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Sir Christopher Bland

Sir Christopher Bland. Chairman • BT Group plc. Delivering today. Investing for tomorrow. 2003/04 - another year of good progress. £18.5bn, maintained*. Group turnover. 16.9p, up 19%**. Earnings per share. £2.1bn, up 21%. Free cash flow. 8.5p, up 31%. Dividend. £8.4bn, down 12%.

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Sir Christopher Bland

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  1. Sir Christopher Bland Chairman • BT Group plc

  2. Delivering today Investing for tomorrow

  3. 2003/04 - another year of good progress £18.5bn, maintained* Group turnover 16.9p, up 19%** Earnings per share £2.1bn, up 21% Free cash flow 8.5p, up 31% Dividend £8.4bn, down 12% Net debt *Adjusted for the impact of mobile termination cut**Before exceptional items and goodwill Delivering today

  4. 2003/04 - key financial indicators Earnings per share* (pence) Dividend per share* (pence) 18p 9p 15p 8.5 16.9 14.2 6.5 12p 6p 9p 8.8 6p 3p 2.0 3p 0p 0p FY 01/02 FY 02/03 FY 03/04 FY 01/02 FY 02/03 FY 03/04 Free cash flow**(£m) Net debt (£bn) 2,250 0 -8.4 1,750 2,071 -9.6 (7) 1,708 -13.7 1,250 750 (14) 250 (21) -27.9 (250) -732 (750) (28) FY 01/02 FY 02/03 FY 03/04 Mar 01 Mar 02 Mar 03 Mar 04 *Before exceptional items, goodwill amortisation **Free cash flow for 2001/02 excludes the property transaction and includespension payments, emerged and discontinued activities

  5. 2003/04 - dividends and buy backs To date: • Purchased 1.1% of sharecapital (97m shares) • Total cost of purchase£174m • Authorisation for 10%of share capital 10p Rolling share buy backprogramme commenced +31% 8.5p 8p 6.5p 6p 4p 2p 2.0p 0p FY 01/02 FY 02/03 FY 03/04 • Dividend pay-out 50% of earnings • Targeting a 60% pay-out ratio in2005/06

  6. Continuing the transformation Over the last three years and going forward: • delivering on a clear strategy • rigorous financial discipline • strong free cash flow • debt reduced by £20bn since March 2001 • sustained reductions in customer dissatisfaction • accelerating new wave innovations • cultural change: BT’s people and brand values • deepening our community engagement Delivering todayInvesting for tomorrow

  7. Our contribution to the community • Supporting good causes£18 million • Education support2 million children, 10,000 schools • 4,000 BT VolunteersFree teaching resources • ChildLine£1.5 million cash, £2 million in kind,19% more children helped • EverybodyonlineHelped 8 communities - digital inclusion - 3 in Wales communitiesfirst cymunedau yn gyntaf Helping everyone benefitfrom improved communication

  8. Delivering today Investing for tomorrow Ben Verwaayen Chief Executive • BT Group plc

  9. Defend traditional Improved service Aggressive & creative marketing Price innovation Reduce costs / improve margin Our strategy Long termpartnership with our customers Grow new wave • Broadband • Mobility • ICT • Global Solutions Transformation 21stCenturyNetwork

  10. Transformation is underway 19 2.6New wave 3.4New wave 17 +30% 15.9* Traditional 15 Total revenue £bn -5%* 15.1* Traditional 13 11 FY 02/03 FY 03/04 New wave now represents 18% of Group turnover *Excluding the impact of the mobile termination rate reduction Investing for tomorrow

  11. Building for the future • Lead on network centric ICT capability • Deliver on broadband • Create convergent mobilitysolutions • Defend traditional business rigorously • Drive for cost leadership Investing for tomorrow

  12. Embracing technology - enabling change • ICT - combines telecoms experienceand IT innovation • Major wins across UK, Europe and US • Unilever • NHS • Honeywell Leading the world in network-centric ICT solutions

  13. Broadband - making Britain click 2.5m • BT’s UK-wide broadband coverage more than 90%, andto rise to 99.6% by summer ’05 • Cardiff: now 100% broadband enabled • Pan-Wales coverage: 96% by summer '05 End user connections now over 2.5m BT Wholesale Broadband 2.0m 1.5m 1m 0.5m 0.0m Mar Jun Sep Dec Mar Jun Sep Dec Mar 2002 2003 2004 Broadband at the heart of BT

  14. Building a seamless converged service BT re-enters mobility by: • Partnering with industry leaders • Re-building the brand in the high street • Acting as a virtual network operator • Innovating through Wi-Fi – BT Openzone • Launching converged services –e.g. Project Bluephone • enabling the mobile phone to “roam”onto the fixed network Create mobility services and solutions

  15. BT Together Option 1 customers on Standardmigrated to Option 1 on 1st July Option 1 price reduced £1 to £10.50 per month BT Together Option 2 price reduced from 1st April by£1 to £6 per month (+ line rental) BT Together Option 3 price reduced from 1st April by £3 to £15 per month (+ line rental) BT Business Plan no UK or US call costs more than 10p for an hour calls to key European countries cost no more than 20p BT Local Business active in 73 locations billing over £1bn of revenue Good value for money Consumer Business Reinvent our traditional business

  16. Financial discipline with cost leadership Savings to dateacross the business £1.7bn £1bn Future savings programmesacross the business 21st Century Network savings 01/02 02/03 03/04 04/05 05/06 06/07 07/08 08/09 Good progressto date much more to come... Competitive advantage through cost leadership

  17. 21st Century Network • What? • A single intelligent network to replace many legacy platforms • Why? • Driving efficiency • Better range and quality of services for customers • Speed to market • When? • Trials in 2004 • Starting mass migration to new IP network - 2006 • Broadband available as “dialtone” to most customers - 2009

  18. BT’s values • Trustworthy • Helpful • Inspiring • Straightforward • Heart On 4 May 2004 over 1,300 senior managers went back to the floor ‘my customer’ challenge cup Hundreds of teams across BT competing to help improve customer satisfaction BT peopleproviding a customer-centric organisation

  19. Our customer promises When you make an appointment with us our engineers will do whatever they can to keep it When you call BT you can choose to opt out of the machine andtalk to a real person If the first person you call at BT can’t help they’ll make it their top priority to find theperson who can Improving customer satisfaction

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