BT Group plc (BTA) Earnings Call Transcript & Summary

Good afternoon, everybody. Yes. And the Webex is now screaming good afternoon. But the room here is not responding. So your audio still works a little bit. Thank you very much for coming, and welcome to everybody here in the room. Welcome to everyone on the Webex that has decided to join us today. Thank you very much for the overwhelming interest in what we're going to say today. I've seen that you -- in anticipation of this meeting today you've already propped up share price this morning, so we're going to hope that's going to be worth it. Okay. It was a joke, but it didn't really work. Anyway, welcome to BT business, a part -- the B2B part of BT Group and the first time we're going to share our thoughts around what we do as that important part of BT Group. And I'll give you an overview of the strategy. And Kerry Small is going to talk about the outline of our transformation plans, the market and our portfolio. Then we have Chris Sims, Ashish Gupta and Joris van Oers that will talk about the layout of our go-to-market strategy, particularly small and medium business, corporate and public sector, wholesale as well as global. Chris is going to cover SMB and wholesale both because Alex Tempest, who leads our wholesale business, unfortunately can't be here today due to illness. So on very short notice Chris is going to do that part on her behalf. And then finally, we have Martin Smith, who will talk about the CFO perspective of our plans and our prospects. The presentation will last about 75 minutes. I expect, and then we have 45 minutes for Q&A after that. Good. Now let me just take a step back for a second before we go into the strategy. Back in December 2022, we announced our intention to create one business unit, dedicated to just B2B operations. And on April 1, 2023, we brought together the two B2B teams and started the integration process with three objectives in mind. First of all, to leverage the full scale capabilities of BT Group to develop market-leading products and services for all B2B customers. Secondly, to create a single interface for all our corporate customers, public institutions and removing any implications that we have. And thirdly, of course, to do some additional cost savings of at GBP 100 million before full year 2025, mainly through the consolidation of management teams, support functions, product portfolios and systems. I'm very pleased to report that we have achieved the first 2, and we are well on track to hit the third one as well. Now today, we are going to share what we see as the opportunity ahead and also how we intend to seize that opportunity. Now before doing that, I just want to say a couple of things, which are also on the next slide. I want to acknowledge that in the past for this B2B unit has not been straightforward and that previous promises on growth have not all materialized. And in bringing together enterprise and global, we've examined the historical challenges that we faced and determined how we would fix them for the future. In the past, we were slow to migrate away from legacy products. We can also say we had too many bespoke solutions, and that increased our costs, our complexity and our inefficiencies. And also something we didn't anticipate is the cost increases, and we are unable to offset those cost increases towards our customers. Now this led to a scenario where our profitability and market share were declining and a scenario that called for radical modernization of our business. At that time, we underestimated the size and the complexity of this task, and I can say that with all the analysis that we've done and the plan that you're going to hear about today, we are now in a position to see this through in full. Now we plan to accelerate the move to next-generation products and services to streamline, standardize and scale our portfolio. To drastically reduce our cost base, and we are reviewing our pricing strategy at the same time. This will give us a simpler, more standardized next-generation portfolio with increased profitability as well as increased return on capital employed and an increased share in the markets that we choose to win in. Now in short, we are ripping off the plaster. And I'm convinced that the short-term pain of radical modernization will lead to long-term benefits for our customers, our partners, our people and ultimately the shareholders of BT. Now there's a few takeaways I would like you to remember when you leave. And these are the following ones. First of all, customers. We know what customers need. And what they need is a rock-solid foundation on which they can build their digital future. Now we, better than anybody else in the market, are able to deliver that rock-solid foundation. Now if you talk about value, we see an opportunity for long-term value generation in the B2B market through modernizing and focus, we will deliver outcomes for customers, and this will deliver value, customers will recognize and will pay for. And then growth, we will build on our assets and simplify our portfolio and predominantly scale our platforms at pace to reach long-term goal of sustained financial growth. Now our aim today is to share an open forthright view of the challenges ahead, recognizing that the obstacles that we have faced in the past to present a realistic picture of our prospects. Now let's move to our customers. Our business starts with customers, of course, and we address these customers through the following channels, as you can see here, starting from let's say, left to right, small and medium business, which is -- or we also call it SMB, which made up over just 1 million enterprises, and these are all companies under 250 employees. This segment resulted from the merging of the SME segment, small and medium enterprises as well as the SOHO segment, which is small office/home office segment we presented before. It generates around GBP 1.5 billion in revenue, and we have between 20% and 30% of the market. Next, you have the corporate and public sector, which covers the larger organizations in the public and private sector, ranging from high street brands to government departments as well as the NHS. And as part of the merger of Global Enterprise, we have integrated our top U.K. headquartered multinationals from global into CPS. Now therefore, CPS now has about 12,000 customers in the segment generating roughly GBP 2.4 billion, making up 20% to 30% of the market. Now in the middle, you see our wholesale segment. That's made up out of 1,000 customers generating a revenue of around GBP 1.2 billion, and these customers include other telecommunication companies, mobile virtual operators, resellers in the U.K. and our market share there is roughly 20% to 30% as well. Now next is global, serving predominantly multinational corporations and international government bodies. This segment revenue after moving the customers into CPS currently is now sits at GBP 2.4 billion. And it represents roughly 5% to 10% of the addressable market globally. Now and finally, you see portfolio businesses. This consists of end-to-end businesses, which do not easily integrate into the operating model that we have designed, but -- which consume our core assets and operate successfully on a stand-alone basis, which we will optimize for value going forward. And these include businesses like Radianz, Trading & Command, Redcare, and one of the businesses mentioned here is actually media and broadcast. And for those of you that saw the message we sent out yesterday, we've just announced a partnership with Telstra in that particular area. The portfolio of the business is roughly GBP 700 million revenue. We won't present on this particular segment in any detail in the presentation but obviously we are more than happy to answer any questions at the end. Now put this all together, you have a business revenue around GBP 8.3 billion, representing 40% of group revenue, 25% of group EBITDA and 33% of the cash generated in the trading units of BT Group. Therefore, it's a significant factor in the future of BT Group, which is why the planned modernization is so critical and it's so urgent. Now if we then look at customer needs, I would like to -- before we're actually going to talk about customer needs, I would like to describe the relevant changes that we have observed in the business environments. Basically, the environments the customers you saw on the previous slide, actually sit in every single day whether you're a company or a large company. Can we go one slide back. So just think the world that these customers live in 5 to 10 years ago, this was the time when many organizations help most of their data and applications on site. Either on a stand-alone computer or on a server in the case of a small and medium business or in a data center in the case of a corporate or a large government department. Today, the growth of Software-as-a-Service, cloud-based application offers an efficient way in a convenient way of running the operations differently. Whether you're a flower shop in Bristol, which is obviously an SME or you're a multinational in Berlin, it just makes more sense to run your company out of the cloud. Whether it's your website, your accounting software, your HR tools, TS makes more sense to do that out of the cloud. But the downside of this is that your data is distributed across multiple clouds, multiple locations and across the entire world, to access that data in a secure reliable way, it may not be guaranteed. And customers recognize that it also may be at risk. And because customers are aware of this risk, that is why it's so important for them to have a rock-solid foundation on which they can build their digital future. And that rock-solid foundation is where our unique assets play such an important role. Now we're going to talk about that a little bit more later on. Now moving to the next slide. The uniting factor that all of our customers have, large and small, is that they want secure always on connectivity. You may recall the group's ambition is to be the world's most trusted connector of people, devices and machines. Nowhere is that ambition so pronounced as in the unit business. Now the data we gather from our networks, the conversations we have with our customers, and the insights we get from the market paints a very, very clear picture. And the picture says where -- the picture about where the demand is coming from. And that is an increase -- a tremendous increase in compute power, predominantly driven by the expansion of AI-driven application, the massive increase in data generated by more and more connected devices and the continued digitization of businesses and accompanying traffic to, from and between clouds. At the same time, the demand is driven by the expansion of cyber risk and geopolitical risk combined with an increased requirement from governments and related agencies to comply with new data sovereignty regulation as well as ESG targets. An example of how we are addressing these issues is the rollout of our new network as a service, which we call Global Fabric. Now Joris and Kerry will touch on that in a second as well. Now when we ask our customers what keeps them awake at night, our customers basically say, all of the above. Along with the concern that they simply do not have the skills internally, to do what needs to be done to enhance their own competitive advantage using digital technology. So in short, they need a partner that can help them fulfill their own ambitions. So we've translated those market trends into outcomes that we need to deliver for customers. So these are 5 Ss or 5 outcomes. These are not technologies we sell. This is what our customer expects us to deliver. And if we do, they have told us they see value. Now this is stability in the form of the most reliable, secure and resilient connectivity. It is skills in the form of deep technical network and digital expertise. It is security, cybersecurity in the form of best-in-class protection from the ever-increasing threat of cyber crime and its sustainability in the form of practical tools to help them reduce their energy consumption and carbon footprint as well as sovereignty in the form of strategic support in complying to local and international regulation on data and data sovereignty. Now let's now have a look at our markets and our solutions. We are addressing all of these markets that I just talked about through a clear defined what we call product powerhouse, which is this side of the screen. Kerry will describe this in more detail in a second. But reading from the bottom up, you can see that we start with our assets, and it's all about asset utilization, you will hear today. So -- and that is a rock solid foundation I spoke about a second ago, which is made up our fixed mobile voice networks in the U.K., our global networks as well as our rich data resources, which all of these assets generate. The 3 portfolio categories on top of the foundation drive our customer benefits while prioritizing the consumption of our core assets. And these 3 areas are digital infrastructure, which is our voice and digital collaboration -- or sorry, it's our converged mobile and fixed networks. Digital work is our voice and digital collaboration products and digital services is our managed services as well as our fast-growing cybersecurity solutions. Now as you look at this chart, I'd like you to imagine that it's segmented to reflect 2 key financial drivers, which Martin will come back to, I'll introduce right now. One is our volume business, which comprises of our product-centric mobile voice and broadband business in the U.K. And then our value business, which is centered around the U.K. and Global Managed Services. Now the volume business in the U.K. represents roughly 40% of our revenue base, covering the majority of SMB and wholesale along with roughly 1/3 of the CPS revenue. Then the value business represents roughly 60%, and it's covering all of global and the portfolio segment and roughly 2/3 of CPS and the rest of wholesale and SMB. And like I said, Martin will explain in a second what the financial drivers are that play out between those 2 drivers. Now let's finish with our strategy. So knowing all of this, knowing how our customers are organized, knowing what they expect from us in an outcome, knowing what we really do well. We have said, look, our strategy is all about a focused strategy. And we have called it Better on BT. You will hear the segment leads talk about this in the same context. But in brief, it's -- the Better on BT strategy aims to build a company where customers are eventually going to say, look, my organization, my company just works better on BT. And for the companies that we decide to partner with and decide to partner with us that they can say, look, our technology just works better on BT. Now this strategy consists of 3 components: Better focus means prioritizing decisions that radically simplify our business, allowing us to grow -- to go faster and to scale. Better outcomes as we covered. It defines how we deliver value for our customers through modern scalable platforms and better tomorrow sees us investing in skills and technologies that deliver long-term benefits. The measures that are captured in this chart, I'll leave up for a second, so you can consider how this works in the case of radical modernization. Because, Better on BT is all about focus and execution, deciding where to build, deciding where to partner and deciding where to stop doing stuff. The case for change is compelling and urgent. We will move off legacy products, speed up our modernization of our IT systems and to radically simplify our processes so that we emerge as an efficient, streamlined and future-focused business. Like I said, we will rip off the plaster quickly, knowing that the long-term benefits will outweigh the short-term pain. Martin will explain what this means in terms of our growth trajectory. As you all appreciate, timing is everything and as we approach this in a realistic way. Now in short and in summary, we understand customers' needs today. We can help them navigate their future challenges, and I'm incredibly confident that we can do this better than anyone else. If we execute on our modernization right now. We are confident in the opportunity for long-term value generation in the B2B market, and we have organized ourselves to maximize that opportunity. As we believe that our better on BT strategy will help us achieve our long-term goals of sustained financial growth. At the same time, we have no illusions. It is complex. It will take time. It requires bold decisions and relentless focus on execution. Now to describe our approach to modernization and the future of our portfolio, I'd like to hand over now to our most recent member of our team, Kerry Small. Come on up.

