BT GROUP PLC RESULTS FOR THE SECOND QUARTER AND HALF YEAR TO 30 SEPTEMBER 2015

BT GROUP PLC RESULTS FOR THE SECOND QUARTER AND HALF YEAR TO 30 SEPTEMBER 2015 BT Group plc (BT.L) today announced its results for the second quarter and half year 2015. Second quarter to 30 September 2015 29 October 2015 Half year to 30 September 2015 m Change m Change Revenue 1 4,381 0% 8,659 (1)% Change in underlying revenue 2 excluding transit 2.0% 1.0% EBITDA 1 1,442 (1)% 2,891 0% Profit before tax - adjusted 1 706 2% 1,400 5% - reported 642 14% 1,274 15% Earnings per share - adjusted 1 6.9p 0% 13.6p 2% - reported 6.3p 13% 12.4p 11% Interim dividend 4.4p 13% Normalised free cash flow 3 569 36m 675 20m Net debt 5,919 (1,144)m Gavin Patterson, Chief Executive, commenting on the results, said: We ve delivered a good financial performance with revenue 4 up 2% this quarter. Fibre broadband is a success story and we continue to invest heavily to help the UK remain a broadband leader among major European nations. Our open access fibre network now passes 24 million premises and we are not stopping there. We want to get fibre broadband to as many people as possible and we are also pushing ahead with our plans to get ultrafast broadband to ten million premises by the end of 2020. Market-wide demand for fibre remains strong with fibre net additions up 21% as we hit the five million milestone for homes and businesses connected. We ve seen good demand for BT Sport Europe and this has helped us add a record number of BT TV customers in the quarter. Its contribution has been better than we expected, helping drive a 7% increase in BT Consumer revenue. Mobile is another growth area and I am pleased our consumer customer base now stands at more than 200,000. And I am also pleased that yesterday, the Competition and Markets Authority provisionally approved our planned acquisition of EE, unconditionally without remedies. We are making step changes to improve customer service, as part of our group-wide programme. Openreach s recently launched View my Engineer service is going down well. The 3,000 engineers we hired in the last 18 months are helping us fix faults faster and provide new services sooner. We have also created more than 1,000 new contact centre jobs in the UK, with hundreds more to come, to meet our 2016 commitment for more than 80% of consumer customer calls to be answered in the UK. And we have plans to go even further in years to come. Our strategy is delivering and our results show we re on track to achieve our outlook for the year. Key points for the second quarter: Growth in underlying revenue excluding transit, up 2.0% EBITDA 1 down 1% reflecting our investment in BT Sport Europe 106,000 BT TV net additions, our best ever performance Strong order book across the group Interim dividend of 4.4p, up 13% 1 Before specific items. Specific items are defined on page 3 2 Excludes specific items, foreign exchange movements and the effect of acquisitions and disposals 3 Before specific items, pension deficit payments and the cash tax benefit of pension deficit payments 4 Change in underlying revenue excluding transit

GROUP RESULTS FOR THE SECOND QUARTER AND HALF YEAR TO 30 SEPTEMBER 2015 Revenue Second quarter Half year 2015 2014 Change 2015 2014 Change m m % m m % - adjusted 1 4,381 4,383 0 8,659 8,737 (1) - reported 4,459 4,441 0 8,819 8,795 0 - change in underlying revenue 2 excluding transit 2.0 1.0 EBITDA - adjusted 1 1,442 1,450 (1) 2,891 2,885 0 - reported 1,436 1,396 3 2,878 2,787 3 Operating profit - adjusted 1 819 832 (2) 1,640 1,615 2 - reported 813 778 4 1,627 1,517 7 Profit before tax - adjusted 1 706 690 2 1,400 1,328 5 - reported 642 563 14 1,274 1,109 15 Earnings per share - adjusted 1 6.9p 6.9p 0 13.6 13.4p 2 - reported 6.3p 5.6p 13 12.4 11.2p 11 Interim dividend 4.4p 3.9p 13 Capital expenditure 629 533 18 1,287 1,049 23 Normalised free cash flow 3 569 533 7 675 655 3 Net debt 5,919 7,063 (1,144)m Line of business results 1 Revenue EBITDA Free cash flow 3 Second quarter to 2015 2014 Change 2015 2014 Change 2015 2014 Change 30 September m m % m m % m m % BT Global Services 1,559 1,649 (5) 216 226 (4) 113 35 223 BT Business 781 789 (1) 261 258 1 215 231 (7) BT Consumer 1,127 1,056 7 202 225 (10) 53 105 (50) BT Wholesale 520 529 (2) 127 125 2 63 60 5 Openreach 1,267 1,245 2 648 627 3 329 339 (3) Other and intra-group items (873) (885) 1 (12) (11) (9) (204) (237) 14 Total 4,381 4,383 0 1,442 1,450 (1) 569 533 7 1 Before specific items 2 Excludes specific items, foreign exchange movements and the effect of acquisitions and disposals 3 Before specific items, pension deficit payments and the cash tax benefit of pension deficit payments 2

