FULL YEAR PROFITS UP 18 PERCENT AT BT, DESPITE REVENUE DECLINE

BT announces latest investment in next generation network, despite challenging economic environment

BT today reported a strong performance at its all island operation for the full year to 31st March 2009 with improved margins and a major uplift in free cash flows. EBITDA* increased by 18 percent year on year as a result of rigorous cost transformation programmes underway in the company. Gross margin improved by 9 percent while underlying revenues excluding foreign exchange movement declined by 4 percent to £800.8 million.

Over the course of the year BT combined great value packages with enhanced service to help customers get more for less in challenging economic times. Calls to 0845 and 0870 numbers are now included for free in our packages — a first for the Northern Ireland market. Calls to mobiles have been cut by 40 percent following the launch of our new Friends and Family mobile service, and we have completely removed charges for calls to our broadband technical support and customer services. We also launched BT Basic, our new subsidised telephone service, which will help lower income families cope with the rising cost of household bills.

BT is still Northern Ireland's most popular broadband provider with 167,000 customers (up 9 percent year on year) choosing packages like BT Total Broadband and all its added extras including mobile broadband and BT Vision, our on-demand TV service.

The company's business division continued to perform well with organisations looking to harness communications and IT services to reduce their costs while boosting efficiencies and productivity. Demand for BT's Business One Plan package resulted in the company remaining the most popular business broadband provider in Northern Ireland, with small and medium businesses opting for all-inclusive bundles of calls, lines, broadband and mobile to maximise their total communications spend. Key business deals signed in the year include American Airlines, Barclays, Cable & Accessories, Consilium Technologies, The Country Garage, Danske Bank, DSG, EMC, O'Kane Poultry, Natural World Products, and Todd Architects.

BT continued to support the public sector in its implementation of its Programme for Government by bringing its global expertise and capabilities to bear in the Northern Ireland marketplace. The Department of Finance & Personnel awarded BT a multi-million pound contract to manage the voice infrastructure for over 180 Government buildings across Northern Ireland. The company was also awarded a contract to deliver a new Taxi Licensing System for the Driver and Vehicle Agency in Northern Ireland and secured a £2.7million order from Police Service NI to provide an innovative Digital Pens solution. In addition the company will be responsible for the delivery of Web Packages for up to 4,000 eligible businesses as part of Enterprise Northern Ireland's new Enterprise Development Programmes, which was awarded by Invest Northern Ireland.

We have also won a number of landmark managed services contracts in the Republic of Ireland, boosting our stated ambition to become the leading networked IT services provider across the island.

We have signed a concession agreement with the Department of Communications, Energy and Natural Resources (ROI) to provide an Emergency Call Answering Service (ECAS), bringing to bear its expertise in providing a similar mission critical service for over 60 years in Northern Ireland.

Telefonica O2 Ireland has selected BT as a managed services partner in a multi-million pound deal. As part of the seven year contract, O2 has outsourced part of its network services to BT and successfully transitioned a number of highly skilled O2 employees to BT.

The company's successful collaboration with other key IT brands in the market to deliver and execute these customer contracts has been recognised by a host of awards including Cisco Gold Partner of the Year, Avaya Service Provider of the Year and the largest partner to HP on the island.

BT continues to experience steady growth in the provision of wholesale broadband and there are now more than 355,000 homes and businesses in the North using broadband provided over the BT network. BT continues to be the only Northern Ireland company making its network available to other operators on a wholesale basis for others to provide services to their customers.

Chris Clark, CEO, BT said; 'It has been a tough year with a slowdown in overall business activity and heightened competition. However, by executing against our strategy of bringing together value, service, and innovation for customers of all sizes we have delivered a very impressive set of results.'

'We have also successfully managed to balance rigorous cost management programmes with ongoing strategic investments to keep our business on track. Making our business efficient and sustainable is beneficial for our customers and for Northern Ireland.'

Despite the challenging economic climate, BT has continued to make a number of strategic investments in its network infrastructure to expand the range of next generation services it provides to customers across all market segments in Northern Ireland while simultaneously reducing prices. Belfast was chosen as one of the first areas in the UK to benefit from broadband speeds of up to 40Mb/s through BT's investment in fibre to the cabinet technology (FTTC). The company also introduced Ethernet services — uncontended, faster bandwidth for a fraction of the cost of traditional networks.

BT today revealed the next phase of its investment in the rollout of its next generation network. The company will extend its network capability on the island by directly linking Letterkenny, Londonderry, Belfast and Dublin and also connecting with over 1,270 cities worldwide through BT's extensive global network.

The latest development from BT will address the limited choice of high capacity communications networks, particularly in the North West. By enhancing its infrastructure BT will bring higher bandwidth, competitive pricing, and next generation services to businesses in these locations.

BT is utilising two links between each location to ensure that there is both a primary network and secondary back up network to guarantee 99.99 percent reliability. The infrastructure is also future-proofed to allow BT to expand the network when required to support the growing demand for broadband services.

Chris Clark said, 'Navigating through challenging economic times means we need to seize any opportunities that will give us a competitive edge. Our strategy is straightforward — the development of a world class next generation network will help all of us to seek out future growth opportunities whether through access to new markets, attracting foreign direct investment, or driving productivity and efficiency in our organisations.'

The fibre optic network, which is operational from August of this year, will extend from Dublin to Letterkenny connecting Belfast and Derry along the route through Points of Presence (PoPs).** Initial speeds of up to 10 Gigabytes per second are available but can be scaled up where required by customers.