Thanks, Bas. Warm welcome to everybody. I joined BT back in April. My welcome indeed was very warm. I think perhaps now in anticipation of the task ahead I've been to do with that warmth. But like 7 months in, my main reflection really is that the company has got some good assets. Now we've got great people, we've got great networks, and we've got some really amazing customers. My role is to help convert those assets into a viable, future-focused product powerhouse. But whilst recognizing the considerable external pressures to transform to respond to new competitive forces and to accommodate the shift in customer expectations that we see every day. So in the next 10 minutes, I'd like to cover 2 specific areas that will guide this process. One, the transformation plan to modernize our business. And then secondly, our product portfolio. So first up, Bas spoke about our need to transform. We'll need to do this through radical simplification of our products, our operating processes and our technology. We're running a multiyear complex transformation with a view to both protect the base whilst building for the future growth. The transformation plan itself relies on 3 core levers. So number one, simplification. So we've got structural simplification through the merging of the former B2B businesses, our enterprise and global. This allows us to remove duplication also allows us to optimize the P&L, and we can actively address the cost structure. The second lever rationalization. This is really key to our product portfolio. So going forward, we will build new products on common platforms, move from building products to each channel to products that can be configured to meet the needs of each of those customers. By adopting the approach to build once deploy to many, we will be able to significantly improve our capital returns, our unit economics and our scale benefits. The third lever is digitization. So we're building a modern modular IT stack that reuses components across products. It's future-proof to exploit AI and data mining. And we've got an ecosystem set up where our partners can plug and play. This is really critical because it builds a -- sorry, it decouples our digital layer from the complexity we know is below that. So the telco is operating and business systems. What this will give us is those zero-touch journeys that our customers crave and a marketplace capability to build our new revenues for the future. By pulling each of these levers, we'll create a modern business that is fast to market has digitally engaged customer base for the future and at the right cost point for sustainable growth. We're not starting now, though, so we've already kicked off our transformation plan, and it does touch on all aspects of the organization. What's really key is that we continue to optimize the current state or carrying out the longer-term changes. And I'll share up here a couple of the examples of where we are in our journey. So we talk about our sales transformation first. This is really focused on increasing our sales order volume, moving to solution selling and critically driving up productivity through things like digital sales. We're already on track here to deliver a 40% year-on-year increase in our digital channel sales in SMB critical for a scaled channel. In our service transformation, we've deployed ServiceNow, cloud-based workflow automation platform. We've already put 240 of our most complex customers onto that platform. We have migrated 2,500 by the end of the year. And then we will be scaling across thousands of customers as we push this migration across all of our customers. This will drive significant cost savings but also a much needed uplift in customer experience. On the third lever digitization, we're not at the beginning of the story here either. So we signed a partnership with Tata Consultant Services, TCS to focus on simplifying the BT Group legacy estate. This was announced earlier on in the year. and it allows us to focus on delivering the new tech we need to meet our customers' needs and drive growth for the future. We've already migrated around 500 of our legacy apps. And we're on track to deliver group-wide savings of GBP 145 million by FY '27. Now as I said, the portfolio is a key part of those levers that we need to modernize our business and how we transform that portfolio. So let me start by just talking a little bit about our product strategy first, and then I'll go into the portfolio. So our product strategy is key to have a reduced number of products. We'll be moving from 312 to 150 products. The products will be secure, cloud-centric, built on that new IT in a modular componentized way. This is critical because it meets the needs of our ever-increasing -- sorry, the needs of our customers' ever-increasing need for secure, always-on connectivity. On top of this, we can then layer the digital services. Now let me talk -- I'll just start by talking through the 3 portfolio areas. So first off, starting from the bottom, we've got our digital infrastructure. This is where you'll find our converged mobile and fixed networks providing a stable connectivity all of our businesses need to run effectively and efficiently. Here, we've got unmatched core infrastructure -- sorry, 27 terabytes of core traffic. We've also been consistently the leader in mobile network for 10 years, and we've been the global leader for 20 years in our global network services. That's our rock-solid base. Digital work, the next part of our portfolio. So this is where you find we help all of teams and individuals work seamlessly, online meetings, collaboration, communication tools and our customer contact centers. And you'll see here many of the major partners that you'll recognize that we work with Microsoft Teams, Cisco Webex, Zoom, RingCentral, we use all of these partnerships to both build, innovate and integrate into the solutions that we provide for our customers. And then the final set is our digital services portfolio. This is where you'll find our end-to-end solutions, such as cybersecurity that Bas mentioned earlier, we've got Eagle-i in there. We've also got our industry-specific solutions, our industry verticals there. As an example, health care within our government vertical, you'll find our defense vertical and also our managed services. Just focus on security for a minute. Security is the #1 concern for all businesses, driven by the increased number of threats and the continued move to the cloud. We expect this to continue to increase. Right now, we've got an established market-leading security proposition, which grew 14% year-on-year in H1. We're differentiated, and we believe the reason for this is because we've got our own 14 cyber operation centers and 3,000 experts that all are credited with vendor and industry accreditations. This is also a really good example of where we will take our existing global proposition and scale it down to our SMB segment, build once, deploy to many. Now we're seeing this as one of our major places where we'll see that capital investment start to change in shape as we build out our security portfolio for all of our customers. When you take a look at the entire portfolio, our ambition is to embed sustainability by design. It's already there. But already transition our networks to be more efficient. So when you look at our fiber networks, 5G, our global networks, all of these are contributing towards our sustainability goals. Not only is it lower our own carbon emissions and contribute to our net 0 ambition in the supply chain of our customers, it also helps the customers to reduce their carbon footprint. Again, some examples, we're not at the start of this journey. Our global voice network also already reducing carbon footprint by 81%. Moving from 3G to 5G up to 90% more efficient. And when you think about our mobile, digital eSIM which reduces the carbon footprint by 99% versus traditional SIM card. So that's today's portfolio. And hopefully, you'll agree, it's a pretty strong portfolio. But the market is ever moving. So we're seeing migrations today from copper to fiber, 3G to 5G, voice to IP, and we need to pivot that portfolio to capture the value shift that's happening in the market today. And we say we're already on this journey, but we need to go faster. We need to take leadership in that next-generation connectivity to the virtualized networks that are coming. Global Fabric, as you've heard about already, fiber cyber, 5G and IP voice. To do this, it needs a programmatic orchestration of customer migrations in huge volumes. You heard Bas talk a little bit about we've been slow in this space. To do this is not easy. It includes everything from sales training and incentivization, building new products for customers to migrate to, regulatory compliance, IT development, and we've set up a factory approach to be able to move these huge volumes of customers across. So a couple of examples on here, which I'm pleased to share with you where we are. So on voice, we're 50% of the way there and due to complete by 2025. For those customers that adopted collaborative ways of working, often driven by COVID, that first cohort moved really quickly. We've got a second cohort where we're putting more actions in place now to move them on that migration journey. Three of the key things we're doing, making the migrations themselves much more seamless to the customer, sort of smoothen their path. We're making the commercials attractive by billing on activation. And we're also doing targeted campaigns with services wrapped around to help customers make that move. If you then have a look at the move across on our fixed side, we look to the end of 2025. We expect all of our broadband customers will either be on an FTTP or a single order access solution, i.e. broadband without the traditional phone line. We're currently circa 25% of the way. So we know we've got a long way to go on the other side. But on FTTP specifically, business has got a really good take-up where it's available. With the vast majority of orders are for business broadband. So as coverage increases, our take above FTTP will increase. And we're really confident about the future of FTTP looking forward because we've got a great set of products for our customers to migrate to. However, the future doesn't stop there. As we said, the world is never changing place. The connectivity doesn't remain stand-alone. The future is convergent. And what we're seeing now and what we're working on is the likelihood of security, networking converging already. We're also going to see the convergence of 5G with voice, and we're planning for that move now as we take our customers on this journey. So in summary, to transform into a modern business, we've got 3 things that we need to do. Simplify the integrated businesses, rationalize the portfolio of products from 312 to 150, and pivot to take that next-generation connectivity leadership. And thirdly, we need to digitize the business to enable those 0 touch journeys to make our customer experience the right experience and build a marketplace capability for our new future revenues. Now this level of transformation can only work with a deep focus on our customers being front and center. What I want to do now is let you hear more from our segment leaders to talk about how this is actually happening in each of the areas. I'd like to hand over to Chris Sims, who's going to talk through our small and medium business customers. Chris?

