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Executives

Damien Maltarp

Anthony Everard Ashiantha Chanmugam - Principal Financial Officer, Group Finance Director, Director and Member of Operating Committee

Ian Paul Livingston - Chief Executive Officer, Executive Director, Chairman of Operating Committee and Member of BT Pensions Committee

Gavin E. Patterson - Executive Director, Member of Committee for Sustainable & Responsible Business, Member of Operating Committee and Chief Executive of BT Retail

Luis Alvarez - Chief Executive Officer of BT Global Services

Olivia Garfield - Chief Executive Officer of Openreach

Analysts

Nick Delfas - Morgan Stanley, Research Division

Maurice Patrick - Barclays Capital, Research Division

Simon Weeden - Citigroup Inc, Research Division

Carl Murdock-Smith - JPMorgan Cazenove Limited, Research Division

Nick Lyall - UBS Investment Bank, Research Division

Paul Sidney - Crédit Suisse AG, Research Division

Jeremy A. Dellis - Jefferies & Company, Inc., Research Division

Sam McHugh

Stephen Paul Malcolm - Arete Research Services LLP

David-A Wright - Deutsche Bank AG, Research Division

John Karidis - Oriel Securities Ltd., Research Division

James Ratzer - New Street Research LLP

Guy R. Peddy - Macquarie Research

Lawrence J. Sugarman - Liberum Capital Limited, Research Division

Adam M. Rumley - HSBC, Research Division

James Britton - Nomura Securities Co. Ltd., Research Division

BT Group (BT) Q3 2013 Earnings Call February 1, 2013 4:00 AM ET

Operator

Hello, ladies and gentlemen, and welcome to BT's Results Conference Call for the third quarter ended 31st of December, 2012. My name is Andrew, and I'm your coordinator for today. [Operator Instructions] I would like to advise all parties this conference is being recorded today. I'll now hand you over to the company.

Damien Maltarp

Thanks, and welcome, everyone. My name is Damien Maltarp, and I'm the IR Director for BT. On the call today, we have Ian Livingston, Chief Executive; and Tony Chanmugam, Group Finance Director. Tony will go through the headline results of the financials, and then Ian will go through the lines of business. We will then hand over to you for questions. In the room with us today, we also have the CEOs of our lines of business.

Before we start, I'd like to draw your attention to the usual caution on forward-looking statements. Please see the slide that accompanies today's call and our latest annual report on Form 20-F, for examples of the factors that could cause actual results to differ from any forward-looking statements we may make. Both the slides and the annual report can be found on our website.

I'll now hand over to Tony.

Anthony Everard Ashiantha Chanmugam

Thanks, Damien. Good morning, everyone, and thanks for joining the call for our third quarter results. Overall, we've delivered a good solid financial performance and made progress in a number of areas.

We delivered good growth and cash flow, mainly due to working capital timing. We're making progress in transforming our cost base, but there's still much more to do. Overall, this quarter is in line with our expectations for the year, which remain unchanged.

Starting with the income statement on Slide 4. Headline revenue was down 6% in the quarter, which includes the impact of a GBP 66 million decline in transit revenue and a GBP 50 million negative impact from FX. Our main measure, underlying revenue excluding transit was down 3.1%. As expected, this was an improvement on the decline in H1 due to slightly better performances from Global Services and Wholesale.

We delivered another quarter of growth in EBITDA, which was up 2%, helped by a 7% decline in our underlying cost base. The group's EBITDA performance was partly helped by Global Services, but this was mainly due to the timing of cost during the year. For the 9 months, Global Services underlying EBITDA is down 1%, and there's much more we need to do.

Depreciation was down 4%, largely due to lower overall CapEx over the last few years. This contributed operating profit growing by 7%. Interest is more broadly flat leading to profit before tax growing 7%, which drove an 8% increase in our adjusted EPS. Specific items were a net charge of GBP 38 million.

During the quarter, Ofcom published its final determinations on some disputes around historic Ethernet pricing. These went against us, and while we are likely to appeal, we recognized a specific challenge of GBP 151 million against revenue and GBP 36 million against EBITDA. We also incurred GBP 28 million of restructuring cost in the quarter, which I'll say more on shortly. These were partly offset by a GBP 9 million profit on the sale of our final stake in Tech Mahindra. In total, we recognized profit of around GBP 350 million over the life of our investment in Tech Mahindra.

Turning to free cash flow, Slide 5. Normalized free cash flow was an inflow of GBP 807 million in the quarter, which was GBP 173 million up from last year. Quarterly cash flow will tend to bounce around and most for the increase was due to working capital. You may remember that our cash flow in Quarter 2 was impacted by the last day of the quarter falling at the weekend. This effect reversed in the third quarter, which boosted the working capital position. Our cash CapEx was also lower, which is probably reflecting higher spend on our Wholesale Broadband Connect Network last year.

Below the normalized cash flow, we had GBP 157 million cash tax benefit from pension deficit payments. We expect a smaller benefit next quarter to bring the full year benefit to around GBP 560 million, which we've indicated previously. Of the specific items of GBP 96 million, mainly relating to the Ethernet pricing determination and restructuring cost, reported cash flow was GBP 866 million in the quarter. Together with the Tech Mahindra disposal proceeds and the GBP 75 million we spent at our buyback, net debt declined by almost GBP 900 million during the quarter to GBP 8.1 billion. Net debt is still up year-on-year, but this reflects the GBP 2 billion pension payment in March last year. If it were not for that, our debt would be lower.

Turning to cost transformation on Slide 6. During the quarter, we cut our cost by GBP 274 million. On an underlying basis, excluding FX and disposal, costs were down 7%. For the 9 months to date, we've used our cost by over GBP 1 billion.

As I mentioned last quarter, Luis and I are jointly focused on making GS a more efficient business. The cost here is reduced by 7% in the quarter, which compares with a 1% reduction last year. We continue to focus on improving our inventory management, procurement and process reengineering work, as well as increasing the focus of delivering benefits from group wide end-to-end programs.

I'll give you a few examples of lots of things we do across the group. We're reviewing fault resolution process for both GS and Wholesale customers that are in the process of redesigning it. We're also migrating to work into our strategic service centers to improve operational efficiency and reduce cost through standardization and better resource planning. This will enable our frontline agents to resolve faults earlier in the process and reduce unnecessary handoffs between different teams within BT.

Since this program started in September, we've identified the cost reduction opportunity of GBP 40 million while improving customer experience at the same time.

In Openreach, there's been a material increase with fair volume caused primarily by the poor weather; and in provision volumes, caused by the success of our fiber program. However, this has led to increased pressure on both our direct and indirect labor cost. The introduction of better resource management programs, which utilized fair resource and reduced indirect time will generate savings of circa GBP 30 million. We continue to make good progress on our travel and subsistence programs. And we're on target to deliver the circa 12% year-on-year savings that I mentioned last quarter. Overall, we're making good progress, but there's still much more we could do.

