Investing for growthSean WilliamsGroup Director Strategy, Policy and Portfolio

10 December 2015

© British Telecommunications plc

Our purpose, goal, strategy and culture

Broaden and deepen our customer relationships

FibreTV and content

Mobility and

future voice

UK businessmarkets

Leading global

companies

Our strategy

A growing BT: to deliver sustainable profitable revenue growth

Invest for growth

Our goal

A healthy organisation

Deliver superiorcustomer service

Transformour costs

Our purpose

Our culture

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To use the power of communications to make a better world

© British Telecommunications plc

1. Leading global companies

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New products– BT Assure Threat Defence; BT Compute Storage

– cloud-based CRM service

Expanding network– new cloud-enabled data centres in Argentina, Japan,

South Africa and Colombia

A leader in Gartner’s Magic Quadrant for Global Network Service Providers

Future plans

Increasing share of wallet– extending industry focus, expanding solutions

Supporting multinational customers– investing in global account management and network

Further network expansion

Focusing on gross margin and cash

Achieved so far

Source: Gartner, Magic Quadrant for Global Network Service Providers, Neil Rickard, Bjarne Much, January 14, 2015

This graphic was published by Gartner, Inc. as part of a larger research document and should be evaluated in the context of the entire document. The Gartner document is available upon request from http://www.globalservices.bt.com/uk/en/news/gartner-nsp-mq-2015.Gartner does not endorse any vendor, product or service depicted in its research publications, and does not advise technology users to select only those vendors with the highest ratings or other designation. Gartner research publications consist of the opinions of Gartner's research organization and should not be construed as statements of fact. Gartner disclaims all warranties, expressed or implied, with respect to this research, including any warranties of merchantability or fitness for a particular purpose.

© British Telecommunications plc

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© British Telecommunications plc

Growing share of wallet with existing customers

Developing new IP-based voice and data products

Cross-selling from leading position in fixed

2. UK business markets

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Achieved so far Future plans

Benefits of BT Business organisation

– simplified structure

– synergies from combining IT services units

Portfolio evolution

– IP voice services

• BT Cloud Voice

• Wholesale Hosted Centrex

– new broadband portfolio including IT support and Office 365

– streamlined IT services portfolioFixed-voice and

dataMobility Addressable IT

services market

BT Rest of market

Mar

ket

size

(£

bn

)

30%1% 6%

1086420

© British Telecommunications plc

3. Mobility and future voice

Customers want seamless, fast and reliable access to content

Exciting opportunity to leverage our brand and capabilities

£12.5bn acquisition of EE expected to complete by end of 2015/16

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For businesses

A complete, converged fixed and mobile solution

Single platform available wherever customers are

BT One Phone and 4G mobile plans launched

For consumers

Fast and reliable data and voice services wherever they are

Compelling propositions at competitive prices

Three SIM-only deals launched March 2015

– customer base now >200,000

© British Telecommunications plc

Position

Mobile market share1

Broadband market share1

No.1 in mobile

35%

3%

No.1 in fixed

<1%

32%

Combining the UK’s fixed and mobile market leaders

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Innovative, seamless services combining fibre,

4G and wi-fi

Cross-selling opportunities

Significant cost synergies

A highly complementary combination, with little overlap

Combining best fixed-line network with best mobile

network

1 Source: Company reporting and Ofcom subscriber data

Enhanced distribution

network with c.550 retail stores

© British Telecommunications plc

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FMC customers as % of broadband customers/households1

European examples show strong penetration of FMC offerings

Move from voice to data has blurred lines between fixed and mobile propositions

– tablets/phablets/smartphones used for both home broadband and on the move

– >250m iPads sold worldwide since launch in 2010

Some European telcos have signed up more than half of their broadband customers to mobile offers

Currently consumer FMC propositions are only offered by Virgin Media and TalkTalk in the UK

BT will be better equipped to provide FMC services in the UK, with its own networks

0%

10%

20%

30%

40%

50%

60%

70%

KPN Telenet OrangeFrance

Belgacom TelefonicaSpain

1 All figures per latest company report. KPN: Penetration rate calculated as 4P customers as % of "Residential Broadband Customers“; Telenet: percentage of unique customer relationships taking mobile services; Orange France: Orange Open customers excluding Open multi-ligne (multi-sim 4P) as proportion of total broadband customers; Belgacom: percentage of households with a fixed and mobile component; Telefonica: Fusion customers as % of total broadband customers

Meeting customer demand for FMC products

© British Telecommunications plc

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Popular BT TV channels- 1.3m BT TV customers

Popular BT Sport rights- 5.2m BT Sport households, incl. wholesale1

- 3.3m retail customers1

1 As announced at Q4 2014/15 results, 7 May 2015

4. TV and content offering overview

© British Telecommunications plc

TV strategy is working

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Consumer line loss BT TV net adds

Line loss 67% better over nine quarters post-BT Sport launch versus nine quarters pre-launch