Thank you, Kerry. Good afternoon, everyone. As said earlier, the SMB businesses services organizations with less than 250 employees. And of course, you'll know that is actually the majority of businesses in the U.K. It's a pretty broad segment with a range of needs, both in terms of the products they require, the level of service they want, but also how they choose to engage with us. But make no mistake, these businesses really understand what technology can do for them, but sometimes just need a little bit of a hand getting there. And they know that with growth, they need technology to keep up with the competition. But at the same time, they remain very value conscious and very considered. Critically, they're super time poor. They don't often use professional buyers. And that makes them just a little bit more emotive in their decision-making for the more emphasis on brand and marketing, which, of course, plays really nicely into our 2-brand strategy. For this segment, we primarily sell mobile connectivity and voice solutions. And increasingly, we're selling solutions that help businesses operate more efficiently, things such as collaboration tools, payments, messaging. Now we believe the market as a whole will grow by about 4% CAGR up to 2028. But today, it's clear that the current environment is not massively favorable to small businesses. In 2022, we saw the total number of businesses shrink. And over the last month, you'll have seen in the news a big rise in reported insolvencies. But we do see evidence of confidence improving, and I'm always massively impressed by how resilient in this sector is. What's clear is that if we look at our base, over the next year, we'll see a few winners and a few losers. And our growth comes in part from businesses embracing digital technology to make sure that they are one of the winners. Let's turn a little bit to the market now. So you'll see we have a really good core market share. So we're clearly over-indexing in mobile, in connectivity and traditional lines. And the great news is actually we've got a great opportunity to gain share in IP voice and security. But if you peel underneath that a little bit, you'll see the picture actually is not completely homogenous. We definitely have a higher share in micro and small than we do in medium and that gives us an opportunity to grow further. Additionally, there's still opportunity in cross-sell and our push into security and other digital services is absolutely crucial to that. Last year, we grew 4% year-on-year. We actually grew a lot more than that in H1. And this is partially due to index-linked pricing, but also due to strong trading. And we believe we actually beat the market in most of our products. In no small part, this has been helped by our market-leading reach. The smaller businesses, we operate through telesales. We've got access to the E high street retail stores, and we have a growing digital channel. And for larger customers, we continue to invest in our local business channel. So this is this network of 28 independent businesses selling BT products and services within their geography. And that is coupled with a growing direct field [ investing ]. And as a result of all that, we've seen growth. We've increased our mobile market share year-on-year, increasing our average deal size as well. And our inside data has shown that BT has comfortably outperformed the market during this time, taking 40% of all mobile transactions. IP voice has also grown faster than market, and we're finally starting to see traction with larger customers. But it is also clear that the smaller customers, some of the market has moved a little bit away from voice. And here, our unbundled Solus broadband proposition has been absolutely key in retaining these customers without unduly diluting ARPU. We also see early signs that FTTP is driving lower churn and higher ARPUs and our net adds position on Ethernet has grown 6% year-on-year. So we're really happy with the trading over the last period. So before I share the plan for SMB, I just want to highlight 3 major trends that are actually touching our market at the moment. So the first of those is the growth of mobile first businesses, remote working, cloud servicing, which are all helping drive that transition from traditional voice to IP voice. And this, of course, is having a positive impact on the U.K. economy. IP services are more affordable and actually help businesses improve their productivity. The good news for BT as a supplier is that actually for our smaller customers, we are a little bit insulated from the dilution because voice is always going to be bundled with broadband. And for our larger customers, propositions such as Teams Phone Mobile, which we're doing in partnership with Microsoft really help us directly monetize that trend. And importantly, for both, we are providing a range of tools that support digitization from payments, website builders, collaboration tools, such as Microsoft 365. And all of these are just helping build back that value for BT. The second trend there is that SMBs are really at high risk of attack of cyber attacks. Things such as fishing, fishing malware, ransomware, data breaches. And it's clear that SMBs rightly are worried about this. But the security expertise that Kerry outlined earlier means customers are confident that BT is the right partner for them. And we have a range of solutions that support businesses regardless of their size, scale and needs. And over the next period, we're going to continue to build out security standard across the portfolio. And the really good example of this is our BT Net proposition, which has a really powerful security add-on offers firewall, content filtering, anti-malware protection, intrusion detection, and it's done very, very simply. It's truly a one-stop shop for our customers. And the final trend there is actually customers continuing to face uncertainty, of course, driven by global instability. And as a result of this, the need for flexibility and tailored levels of support has never been greater, and BT's scale means that we're really well positioned to respond to this. Firstly, our index-linked pricing allows us to continue to invest for the longer term, obviously, focusing on the stability of our network and our service levels. But secondly and shortly, our scale is going to allow us to launch new mobile and broadband propositions with significantly more favorable commercial terms. So addressing these trends, we have a really clear plan to transform SMB. So firstly, we're going to modernize our sales engine. And that really means shifting customers online to reduce costs and actually also provides greater opportunities to cross-sell, driving RGUs. It also frees up capacity for us to invest in our channels servicing larger businesses. And there is a big opportunity to gain market share with larger customers and this increased investment in people and sales tools will drive this. Related, we're also going to be massively simplifying our business, radically reducing the number of products we sell, simplifying things for our customers and colleagues, and you heard a little bit about that from Kerry earlier. The good news is we've actually seen from closing Plusnet business and BT Mobile, which we've done over the last period that we can move customers to strategic propositions with acceptable churn levels and acceptable ARPU outcomes, which is great news and gives us a lot of confidence in the simplification plan for the future. Secondly and probably most excitingly for me is the work we're going to do to amplify customer value, showing customers that they really are truly better on BT. Today, we believe we have the best customer propositions blending the power of fixed and mobile, innovative service models, great add-ons such as free roaming, exclusive [indiscernible] content, and of course, all on the best network. And we also have security embedded with options to pay more if customers want enhanced coverage, which, of course, many now choose to do. Over the next year, we're going to work really hard to enhance those propositions, making them richer, but actually, more importantly, making them much, much easier to use. And this is going to include providing a range of tools that make it easier for customers to run their business, all of which, of course, work better on BT. As part of this, improving early life journeys is absolutely key, and we've got several initiatives which will do just that significantly reducing our breakage. And all of this combined will really enable us to become a much more trusted partner for our customers from start-up to scale-up and it's hugely exciting, both for us and our customers. But finally, we'll continue to focus on driving a broader impact, supporting businesses to become more sustainable and digitally skilled as we've done so far on our hugely successful Skills for Tomorrow program. So in summary, we've made a really great start getting SMB back to growth, and we've got a lot of headroom to go further to offset any headwinds. We are very well placed to modernize our sales channels, amplify customer value and simplify our business. And I'm really excited about what the next year will bring for us and our customers. And with that, I'm going to hand over to Ashish.