Notes: 1. The commentary focuses on the trading results on an adjusted basis, which is a non-gaap measure, being before specific items. Unless otherwise stated, revenue, operating costs, earnings before interest, tax, depreciation and amortisation (EBITDA), operating profit, profit before tax, net finance expense, earnings per share (EPS) and normalised free cash flow are measured before specific items. This is consistent with the way that financial performance is measured by management and reported to the Board and the Operating Committee and assists in providing a meaningful analysis of the trading results of the group. The directors believe that presentation of the group s results in this way is relevant to the understanding of the group s financial performance as specific items are those that in management s judgement need to be disclosed by virtue of their size, nature or incidence. In determining whether an event or transaction is specific, management considers quantitative as well as qualitative factors such as the frequency or predictability of occurrence. Specific items may not be comparable to similarly titled measures used by other companies. Reported revenue, reported operating costs, reported EBITDA, reported operating profit, reported profit before tax, reported net finance expense, reported EPS and reported free cash flow are the equivalent unadjusted or statutory measures. 2. Trends in underlying revenue, trends in underlying operating costs, and underlying EBITDA are non-gaap measures which seek to reflect the underlying performance of the group that will contribute to long-term sustainable growth and as such exclude the impact of acquisitions and disposals, foreign exchange movements and any specific items. We focus on the trends in underlying revenue and underlying operating costs excluding transit as transit traffic is low-margin and is significantly affected by reductions in mobile termination rates. Enquiries Press office: Ross Cook Tel: 020 7356 5369 Investor relations: Damien Maltarp Tel: 020 7356 4909 We will hold the second quarter and half year 2015/16 results presentation for analysts and investors at 9.00am today in London and a simultaneous webcast will be available at www.bt.com/results We are scheduled to announce the third quarter results for 2015/16 on Friday 29 January 2016. About BT BT s purpose is to use the power of communications to make a better world. It is one of the world s leading providers of communications services and solutions, serving customers in more than 170 countries. Its principal activities include the provision of networked IT services globally; local, national and international telecommunications services to its customers for use at home, at work and on the move; broadband, TV and internet products and services and converged fixed/mobile products and services. BT consists principally of five customer-facing lines of business: BT Global Services, BT Business, BT Consumer, BT Wholesale and Openreach. For the year ended 31 March 2015, BT Group s reported revenue was 17,979m with reported profit before taxation of 2,645m. British Telecommunications plc (BT) is a wholly-owned subsidiary of BT Group plc and encompasses virtually all businesses and assets of the BT Group. BT Group plc is listed on stock exchanges in London and New York. For more information, visit www.btplc.com 3

BT Group plc GROUP RESULTS FOR THE SECOND QUARTER TO 30 SEPTEMBER 2015 Overview Our key measure of the group s revenue trend, underlying revenue excluding transit, was up 2.0%. This growth was driven by BT Consumer where broadband and TV revenue was up 17% helped by strong demand for fibre broadband and the launch of BT Sport Europe, where the contribution has been better than we expected. Openreach revenue was up 2% with growth in fibre broadband partly offset by regulatory price changes, and BT Wholesale grew its underlying revenue excluding transit again. Within our business divisions, BT Business underlying revenue excluding transit was flat while in BT Global Services a strong performance in Continental Europe helped offset the ongoing declines in the UK. Underlying operating costs 1 excluding transit were up 3%. As we highlighted in our fourth quarter results, EBITDA this year will no longer benefit from the sale of redundant copper and will be impacted by higher leaver costs (as last year most were included within specific items), a higher pensions operating charge and our investment in BT Sport Europe. Without these effects, underlying operating costs 1 excluding transit would have been down 1%. Adjusted EBITDA was down 1% with our investment in UEFA Champions League and UEFA Europa League rights largely offset by the benefit of our cost transformation activities. Excluding foreign exchange movements and the effect of acquisitions and disposals, our underlying EBITDA was flat. We added 106,000 BT TV customers, our best performance ever. With the first UEFA Champions League group stage matches starting at the end of the quarter, initial viewing figures are encouraging. We were also pleased with the launch of the new AMC channel, which is exclusive to BT. Order intakes were good across the group. On a rolling twelve-month basis, order intake was up 16% to 7.1bn in BT Global Services and up 39% to 2.1bn in BT Wholesale, reflecting some large contract wins. It was also up 1% to 2.1bn in BT Business. On 28 October the Competition and Markets Authority (CMA) provisionally approved our 12.5bn acquisition of EE, unconditionally without remedies. The CMA has provisionally decided that the acquisition is not expected to result in a substantial lessening of competition. The CMA has said that it will publish its final decision by 18 January 2016. We welcome the provisional approval; the combined BT and EE will be good for the UK, providing investment and making sure consumers and businesses can benefit from more innovation in a highly competitive market. It also brings us a step closer to creating a true digital champion to serve the UK. The planned acquisition will accelerate our existing mobility strategy, where more than 200,000 consumer customers have joined us to date. In September we set out our vision for the UK s digital future and the contribution BT can make, subject to regulatory support and the right policy framework. We have four objectives: 1. To deliver minimum broadband speeds of between 5Mbps and 10Mbps, as needed for every home to enjoy the most popular internet services, if Ofcom and the government take the action necessary to make this commercially viable. 2. To expand the reach of fibre broadband in the UK beyond the government s current target of 95%. Should the current public funding model be continued, we are willing to support the government to make sure homes and businesses in the most difficult and commercially-inaccessible areas are connected. 3. To provide ultrafast broadband speeds of 300Mbps to 500Mbps to 10m premises by the end of 2020, plus a service offering up to 1Gbps for those who want even faster speeds. 4. To deliver a higher service quality to our customers businesses, households and other Communications Providers (CPs) to match their growing expectations. Alongside these ambitions, Openreach announced the Openreach Charter which sets out its specific commitments. As well as investing in coverage and speed, Openreach will raise its service standards, offering quicker installations and faster fixes. For business customers, Openreach: will increase the number of new Ethernet circuit connections by over 30% this year; will continue to significantly increase speed of service delivery and improve the number of on-time installations; and is committed to introducing new Ethernet minimum service levels, working closely with industry and Ofcom. Openreach has launched a new View my Engineer service, which provides text progress updates, as well as the engineer s name and phone number ahead of an appointment. Openreach aims to achieve 95% on-time installations by 2017, which is ahead of Ofcom s minimum service level. We have passed 24m premises with our fibre broadband network, over 80% of the UK. We achieved 415,000 fibre broadband net connections, an increase of 21%. This brings the number of homes and businesses connected to 5m, 21% of those passed. We have 3.4m retail fibre broadband customers, having added 212,000 this quarter. And the UK broadband market 2 grew by 160,000, of which our share was 82,000 or 51%. 1 Excludes specific items, foreign exchange movements and the effect of acquisitions and disposals, and is before depreciation and amortisation 2 DSL and fibre 4

