KCOM Group Forges Strategic Agreement with BT Group

June 22, 2009

KCOM Group has signed a strategic agreement with BT Group, which will see KCOM extend its network reach through access to BT's national network, and outsource the management of its network assets to BT's wholesale division.

The agreement takes aim at a number of important benefits to the KCOM Group. These are directly aligned with the findings of the KCOM Group's strategic review, which was undertaken last November. As outlined at KCOM’s full year results in June, the key areas of focus during the next 12 months are:

- to transition to a more focused and integrated business model
- to deliver extended reach and range of our communications products and services
- to reduce the ongoing capital and fixed investment requirements of the business
- to continue to reduce operating costs and tighten focus

Through this agreement with BT, KCOM will reduce the ongoing fixed costs and capital expenditure associated with the management of its network infrastructure. The retention of KCOM’s existing fibre access network, coupled with access to BT's network scale and service capability, will position the KCOM Group very strongly in the provision of communications services to its target markets.

The managed network services agreement with BT will see the phased and controlled outsource of the management of KCOM's UK network operations to BT over the next few years, with the initial stage of this work being completed in September. BT will manage, maintain and enhance network operations, network management and vendor management on KCOM's behalf, allowing KCOM to focus on meeting the needs of its customers.

Bill Halbert, Deputy Executive Chairman says, "This agreement is an important step in the transformation of the KCOM Group. It will allow us to reduce our fixed costs and capital expenditure significantly, while strengthening our competitive position and ability to grow. In addition to creating a more variable cost model, it gives us the ability to offer more extensive and competitive carrier and managed communications services and new next generation propositions to our customers. "

Sally Davis, Chief Executive of BT Wholesale, said: "This is one of the most exciting developments to happen in the UK fixed line communications market for some time. It allows KCOM's business to benefit from BT's national reach as well as our significant ongoing investments in 21st century network infrastructure and next generation product and service developments. We are delighted that KCOM has chosen BT and look forward to working together to build a strong and lasting relationship."

Going forward, in addition to strengthening its managed communications service capability, the partnership provides KCOM with the scope to deliver a full suite of next generation products and services to its customers, which both supports and strengthens the business's strategy to focus on delivering high value services with recurring, sustainable revenues.

KCOM Group's transformation will see the Group focused around two core businesses: the first being the East Yorkshire activities and Eclipse Internet, and the second the managed communications business serving the needs of the enterprise and public sector markets.