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Andy Green Chief Executive Officer January 13th 2003

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: revenue, market share

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Andy Green Chief Executive Officer January 13th 2003

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    1. Andy Green Chief Executive Officer January 13th 2003

    2. 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: revenue, market share, margins, working capital and capital expenditure control, cash management, earnings per share, cash-flow and debt reduction targets; growth opportunities by BT business, including broadband growth in the UK; BT Retail, BT Wholesale and BT Ignite cost control and savings; break-even and cash flow targets for BT Ignite’s loss-making and ex-Concert businesses; revenue targets for BT Ignite’s businesses; broadband growth and customer targets; reductions in costs, and prices for customers, and increased access to broadband. Although BT Group 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 and its lines of business; future regulatory actions and conditions in BT’s operating areas, including competition from others in communications markets; selection by BT and its lines of business of the appropriate trading and marketing models for its products and services; technological innovations, including the cost of developing new products and the need to increase expenditures for improving the quality of service; the anticipated benefits and advantages of new technologies not being realised; developments in the convergence of technologies; prolonged adverse weather conditions resulting in a material increase in overtime, staff or other costs; the anticipated benefits and advantages of new technologies, products and services, including broadband, not being realised; the timing of entry and profitability of BT and its lines of business in certain communication markets; significant changes in market shares for BT, its lines of business and its principal products and services; fluctuations in foreign currency exchange rates and interest rates; general financial market conditions affecting BT’s performance; factors not within BT’s control which may affect the ability of BT’s lines of business to reduce costs, grow revenue, improve quality and maximise return on capital employed; and the reintegration of Concert.

    3. Agenda Who are we? Our global position Our performance against strategy

    4. Our core focus

    5. What is BT Ignite?

    6. Our existing strengths

    7. Based on a market leading performance

    8. BT brand and financial strength Corporate customers need a trusted, long-term business partner BT is one of the most recognised brands in the marketplace: In Europe By corporates BT brand attributes important to corporates Trust, reach, stability, security BT Group on ‘sound’ financial footing Healthy balance sheet Cash generating businesses Flexibility to pursue growth strategies

    9. Existing strength in target segment In the UK: 80 of FTSE 100 19 of top 20 UK headquartered financial institutions And internationally, customer examples include:

    10. Major strength in global account and service management Heritage across BT Single interface support to customers 17 years experience Concert Global Accounts back in BT Group Continuous improvement from customer feedback

    11. Global Position

    12. Global Position - BT in Asia Pacific BT is committed to Asia Pacific. We will:- Expand the BT regional, post Concert product footprint where it supports our customers Proactively expand the product portfolio Provide price competitive products based on market rates Offer in-region customer support Challenge regulatory barriers to enhance product propositions and service levels Continue to focus on Asia Pacific as a key component of BT’s global MNC strategy

    13. Global Position - BT in the US – Assets 1,400 professionals on the ground Comprehensive ICT portfolio with continent-wide coverage Operate and manage US network infrastructure Regional customer service center of excellence in Atlanta Own and operate media centers in Washington, DC and Los Angeles offering a wide range of global broadcast solutions Sales offices in more than a dozen key US business cities Boston-based 24-hour operations center for conferencing On-the-ground in the US since 1988

    14. BT in the US – Depth of capabilities Already have 1200 business customers in the Americas Global sales & service Customized solutions/outsourcing Broadcast services Carrier services Conferencing # 1 in the UK; rapid growth in the US Consultancy/systems integration (Syntegra) Specialist Financial/Banking applications, trading floors BTexact R&D relationship with MIT Labs US venturing operation on the West Coast

    15. How are we delivering against strategy?

    16. BT in Europe - Built on a deep and broad retail network

    18. European Path to Profitability Spain and Ireland already reached EBITDA breakeven All other countries currently on target for end of March 2003

    19. Standard Operating Environment The Proposition To Create Cost Competitiveness with Consistency requires a Common Portfolio Supported by Common Processes and Systems.

    20. Standard Operating Environment - Areas of Focus Product Harmonisation Reduced size of portfolio Consistent portfolio across BT Ignite Minimise local products Common management processes Sales Upskilling Underpinned by Common Process Tools and Systems Single approach to management and targeting Customer Service Defined Portfolio of service products available everywhere Global Processes and Systems to deliver service excellence Consolidated Service Centres

    21. Standard Operating Environment - Areas of Focus Network Automation Centralised management Automated Delivery of Bandwidth; Frame and IP/MPLS Centralised Billing Rationalised Billing Operations Common Processes and Systems (52 systems today) Enhanced Billing Capability (single bills, currencies etc) Running the Business Integrated Processes for HR, Finance Simplified Commercial Models and Decision Making Common internal infrastructure

    22. Standard Operating Environment in Action Recent Examples Network Control Centre opened in Brussels centralises network management across 16 countries Web based access pricing tool across all major markets speeds up revised bid process Common customer contracts to be launched 1st February Single HR system across BT Ignite available by March as first phase of wider systems consolidation programme (sales, service, billing etc) Single functional leadership of Customer Service implemented Process rationalisation work underway First phase of data consolidation underway

