1. Q3 Results 2004/05 10 th February 2005 Growth through transformation - four quarters running

2. Q3 Results 2004/05 Ben Verwaayen CEO Growth through transformation - four quarters running

3. 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 1995. These statements include, without limitation, those concerning: continued growth in new wave turnover from broadband, ICT and mobility solutions growth; turnover transformation and underlying revenue trend; expectations regarding broadband DSL line connections; implementation of BT’s 21st century network; and expectations regarding cost transformation, capital expenditure and cost efficiency delivering EPS growth. 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 BT’s operating areas, including competition from others; selection by BT and its lines of business of the appropriate trading and marketing models for its products and services; fluctuations in foreign currency exchange rates and interest rates; technological innovations, including the cost of developing new products, networks and solutions and the need to increase expenditures for improving the quality of service; prolonged adverse weather conditions resulting in a material increase in overtime, staff or other costs; developments in the convergence of technologies; the anticipated benefits and advantages of new technologies, products and services, including broadband and other new wave initiatives, not being realised; and general financial market conditions affecting BT’s performance. BT undertakes no obligation to update any forward-looking statements whether as a result of new information, future events or otherwise.

4. Key deliverables Build on network centric ICT capability Deliver on BROADBAND Create convergent MOBILITY solutions Defend TRADITIONAL business vigorously Drive for COST LEADERSHIP

5. Q3 04/05 - Turnover transformation + 35% - 4% * New wave Traditional Total Revenue £bn New wave : BT Retail and Wholesale new wave plus C&SI and Solutions revenue * adjusted for the impact of mobile termination cut + 3.2% *

6. Underlying* revenue trend improving 2003/04 2004/05 2002/03 * 2002/3 is adjusted to take account of Concert unwind. 2003/04 and 2004/05 adjusted for the impact of mobile termination cut

7. Q3 04/05 : turnover by customer group New Wave proportion for Q3 04/05 03/04 Consumer 8% 4% Business 19% 13% Major Corporate 49% 42% Wholesale/Carrier 17% 10% TOTAL 25% 18% Consumer 32% Business 13% Major Corporate 31% Wholesale / Carrier 24% Q3 Turnover growth*Segmented turnover * excluding the impact of the mobile termination rate reduction

8. Strong New Wave growth 2003/04 + 23% + 25% + 31% + 38% + 20% + 32% 2004/05 + 36% + 35%

9. ICT Mobility Broadband Other Q3 04/05 - New Wave turnover £m Q3 04/05Q3 03/04 + £127m + £125m + £29m + £16m + 98%+ 22%+ 112%+ 21% + 35% £838 m £1,135 m

10. * Sales Order Value of contracts won by Solutions and C&SI ICT - building for the future Q3 Total Order intake £1.2bn * Key wins include –Barclays 7 years, WAN & LAN services over IP network –Thales Group (France) 5 years management of all fixed voice and data network services in 42 countries –NATO HQ (Belgium) 5 years, data & voice in 28 countries –Registers of Scotland 10 years, range of IT service delivery projects Including 47 Solutions wins each worth between £1m & £2m

11. ICT - acquisition update Albacom Acquired for €116m Received EC clearance, January 31st Deal completed on February 4th Infonet US antitrust and EU clearance received Shareholders vote at EGM on February 23rd Expected annual synergy savings of £80m from year three

12. Broadband - BT Wholesale Wholesale end user connections as at end Dec ‘04 - 4.1m Q3 net additions > 800,000 Another Record Trials of 8Mb and ADSL2+ to begin in April 2003/04 2002/03 2004/05 Wholesale DSL end users

13. Broadband - BT Retail Q3 1.5m DSL subscribers at end of December 80% higher than prior year Market share of DSL 36% Record quarterly net additions 208k BUT market share of Q3 net adds 26% 2003/042002/032004/05

