Keeping BT ahead of the gameQ2 and half year results 2007/8November 8th 2007

BT Group plcSir Michael Rake - Chairman

BT Group plcBen Verwaayen - CEO

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, earnings per share, EBITDA and dividends; growth in new wave revenue mainly from networked IT services and broadband; the introduction of next generation services; Global Services’ cost reductions and EBITDA margin; and the anticipated benefits of BT’s business transformation, including cost savings.

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.

Q2 – 2007/8 highlights

• Dividend up 6%• Interim dividend 5.4p, ex-div 24 Dec ‘07

* Before specific items and leavers

0

2

4

6

8

10

2002/3 2003/4 2004/5 2005/6 2006/7 2007/8

Interim

Final

• Revenue up 3%• Global Services non-UK grew by 19%• Consumer up for the first time in four years• BT’s retail market share of DSL broadband net adds, 37%

• EBITDA*up 2%• Q2 cost reduction delivered £136m of savings • Best fault repair stats in Openreach for 10 years

• EPS* up 2%• 22 quarters of year on year growth

3.2 3.2

1.7 1.9

0.0

1.0

2.0

3.0

4.0

5.0

Q2 2006/7 Q2 2007/8New WaveTraditional

Q2 2007/8 - Group revenue up 3%£bn

10%

1%

(6%)

(5%)

(4%)

(3%)

(2%)

(1%)

0%Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2

Q2 traditional revenue down 0.7%

Strategy in action – defend traditional

2005/62004/5 2006/7 2007/8

* Growth versus prior year adjusted for the impact of mobile termination cut and excluding Albacom 2005/06

-

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

2,200

Dec-03 Mar-04 Jun-04 Sep-04 Dec-04 Mar-05 Jun-05 Sep-05 Dec-05 Mar-06 Jun-06 Sep-06 Dec-06 Mar-07 Jun-07 Sep-07

Strategy in action – grow new wave

£m

Q2 new wave revenue up 10.3%

Reu

ters

2005/62004/5 2006/7

£m

2007/8

DHL Express (Italy), ArcelorMittalNovartis, LogicaCMG

DFT

S

0

1,000

2,000

3,000

4,000

5,000

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2

£1.3bn £1.5bn £1.6bn £1.6bn

Other orders

Networked IT services

Reu

ters

2005/62004/5 2006/7

£m

2007/8

DHL Express (Italy), ArcelorMittalNovartis, LogicaCMG

DFT

S

0

1,000

2,000

3,000

4,000

5,000

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2

£1.3bn £1.5bn £1.6bn £1.6bn

Other orders

Networked IT services

BT Global Services – Q2 total order intake £1.6bn

Rolling 12 months intake £9.2bn

European network* deals - April ’04 to Sept ‘07

Company DealsBT Global Services 75Ericsson 36

AT&T 16HP 15

Fujitsu 12IBM 11

Alcatel-Lucent 34

T-Systems 29

Atos Origin 14

CSC 11Capgemini 7Others (>130 firms) 390

Total 650

Company ValueBT Global Services $11.5bnSiemens AG $6.3bn

IBM Global Services $5.9bn

Fujitsu $2.1bn

Atos Origin $0.9bnAT&T $0.3bn

HP $1.6bn

EDS $6.0bn

T-Systems $2.8bn

CSC $1.4bnCapgemini $1.0bn

Others (>130 firms) $23.4bn

Total $63.2bn

* Source Datamonitor Computerwire - deals excluding Wholesale networks

0

2000

4000

6000

8000

10000

12000

Mar-05 Jun-05 Sep-05 Dec-05 Mar-06 Jun-06 Sep-06 Dec-06 Mar-07 Jun-07 Sep-07

LLUOther ISPsBT Retail

000s

Broadband – DSL continues to grow

Q2 net additions 479k

11.7 million ADSL connections

0

700

1,400

2,100

2,800

3,500

4,200

Sep-05

Dec-05

Mar-06

Jun-06

Sep-06

Dec-06

Mar-07

Jun-07

Sep-07

Broadband – BT’s retail market share* 37%

Subscriber base 4.1m

PlusNetBest Broadband Provider

BT Total Broadband

Q2 gross installs 450k• c60% take Option 2 or 3

• 178k net additions

Subscriber base000s

* DSL and LLU net adds

Net adds in Q2

Report net adds Nov 8th

Acquisition of Brightview

0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000

Sky

Orange

Tiscali

CPW / AOL

Virgin Media

BT Retail

Net adds in Q2

Report net adds Nov 8th

Acquisition of Brightview

0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000

Sky

Orange

Tiscali

CPW / AOL

Virgin Media

BT Retail

Broadband – UK retail market including cable

Total broadband customers (k)