Thank you, Chris. So to give you a brief overview, the CPS customer base is compromised of large enterprises across the U.K. that includes public sector as well as private companies and roughly equals about 12,000 customers. And of these 12,000 customers, BT has well-established relationships with about 50%. So obviously, 50% creates an opportunity for us to grow. The public sector base covers all areas of U.K. government, all public services, the devolved authorities of Scotland Wales in Northern Ireland, all local councils, police forces and NHS trusts. And BT is -- that is, by far, the largest telco in the public sector and actually is one of the biggest provider of technology solutions to government as we stand today. Our corporate base covers all U.K. headquartered businesses, including U.K. MNCs. with over 250 employees across all industry segments, and we fundamentally power the digital operations of a sizable number of the most well-known U.K. companies. And now across all of these sectors, public and private, our customers are increasingly seeking enhanced business outcomes through transformational investments and digital capabilities. And we are supporting them by providing end-to-end infrastructure managed services, which cover networking, mobility, collaboration and security. I guess the slight difference to recognize is unlike Chris' customers, most of my customers have well-established procurement, CIO and infrastructure divisions. So they're quite knowledgeable buyers of the services that they're out in the market to provide. And actually, the CPS segment is quite led by not selling just of a catalog, but making sure that we're selling tailored solutions that help our customers with their outcomes. So the CPS business has been under fairly significant financial pressure. In fact, quite a lot of the declines that we've seen in revenues over the last, I don't know, 5 to 7 years have been driven by revenue declines in this segment. as we migrate our customers from high-margin legacy revenues to next-generation services and also as we've run down some large legacy contracts. Public sector pricing has also been particularly challenging, given significant competition as well as the structure of general public procurement, especially for mobile services. And also given the nature of the services that we offer in the segment, we compete not just with telcos in the U.K., but with also a number of systems integrators, the likes of the Capitas, Atoses, Capgeminis, et cetera. Having said all of that, we are seeing a significantly increased demand for our digital infrastructure and digital work offerings that Kerry talked about Especially as our customers look to upgrade to secure converged networks as they move to their journey to the cloud. And where flexibility, simplicity, security and sovereignty that Bas talked about are fundamentally key requirements for this base of customers. And also, alongside that, customers are really looking for partners who can help manage all of this infrastructure. Especially as they don't necessarily want to hire these skills in-house and they also want to make sure that they're mitigating any skill gaps. And they're also making sure that they have a trusted partner to help them achieve their business outcomes. So whilst we face a number of headwinds in this sector, we continue to maintain a very unique position to meet our customers' growing and changing demands with the broadest base of assets that Bas and Kerry talked about, we have a very well-established ecosystem. We are probably the #1 partner for pretty much every telco equipment manufacturer that is out there. And we also have unrivaled skills in our managed services business. So as a consequence of all of that, we already have a leading position in all of our core markets. We have a very, very strong base of large managed service contracts across all sectors, to name a few defense, banking, retail, transport logistics. We're a clear market leader in connectivity. We have overall 39% market share, and we continue to win customers back to BT. So for example, we won the Scottish Public sector network, which has been with Capita for 10 years. They are back with BT. We just did an amazing deal with National Air Traffic Services, a long-term Vodafone customer back with BT. We also won a huge deal with Scottish Power in Scotland, and other Vodafone customer back with BT. We already have a fairly strong mobile market share at about 30%. And then when it comes to security in a fairly heavily fragmented market where a lot of customers also do a lot of DRY. We have a very decent market share. And actually, we're growing very strongly. Kerry mentioned 14%. I think in CPS, we're growing a bit faster than that. So I guess that sort of paints up hopefully a good picture as to what we do and the customers we serve and what they're looking for. In terms of where is the future value for CPS. So the fundamental value for CPS comes from the following areas. First, our mobile penetration, the 30% share, is quite heavily focused in public sector, especially central government. So this gives us quite a big opportunity to grow our mobile base in the corporate services. And of course, as we can attach more value-added services, this gives us an opportunity to drive ARPU improvement, especially in markets where our margins are under pressure from pricing. We have quite a significant traditional voice base, and we're looking at migrating them directly to our digital workplace solutions. This limits some of the ARPU dilution we would have seen by moving them on to lower priced, lower ARPU, on-premise SIP enabled services. And then, of course, we are uniquely positioned also to attach contact center services, which represents a huge opportunity for us to grow, not just our base but also our ARPUs. And then lastly, our very strong connectivity market share is really helping us to drive adjacent network services, so specifically cloud connectivity, security and network managed services. And alongside all of that, we are also very uniquely positioned to help our customers through the well-established partnerships we have with the hyperscalers, with service systems integrators as well as a whole bunch of other vendors to deliver not just infrastructure but also outcome-based services. So in a fragmented and competitive market, BT is and continue to win by being the partner of choice for our customers, offering a comprehensive range of services which are better on BT than they are with any other market participant. So lastly, while there's still a lot to do, obviously, to get this segment back to growth, but we have 3 key areas of the plan which will help us turn this business around and get it back to growth. The first is a rigorous focus on the growth of our core portfolio. Now this has been a shift for this segment because historically, we've been heavily focused on some of the larger deals and transactions in the market. But over the last year, we've dialed up the approach to managing volume product sales. And we've made lots of good strides, and we're seeing a number of benefits with more to come. We're seeing strong growth across networking and security, and we hope to be able to demonstrate in the coming weeks and months material growth in other portfolio areas, the likes of IP voice as well as collaboration. Now this is really important to the CPS business because it will help us consolidate market shares, but it will also help us drive up our margins and be able to manage that more sustainably in the future because we're not as heavily dependent on just some large contracts and large deals. The second big area of focus is in order to support the growth, we have to continue to drive improvements in customer experience. We've had a really good uptick in our Net Promoter Score over the last 12, 18 months. But we also understand that our customers expect always-on, completely secure services from BT, and we have some work to do in order to get us there. And very specifically, service delivery and the quality of our billing inquiries and resolutions come up as some of the biggest areas of detractors from our customer perspective. So lots of work to do there. The second bit that comes up quite a lot is given the nature of our customers, they want quite a lot of focus from us in terms of digitally integrating our service models into their back-end investments in robotics and other capabilities so that they can drive a more seamless end-to-end solution across their applications and their infrastructure. So again, we're making investments in that space. And of course, this is also an opportunity for us to embed AI ops and other capabilities along with our partners to make that even more efficient. So look, lastly, I guess, it says the service that we provide our customers is absolutely critical to create an efficient functioning operation for them. And we are continuing to drive improvements and we're absolutely committed to make sure that we are the best in the market in the services that we offer. And then last but not least, we want to be the national champion and we want a partner to deliver infrastructure-enabled vertical solutions. So just to sort of build on that a little bit, our customers want us to leverage technology to drive transformational outcomes. I said that earlier. These tend to be quite unique to their respective verticals. So if you speak to the train companies, they want to deliver a great experience to people on the journeys. If you speak to the banks, they want to deliver great financial services. But in the nature of our assets and the skills that we've got, we are uniquely placed to be their partner of choice to use our infrastructure to create these solutions on their behalf. We've already made a lot of good progress in developing a number of solutions where we've created outcome-based solutions for our customers. For example, in health services, we're helping remote diagnostics in logistics companies, we are helping the user -- with the use of WiFi to deliver a whole bunch of services on trains. And I can talk about what we're doing with ports and others at another time. And of course, in defense, we're doing a huge amount of work with the MOD in terms of creating smart bases in the future of how the soldiers that battle for us are best trained and best able to use our technology to do the best they can. So I guess that's the focus on that. And then last but not least, we are absolutely committed to being the partner of choice in public sector. We've been verticalized in this area for a number of years, and this has allowed us to make some very targeted investments and also evolve our service model because, obviously, in government, you need a whole bunch of clearances and we have a very well established business, which deals with clearances of all levels, so we can deliver services that others struggle to. And we hope to continue to partner with government in the delivery of next-generation infrastructure programs such as ESN. So I guess in conclusion, whilst the CPS market is fragmented and challenging and we still have quite a lot of legacy revenue to manage. We have the scale and the breadth to be able to evolve ourselves to being the infrastructure solution partner of choice and return the segment back to growth. Thank you. And I'm going to hand back to Alex -- sorry, Chris, to talk about wholesale.

Thank you. Good afternoon, everyone, again. Yes. So it's been a busy morning. Alex is ill, so I'm covering for her. She does send to you her apologies. I can only seem to me she's going to be sending a massive case of wine, Alex if you're watching. So wholesale, our legal advice -- I just need to remind the audience, I have no operational influence on the wholesale team. We run them as separate businesses. Of course, I'm on the leadership team. So I'm a very keen observer of the excellent work that Alex is doing. And one of my observations actually is that wholesale continues to be one of the least understood parts of BT business. Which is a little bit ironic really because they are really integral to the success of us as an organization because what they do is address a really sizable part of the U.K. telco market that buys and sells through indirect channels. And that market is worth getting on for GBP 4.5 billion. So what I'm going to do today is just trying demystify the area a little bit. So starting from the beginning then. What we do in wholesale is provide communication providers to our customers with a variety of solutions that are both to sell to and sell through. And fundamentally, what these do is enable BT to incrementally monetize the fixed and mobile access assets we have today. That drives better unit economics and maximizes the market value we get for BT as a whole. And we're actually often asked how BT Wholesale differs from Openreach. And the reality is that Openreach provides the basic building blocks of the service, and we take those and build them into an end-to-end solution that's ready for our customers, those communication providers to onward, sell and brand to their customers. Wholesale is primarily a volume business. 81% revenues come from selling standard products like broadband, voice and mobile, same as SMB. And we are really strong in this market. We've got over 1,000 customers, as Bas said earlier. But importantly, we operate in 3 segments. And it's worth just understanding the 3 segments to help get a little bit of transparency into the business. So the first of those segments is wholesale partners, and that's predominantly where we sell broadband, Ethernet, optical and hosted, which is IP telephony. And we do this through some of the U.K.'s largest resellers. So these are people like Gamma, Daisy, Claranet, et cetera. And we do that alongside sales through national and global network operators such as TalkTalk, COLT and Verizon. The second segment is mobile and digital infrastructure, and that's where we work with some of the U.K.'s mobile operators, such as BMO 2, 3 and Vodafone. To bring this brilliant BT connectivity to help them run their business. And within this segment, there's this new and super exciting world of edge and colocation, where we're actually forming partnerships with cloud providers such as AWS to run network edge services from our exchanges. And the third segment is, it's a bit of a mouthful, mobile virtual network operators. We just call them MVNOs. And here, we partner with businesses to provide access to the e-mobile network to allow and sell to their own customers under their own brands. And this segment continues to grow in the consumer MVNO market. For us with brands such as utility warehouse or UW and Lyca. But we're also now starting to see growth in the enterprise and IoT MVNO market with partners such as Plan.com and Wireless Logic. So let's turn to the market. As you can see, we're a leader in traditional broadband and small cells. We're around 30% market share, and we do about 1/5 of Openreach's Ethernet market. Importantly, we're aiming to grow our market share in that fast-growing hosted to the IP voice space. And following the exit of Virgin from our MVNO business a couple of years ago, we have seen good recovery and strong year-on-year growth in MVNO driven by existing partners but actually also from new partners such as Lyca Mobile. However, the wholesale market is increasingly challenging. We see competition compounded by reseller consolidation. We do see some ARPU erosion. And actually in the wholesale space, we do see costly demands for higher bandwidths. But whereas there's tension in that traditional wholesale market, we do see new opportunities to grow in these newer markets. And this is what gives us confidence about the future. And crucially, we are actively investing in these new opportunities, and that is what is going to set us up for growth in years to come. In today's environment, we place a premium on the ability of communication partners to collaborate. And the partnerships we have allow us to play in these new areas, especially in relation to digital infrastructure. It's allowing us to combine the benefits of hyperscalers, such as AWS, Microsoft Azure, Google Cloud and combine those with the power of BT wholesale to bring new solutions to market quickly. And a really good example of that is the joint projects we've got on the go at the moment with AWS to provide mobile edge compute services in the U.K., starting with the delivery of the Manchester wavelength zone. It's a really great example of a value of bringing two partners together and BT leveraging its existing assets to deliver new services to customers. A further opportunity, of course, is the migration from PSTN to IP voice. We, in wholesale are choosing to get ahead of the competition by offering stability in this ever-changing market rather than waiting until 2025 for the switch-off. And this is in stark contrast to some of our competitors. We're doing this by running campaigns that help our partners identify, understand and execute their migrations with white label collateral and benefiting from our professional services and support to ensure that these customers really are better on BT. And just to highlight a little bit the scale of the opportunity, the broadband market is around 2 million business lines that need migrating and we've got the capacity and capability to service these for a range of different technologies. And finally, another area that's super exciting is complete mobile, which recognizes our customers' need for a wholesale mobile solution, and we've recently launched that into the market. So let's look at our execution. So we've got 3 priorities to really build on this market leadership. And loosely, they've broken down into our propositions, our customer experience and our people. So firstly, let's focus on what we're going to be doing to develop market-leading propositions, both in that traditional telco space, but of course, in those new future-proof products. In the telco space, we're really focusing on helping those communication providers move to IP products through that expert support provided by our professional services. In those exciting new opportunities, we see opportunities in security, edge, asset commercialization and IoT. And earlier in the SMB section, I was talking about their concern for cybersecurity, but it's also great news that we are perfectly positioned to offer cyber solutions as a wholesaler through the same partnerships we have with leading vendors. So secondly, there, we have an uncompromising focus on customer experience. And fundamentally, we're going to work super hard to ensure that our customers find this as easy as possible to do business with. But in order to do this, we need to absolutely make sure we're prioritizing our spend on modernizing our IT platforms, which you heard from Kerry earlier. But it's not just about IT. You heard me mention earlier, partnerships lies very much at the heart of our success, and we're working hand-in-hand with customers to make sure we're really focusing on creating value-driven partnerships that demonstrate that customers their better on BT. And Lyca mobile is actually a really great example of this. Recently, Lyca migrated their customer base to BT wholesale, that's given them 4x average faster data speeds and significantly broader coverage than they previously experienced. And that, of course, is thanks to the power of the EE network. And finally, looking towards a better tomorrow, we recognize that 1 of our key differentiators is the caliber of our people and they stand out not just as experts in their field, but also as trusted advisers in this really fast-moving, ever-changing world of technology. And that's why we're continually investing in the training of these teams, acknowledging that actually within the telco space, 42% of employees report a significant digital and IT skills gap. Again, another reason why customers are better with us are better on BT. So before I go, I just want to reiterate some of the key messages. So firstly, wholesale is utilizing BT's existing assets to try and drive better value for the group as a whole. We partner with customers bundling these components together to make sure we're giving really high-quality end-to-end solutions. And the great news for us is these new technology changes have given us plenty of opportunities in new markets to push for growth. So there, I hope you have a slightly better feel and understanding for the dynamics of the wholesale business and are as excited and as Alex and the team are in the passage forward over the next few years. And with that, I'm going to hand over to Joris.

