've got questions online, please use the WebEx hand. And I'll ask the team to come up, please.

So I'll just introduce them quickly, and then we'll do questions and we'll go from left to right, and then we'll intersperse those with the online questions. So we've got Rich Cackett, far left, Commercial Finance Director, instrumental in the joint venture deal on Sport, amongst other things, but here if there's any questions on that, certainly. Bridget Lea, MD of commercial channels, trading function, that whole world reports to Bridget. Stephen, as CFO, you've already seen, and Christian Thrane, who heads up all of our marketing to product, price propositions, communications, branding pretty much anything you'd expect from a marketing function is all under his wing. So let's start with questions, and we'll start with you.

It's Terence from Morgan Stanley. I just had a couple of follow-ups around the social tariffs. Can you share with us perhaps like a few more details, maybe like broadly speaking, what the percentage take-up is? What is the ARPU of these customers compared to what they could get on these social tariffs? And how do you expect it to evolve over the next 12 to 18 months, please?

Yes. Terence, thank you. So social tariffs, there was an Ofcom report recently that showed that we've got over 80% market share of the social tariffs in the market. So as I was saying before, I think we've certainly led the way. We've been a pioneer in putting those offerings out there, making them available to customers. But I do feel we're sharing a disproportionate share of the cost in the market now. And I think it's great to see that other providers now are also offering various social tariffs across broadband and mobile, including ourselves. The ARPU that you see is much lower. I mean the pricing is GBP 15 to GBP 20, depending on the type of plan the customer is on. And so we do get some dilution when we move customers to them. It's important to say that customers have to be eligible every year for that pricing to continue. So we're already seeing actually a number of customers who are eligible and on Universal Credit a year ago now coming out of eligibility 12 months on because they've got themselves into a different situation. So I think it's a customer base that's relatively fluid. And we're still learning as we go and dealing with it because it's still relatively new. The uptake has certainly grown. I think the uptake in the last couple of quarters is double as a percentage mix of our sales than it was before. And I think going forward, it's going to be a key area of focus for us. We've got to balance our input cost prices, the ARPU dilution, the scale of demand for it. But also, I think -- and we are engaging in a dialogue with a number of different stakeholders here because I don't think it's purely the job of BT or any telecoms provider on its own to be subsidizing those that are most in need. So we're engaged in dialogue across all of the various stakeholders maturities to government, to DWP, whoever you'd expect us to be to see if we can find ways to access new ways of helping these customers in greater volume than we have today. I hope that helps. Right. I'm going to go left to right on this table.

James Ratzer from New Street Research. So I had two questions, please. The first one is, I mean, stating the obvious, we are getting into unprecedented times around kind of cost of living crisis. So it's interesting to see are you seeing any changes in your KPIs as a result of that and in particular, I mean, a lot of the focus today was obviously on EE, but are you seeing increased demand for Plusnet or people spinning down to the lower-end brands? And the second question I had was just you talked about the CPI plus 3.9% as being a mechanic rather than a strategy. Given it's a mechanic, I mean does that mean that if Equinox 2 pricing comes out, which could change the way some of your input costs come into your business, could that mechanic actually change as a result of that?

Yes. Thanks, James. I mean, you're right, it is unprecedented time. So I think we have no crystal ball, although I think we are -- the way we're thinking about things is assume the worst in the marketplace and everything that we do has to be able to respond to customers and their needs. So I think I mean I visit stores and contact centers a lot and certainly the conversations that I have either had or heard with customers have changed and there's no doubt. And I think the telecoms industry is not and will not be immune to the pressures that customers are seeing. And there's certainly a lot more focus on value for money and ways to save money. And I think the way we think about it, as I talked about in the pricing strategy is if you try and deal with a customer on a pure product-by-product basis, that's a real opportunity for value dilution. The great thing for us is with mobile, with broadband, with TV, with voice and other content services, we do have an opportunity to engage with customers at a household level, and that's something we're encouraging all of our teams to talk about. So it's a real focus for us. Churn so far is largely under control. That's the first thing. Are we holding on to the customer base, first and foremost? I think some customer cohorts -- because this cost of living crisis is not felt by everybody the same way. And so I think one has to deaverage the impact by customer cohort by region. So we're seeing differences there. The other thing we're keeping a really close eye on is bad debt and customer credit quality. We're not seeing any major changes there yet. And these are all caveated with yet, and we'll have to see what next year brings. So I think our focus remains keeping churn under control and Stephen has talked about it, I talk about -- we all talk about it all the time, holding on to our base, really important. We may need to invest a bit more in this period to do that. We will be looking across the portfolio to try and create bundled services to help customers through the cost of living crisis. We will be leaning in to Terence's question on social tariffs. We're seeing increased demand there and balancing all of this as we go. But I think we've got all the right plans and all the right focus to deal with this as best we can. And I think as a sector, we're going to be more resilient than most. But we'll have to see. We'll have to see. Does Equinox change it? No. We will -- as I said, we'll be implementing our mechanics. There's so many reasons why we need to do that, particularly when we look at Openreach is one cost. It's not the only cost, devices, components, I mean pretty much everything we're buying is going up at a great -- at least the level of inflation and the need for us just to cope with that before we even think about investing in the brilliant networks and swapping out Huawei at the cost of hundreds of millions and so on is the lease that we have to deal with. So we will be implementing.