We are making good progress with our trials of ultrafast fibre broadband, with homes and businesses participating in the trial getting speeds of up to 330Mbps using G.fast technology. And we see the potential to go faster still a future variant of the technology, XG-FAST, achieved a speed of 5.6Gbps over a typical 35 metre copper cable in tests carried out at our research campus in Suffolk. Income statement Reported revenue of 4,459m was flat. This included ladder pricing transit revenue of 78m relating to previous years which we have treated as a specific item. Last year reported revenue included a specific item benefit of 58m relating to ladder pricing agreements. Adjusted revenue, which excludes specific items, was also flat at 4,381m. We had a 53m negative impact from foreign exchange movements, a 33m reduction in transit revenue and a 2m impact from disposals. Excluding these, underlying revenue excluding transit was up 2.0%. Adjusted operating costs 1 were flat. Net labour costs decreased 3%, or 1% excluding foreign exchange movements and the effect of acquisitions and disposals. This decrease was despite 20m (Q2 2014/15: 1m) of leaver costs and an 8m increase in the pensions operating charge. Excluding these, net labour costs were down 4% due to further efficiencies achieved by our cost transformation programmes. Payments to telecommunications operators were down 3% and Other costs were down 1%. These reductions were offset by higher programme rights charges which increased by 52m to 135m, primarily reflecting the launch of BT Sport Europe. Network operating and IT costs were up 7% and property and energy costs were flat. Adjusted EBITDA of 1,442m was down 1%. Depreciation and amortisation of 623m was up 1% and adjusted net finance expense was 112m, down 31m primarily due to lower net debt. As a result, adjusted profit before tax was 706m, up 2%. Reported profit before tax (which includes specific items) was 642m, up 14%. The effective tax rate on the profit before specific items was 18.3% (Q2 2014/15: 19.9%). Adjusted EPS of 6.9p was flat. Reported EPS (which includes specific items) was 6.3p, up 13%. Our EPS measures are based on a weighted average number of shares in issue of 8,339m (Q2 2014/15: 8,027m). The average number of shares in issue is 4% higher than a year ago reflecting employee share schemes having matured and the equity placing in February to part fund our planned acquisition of EE. Specific items Specific items resulted in a net charge after tax of 52m (Q2 2014/15: 107m). This mainly reflects net interest expense on pensions of 56m (Q2 2014/15: 73m) and 8m of costs relating to the planned acquisition of EE. We also recognised 78m of both transit revenue and costs, being the impact of ladder pricing agreements relating to prior years following a Supreme Court judgment last year. The tax credit on specific items was 12m (Q2 2014/15: 20m). Last year, specific items included restructuring charges of 60m and a net EBITDA credit of 5m relating to ladder pricing and regulatory risks. Capital expenditure Capital expenditure was 629m (Q2 2014/15: 533m) after 62m (Q2 2014/15: 95m) of net grant funding mainly relating to the Broadband Delivery UK (BDUK) programme. The higher capital expenditure was mainly due to our fibre rollout, connecting new homes, and higher volumes of Ethernet provision. To date, we have deferred a total of 157m of grant funding reflecting the strong fibre take-up in BDUK areas. This will potentially be reinvested or repaid in future financial years. Free cash flow Normalised free cash flow 2 was an inflow of 569m, an increase of 36m compared with last year. The net cash cost of specific items was 30m (Q2 2014/15: 75m) mainly comprising prior year restructuring costs of 14m, EE acquisition-related costs of 8m, property rationalisation costs of 4m and payments relating to historical Ethernet pricing of 3m (following a 2012 Ofcom determination). After specific items and a 46m (Q2 2014/15: 19m) cash tax benefit from pension deficit payments, reported free cash flow was an inflow of 585m (Q2 2014/15: 477m). Net debt and liquidity Net debt was 5,919m at 30 September 2015, an increase of 100m since 30 June 2015 and 800m higher than at 31 March 2015. In the quarter, reported free cash flow of 585m and proceeds of 81m from the exercise of employee share options were offset by payments of 704m on dividends and a cash cost of 61m on our share buyback programme for the purchase of 13m shares. So far this year we have spent 250m on our share buyback programme and we continue to expect to spend around 300m on the programme for the year as a whole. 1 Before depreciation and amortisation 2 Before specific items, pension deficit payments and the cash tax benefit of pension deficit payments 5