Best-ever BT TV net adds in Q2

1.3m BT TV customers

2013/14 2014/15 2015/16

-300

-250

-200

-150

-100

-50

0

2013/14 2014/15 2015/162012/132011/12

0

20

40

60

80

100

120

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2

600

700

800

900

1,000

2011/12 2012/13 2013/14 2014/15

BT

Spo

rt

-6%

-4%

-2%

0%

2%

4%

6%

8%

2011/12 2012/13 2013/14 2014/152

2 As reported

BT Consumer EBITDA

BT Consumer revenue growth

£m

‘000s ‘000s

© British Telecommunications plc

5. Fibre - four pledges to support the UK’s digital future

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Deliver minimumbroadband speedsof 5Mbps to 10Mbps

Expand the reach of fibre broadband beyond 95%

Take the UKfrom a Superfast to an Ultrafast nation

Raise the baron service

1 2

3 4

© British Telecommunications plc

Coverage we aspire to go beyond the UK’s 95% target for fibrebroadband

On track to help government 95% fibre by 2017

Plans:• Help to go further, with £130m BDUK dividend

• Extend our ‘community fibre partnerships’ – our intention is to ‘never say no’

• Ambition to offer fibre solutions for all new sites

Speedwe will work to provide the speed people need, including our proposal to give 10 million homes and businesses access to ultrafast broadband by end of 2020

UK average speeds - 20x increase (1-23Mbps ) and G.fast CP trials

Plans:• Upgrade special fibre offer for 400k slow copper lines

• Ultrafast to 10m premises by 2020 – G.fast and FTTP

• 1Gbps fibre product for SMEs

Servicewe will raise our service standards, offering quicker installations and faster fixes

Achieved all 14/15 Ofcom Minimum Service Levels (MSLs)

Plans:• Aim to exceed future MSLs, with 95% on-time

installations by 2017• Provide CPs with a menu of repair options and

‘View my engineer’• Increase Ethernet circuit connections by 30% YoY

Trusted partnerwe will be a trusted partner for CPs, continuing to guarantee fair and equal treatment for all

Serve 500+ CPs equivalently (c.40% revenue from non-BT CPs)

Plans:• Consult with CPs on offering:

• increased end customer contact with Openreach

• Consumer and business customer panels to input to our service and product developments

Contribution to our communitywe will make a difference to the communities we serve, inspiring over half our people to become volunteers in the community

Support communities through employment, infrastructure and volunteering

Plans:• Support our people to be community volunteers,

doubling by 2020• Increase support for charities, especially our partner

SSAFA• More job opportunities for military veterans and

apprentices

Investmentwe will invest to sustain Britain’s digital leadership

Invested over £10.5bn in digital infrastructure, including over £3bn on fibre

Plans:• Continue to roll out fibre as widely as possible

• Ultrafast to 10m premises by 2020 – G.fast and FTTP

• Continue investing to extend, upgrade and maintain our networks

The Openreach charter

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© British Telecommunications plc

Increasing broadband speeds

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Raise minimum broadband speeds to 5-10Mbps

More than 80% of UK premises passed with fibre– working with government to help reach further than 95%

G.fast improvements will enable cabinet-based deployment– builds on existing NGA investment– scale trials in Huntingdon and Gosforth now running– 300Mbps-500Mbps to 10m premises by 2020– up to 500Mbps available to most of the UK by 2025– premium 1Gbps fibre broadband services for high-

demand customers

Investment managed broadly within existing capex envelope

Also trialling XG-FAST, a new variant of ultrafast, in partnership with Alcatel-Lucent– 5.6Gbps demonstrated over 35 metre copper cable

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10,000

100,000

1,000,000

Do

wn

stre

am r

ate

(kb

ps)

1

Evolution of access speed standards

ADSL

VDSL

G.fast

1960s 2025

1 Log scale

Narrowband

Broadband

© British Telecommunications plc

0 2 4 6 8 10

MexicoAustraliaGermany

G20IndiaUSA

JapanSouth Korea

ChinaUK

Source: BCG UK eGDP, May 2015

% of GDP driven by internet (eGDP)

Competitive intensity

(HHI)

Most affordable

pricing

Fixed broadband penetration

Avg. measured bandwidth

downstream

Superfast coverage

Superfast take-up

Source: Analysys Mason

1st

2nd

4th

5th

3rd

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Digital communications is a UK success story

© British Telecommunications plc

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Certainty

– regulatory timescales aligned to network investment horizon

Clarity

– a simple and robust framework

Fairness

– companies able to generate an appropriate return on investment

– Ofcom should look at pay-TV market

£62.57£52.79

£40.35 £37.61£29.58

£0

£20

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£60

£80

UK Spain France Italy Germany

£12.19£16.81 £17.01

£24.26£30.45

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£10

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UK France Germany Italy Spain

Broadband pricing1

Pay-TV pricing1

1 Monthly prices in the ‘Big 5’ European economies; source: Ofcom International Communications Market Report, December 2014Broadband: Comparative stand-alone ‘lowest available’ fixed-line broadband pricing; family household with multiple needsPay-TV: Premium pay-TV with HD and PVR

What do we want from the review?

Ofcom’s Strategic Review of Digital Communications

© British Telecommunications plc

Summary

Progress in our five key growth areas

Operational trends show our strategy is working

– innovative business solutions driving orders in BT Global Services and BT Business

– BT Mobile has built on its strong start

– record TV net adds

– contribution of BT Sport Europe ahead of our expectations

– fibre going from strength to strength

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Investing in a strong platform for growth