Thank you, Chris, and I think you did an amazing job. So thanks, everybody. I'm Joris, and I'm responsible for Global and I'm -- I think it's a great opportunity to provide you a little bit more insight into our business. As Bas mentioned earlier, in Global, we serve the largest multinational corporates and international governmental institutions in the world, and we're helping them to digitize their business. This means moving their operations into the cloud in an environment that is getting even more complex with multi-cloud, AI, data flows and cyber threats. And for our customers, this is a critical transformation that requires a shift to cloud connectivity. They need a stable performing network where they can move their applications and they don't and access them anytime, anywhere securely. And we take them on this, journey thanks to our rock solid foundations and secure multi-cloud offerings, which I will address shortly. Before that, let me call out a few examples of what we actually do. For instance, we optimized cloud data flows to allow financial services customers to meet data sovereignty and regulatory requirements. But we also keep, for instance, the European air space safe by providing highly resilient networks to Eurocontrol. We connect and simplify mission-critical services for many of the ministries of foreign affairs of multiple countries. And we also provide network and security services to leading manufacturing companies such as Michelin. Just a few examples of where our platforms and services help our customers to digitize their business. Now let me highlight a few relevant market trends. The cloud's connectivity, collaboration and cyber security market where we are operating in, is growing at circa 5% per annum. And to drive the right returns on our investment, as Bas said earlier, our strategy is to double down where we excel and partner where we see opportunities. And this is even more relevant in a changing telco landscape where we see more system integrators and hyperscalers being active. Global organizations are doubling down on their digitization journey and there's still a significant amount of data and applications that they need to move to the cloud. They see complexity, cost and security as their key challenges, which our secure multi-cloud connectivity offerings are fully addressing. Hence, in our view, there's a huge growth opportunity out there, and we're well positioned to capture this. So let me briefly talk about our market position and capabilities on the next slide. Over the past 4 years, we have refocused our global business on a select set of customers, and we have really significantly divested noncore assets and portfolio. We're now a much smaller but more focused business, ready to double down and secure multi-cloud connectivity. Now going through this change, we also need to recognize that we have underestimated the [indiscernible] of transforming and simplifying our portfolio of modern IT. This is now a key part of our modernization plan, as highlighted by Kerry. Together, all of this puts us in a strong position, making us one of the global leading providers in this market. Now with regard to our go-to-market, let me highlight 3 key elements: First, we grow our business from our flagship customers to drive profitable growth. Last year, for example, we renewed 96% of our existing contracts, which gives us a solid foundation for cross and upsell. One of them is DHL, relationship we have for over 12 years. They have renewed their contract, trusting us to transform their connectivity in 27 countries across Europe. Then the second thing is we expand our customer base with new contracts via our regional sales force. Last year, we won approximately 41% of the opportunities we went after. A good example in this space is Rio Tinto, where we'll be transforming their network unified comms and security environment. A new acquisition carefully selected on the back of the credibility in the mining industry, supported by a long-standing customer Anglo America. Another example in this space is the global SD-WAN contract with Unilabs, we [indiscernible] that on the back of experience in the pharma industry. And finally, we work more and more with our evolving ecosystem of partners, where we see opportunities to leverage their capabilities. Let me give you a couple of examples. With Microsoft, for instance, we combine products and services to drive voice volumes through Microsoft Teams, but we also have a joint go-to-market with CrowdStrike as part of our managed security service portfolio, as Kevin mentioned. And we partner with system integrators such as Atos, Infosys, Wipro to drive volume on our core platforms. So our leading position is well recognized by our customers and our partners. And our market-leading portfolio and capabilities, as explained by Kerry, gives us, in my view, the credibility to help our customers migrate from the old to the new. And we see basically sort of 3 migrations. Firstly, we migrate our customers into the cloud with digital infrastructure and our network-as-a-service offering, including our new global fabric network that we recently announced. Currently being deployed globally, it marks a once-in-a-decade shift in technology to a high performance, fully programmable cloud-centric network that's a lot of words, right? To make it simple for us, global fabric enables our customers to easily move data between clouds at lower cost and security. The second migration we support our customers with is into cloud voice and contact center platforms with digital work. And finally, we secure their multi-cloud environments with digital services or managed security portfolio [indiscernible]. This is our winning value proposition, which covers the digital transformation agenda of our customers making them better on BT. Now learning from the past, we need to control this migration better, so we can put our legacy platforms end of life, giving us the opportunity to further remove complexity and reduce our cost base. Moving to the next slide, we want to -- I want to talk about better on BT for Global, because it's all about the execution of our plan, our strategy with a clear set of priorities. For us, better focus is not [indiscernible]. I mentioned it's the continuation of the strategic refocus we started in 2019. This has allowed us to reduce the number of customers that we serve by 54%, while at the same time, increasing the share of wallet that we have with them of 64%. And almost today, 66% of our existing customers are already consuming our growth portfolio. So although we didn't grow as we wanted, we have radically refocused our business and improved the predictability over the years. On the previous slide, I already covered sort of the who and the what of our go-to-market strategy. Now let me briefly cover sort of the where and how. Our global reach will absolutely remain one of our key differentiators for our customers. So we continue to serve our customers in 180 countries. However, we will do ourselves through our direct channels in more selected number of key and emerging markets outside of the U.K. And we will expand our distribution via partners everywhere else. With regard to how we have 3 clear priorities: first, focus on cross and upsell of our core services with existing customers to improve profitable growth. Second, we use data analytics to identify targeted new logos where we have to -- where we have the higher chance to win. And third, we digitize our sales processes to drive the productivity of our workforce. Now better outcomes for us means better outcomes for our customers and for BT. We deliver value for our customers by supporting their cloud strategies and the key metric here for us is NPS. Over the last year, our global NPS improved by 21% year-over-year. For BT, we drive profitable growth by retaining our customers and with higher win rates on new business in key selected markets and we transform Global to a new scalable platform, delivering higher return on investments. But we're also looking ahead in everything we do today for a better tomorrow. With the investment in Global Fabric, we create, in our view, a long-term value for existing and future customers for leading technology partners, hyperscalers and application providers. We also see our customers requesting sustainability commitments, and we are driving differentiation here with our global fabric offering, which drives approximately 80% reduction in carbon footprint. We're also shaping a better tomorrow for our people, for example, by upscaling them as accredited cybersecurity professionals. And by doing that, we address critical skill shortages and enhance customer experience. So in summary, Global is a very different business today. We are laser focused on our target customers, and we have radically simplified our offerings now focused on secure multi-cloud connectivity. We addressed the key needs of our customers who all move to multiple clouds at pace, which results in a growing market opportunity and leveraging the credibility we have with our customers and our partners, and together with the investments in global fabric and security, we think we're well positioned to capture that growth. Thank you, and I want to hand over to Martin.