Yes, it's Jerry Dellis from Jefferies here. I've got two questions, please. Firstly, in relation to front book price increases, you talked about implementing front book price increases. And I wondered whether that comes as a priority of retaining market share if others don't follow suit, how you would weigh that up? And then perhaps more directly in terms of the CPI plus 3.9%, separating it from the Equinox 2 issue. Should we expect CPI plus 3.9% to still be in customers' contracts in 1 year, 2 years' time? Is it here for the foreseeable future?

Yes. Yes, front book pricing, the chart that I walked you through on the pricing strategy, and I don't know if we can throw that up on the slide here. But it's clear to me that with input prices going up, not just on network line rentals, on everything that we're dealing with and purchasing that is going to have to result in front book prices going up, unless we're prepared to accept a reduction in margins, which we're currently not. So just to deal with those costs, I think it's quite natural for us to think about front book prices increasing. And I think it also helps us think about how we might be able to keep this Loyalty Gap under greater control if we can elevate front book pricing and reinvest in the customer base as well. So that's the first point. Are we prepared to accept a drop in market share, which is sort of related point, no, we're not. And so there is a sort of big asteric, I suppose, on all of this, which is if we need to adapt and react in the marketplace, we will. There is no doubt we will, and we've been very consistent over the years that we've been driving, what I believe is a very rational pricing and business model and huge focus on customer experience, as you can see from all of those metrics and delivering a number of things that have created real value for our business and are better for customers and shareholders alike from the moves to direct distribution, the focus on service, the focus on churn, the quality that we're delivering to our customers, but we will not accept a drop in market share. So there is a caveat to it. But I think we won't be alone in experiencing the challenges from the consumer back and from the input prices going up as well. So you'll have to ask others what they'll be doing, but this is what we'll be doing. But if anyone wants to try and take share from us, we will certainly react and make sure that doesn't happen. Did you have a second question? Yes. I mean it's our contractual -- it was as relevant -- in periods of very low inflation, which we had 2 years ago, 0.6%. The mechanic was very relevant here. There were no significant increases in costs that we are recurring. So therefore, the pass-through to the customer is incredibly low. I think on average, it was about 15p to 20p a month in that period, and now it's more like GBP 2 to GBP 3. But in the grand scheme of a household expenditure from mortgage, to energy, to council tax, food, fuel, car, you name it, we're pretty much right at the bottom in terms of an outgoing and offering outstanding value for money. So I think it's a much better mechanic than a random price increase at a random amount at a random time, which others have as their mechanic, and that's for them. But for us, we believe an annual event that is pegged to inflation that is clearly delivered and has been in place, as I've shown in mobile for 9 years, I think persists going forward. I see no reason why not.

Jakob Bluestone from Credit Suisse. I've got two questions as well. Firstly, you talked quite a bit about digital. I was wondering if you could maybe share with us how digitized the business is already? So what share of revenues or sales or gross adds are coming from digital channels? And maybe if you can share where you think that can get to? And then just secondly, on the pricing slide that you just had out, can you maybe expand a little bit on what are some of the measures you're doing when you talk about reinvesting in the base? Are these retention offers? Or is it things like the social tariffs? So if you can maybe just expand a little bit on that?

Yes. So I'll ask Bridget perhaps just sort of directionally, let's talk about where we are in digital in terms of channel mix, where we think we can get to and what will that mean for other channels? If you could just bring that to life and then Christian, if you can bring to life just some of the things that we do when we talk about reinvesting in the base, what are we talking about, so Bridget?

Yes, absolutely. So digital is growing for us, as you saw in the charts before. And digital is really, really important for us in the future as we move to new EE. At the moment, the assisted channels make up the vast majority of our sales. So the vast majority of our sales come through our assisted channels, digital sort of slightly behind that. But our ambition is for digital to make up about half of those sales within the next sort of 5-plus years. So as we -- we've got a bit of a two-pronged attack really at the moment, which is about investing in digital and ensuring that within new EE, we've got the right systems, processes, et cetera, to grow that, but also how do we then evolve the assisted channels so that they fit for purpose in a world where digital is actually taking a much greater proportion of the share, and that's actually really exciting because we've been asking customers what it is that they want. We've been looking at all of that sort of feedback that they've been giving us, and as you heard from Stephen earlier on, it's enabling us to evolve our retail channel to sort of really rationalize that. We're really sensible about what we're doing there. I'm really proud of the work that's gone on in the retail channel actually because although we've significantly reduced the number of stores in retail and we'll continue to do so. But we're very thoughtful about doing that in a way that doesn't make huge numbers of redundancies. We've been able to -- for the vast majority of people, put them into local stores, et cetera, and through natural attrition, we've been able to make those savings. So that's been done really well. We haven't lost any volume along the way, doing that as well. So it's been really successful. And what we anticipate is that retail will evolve in terms of its purpose as well contact center in the future. And we're also looking at sort of new channels as well that customers may want to interact with us. And retail will sort of become and you'll start to see this next year more interactive, more inspirational. We're going to move away from that sort of traditional mobile phone store where you might go once every 2 years to a more sort of inspirational place where you can understand more about technology. Hopefully, you'll want to go and visit there every week because [indiscernible] not every 2 years. And you'll start to see those stores from the beginning of next year.