Debt of 0.8bn matured in July and a further 0.4bn is repayable during the remainder of 2015/16. At 30 September 2015 the group held cash and current investment balances of 1.8bn. We also have a 1.5bn committed facility and a 3.6bn committed acquisition facility to be used for the planned EE transaction, both of which are undrawn. We have extended our 1.5bn committed facility by one year to September 2020. Pensions The IAS 19 net pension position at 30 September 2015 was a deficit of 5.6bn net of tax ( 7.0bn gross of tax) compared with 5.8bn net of tax ( 7.2bn gross of tax) at 30 June 2015. The reduction primarily reflects a decrease in the liabilities due to lower future inflation expectations largely offset by a decline in asset values due to market conditions. The IAS 19 accounting position and key assumptions are provided in Note 10. Regulation In August, Ofcom issued supplementary guidance on how the minimum margin test in respect of fibre broadband would be impacted by a material change in circumstances (which would include the launch of our UEFA Champions League and UEFA Europa League content). Whilst we welcome this new guidance, it still does not provide enough flexibility around how we recover our sport costs, and we believe does not address the concerns raised by the European Commission about the test. In August, the Court of Appeal granted us permission to appeal the August 2014 decision of the Competition Appeal Tribunal relating to a dispute on historical Ethernet pricing that was originally determined by Ofcom in 2012. Our appeal was granted on three legal grounds, including whether Ofcom had the power to require us to make the payments it determined in the dispute and if it has the power to award interest charges on these payments. Ofcom has therefore deferred its final determination on the amount of interest payable on claims under this dispute until the Court hears the appeal, which we expect to take place during 2016/17. In October, we and other parties responded to Ofcom s discussion document in its Strategic Review of Digital Communications. We believe regulation should make sure customers needs are met by ensuring efficient investment and delivering effective competition across the whole of industry, including pay-tv as well as communications. Ofcom has a key role to play by modernising the regulatory framework in the following key areas: Long-term commitment Ofcom should make long-term commitments in regulation to secure the long-term investments necessary to meet future customers needs; Support for investment Ofcom should not price regulate services that depend on new investments before payback has been achieved. Britain has gained, and will continue to gain, from Openreach being part of BT benefiting from more investment, coverage and speed. We have called on Ofcom to reject at the earliest opportunity the calls from some other CPs for structural separation; Consolidation Ofcom should support consolidation that promotes investment and competition; Balance between service quality and price Ofcom should take customers service needs into account when setting price controls; Level playing field Ofcom needs to ensure a level playing field of competition across the whole industry and should focus its efforts on the competition problems in pay-tv; and Regulate only where necessary Ofcom should apply the minimum regulation necessary to ensure markets work for customers without distortion. Dividends In line with our full year outlook for 10%-15% growth in dividends per share, the Board has declared an interim dividend of 4.4p per share, up 13%, and totalling 368m (Q2 2014/15: 316m). It will be paid on 8 February 2016 to shareholders on the register on 29 December 2015. The ex-dividend date is 24 December 2015. The election date for participation in BT s Dividend Investment Plan in respect of this dividend is also 29 December 2015. The final dividend for the year to 31 March 2015 of 8.5p, amounting to 710m, was approved at the Annual General Meeting on 15 July 2015. 2015/16 outlook Our outlook is unchanged. We continue to expect growth in underlying revenue excluding transit in 2015/16 with modest growth in adjusted EBITDA. Normalised free cash flow is expected to be around 2.8bn. We continue to expect to grow our dividend per share by 10%-15% and to complete a share buyback of around 300m to help offset the dilutive effect of maturing all-employee share plans. We are targeting a BBB+/Baa1 credit rating over the medium term. 6

GROUP RESULTS FOR THE HALF YEAR TO 30 SEPTEMBER 2015 Income statement Reported revenue of 8,819m was flat. Adjusted revenue of 8,659m was down 1% with a 101m negative impact from foreign exchange movements, a 57m reduction in transit revenue and a 6m impact from disposals. Underlying revenue excluding transit was up 1.0% in the first half reflecting growth in BT Consumer, BT Wholesale and Openreach, which was partly offset by revenue declines elsewhere, including lower UK revenue in BT Global Services. Adjusted operating costs 1 were down 1%. Net labour costs decreased 4%, or 3% excluding foreign exchange movements and the effect of acquisitions and disposals. Excluding the impact of higher leaver costs and higher pensions operating charges, net labour costs were down 5% due to further efficiencies achieved by our cost transformation programmes. Payments to telecommunications operators were down 5%, largely benefiting from foreign exchange movements. Network operating and IT costs were down 4%. These reductions were offset by higher programme rights charges which increased by 60m to 221m primarily reflecting the launch of BT Sport Europe. Other costs were up 1% and property and energy costs were flat. Adjusted EBITDA was flat at 2,891m. Excluding foreign exchange movements and the effect of acquisitions and disposals, underlying EBITDA was up 1%. Depreciation and amortisation of 1,251m was down 1%. Adjusted net finance expense was 244m, a decrease of 44m primarily due to lower net debt. Adjusted profit before tax of 1,400m was up 5% reflecting the lower net finance expense and higher operating profit. Reported profit before tax (which includes specific items) was 1,274m, up 15%. The effective tax rate on the profit before specific items was 18.6% (HY 2014/15: 19.9%). Adjusted EPS was 13.6p, up 2%, and reported EPS (which includes specific items) was 12.4p, up 11%. These are based on a weighted average number of shares in issue of 8,334m (HY 2014/15: 7,942m). Specific items Specific items resulted in a net charge after tax of 103m (HY 2014/15: 177m). This reflects net interest expense on pensions of 111m (HY 2014/15: 146m) and 15m of costs relating to the planned acquisition of EE. We recognised 160m of both transit revenue and costs, being the impact of ladder pricing agreements relating to prior years following a Supreme Court judgment last year. The tax credit on specific items was 23m (HY 2014/15: 42m). Last year, specific items included restructuring charges of 104m, a net EBITDA credit of 5m in relation to ladder pricing and regulatory risks and a profit of 25m on the disposal of our interest in an associate. Capital expenditure Capital expenditure was 1,287m (HY 2014/15: 1,049m) after 65m (HY 2014/15: 173m) of net grant funding mainly relating to the BDUK programme. The higher capital expenditure was mainly due to our fibre rollout, the expansion of our network to new homes, and higher volumes of Ethernet provision. Free cash flow Normalised free cash flow 2 was an inflow of 675m, an increase of 20m compared with last year. The net cash cost of specific items was 82m (HY 2014/15: 155m). Payments relating to prior year restructuring costs of 65m, EE acquisition-related costs of 24m and historical Ethernet pricing of 19m (following a 2012 Ofcom determination), were partly offset by receipts of 40m relating to ladder pricing revenue. After specific items and a 115m (HY 2014/15: 38m) cash tax benefit from pension deficit payments, reported free cash flow was an inflow of 708m (HY 2014/15: 538m). Free cash flow excludes the 625m pension deficit payment made in April 2015. Principal risks and uncertainties A summary of the group s principal risks and uncertainties is provided in Note 15. 1 Before depreciation and amortisation 2 Before specific items, pension deficit payments and the cash tax benefit of pension deficit payments 7

