Sir Christopher Bland Chairman BT Group plc

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2 Sir Christopher Bland Chairman BT Group plc

3 Delivering today Investing for tomorrow

4 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

5 2003/04 - key financial indicators Earnings per share* (pence) 18p 15p 12p 9p 6p Free cash flow**( m) 2,250 1,750 1, (250) (750) p 0p FY 01/02 FY 02/03 FY 03/04 2,071 1, FY 01/02 FY 02/03 FY 03/04 Dividend per share* (pence) 9p 6p 3p 0p FY 01/02 FY 02/03 FY 03/04 Net debt ( bn) 0 (7) (14) (21) (28) Mar 01 Mar 02 Mar 03 Mar 04 *Before exceptional items, goodwill amortisation **Free cash flow for 2001/02 excludes the property transaction and includes pension payments, emerged and discontinued activities

6 2003/04 - dividends and buy backs 10p 8p 6p 4p 2p 0p 2.0p FY 01/02 +31% 6.5p 8.5p FY 02/03 FY 03/04 Dividend pay-out 50% of earnings Targeting a 60% pay-out ratio in 2005/06 Rolling share buy back programme commenced To date: Purchased 1.1% of share capital (97m shares) Total cost of purchase 174m Authorisation for 10% of share capital

7 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

8 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 Everybodyonline Helped 8 communities - digital inclusion - 3 in Wales Helping everyone benefit from improved communication communities first cymunedau yn gyntaf

9 Delivering today Investing for tomorrow Ben Verwaayen Chief Executive BT Group plc

10 Our strategy Defend traditional Improved service Aggressive & creative marketing Price innovation Reduce costs / improve margin Long term partnership with our customers Transformation 21 st CenturyNetwork Grow new wave Broadband Mobility ICT Global Solutions

11 Transformation is underway 19 Total revenue bn New wave 15.9* Traditional 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

12 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

13 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

14 Broadband - making Britain click BT s UK-wide broadband coverage more than 90%, and to rise to 99.6% by summer 05 Cardiff: now 100% broadband enabled Pan-Wales coverage: 96% by summer '05 2.5m 2.0m 1.5m 1m 0.5m End user connections now over 2.5m BT Wholesale Broadband 0.0m Mar Jun Sep Dec Mar Jun Sep Dec Mar Broadband at the heart of BT

15 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

16 Good value for money Consumer BT Together Option 1 customers on Standard migrated to Option 1 on 1st July Option 1 price reduced 1 to per month BT Together Option 2 price reduced from 1st April by 1 to 6 per month (+ line rental) Business 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 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

17 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

18 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 Broadband available as dialtone to most customers

19 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

20 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

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