So I'll give you a small clue on the number, because we never give the number we shared the growth. If we want to be at 50% at least, that won't require us to double where we are today. So that gives you a sort of indication broadly where we are. Christian?

I'll come back to your question. I think retention is one element, but that's not -- that's the reactive part and not how we think about reinvesting in the base. We talk about the proactive part. When do we when we deaverage the base in totality and look at different cohorts of customers who have a certain ARPU with us, a certain churn rate or customer satisfaction and then we deal with them as where they are. I mean, we look at, for instance, customers that are on fiber to the curb and not FTTP now when they regret, we bring them on to FTTP. As an example, we take the cost we're bringing them on to fiber without them ether asking for it. We have cohorts that we move from one product on to a better product. We call them up and activated service. They have an activated, we may even take customers that we think are paying too much and bring them down a bit. So there is an element of proactively dealing with the base to make sure that customers are happy, stay longer and say nice things about us for their friends and family.

It's very much on a personalized basis, isn't it customer by customer rather than support broad cohort.

Yes, I think it's important to maybe just underline how big a step we've taken and our ability to be much more customer focus and much more data driven over the last couple of years. We have invested massively, and we brought in a team and strengthened that capability. So we are in a very different place from when we sat and B2C 2 years ago in our ability to manage and deliver personalization at scale.

Yes. I mean this is such an important thing that you can't see is the work that's been going on under the bonnet as we've been working on this integration to give us better data capability, which is what gives us the confidence for the realization of convergence vision of the future. Matt, should we take it -- I'm just conscious of our online audience.

Yes, we have a few questions coming in online. Before we go back to the room, we'll take a couple of questions online, perhaps I can hand over Chris, who's operating the WebEx, and he'll introduce those. Just a quick reminder, anyone online, put your virtual hand up, and Chris will come to you next time around when we open the line to WebEx back again. So Chris, over to you.

So the first online question is coming from Nick Lyall from Societe Generale.

It was just a quick one, a bit of a train spot or one, please, on the -- following up on James' point on the churn. I think for your broadband subs on the CPI plus 3.9%, I think a lot of them went into contracts on September 2020. So could you tell us what sort of proportion of the guys that could actually come out of contract and able to churn, did actually churn, please? And is that worse and some of the rates you're seeing in the old contracts. Is there any sort of reason why that might spike in the next few months, just to get a gauge of whether that's a risk or not if possible. And then one on the EE brand, if that's okay. Is that rebranding a chance to shift prices again? Or is that a point to which you have to defend, do you think, in terms of pricing and investment.

Yes. Good transporters question. It's true. I mean that is when they come out of contract. But like the cohorts, when we first implemented the mechanic in year 1 and year 2, we're not seeing any real change in churn propensity on that base. Now admittedly, we've got -- it's a couple of months worth of data. But normally, you get these signs for 3 or 4 months in advance of that contract coming up, there's lots of triggers that we see in terms of phone calls and disconnections and those kind of things. And as I said, on the mobile base, this mechanic been in place largely in various forms on our brand for 9 years. So we're seeing no material change there. It doesn't mean to say we're complacent by any stretch of the imagination, but we're certainly not seeing any change in customer behavior in particular, from that cohort. On the question of pricing for new EE, look, I mean, I think our focus is really differentiated products and services, thinking through a fantastic offer across broadband and mobile and TV and a pricing strategy that delivers value for money and enhances the number of SIMs and connections across mobile and other connected devices and services. So that -- it's an opportunity to rethink how we think about household value and pricing. And Christine, if you want to perhaps bring some of that to life without giving -- it's all the prices away. But it is an opportunity for us to rethink the portfolio that is for sure.

Yes. No, but it's -- I mean it's hard to give a whole lot more than you just don't do without bringing to life. But very clearly, when you drive convergence and what we call is a both, right? You have 2 brands communicated to the customers with a discount if you take the other being able to communicate with a single voyage to a customer on an account where you can see the benefit, structural bundles, so we can bring above the line, we can show above the line. It gives us a much better opportunity to work with, work with pricing, work with demonstrating value to our customers than we have across 2 brands. So it does give us an opportunity to reset and bring some clarity, make it easier for our customers and for our channels.

The next question is coming from Robert Grindle from Deutsche Bank.

I was wondering what the outlook for CapEx is at consumer, given your digital and various innovation initiatives, but I think CapEx was up in line with strong EBITDA in H1. And -- and my second question is, what impact are you seeing, if any, from the [indiscernible] in the market thus far? Is this changing the way you go to market as they are building out?