Thanks very much, Joris, and good afternoon, everybody. So I'm going to start with a brief look back at our financial history and some reflections both in terms of what's gone well, but also some of the challenges that we faced along the way. And this is since the last Global Enterprise investor briefing back in 2020 and 2021. So at that point in time, both units were expecting revenue declines to continue in the near term before pivoting to modest growth with declines reflecting combination of impacts, including divestments, COVID, market headwinds and legacy declines and the loss of the Virgin Mobile MVNO. Now both units also highlighted at that point in time, the critical importance of increasing investment in transformation and in driving efficiency to stem the EBITDA declines and those declines being caused, obviously, by the ongoing changing revenue mix with longer-term goal of ultimately reaching sustainable EBITDA and cash flow growth. Now looking back at the combined results of both Enterprise and Global over the last 3 years, we have seen revenue declines on a steadily improving trajectory. Both units navigated through the short-term challenges but also executed the divestment plan. Both units also executed the transformation plans and have collectively delivered a cumulative gross transformation benefit of GBP 451 million by the end of last year. And over the same period, the combined headcount reduction was around 6,400 FTE, representing just over 20%. Now despite that improved revenue profile and the extensive transformation, EBITDA performance has absolutely been disappointing with downward trends continuing at levels far worse than anticipated. This performance reflects various factors that Bas described in his opening remarks, translating into a greater-than-expected margin mix impact from legacy migration and also managed contract declines and more recently, importantly, the macroeconomic conditions, which have led to material inflation on our input costs. We are now negatively geared to inflation. Historically, around 20% of our revenues were index-linked. Moving on to half 1 of this year. Our financial performance has showed broadly the same trends continuing. On revenue, we saw a modest growth, up 1%, and that was driven by continued trading momentum, enhanced by index-linked pricing in SMB, also combined with strong performance in our security products, which were up 14%. Now we also saw an increase in our lower margin sales, and that's somewhat masked the ongoing impact of higher-margin legacy product and managed contract declines. Our EBITDA declined 11%, reflecting the impact of high inflation on our input costs. And despite ongoing efforts to increase coverage, we still only have just over 1/4 of our revenues index-linked and so we remain negatively geared to inflation. In addition, the margin mix impact from legacy declines continues to have a material negative effect on gross margins, offsetting the trading momentum in SMB and in security. The prior year comparator also benefited from a number of one-offs and marginally favorable foreign exchange. Our transformation and tight cost control continues at scale, and we're now also starting to realize the benefits of synergy from the integration, which will continue to ramp up over the next 18 months. However, with heightened inflation, these transformation and integration benefits only partly offset the higher input costs and the margin mix impacts. In the prior year, we saw an unusually large step-up in half 2 EBITDA from half 1. And that reflects a number of one-offs in the prior year and bonus provision releases and also favorable exchange -- foreign exchange on the back of weak sterling at that point in time. And whilst we continue to expect some positive momentum this year as we move into half 2, the current year profile will be much flatter. That reflects the impact of September pay rises and also the attenuation of April's paying -- sorry, price rises as we move through the rest of the year. Now before I move on to describe our financial goals, I will briefly cover the key financial drivers that Bas referred to earlier. These are most easily considered by segmenting the volume business which comprises our product-centric mobile voice and broadband business in the U.K. from the value business, which is centered on our U.K. and Global Managed Services. The volume business in the U.K. represents around 40% of our revenue base, and it covers the majority of SMB along with wholesale and around about 1/3 of CPS. And this business can be modeled on a relatively simple price volume basis. The value business represents the remaining 60% of our revenue base, and it covers all of our global and portfolio segments, around 2/3 of CPS and remaining small elements of wholesale and SMB. Now for the volume business, the primary KPI is our revenue-generating units or RGUs. It's a metric that we -- is consistent with the published volume KPIs we have. Index-linked pricing for the volume business is in place a standard across SMB. It's less common in CPS and wholesale where we tend to have much more bespoke pricing and fixed rate card trading models in place. Overall, around half of the current volume revenue base has indexed linked pricing in place. The main future drivers of value in this business include: firstly, driving volume growth from the current 7.8 million RGUs up to our target to reach 11 million RGUs by the end of the decade, including, as Chris referred to, through cross-selling of our product portfolio. Secondly, driving unit revenues through index-linked pricing and also increasing value-added attachments. And thirdly, addressing the margin mix impact as we transition from the higher-margin legacy products through our modernization plans that Kerry took us through. Now moving on to the value business. The primary KPI is our published managed services revenue metric. And of the GBP 5 billion value revenue, GBP 4.7 billion is reported as managed services, with a balancing GBP 300 million, reflecting other trading categories, as you can note on the slide, in very small writing. On average, around 80% of the value revenue base is contracted with the remaining 20%, representing additional in-year revenues that generated through change controls but also other trading above the contracted base. Now with the value business, the main financial driver is orders won and as reported in our KPIs. Now over the last 12 months, we've generated GBP 6.9 billion of retail and wholesale orders. around 80% of which relates to managed services. The current length of the average -- sorry, the current average length of weighted by value of orders won in the last 12 months was around 2.5 years. Now our value business faces the same margin pressures as the volume business through both input cost inflation and also margin mix as we transition from legacy. However, the impact on gross margins is much more pronounced because historically, we've been able to pass on much of that cost inflation through our prices to our customers. And so we've had much more sort of bespoke pricing in place for a variety of reasons, including the competitive environment. Now since the start of last year, we have where possible built indexation into our contracts and in order to build future resilience. And currently, of the value base, around 15% has index-linked pricing in place. And of the orders that we've made -- we've won in the last 12 months, around 25% of those contracts had indexation clauses included. So in addition to driving managed services revenue, both through well, managed service revenue growth and indexation. Other main drivers of future value for this business are focused on optimizing the margins. And as we've touched on a little bit through the previous sections, key focus areas include executing the modernization plans, helps to refocus and simplify the portfolio and importantly, improve the margins of the next-gen platforms as they scale as well as driving the transformation required to improve the returns on our existing contracted base. Now finally, moving on to our financial goals, which I'll consider in 3 time horizons, having already reflected on the historical dynamics and the financial outcomes to the end of FY '24. So in the near term, beyond FY '24, we see extensive migration from legacy to our next-gen portfolio. But given the next-gen base, we expect revenue to be broadly stable. The margin mix impact of the legacy declines and the higher input costs driven by ongoing inflationary pressures will continue to impact our margins. We will continue with broadly the same level of investment in modernization and we'll push hard to maximize transformation benefits, which we expect to keep delivering on the same scale as today. In addition, we're firmly on track to deliver gross annualized group synergies of GBP 100 million in relation to integration with around 1/3 to be delivered in the current financial year and the remainder to be delivered by the end of FY '25. As a result, we expect EBITDA to continue to decline, but at a reducing rate as inflationary pressures subside and the benefits of transformation and integration increasingly offset the legacy margin mix impact. In the midterm, we expect the growth in next-gen products to more than offset the legacy declines as we complete the majority of the transition from legacy leading to increased RGUs and modest revenue growth. In this period, we expect the margin pressure to continue with the pivot to the next-gen portfolio, but also the delivery of our modernization plans. And combined with reduced inflationary pressure and lower dual running costs, we will lead to stabilized EBITDA and cash. And again, throughout this period, the investments we're making in modernization and the expected outcome from those investments in terms of transformational benefits will remain at today's levels. Finally, in the longer term, we expect sustainable revenue growth driven by the products or growth in our products for the next -- for the next generation, also gaining market share with the transition from legacy largely complete. We expect sustainable EBITDA growth driven by the scaling of that next-gen portfolio, the finalization of the modernization plans and also the decommissioning of our legacy products. Conclusion of our modernization plans, combined with less capital-intensive next-gen products will lead to material reductions in our CapEx, which together will drive sustainable growth in our free cash flows. Our return on capital employed for business at the end of last year was around 15%. Despite returns declining in the near term, we expect to remain well above the group average and the cost of capital throughout this period with material expansion than expected in the longer term. In summary, we have a clear path to navigate through the near-term challenges to transform, to stem the declines and to stabilize financial performance and to create the strong foundations that we need to deliver long-term sustainable financial growth. Thank you. I'll now hand you back to Bas for closing remarks.

Thanks a lot, Martin. All right. I hope you've now spoken -- you've now seen the team. And hopefully, you are -- and you feel a little bit more knowledgeable about what we actually do in the B2B operations. Our aim has been to shine a light on a complex business, which we are striving to simplify, a promising business that we are looking to modernize and improve and an important business that we believe contributes to long-term success of BT Group and through the execution of our strategy. So with this brand new leadership team, a new strategy and our new focus, we are ready, as I said, to rip off the plaster and I'm convinced that short-term pain of the radical modernization will lead to long-term benefits for our customers, our partners, our own people and ultimately, the shareholders of BT Group. Now as you can see, customers need a rock-solid foundation, and we are better than anybody to deliver that. We see value in the long term -- we see long-term value in generation in the B2B market through modernization and a focus on scaling. And we grow because we will build our assets, we will simplify and we will reach scale and long-term growth in sustained financial growth. Now we do this. If we do this, our customers will see that their business, their individual business simply works better on BT. And our partners will know that our technology just works better on BT. Now this brings me to the end of the presentation part of today. We're going to go into Q&A. I will invite the speakers up on stage. We're going to start with questions here in the room, and I'm going to look at Hayley in a second for questions on the WebEx. So I think we probably can put the chairs. Let's start on this side of the fence. Go ahead. Maybe wait until the microphone is here.

Jakob Bluestone from BNP Paribas Exane. I had a question around the voice legacy declines in particular. I think you generated around GBP 800 million of fixed voice revenues, shrinking about 10% a year. But I guess that's the bulk of the legacy revenues that are the high-margin legacy revenues that are going to fall away. I guess the question is, how far along are you in the repricing? And specifically, you said that you expect to fully complete the IP voice migration by 2025. Should we expect an acceleration in the decline in fixed voice as a result of that?

Yes. I'll ask maybe Kerry to elaborate. But generically, our plan is to basically end our PSTN switched voice network by the end of 2025. Obviously, we will migrate to other voice solutions that we will still contract with customers. So that will mean that we still build for the services, but the actual technology by which we deliver it will be over in 2025.

[indiscernible].

No. it will be replaced by other revenue that is fulfilling the same outcome. Anything you want to add?

Yes. I think I'd add as we go across, we've obviously got -- we'll migrate from the existing products today to the new. To your point, what we'd need to do is that add on the value-added services on top of that as well to bring it back up to the same level of revenue. As we go through that factory approach to look at how many customers do we successfully migrate, Chris talked a little bit about the experience in SMB. As you go through these, we're having to look at how many customers may turn in the process. We believe from the experience that we've seen before, and we'll see -- we're going to learn more as we go through the scale and migrations. We think we can bring enough customers across that we maintain the revenue, but we have to put these value-added services on, because we know there's a drop-off on ARPU. If you take the like-for-like service of an old ADSL with one of our new broadband lines.

That is a dynamic. The margin dynamic is different than the revenue dynamic, particularly when you're still double running 2 platforms. Go ahead.

This is Nick Delfas from Redburn Atlantic. So a general question, first of all, because these businesses are notoriously hard to predict, but there are some that have turned around. So I don't know if when you look across Europe, you see, for example, KPN's business and say, the reason why they're growing in business is X, Y or Z. So just any reflections you have on BT's position in this business relative to the European comparables. And the second question was really for Ashish on some of the wins, you mentioned traffic control, Scottish government, Scottish Power. Can you talk a little bit more about why BT won those contracts was it that tipped the balance in your favor?

Yes. Just on the first one, I think you're right. I think there are telcos -- incumbent telcos in Europe that are a little bit further along than others. I think the example you mentioned around KPN, they have started transforming their SME business a little bit before we have, I think that's the area where you see them grow. Obviously, they don't have the complexity of a global business or large corporate businesses we have. But yes, I think it's fair to say that we are a little bit behind the curve on some of these types of developments, but there's no reason that we can't basically improve our business, modernize it in the same way and then get to the same type of outcome or even better.

Yes. And look, in terms of the deals, I mean, first of all, I'd say every one of these deals is very competitive. We never have a customer that comes and says, well, BT, you can have this business. So obviously, we compete very hard. And I guess part of it is to do with the economies of scale and scope. I mean when we look at the range of services, everything from networks, on-premise resources, people in our NOCs and SOCs, we have fundamentally greater scale. So our unit economics are better. And frankly, the service that we can deliver for -- especially for these critical national infrastructure type programs like NOCs, et cetera, is hugely important to them. I mean, it's a very price-sensitive market. So we're not here trying to fundamentally make huge margins. But fundamentally, customers want value from a price perspective. They also want trusted partners who they can trust to keep the planes in the air. And fundamentally, as they go through the technology shift, which they know they have to because we're shutting down PSTN, the tendency to just stay with the incumbent is a bit less obvious. So where there is possibly the ability to just sweat the assets, so you might stay with the incumbent for longer. But now that we're switching off our -- off the PSTN network, you have to change your technology. And at that point, fundamentally, people think more about do they want to stay where they are or go with someone else.