* Based on published data for 30th Sept 2007

Gaming

Wireless Networks

Monitoring and Control

Home IT advisor

BT BroadbandTalk

BT FusionBroadband – so much more than just access

Security & Storage

05

10152025303540455055606570

06-A

pr27

-Apr

18-M

ay08

-Jun

29-J

un20

-Jul

10-A

ug31

-Aug

21-S

ep12

-Oct

02-N

ov

000s Installed customer base Installed base• 46k at the end of September• Now over 70k

Self-install • Option of choice by over 75%

of new installs• Recently increased number of trained

call centre staff to cross sell Total Broadband and Vision

Customer Marketing Strategy• Customers targeted by segment• Vision Customer

magazine launched November 1st

– that’s entertainment

• Free access in hundreds of thousands of places in the UK and around the world

• Completely secure

The world’s largest Wi-Fi community

• It’s included as part of the BT Total Broadband package– which includes access to BT Openzone

and wireless city networks

200

215

230

245

260

275

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2

New waveTraditional

Consumer ARPU* – up £5 to £271

£

2004/5 2005/6 2006/7 2007/8

* Consumer household rolling 12 months

2004/5 2005/6 2006/7 2007/82003/4

(7%)

(6%)

(5%)

(4%)

(3%)

(2%)

(1%)

0%

1%

2%

3%

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q22004/5 2005/6 2006/7 2007/82003/4

(7%)

(6%)

(5%)

(4%)

(3%)

(2%)

(1%)

0%

1%

2%

3%

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2

Consumer – revenue growth

-8%

-6%

-4%

-2%

0%

2%

4%

Q1 05/0

6Q2 0

5/06

Q3 05/0

6Q4 0

5/06

Q1 06/0

7Q2 0

6/07

Q3 06/0

7Q4 0

6/07

Q1 07/0

8Q2 0

7/08

-8%

-6%

-4%

-2%

0%

2%

4%

Q1 05/0

6Q2 0

5/06

Q3 05/0

6Q4 0

5/06

Q1 06/0

7Q2 0

6/07

Q3 06/0

7Q4 0

6/07

Q1 07/0

8Q2 0

7/08

Business – performance transformed

6th quarter of revenue growth

• Value packages• c30% take-up amongst SMEs• 18k new One Plan customers

• Uplift in new wave revenue• ICT revenue up 24%• Mobile revenue up 35%

• Business broadband market share remains over 40%

• BT Enterprise (EBITDA up 14%)- deals signed with Yahoo and Morrison’s- strong performance from Dabs & Expedite

• BT Ireland (EBITDA up 13%)- network IT services accounts for 29% of revenue

Revenue-4%

-3%

-2%

-1%0%

1%

2%

3%

4%

Q1 06/07 Q2 06/07 Q3 06/07 Q4 06/07 Q1 07/08 Q2 07/08

Wholesale - future growth from managed services

Recent wins

And in Q2• Orange

for Calls and Lines - signed late August and launched on 18th September

• Jersey Telecom12 year contract for managed backhaul,equipment and accommodation services

000s Broadband

0

2000

4000

6000

8000

10000

12000

Mar-05 Jun-05 Sep-05 Dec-05 Mar-06 Jun-06 Sep-06 Dec-06 Mar-07 Jun-07 Sep-07

LLUOther ISPsBT Retail

-4%

-3%

-2%

-1%

0%

1%

2%

3%

4%

Q106/07

Q206/07

Q306/07

Q406/07

Q107/08

Q207/08

-4%

-3%

-2%

-1%

0%

1%

2%

3%

4%

Q106/07

Q206/07

Q306/07

Q406/07

Q107/08

Q207/08

Openreach

• Best fault repair stats for 10 years

• 50% increase in frame activity

• Rapid take-up of Ethernet services driving revenue

• OTA report - Oct 2007– encouraging signs of improvement

in service quality for SMPF & MPF

Revenue growth

Transformation of cost base – FY target £600m

Global• De-layering (c£20m)• Global sourcing (c£60m)• Non telco procurement activity (c£120m)