Yes. Robert, thank you. Yes. I mean we have had some elevated CapEx as we've been investing in all the capability that we've showcased today, but all the CapEx for consumer is in the envelope that we've communicated as part of the group CapEx envelope. So no significant change looking forward. And one of the key benefits of moving to a flagship brand is we can take the money that was spread across 2 brands and 2 IT stacks, 2 product portfolios, 2 app teams 2 of everything and really concentrate that on 1 platform and 1 set of capability, which is the benefit of moving to a flagship brand. In terms of [indiscernible] I'd say nothing significant. Nothing significant. We do see pockets of activity. And I think the great thing now is we can see much more clearly than ever before with the data and the capability we've got to either predict and/or react to [indiscernible] activity. So again, we're not complacent. We've got great data. We're proactively and reactively able to deal with them and you can see in our churn results, we're doing a pretty good job so far of holding on to our customer base.

David Wright from Bank of America. A couple please. Could you just confirm on the brands you ease the flagship brand. What will the brands you will continue to run? I'm assuming you want some kind of agility, some kind of fighter opportunity out there to just be a little bit more reactive. And then my next question is just on the numbers. And I wanted to just clear something up from the Q2 where I was a little confused because in the Q1, with the price rise from April, the 9.3 million there was an instant sort of kicker into the fix in the broadband revenue growth, and it went up to a bit. But then in the Q2, both fixed and broadband revenue growth dropped 2 percentage points. And I couldn't quite figure out why that would be the case, why the price rise didn't sustain and given it didn't have comps, any kind of price rise comps, why didn't you kind of hold that level? So just those 2 questions.

Yes. All right. So perhaps, Christian, if you can bring to life how we're thinking about the role of the BT brand going forward, where we see plus even though we've got -- we've taken that -- the vast majority of the focus going forward is the flagship and then Steve, if you can bring to life just some of the dynamics going on in terms of the revenue and how we think. How this audience should think about the price rise throughout the year, and what comes in at the top and what's reinvested and what we end up with net, net, net, because I always say, you've got to judge the price rise not in the first quarter, not in the second quarter at the end of the year. And that's, I think, how you judge the success looking at churn and satisfaction and financial metrics and the whole thing in one go. So you bring that to [indiscernible] the branding.

[indiscernible] the brand. I double plus net because that's probably the easier one too, because it's an isolated brand that runs by itself, we are deploying some capabilities to sell EE if customers want it, but it's essentially a stand-alone fiber brand in the broadband space. And then we are on a journey with the EE and the BT brand where EE will be our flagship brand. You've seen us already now deploying powered by BT and broadband to build some of that -- transfer some of that brand equity in the broadband space onto EE. When we launch new EE, we will allocate marketing, we'll allocate build propositions onto new EE. And that's why we'll focus on our funds, and we'll keep delivering a good experience for the BT customers who are on BT, and we'll keep trading BT as long as we feel we need it. So that's going to be a balancing act on 2 brands. [indiscernible] is separate, sustained.

So I'll address the point you've raised, and then I'll bring it back to the absolute numbers. So just a reminder, there is a chunk of revenue that actually CPI doesn't apply to pay as you go being a very good example. You've then got the flow-through of -- we do have customers churn. We do have dilution because we want to retain as many customers we possibly can. So it isn't instantaneous as Mark alluded it across the year. But equally, you have to look at what else was going on at the same time. So Q2 last year, it was actually quite a strong trading period coming out of COVID to a large extent. You've got the timing of devices launches in there as well from Q1 to Q2. So one of our major device suppliers has a big launch that drives Q1. It's not in Q2. On broadband, you've also got the seasonality of sports effectively Q2 is the low season, less customers taking sports and TV bundles because football is resting over the summer effectively. So you've got a whole raft of mechanics coupled with linking back to COVID just remembering, roaming as well. Roaming, whilst it's improving, is still not back to pre-pandemic levels and does have much more change in it than we've ever seen before. So it isn't just a CPI price rise. You've got all the other trading dynamics in there as well, and we are still recovering to some degree from COVID. It was absolutely stronger than a year ago. Is it back to pre-COVID levels. No, it's not.

Yes. I mean our traffic levels are sort of 70-ish percent -- when we look at how many of our customers, what percentage of our base relative to the pre-COVID world of traveling again, it's about 7 out of 10.

Correct, exactly. I mean, some countries in Europe are almost back to the same levels. But on average, Europe is sort of 85%, 90%. Rest of the world, Asia, U.S. is in the 60s and 70s.

Chris Lewis from Lewis Insight. I want to take it back a little bit. You mentioned, Mark, in your comments that the -- and you mentioned voice specifically along with broadband and mobile. I guess my fundamental question is what product is this new brand going to be selling and perhaps more of a marketing question is what do people think they're buying from you? Because having just recently gone through the process of renewing a service [indiscernible], the confusion out there in the market about which bundle is applied to which is enormous. So -- and that includes, by the way, people in the contact center because there are so many options available. So first -- the main question is really, what are you selling as a business? I think we focus on the technology because we're a technology industry. And then secondly, what's the real word coming from the customer base, that breadth of customer base about what is I think they're buying from you?

