BT Group plc

Q3 2007/8 results

February 7th 2008

Forward-looking statements - cautionCertain 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 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.

Earnings per share* 5.9p

Group revenue £5.2bn

EBITDA* £1.5bn

Capital expenditure £0.9bn

Operating profit* £0.7bn

Free cash outflow £0.2bn

Q3 2007/8 – Group financial headlines

* Before specific items and leavers

2%

2%

1%

6%

Q3 2007/8 – revenue by customer

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

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

Consumer

* DSL & LLU

Q3 – 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

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

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

Transforming the cost base – Q3 YTD

£468m of cost efficiencies

* Before specific items and leavers

• 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

Transforming the cost base – opportunities

On track to exceed FY target of £600m

21CN - update

Overall objective remains unchanged

Services driven migration

• >35% 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

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

BT Group plcHanif Lalani – Group Finance Director

Q3 2007/8 – line of business analysis

* Before specific items and leavers

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

Q3 2007/8 – lines of business dashboard

Global Retail Wholesale OpenreachGroup

6%Revenue 2% 11% 1%1%

9%New wave

growth18% (23%) 31%7%

23%EBITDA* 12% 9% 2%2%

10.9% 18.7% 28.5% 37.1%28.5% EBITDA*margin

Global Services – Revenue £2.0bn EBITDA £0.22bn

Rolling 12 months intake £8.6bn

BT Global Services – Q3 total order intake £1.9bn

6%

Q3Revenue

10.9%

EBITDA

EBITDAmargin

23%

• 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%

BT Global Services – margin expansion

Q3Revenue

Medium term EBITDA margin target 15%10.9%

EBITDA

EBITDAmargin

23%

BT Retail – Revenue £2.1bn EBITDA £0.4bn

2%

Q3Revenue

18.7%

EBITDA

EBITDAmargin

12%

BT Retail

* DSL & LLU

Broadband

• Q3 gross installs 404k

• c65% take Option 2 or 3

• 177k net additions

• Market share* 35%

• Currently >150k Vision subscribers

Consumer ARPU • £273 up £2 • 69% contracted

BT Wholesale – Revenue £1.2bn EBITDA £0.3bn

Revenue• Transit & PRS

– Continued decline– Low margin

• Broadband– Price reductions– Migration volumes

Cost base• SG&A reduced by 10%

• EBITDA margin up 60bp from 27.9%

Q3Revenue

28.5%

EBITDA

EBITDAmargin

9%

11%

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

– Revenue £1.3bn EBITDA £0.5bn

Q3Revenue

37.1%

EBITDA

EBITDAmargin

2%

1%

RevenuePOLOsRevenue (net of POLOs)EBITDA (pre leavers)

Depreciation & amortisationOperating profit (pre leavers)

Operating margin

Leaver costs AssociatesFinance costs (net)Profit before taxTax Profit for the period

Earnings per share (post leavers)

Earnings per share (pre leavers)

5,1541,0234,1371,469(732)

73714.3%

(20)(2)

(134)581

(120)461

5.7p5.9p

Q3 2007/8 results Q3 2006/7

£mQ3 2007/8

£mChange

£m

5,1261,0514,0751,439(741)

69813.6%

(27)7

(62)616

(150)466

5.6p5.8p

Note: all numbers are before specific items. Q3 2007/8 specific charge £134m pre tax.

28285630

939

7(9)

(72)(35)

30(5)

0.1p0.1p

1,412

(436)

(777)

(212)

(500)

(12)

(525)

1,449

(414)

(877)

(294)

---

(85)

(221)

Q3 2007/8 - free cash flow

EBITDA*(post leavers)

Interest & Tax

Capex

Working capital

Pension deficiency contribution

Other (incl specific items)

Free cash flow

Q3 2006/7 £m

Q3 2007/8 £m

37

22

(100)

(82)

500

(73)

304

Change £m

* Before specific items

Balance sheet - as at 31 December 2007

Liquidity

Buy back

Net debt

Pension

• Raised debt of €1.0bn and $1.2bn in the quarter

• 5 year facility of £1.5bn

• Currently £10.2bn

• Seasonal turnaround in FCF expected in Q4

• 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

Earnings per share

* Before exceptional items and goodwill from continuing activities** Before specific items and leavers

BT Group plc

Q3 2007/8 results