BT Group plc

1

• BT Group plc
• Q3 2007/8 results

February 7th 2008
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 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 21CN 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 BTs
  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 BTs
  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.

3
Q3 2007/8 Group financial headlines
Group revenue
5.2bn
1
EBITDA
1.5bn
2
Operating profit
0.7bn
6
Earnings per share 5.9p
2
Capital expenditure 0.9bn
Free cash outflow 0.2bn
Before specific items and leavers
4
Q3 2007/8 revenue by customer
5
Corporate

• Q3 - Global Services
• Improvement in EBITDA margin of 140bp to 10.9
• 22 growth in non-UK revenue
• Robust 29bn prospect order book pipeline
• Corporate market trends
• Globalisation
• Convergence
• Optimisation
• Growth

2006/7 growth rates not restated for
reorganisation
6
Business

• Q3 Retail Business
• Continued strong revenue growth
• Value packages
• c38 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
7
Consumer

• Q3 Retail Consumer
• Continued ARPU growth
• BT remains UKs No.1 broadband provider
• Resilient broadband market share, 35
• Consumer market trends
• Broadband now a necessity
• Inclusive call bundles
• Highly competitive market

DSL LLU
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Carrier

• Q3 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

9
Carrier

• Q3 Wholesale
• Expected decline in low margin transit and PRS
  revenue continues, down 68m YoY
• Ongoing migration from IPstream to LLU
• Focus on managed services
• 98m Virgin Media contract
• Market trends
• Network rationalisation
• More outsourcing
• Further transit declines

10
Transforming the cost base Q3 YTD
468m of cost efficiencies
Before specific items and leavers
11
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
• 21CN

On track to exceed FY target of 600m
12
21CN - update

• Services driven migration
• gt35 of UK core network already rebuilt
• Wholesale Broadband Connect
• ADSL2 rollout from Spring 2008 with
  speeds of up to 24Mb 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
13
Summary

• Q3 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
• Q4 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
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BT Group plc

• Hanif Lalani Group Finance Director

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Q3 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
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Q3 2007/8 lines of business dashboard
Global
Retail
Openreach
Wholesale
Group
Revenue
6
2
11
1
1
New wave growth
9
18
(23)
31
7
EBITDA
23
12
9
2
2
EBITDA
37.1
28.5
10.9
18.7
28.5
margin
Before specific items and leavers
17
Global Services Revenue 2.0bn EBITDA 0.22bn
18
BT Global Services Q3 total order intake 1.9bn
Q3 Revenue
6
EBITDA
23
EBITDAmargin
10.9
Rolling 12 months intake 8.6bn
19
BT Global Services margin expansion
Q3 Revenue

• EBITDA margin up 140bp
• Contract maturity
• c60 of top 100 contracts now in 2nd half
  of life, rising to two thirds by year end
• Cost transformation
• Rebalancing of workforce
• De-layering management structures
• Rationalisation of networks and IT systems

6
EBITDA
23
EBITDAmargin
10.9
Medium term EBITDA margin target 15
20
BT Retail Revenue 2.1bn EBITDA 0.4bn
Q3 Revenue
2
EBITDA
12
EBITDAmargin
18.7
21
BT Retail

• Broadband
• Q3 gross installs 404k
• c65 take Option 2 or 3
• 177k net additions
• Market share 35
• Currently gt150k Vision subscribers
• Consumer ARPU
• 273 up 2
• 69 contracted

DSL LLU
22
BT Wholesale Revenue 1.2bn EBITDA 0.3bn

• Revenue
• Transit PRS
• Continued decline
• Low margin
• Broadband
• Price reductions
• Migration volumes
• Cost base
• SGA reduced by 10
• EBITDA margin up 60bp from 27.9

Q3 Revenue
11
EBITDA
9
EBITDAmargin
28.5
23
Revenue 1.3bn EBITDA
0.5bn
Q3 Revenue

• Revenue
• External up 15
• - LLU WLR growth
• Rest of BT down 3
• - WLR migration
• Cost efficiencies
• Operating cost down 17m
• 50 improvement in average provisioning and
  repair lead times

1
EBITDA
2
EBITDAmargin
37.1
24
Q3 2007/8 results
Change m
Q3 2007/8 m
Q3 2006/7 m
28 28 56 30 9 39 7 (9) (72) (35) 30 (5) 0.1p 0.1
p
Revenue POLOs Revenue (net of POLOs) EBITDA (pre
leavers) Depreciation amortisation Operating
profit (pre leavers) Operating margin Leaver
costs Associates Finance costs (net) Profit
before tax Tax Profit for the period Earnings
per share (post leavers) Earnings per share (pre
leavers)
5,154 1,023 4,137 1,469 (732) 737 14.3 (20) (2) (
134) 581 (120) 461 5.7p 5.9p
5,126 1,051 4,075 1,439 (741) 698 13.6 (27) 7 (62
) 616 (150) 466 5.6p 5.8p
Note all numbers are before specific items. Q3
2007/8 specific charge 134m pre tax.
25
Q3 2007/8 - free cash flow
Q3 2006/7 m
Q3 2007/8 m
Change m
EBITDA(post leavers) Interest
Tax Capex Working capital Pension deficiency
contribution Other (incl specific items) Free
cash flow
1,449 (414) (877) (294) --- (85) (221)
37 22 (100) (82) 500 (73) 304
1,412 (436) (777) (212) (500) (12) (525)
Before specific items
26
Balance sheet - as at 31 December 2007
Buy back
Pension

• Repurchased 281m of shares in Q3
• YTD repurchased 1.0bn of planned 2.5bn buy back
  by March 2009

• Q3 IAS19 surplus 0.9bn - 1.6bn deficit last
  year
• Previous mitigation of exposure to equity market
  risk

Net debt
Liquidity

• Currently 10.2bn
• Seasonal turnaround in FCF expected in Q4

• Raised debt of 1.0bn and 1.2bn in the quarter
• 5 year facility of 1.5bn

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Earnings per share
Before exceptional items and goodwill from
continuing activities Before specific items
and leavers
28
BT Group plc

• Q3 2007/8 results