Strategy in action

Our strategic goals

We aim to deliver organic service revenue growth of 1-4% per year until the year ending 31 March 2014. We see five key areas of growth potential:

• mobile data: accelerate mobile data growth opportunity;
• emerging markets: increase mobile penetration and data adoption;
• enterprise: selectively expand growth segments;
• total communications: continue to develop the adoption of converged fixed and mobile services; and
• new services: expand into new growth areas including machine-to-machine and financial services.

We will continue to drive benefit from the Group’s scale advantage and maintain our focus on cost. We have favourable cost positions in many markets and intend to generate further significant savings from technology standardisation, off-shoring, outsourcing and platform sharing.

We will seek to maximise the value of non-controlled interests either through generating liquidity or increasing free cash flow in order to fund profitable investment and enhance shareholder returns.

We will continue to apply capital discipline to our investment decisions through rigorous commercial analysis and demanding investment criteria to ensure any investment in existing businesses or acquisitions will enhance value for shareholders.

We aim to maintain our low single A long-term credit rating.

Business drivers

The following are some of our principal business drivers which may influence our performance.⁽¹⁾

A number of factors may impact the prices we charge and therefore the revenue we receive including:

• competition;
• regulatory decisions and legislation on mobile termination rates, international roaming charges and the availability and cost of spectrum; and
• changes in macroeconomic conditions.

The net savings from our cost efficiency programmes may be impacted by inflationary pressures and the volume of traffic on our networks which can affect our operating costs. Net savings will be used either to invest in commercial activities or respond to competitor activity or retained for margin enhancement.

In those businesses in which we have a non-controlling interest, matters such as the timing and amount of cash distribution may require the consent of our partners which can influence the level of free cash flow we receive from that business.

The returns we make on investments may be impacted by competitor activity, regulatory decisions and macroeconomic conditions that affect our commercial position, financial performance and the market environment in which we operate.

The cost of financing investment and hence the return on investment may be influenced by changes in credit markets or our credit ratings.

How we measure our progress

Key revenue performance indicators⁽²⁾

Organic European operating expenses (£bn)

Dividends and sale proceeds from non-controlled interests (£bn)

Return to shareholders (£bn)