Okay. Well, I think the -- you're sort of alluding to -- I think why we are focusing to one brand and simplifying our product portfolio because of the complexity that is out there for customers in our industry that we created, we created some ourselves with multiple brands selling similar products and services. So on a real mission to simplify our portfolio, reduce the level of complexity in our business, particularly off the back of the next-generation networks and the capability they'll bring. So just bringing you back to what I think the core portfolio that we're bringing is amazing connectivity on the U.K.'s best networks, fixed and mobile, which increasingly are coming together. So from a customer's point of view, there will be less focus on 4G, 5G, Wi-Fi, 6G, but just brilliant connectivity and the capability of conversion network can bring some of the innovation they can bring, which we haven't talked about today because a lot of that is for next year's road map. And then the ability to connect multiple devices much more easily than today through the account with multiple ways of buying those devices through leasing capability through all of our channels and then new products and services that are available through our brilliant partnerships that can enhance their overall experience. That's ultimately what they're buying. And I do think one brand is going to simplify a lot of these challenges for many people.

Carl Murdock-Smith from Berenberg. Two, please. First, we know that Vodafone and 3 are in talks about merging. I'd love to know your thoughts on that. And would it be a good thing for the market? Or would it -- in your view, potentially risking disruption -- given that one of those operators is currently increasing prices by CPI plus 3.9%. The other one is increasing prices by 4.5%. So these are not irrational operators. So I'd be interested in your thoughts on how that merger could evolve the market. And then secondly, and apologies if this is more of a question for technology, but coming back to Robert's question about CapEx outlook going forward. Just an update on the Huawei-related spend. And obviously, a lot of that is reallocated into consumer. So where are we in that spend? And afterwards, should we expect CapEx to come down in a few years?

Yes. I mean thanks, Carl. Just on the -- so let's start with Vodafone and 3. I think by -- and this is to quote them, I think, not generating a return on cost of capital shows that there's something not quite right in the industry structure, if that is the case. And I think as I've said on numerous occasions now, I think there's too much noise and narrative in our industry that is purely focused on price and not on how we create a really, really fantastic environment in this country to invest in the best networks in the world. How we create innovation, how we have semiconductor manufacturing capability here, how we have network equipment manufacturers here, how we and others should be running towards 6G instead of running away from it. And I think that the structure and situation in the market and the narrative has just been so dominated by lowest prices as being the only thing anyone seems to talk about in many quarters. So I think we've -- as a country, as a sector, we've got to really think about how we change the game and really reframe the conversation. And so that's why I think if that is the case, scale will help that organization as it helped our organization, invest in brilliant networks and service and do great things for customers. And I think the argument this obsession with is going to be 5 or 4 or 3 is a solution that's looking for a problem. There's no sort of rule that says the optimal number of operators should be this number, in my view, because we are, I think, a great case study that you can bring 2 organizations together, create more efficiencies, create brilliant networks, invest in customers, create brilliant value for money and new experiences and innovate, all of which are great customer arguments through consolidation. I think we're a great case study of it. The first time we did it with Orange and T-Mobile come together and the second time we did it and be part of it coming into BT. So I think all the arguments are sort of from a decade ago and around a touch with the reality today. So -- so as you can tell, I'm a fan of consolidation of the right companies at the right time with the right conditions. I think it's -- it is something that needs to be looked at in the context of a wider longer-term look at industrial strategy and the need for this country to have more resilient industries, not just telecommunications, food and agriculture and energy and every way you look, you can see that short-termism has created real problems, and we need to all of us look out much longer term, not just people and operators, but regulators and government and everybody needs to be thinking 10, 20, 30 years out, -- that's why we've got ourselves in some of the challenges we're in. So that deals with that one. Huawei. Yes, I think, I mean, it's -- I don't know if Stephen, you've got that. We're sort of -- I mean, we are making great progress. We are in line with the commitments that we've made. I think that element of the CapEx, obviously, will reduce over time because we'll be through it. And then you've got other competing demands of CapEx like fiber rollout and investment in a bunch of other new networks and services that will potentially set some of that up, but again, none of it outside of the guidance and the envelope that we've communicated in our quarterly results. So it's all manageable within that framework. Does that answer your question?

It's Sam from BNP Exane. Two questions. You said earlier, all your costs are going up faster than inflation. I guess the one exception is obviously wages. And you've shown how you're squeezing more and more out of the existing workers at the moment. How is morale in BT consumer? Do you think it's a problem? Are you worried about productivity going into next year and within your business? And then the second question, just if we look at Openreach broadband losses, and you're wanting to protect market share, all of that's growing, Vodafone growing, Telecom Plus growing. It looks like talk and Sky and maybe some of the small ISPs or the losers. Do you think that's just a sustainable structure for the market? Will they just be permanent loser like talks or can may just disappear in 5, 10 years' time?