    23. Realising the benefits of Concert Integration Physical network infrastructure split and network operation centres hand-over completed 2361 employees transferred to BT Group entities Customer accounts successfully split between parents and ongoing commercial contracts transferred Ł140m annualised synergies on track to be achieved by December 2003 Total synergies likely to exceed Ł140m target

    24. Next generation IP products Some examples: Global MPLS - based IP VPNs Gigabit Ethernet Wireless LAN Transform Data Storage

    25. BT’s MPLS Services - The Brief History BT has been working with Cisco on MPLS since 1997 BT launched world’s first QoS MPLS offer at Telecom ‘99 First BT customers were brought into service in mid 2000. BT has invested Ł45M to date in design and systems Constructed a testbed at Adastral Park that is larger than many production networks

    26. BT’s MPLS Services - Current Facts We manage about 17,000 MPLS ports, in about 800 VPNs Most are in the UK - we have about 2000 non-UK ports Adding 1,000 ports per month in UK, 200 per month RoW Recently received orders for a 6,000 site deal in the UK, a 1,000 site deal in NL, and 500 site deal in Germany Domestic MPLS services now available in UK, Nordics, Germany, Ireland, Netherlands, Belgium and Spain 60 countries of seamless global reach

    27. Why MPLS? Why BT? Why Now? MPLS VPNs are forward looking and mix the flexibility of IP with the security and stability of services like ATM They make management of VPNs more simple in many ways - moves, changes, scaling, application mix Of course, price points are more keen than Layer 2 services New customers choose us primarily because of our experience, credibility, stability and breadth of vision Existing customers like our “Technology Refresh” vision that Transforms them seamlessly from layer 2 to Agile IP

    28. Global Proposition Global Proposition: Ignite & Concert networks aligned, integrated Global MPLS product other Ignite product harmonisation underway Germany, NL, Spain target completion all european countries April 2003 Extensive Global IPVPN Footprint Connectivity in 60+ countries from 500+ PoPs 400+ cities/towns in Europe (inc UK), 130 cities outside Europe MPLS connections growing at +6% month on month (5.6% UK,12.5% outside UK) EVUA report in November recommends BT: IP VPN BT price at competitive level with Infonet and Equant Global Products like for like revenue growth 10% year on year

    29. Track record in UK Łm Q2 02/03 Revenue 475 EBITDA 45 Strength across industry sectors Expansion of solutions capability in Europe core to BT Ignite’s strategy Leading supplier of solutions

    30. Accelerating solutions growth

    31. Unilever - Key Facts Contract signed 4 November 2002 - one of the largest ever outsourcing contracts in UK corporate history Worth 1 billion Euros over 7 years to manage and develop the company's entire global communications infrastructure Unilever appointed BT as their exclusive network provider for 5 years and preferred supplier for a further 2 years BT will acquire 20 million Euros of assets, up to 250 people and all the existing supplier contracts (circa 200) BT will provide Unilever with all voice, data and mobile communications in 90 countries

    34. We are driving ICT growth in the UK with BT Retail

    35. BT ICT Strategy in the UK A Ł38bn market Growing at 6% Highly fragmented BT market leader at 11% Twice the size of IBM overall, bigger even if connectivity and transport excluded Network and voice skills becoming more important: - Blurring of LAN/WAN boundaries - Voice and data convergence - Networked storage - Migration to IP

    36. BT ICT strategy in Western Europe Ł76bn market growing at c10% CAGR Top Level Business Plan Grow BT market share faster than market CAGR Primary focus on IP Infrastructure, Outsourcing and Applications Management Build strong customer base (e.g, €1bn Unilever contract) Enablers Leverage BT assets and strengths Build on existing European businesses Extend and build partnerships Leverage pan-European IP network

    37. Syntegra provides systems integration and consulting services

    38. Driving down customer dissatisfaction

    39. BT’s investment in customer service Increased resources on areas that surround the customer Global network of service and network management Service and reliability backed by competitive SLAs, SLGs which reflect the customer’s experience access included, where supplied by BT; site-level measurement Flexible global billing services in multiple currencies, accounting options and management reports State-of-the-art e-Business tools

    40. BT investment in customer service Global reach, local touch Single point of contact for account management and customer service worldwide – with access to global resources Global ownership & co-ordination of order, repair, reporting and support Multilingual support 20 years managing customers’ global networks. Extensive experience working with large organizations to deliver value-added services and custom solutions.

    41. Motivating our people Leadership and change ‘One company in many countries’ organisation Key appointments at senior level across Europe Rebalancing and rightsizing Organisational realignment Integration of Concert people Inspiring our people Performance orientation Growing the skills base Diversity mix Culture - ‘Inspire’ programme

    42. Summary Leader in Solutions for Multi-Site Corporates European focus; global reach through partnership Rigorous financial discipline Challenging but achievable targets and …

    43. One brand everywhere

    44. Q&A

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