Reuters Group PLC Annual Report and Form 20 ... - Thomson Reuters

6 Reuters Group PLC Annual Report and Form 20-F 2002Company informationcontinuedInstinetInstinet, the largest global electronic agency securities broker,has been providing investors with electronic trading solutions formore than 30 years. Its services enable buyers and sellers worldwideto trade securities directly and anonymously with each other, gainprice improvement for their trades, manage their orders and lowertheir overall trading costs. Through its electronic platforms, Instinet’scustomers also can access over 40 securities markets throughout theworld, including Nasdaq, the NYSE and stock exchanges in Frankfurt,Hong Kong, London, Paris, Sydney, Tokyo, Toronto and Zurich.Instinet’s customers primarily consist of institutional investors, such asmutual funds, pension funds, insurance companies and hedge funds,as well as market professionals, including broker-dealers.Instinet completed an initial public offering in May 2001 and itscommon stock is listed on the Nasdaq Stock Market (symbol INET.O).In October 2001 Instinet acquired ProTrader Group LP, a providerof advanced trading technologies and electronic brokerage services,for consideration consisting of cash and shares. In September 2002,Instinet completed its acquisition of Island Holding Company, Inc., theparent company of The Island ECN, Inc. (Island), a leading electronicsecurities marketplace, in an all-stock transaction. As a result of theinitial public offering, the ProTrader acquisition and the Islandacquisition, Reuters Group’s shareholding of Instinet is nowapproximately 63%.Communications networks and equipmentThe Group uses multiple communications networks, employinga complex variety of technologies, for distribution of its products.Reuters Group completed the first year of a major strategic initiative tomigrate its principal product sets from its prior network infrastructureson to a single global IP-based network provided by Radianz Limited(Radianz), the 51% owned joint venture with network services providerEquant BV. This will deliver greater resilience, speed and capability atlower overall cost.Reuters has four global technical centres, two main technical centresand many smaller local data centres. Our data centres are linkedby communications services provided by Radianz, using dedicatedinternational communications circuits that rely on satellite links,optical fibre cables and coaxial cables. These circuits are leased byRadianz from various governmental and private telecommunicationsoperators including Equant. Communications between data centresand subscribers are provided by Radianz in 20 countries and byReuters directly or third parties elsewhere; they mainly use dedicatedterrestrial circuits which are leased from telecommunications operatorsand are supplemented by a variety of other transmission systems.These include satellite-based networks for delivery of services to smalldish receivers on customer premises.For further information regarding Radianz and the relationshipbetween Reuters Group and Radianz, see page 77.Two of the global technical centres and a number of smallerdistribution centres were acquired in 2001 as part of Reutersacquisition of the core North American equities information andtrading businesses of Bridge Information Systems, Inc. Some ofthese smaller distribution centres, located in Europe and Asia, aremaintained by Moneyline Telerate (which acquired certain otherbusinesses of Bridge).The network services agreements with Radianz and with SavvisCommunications Corporation (Savvis), Bridge’s legacy networkservice provider, are important to the Group’s capability to deliverproducts and services to customers. Although reasonable steps aretaken to ensure continuity of service, any failure or interruption ofsuch systems could have a significant effect on the Group’s business(see ‘Risk factors’ on page 34). A summary of these network servicesagreements is given on page 77.SubscribersReuters products are generally billed by number of user accesses todatafeeds, portable devices and terminals. The number of accessesat the end of the last three years are shown below:31 December000s 2002 2001 2000Premium products* 93 84 312000/3000 series 98 134 166Mid and lower tier 302 374 330Total 493 592 527*Premium products include 3000 Xtra, Dealing and BridgeStation.Joint ventures and associatesReuters principal joint ventures and associates include:TIBCO Software Inc. (TSI). TSI provides total business integrationsolutions delivering infrastructure software that enables businesses tointegrate their business systems in real-time. In 1999 TSI completed aninitial public offering of its common stock on the Nasdaq Stock Market(symbol TIBX.O). At 31 December 2002 Reuters held approximately50% (39% fully diluted) of the outstanding shares of TSI. Reuters Groupdoes not consolidate TSI for accounting purposes. For information ona license agreement between Reuters and TSI with respect to TIBCOtechnology, see ‘Related party transactions’ on page 72.Radianz. Radianz, the joint venture with Equant, was formed in 2000to develop a secure internet protocol network for use by the financialservices industry. Reuters own 51% of the company but shares votingcontrol and therefore does not consolidate Radianz as a subsidiaryfor accounting purposes. Radianz connects all types of marketparticipants: brokers, institutions, exchanges, custodians, and clearingand settlement houses. An important part of Reuters strategy is tobuild communities in the securities markets as Reuters has done inthe foreign exchange and money markets.Factiva. Factiva is a 50% owned joint venture with Dow Jones formedin 1999. It provides a broad range of global news and a deep historicalarchive of business information. Through its products and technologysolutions Factiva enables enterprises to retrieve information and tointegrate content into their business applications and intranet portals.Factiva’s business information includes Reuters and Dow Jonesnewswires, plus nearly 8,000 other newspaper and periodical sourcesand 8,500 business-oriented websites from around the world, deliveredin 22 languages. These sources provide current news, historical articles,photographs, market research and investment analyst reports, andstock quotes. Factiva’s primary audience consists of informationprofessionals and researchers, with around 70% of their revenuederived from sources outside the financial services sector. Reuters is amajor distributor of Factiva content within the financial services sector.Reuters Group does not consolidate Factiva for accounting purposes.CompetitorsThe Group faces significant competition in all market sectors andgeographical areas in which it operates.Competing information products for the financial markets are offeredby Bloomberg LP, Quick Corporation of Japan, Telekurs AG, ThomsonFinancial, a division of The Thomson Corporation, Sungard, MoneylineTelerate (including the Telerate business formerly owned by Bridge)and Factset, plus a number of smaller local and regional competitors.In connection with the Bridge acquisition, Reuters agreed to provideMoneyline Telerate with various network, software development, datamanagement, customer support, administrative and other transitionalservices and granted to Moneyline Telerate certain intellectualproperty and software licenses. Moneyline Telerate agreed to provideReuters with various field support, network and administrative servicesand co-location rights, in each case for a term not to exceed four years(depending upon the service in question).