OPERATING REVIEW BT Global Services Second quarter Half year 2015 2014 Change 2015 2014 Change m m m % m m m % Revenue 1,559 1,649 (90) (5) 3,102 3,296 (194) (6) - underlying excluding transit (2) (3) Operating costs 1,343 1,423 (80) (6) 2,696 2,857 (161) (6) EBITDA 216 226 (10) (4) 406 439 (33) (8) Depreciation & amortisation 130 124 6 5 257 264 (7) (3) Operating profit 86 102 (16) (16) 149 175 (26) (15) Capital expenditure 107 116 (9) (8) 193 222 (29) (13) Operating cash flow 113 35 78 223 (179) (302) 123 41 Revenue declined 5% including a 45m negative impact from foreign exchange movements and a 9m decline in transit revenue. Underlying revenue excluding transit decreased 2% primarily reflecting lower revenue in the UK and in the US and Canada. UK revenue was down 8%. This was an improvement on recent quarters but continues to reflect the decline in public sector revenue. In the US and Canada underlying revenue excluding transit declined 11% as a major customer has started to insource some services. In the high-growth regions 1 underlying revenue excluding transit declined 2%. Growth in AMEA was more than offset by declines in some Latin American countries which continue to reflect our change in portfolio focus, given currency uncertainty. Underlying revenue excluding transit grew by 12% in Continental Europe. This was better than recent quarters reflecting higher IP Exchange volumes in the quarter and the delivery of some major customer contracts. Total order intake in the quarter was 1.8bn, up 36%, and 7.1bn on a rolling twelve-month basis, up 16%. We renewed our contract with Caixa Econômica Federal by a further five years, increasing the number of lottery outlets that we will serve in Brazil from 14,000 to 18,000 during the term of the contract. We have become an international IT partner for Walgreens Boots Alliance under a new five-year contract, upgrading and expanding their IT network in around 20 countries across Europe, Latin America, the Middle East and Asia. We also signed a new five-year contract with Alstom Transport to provide a complete managed network services solution at 350 locations across all continents. As part of our Cloud of Clouds strategy, we launched cloud-based communications and collaboration services which make it easier for our customers to integrate video, conferencing and messaging platforms delivered by different providers. We introduced cloud-based DDoS mitigation services that will improve security for our customers globally. We launched a solution that allows our customers to access Microsoft s cloud-based Office 365 suite across the globe, delivering speed, security and reliability. We also extended our ethical hacking service to help financial sector organisations test their resilience to cyberattacks and secure their data. Operating costs declined 6% with underlying operating costs excluding transit down 2%. EBITDA was 4% lower, or down 3% excluding foreign exchange movements. As in the first quarter, the decline mainly reflects the impact of our major health programmes moving into their service and maintenance phase and the impact of leaver costs, with these partially offset by the benefit of our cost transformation programmes. Included in EBITDA were leaver costs of 5m (Q2 2014/15: nil). While we expect to incur further leaver costs during the remainder of the year, we expect EBITDA in the second half to grow year on year. Depreciation and amortisation was up 5% due to the timing of recognition on certain contracts. Operating profit of 86m was down 16%. Capital expenditure was down 8% due to the timing of project related expenditure. Operating cash inflow was 113m, an increase of 78m as a result of improved collections and the timing of contract-specific cash flows. 1 Asia Pacific, the Middle East and Africa (AMEA) and Latin America 8

BT Business Second quarter Half year 2015 2014 Change 2015 2014 Change m m m % m m m % Revenue 781 789 (8) (1) 1,530 1,551 (21) (1) - underlying excluding transit 0 0 Operating costs 520 531 (11) (2) 1,029 1,053 (24) (2) EBITDA 261 258 3 1 501 498 3 1 Depreciation & amortisation 49 45 4 9 99 88 11 13 Operating profit 212 213 (1) 0 402 410 (8) (2) Capital expenditure 37 32 5 16 72 56 16 29 Operating cash flow 215 231 (16) (7) 331 421 (90) (21) Revenue was down 1% with underlying revenue excluding transit flat. SME & Corporate voice revenue decreased 1% with higher average revenue per user partly mitigating the continued fall in business line volumes, as customers move to data and VoIP services. The number of traditional lines declined 7% but this was partly offset by a 49% increase in the number of IP lines. SME & Corporate data and networking revenue increased 3% with continued growth in our networking products and fibre broadband. Business fibre broadband net additions were up 38%. IT services revenue decreased 4% due to lower hardware sales as we continue to focus our strategy more towards providing higher margin managed services. BT Ireland had another good quarter, with its underlying revenue excluding transit up 14%, helped by some ICT equipment sales in the Republic of Ireland and fibre broadband growth in Northern Ireland. Foreign exchange movements had an 8m negative impact on BT Ireland revenue. Order intake in the quarter increased 16% to 538m and was up 1% to 2,121m on a rolling twelve-month basis. BT Ireland signed a deal with Sky Ireland to transport all of its IP core internet traffic, and with the Department of Finance and Personnel to provide secure data centre facilities. We also signed a deal with ICON for data centre services. BT Cloud Voice (our business-grade IP voice service) and BT Cloud Phone (a 'plug and play' IP phone system), which we launched last financial year, continue to perform well. Since the start of this quarter, the number of BT Cloud Voice users has increased 48% and the number of BT Cloud Phone subscriptions has more than doubled. In May we launched Call Essentials, aimed at small UK businesses with up to 50 phone lines. Customers can enjoy unlimited calls to UK landlines and mobiles for 10 a month, or with our international package they can make up to 2,500 minutes of calls to almost any international destination, also for 10 a month. We have signed up around 30,000 customers since launch. Operating costs were down 2%. Underlying operating costs excluding transit were down 1% reflecting the benefit of our cost transformation programmes including a 3% reduction in total labour costs. As a result, EBITDA grew 1%. Depreciation and amortisation was up 4m and operating profit was flat. Capital expenditure increased by 5m and operating cash flow was 7% lower mainly reflecting the timing of working capital movements. 9