Yes. I think -- I mean on wages, I mean, firstly, we are always thinking about how we can do the best for our colleagues. If you look at the wage offer that -- and the wage increase that we implemented last spring. It is the highest award in the industry. Is it what -- is it exactly what people wanted to know. But I think -- we did everything we could and the maximum amount we could do, and we disproportionately generated those funds towards those that were earning the least in our company. So if you think about consumer, 90% of our workforce are customer-facing colleagues, retail and contact centers and a large proportion of those would have got between 8% and 9% because that's where the award was generated. Those in the corporate functions would have got a lot less. We averaged around 5%. So I'm sure our colleagues would always want more. I think we delivered the best we could to ensure we could deliver on all of our commitments in the round, and it benchmarks better than any other award out there in our industry, and it is under constant review. It is something we think about all the time. And obviously, we're thinking very carefully about what we do next year as well. And that's not something we can talk about today, but I can assure you at the ExCo, it is something we talk about every single week, and we recognize the need to do everything we possibly can to support our colleagues through this. On the structure of the industry, I mean, I don't really want to comment on the individual companies. I think -- I think the -- when it goes back a little bit to the -- what's the right long-term structure for the country. Does it make sense to have 3 networks building down the same street? At the same time, whilst parts of the country that aren't covered aren't being rolled out and how we could be a more and more efficient allocator of CapEx and funds as an industry this areas of opportunity, let's say. But I don't want to get into any individual operator comments.

It's Adam Fox-Rumley here from HSBC. I wanted to ask firstly about the KPIs that we should look for here kind of as a result of new chapter coming back in a couple of years' time. You didn't mention halo too much today. If I look at the KPI file, the convergence uptake percentages have been pretty much unchanged for the last several quarters. So I guess -- is that a metric that we should be following? Are you assuming that's going to track much higher once we now move to this converged brand? And then the second question I had was on the marketing return on investment comments you made. It was interesting to see that you could measure that EE was much higher than BT there. So I'd be interested to know how you're measuring that, whether or not your view and approach to marketing has changed materially since COVID because my sense is there's a lot less above the line than there was. And so how you expect that to evolve as well would be helpful.

And just on the above-the-line comment you mean as an industry or from us?

Yes. I mean just generally, I don't see as many billboards with -- would be with telecoms in general at the moment.

All right. So on the KPI question, I'll ask Stephen just to bring to life how we're thinking about the future KPIs. I think it's a great question, and we've been wrestling with this, how do we then set the KPI base that reflects the business and the focus areas going forward. And Christian, if there's anything you want to add there? And then the marketing ROI, I'll ask you to take that one, please. So Steve?

Yes. Thank you. Live conversation with my eminent Investor Relations colleagues at the moment. Any changes that we make will be from the beginning of the next fiscal year, so from April next year. And any constructive comments and suggestions what happen to take on board as well. And we do want to constantly improve how you understand our results. So we are looking at -- I probably won't go into details, but how do we communicate even better, the strength of our revenue growth particularly as we move into new areas and what that means for our customer base as well. So not answered yet. And Mr. Lidiard will sign off on those before the 31st of March.

And we just -- I mean, convergence is onto that -- convergence what's been going on under the bonnet -- because you're right, there hasn't been a lot of movement at a household level stuff going under the bonnet we should bring to light. And then the sort of category management approach that -- so you're right, the overall number of converged household has been flattish under the bonnet. What we've seen is we've been focusing on building the capability to prepare ourselves for new EE selling the best of both. So we're selling more premium products to the 2 bases of BT broadband to the EE base and EE-mobile to the BT broadband base, that share of customers who have better both have been increasing by a bit more than 25%. The ARPU in that base is more than 25% higher than the stand-alone converged basis and has been increasing as well at the same time. So we've done this without aggressive discounting, right? So it's all about how do you manage this. We could throw ourselves in, be very aggressive on discounting and probably seen a better number. What we believe is that once we go out with one brand, structural systems behind bundles above the line, easier journeys, more effective marketing because you know customers see communication on their own brand before they see it from other brands, we believe we'll begin to see that number move. So maybe that's the comment on that one. And then the other comment was on marketing ROI. So what we do is that we work on a full-scale econometrics modeling where we look at relative impact from the different media channels we invest in, and we see waiting for what drives -- what drives sale, and we have a model that we input our prices, our spend, competitive prices, competitive spend, relative price. We're able to see relative pricing impact on sales, relative share voice impact on spend. And we do that in effectively 2 chunks. One is which is more demand generation where it's a bit more cost per acquisition. You pay for what you get almost immediately. And search is a big part of that. And then we have branding, sort of a bit more consideration awareness spend. That's the part we looked at. So it's not the entire spend. That's the part we looked at. And when we look at more strategic brand impact, and we look at what does it drive in terms of sales over the coming 2 years, that's where EE has been standing out.

I think the thing that's been really encouraging. I mean, Bridget and team really bring this to life. It's just it's how in our BT channels, how open and quickly they're run towards selling EE and vice versa. So it's amazing. I was on a BT call center a couple of weeks ago, 500 people there, 400 of them wearing an EE hoodie. And these are small things, but big things, which show culturally and mentally the team are ready to run towards a new brand. And with 9,000 of our BT colleagues across -- limited now. So the whole consumer business is under one legal entity, which is also a big -- this is a cultural unlock for also driving convergence and single brand as well that we haven't talked about today. Well that's the comment about there's less billboards that [indiscernible].

No, that's right, I don't recall the numbers, I don't think there are -- what we see a lower spend certain our spend is -- I won't share all the numbers. Our spend is not down, and the industry, our share voice is not significantly up. So that's not the case. I was trying to think whether you're out of home that's different. I don't think there are big movements in that team that [indiscernible] still as well. So not a big movement. No we haven't seen it.

