Sir Christopher BlandChairman • BT Group plc

Delivering todayInvesting for tomorrow

2003/04 - another year of good progress

Group turnover £18.5bn, maintained*

Earnings per share 16.9p, up 19%**

Free cash flow £2.1bn, up 21%

Dividend 8.5p, up 31%

Net debt £8.4bn, down 12%

*Adjusted for the impact of mobile termination cut**Before exceptional items and goodwill

Delivering today

FY 01/02

2,250

1,750

1,250

750

250

(250)

(750)FY

02/03FY

03/04

Free cash flow**(£m)

FY 01/02

18p

15p

12p

9p

6p

3p

0pFY

02/03FY

03/04

Earnings per share* (pence)

Mar 01

0

(7)

(14)

(21)

(28)Mar 02 Mar 03

Net debt (£bn)

FY 01/02

9p

6p

3p

0pFY

02/03FY

03/04

Dividend per share* (pence)

2003/04 - key financial indicators

8.8

14.216.9

2.0

6.58.5

-732

1,708 2,071

Mar 04

*Before exceptional items, goodwill amortisation**Free cash flow for 2001/02 excludes the property transaction and includespension payments, emerged and discontinued activities

-27.9

-9.6 -8.4-13.7

2003/04 - dividends and buy backs

To date:

Purchased 1.1% of sharecapital (97m shares)

Total cost of purchase£174m

Authorisation for 10%of share capital

Rolling share buy backprogramme commenced

FY 01/020p

FY 02/03 FY 03/04

10p

8p

6p

4p

2p2.0p

6.5p

8.5p+31%

Dividend pay-out 50% of earningsTargeting a 60% pay-out ratio in2005/06

Continuing the transformation

Over the last three years and going forward:delivering on a clear strategy

rigorous financial discipline− strong free cash flow− debt reduced by £20bn since March 2001

sustained reductions in customer dissatisfaction

accelerating new wave innovations

cultural change: BT’s people and brand values

deepening our community engagement Delivering today Investing for tomorrow

Our contribution to the community

Helping everyone benefit from improved communication

communities first cymunedau yn gyntaf

Supporting good causes£18 million

Education support2 million children, 10,000 schools

4,000 BT VolunteersFree teaching resources

ChildLine£1.5 million cash, £2 million in kind,19% more children helped

EverybodyonlineHelped 8 communities - digital inclusion - 3 in Wales

Ben VerwaayenChief Executive • BT Group plc

Delivering todayInvesting for tomorrow

Our strategyDefend traditional

Improved serviceAggressive & creative marketingPrice innovationReduce costs / improve margin

Long termpartnershipwith our customers

Grow new waveBroadbandMobilityICTGlobal Solutions

Transformation21st

Century Network

Transformation is underway

Investing for tomorrow

New wave now represents 18% of Group turnover

*Excluding the impact of the mobile termination rate reduction

FY 02/03

11FY

03/04

19

17

15

13

2.6New wave

15.9*Traditional

Tota

l re

ven

ue £

bn

-5%*

+30%

3.4New wave

15.1*Traditional

Building for the future

Lead on network centric ICT capability

Deliver on broadband

Create convergent mobility solutions

Defend traditional business rigorously

Drive for cost leadership

Investing for tomorrow

Embracing technology - enabling change

ICT - combines telecoms experienceand IT innovation

Major wins across UK, Europe and US− Unilever− NHS− Honeywell

Leading the world in network-centric ICT solutions

Broadband - making Britain click

Broadband at the heart of BT

BT’s UK-wide broadband coverage more than 90%, andto rise to 99.6% by summer ’05

Cardiff: now 100% broadband enabled

Pan-Wales coverage: 96% by summer '05

Mar0.0m

2.5m

1.5m

1m

0.5m

2.0m

Jun SepDecMar Jun SepDecMar2002 2003

End user connections now over 2.5m

BT Wholesale Broadband

2004

Building a seamless converged service

BT re-enters mobility by:Partnering with industry leaders

Re-building the brand in the high streetActing as a virtual network operatorInnovating through Wi-Fi – BT OpenzoneLaunching converged services –e.g. Project Bluephone− enabling the mobile phone to “roam”

onto the fixed network Create mobility services and solutions

Good value for money

BT Together Option 1customers on Standardmigrated to Option 1 on 1st JulyOption 1 price reduced £1 to £10.50 per month

BT Together Option 2price reduced from 1st April by£1 to £6 per month (+ line rental)

BT Together Option 3price reduced from 1st April by £3 to £15 per month (+ line rental)

BT Business Planno UK or US call costs more than 10p for an hourcalls to key European countries cost no more than 20p

BT Local Businessactive in 73 locationsbilling over £1bn of revenue

Consumer Business

Reinvent our traditional business

Financial discipline with cost leadership

Competitive advantage through cost leadership

01/02 02/03 03/04 04/05 05/06 06/07 07/08 08/09

Future savings programmesacross the business

£1.7bn £1bn

Savings to dateacross the business

21st Century Network savings

much more to come...Good progressto date

What?A single intelligent network to replace many legacy platformsWhy?

Driving efficiencyBetter range and quality of services for customersSpeed to market

When?Trials in 2004Starting mass migration to new IP network - 2006Broadband available as “dialtone” to most customers - 2009

21st Century Network

BT’s values

Trustworthy

Helpful

Inspiring

Straightforward

Heart

BT peopleproviding a customer-centric organisation

On 4 May 2004 over 1,300 senior managerswent back to the floor

‘my customer’ challenge cup

Hundreds of teams across BT competing

to help improve customer satisfaction

Our customer promises

When you make an appointment with usour engineers will do whatever they can to keep it

When you call BTyou can choose to opt out of the machine andtalk to a real person

If the first person you call at BT can’t helpthey’ll make it their top priority to find theperson who can

Improving customer satisfaction