BT Consumer Second quarter Half year 2015 2014 Change 2015 2014 Change m m m % m m m % Revenue 1,127 1,056 71 7 2,201 2,102 99 5 Operating costs 925 831 94 11 1,745 1,639 106 6 EBITDA 202 225 (23) (10) 456 463 (7) (2) Depreciation & amortisation 58 54 4 7 108 109 (1) (1) Operating profit 144 171 (27) (16) 348 354 (6) (2) Capital expenditure 56 52 4 8 108 91 17 19 Operating cash flow 53 105 (52) (50) 264 332 (68) (20) Revenue was up 7% with a 17% increase in broadband and TV revenue and a 1% increase in calls and lines. Consumer ARPU increased 6% to 427 driven by broadband and customers taking our new BT Sport Europe channels. BT added 82,000 retail broadband customers, representing 51% of the DSL and fibre broadband market net additions. Fibre broadband growth continued with 212,000 retail net additions, taking our customer base to 3.4m. Of our broadband customers, 44% are now on fibre. Our consumer line losses of 52,000 were the second lowest in over five years. We continued to grow our BT Mobile business, which launched in March, with our customer base now over 200,000. On 1 August, we launched our new BT Sport Pack, including the new home of European football, BT Sport Europe. This pack is free for customers taking BT TV, 5 a month for BT broadband customers and is available via the satellite platform. Its contribution in the quarter was ahead of our expectations and it has proved popular amongst our sport customers with the majority now enjoying our entire range of channels. BT Sport average daily audience figures increased 47% in the quarter, with encouraging viewing figures from the UEFA Champions League so far. In August, we announced that BT Sport had won the UK rights to show all Australian home cricket internationals, including the 2017/18 Ashes. The five-year rights deal starts in 2016 and includes all Australian Test Matches, One Day Internationals and T20 Internationals played in Australia. We added 106,000 BT TV customers, taking our customer base to 1.3m. This is our best ever quarter reflecting the improvements we have made to our TV offering including the launch of BT Sport Europe and our new AMC TV channel. In the quarter we launched our BT TV Ultra HD package, which includes Europe s very first live sports Ultra HD (4K) channel and our new BT TV Ultra HD set top box. Also this quarter we announced a deal to make UKTV s full portfolio of channels available to BT customers for the very first time, with Eden, Good Food and Home joining the seven UKTV channels already on BT TV. This means we now offer a total of 182 channels, including our BT Sport and AMC channels. In the quarter, we launched our new online security product, BT Protect, which is free for all BT broadband customers and helps protect them from viruses, scams and phishing attacks by warning them if they are about to visit a potentially harmful website. It protects devices such as laptops, tablets, mobiles and games consoles, connected both inside the customer s home and when using our BT Wi-fi hotspots around the UK. BT Protect is proving to be very popular, with over 100,000 customers signing up in the first three weeks. We also launched the new My BT service app that means customers can check their latest bill, view their services, track a BT order and change an engineer appointment, and includes tools to help optimise a customer s broadband. BT is the only broadband provider to offer these tools via an app. It is also possible to contact BT directly through the app if a customer wants to email, live chat or speak to an advisor. Operating costs increased 11% as a result of the launch of BT Sport Europe and AMC, leading to a 10% reduction in EBITDA. Depreciation and amortisation increased 7% and operating profit was down 16%. Capital expenditure was up 4m in the quarter. Operating cash flow decreased 52m as a result of the lower EBITDA and the phasing of rights payments for BT Sport Europe content, which were partially offset by favourable other working capital movements. 10

BT Wholesale Second quarter Half year 2015 2014 Change 2015 2014 Change m m m % m m m % Revenue 520 529 (9) (2) 1,050 1,054 (4) 0 - underlying excluding transit 3 4 Operating costs 393 404 (11) (3) 783 803 (20) (2) EBITDA 127 125 2 2 267 251 16 6 Depreciation & amortisation 55 55 0 0 113 114 (1) (1) Operating profit 72 70 2 3 154 137 17 12 Capital expenditure 46 53 (7) (13) 90 106 (16) (15) Operating cash flow 63 60 3 5 180 71 109 154 Revenue decreased 2% driven by a 25m decline in transit revenue. Underlying revenue excluding transit was up 3% reflecting ongoing growth in IP services, where revenue was up 22%. This partly reflects a 23% increase in IP Exchange voice minutes, a platform that now carries over two billion minutes a month. Ethernet continues to grow strongly with a 26% increase in the rental base, helped by network deals we have won. We continue to invest in our data product set and in July we launched our new Wholesale Optical product which allows CPs to respond rapidly to their customers changing bandwidth needs. Managed solutions revenue was up 1%. Calls, lines and circuits revenue was flat, with some specific work for some major customers offsetting declining volumes. Broadband revenue declined 12%, an improvement on last quarter s decline of 21% helped by lower migration to LLU this quarter. While migration to LLU continues to reduce the total size of our wholesale broadband base, fibre broadband has seen a pick-up in growth, reflecting demand across the market. Order intake in the quarter was 349m, up 40% reflecting some key wins across IP Exchange and private circuits. On a rolling twelve-month basis, our order intake was 2,095m, up 39%. Operating costs decreased 3%. Underlying operating costs excluding transit increased 4% reflecting the increased volumes in IP services, partially offset by a 15% reduction in selling and general administration costs as we continue to focus on our cost transformation activities. EBITDA grew 2%. Depreciation and amortisation was in line with the prior year and operating profit was up 3%. Capital expenditure was 7m lower contributing to operating cash flow growing 3m. 11