It's Georgios from Citi. My first question is a follow-up on convergence. And you kind of answer the question whether discounting is on the table, probably not. There's 2 other ways to play convergence. One of your main competitors is trying to increase speeds or allowances when you converge -- and the third way is sometimes it's been used in some of -- in Switzerland and Germany, whereby we try to add more SIMs at a discount with the assumption that even though people love their kids, they sometimes don't spend as much on their usage as they do on theirs. So is that something which you are thinking about going from multi-SIM house plans? And how you think that could change the dynamics in the mobile market, if you do -- and then the second question I have is around connected devices. We've been hearing about this for years in the industry where I think sometimes if you are too greedy about the ARPU, the product never comes. So I'm curious whether you are thinking about perhaps -- thinking about multiple devices rather than high ARPU in each device and whether fixed is the way you're going to go about it or mobile is easier.

Thank you. I don't want to -- we don't want to give too much away in terms of how we're thinking about convergence here. I mean it's safe to say we do see the opportunity to drive and where we're successful is driving more SIMs per household than previously with the data and the focus that we've got and our portfolio will evolve to take the advantage of that opportunity and differentiate in other ways, and you'll have to wait a few months to see what we're going to do on that. On connected devices, I think the point I was trying to make was really simple. When I talked to all of the key vendors of hardware, and all of the key chip vendors, the Qualcomms of this world, the range of connected devices that can be connected through an eSIM or SIM that an operator like us can bundle together like a smartphone package with connectivity and other services. And when we -- I touched on it before, we think about Device as a Service, and I think there's new ways in which we can sell and customers want to buy devices. So we can make it easier for them rent to ensure out of the box, they're connected out of the box. They've got the Microsoft software out of the box, they've got all of the content and services you want, which is a much better experience than what you get today, which is something turns up and then you've got to spend half an hour trying to connect it to WiFi and it doesn't come with a 5G SIM and then you've got to get a SIM and it's all far too complicated. So we think the range is increasing. The opportunity is enormous. It's -- I think connected PC is 3% of the total PC market in a few years, it will be 30% and then it will be 50%. And then I think it will be unimaginable to think about buying a laptop or an iPad that doesn't have an integrated SIM in it to give you connectivity wherever you want to go. So that is one example of a great growth opportunity for us. And I agree. And it's important not to be too greedy. You've got a lot of great value for money. You've got to think about with that converged network and package how to price these multiple devices because we've got 100, I'm going to have 100 SIMs at GBP 15, no. And so we're really thinking through what the connectivity and the packaging and pricing portfolio is to make the most of it. It's more mobile because they're mobile -- I mean, just looking at everyone here, where are we? We're not at home and what are the devices? And do they stay in the same room all of the time. I mean this is a mobile world and it's getting more and more mobile. And we've got a large number of devices today, and that's going to explode in and out of our homes and on our bodies and everything we we're connecting to, which is part of what's the most natural brand to connect a mobile device. And that has also been a justification for how we think about the branding. Does that answer your question?

Mark, if we can go to the WebEx. We've got sort of 14 minutes left. There's, I think, one question on there, and then we'll end in with some final questions from the room. Okay. Chris, over to you.

Our next question is coming from Yemi Falana from Goldman Sachs.

Can you talk a bit more about the loyalty gap? You've clearly made a lot of progress, but do you anticipate Ofcom will be more proactive in driving this down further across the industry? And then secondly on the NPS. The NPS improvements have been similarly impressive, particularly as it expands with a period where prices have been rising. But FTTP has clearly been a driver. So I'd be interested to know if you're seeing a similar trend of improvement on a like-for-like product basis. So kind of FTTC NPS has that been improving over that same time horizon in the last 1 to 2 years, for example?

Yes. Thanks. On the second one, we see an uplift in NPS on all products because those journeys and experiences are improving and the channel experience that we're creating through sales and services is better than it ever was. So that's a pretty easy answer. On the loyalty gap, I don't know, if we will see any intervention from Ofcom, I think the fairness principles that they set out 3 years ago, we have run towards because we felt that there were a large number of things that we needed to do in our business to improve service, lower churn, reduce the loyalty gap and be more proactive than reactive in addressing some customer cohorts and situations that haven't been dealt with for many years. So a couple of customers that are eligible for fiber moving to FTTC as an example, proactively reducing those loyalty gaps. And looking at a model where is it sustainable that the best idea we can come up with as an industry to reward a customer after 2 years of loyalty is to put their price up GBP 15 at the end of the contract. I don't think that's the best way of going about driving loyalty nor managing a loyalty gap nor reducing churn or reducing dilution at the end of a customer's contract. So we've lent in and as you've seen, proactively addressed so many of those things. I think the thing we've got to -- we're very conscious of is in this inflationary environment, there is a risk that the loyalty gap starts to increase again. And so we're thinking very hard about what we need to continue to do to keep reinvesting in the base. As I said before, front book prices will be rising and that will help reduce that gap. But it's not just one thing, there are many things that we do. I'm not anticipating any intervention from Ofcom. And I believe we're the industry leader in embracing the fairness agenda and delivering on it, as you can see from all of the charts and how we're positioned versus our competition.