I'm Nick Lyall from SocGen. Can I just ask 1 on small and medium enterprise piece? So it looks like the majority of your customers in your revenues index linked. So does it mean the latest revenue numbers and the guidance, we're assuming a fall in volumes for SME. I think it's about 7%, latest number is 4% for the guidance. And on the second point, you also give us the EBITDA number, please, for SMEs as well because I'm assuming they're quite high margin.

Chris, can you answer the first one?

I don't provide the guidance, but I can say that we are assuming a reduction in inflation in our financial planning.

So you know that 4% market growth you talked about, does that assume customer numbers falling? Or does your confidence mean that customer numbers are...

4% was full year last year in what I talked about. Yes, full year last year. And we grew more than that in H1, this year.

And in terms of segment EBITDA, we're not going to disclose breakdown of EBITDA by second today, unfortunately.

What should we assume -- I mean, we should assume it's higher margin...

Yes. So in terms of margin, it is towards the top of the units in terms of average margins, absolutely.

Robert Grindle from Deutsche Bank. Are you seeing any impact from the alt nets yet? I suppose that would be in the SMB unit. Is Virgin Media O2, a more competitive challenge since they merged with O2. And in the good old days or bad old days, maybe global services revenues growth was very much tied to CapEx when the growth went up, the capital intensity went up as well. What's changed? Is it just a new world and a more sort of CapEx-light model in that segment, please? And then finally, on also, I guess, global services or the global data sovereignty, is that an obstacle to you winning business in the EU? Are they looking to sell to their own providers? Or can you compete with the incumbents there?

All right. Chris, you can take the first 2, Joris the second 2?

So with VMO2, that has not caused us an issue. I think it's the lack of my answer. On alt nets, of course, if you look particularly at the areas where alt nets exists where Openreach doesn't have fiber, we do find the competition a little tougher. I think it's also clear that the breadth of our proposition doesn't just rely on speed. There's a whole lot of other stuff we provide, such as security, guest WiFi and the like of the customers value. So even in the area where there are alt nets and Openreach don't have FTTP, we're still able to do a pretty good job of retaining those customers.

Just before Joris start, we do see both VMO2 and Voda compete very hard in the CPS markets for mobile services. I'm not sure it's necessarily down to the merger, but it certainly is on government frameworks, they are very, very competitive as are we -- so yes, I mean, I'm not sure it's down to the merger, but they are very, very good, strong competitor for us in the market. Sorry, Joris.

The first question was around our assets and CapEx, right? So I think the whole transformation, and what I highlighted is the divestment of our noncore assets across many countries is actually the driver to move to an asset-light business, and that has an immediate impact on the CapEx numbers that you were referring to. And the second one was around data sovereignty. I think you're spot on, both from what we sort of offering in the market. I mentioned global fabric and I mentioned what we do, for instance, for financial services customers controlling their data flows so that they are able to operate in line with regulation. Those are sort of baked into our propositions and I think both the proposition as well as the customers we have, a lot of governmental institutions across Europe are giving us the credibility to use that to differentiate and to expand our business.

Maybe to add on the CapEx question. I think there's 2 areas of CapEx that we wanted to avoid when we did the divestments in global. One was by divesting the domestic access networks, which are very capital-intensive and divesting the data centers, which are very capital intensive. So those we don't have anymore. So that makes it an asset-light, not asset zero, but asset-light type of business. The other component of CapEx is customer CapEx, which is basically equipment that is solely bought for 1 customer. And as Joris was talking about it and Kerry as well, global fabric actually works on the trend that customers actually want to keep a lot of their data movements in the public cloud. So they don't have to trombone traffic into the site, which means you don't have to have a lot of equipment and a lot of big pipes into buildings. If you can keep the data moving from Google to Amazon to your own data center and back. So that means that we can share a lot of that infrastructure. And that still means we have to pay CapEx -- we spend CapEx to build it, but we can share the CapEx rather than in the past where it's all around 1 customer. So I think that makes the future type of return on that particular capital employed a lot better. Carl?

Carl Murdock-Smith from Berenberg. Three please. Firstly, a slightly blunt one. Consensus EBITDA for this year is 1,707. For next year, it's 1,679. Is it a fair interpretation of your slides, Martin, that those numbers need to go down? Secondly, in terms of the portfolio reshaping that you're talking about Bas, kind of are we done in particular? I mean you've talked about global, but secondly, on the portfolio assets, you mentioned optimizing for value and is BT the natural home for all of those going forward. And then the third question is on the portfolio businesses. They were actually the biggest absolute drag on year-on-year revenue in H1. So can you just talk about some of the...

Sorry, what was the drag on...

The portfolio divisions. So I don't know if the question for you or for Martin, just in terms of the drivers of what was driving the decline in the portfolio business this year after admittedly a very strong year last year.

So in terms of consensus, we're in a bit of a middle ground at the moment. Following the half 1 results where Simon described the dynamics for business in the second half of the year, which I've reiterated here today. We have seen consensus come down. We've only had about 1/3 of analysts updating their outlook. So our expectation is that will continue to come down as we get the other analysts to remodel and to represent. So is it a fair reflection of where we are and this not as yet. But as it plays out, we're expecting it to move towards that. In terms of the revenue -- so portfolio revenue last -- or year-over-year. We've had some declines in some of the parts of the organization. We are putting through of various types of deals that are coming through. So 1 part of that organization was the phone book, which is coming to an end this year. So that's 1 example of a part of that portfolio, which is coming to an end. There are other -- there's quite a mix of organizations in there. Italy is also a part of it, which is on a decline as well. So they're some of the aspects, but that's also why we're sort of holding them separate to make sure we're working through in terms of how best to optimize them.

So Carl, on the future of these businesses. So let me start by saying the reason we put them separate is because they don't really fit in the current model. So in order for us to speed up in the current model, like Kerry said, we're going to have a number of products, we're going to simplify and we're going to make some really big bets on a few areas. These businesses are not naturally fit in that. So we basically put them aside. Some actually are very well operated, make really good cash flow and utilize our assets really well. It's just dissecting them in the various parts, makes it inefficient, and it basically distracts the main core business from operating fast. That's the main reason they're in there. Now obviously, there is a wide variety of businesses in there. Suddenly, we are already running down as to the example of Martin, some we are still managing for value, and we're addressing. And if we can find partnerships like, for example, the one that we announced yesterday with Telstra, in the media and broadcast area outside of the U.K., means that we have to invest less in the network, and we do this together with a partner, and we can service our customers even better with a lower expenditure. We will do that. with regard to now. If there are other options for that particular, the future, we'll see. Obviously, we can't really comment on it because we haven't taken any decisions on that yet.

It's Adam Fox-Rumley from HSBC. I had 2, please. Firstly, I wondered if you could talk a little bit about the sales incentives that you have across the various different parts of the business we've spoken about today. Are you incenting your sales staff on revenue, gross margin, EBITDA, kind of -- and how has that changed or planned to change? And then the second question was about the IT modernization. Obviously, it's a long-term plan, as you outlined towards the end. Is it all mapped out at this stage? Or to what extent is it all mapped out? And where would you identify the biggest risks of that project, please?

Okay. Maybe I can ask Ashish and Chris to talk about incentives and maybe Kerry on the IT.

Yes. So our predominant incentive is on margin, not on revenue. And then we have some strategic enablers within that. So if we're accelerating IP, we might have an accelerator on the things we want to drive the sales organization to do. So it's a fairly structured simple incentive plan, the driver is margin, not revenue, and the accelerators are typically strategic things we want to push into the market.

Yes. And we're in the very similar position. I mean within SMB, we sell through 7 different channels of different complexities, but it always equates to something that is a proxy for margin.

Just a follow-up on that. Does the change in the product mix that you're selling make that more difficult and make your ability to know what the margin of a product that you're selling over the lifetime of the product. Is that any more difficult?

Not really. I mean the margins, in some cases are lower, so you adjust the targets accordingly. But especially in CPS, you do a deal for anywhere between 3 and 5 years, and you know what you're pricing and you know what your margins are at the point of pricing. If anything, as the transformation programs run through, some of the margins we think we make today might be a bit higher tomorrow because we might have some structural inefficiencies removed out of the process. So no, it doesn't -- you just have to adjust the levels of margin because you have to be aware of the fact that you might be going from a higher-margin product to a low margin product as you migrate customers.

And the only thing I would add, of course, is as part of the product simplification, there will be less stuff in the tool bag for the -- for our sales colleagues to sell as well, which makes it easier for us to control that value.

Okay. Let's do the IT question and we will -- then we will...

Yes. So we've got a very good bottom-up plan that's a complex one for the first year, 18 months, 24 months. What we're doing now is really focused on making sure we've got a complex plan that goes out over the 5 years. So that's the -- it's the out years that we're doing the work on at the moment. As you said, it's a big plan. It needs to be phased. It needs to be linked to the dependencies and risks. And most of the work is now on the out years rather than in the early years.

Georgios from Citi. Three questions from my side, please. The first 1 is on M&A. And I appreciate the different subsegments, but a lot of the markets are fragmented, are there opportunities to consolidate? And/or do you need to make acquisitions to gain capabilities particularly in managed services, a lot of the other business divisions in Europe have been doing active M&A on that front? The second one is around FTTH migration. In consumer FTTH is worth more than a DSL line product, but the more you're going to SME incorporate, you can replace more than 1 DSL line with an FTTH line. So could that be dilutive and is that something that's going to accelerate given your plans to push more in that direction in the next 2 years? And then finally, around margins. I'm less interested about intersegment revenues towards Openreach because those are upside somewhere else. But on energy, you touched a bit on labor costs, any other big moving parts on OpEx. You can maybe give us indications going into next year, just to understand the moving parts.

Okay. I'll take the M&A question. If we can get between you guys, the FTTP and maybe you can answer the last one, Martin. On M&A, to your question, do we need to do M&A to actually get scale in some of the areas we focus on. George, the answer is no. We are -- like we said, we have an enormous amount of activity that we do. We've picked a few areas that we think we have the scale and we have the skills and capabilities and it's more that we stop doing the rest rather than buy more from the areas where we're weaker. So we've decided not to do that in that particular capability set because we are confident we can build it ourselves and/or we already have the capabilities in-house, particularly in the security space and in the managed services space, we are very confident and strong in those areas that we've picked. Now of course, I cannot look into the future. It could very well be that we're accelerating our goal so fast in particular areas that we will partner with other companies and then decide to maybe scale that up ourselves. But in the short run, that is not in the plan. Do you want to go for...