Turning to Slide 7. As I mentioned before, we're increasingly looking at our processes on an end-to-end basis across the different lines of business. Building on this, we're putting in place the next phase of our group-wide restructuring programs, which has 3 key activities: Firstly, we've migrated our 2 support units, BT Innovate & Design and BT Operate into a new division called, BT Technology, Services & Operations and moved several other functions into the lines of business. As part of this, we'll be integrating our engineering field force, reorganizing Wholesale's contract delivery activities and rationalizing our data centers. This will allow us to simplify and speed up our group-wide processes, work better with the market-placing units and improve the quality of service we give our customers.

Secondly, we're rationalizing Global Services, processes, resources, network and systems, which will drive the next stage of Global Services cost transformation program.

Finally, we are transforming some of the group-wide support functions, such as HR and Finance. The cost of this program will be recognized over Q4 and the next financial year and will be treated as a specific item. We're confident that this program will make us a better business by delivering cost savings and improve customer service delivery in the years to come. We'll see the benefits in the 2015 financial year and beyond. We'll go to more detail on this on our full year results in May.

Turning to Slide 8. There are a couple of more items I'd like to point out. Of the pension, the IAS19 deficit came in at GBP 4.3 billion net of tax compared with GBP 3.1 billion at Q2. The higher deficit, principally reflects the higher inflation assumption, partly offset by the increase in the pension assets.

In terms of our debt position, we repaid GBP 1.4 billion of term debt in January, which we funded from our cash and investment balances. We're paying interest of 5.7% on this debt, so this will lower our interest costs going forward. Our next major maturities are not now [ph] until the summer of 2014, which means that we continue to have a strong liquidity position.

Let me now hand over to Ian, who will take you through the lines of business.

Ian Paul Livingston

Thank you, Tony, and thank you to all of you for coming on the call. The word, solid, tends to be a bit of an overused phrase when it comes to results, but I think that pretty much does describe them in this quarter. I think we made [indiscernible] reasonable financials and at the same time have made progress in a number of areas in terms of operational metrics. What I'd like to do is run through the individual lines of business now starting off with Global Services.

On Slide 10, Global Services. Our underlying revenue, excluding transit, was down 5% in the quarter. That's a slight improvement in Q1, Q2, where it was down 6%. We are seeing the same trends, continued tough conditions in Europe and financial services sector, although probably slightly less bad than they have been in previous quarters. Against that, we're seeing continued double-digit growth in high-growth regions of Latin America, Asia and Middle East, and we see that actually in our larger order, our overall order intake, GBP 1.9 billion. I think that's a good number, compares to GBP 1.6 billion in the same quarter the previous year and GBP 1.3 billion in the previous quarter in Quarter 2.

Among the wins in the quarter, some very good names. National Bank of Abu Dhabi, obviously reflecting what we're doing in the Middle East. HTC in the Far East, showing that it is, if you pardon the expression, a very smartphone maker. And also in Europe, we've done well with companies, such as Clarins, which is a new win for the group and the public employment agency in Spain. That's the third time renewal for us, and that's very similar to DWP, and in fact, in the U.K. And then we do a very similar piece of work for them. And KPMG as well, very pleased to renew an extended contact with them.

In terms of operating costs, down 7%. Tony has really covered that. That, that's an improving trend that Tony had said. I will say much more to be done there. And underlying EBITDA, up 17%. It's a good number for the quarter, but I would stress it is only a quarter. And it does reflect the timing of cost, and we've got to recognize and we do recognize that year-to-date, EBITDA is still down 1%. EBITDA less CapEx of GBP 42 million. That's actually one of the best numbers in EBITDA -- best CapEx for some time and compares to the Q3 number of the GBP 5 million. However, the cash flow is, remains affected overall, and particularly, year-to-date by changes of working capital that we said would happen in the current year.

Now, let's move into retail. Retail consumer revenue, down 3%, lower calls and line revenue. Now one thing to bear in mind is we did freeze our key prices through 2012, and that does impact revenue. Against that, we've seen good growth in broadband. It's a good quarter in broadband. We'll talk about that in the second, but we continue to see growth in revenue and the number of broadband.

On business. Again, similar trends, lower calls and lines, growth in IT services. Whilst the number looks similar to previous quarter, actually, there's some underlying progress. And we continue to see, I think, good progress of our SME business. And we're growing in the right places there.

I think one of the most interesting areas, and something I've mentioned in previous calls, is Ireland. In many ways, Ireland starts with a mini BT because that contains all aspects of the BT Business in our Irish business. And the revenue, excluding the impact of FX, was up 5% in Ireland. Now, some of the interesting facts about Ireland is it has now 90% rollout of fiber. And actually, no -- and Northern Ireland Retail business has more fiber customers than it has copper customers. It's not by a lot, but it's past that 50% number. We've seen good growth in government and corporate contracts, both the, both size of the border in Ireland. The wholesale business is doing well. We mentioned last quarter a new deal with Sky, and they're public. And as I said earlier, we're seeing an impact of fiber. I think it's encouraging to see the performance in Ireland despite the economy, particularly size of the border.

Turning now to some of the operational things in retail. 44% market share of broadband, net adds at 122,000. A reasonable performance in what was the bigger market. I think particularly encouraging has been performance in fiber. Real step-up there at roughly 200,000 fiber net adds in retail. And now, retail's gone through over 1 million fiber customers. And I think the investment the retail's been making in fiber, particularly in advertising and proposition is starting to come through.

WiFi minutes travel to 3.9 billion, and I think the impact of WiFi hotspots are really having an impact. And they are helping with our proposition. And more and more customers, of course, have got smart devices, tablets, et cetera, that would look for WiFi as the first point. And actually to use that WiFi service, we've recently introduced something called SmartTalk. And if any of you have that -- particularly, if you've got BT account at home. If you've got an Android phone or an iPhone, I'd really encourage you to download it. It allows customers, basically, to make calls as it was part of their normal BT package. So if you've got any time package that allow you to call 800 or 845 calls for free, which you certainly cannot do on a mobile phone. But also when you're traveling, as of course, many of you do, and you can make calls to the U.K. for free as long as you are plugged into a WiFi hot -- your connector WiFi hotspot. Very good reviews on the app site. And I think that's just another thing that we're trying to take advantage of using WiFi and provide more value for our customers on our overall proposition.

Another area that has caused some excitement recently is on TV. And Vision, reasonable quarter, 21,000 net adds. We started advertising YouView actually after the quarter end in January. And we've now got over 60,000 customers with YouView. We're seeing a good rate of take-up there. We're also rolling out multicast to our existing Vision customers. The multicast offering, basically, is 18 standard definition plus 4 high-def channels. You can see the channels on the right hind side. Some channels are very popular in terms of, I think, National Geographic. Comedy Central and channels like that, so some good very channels. It's available for only an extra GBP 2 per month. And I think this is part of our strategy, which is to provide people, who actually want more choice and want more opportunity, but perhaps, don't want to pay the very high prices that come with Pay TV. The U.K. is underserved in relative terms of Pay TV if you compare the U.S. experience from the U.K. And we want to give our customers more choice and a really good value proposition.

