BT Group plc Q4 and preliminary 2007/8 full year results

1. BT Group plc Q4 and preliminary 2007/8 full year results

2. BT Group plc Sir Michael Rake - Chairman

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: expectations of continuing growth in revenue, EBITDA, earnings per share and dividends per share; levels of free cash flow; continued growth in Global Services’ revenue and EBITDA margins; growth in new wave revenue, mainly from networked IT services and broadband; continued growth in the broadband market; cost efficiencies and reduced capital expenditure; investment in, and the delivery and benefits of, BT’s 21st Century Network and the expected cost savings; and the scope and delivery of next generation services. 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 and 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.

4. Improved service Price innovation Reduce costs / improve margin Aggressive & creative marketing Consistent strategy … Long-term Partnership with our customers Defend traditional Grow new wave • NetworkedIT services • Broadband • Mobility solutions 21st Century Network … evolving to meet our customers needs

5. FY 2007/8 – Group financial headlines Group revenue £20.7bn 2% EBITDA (1) £5.8bn 3% Earnings per share (1) 23.9p 5% Free cash flow £1.5bn 11% Dividend 15.8p 5% (1) Before specific items

6. FY 2007/8 – final dividend 10.4p pence Full year dividend 15.8p up 5%

7. Opportunities and priorities Customers Globalisation Investment & returns People Continue to deliver for customers and shareholders

8. BT Group plc Ben Verwaayen - CEO

9. Q4 2007/8 – Group financial headlines Group revenue £5.4bn 2% EBITDA (1) £1.6bn 2% Operating profit (1) £0.8bn 7% Earnings per share (1) 7.0p 11% Free cash flow £1.7bn 9% (1) Before specific items and leavers

10. Q4 2007/8 – revenue by customer Carrier Corporate 25% 40% 23% 12% Business Consumer Strength in mix of customers and businesses

11. Corporate Corporate revenue growth • Q4 • 28% growth in non-UK revenue • Further improvement in Global Services EBITDA* margin,13.7% • Order intake £2.8bn • Key business trends • Globalisation • Convergence • Right sourcing • Capabilities

12. BT Global Services – £2.8bn order intake in Q4 £m Networked IT services Other orders Reuters DFTS 2004/5 2005/6 2007/8 2006/7 Rolling 12 months order intake £8bn

13. BT Global Services – customer diversity Q4 2007/8 order intake

14. Business Business revenue growth • Q4 • Value packages • 39% increase in take-up • Continued strong revenue growth • New wave up 33% • Basilica and Lynx boost service portfolio • Developing our portfolio • Expansion of capabilities into adjacent markets • Niche business units complement overall strategy for SMEs

15. BT Group plc Running VT

16. Consumer Consumer household ARPU • Q4 • Revenue down 4% • Impact of free evening and weekend calls • New wave up 19% • Household ARPU £274 up £1 • UK’s No.1 retail broadband provider • 4.4m connections • 30%of net adds* • Customers demand • Value packages • Innovative products • Converged services £ * DSL & LLU

17. BT Total Broadband – work, rest and play BT ToGo Security & Storage > 600k users BT Broadband Talk > 2m users Launched May 7th Entertainment Wireless Networks 250K customers now Openzone c.1m minutes of usage per day All calls to our Helpdesks are now free Gaming “Go messenger” now has 300k users Monitoring and Control Home IT advisor

18. BT Group plc Running VT

19. BT Total Broadband – work, rest and play BT ToGo Security & Storage > 600k users BT Broadband Talk > 2m users Launched May 7th Entertainment Wireless Networks 250K customers now Openzone c.1m minutes of usage per day All calls to our Helpdesks are now free Gaming “Go messenger” now has 300k users Monitoring and Control Home IT advisor

20. – that’s entertainment Installed customer base • Installed base • 214k at the end of March • Now over 250k • Q4 net adds • 94k 56k 37k • 68% of new customers chose a subscription package at point of sale • Usage • 4,660hrs of VoD content now available • The average number of views per subscriber, per month, was 29 000s

21. Carrier – BT Wholesale • Growth • Continued success in long term managed solutions • £750m of managed access on next generation Ethernet signed in 2007/8 • Agreements signed during the quarter include • Q4 • £1bn of contracts signed • Operational trends continue as expected • Low margin transit and PRS revenue decline continues • Ongoing migration from IPstream to LLU and price reductions • Introduced family of 21CN ‘smart’ broadband services • Higher speeds • Flexible bandwidth • Quality control for video • Launch of next generation Ethernet

22. Carrier – Openreach ADSL Broadband • Q4 • External revenue up 22% driven by LLU growth • Operating cost down 2% due to previous investment in service • Average lead times on provision and repair improved by over 40% • Market fundamentals • LLU business model evolving • Financial Framework Review due soon for public consultation 000’s

23. Transforming the cost base – FY 2007/8 £625m of cost efficiencies £m £625m £386m £304m £260m £148m £15,152m Systems & processes Global propositions 21CN programmes Customer service BT Vision £14,679m FY2008/9 target of £700m

24. 21CN – objective remains unchanged Legacy network 21CN platform PSTN Migration Converged Core Class 5 Call Server Fibre orCopper WWW DSL IP-MPLS-WDM ISP Content EndUser ~5knodes ~100nodes 17 networks to ONE global platform

25. Next Generation Services Speed to Market Cost Transformation Power to Customers 21CN – faster, better, cheaper services • Scope extended to include • 21CN Ethernet • 21CN “Smart” Broadband • Software Development Kits (SDK) 21CN now customer led