Yes, I will go for first. I mean with the closure of any technology or replacement of new technology, of course, there's examples of some customers optimizing their portfolio of us, which, of course, causes a little bit dilution. Of course, that new technology opens up opportunities for us to sell other stuff. And part of the reason we're arranging the digital products is to try and build back that value. And that's understood and we've got that modeled out in our financial plan. . What we're not seeing, though, is full-scale people substituting away from high-value ethernet to FTTP. We're just not seeing that today. Customers value the additional protection, the additional quality of ethernet, and that is holding up that market quite nicely for us.

Yes. And I guess in the corporate market, it's a bit of a similar story. On a like-for-like basis, clearly going from FTTX to FTTH is not ARPU dilutive because FTTP is a better product. It's higher revenues and it's higher margins at an end-to-end level. So that's not an issue where there is a potential challenge is to the point that Chris made, we do see a level of substitution or point-to-point ethernet circuits with a more contended FTTP as capability. But of course, to some extent, over the medium term, that's a bit limited given where FTTP is available in the B2B market versus consumer. And at the moment, at least, we are seeing very high demand for point-to-point circuits. And actually, we're seeing an even higher demand for even higher bandwidth a gig and above uncontended especially as people start running more applications in the cloud. And as you see the bigger companies want to do that, I guess the difference of cost of FTTP versus an Ethernet is not worth the hassle of having a contended access product.

And in terms of operating costs, to give you a bit of a breakdown. So our labor cost is over 20% of the cost base. And whilst it was measured on the slide in terms of transformation, that's because we measured it consistently with how the group measure transformation outcome, which is largely TLR/TLC related or labor cost related. Beyond that, 50% of the cost base is actually third-party cost. And within that, obviously, we invest a lot of time working with our procurement colleagues to make sure that we're managing that as tightly as we can. . Clearly, there's been a lot of inflationary pressure coming through there, but we've been able to offset a reasonable amount of that. Beyond that, we have around 25% of the cost base, which is internal cost, which includes a not insignificant amount coming through from Openreach. And then, we also have around 5%, which is a nonlabor SG&A. And again, that's something we look at as part of transformation. Hopefully, that helps.

We also get inflation from the equipment providers, but most of that we can pass through.

Yes. But thank you for recognizing the internal recharges from Openreach in the beginning.

It's Andrew Lee from Goldman Sachs. I just had 1 question just going back to your kind of ripping off the plaster comment and what you said at the outset saying you're aiming for growth. Do you think you've fully ripped off the plaster? Do you actually think it's the best use of capital BT for you to pursue growth in the Business division ? So if we just look at a few things and maybe recut that's the question. But just maybe if we just recut things like 1 of the way investors look at this business is you've got the connectivity business that where you compete against people that have a low marginal cost, and you've got too much market share. As you go into the ICT space, you're facing so many other competitors that the [indiscernible] just so de minimis. And so the question is, is there any real structural growth for BT within that? And are you destroying returns actually by pursuing that growth.

Yes, good question. I think -- just a couple of things on this. I think where we say ripping off the plaster and where we said we should have done this earlier, has actually to do with, are we -- do we think we are destroying value? Or are we -- do we think we are accretive. And I think when we talk about growth, we're talking about value growth. And it is our firm opinion at the moment, that the only way to create long-term growth is to now jump from old to new. If we don't do that, you might have a few years of good returns on the old, but everybody else will take the new markets. And if we don't do that, there is no new market. And this is the same equivalent for why we move from copper to fiber, while we build 5G and closed 3G and 2G and it's the same thing for MPLS to Global Fabric. So we have made a few bets on that. So when we talk about growth, we're talking about value growth for the organization in the first instance. Secondly, of course, there is a market. And if you have a high market share, yes, you need to make sure that you gain market share in order to grow as such. But at the same time, you've heard all the segments talk about value-added services that basically our customers want to deliver out of the infrastructure. And when we speak to customers, where they today buy a service, they buy bandwidth or they buy a particular line. They pay for technology. And when we talk about value in the presentation, we -- and this is what our customers tell us. They say, look, if you can guarantee uptime stability, you can guarantee I can report my data sovereignty, if you can guarantee this rock solid base and you're better at that than anybody else, and you can prove it, we'll pay more money for it. So the growth there sits in margin growth. If you can scale the underlying backbone and you're more available than anything else and you can pay for -- you can price for value rather than cost plus, there is an ability to grow. And there is also an ability to then make sure you utilize your existing assets better because then you don't get a lot of questions from customers to say, "I want technology A, technology B connected to this 1 technology from you and there's 3 other technologies from somebody else. Now they're going to ask you for an outcome and you can orchestrate to Ashish's point earlier, your managed services in the best way possible to deliver that outcome. So that will again mean that we can scale our assets, we can pick the technologies that we want to deliver to customers, but we do need to deliver that outcome. And that's where the value growth sits according to us.

And can I just make one other point. I don't know how you see it, but our relative discretionary CapEx investment is not that high. So if you think about the GBP 8 billion of revenue, we've got to spend CapEx just to sustain that, forget about investing in huge, shiny new things. And the things we are predominantly investing in are the things we have to move our existing revenues on to. So if we didn't invest in IP voice, we'd have GBP 800 million of revenues that has nowhere else to go. . So I think the point that Bas made from a focus perspective, we're not off investing in stuff that is massively off of our adjacencies. We are predominantly investing in things that will take us from where we are to where we're going to. And then, of course, obvious adjacencies next to that based on what our customers are telling us. So I don't know how you guys think about our investments, but, a, it's not huge in the grand scheme of things from a group perspective. And b, it's not -- a lot of it isn't hugely discretionary.

And maybe just to scale that out a little bit. So we're talking about a couple of hundred million a year that's focused on modernization, both product and transformation. And the returns on that is actually incredibly high compared to many of the investments, including customer CapEx.

Is it what checking on the bridge?

Just, Yes, who's wanting the bridge? Hayley?

Yes. So this question comes from Terence at Morgan Stanley. His question is, what is the plan for the international business? Could BT explore strategic options in this area?

I think the plan for the international business is what we have done in the last 5, 6 years, and that is what Joris explained earlier, is focus on purely multinational corporations to make sure that we are 100% in an asset-light environment, scaling our global networks, our global security and our global voice backbone, which at the moment we are doing, and we are doing really well. We're one of the bigger ones of the global providers if you exclude the home market. And yes, so for us, that's a really good business. It's a good business also because we do 90% of the top 100 banks. We do 80% of the insurance companies globally. We do the majority of the mining and mining companies in the world. So we have a base that scales in that sector. So it's a valuable asset to own. It also gives us the ability to scale some of the technology also for our U.K. customer base. It also allows us to buy and partner at scale globally with the global providers, which will also benefit the U.K. market as such. Obviously, when we start growing and we start implementing our global fabric, we will have to see how partnerships develop. But at this point in time, we absolutely see benefit of having an international business.

And another question. This one is from Polo Tang at UBS. On the PSTN shutdown in 2025, is this not a source of downward pressure in churn as you will have 2.1 million subscribers switching products?

Yes. I mean it definitely is. But that's what -- that's the painful thing of ripping off the plaster, Polo. It's something we have to do. And we've decided to do and we will pursue it in the best way possible. But yes, there is obviously pain that's associated with it because paying with customers that don't want to migrate that are not happy with that. You'll see that we obviously -- with the migration, we will see that maybe some customers want to go to a different service. But we are managing this as well as possible. We've seen this coming for quite some time, but it is not something that we can back down off because we think it might have a downward pressure in some of these areas. I don't know, Kerry, if you have anything else or...

I don't have anything to add to what we've already said. I think we've covered it quite well.

Yes. And 1 more online. This is from Maurice Patrick at Barclays. What do you think your medium-term market shares could be in voice over IP and cloud BPX in the different segments?

Anybody for the different segments, Ashish will...

I mean, look, I'll go first. If I pick CPS. I mean our aggregate voice and collaboration market share today is in the high 30s. Obviously, our IP share is much smaller at about 15%. So obviously, a little bit dependent on the success of us helping our customers migrate to IP. If we did that because the market is voice and collaboration, it's not PSTN and IP. If we were able to get majority of those customers across even from our base, we have the ability to get market -- leading-market share. And then, of course, we've got opportunities with some customers that have moved to IP quite a while ago as they go through their cycle to perhaps reacquire some of those that have gone away from BT in the past like we're doing in networking. So I think we would be certainly targeting to be in the 25%, 30% market shares. We have to execute. So I guess that would be the caveat. So that's what I would say about CPS. I don't know about Chris.

I'm pretty confident we'll continue to beat the market in IP. We've obviously got a number in our plan, but it's not one I'm comfortable sharing.

Okay. I do want to be respectful of everyone's time also on the people that have joined. Maybe one last question. Anybody? nobody dares to. Had you turn a -- you had 4 already. Here we go.

Carl from Berenberg going in for seconds. How do you think about wholesale pricing? So thinking about MVNOs, I mean I acknowledge it's Black Friday this week. I was looking like a mobile, you can get 100 gig for GBP 699 on rolling contracts. The equivalent our EE is 4x the cost. So when you're pricing a wholesale MVNO contract, enabling a mobile competitor to other parts of BT, how do you think about that kind of from a cross-divisional perspective? I'll leave it there.

Yes, let's do that because otherwise, people are going to start leaving and then I'm still answering. Look, the reason we have a wholesale business, as Alex [ stand-in ] actually said was to utilize our assets. So in the case of MVNO, we always make the decision, okay, is this a group of customers that we are going to reach that we otherwise do not reach utilizing our own assets, and is it beneficial for us. And don't forget, when we envy a customer like a mobile, it's their brand. It's not the EE brand. And obviously, we don't sell the entire EE portfolio, we sell our mobile network. So they have to add their brands and their value-add on top of it. That will bring them to their costs. And EE does the same thing with the mobile network. Obviously, we are very conscious of where we do this and this choice we make together with BT Group folks around those areas where we really think we can utilize our assets better and we do not cannibalize the rest of the organization. And how we price that, obviously, we're not going to share. All right. Thank you very much, everyone, for joining me here in the room, and thank you very much for everyone joining me on Webex and hope to see you next time. Bye-bye.