BT Group plc Q 3 2007 8 results February

BT Group plc Q 3 2007/8 results February 7 th 2008

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: continuing growth in revenue, EBITDA, earnings per share and dividends; growth in new wave revenue mainly from networked IT services and broadband; transforming the cost base; delivery of 21 CN; and Global Services’ cost reductions and EBITDA margin. 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 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, including broadband other new wave initiatives, 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 BT’s 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.

Q 3 2007/8 – Group financial headlines Group revenue £ 5. 2 bn 1% EBITDA* £ 1. 5 bn 2% Operating profit* £ 0. 7 bn 6% Earnings per share* 5. 9 p 2% Capital expenditure £ 0. 9 bn * Before specific items and leavers Free cash outflow £ 0. 2 bn

Q 3 2007/8 – revenue by customer

Corporate Q 3 - Global Services • Improvement in EBITDA margin of 140 bp to 10. 9% • 22% growth in non-UK revenue • Robust £ 29 bn prospect order book pipeline Corporate market trends • Globalisation • Convergence • Optimisation • Growth * 2006/7 growth rates not restated for reorganisation

Business Q 3 – Retail Business • Continued strong revenue growth • Value packages - c 38% take-up amongst SMEs • Good growth from BT Enterprises SME market trends • Decline in spend on hardware • Simplify technology for customers • Increased spend on networked IT services * 2006/7 growth rates not restated for reorganisation

Consumer Q 3 – Retail Consumer • Continued ARPU growth • BT remains UK’s No. 1 broadband provider – Resilient broadband market share*, 35% Consumer market trends • Broadband now a necessity • Inclusive call bundles • Highly competitive market * DSL & LLU

Carrier Q 3 – Openreach • Steady performance driven by LLU line growth • Cost efficiencies • Service improvements Market trends • • • Continued LLU migration Slowing LLU build out More demand for backhaul Principle based regulation Regulatory pricing review

Carrier Q 3 – Wholesale • Expected decline in low margin transit and PRS revenue continues, down £ 68 m Yo. Y • Ongoing migration from IPstream to LLU • Focus on managed services – £ 98 m Virgin Media contract Market trends • Network rationalisation • More outsourcing • Further transit declines

Transforming the cost base – Q 3 YTD £ 468 m of cost efficiencies * Before specific items and leavers

Transforming the cost base – opportunities • Ongoing efficiency opportunities • Right first time focus for customer service – Reduce cost of complexity and failure • Overhead Value Analysis • Global sourcing • Ongoing re-investment for the future • 21 CN On track to exceed FY target of £ 600 m

21 CN - update Services driven migration • >35% of UK core network already rebuilt • Wholesale Broadband Connect – ADSL 2+ rollout from Spring 2008 with speeds of up to 24 Mb available • Next generation Ethernet Services – More bandwidth, more reach, more flexibility Platform operational in more than 160 countries NGA • Openreach deploying fiber technology at Ebbsfleet Overall objective remains unchanged

Summary Q 3 highlights • • • Global Services - EBITDA margin improvement Retail - continued strong EBITDA growth Openreach - strong operational performance Wholesale - decline in transit and migration to LLU Cost savings - on track to exceed target Q 4 Outlook • Expect continued growth in revenue, EBITDA*, EPS* and dividends and significant cash inflow Continue to deliver for customers and shareholders * Before specific items and leavers

BT Group plc Hanif Lalani – Group Finance Director

Q 3 2007/8 – line of business analysis First quarter of reporting under new structure - Increased line of sight of end to end profitability - Significant reduction in internal trading - No material change to Openreach Transformation into software driven services company * Before specific items and leavers

Q 3 2007/8 – lines of business dashboard Global Group Retail Wholesale Openreach 1% Revenue 6% 2% 11% 1% 7% New wave growth 9% 18% (23%) 31% 2% EBITDA* 23% 12% 9% 2% 28. 5% EBITDA* margin 10. 9% 18. 7% 28. 5% 37. 1% * Before specific items and leavers

