Adastral Park BT’s research and development campus, one of the world’s leading centres of technology and telecommunications.

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Developing and investing in new technologies, attracting and keeping the best people, leading markets and competing freely: innovation drives everything we do and has since we started in 1846. The next pages highlight some of our more recent achievements following our stock market listing in

85%of the UK population had access to Cellnet after the first year

1stBT international office opened in New York

170+countries now part of an international network

140MbpsRevolutionary optical fibre cable speed

The facts tell the story: 4 billion people watching, 27,500 journalists reporting, 14,700 athletes contacting home. Around four times the data needs of the Beijing Games in 2008. But unlike those Games, 2012 was run from one integrated network. With 80,000 connections, 16,500 phone lines and 14,000 cable TV outlets in 94 locations. That was our innovative and resilient solution for the ultimate ‘right first time’ challenge. Like everyone involved, we’re proud to have been part of it.

The first stock market flotation of a major utility helped to create a new type of share ownership – one where anyone could join in. It gave BT the freedom to invest, innovate and develop to better meet the demands of the market and of customers.

Switched on – as alwaysArguably the biggest step change in day-to-day communications, ‘always on’ BT Broadband was launched in April 2002. For those with a phone line, it was the simple, one stop shop and – just over a decade ago – a massive change in how we all kept in touch, did business and entertained ourselves. What’s more, all it needed was a ‘plug and play’ set‑up that anyone could install.

The world’s first commercial single‑mode optical fibre link

Bringing nations closer.The world’s first international, optical fibre undersea cable

Running between Luton and Milton Keynes, these revolutionary 140 Megabits per second optical fibre cables replaced traditional copper. Lighter and thinner, they carried more information over longer distances. Fibre cables are also easier to install and maintain, this link taking just 38 days to get up and running.

Our cableship Alert laid the submarine cable between Broadstairs in Kent and Ostend in Belgium. By allowing direct communication, it did away with the delays and echoes that plagued satellite calls. And by transmitting far more information at much higher speeds, it transformed the likes of Europe’s financial sector. A short step across the Channel, but the first in what’s now a global network of undersea fibre cables.

The biggest, best and mostconnected yet. The London 2012Olympic and Paralympic games.

30 years of innovation: finding a better way of doing things

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The first such major transition in the world, BT’s long distance network turned completely digital on 3 July after five years of intense work. Processors now controlled the exchanges, generating relevant, real-time data and continuously feeding it to the network managers. So problems could be identified and remedied, often before customers became aware of them.

The world’s first fully digital long distance network

Find out more about BT’s history at www.btplc.com/Thegroup/BTsHistory

Open for business.Three billion British Telecom shares went on sale 3 December

Innovation has always been at the heart of our business. Our desire to find the next new thing doesn’t change. Breakthroughs in equipment, networks and services help to improve lives, something that goes to the core purpose of our company.

It’s good to talk – wherever you areOn 7 January 1985, together with Securicor, we launched Cellnet, the first commercial cellular radio service. Uniquely, we combined our network expertise with our partner’s handset skills to be the first to offer something more, useful and new. Now 30 years on, we have our BT Mobile service and announced our proposed acquisition of EE.

Speeding up the real worldSetting the record for the fastest data transmission speed over an operational optical fibre link.This year BT and Huawei achieved a super channel speed of 3 Terabits per second. An incredible feat made even more impressive by being set over an existing fibre link, using commercial grade hardware and software in a real-world operating environment. To put that speed into a real context, it’s the equivalent of transmitting around 100 HD films in a single second.

We think this record shows how our core fibre optic infrastructure is capable of working even more efficiently in the future. The demand for higher bandwidth grows by around 35% every year. From film streaming to mobile apps, the different ways we consume entertainment, stay in touch and do business, all put pressure on internet service providers.

The high speeds we’ve achieved across existing infrastructure mean our customers can enjoy superfast broadband without interruptions or delays, and without paying much more for it either.

Find out more about 3TB super channel speed trials at www.btplc.com/Innovation/Innovationnews/Huawei3TB

2014>15

“ We fundamentally proved in our experiments that we can get 50% more traffic over a single piece of fibre than we previously thought possible. A great result. We’re immensely proud of that achievement ”

3Tbps

The real-world super channel speed achieved

Growth in higher bandwidth demand every year

35%

Dr. Kevin Smith Transmission, Futures and Innovation Technology, based at Adastral Park, has been with BT for the last 25 years. His team were instrumental in setting the record breaking data transmission speed.