14. Broadband - BT Retail, today’s announcement Consumer –Changing the landscape for value –Four times the speed –Up to 2Mb for most customers –At no extra cost Business –2Mb as standard for all business customers from 1st April –New service level guarantees on premium products –Already profitable

15. Mobility Q3 Mobility revenues grew 112% to £55m –MVNO operational for both Business and Consumer Service Provision connections base grew 36k in Q3 to 341k (post pay) –PLUS 62k own use mobiles Laying the foundations for fixed mobile convergence –Bluephone target launch – Spring 05

16. Traditional turnover* - rate of decline slowing 2003/04 - 2.4% - 4.5% - 6.5% - 5.8% - 1.0% - 4.9% 2004/05 - 4.6% - 4.0% * adjusted for the impact of mobile termination cut

17. No effect on profit next slide Q3 04/05 -Traditional turnover £m £3,740 m Q3 04/05 Q3 03/04 - £141m - £23m - £192m Mobile Termination Private Circuits CallsLinesOther + £13m + £52m + WLR + Interconnect - Payphones Adj’d Q3 03/04 - 7%- 18% + 1%+ 4% - 4% * DSL & WLR substitution offset by re-balancing £3,599 m £3,449 m * adjusted for the impact of mobile termination cut

18. Q3 04/05 - Call revenues - £192m decrease year on year * BT estimates based on latest Ofcom data - Local, national, international and non-geographic voice minutes Rebalancing to lines and other services Market share*: - Business down 0.5% - Consumer down 1.3% £54m £42m £68m Fixed voice market* Volume and price reductions £28m Dial IP Broadband substitution

19. Trials –VOICE Voice trialists connected via MSANs and Core routers First end to end IP voice call made on January 7th –FIBRE First fibre connections live - serving more than 200 premises with 2Mbit/s broadband and voice –ADSL 2+ Using MSANs which are already in place to trial up to 18Mb from April Consult21 –Continuing industry engagement to offer fair access to 21CN 21st Century Network MSAN Metro Node IP/MPLS core BexleyheathWoolwich

20. Regulation, a step change BT to set up an Access Services division to provide transparent and equal access to BT’s local network BT to cut a range of wholesale broadband prices and introduce faster services BT reaffirms its commitment to LLU and proposes a further price cut (subject to the completion of other consultations) BT to increase the commercial attractiveness of WLR BT to offer fair access to 21CN OFCOM to rollback regulation and red tape and provide assurances that investment will be rewarded appropriately

21. Cost Leadership Savings in Traditional areas £300m year to date –Reducing field visits Using more remote testing and automation of provision activities –More effective fault diagnostics in Broadband –Customer facing employees up-skilled to deal with a wider range of enquiries –More use of agile working and better utilisation accommodation –Negotiating better tariffs with other carriers globally –Continued overhead reductions

22. Underlying earnings per share* * before leaver costs, goodwill and exceptionals

23. Q3 - Delivering on our strategy Grow the business Revenue +3%* Fourth consecutive quarter of growth Transform the mix New wave now 25% of revenues Global revenue +10% ICT revenue +21% Change what customers buy More broadband lines than ISDN Broadband now up to 4x faster MPLS revenues up 32% Take out costs Savings £300m year to date Build long term shareholder value EPS** +9% to 4.8p in Q3 * adjusted for the impact of mobile termination rate cut ** before exceptional items and goodwill

24. Q3 Results 2004/05 Hanif Lalani Group Finance Director Growth through transformation - four quarters running

25. Q3 04/05 – Financial headlines Group turnover £4.6bn 3.2%* / 0.1% Free cashflow £387m £0.3bn Net debt £7.9bn £0.9bn Earnings per share ** 4.8p9% Profit before tax ** £545m4% *adjusted for the impact of mobile termination rate cut **before exceptional items and goodwill

