Phil Moses
– Group Controller & Director of Investor Relations
23 January 2008

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 margins, restructuring charges and financial targets. 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 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; and the timing of entry and profitability of BT in certain communications markets. BT undertakes no obligation to update any forward-looking statements whether as a result of new information, future events or otherwise.
2

Apr 2007 - New organisational structure announced
Oct 2007 - New organisational structure effective
New organisational structure benefits customers
– faster, better, more efficient services
BT Design is responsible for service design and development
BT Operate is responsible for service deployment and network operation
Lines of business retain responsibility for sales and customer service
BT continues to comply with regulatory Undertakings and obligations
Results for Q3 onwards to be reported under new structure
3

Significant amount of intra-group trading removed
(excluding Openreach)
No material change to Openreach
Greater visibility on end-to-end profitability of lines of business
BT Design and BT Operate are cost recovery centres
Some minor reallocation of customer accounts between
Global Services, Retail and Wholesale
Previously announced expected restructuring charge of
£450m and 2-3 year payback period remain unchanged
Previously reported group level results and financial targets are unaffected
4

External revenue
Internal revenue
Eliminations
Total revenue
EBITDA*
Depreciation & amortisation
Operating profit*
Old
FY2006/07
£m
20,223
10,075
(10,075)
20,223
5,780
2,920
Adjustment
£m
0
(4,014)
4,014
0
New
FY2006/07
£m
20,223
6,061
(6,061)
20,223
0 5,780
0 2,920
2,860 0 2,860
• Significant amount of intra-group trading removed
• No change to total group EBITDA or EBIT
• No change to other group P&L items
* Pre specific items and leaver costs
5

External revenue
Internal revenue
Total revenue
EBITDA*
EBITDA* margin
Depreciation & amortisation
Operating profit*
Old
FY2006/07
£m
7,467
1,639
9,106
1,020
11.2%
Adjustment
£m
(155)
(1,639)
(1,794)
(244)
New
FY2006/07
£m
7,312
0
7,312
776
10.6%
675
345
(10)
(234)
665
111
• All internal revenue and related EBITDA removed as UK IP network has been transferred to BT Operate
• A few small ‘major corporate’ accounts transferred to Retail
• Reduction in EBITDA partially offset by benefits of end-to-end profitability on external trading
• EBITDA margin target of 15% remains
* Pre leaver costs
6

External revenue
Internal revenue
Total revenue
Old
FY2006/07
£m
4,057
3,527
7,584
1,961
25.9%
Adjustment
£m
52
(2,250)
(2,198)
New
FY2006/07
£m
4,109
1,277
5,386
(450) 1,511
28.1%
EBITDA*
EBITDA* margin
Depreciation & amortisation 1,198 (290) 908
Operating profit* 763 (160) 603
• Small increase in external revenue due to transfer of some customer accounts from Retail
• Removal of substantial amount of internal revenue and related EBITDA as Wholesale no longer charges other lines of business for network
• Internal revenue only relates to line cards and electronics charged to Openreach
• Reduction in depreciation as no longer running network
* Pre leaver costs
7

External revenue
Internal revenue
Total revenue
EBITDA*
EBITDA* margin
Old
FY2006/07
£m
7,997
417
8,414
869
10.3%
Adjustment
£m
103
(171)
(68)
New
FY2006/07
£m
8,100
246
8,346
512 1,381
16.5%
Depreciation & amortisation
171 274 445
Operating profit*
698 238 936
• Small net decrease in revenue due to transfer of customer accounts between
Retail and other lines of business and reduction in intra-group trading
• Increase in EBITDA reflects full end-to-end profitability of products
(downstream of Openreach)
• Increase in depreciation due to allocation of network costs
* Pre leaver costs
8

External revenue
Internal revenue
Total revenue
EBITDA*
EBITDA* margin
Depreciation & amortisation
Operating profit*
Old
FY2006/07
£m
685
4,492
5,177
1,888
36.5%
707
1,181
Adjustment
£m
0
46
46
New
FY2006/07
£m
685
4,538
5,223
43
0
43
1,931
37.0%
707
1,224
• Small increase in internal revenue to realign with regulatory accounts
• Now sells LLU and partial private circuit tails to BT Operate rather than
Wholesale
• Regulatory accounts unchanged
* Pre leaver costs
9

Revenue
EBITDA*
Depreciation & amortisation
Operating profit*
Old
FY 2006/07
£m
17
Adjustment
£m
0
New
FY2006/07
£m
17
42 139 181
169
(127)
26
113
195
(14)
• Increase in EBITDA primarily due to regulated return on line cards
• EBITDA will include BT Design and BT Operate under/over recoveries
• Increase in depreciation relates to IT assets that support group overhead activity
* Pre leaver costs
10

Previously reported group level results and financial targets are unaffected
11

Q&A