[indiscernible] Mark, I just wondering if you could expand a little bit on your thinking around eSIM obviously very relevant given the Apple announcement recently. It sounds to me that you see this as an opportunity to add new devices and maybe customers as well. But is it not also a threat in terms of your market share position, particularly in a cost of living crisis?

Yes. I mean you're certainly right. I think the noise around eSIM is going to dial up massively in '23. There's no doubt about that. I think it is all about mindset. I mean, is it an opportunity and a threat, depending on how you approach it. We think with millions more devices that can be connected more easily with a fantastic network, brand, channels, reach, data, we see it as a great opportunity to connect to more customers, and we're confident in our brand and our experience that we deliver to keep the customers that we do have happy. So I'm more in the opportunity camp, but we are far from complacent and ensuring that we keep reinvesting in differentiation and products and propositions and reasons to be with us. And many other things we're working on to ensure we stay relevant, and I'm confident we will. I don't know if anyone wants to add anything on eSIM.

Not many, I think this is at the core how we think about sort of household. It's easy to hold on to customers with 15 SIMs connected. You go through a list if you add a new iPad you can connect it to a network, you wouldn't want to choose any other network if the marginal cost of adding that to list of already 15 versus the complexity of changing 15 SIMs onto. So this is part of playing a bigger role for the customers in the households we serve and deliver more services and connect more devices and ultimately, not having that incremental ARPU for the next device, this margin all the time.

And I think all of the changes, that we've talked about, the move to 1 account, 1 brand, a place where you can manage if you're going to have 10, 15, 20 devices connected. You want that all in 1 place, 1 account. Some of them will have been bought by us through us rather and finance through us, some of them may be on -- through other channels, the ability to ensure and protect them and see the data on them and gift data or add new SIMs. All of that gets a lot easier when we move to this account led model. So when we put the foundations in place, we're putting in and you'll see next year, I think that then does create the unlock in the opportunity to run towards something like eSIM with an old model, I think you run away from it, where we're going. I think we're going to run towards it.

Out of online questions, no more online questions. No more questions in the room. I think on behalf of my team.

Sorry. Chris has 1 more in.

I have to get my second question in at the time. On the fairness program, it raises a very interesting topic about all of the data analysis that you're doing on usage by customers and how you might apply that to give the best service for the customer. Is there any movement on that front? So where they're not using their fixed line very much they use their mobile line a lot more. Is that likely to balance out and be delivered as per your last question to answer rather to [indiscernible], while that usage shared between the different services? Because at the moment, there's an equity between the service they buy and the consumption. Are you starting to marry those 2 things more together in the future?

So can you just bring to life why you believe there's -- in equity, what do you mean by that?

Perhaps this is a conversation or overtrain. No, because I think if you look at -- if you analyze the usage by people and the different packages that they're on. Often you find they're on the wrong package. So people using the good old-fashion people who wouldn't make phone calls before 6:00 in the evening because it was more expensive before that. So we do see usage and, especially in the older group, actually, this is sort of an age-related issue to a certain extent. But -- so that's the inequity, which I think the package has been sold not based on actual usage patterns, and it will be really nice to see with fairness in mind, actually saying to a customer, this is your usage pattern. This is the best package for you rather than the optimum revenue package for BTE. Sorry, for EE big...

I understand better now your question. Thank you. I mean I do think this is a really difficult one. So I understand where you're pushing. And I think it's really important, philosophically, as a provider of a service, you want to ensure that people are using the service that you provide and getting good value for money for it. And increasingly, our data on our customer base and usage patterns and their behavior is just getting better and better and better. I think the risk of reacting to the question you posed, I think, is that you go back to a usage-based pricing model. And we're in an unlimited world. And if I ask most of our customers, how much data are you going to use at home on your broadband or how many minutes are you going to use on your landline. To be honest answer for most people, they've got no idea -- and they also will find it really hard to predict what their future behavior is going to be like. So if my mother-in-law in New Zealand is unwell, then my landline usage to New Zealand is going to spike for the next 3 months. I can't predict that. And so if we rightsize and then something like that changes, then we get all sorts of problems like bills shock and a complete lack of understanding from customers where they are. However, I am thinking and the team are thinking about pricing models for the future because I think if you look at roaming, is a good example where those that didn't travel were subsidizing those that did historically. Is that fair? And so now we've got a very clear price for roaming, which matches the cost. I think that's a much fairer model. It's not necessarily the most popular model with anyone that travels, but it's fair. Should those who use huge amount of data be subsidized by those who don't. So I think it's a very important question, but the solution to the problem is less clear. And I'm not sure the market where our customers are ready for moving to usage-based -- usage-based pricing. But that may be where we may need to go in the future, to some extent on some products. On that note, just a huge thank you from me and the team and all of you for spending time with us, both online and off-line. I found it really helpful, really insightful to get your questions. Hopefully, we managed to answer them as best we could, and thank you for your interest in our business. Thank you very much.

Thank you.