Q1 2008/9 Results 31 July 2008 BT Group plc

Ian Livingston – Chief Executive BT Group plc

© British Telecommunications plc Forward-looking statements caution Certain statements in this presentation are forward-looking and are made in reliance on the safe harbour provisions of the US Private Securities Litigation Reform Act of These statements include, without limitation, those concerning: expectations of continuing growth in revenue, EBITDA, earnings per share and dividends per share; continued growth in BT Global Services revenue, and EBITDA margin improvement; BT Retail EBITDA growth and improving trends in BT Wholesale; continued growth in the broadband market; further cost savings; expectations regarding capital expenditure, and levels of free cash flow; planned investment in fibre-based super-fast broadband; investment in BTs 21st Century Network and growth of the 21CN Ethernet footprint; and the scope and delivery of next generation services and applications. Although BT believes that the expectations reflected in these forward-looking statements are reasonable, it can give no assurance that these expectations will prove to have been correct. Because these statements involve risks and uncertainties, actual results may differ materially from those expressed or implied by these forward-looking statements. Factors that could cause differences between actual results and those implied by the forward-looking statements include, but are not limited to: material adverse changes in economic conditions in the markets served by BT; future regulatory actions and conditions in BTs operating areas, including competition from others; selection by BT of the appropriate trading and marketing models for its products and services; technological innovations, including the cost of developing new products, networks and solutions and the need to increase expenditures to improve the quality of service; the anticipated benefits and advantages of new technologies, products and services not being realised; developments in the convergence of technologies; fluctuations in foreign currency exchange rates and interest rates; prolonged adverse weather conditions resulting in a material increase in overtime, staff or other costs; the timing of entry and profitability of BT in certain communications markets; and general financial market conditions affecting BTs performance and ability to raise finance. BT undertakes no obligation to update any forward-looking statements whether as a result of new information, future events or otherwise

© British Telecommunications plc Q1 2008/9 key points Good revenue growth up 3% Strong order intake, growing order pipeline EBITDA* up 1% –revenue growth and cost savings –effect of LLU –higher input costs Working capital –weak versus strong Q4 –full year cash flow forecast remains EPS* up 2% –25th quarter of growth * before specific items and leaver costs

© British Telecommunications plc Q1 2008/9 revenue by customer Strength in mix of customers and businesses Corporate 12% Business 5% Consumer flat Carrier 7% External revenue

© British Telecommunications plc Q1 2008/9 line of business summary Retail – better than expected performance Wholesale and Openreach – performed as expected Global Services – strong revenue but margin needs improvement

© British Telecommunications plc Q1 2008/9 line of business overview Global Services Strong revenue growth –33% non-UK revenue growth –NITS/MPLS revenue up 19% EBITDA* up 10% EBITDA* margin growth held back –FX –decline in higher margin UK calls and lines 15% EBITDA* margin target remains Q1 order intake £1.9bn up 12%, order pipeline c.£29bn * before specific items and leaver costs

© British Telecommunications plc Global Services £1.9bn order intake in Q1 Rolling 12 months order intake £8.2bn DFTS Networked IT services Other orders 2008/92005/62006/72007/8 £m

© British Telecommunications plc Q1 2008/9 line of business overview Global Services Focus on margin improvement: quality of contracts replicable solutions product mix product rationalisation cost savings initiatives contract execution maturity of contracts

© British Telecommunications plc Q1 2008/9 line of business overview Retail Revenue growth Strong profit growth –all business units growing profits BT Business up 7% –NITS revenue up 38% –fast growing Tradespace community Consumer revenue trend improved –ARPU up £4 to £278 –Option 2 & 3 calling plans up 53% year on year –c.300,000 Vision customers Maintained share of DSL and LLU installed base 35% –new Home Hub launched

© British Telecommunications plc Retail new Home Hub Best wireless range of any UK broadband provider Our simplest ever set-up process Improved security More energy efficient –allows power consumption control

© British Telecommunications plc Q1 2008/9 line of business overview Wholesale Trends continue as expected –decline in broadband reflects LLU growth –continued decline in low margin transit revenue –growth in managed network solutions and white label revenue Managed network solutions –Q1 order intake £490m –rolling 12 month order intake £1.2bn, Sky, vodafone and O2 deals –order pipeline £2.7bn Around a third FY 2008/9 revenue contracted Good cost reductions

© British Telecommunications plc Q1 2008/9 line of business overview Openreach Continued steady performance LLU net additions slowing Slower housing market affecting connections as expected Cost efficiencies driving margin improvement Driving for a fairer regulatory environment LLU net adds 2008/9 2005/6 2006/72007/8 000

© British Telecommunications plc Priorities Customer service Global platforms Agility Customer loyalty Lower costs Margin expansion Stronger cashflow Shareholder returns

© British Telecommunications plc Customer service Right First Time programme: broadband repair and help – dissatisfaction reduced by a third complaint volumes reduced by a third abandoned calls have more than halved lead times for repair and provision down by a quarter access faults down by 16% …but still more to do