26. 21CN – progress to date • 58% of UK national core infrastructure built • 21CN “Smart” Broadband • Available from exchanges serving 1m homes and businesses • 21CN Ethernet • Available to c. 20% of UK business market by the end of May 2008, rising to 80% or more in 12 months • 21CN Global Platform • Available in 172 countries • BT’s Software Development Kits (SDK) now in use • 11,000 downloads • 500 applications in production • 5,000 in testing

27. 21CN – SDK, what developers say “We are very pleased with how rapidly we were able to add the voice and SMS capabilities into the BT BizBox solution…if it weren’t for BT’s SDK we would not have been able to do this so quickly.” Sarah Laylock, COO of TierLinear “BT says that it takes one line of code to add voice to an application and it’s true. This functionality is easily accessible and doesn’t require a large budget. Because we are leveraging the power of BT’s global network we know our applications can scale to handle high volumes if needed. This lets us focus on what we do best – building great applications.” Miha Lesjak, co-founder of Inova IT and inventor of Click2Call.

28. 21CN – forward view • …upcoming in 2008/9 • … financials • Substantial cost savings already delivered • > £200m pa cost savings • > £400m pa, legacy capex savings • Total cash cost savings will • exceed £1bn • - Opex savings increase • - Capex will be reduced over time • Revenue opportunities available much earlier • 21CN “Smart” Broadband • available to over 10m homes and businesses by April 2009 • 21CN Gigabit Ethernet • rising to c600 nodes by April 2009 • Gigabit speeds will be available • Converged broadband & voice • Trials 2008, launch 2009 Business case remains strongly NPV positive

29. The trends ARE your friends! Revenue EBITDA* 9th quarter of growth 17th quarter of growth EPS* Dividends 24th quarter of growth * Before specific items and leavers

30. BT Group plc Hanif Lalani – Group Finance Director

31. Revenue 2% 10% 12% 22%* 2% EBITDA(1) 0% 8% 14% 13% 2% Q4 2007/8 – lines of business dashboard Openreach Retail Global Wholesale Group Openreach Retail Global Wholesale Group * External revenue (1) Before leavers

32. BT Global Services Q4 Revenue • Revenue £2,226m • 19% growth in MPLS • EBITDA £304m with margin • improving by 40bp • Maturing contracts • Global sourcing • Process improvement • SG&A reduced by 1% • Delivered H2 margin • expansion • Operating profit up 30% H1 9.6%9.8% H2 11.5% 12.4% % 10% EBITDA 13% EBITDAmargin 13.7% EBITDA margin progression

33. 2% 8% BT Retail EBITDA • Revenue £2,158m • New wave revenue up 24% • 27% of total revenue • Gross profit up 4% • Margin improved 80bp to 36.5% • EBITDA £391m • Operating profit up 12% Q4 Revenue £m EBITDA

34. BT Wholesale External revenue mix • Revenue £1,180m • Transit and PRS – down £97m • Broadband - down £54m (volume and price cuts) • £1bn of orders signed in Q4 • EBITDA £320m • SG&A reduced by 9% • Headcount reduced by 13% • Process improvements helping to drive costs down Q4 Revenue £m 12% EBITDA 14%

35. External volumes • Revenue £1,320m • External revenue up 22% • Sales to other lines of business down 5% • EBITDA £496m • Operating costs reduced by £15m • Record levels of service improvement • Operating profit up 1% Q4 Revenue 1% EBITDA 0%

36. Q4 2007/8results Change Q42007/8 Q42006/7 £m Revenue POLOs Revenue (net) EBITDA (pre leavers) Depreciation & amortisation Operating profit (pre leavers) Operating margin Leaver costs Finance costs(net) Profit before tax Tax Profit for the period Earnings per share(post leavers) Earnings per share(pre leavers) 5,422 1,098 4,324 1,569 (755) 814 15.0% (56) (97) 658 (147) 511 6.5p 7.0p 5,292 1,071 4,221 1,537 (773) 764 14.4% (63) (70) 632 (155) 477 5.8p 6.3p 2% 2% 7% 5% 11% Note: all numbers are before specific items. Q4 2007/8 specific charge £85m post tax.

37. Earnings per share pence * ** * ** * ** * before exceptional items and goodwill from continuing activities ** before leavers and specific items

38. Free cash flow Change £m Q42007/8 £m Q42006/7 £m EBITDA*(post leavers) Interest & Tax Capex Working capital Other (incl specific items) Free cash flow Net debt 1,569 (159) (759) 1,195 (141) 1,705 9,460 32 (371) 77 482 (73) 147 1,546 1,537 212 (836) 713 (68) 1,558 7,914 * Before specific items

39. Pension IAS 19 pre tax • BT Pension Scheme £2.9bn pre tax in surplus based on IAS19 valuation • Next triennial funding valuation begins after 31/12/2008 • Pension scheme asset mix • 45% in equities • Pension interest credit • 2008/9 £313m v £420m 2007/8 • but EBITDA benefits from a lower pension scheme service charge £bn

40. 2008/9 outlook Revenue, continued growth expected Costs, £700m of efficiencies to be delivered EBITDA*, growth underpinned by cost transformation Earnings per share*, growth driven by operational performance Capex, reduces to around £3.1bn Free cash flow, similar level to 2007/8 Dividends per share,will alsogrow Continue to deliver for shareholders and customers * Before leavers and specific items

41. BT Group plc Ian Livingston

42. BT Group plc 15 May 2008