Of course, BT Sport. Every quarter, there's a few reannouncements and this quarter is no different. We recently signed a deal with Women's Tennis Association. Gives access by 800 hours of wide high-quality sports and having 2 British tennis players in the top 50. That's a good timing, and it also gives us, I think good content over the summer period, which is helpful. We also announced signing up new contracts for our new production home in Olympic Park. And that's a purpose-built area for media that really gives us a canvas on which to, I think, present some very innovative and high-quality production. And to help with the production, we've chosen Sunset+Vine as our lead partner. They did the Paralympics with Channel 4, which is a big success, and also, horseracing for BBC. And yesterday, we announced joining BTT with the Clare Balding, so we'd like to welcome Clare. And she will be presenting the sports program, particularly focusing on women sports, which I think is underserved in the U.K.

Now turning to Wholesale. Wholesale, of course, is still impacted by larger pricing. Excluding larger pricing, underlying revenue, excluding transit, was down 1%. EBITDA, the same. And that's the best result for some time. I think that is indicative of the process being made in wholesale.

Net operating costs x transit, down 2%. And that reflects the focus on SG&A and labor cost and it's having an impact. But probably the most encouraging thing as one moves to the future for wholesale is order intake, GBP 400 million in the quarter. And if you look at the chart on the right-hand side of the graph there on Page 13, you see really, I think, a kick-up in order value. And that reflects, I think, particularly, the work we're doing with the mobile companies as well as a number of our fixed line providers.

Another area is something I've mentioned before, but I do think it's important for our future growth is IP Exchange minutes, it's up over 80%. And really, I think it's important is if you look this year between BT Wholesale and Global Services, that's going to be GBP 100 million business. And was a business that exists 3 years ago, so it's a fast-growth business. We are continuing to invest in it. We've opened a new node in Singapore, and shortly, we will open a node in Miami. And that gives us good worldwide coverage. And we think there's potential business in the multi-GBP 100 million a year business.

Now turning to Openreach. Openreach revenue was down 2%, and regulation is the key thing there. Regulation accounted for roughly 4%. Of that 2%, i.e., revenue would've been up without it by a couple of percent, and broadly, I think was around 8% impact at EBITDA level. Against that, we are seeing good growth in fiber and in Ethernet. Net operating costs are down 2%, and that's despite the additional engineering resource we've had to bring in because of the worst weather we've had really on record, particularly, wet. And that's had a real impact on the number of field visits we've had to do for faults. And we've seen impact, overall, 1.7 million field visits for faults and provisions over the course of the last quarter, and that's a record. But we've managed to absorb that, but it is an ongoing issue.

EBITDA, down 2%, I think reflects the combination of regulation and rain. And physicals are good, some really good physical [indiscernible] 48,000 increase in physical line, so that's return to growth. You see that chart of the right-hand side. And also broadband net adds, up 281,000. That's better the same quarter last year, and significantly better than the quarter, in Q2, 6% up. So some good overall numbers, I think in Openreach, despite the difficulties in terms of the weather.

Another good number is fiber rollout, if you turn to Slide 15. We passed over 13 million premises. We added roughly 100,000 premises per week, which is a great way to roll out. To our knowledge, that's the fastest anywhere in the world. And it's not just the case of rolling out physical infrastructure. We've also seen good rate of increase and the people taking up the service. 1.25 million homes and businesses now connected. 0.25 million came on in Q3 alone, and we are seeing some very high take-up rates in particular areas. There are some exchanges were already over 50% of people have taken up. These are the exceptions, but I think it shows in certain areas, particularly popular.

On BDUK, now following the agreement from the EU to State Aid for the BDUK rural contracts. I think we've seen a really good increase in the pace, and the government's been very keen on pushing that, and I think with some success. So we signed contracts with Cumbria, Herefordshire and Gloucestershire, Norfolk and Suffolk in Q3. I would mention it's not the case of signing the contract, it's delivery. So for instance, in Q2, we signed a contract with Yorkshire, and first customers in North Yorkshire are already connected. And that's an important differentiation, I think, in some of the other schemes you hear. And you see press releases for them and you hear them mention. And actually, it takes a very long time to connect to anyone.

We do see on the slide that we were awarded preferred bidder status in Q3. That's not strictly true now, because we've actually signed both of these deals in the last couple of days, so it moved in Q4 from that preferred status to signed. So really good progress in the U.K. is well on the way to its aim of being the best broadband in Europe. And in many -- on many ways looking at it, looking at increased speeds we've seen. I saw a survey recently that know the U.K.'s second in the G8 behind Japan in terms of speed. So we really are seeing, I think, a good progress, good take-up, good availability and good competition, of course.

So in summary on Slide 16. The word, solid, again. But it is -- we're moving in the right line. It is only a quarter, and I'll say that for the operational progress as well. We recognize as we continue to do, there's a lot more to do and a lot more we can do. And I think that applies in all areas.

The fiber rollout continues to be a success and continues that pace. And every quarter, we are more pleased with how things are going there. BT Sports plans are progressing well, and we apologize for the quote we referred to. Preseason training is going well, but we are pleased with the progress there.

Overall, as a group, we're very much on track for the full year, and actually, on track for our overall plans. What we will do in Q4, I think, is give you quite a bit more detail on where we are and how we're looking at going forward. So we'll talk in a lot more detail in Q4. But in the meantime, we'd be delighted to take any questions you may have. Thank you very much.

Question-and-Answer Session

Operator

[Operator Instructions] Our first question comes from Nick Delfas, Morgan Stanley.

Nick Delfas - Morgan Stanley, Research Division

I've got 2 questions. First of all, on YouView versus BT Vision boxes. When will sport be available on YouView? Because I think at the moment, you still can't get that on the YouView box? And secondly, on the pension funds, obviously, that went up quite a lot since March. When do you expect the government to report on how to protect companies from the impact of the low yields that are in the market at the moment and the relatively high inflation?

Ian Paul Livingston

Okay. Nick, on the YouView, BT Vision, we expect that to happen before we launch our sports proposition. But maybe I'll ask Gavin to say a few more words on it.

Gavin E. Patterson

Yes. Nick, we continue to negotiate with Sky for access to Sky Sports 1 and Sky Sports 2 on YouView. Of course, BT Sport will be available on YouView when it launches. But in terms of the Sky channel, it's something we are discussing with them.

Nick Delfas - Morgan Stanley, Research Division

Is it the technical issue though that prevents you from offering Sky Sports on YouView? Is that a negotiation issue with Sky?