Retail• Overhead value analysis driving de-

duplication & process efficiency (c£35m)• Marketing efficiencies (c£30m)• Billing programme (c£29m)

Wholesale• Field operations productivity (c£17m)• Support contracts (c£12m)• Network transformation (c£17m)

Openreach• Service systems automation (c£15m)• Field and service centres productivity

improvements (c£17m)• Fault volume reduction and visit

avoidance (c£18m)

H1 delivered £275m, more in H2

H2 agenda

• Deliver £325m efficiency savings in H2 across the business• Global Services EBITDA margin improvement

– contract milestones and operational savings• BT Design and BT Operate synergies

• Grow consumer ARPU with enhanced broadband portfolio• Develop further the addressable SME market with targeted propositions• Convert strong pipeline of orders from corporates• Increase carriers’ take-up of Ethernet services

Revenue

Margin

-5.0%

-4.0%

-3.0%

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

Q1 03/0

4Q2 0

3/04

Q3 03/0

4Q4 0

3/04

Q1 04/0

5Q2 0

4/05

Q3 04/0

5Q4 0

4/05

Q1 05/0

6Q2 0

5/06

Q3 05/0

6Q4 0

5/06

Q1 06/0

7Q2 0

6/07

Q3 06/0

7Q4 0

6/07

Q1 07/0

8Q2 0

7/08

-5.0%

-4.0%

-3.0%

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

Q1 03/0

4Q2 0

3/04

Q3 03/0

4Q4 0

3/04

Q1 04/0

5Q2 0

4/05

Q3 04/0

5Q4 0

4/05

Q1 05/0

6Q2 0

5/06

Q3 05/0

6Q4 0

5/06

Q1 06/0

7Q2 0

6/07

Q3 06/0

7Q4 0

6/07

Q1 07/0

8Q2 0

7/08

Consistent deliveryRevenue

* Before specific items and leavers

EBITDA*7th quarter of growth

EPS* DividendsInterim up 6%

pence

0

2

4

6

8

10

2002/3 2003/4 2004/5 2005/6 2006/7 2007/8

Interim

Final

22nd quarter of growth

2.5

3.5

4.5

5.5

6.5

Q1 Q2 Q3 Q4

pence22nd quarter of growth

2.5

3.5

4.5

5.5

6.5

Q1 Q2 Q3 Q4

pence

-2%-1%-1%0%1%1%2%2%3%3%4%4%5%5%

Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1

15th quarter of growth

BT Group plcHanif Lalani – Group Finance Director

Interim dividend 5.4p

Q2 2007/8 – Financial headlines

(1) Before specific items and leavers

2%

2%

3%

6%

49%Free cash flow £0.2bn

Earnings per share (1) 6.1p

Group revenue £5.1bn

EBITDA (1) £1.4bn

RevenueEBITDA (pre leavers)Depreciation & amortisationOperating profit (pre leavers)Operating marginLeaver costs AssociatesFinance costs (net)Profit before taxTaxProfit for the period

Earnings per share (post leavers)Earnings per share (pre leavers)

Capital Expenditure

5,0951,448(693)

75514.8%

(43)(3)

(92)617

(153)464

5.7p6.1p

£799m

Q2 2007/8 resultsQ2 2006/7

£mQ2 2007/8

£mBetter /

(Worse) £m

4,9411,418(703)

71514.5%

(33)5

(55)632

(155)477

5.7p6.0p

£812m

Note: all numbers are before specific items. Q2 2007/8 charge £182m pre tax

154301040

(10)(8)

(37)(15)

2(13)