© British Telecommunications plc Global platforms Investing for the future North America Wire One, Ribbit LatAm Global sourcing centre MEA Radianz/Etisalat in UAE AsiaPac Frontline, China & Korea PoPs Russia/CEE Global sourcing centre Western Europe Net2S, Stemmer, SND UK 21CN, NGA

© British Telecommunications plc Global platforms Next Generation Access Total investment of c.£1.5bn Available to up to 10m homes by 2012 Majority fibre to the cabinet Basis for nationwide demand led roll out Commencing discussion with Ofcom on regulatory framework Investing in our global platforms

© British Telecommunications plc Global platforms 21CN 100% of UK core and metro nodes interconnected –ahead of plan 21CN Broadband –now available to 1m homes and businesses –target 10m by April CN Ethernet –available from 100 nodes + –target 600 nodes by April 2009 –underpins mobile deals in BT Wholesale worth £770m Software development kits Investing in our global platforms

© British Telecommunications plc Ribbit Silicon Valley based software company Ribbits technology brings telephone functionality to the web Ribbit for Salesforce.com –integrated into commercial CRM system Open platform –thousands of developers using technology to develop applications

© British Telecommunications plc Priorities Customer service Global platforms Agility Customer loyalty Lower costs Margin expansion Stronger cashflow Shareholder returns

© British Telecommunications plc Global Services Retail Wholesale Openreach 2008/9 outlook line of business Full year Group guidance unchanged – we expect revenue, EBITDA*, EPS* and dividends per share to grow in 2008/9 * before specific items and leaver costs Continued strong revenue growth EBITDA* margins may fall slightly in 2008/9 Solid EBITDA* growth Q2 & Q3 similar to Q1, improving trend in Q4 Stable performance

Hanif Lalani – Group Finance Director BT Group plc

© British Telecommunications plc Q1 2008/9 line of business financial headlines GroupGlobal ServicesRetailWholesaleOpenreach 3% Revenue13%3%12%1% 1% EBITDA * 10%11%14%2% * before specific items and leaver costs

© British Telecommunications plc Global Services Revenue £2.1bn up 13% –45% revenue is non-UK, up 33% Costs & savings –network optimisation savings –new cost reduction plans EBITDA* £195m up 10% –EBITDA* margin 9.5% * before specific items and leaver costs EBITDA* 2006/7 2007/8 2008/9 £m

© British Telecommunications plc Retail Revenue £2.1bn up 3% –broadband up 17% –calls & lines down 4% Costs & savings –gross margin 36.8% up 60 b.p. –SG&A reduced by £1m EBITDA* £368m up 11% –EBITDA* margin 17.4% up 120 b.p. EBITDA* 2006/7 2007/8 2008/9 * before specific items and leaver costs £m

© British Telecommunications plc Wholesale Revenue £1.2bn down 12% –transit & interconnect down 19% –private circuits down 15% –broadband down 26% –managed network solutions up 27% Costs & savings –27% reduction in SG&A –customer service efficiencies and productivity improvements EBITDA* £322m down 14% External revenue mix Transit & interconnect Broadband Private circuits Man. network soln. * before specific items and leaver costs £m

© British Telecommunications plc Openreach Revenue £1.3bn down 1% –external up 11% –internal down 3% Costs & savings –productivity improvements –operating costs down 3% –superior service EBITDA* £491m up 2% External LLU BT Wholesale (external sales) BT Retail ADSL broadband * before specific items and leaver costs /92005/62006/72007/8 2004/5

© British Telecommunications plc Profit and loss account * before specific items and leaver costs

© British Telecommunications plc Free cash flow

© British Telecommunications plc Margin management & main cost reduction initiatives Operational efficiencies c.£200mProcurement/COS c.£250m Overhead initiatives c.£150mLOB specific c.£200m FY 2008/9 savings target increased from £700m to c.£800m Right First Time Service systems automation Productivity improvements Fault visit reduction Network optimisation Supplier savings Improved demand management Overhead function reductions Global sourcing Marketing efficiencies Billing programme Cable recovery programme

© British Telecommunications plc Balance sheet Pension fund –£0.6bn post tax deficit at 30 June 2008 on IAS19 basis –next triennial funding valuation at 31 Dec 2008 –sustainable, modernised pension scheme Liquidity –net debt £10.6bn –£4.3bn debt raised in last 12 months –£2.4bn committed facilities –solid investment grade credit rating IAS19 pre tax valuation £bn 2002/32003/42004/52005/62006/72007/82008/9

© British Telecommunications plc 2008/9 outlook Revenue Cost savings c.£800m expected EBITDA* Earnings per share* Capex c.£3.2bn 2008/9, c.£3.1bn 2009/10 Free cash flow c.£1.4bn Dividends per share * before specific items and leavers The Board remains committed to the dividend

Q&A BT Group plc

© British Telecommunications plc