Global Services – Revenue £ 2. 0 bn EBITDA £ 0. 22 bn

BT Global Services – Q 3 total order intake £ 1. 9 bn Q 3 Revenue 6% EBITDA 23% EBITDA margin 10. 9% Rolling 12 months intake £ 8. 6 bn

BT Global Services – margin expansion Q 3 Revenue 6% • EBITDA margin up 140 bp • Contract maturity – c 60% of top 100 contracts now in 2 nd half of life, rising to two thirds by year end EBITDA 23% EBITDA margin • Cost transformation – Rebalancing of workforce – De-layering management structures – Rationalisation of networks and IT systems 10. 9% Medium term EBITDA margin target 15%

BT Retail – Revenue £ 2. 1 bn EBITDA £ 0. 4 bn Q 3 Revenue 2% EBITDA 12% EBITDA margin 18. 7%

BT Retail Broadband • Q 3 gross installs 404 k • c 65% take Option 2 or 3 • 177 k net additions • Market share* 35% • Currently >150 k Vision subscribers Consumer ARPU • £ 273 up £ 2 • 69% contracted * DSL & LLU

BT Wholesale – Revenue £ 1. 2 bn EBITDA £ 0. 3 bn Q 3 Revenue 11% Revenue • Transit & PRS – Continued decline – Low margin • Broadband EBITDA 9% EBITDA margin 28. 5% – Price reductions – Migration volumes Cost base • SG&A reduced by 10% • EBITDA margin up 60 bp from 27. 9%

– Revenue £ 1. 3 bn EBITDA £ 0. 5 bn Q 3 Revenue 1% Revenue • External up 15% - LLU & WLR growth • Rest of BT down 3% EBITDA 2% EBITDA margin 37. 1% - WLR migration Cost efficiencies • Operating cost down £ 17 m • 50% improvement in average provisioning and repair lead times

Q 3 2007/8 results Q 3 2007/8 £m Q 3 2006/7 £m Change £m 28 28 56 30 9 39 Revenue POLOs Revenue (net of POLOs) EBITDA (pre leavers) Depreciation & amortisation Operating profit (pre leavers) 5, 154 1, 023 4, 137 1, 469 (732) 737 5, 126 1, 051 4, 075 1, 439 (741) 698 Operating margin 14. 3% 13. 6% Leaver costs Associates Finance costs (net) Profit before tax Tax Profit for the period (20) (2) (134) 581 (120) 461 (27) 7 (62) 616 (150) 466 7 (9) (72) (35) 30 (5) 5. 7 p 5. 9 p 5. 6 p 5. 8 p 0. 1 p Earnings per share (post leavers) Earnings per share (pre leavers) Note: all numbers are before specific items. Q 3 2007/8 specific charge £ 134 m pre tax.

Q 3 2007/8 - free cash flow Q 3 2007/8 £m Q 3 2006/7 £m Change £m EBITDA*(post leavers) 1, 449 1, 412 37 Interest & Tax (414) (436) 22 Capex (877) (777) (100) Working capital (294) (212) (82) --- (500) 500 (85) (12) (73) (221) (525) 304 Pension deficiency contribution Other (incl specific items) Free cash flow * Before specific items

Balance sheet - as at 31 December 2007 Buy back Pension • Q 3 IAS 19 surplus £ 0. 9 bn - £ 1. 6 bn deficit last year • Previous mitigation of exposure to equity market risk Net debt • Currently £ 10. 2 bn • Seasonal turnaround in FCF expected in Q 4 • Repurchased £ 281 m of shares in Q 3 • YTD repurchased £ 1. 0 bn of planned £ 2. 5 bn buy back by March 2009 Liquidity • Raised debt of € 1. 0 bn and $1. 2 bn in the quarter • 5 year facility of £ 1. 5 bn

Earnings per share * Before exceptional items and goodwill from continuing activities ** Before specific items and leavers

BT Group plc Q 3 2007/8 results