Gavin E. Patterson

I mean at the moment, it's a case of being able to add them to our multicast capabilities. So as Ian mentioned in his presentation, we're rolling that out at the moment. But we have to conclude to negotiations with Sky, and we haven't concluded those yet.

Ian Paul Livingston

So we will see what happens on that. On the pension fund, the government's just started the consultation, so I think it will be a little while before that's concluded, and not in our hands. But certainly, I think it's good and appropriate consultation from the government and a lot of corporates have said the same thing. And it was interesting to hear the Chairman of GPR commenting about maybe the -- some of the funding principles regarding the very heavy investment in gilts was maybe not best way forward. But we'll have to see what happens on that. It -- I'm sure there'll be voices from that profession, who will say different things. So we'll see what happens.

Nick Delfas - Morgan Stanley, Research Division

Briefly, I mean, with bond prices that's very high level, is that something that you're discussing with the trustee about how to move out of those investments and maybe into equity or something like that?

Ian Paul Livingston

Well, the trustee runs the investment policy. I mean, they do discuss it with the company, but they do run the investment policy. And they will, obviously, look for -- look to see what the appropriate mix of investments and the combination of risk and returns. So look at opportunities in infrastructure and places like that, but that's very much -- they run and just talked to us about that earlier. It's probably not a good idea for corporate to try and run an investment policy, so it's a expert investment managers to do that.

Operator

And your next question comes from the line of Maurice Patrick, Barclays.

Maurice Patrick - Barclays Capital, Research Division

It's Maurice. Couple of quick questions. On YouView, love it if you could share some perhaps early data points on viewing stats, what people -- how people consuming it, how that's going. And then secondly, on sports cost with content, can you sort of help us understand a bit about the magnitude of which that will start impacting Q4 and Q1 next year?

Ian Paul Livingston

In terms of YouView, I don't -- I think it's too early for stats, other than to say customers seem to really like it very positive on the YouView box, and we're seeing good take up. So -- but as I said, we started advertising this in January, so I think any extrapolation would be a bad idea at this point. But Gavin, do you want to add anything?

Gavin E. Patterson

The only thing I'd add, Maurice, was the early signs are that it's a decent product. It's a good product. Customers like it and usage particularly of the on demand and catch up compares very well with existing platforms.

Ian Paul Livingston

And on the cost of sporting in Q4. Yes, there is cost. Obviously, we've got people already doing production, but that's something that we will have to try and absorb. And overall, one of these things, and, obviously, we don't recognize the rights cost until we start or hit the Retail business and the impact of it, but we -- the big cost really start to occur starting in -- when we start to advertise the rights cost.

Operator

Your next question comes from Simon Weeden, Citigroup.

Simon Weeden - Citigroup Inc, Research Division

I'm pretty much on the same sort of topic. I just wondered if you could maybe fill in a couple of gaps. First, would it be fair to say that since the beginning of January, you've been seeing a pickup in YouView box shipment. You've already seen a pick-up in net additions on Vision, or are you seeing these YouView boxes going into BT Vision customers' homes? On the subject of set-top boxes, would you be introducing a new unified set-top box in due course to eliminate the duplication here? And on a similar topic, could you tell us when you complete the rollout on multicast, and what technical requirements that needs any barriers you're having to overcome as you go clearly through that [ph]?

Ian Paul Livingston

Okay. On that, and be very careful of management to say is the last 2 weeks have been really good. The answer is yes, we have seen increase and the take up, but one would rather hope after we've advertise it that we would. And so it's been -- has been encouraging over the last few weeks, but it is only the last few weeks, so good stuff there. And in terms of unified set-top box. Yes, absolutely that's the intent, and I think that's indication that I gave to previous question in terms of bringing together in a single box that does everything. Multicasting, we're rolling out now the existing boxes, and as we get towards a unified box, then we'll have the multicasting on that as well, so -- but first of all, give it to the installed base customers.

Operator

Your next question comes from Carl Murdock-Smith, JPMorgan.

Carl Murdock-Smith - JPMorgan Cazenove Limited, Research Division

Two questions please. Firstly, on Global Services. I'm just wondering if you could provide a little bit more color around the strong order intake, particularly, if the strength is it's one or 2 big projects, or is it lots of smaller contracts? And then secondly, on Openreach. I was just wanting a bit more commentary around the lead times. How you say lead times develop now versus last quarter and historically with more resource? Are they starting to get back into normal? And the sense of how much of the 48,000 growth in fiscal launch this quarter was as a result of you getting in control and the more resource coming in there?

Ian Paul Livingston

Okay. So are you moving house, shortly, Carl, is that the question.

Carl Murdock-Smith - JPMorgan Cazenove Limited, Research Division

I'm very worried. I'm very worried, that's why.

Ian Paul Livingston

Well, first of all on Global Services, no, there isn't a megadeal in there. And this is a lot of deals. I mean, some of the reasons I've been not -- we're haven't been gaining the multi hundreds of millions pounds deals in there. I think there's more renewals but not megadeals. There's more renewals in there, but there's made up of a loss of orders, I think, round in the big order book. Luis, do you want to add anything?

Luis Alvarez

I think that there are quite good couple of examples that we mentioned but to put a little bit more color on that as you said. For example, Novartis was the renewal of what we have with them, but we have added also. As you know, they have acquired Alcon, that is a leading player in the eye services industry, and that is adding part of 65 sites around the globe. And we have combined that which is a renewal and extension with the new brands as National Bank of Abu Dhabi, who wants to the best Arab bank in the world. And we are helping them to centralize all of their IT and telecommunications and so on. And the same thing with Clarins, where we have been competing with. That, I think is a good combination of renewals and extensions and a new branch other than with [ph] services.

Ian Paul Livingston

Thanks, Luis. And we have seen -- [indiscernible], but we have seen an improvement in the outstanding base of orders working through. We are hoping for some dry weather one day, Liv?

Olivia Garfield

Yes, the good news, Carl, if you're moving house is that we're -- we are probably literally about 10 days, I think, perfectly back on the agreed and speedy time. So the agreed industry lead time for our new customer provide is 13 working days, so just over a couple of weeks. And we've been 14 days the last few days and gradually improving for the last few months. So yes we think -- we know that all resource come in have made a difference and the backlog of orders this quarter in the caliber pair [ph] is almost worth. So I think you're seeing that. Your other part of the question was whether we're still seeing ongoing, and, I guess, copper growth across markets so we continue to see demands for copper continuing, so it's not just the clear out. We are still seeing the copper continuing to be a desire probably links to 5 orders as well [ph].

Operator

The next question comes from Nick Lyall, UBS.