Q What’s changed most during your time at BT?

A We’ve always done really cool research. The aim of this has shifted so that we’re making sure we develop ideas and solutions that can apply to our network.

Q You set the record for the fastest data transmission over fibre. Other than speed, what does this capability allow people to do?

A We are incredibly proud of that achievement but it’s not just about setting records. It’s about enhanced customer experience, the ability to do all the things that you’re used to doing online but much easier, much faster and much quicker.

Q With increasing consumer and business demands, what’s next in terms of technological advances?

A We need to keep pushing our ability to maximise capacity and innovate to go beyond that capacity. I think what we’ll see is a more agile optical world which is a very exciting and pioneering area to be in.

Watch my video online at www.bt.com/annualreport

The Openreach Next-Generation Field Apps

Tomasz Kulawinski Field engineer

“ It improves my working life and speeds things up. And my customers love it too.”

Find out more about this story and Openreach at www.openreach.co.uk

With millions of customers to support, getting the right engineer, with the right skills, to the right location, at the right time, can be a major challenge.To dispense with the enormous amounts of paperwork each job used to generate, we created our Openreach Next-Generation Field Apps. Loaded onto smartphone devices, now issued to 14,000 of our field engineers, they make sure each engineer has the information needed to do a great job for their customers.

Field engineer Tomasz Kulawinski installs and repairs telecoms services across a large urban area. He has over 20 years’ experience. Handed a device loaded with our job management software, Tomasz now receives new assignments on the move, completes reports in real time, and gets to jobs faster using in-built satnav. By making his life easier, the Apps ensure he also gets more work done. Tomasz says he’s proud of this new device: “I pull it from my pocket and pick up new jobs just like that. It improves my working life and speeds things up. And my customers love it too.”

Since its launch, the suite of Field Apps has transformed our operational efficiency while showing that we’re always ready to embrace new technology and thinking, giving our team of engineers the extra time and space they need for each customer.

Today’s tools to improve productivityHanded a smartphone loaded with the Openreach Next-Generation Field Apps, our engineers can get to the next job quicker, spend more time with the customer and complete reports in real time.

Contributing to greater staff satisfaction Since launch, the quarterly Openreach employee survey has seen an increase in the number of engineers agreeing they have the tools and equipment needed to do their jobs well.

Assignments received on the go

Easy to contact the customer in advance of the visit

Engineers can quickly report progress during the working day

Customers can provide feedback on the engineer visit

All engineers can keep connected with peers and company news

Connecting more of us to the customer journeyOpenreach has distributed 16,000 devices – 2,000 to managers and supervisors and 14,000 to field engineers. Making sure our teams are up to date and up to speed.

Delivering real customer satisfactionThe Enhanced Customer Journey App helps engineers put the customer at the centre of the job from task assignment through to job closure. Watch the video online at

www.bt.com/annualreport

Click on happinessWe’re working with Coca-Cola to bring free internet access to impoverished communities in South Africa.Like all good ideas, it’s simple. Coca-Cola’s dispensing machines are everywhere, so where better to find web access than alongside your cold drink?

The pilot project was launched in Umtata in the Eastern Cape province and Nelspruit in the Mpumalanga province. Locations were carefully chosen for their accessibility and popularity – near taxi ranks, schools or food stores – to maximise use.

Coca-Cola is installing the drinks dispensing coolers, while we’re doing what we do best – the design and support, the connectivity and internet access offered for free via wi-fi through every machine.

There’s no charge from us; no need to buy a can of coke; and everyone can access the internet for as long as they want.

Coca-Cola South Africa, Coca-Cola Fortune and BT Global Services hope to grow the project and install what we’re calling wi-fi coolers wherever they’re needed across South Africa. Helping to support and grow more sustainable communities.

