Sir Christopher Bland Chairman • BT Group plc Delivering today Investing 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 2003/04 - key financial indicators Earnings per share* (pence) 18p 15p 12p 9p 6p 3p 0p Dividend per share* (pence) 9p 14.2 16.9 8.8 3p 2.0 FY 01/02 FY 02/03 FY 03/04 Free cash flow**(£m) 2,250 1,750 1,250 750 250 (250) (750) 6.5 6p 8.5 0p FY 01/02 FY 02/03 FY 03/04 Net debt (£bn) 0 1,708 2,071 (7) -13.7 -9.6 -8.4 Mar 03 Mar 04 (14) (21) -732 FY 01/02 FY 02/03 FY 03/04 (28) -27.9 Mar 01 Mar 02 *Before exceptional items, goodwill amortisation **Free cash flow for 2001/02 excludes the property transaction and includes pension payments, emerged and discontinued activities 2003/04 - dividends and buy backs 10p +31% 8p 8.5p Rolling share buy back programme commenced To date: 6.5p 6p Purchased 1.1% of share capital (97m shares) 4p Total cost of purchase £174m 2p Authorisation for 10% of share capital 2.0p 0p FY 01/02 FY 02/03 FY 03/04 Dividend pay-out 50% of earnings Targeting a 60% pay-out ratio in 2005/06 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 Supporting good causes £18 million Education support 2 million children, 10,000 schools 4,000 BT Volunteers Free teaching resources ChildLine £1.5 million cash, £2 million in kind, 19% more children helped communities first cymunedau yn gyntaf Everybodyonline Helped 8 communities - digital inclusion - 3 in Wales Helping everyone benefit from improved communication Delivering today Investing for tomorrow Ben Verwaayen Chief Executive • BT Group plc Our strategy Defend traditional Improved service Aggressive & creative marketing Price innovation Reduce costs / improve margin Transformation 21st Century Network Long term partnership with our customers Grow new wave Broadband Mobility ICT Global Solutions Transformation is underway Total revenue £bn 19 17 15 2.6 New wave 15.9* Traditional 13 3.4 New wave 15.1* Traditional +30% -5%* 11 FY 02/03 FY 03/04 New wave now represents 18% of Group turnover *Excluding the impact of the mobile termination rate reduction Investing for tomorrow 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 experience and IT innovation Major wins across UK, Europe and US − Unilever − NHS − Honeywell Leading the world in network-centric ICT solutions Broadband - making Britain click 2.5m BT’s UK-wide broadband End user connections now coverage more than over 2.5m 2.0m 90%, and BT Wholesale Broadband to rise to 99.6% by summer ’05 1.5m Cardiff: now 100% broadband enabled Pan-Wales coverage: 96% by summer '05 1m 0.5m 0.0m Mar Jun Sep Dec Mar Jun Sep Dec Mar 2002 2003 2004 Broadband at the heart of BT Building a seamless converged service BT re-enters mobility by: Partnering with industry leaders Re-building the brand in the high street Acting as a virtual network operator Innovating through Wi-Fi – BT Openzone Launching 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 Consumer Business BT Together Option 1 customers on Standard migrated to Option 1 on 1st July Option 1 price reduced £1 to £10.50 per month BT Business Plan no UK or US call costs more than 10p for an hour calls to key European countries cost no more than 20p BT Together Option 2 price reduced from 1st April by £1 to £6 per month (+ line rental) BT Local Business active in 73 locations billing over £1bn of revenue BT Together Option 3 price reduced from 1st April by £3 to £15 per month (+ line rental) Reinvent our traditional business Financial discipline with cost leadership Savings to date across the business £1.7bn £1bn Future savings programmes across the business 21st Century Network savings 01/02 02/03 03/04 04/05 05/06 06/07 07/08 08/09 Good progress to date much more to come... Competitive advantage through cost leadership 21st Century Network What? A single intelligent network to replace many legacy platforms Why? Driving efficiency Better range and quality of services for customers Speed to market When? Trials in 2004 Starting mass migration to new IP network - 2006 Broadband available as “dialtone” to most customers - 2009 BT’s values Trustworthy Helpful Inspiring Straightforward Heart On 4 May 2004 over 1,300 senior managers went back to the floor ‘my customer’ challenge cup Hundreds of teams across BT competing to help improve customer satisfaction BT people providing a customer-centric organisation Our customer promises When you make an appointment with us our engineers will do whatever they can to keep it When you call BT you can choose to opt out of the machine and talk to a real person If the first person you call at BT can’t help they’ll make it their top priority to find the person who can Improving customer satisfaction