26. Q3 04/05 - BT Retail Turnover declined by 1%* year on year –Traditional down 9%* –New wave up 38% Gross margin down 1.4 percentage points –Changing revenue mix SG&A £11m** lower –Ongoing reduction in Traditional offset by investment in New Wave Operating Profit down 15%** *adjusted for the impact of mobile termination rate cut **before exceptional items and goodwill

27. Q3 04/05 - BT Wholesale External turnover up 21%* year on year –Traditional up 13%* and New wave up 80% Internal turnover down 3% year on year Network and SG&A costs reduced by £14m** EBITDA £982m** up 4% Operating profit £510m** up 9% *adjusted for the impact of mobile termination rate cut **before exceptional items and goodwill

28. Q3 04/05 - BT Global Services Turnover up 10% at £1,543m –Global Solutions up 17% –Consulting & Systems Integration up 27% –Global Products up 3% –Global Carrier down 3% EBITDA up 11% at £148m** Operating PROFIT £9m** –Improvements in all business units Operating free cash flow £2m **before exceptional items and goodwill

29. YTD 04/05 - Group P&L Turnover Cost of sales Gross margin Gross margin % SG&A Other operating income Total SG&A SG&A % EBITDA pre leavers Depreciation Total costs (pre leavers & oth. op. income) Operating Profit pre leavers Operating margin pre leavers %13,753(6,329)7,42454.0%(3,213)132(3,081)22.4%4,343(2,096)(11,638)2,24716.3%13,753(6,329)7,42454.0%(3,213)132(3,081)22.4%4,343(2,096)(11,638)2,24716.3% YTD 03/04 £m YTD YTD 04/05 £m YTD Better / (Worse) £m Better / (Worse) £m 21 21(200)(179)69(1)68(111)87(44)(24) (200)(179)69(1)68(111)87(44)(24)13,732(6,129)7,60355.4%(3,282)133(3,149)22.9%4,454(2,183)(11,594)2,27116.5%13,732(6,129)7,60355.4%(3,282)133(3,149)22.9%4,454(2,183)(11,594)2,27116.5% All numbers are before exceptional items and goodwill

30. Other Op costs Pay POLOs YTD 04/05 - Group operating costs Other Op costs £m + £61m - £156m - £87m + £295m YTD 04/05YTD 03/04 Depreciation £44m increase year on year* - £114m £11,638 m £11,594 m + £45m Cost of Sales + £200m SG&A - £69m *before leaver costs and other operating income

31. Q3 04/05 - Group capital expenditure Group capex £770m, up 10% year on year Solutions, Retail & non-UK up 42% Backhaul transmission spending up to support broadband rollout £m } Network related + 42% + 7% - 25% + 8% + 13%

32. EBITDA post exceptional items Interest paid (net) Working capital, tax and other Sale of investments Capex (net) Free cash flow Net Debt Q3 04/05 - Free cash flow generation Q3 04/05 £m 1,428 (380) (356) 450 (755) 387 7,940 Q3 03/04 £m 1,473 (216) (609) 66 (665) 49 8,795 Better / (Worse) £m (45) (164) 253 384 (90) 338 855

33. International Accounting Standards BT timeframe / process Accounting policy review complete 2003/4 and 2004/5 impact quantified Analysts presentation will be held in mid March Restated 2004/5 accounts to be published in June 2005/6 first full year under IFRS

34. Delivering results while transforming the business FOUR consecutive quarters of turnover * growth –New wave now 25% of Group revenue –Broadband revenues annualised > £1bn Cost savings & reinvestment –Continue to extract efficiency in traditional areas –Reinvestment in new wave businesses Transformation accelerating –Growing credibility as an ICT services provider –Acquisitions strengthen capabilities and deliver synergies –Building foundations for fixed mobile convergence ELEVEN consecutive quarters of growth in EPS ** * adjusted for the impact of mobile termination rate cut ** before leavers, exceptional items and goodwill

35. Q3 Results 2004/05 10 th February 2005 Growth through transformation - four quarters running