Nick Lyall - UBS Investment Bank, Research Division

Just a couple, please. On savings. I knew -- can I have a shot at savings at least. I mean, the move to tech services and operations seems pretty substantial, so in very general terms, does that mean the savings for the business before Global Services, the core business could even accelerate or stay similar, and then you can add Global Services savings on top? And then secondly, on -- back on Vision again, can you just explain why December quarter was low, with just 20,000 or 21,000 take-up of Vision and people waiting for YouView. What's the dynamic there, please?

Ian Paul Livingston

I think the second one, let me address that. I think we didn't advertise Vision until New Year. And I think -- and it's just where we're holding far a bit until we felt we have enough starts. And we're out to accelerate, and we have seen an acceleration since then, so we're not unhappy. It's very similar to quarter before and -- but I think our focus is very much greatly in this calendar year, and that focus will increase as we get into the summer quarters. And that's where we'll put our focus. So Vision, we're absolutely happy with. In terms of savings, I think we quite recognize your description of that. Core and global is 2 different things. And what we'll do in Q4 now sits only [indiscernible] interest, but the -- it keep -- we'll talk about -- had better overall savings plans and the scale of sort of this next phase of savings potential across the businesses, not just Global Services and the new TS organization. That's important. There's a number of other things across the business, particularly driving end to end processes. And Tony has mentioned this in previous quarters that this would be a particular focus that will improve customer service, take those out of the business and reduce our cost. But Tony, anything more to add?

Anthony Everard Ashiantha Chanmugam

Yes. I mean, if you look at what we're doing here is we operate business, a chunk of it, a majority of it will move into merging with the design business. But there are other pieces in there that's happening in terms of the overseas activities where we're merging what happened within operate, what happened within our -- the design businesses into Global Services, so that you have one organization operating overseas, one integrated process from order entry to service delivery going through one coordinated overall process. Within the Wholesale business, the support activities, the engineering force that's supporting that, the order entry is being all merged together. It's with work that was previously done within operate. We're moving some design starting the Global Services within the U.K. So this is about integration and single unified processes across the business, across all the lines of business. It's not something that's specific to any area.

Operator

The next question is from Paul Sidney, Credit Suisse.

Paul Sidney - Crédit Suisse AG, Research Division

Just 2 quick questions, please. Firstly, BT saw a slight pickup in wholesale fiber ads in the quarter. I was just wondering, is there any way with BT can further incentivize and better operators to resell Openreach's fiber product? And the second question is on a couple of BDUK contracts won so far, what level of premises connected with that tell you to -- if you -- if we take those contracts?

Ian Paul Livingston

In terms of BDUK, most of the contracts are 90% plus of these areas. So the comment I've made before if we take the -- all of the BDUK together, and I don't know that we'd win all of them, but if we did, we think the possibility for the U.K. is to get well into mid-90% of the U.K. coupled with fiber, whether that's 93%, 94%, 95%, it's a bit early to tell. But that would be -- our expectation on the contracts are mainly 90%-ish of these rural areas. In terms of the headcount, I think, Tony, we recognize that our headcount in terms of wholesale fiber.

Anthony Everard Ashiantha Chanmugam

[indiscernible] it gives the pickup.

Ian Paul Livingston

Pickup. I thought you said hiccup. So I'm wrong, in which case, I'm right there. I didn't see that. Good I didn't give you an explanation for it then. Pick up, we haven't seen pickup. We've seen a pickup in both retail and wholesale and fiber. And the answer is just as more as communication points into -- to be honest, our retail business has pushed fiber, advertised, invested in there and made a priority. A number of other players, I think, were very interested in just keeping that with our previous generation technology that because it suits them for their investment in LLU you and the like. But the customer, ultimately -- I think the customers are showing that they really value fiber and want it. And I think they'll come in. We already incentivized wholesale fiber by having a really low price and also a volume discount for this. And I think it's one of the most attractive wholesale fiber prices anywhere in Europe. And the reason why it's so attractive is we don't feel the network. And so we're pleased with the progress. I think the smaller ISPs are actually doing very well. I think we've seen really good engagement from them. I think we'll see more through some of the larger over time. In the meantime, and I've said this before, the retail part of the business thinks that fibering up the U.K. and making sure the U.K. connected is important for U.K. We believe that as BT as a whole. Other people made don't have that the belief in connecting up the U.K. as being as high in the list of priorities, but that will be their decision over time.

Operator

The next question comes from Jeremy Dellis, Jefferies.

Jeremy A. Dellis - Jefferies & Company, Inc., Research Division

I've got 2 questions, please. One related to the new restructuring program. I just wonder whether we should consider this as being a necessity, if you like, to deliver the existing guidance. So I'm thinking, particularly, the GBP 2.5 billion free cash flow number for FY '15 or does this new program provide you with potential upside to those -- to that existing guidance once the plans are finalized. And then second question is about the sort of the improving trends in revenues x transit. I suppose the third quarter number was probably aided to a degree by -- from the facing of the Global Services contract milestones last year. And I think there was also a benefit in business retail from stopping selling IT hardware. So going forward, the question is your guiding to further stabilization in revenues ex transit, what would be the major drivers of that, please?

Ian Paul Livingston

On the -- first of all, the existing guidance from the restructuring of these. On Q4, we will talk about guidance, going forward. I think it is fair to say that there's some puts and takes but also that if we spend money restructuring, I think the return will be very attractive. So what we'll do is we'll give you an update, I think, on guidance, and we remain positive and competent in the future and ability as a business to generate increased cash flow. Beyond that, I think we'll give an update to reflect also the transformation exercise we referred to this quarter and the impact that will have. In terms of revenue trends, what we said is H1 -- H2 was better than H1 in terms of revenue trends, and that's exactly what you've seen in this quarter and you'll see in next quarter. And I think if you look at some of the fiscal numbers, they're also better in some of the growth in fiber, in broadband, in lines, in order books, so some encouraging things. And we continue to expect to make progress. But Tony, I think you want to add about Global Services [ph]?

Anthony Everard Ashiantha Chanmugam

Yes. Look, there was no phasing benefit from Global Services. This is a straight improvement in the quarter. And we expect that improvement to continue.

Operator

The next question is from Sam McHugh, Sanford Bernstein.

Sam McHugh

Firstly, on the fiber rollout. Can you just help me understand the profile of it in terms of homes passed by Openreach? And then how many homes are marketable in the retail segment? And if that changed relative to previous quarters? I mean, also just the CapEx dynamic between the actual build cost and then the connection or activation costs?

Ian Paul Livingston

I'll ask Liv to talk about the CapEx dynamic between the build cost and -- but we -- the connection costs are pretty straightforward, really. There's a charge for the service price. But I'll ask Liv to just comment on that. In terms of -- there's a gap of about 10 days between something being built and handed over to our retail -- hand over back to all the CPs. So roughly, if you say we do 100,000 a week, there's roughly about 150,000 gap. That's very broadly the parameters, so we're over 30 million in Openreach, so be 130,000 behind. I mean, important thing to think about, if you actually look, I think we've, over the course of last year, tripled the retail fiber base over the course of last year. And we've -- many of the areas we've got in which [indiscernible] have fairly small amount of time, because we've just been building so fast, but we are seeing good take up in these areas. And if an area, for instance, a couple of years, being able a couple of years, we're seeing good double-digit, strong double-digit penetration coming through there. And now is probably the best example where as I said we have more fiber connections in BT Northern Ireland Retail business, and we've got copper. So a good progress, but it's about a 10-day gap between it being available for service provider, having been built and commissioned by Openreach. Liv, on connections.