Openreach Second quarter Half year 2015 2014 Change 2015 2014 Change m m m % m m m % Revenue 1,267 1,245 22 2 2,516 2,490 26 1 Operating costs 619 618 1 0 1,229 1,239 (10) (1) EBITDA 648 627 21 3 1,287 1,251 36 3 Depreciation & amortisation 330 335 (5) (1) 665 684 (19) (3) Operating profit 318 292 26 9 622 567 55 10 Capital expenditure 348 246 102 41 750 504 246 49 Operating cash flow 329 339 (10) (3) 599 637 (38) (6) Revenue increased 2% driven by continued strong growth in fibre broadband revenue, which was up 38%. This growth was partly offset by regulatory price changes which had a negative impact of around 30m, the equivalent of around 2% of our revenue. We continue to extend the reach of fibre broadband beyond our commercial footprint as part of the BDUK programme. We passed around 700,000 properties in the quarter which means our fibre broadband network is available to 24m premises, over 80% of the UK. We achieved 415,000 fibre broadband net connections, an increase of 21%. This brings the number of homes and businesses connected to 5m, 21% of those passed. External CP customers added a record 203,000, or 49%, of the net connections in the quarter demonstrating the market-wide demand for fibre. The UK broadband market 1 increased by 160,000 connections in the quarter compared with 182,000 in the prior year. The physical line base increased by 7,000 in the quarter and has increased by 188,000 over the past 12 months. Our ultrafast fibre broadband trials in Huntingdon and Gosforth are progressing well with homes and businesses participating in the trial now able to receive speeds of up to 330Mbps using G.fast technology. We plan to run the trials for six to nine months allowing Openreach, and its eight CP trialists, to assess the technical performance of the technology across a large footprint. Operating costs were flat year on year with our cost transformation activities offset by the additional costs to deliver revenue growth and by the investments we are making to improve customer service. There was no benefit this quarter from the sale of redundant copper (Q2 2014/15: 6m). EBITDA grew 3% and depreciation and amortisation was 1% lower with operating profit up 9%. Capital expenditure of 348m, which is after net grant funding of 61m (Q2 2014/15: 94m), was up 41%. This was mainly due to our fibre broadband rollout, connecting new homes, and higher volumes of Ethernet provision. For the year as a whole, we expect capital expenditure in Openreach to be above 2014/15 as we continue to invest in these areas. Operating cash flow decreased 3% with the growth in EBITDA and favourable working capital movements more than offset by higher capital expenditure. 1 DSL and fibre 12

FINANCIAL STATEMENTS Group income statement For the second quarter 2015 Before specific items Specific items (Note 4) Total Note m m m Revenue 2 4,381 78 4,459 Operating costs 3 (3,562) (84) (3,646) Operating profit 819 (6) 813 Finance expense (115) (58) (173) Finance income 3-3 Net finance expense (112) (58) (170) Share of post-tax losses of associates and joint ventures (1) - (1) Profit before tax 706 (64) 642 Tax (129) 12 (117) Profit for the period 577 (52) 525 Earnings per share - basic 9 6.9p 6.3p - diluted 6.8p 6.2p Group income statement For the second quarter 2014 Before specific items Specific items (Note 4) Total Note m m m Revenue 2 4,383 58 4,441 Operating costs 3 (3,551) (112) (3,663) Operating profit 832 (54) 778 Finance expense (147) (73) (220) Finance income 4-4 Net finance expense (143) (73) (216) Share of post-tax profits of associates and joint ventures 1-1 Profit before tax 690 (127) 563 Tax (137) 20 (117) Profit for the period 553 (107) 446 Earnings per share - basic 9 6.9p 5.6p - diluted 6.8p 5.5p 13

Group income statement For the half year 2015 Before specific items Specific items (Note 4) Total Note m m m Revenue 2 8,659 160 8,819 Operating costs 3 (7,019) (173) (7,192) Operating profit 1,640 (13) 1,627 Finance expense (253) (113) (366) Finance income 9-9 Net finance expense (244) (113) (357) Share of post-tax profits of associates and joint ventures 4-4 Profit before tax 1,400 (126) 1,274 Tax (261) 23 (238) Profit for the period 1,139 (103) 1,036 Earnings per share - basic 9 13.6p 12.4p - diluted 13.5p 12.3p Group income statement For the half year 2014 Before specific items Specific items (Note 4) Total Note m m m Revenue 2 8,737 58 8,795 Operating costs 3 (7,122) (156) (7,278) Operating profit 1,615 (98) 1,517 Finance expense (295) (146) (441) Finance income 7-7 Net finance expense (288) (146) (434) Share of post-tax profits of associates and joint ventures 1-1 Profit on disposal of interest in associate - 25 25 Profit before tax 1,328 (219) 1,109 Tax (264) 42 (222) Profit for the period 1,064 (177) 887 Earnings per share - basic 9 13.4p 11.2p - diluted 13.2p 11.0p 14

Group statement of comprehensive income For the second quarter and half year Second quarter Half year 2015 2014 2015 2014 m m m m Profit for the period 525 446 1,036 887 Other comprehensive income (loss) Items that will not be reclassified to the income statement Actuarial gains (losses) relating to retirement benefit obligations 275 (5) 157 (41) Tax on actuarial gains and losses (55) 1 (31) 8 Items that may be reclassified subsequently to the income statement Exchange differences on translation of foreign operations 45 36 (59) (27) Fair value movements on available-for-sale assets 1-6 2 Fair value movements on cash flow hedges: - net fair value gains (losses) 307 104 (76) (50) - recognised in income and expense (165) (148) 121 26 Tax on components of other comprehensive income that may be reclassified (18) 10 (8) - Other comprehensive income (loss) for the period, net of tax 390 (2) 110 (82) Total comprehensive income for the period 915 444 1,146 805 15