0.0p0.1p

£13m

-600-400-200

0200400600800

1,0001,2001,4001,600

2004

/5 Q1

2004

/5 Q2

2004

/5 Q3

2004

/5 Q4

2005

/6 Q1

2005

/6 Q2

2005

/6 Q3

2005

/6 Q4

2006

/7 Q1

2006

/7 Q2

2006

/7 Q3

2006

/7 Q4

2007

/8 Q1

£m

2007

/8 Q2

-600-400-200

0200400600800

1,0001,2001,4001,600

2004

/5 Q1

2004

/5 Q2

2004

/5 Q3

2004

/5 Q4

2005

/6 Q1

2005

/6 Q2

2005

/6 Q3

2005

/6 Q4

2006

/7 Q1

2006

/7 Q2

2006

/7 Q3

2006

/7 Q4

2007

/8 Q1

£m

2007

/8 Q2

Free cash flow - seasonality

0

50

100

150

200

250

300

350

Q1 Q2 Q3 Q4

2005/6 2006/7 2007/8

Q2 2007/8 - BT Global Services

• Revenue £2.3bn up 6%– New wave up 10%– UK traditional down 8%

• Gross profit £651m, up 2%

• SG&A £411m, maintained

• EBITDA £240m, up 5%– Margin maintained

• Depreciation up 11%

• Operating profit £65m, down £7m

EBITDA£m

BT Global Services – driving H2 performanceRecent actions• Increasing number of deals with higher value add element

– Standard Chartered Bank (Asia Pac), MPLS network resilience– gasNatural (Spain), network security enhancements– Punch Taverns (UK), technology refresh and integration

• Delivering synergies and scale from acquisitions– Consolidating operations in the Americas – Net2S and CS IT Division providing scale in France

• Rationalisation of cost base– Alcatel-Lucent will support and maintain legacy networks globally– Management delayering and global sourcing of 1,800 roles

• More balanced contract base– Increasing number of contracts entering 2nd half of their lives

0

45

90

135

180

225

270

Q1 Q2 Q3 Q42005/6 2006/7 2007/8

Q2 2007/8 - BT Retail

• Revenue £2.1bn, up 3% – New wave up 18%– Traditional down 2%

• Gross profit £631m, up 7%– Margin improved by

1 percentage point

• SG&A £374m, up 5%– Investment in service

and marketing

• EBITDA £257m, up 9%

• Operating profit £217m, up 11%

£mEBITDA

350

400

450

500

Q1 Q2 Q3 Q4

2005/6 2006/7 2007/8

Q2 2007/8 - BT Wholesale

• Revenue £1.8bn down 4%– External down 9%– Internal up 2%

• Gross variable profit down 1%

• Network and SG&A up 1%

• EBITDA £466m, down 4%

• Depreciation down 14%

• Operating profit £216m, up 12%

£mEBITDA

0

70

140

210

Q1 Q2 Q3 Q42005/6 2006/7 2007/8

Q2 2007/8 -

• Revenue £1.3bn up 2%– External up 28%– Internal down 2%

• Operating costs 2% higher at £836m

• EBITDA £468m, up 2%

• Depreciation up 4%

• Operating profit £298m, up 6%

External Revenue£m

EBITDA* - seventh consecutive quarter of growth

* Before exceptionals / specific items, leaver costs and sale of property in Q2 2004/5

-5.0%

-4.0%

-3.0%

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

Q1 03/0

4Q2 0

3/04

Q3 03/0

4Q4 0

3/04

Q1 04/0

5Q2 0

4/05

Q3 04/0

5Q4 0

4/05

Q1 05/0

6Q2 0

5/06

Q3 05/0

6Q4 0

5/06

Q1 06/0

7Q2 0

6/07

Q3 06/0

7Q4 0

6/07

Q1 07/0

8Q2 0

7/08

2.5

3.5

4.5

5.5

6.5

Q1 Q2 Q3 Q4

2002/3 2003/4 2004/5 2005/6 2006/7 2007/8* * *** ****

Earnings per share – 22 quarters of delivery

* before exceptional items and goodwill from continuing activities** before specific items

pence

0

2

4

6

8

10

2002/3 2003/4 2004/5 2005/6 2006/7 2007/8

Interim Final

Dividends – interim dividend 5.4ppence

up 6%

Complete £2.5bn buy back by March 2009

Corporate evolution• From traditional telco to leading services provider

with global capabilities

Building on success – keeping ahead of the game

Strong momentum with track record of delivery• Twenty-two quarters of EPS* growth• Fifteen quarters of revenue growth• Seven quarters of EBITDA* growth

Strategy built around convergence & innovation• 10% growth in new wave revenues

Continue to grow revenue, EBITDA*, EPS* and dividends in 2007/8

* Before specific items and leavers

BT Group plcQ2 results 2007/8