Olivia Garfield

Yes, on connections, most of our connections are FTTC the fiber to the curb connections. The CP pays or either manage installation or a base connection fee, depending on the communications provider. So that could be GBP 80 or about could be GBP 105, depends on what service you started to go for. So that's kind of how connections works. And obviously, from a CapEx perspective, we would have CapEx and build cost, as you say. And then we've had CapEx for deflation cost. So it just works very, very simply, math-wise. So I guess, I'm not sure whether I'm missing something as to the question, but it's...

Sam McHugh

Yes, what was the kind of a split between the actual connection costs than in the build cost, if you say -- so I mean, when the customer actually connect.

Ian Paul Livingston

The build cost is a big cost and for FTTC. Connecting it is about sending an engineer around, because it's copper at the end, so it's a pretty simple connection, and that's not a capital item. It's expense, so the capital was in the build cost.

Olivia Garfield

They know when build.

Sam McHugh

Okay. And on having a self-install option as well, just on that too.

Olivia Garfield

So in order to have self-install option, we, obviously, have to do the standard activity, which we're working close with the industry. And that requires all of industry to agree some adamants around standard. That's under way. We also need to do a decent trial, and that requires industry to get a couple of thousand trialists signed up. Industry big players -- all the big players are committed to getting trialists. They're in the process of working out some of their system's angle, when they can get this, try this onboard, how their systems can work and also equipment and stuff, so actively pushing it to be ready. We always said that we'd look through already late summer, with the self-install product. It will come down to one of the CPs have trials to scale by then. So it's my side, and we'll have our share of the work done. And we'll probably be able to give you an update as to how we're getting on with signing up trialists on the next set of results. But I think it'll come down to that. So it will be -- yes, it's imminent, I guess, in terms of working hard to get the trial up and running.

Operator

Next question is from Steve Malcolm, Arete Research.

Stephen Paul Malcolm - Arete Research Services LLP

I want to come back to YouView. I'm just really trying to understand when you make a sort of a more concerted push, because my perspective on YouView is that the consumer proposition is sort of confused. And I know there's some gating factors, maybe you can walk us through those. I mean, as far as I understand there's still some sort of PVR functionality issues around IT multicast. Obviously, you want the sports channel around it as well, I guess, merge it with fiber and do a deal with Sky. So when you put all that together, are we thinking sort of April, May before a kind of more concerted single platform pusher on YouView. That will really be helpful. And secondly, a question on regulations. I guess, we're getting a little anesthesized. I'm sure you know, to the kind of the indignant press releases on Ethernet pricing, ladder pricing. Is there anything you can do to kind of stop this one-way traffic against -- did you think you're getting the right advice? Is it -- is the relationship with Ofcom okay? I'm sure you're pretty set out with forking over GBP 150 for the year. I think, that's really [indiscernible] increase services to other CPs on stuff you haven't even done wrong?

Ian Paul Livingston

Yes. I share your frustration. And I think what happened in Ethernet was a completely unexpected consequence of a legal technicality. And we don't think the answer is the right answer, legal. And certainly, and I think there's a fairly widespread view, not economically or morally. Are we pretty fed up about it? Yes. Yes, we share that. And I think, certainly, there is an industry now which -- among the CPs, which is I think sometimes are employing more lawyers than there are engineers. And I think that's not good. It's not good for the industry. It's not good for the customer, because I don't think any of these people were rushing to pass the money back to customers. I think it's clearly gotten into the P&L and their bonuses et cetera. And so it's not a great situation. Now we are -- are we upping our regulatory effort? Yes, we are. And I think we'll be pushing hard to make sure that -- but there's not these unintended consequences. And I think Ofcom would recognize this in terms of fact, the -- some of their work on -- some of their recent proposals haven't had a mixture of obligations, which have really been -- having basically a mixture of price control and the cost orientation obligation with the real problem with Ethernet. And I think Ofcom would recognize that, that created an unfair position. So we're going to be pushing back and pushing back aggressively on that regulatory point of view. As I said, I don't think it was Ofcom's intent, but there is an industry -- we've seen many things where people appeal 32 different points of a price review. And if they're wrong in 31 one of them, it doesn't matter, because it's one-way bet. And I think Ofcom will probably share some of that frustration and we all -- in the past, we've tried to respect the regulatory process and get a sensible answer. We also have to be clear and make sure we protect all of our legal rights going forward. And yes, we're putting more resources into doing just that. In terms of YouView, very simply, the boxes will converge. We expect it in time for launch of BT Sport, so that will be a single box. It's does multicast, conditional access. It will be able to take sport, and that will be then. At the moment, for customers, it's pretty straightforward. There's not actually so much confusion. If they want sport to get one box, if they don't want sport, they get another box. But so we'd like to get one box as soon as possible but the intentions will be in the -- in time for the start of the sport season.

Operator

Next question is from David Wright, Deutsche Bank.

David-A Wright - Deutsche Bank AG, Research Division

A couple of questions. And I'm kind of sorry we've already chased you a lot on the cost side, especially associated Vision and TV et cetera. But is there any materiality or any guidance you can give us on sort of costs spent to date on production, just so we can get an idea of what the real sort of underlying cost movements are in the business. And I appreciate that, that might be a touch difficult. And then second of all, you've obviously acquired the content, the football content in various sources. Are you now in the process of discussing potential wholesale access to those with your competitors? And can you give us any more information than that? I know it's quite difficult at this early stage.

Ian Paul Livingston

I think you already answered the second one. No, I can't give you any more information. We've said we'll always be open. We expect to be multichannel, not multi-platform. It depends exactly whether that's a wholesale or retail relationship. We have no fundamental opposition to wholesale. If we are happy wholesalers across the whole of our business, have always been so. We'll expect to continue to be so. Just as a matter of the price. If the deal is right, we'll wholesale. If the deal is not right, then we won't and that is very simply. In terms of the cost, we talked GBP 0.25 billion of savings last quarter, over GBP 1 billion of savings year-to-date. In terms of the production cost of BT Sport, as much as I know it's a really exciting area, it's really not that material at this point against it. What really -- as we start actually to produce the thing, then you'll get more of it but most importantly is going to be the amortization of the right acquisition cost which start when we actually start, when the season starts. Whilst we have spent already multimillions on this, there's many other developments you spent mighty millions on, the people don't talk about all of the business. So really we're not asking for any sort of, say, what we spent millions on this, it's certainly the impact of it. There's been a lot less, there's been the better to reign on network reach, last quarter as for example. So I think it should be when next year starts and new football season that's when you really look to kick off in cost. Obviously, those start to be more in next quarter as we do the preparation but it's really the start of football season that you see it.