Group statement of changes in equity For the half year 2015 Share capital Share premium Own shares Other reserves Retained earnings Total equity m m m m m m At 1 April 2015 419 1,051 (165) 1,485 (1,982) 808 Profit for the period - - - - 1,036 1,036 Other comprehensive (loss) income before tax - - - (129) 157 28 Tax on other comprehensive (loss) income - - - (8) (31) (39) Transferred to the income statement - - - 121-121 Comprehensive (loss) income - - - (16) 1,162 1,146 Dividends to shareholders - - - - (710) (710) Share-based payments - - - - 32 32 Net buyback of own shares - - 98 - (265) (167) Other movements - - - - (3) (3) At 30 September 2015 419 1,051 (67) 1,469 (1,766) 1,106 For the half year 2014 At 1 April 2014 408 62 (829) 1,447 (1,680) (592) Profit for the period - - - - 887 887 Other comprehensive loss before tax - - - (73) (43) (116) Tax on other comprehensive loss - - - - 8 8 Transferred to the income statement - - - 26-26 Comprehensive (loss) income - - - (47) 852 805 Dividends to shareholders - - - - (609) (609) Share-based payments - - - - 36 36 Net buyback of own shares - - 746 - (751) (5) At 30 September 2014 408 62 (83) 1,400 (2,152) (365) 16

Group cash flow statement For the second quarter and half year Cash flow from operating activities Second quarter Half year 2015 2014 2015 2014 m m m m Profit before tax 642 563 1,274 1,109 Share-based payments 13 18 32 36 Profit on disposal of subsidiaries and interest in associates - (1) - (26) Share of post-tax losses (profits) of associates and joint ventures 1 (1) (4) (1) Net finance expense 170 216 357 434 Depreciation and amortisation 623 618 1,251 1,270 Increase in working capital (150) (254) (684) (806) Provisions, pensions and other non-cash movements 1 (9) 43 (627) 98 Cash generated from operating activities 2 1,290 1,202 1,599 2,114 Tax paid (45) (117) (64) (231) Net cash inflow from operating activities 1,245 1,085 1,535 1,883 Cash flow from investing activities Interest received 2 2 5 4 Dividends received from associates and joint ventures - - 17 - Acquisition of subsidiaries 3 and joint ventures (1) (4) (2) (6) Proceeds on disposal of subsidiaries 3, associates and joint ventures - 3-28 Purchases of property, plant and equipment and software (597) (521) (1,225) (1,054) Proceeds on disposal of property, plant and equipment 2-4 3 Net purchase of non-current asset investments - - - (2) Purchases of current asset investments (2,146) (1,697) (3,625) (4,112) Sale of current asset investments 2,665 2,180 5,819 4,734 Net cash (used in) generated from investing activities (75) (37) 993 (405) Cash flow from financing activities Interest paid (67) (89) (253) (296) Equity dividends paid (704) (603) (705) (604) New borrowings 1-1 812 Repayment of borrowings 4 (794) (520) (1,271) (1,151) Cash flows from derivatives related to net debt 78 59 (66) 50 Net repayment of commercial paper - - - (338) Proceeds on issue of own shares 81 188 83 192 Repurchase of ordinary share capital (61) (56) (250) (197) Net cash used in financing activities (1,466) (1,021) (2,461) (1,532) Net (decrease) increase in cash and cash equivalents (296) 27 67 (54) Opening cash and cash equivalents 761 598 407 684 Net (decrease) increase in cash and cash equivalents (296) 27 67 (54) Effect of exchange rate changes 4 6 (5) 1 Closing cash and cash equivalents 5 469 631 469 631 1 Includes pension deficit payments of nil for the quarter (Q2 2014/15: nil) and 625m for the half year 2015 (HY 2014/15: nil). 2 Includes cash flows relating to programme rights 3 Acquisitions and disposals of subsidiaries are shown net of cash acquired or disposed of 4 Repayment of borrowings includes the impact of hedging and repayment of lease liabilities 5 Net of bank overdrafts of 16m (30 September 2014: 17m) 17

Group balance sheet 30 September 2015 30 September 2014 31 March 2015 m m m Non-current assets Intangible assets 3,076 3,051 3,170 Property, plant and equipment 13,607 13,627 13,505 Derivative financial instruments 1,124 657 1,232 Investments 48 38 44 Associates and joint ventures 15 22 26 Trade and other receivables 180 148 184 Deferred tax assets 1,420 1,468 1,559 19,470 19,011 19,720 Current assets Programme rights 541 280 118 Inventories 112 116 94 Trade and other receivables 3,327 3,249 3,140 Current tax receivable 65 23 65 Derivative financial instruments 77 61 97 Investments 1,336 1,152 3,523 Cash and cash equivalents 485 648 434 5,943 5,529 7,471 Current liabilities Loans and other borrowings 983 1,677 1,900 Derivative financial instruments 62 115 168 Trade and other payables 5,254 4,974 5,276 Current tax liabilities 289 163 222 Provisions 137 123 142 6,725 7,052 7,708 Total assets less current liabilities 18,688 17,488 19,483 Non-current liabilities Loans and other borrowings 7,407 7,564 7,868 Derivative financial instruments 851 709 927 Retirement benefit obligations 6,958 7,296 7,583 Other payables 1,032 901 927 Deferred tax liabilities 955 961 948 Provisions 379 422 422 17,582 17,853 18,675 Equity Ordinary shares 419 408 419 Share premium 1,051 62 1,051 Own shares (67) (83) (165) Other reserves 1,469 1,400 1,485 Retained loss (1,766) (2,152) (1,982) Total equity (deficit) 1,106 (365) 808 18,688 17,488 19,483 18