Then ask how is there any room for BT's capital contribution given the scale of state aid reported in BT's accounts, relative to what's been delivered and relative to what BT did commercially?
How can this be state aid complaint when there is not even a reference to BT making a capital contribution in the notes of the accounts?
There's just too much to be able to fit into 600 characters...
Here are the ways I look at BT's expenditure, and the kind of questions I ask to see whether the data presented is sensible. Or whether further dirt needs digging.
Sniff test 1: Is BTOR's net capital spend returning to pre-NGA levels?
Sniff test 2: Are BTOR spending a lot more than they receive from state aid?
Sniff test 3: What rate of BTOR expenditure should we expect?
Sniff test 4: What rate of state aid payments should we expect?
Sniff test 5: What relative proportion of state aid do we expect?
Test 1: We need to see BTOR expenditure down near £700-800m for this, but the quarterly figures don't show this. They show total spend is increasing (and increasing a lot in the last year, when the state aid is coming in quickest).
(The history of BTOR capital expenditure figures is listed below)
Test 2: In the Q4 accounts, and for the whole of 2014/15, BTOR's capital spend went up. The state aid only accounts for 25% of total capital expenditure.
In the other 75% is the "room" for BT's own contribution. That's enough room to pass the sniff test. No note is needed in the accounts to make it "state aid compliant"
So - there's room, but does this mean BT made any of their own contributions to the NGA rollout?
Test 3: I'd be expecting BT to be capable of wiring in the same number of cabs now (peak BDUK rollout) compared with 2013 (peak commercial rollout). However, the line density will be lower, so I'd expect fewer homes passed.
Meanwhile, I'd expect the length of fibre spine to be getting much longer - so there'd be higher costs for civil engineering (likely contractor?).
In 2013, Liv reported an NGA spend rate of £300-400m pa, out of BTOR total £1144m. About 30% of their total spend, when passing 80,000 premises per week.
In 2015, BTOR's total spend (net of aid) remains the same; it is a reasonable assumption that the NGA spend rate remains similar: £300-400m pa.
This kind of rate of expenditure is probably within the limits that city financiers will accept - keeping within the cashflow generated by the business.
In the middle of the 2014/15 financial year, they reported passing 60,000 premises per week, with 40,000 of these within BDUK - a rate that suggests they have been keeping up with the rate of cabinets deployed, but they're gradually getting less dense.
At the same time as keeping their own spending going, they've pulled in (and spent) aid of £378m. They either employed a lot of new people for that, or contracted a lot of work out.
Those rough figures suggest BT is continuing to spend their own money on the NGA rollout as before, but state aid is paying for a large slab of additional expenditure.
Isn't that what we would expect?
I might go as far as to say it exceeds my expectations. The combination of continuing their own spending (within the cashflow of the business) plus one-off additional expenditure, fully financed by state aid, leads to a total that is higher than I'd have predicted.
Test 4: For BDUK phase 1 alone, we expect BT to receive £1.2bn of combined state aid over the course of 4+ years - but spread unevenly, with notable ramp-up/down. Right now would probably be the expected peak rate (as seems to be confirmed in the Welsh report this week)
If totally even, the aid would spread out as £300m pa, £75m pq.
Receiving £378m in the peak year seems reasonable.
Test 5: In all of the press releases for phase 1 BDUK contracts, BT's own contribution amounted to slightly less than the total subsidies. IIRC, I calculated around £1bn for BT vs £1.2bn from public subsidy, but I can't find my figures right now.
So let's just say that I'd expect BT to spend their own money at, very very roughly, the same rate as the state aid they receive; probably slightly less.
And the Q4 figures from BT suggest, very very roughly, state aid totals around the same amount as BT's own expenditure.
When looking at BT's financial reports, the figures offered pass my "do they make sense?" tests.
Capital spend, £m: 2008/09 Total Q4= 248 FY= 951 2009/10 Total Q4= 278 FY= 907 2010/11 Total Q4= 294 FY=1,087 2011/12 Total Q4= 279 FY=1,075 2012/13 Cap Q4= 293 FY=1,144 Aid Q4= 0 FY= 0 Total Q4= 293 FY=1,144 2013/14 Cap Q4= 252 FY=1,049 Aid Q4= 59 FY= 126 Total Q4= 311 FY=1,175 2014/15 Cap. Q4= 278 FY=1,082 Aid Q4= 117 FY= 378 Total Q4= 395 FY=1,460