Operator

The next question comes from John Karidis, Oriel Securities.

John Karidis - Oriel Securities Ltd., Research Division

2 questions, please. Firstly, depreciation versus CapEx. Should we expect depreciation to start falling towards the CapEx level? And if so, over how many years? And then secondly, the wet weather exceptional costs, is it possible you could give us an idea of what we're talking about here? Are we talking about single millions per quarter or tens of millions per quarter?

Ian Paul Livingston

Well, the overall scale of the specific item, it will be over a period. It will be, I think, hundreds millions over going into next year, is what's -- including next year as well. So I think we are talking about quite significant changes in the relationship in the business and the scales of opportunities there. In terms of depreciation, depreciation is trending down. I think we'll give in Q4 a bit more guidance. But over time, yes, it will over time trend down towards our CapEx level. And I think you've already start to see some of that trending down happening and you'll continue to see we've been spending out sort of 2.5, 2.6 level now for a number of years and eventually, and that the depreciation starts to come down. I think it's fair to say we've been pretty conservative in the way we've been depreciating assets and that's the right way to be. But yes, you will continue to see it trending down. I think we'll try and get some guidance on that number but I think as we -- in Q4 when we look forward to future years.

John Karidis - Oriel Securities Ltd., Research Division

Sorry, what are you talking about hundreds of millions of exceptionals due to the wet weather?

Ian Paul Livingston

I'm sorry, I misunderstood you. I thought you were talking about restructuring. No, it's a few tens of millions. GBP 10 million, GBP 20 million that sort of amount in the quarter. So double digit but not well into double digit. Sorry, I thought you're talking about the specific item we preferred, going into the course of next year.

Operator

The next question is from James Ratzer, New Street Research.

James Ratzer - New Street Research LLP

I have 2 questions, please. The first one was on your CapEx there was encouragingly low in the quarter, once we go forward into the next few years its fiber build is increasingly completed and fibers is more efficient than copper. I mean is your CapEx guidance of GBP 2.6 billion looking too high? I mean why shouldn't that start to come down quite a bit from this level? And then the second question was on the revenue trends in BT Retail. Since fiber has launched and you've now got 15% of your base already taking the product, but during that period, BT Retail revenues are actually down about I think about 6% or 7%. So what can we see happening to cause that trend to inflect, start to stabilize or unfortunately, do you think retail revenue still remain under pressure going forward?

Ian Paul Livingston

So I think on retail revenue. As I mentioned, as I said, we held the prices right in 2012 like some other players. We've introduced that increase over the prices. If you look at the line revenue, for instance, you see a big drop off. Actually, the other numbers are very encouraging. I think what's encouraging certainly in there in terms of broadband and fiber growth, you see that coming through the numbers and the convergence revenues up. I think you will see improvements in BT Business. We've mentioned that already. So I think just, I think, the fiscals are good and you'll see the absolute numbers will follow on from that. So I'm very happy with that. In terms of CapEx, the fiber program hasn't finished. We've got a lot more to do. When the fiber program first finished, will that improve CapEx or things will be equal, absolutely. But in the meantime, we are busy rolling out to lots of -- we've got still some more in our commercial rollout program to do although we're making very, very good progress. But we also got BDUK. And we'll be moving as quickly as we can on the BDUK stuff, so we're recruiting people. So we were seeing CapEx from that. But overall, we continue to get more efficient in our CapEx. But we are not -- we're most definitely not finished in terms of the fiber program but we'll be making good progress and the great news is of course once you build the thing, that as you sign up customers, you sign up customers, there will be good margins on return on the capital you've already spent. So we're currently progressing CapEx is being done efficiently and effectively and we're going as fast as we can on fiber and other programs.

Operator

The next question is from Guy Peddy, Macquarie.

Guy R. Peddy - Macquarie Research

Just quickly please. On the multicasting technology, are there any sort of capacity limitations to how many HD channels and standard definition channels you financially have? And secondly, on cost-cutting, can you talk about how much of the sort of the GBP 1 billion of effective cost-cutting delivered in the 9 months, therefore, how much of that is sort of directly revenue related and how much of that is actually what I'll call cost, fixed cost being taken out to the business and therefore is sustainable into the longer term?

Ian Paul Livingston

On multicasting, there, yes, there's a limit. But actually, that limit increases as we increase the bandwidth and that's absolutely something that we're investing in to increase the bandwidth, we can deliver with multicasting which in turn will significantly increase the number of channels that we can deal on. So it's a question of how much bandwidth you throw at it and we'll be tripling the bandwidth, I think, over the course of this calendar year. So that will give us a lot more opportunities to deliver more channels. And of course, you've got channels, yes, with single box in YouView over different [ph] areas as well. So you have a range of different options about how you deliver things. Tony, do you want to talk about the cost side of things?

Anthony Everard Ashiantha Chanmugam

Yes. I mean, over half, slightly over half, the costs that are non-revenue related, on the slide pack you'll see that we put out GBP 2 million [ph] was transit type of revenues, so revenue costs associated with the transit revenues. The bulk of it, the costs that we take out are long term. They are sustainable. I think it's worth probably emphasizing to everyone that the opportunities for further cost-cutting remains within the business. We put together the requirement for a restructuring provision. We'll give the details on that and that will make substantial capital expenditure across the business during the course of the next couple of years.

Operator

The next question comes from Lawrence Sugarman, Liberum Capital.

Lawrence J. Sugarman - Liberum Capital Limited, Research Division

Just a couple of questions for me. Firstly, in your commentary, you talked about in Global Services, things sort of not being incrementally -- there were perhaps some signs of improvement. Can you perhaps give a little color in terms of whether we're seeing any improvements particularly in the U.K? And also just with respect to medium-size businesses as well, how's the macro environment developing? And on the second, there was a reference to the debt profile. I know in the previous set of results, you talked about how the opportunity for potential savings around interest, it's sort of a more medium-term issue. Has anything sort of changed around that? Are there any opportunities developing in the debt market to potentially increase the rate of interest that's being paid?