Find out more about this story and BT Global Services at www.globalservices.bt.com

Jean-Marc FrangosManaging Director External Innovation, BT Technology, Service & Operations

2014>15

“ By giving people access to free wi-fi, we help them build the knowledge crucial to the future of their communities. Making it easier to get online also helps businesses to spread prosperity where it’s most needed”

What’s on TV next?These days we expect to be able to watch whatever programmes we want, when we want and wherever we want.Of course, more choice doesn’t always mean better options. It can mean we just have more decisions to make before we find something we want to watch. But it’s in the area of making an informed choice that the technological story and the human aspect merge.

According to a ‘10-year outlook’ report compiled by our research and technology team, the way we interact with and view television will change even more radically over the next decade. TV content will be broadband-driven and consumption of it will be on smart TVs, closer to computers than televisions. So, we’ll have the world to choose from, but even greater scope to individualise the way we view it.

But while TV schedules decline in importance, research suggests there is still great demand for some kind of guide to all the content that’s available. The trusted voice who’ll direct us towards what’s relevant and good. It’s a role being taken on by recommendation engines and social network sites. And to be noticed, the established television networks will have to be on them.

Of course, we’re in the thick of this. We use the power of broadband to help people get the TV they want, in the manner they want. We need to help content providers, ranging from programme-makers to interactive games-makers, to offer options for people at home or on the move.

We’re not sure if it’s what Logie Baird had in mind. But as an innovator himself, we think he’d appreciate what we’ve done with his invention.

Find out more about this story and BT Consumer at www.productsandservices.bt.com

What you want, when you want itBT TV is our TV service, offering 3 great TV packages for our customers - each with up to 70 Freeview TV and radio channels.

Brilliant set- top boxesOur YouView+ box lets customers pause live TV and record up to 300 hours of programmes with 7 days of catch-up TV.

Extraordinary TV for everyoneYouView combines the power of high-speed broadband with the world of choosing, watching and recording content.

Delia BushellManaging Director of BT TV and BT Sport

“ People are spending more time online and less time on standard linear TV viewing, so are now less willing to pay ‘full fat’ TV pricing. This gives BT TV a strong growth opportunity from offering a selection of high-end sport and entertainment at great value prices.”

We never stand still Smart City programme

As cities grow they risk outstripping the infrastructures they rely on. The Milton Keynes Smart City programme is pioneering a solution with the MK Data Hub. Using cloud and big data technology, it sources information from energy, transport, water use and weather to create a fuller picture of the city’s real-time needs, so resources can be managed better and more sustainably.

Coming up with new ideas and developing new technologies is core to what we do at BT. This page gives you an idea of the range of those ideas, designed to push technology further than before. All intended to improve people’s lives in welcome, relevant and affordable ways.

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Dr. Tim WhitleyManaging Director, Reseach & Innovation and Adastral Park

“ Innovation has always been in BT’s DNA. Today, we bring the best of our creative thinking together through the ‘BT Ingenious’ programme”

Find out more about this at www.btplc.com/Innovation

Watch the video online at www.bt.com/annualreport

G.fast Technology

Last summer, we conducted the first technical trials of G.fast technology. This ultrafast broadband has the potential to deliver speeds of up to 500Mbps to most homes within a decade. It keeps us ahead of much of Europe and means we join the ranks of world leaders such as Japan and South Korea. We’re also currently expanding our fibre network by working with the public sector across the UK to help achieve an estimated superfast broadband coverage of 95% in the next few years.

The Internet of Things

“There are now more devices connected to the Internet than people” says John Davies, a chief researcher at BT. By providing the networks that connect all these devices, BT is also developing ways to analyse and combine the data they produce, creating an amazing fund of information to drive the development of new services. The number of connected objects is expected to reach 50 billion by 2020 – meaning a transformation in how we live in our cities, travel, manage our lives sustainably and draw on different services.

Taking a quantum leap

Normal computers keep billions of bits of data in just one of two definite states. Theoretically quantum computers could evaluate all this data in every possible combination, which means they could solve vast numbers of problems at the same time – even including things other computers can’t answer.

We’re exploring what quantum technology can do in our world.

Can we create ultrafast communications, distributed across the country and made totally secure by fundamental physics? And can we provide a quantum signature, making it impossible to impersonate you? We’re working on it.

Find out more about BT Technology, Service & Operations at www.btplc.com/Thegroup/ Ourcompany/Groupbusinesses/BTTSO