Ian Paul Livingston

I'll let Tony talk about debt profile. On the Global Services, yes, it's difficult in one quarter to give too much of a view. And I think I would say overall, the U.K. is probably a bit less worse which seems to be the phrase of the moment and I think that's true both in the large corporate side and the SME sector. Government expenditure I think remain subdued. But a lot of our U.K. customers are big global customers and that's -- so are they impacted by the U.K. economy or otherwise, but U.K. still difficult, not as difficult as Southern Europe. But certainly, it doesn't look like the high-growth of economies. SMEs, I think as of many things, there remains a headwinds with SMEs but we think there remains a real opportunity with SME market. And a lot of this is about how you grow your market share. If you look at the total iCT market for SMEs. We've got 10% market share. So whilst in communication we've been gaining market share, certainly according to all the Ofcom numbers for a number of quarters, it's been against a declining market and that's been problematic, we've got a 40-odd percent market share in that and that's difficult to overcome the declining market. And iCT -- in IT market where we've got a low market share actually the [indiscernible] you grow market share is the most important thing. And I think we remain positive on our opportunity in the SME market. On debt, Tony?

Anthony Everard Ashiantha Chanmugam

Yes. If you look at Slide 8, it shows the profile of the debt that we're covering forward. But very simplistically, in terms of the interest payment, the GBP 1.4 billion that we paid down -- we have savings at 5.7 to 7 which is the average coupon rate over that. In terms of the ability to buy back old debt, I can't get that to be NPV positive and we're going to do anything unless we can make it NPV positive. So that will just have to flow through. If opportunities come up that allows us to do that, then we'll take it.

Operator

The next question comes from Adam Rumley, HSBC.

Adam M. Rumley - HSBC, Research Division

A couple of question for the fiber deployment. Firstly, do you think the government is satisfied with the progress, are they happy with the fact that you're winning all the BDUK project contracts? And then, secondly, are you concerned about state aid and the risk that the government funds could be directed towards parallel fiber build against cities? I'm thinking here particularly at Birmingham. And then finally, I just wondered if you could give us an update on the retail side of the customers taking the opportunity, if fiber product is still the majority?

Ian Paul Livingston

I'll ask Gavin to talk about retail customers. In terms of pace I think it's a bit difficult for people -- people service should do fast ride with the fastest in the world. And I think I'm not aware of an interplanetary contest on this but we're doing well as far as earth is concern, fastest in the world. We are working with government very closely to see how we can go faster because many of the things are things like planning, issues, electricity supply and timing to move these obstacles, we've recruited 1,000 people this year to help them to build, many of them from the armed forces. And I said many times we don't think we will win every area. There will probably be somebody who will win. The reason we're winning is actually because we've got an industrialized process and we're prepared to commit the investment. It's sort of that's not our fault. But one thing is when we win, we've got open platforms and allow anyone to sell the service. So actually the U.K. is in a much better position if BT -- with its open platform, whole range of service providers that already have the system to provide this and it's why you've got 60 or 70 people providing, offering fiber to customers from BT, whereas if you look at some of those specialized projects like in South Yorks, I think they've done that sort of 100 or few 100 connections from a few service providers. So I don't think that's good for the U.K. and probably more importantly not good for customers. And in terms of cities, I think we and Virgin would share the same view that the Birmingham program has not been well thought out. I think in the U.K., we should really be focusing at where there isn't an infrastructure rather than where there already is. Particularly focused in areas such as business parks which maybe will be a bit more difficult to reach. And we both, Virgin and ourselves, we'd say, the government not a terribly sensible way and a whole revenue will come up with the new sets of proposals because the current one is, I think, will be a real example of Euromoney as a taxpayer being wasted on the fact, and will stifle some of the life investment, European premium. So I think it's -- a corporate [indiscernible] will come a different answer and certainly we've been working with a number of cities as I'm sure other providers have to really identify how we can turbo-charge businesses because that's what the U.K. needs, is businesses being turbo charged by having fiber where they're not available rather than giving them an alternative fiber to one that already is. Okay.

Gavin E. Patterson

I think we have a question on retail. Metric, I've talked about before is where we rolled out fiber, and customers are out of contract, what percentage of them take fiber who could and that continues to run over 3 quarters. So when faced with the choice, the majority are taking fiber, a good majority in fact. And indeed, 50% of them are taking the top tier.

Operator

The question comes from James Britton, Nomura.

James Britton - Nomura Securities Co. Ltd., Research Division

Two quick ones. Have you've been able to assess the consumer reaction to the January price increases yet? I think you bill line rental 3 months in advance? So would you expect any churn pickup in the coming quarters? And then finally, can you just update us on your expectations for FTTH rollout amount to 2015?

Ian Paul Livingston

On the second one that really depends on what happens, I think a couple of things. First of all what happens on that BTUK in terms of the particular mix that the local authority's looking for. Also on the, I think, changing some of the rules regarding access to multi-dwelling units is really important as well as really making the government would do more fiber to the premise if we could actually get into the premise, and some other apartment blocks [indiscernible] holders not being terribly helpful in that in some cases. But actually the important thing is a point we've made before, is we intend to make fiber to the premise available to anyone who has got the fiber [indiscernible] available. So the answer is going to be over 90% of the U.K. what we should have ultimately fiber [indiscernible] available to them if they want to use it by a fiber to the premise on demand product. I think it's really important to say what we're trying to do is deliver speeds that are currently 80 and will be over 100 meg per second and maybe even more to all customers. And for those customers of which I don't think there will be an enormous number who say actually, I want to be at multi-100 megabits per second because actually I'm a small business or who's very IT intensive or whatever. And I think it won't be a huge number of these. I want to do something more and that will be available to them. But we get the best of both worlds by having the speed and price associated to the FTTC and speed of rollout and also the availability for those people under FTTP and I think that's a really good answer and I think it's saying a number countries have been looking at. It's interesting to hear, for instance, Malcolm Turnbull of Australia commenting that the Australian fiber program should really look to copy BT in the U.K. And I think that's probably a first that we're having someone from Australia say we should copy the U.K. So that's in terms of the reserve.

Anthony Everard Ashiantha Chanmugam

Churn effect.

Ian Paul Livingston

The prices. I thought particularly, you've got to remember, I mean, I'll just comment, but few tend to comment on price increases and not price reductions and we've been in the marketplace, or actually, we've seen aggressive offers on broadband on one side and probably some inflation, inflation pricing increases in line rental, albeit we froze our prices through the course of last year. But Gavin, do you want to...

Gavin E. Patterson

I think you captured the point I was going to make. I wouldn't -- I'd see a marginal effect of any price changing in January or I would expect to see and you've got to balance the promotions and the new propositions that we've got coming through on broadband and fiber and TV against anything on the price increase side of things. So I think it'll be a marginal effect.

Ian Paul Livingston

You'll tend to see because newspapers cover price increases rather than price reductions but the U.K. remains one of the cheapest places to buy telecommunication, for instance, 30% to 40% cheaper than the U.S. which is quite remarkable and that, I think, that's quite an interesting statistic. And if you look against Continental Europe, very much the same story, U.K. is one of the cheapest markets, anyway. So with that, thank you very much for coming on the call. Have a good day, and I hope you have a very good weekend.

Operator

Thank you, ladies and gentlemen, that concludes your conference call for today. You may now disconnect. Thank you for joining and have a very good day.

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