Broadband

1
Broadband

• Alison Ritchie

2
Forward-looking statements - caution

• Certain statements in this presentation are
  forward-looking and are made in reliance on the
  safe harbour provisions of the US Private
  Securities Litigation Reform Act of 1995. These
  statements include, without limitation, those
  concerning expectations regarding customer
  growth, investment plans, strategy, and the
  benefits of new initiatives the possible or
  assumed future results of operations of BT and/or
  its lines of business expectations regarding
  product volume, revenue targets and/or growth,
  capital expenditure, network infrastructure and
  savings, customer satisfaction, free cash-flow,
  market share, cost reductions and cash savings,
  productivity improvements, and profitability.
• Although BT Group believes that the expectations
  reflected in these forward-looking statements are
  reasonable, it can give no assurance that these
  expectations will prove to have been correct.
  Because these statements involve risks and
  uncertainties, actual results may differ
  materially from those expressed or implied by
  these forward-looking statements.
• Factors that could cause differences between
  actual results and those implied by the
  forward-looking statements include, but are not
  limited to material adverse changes in economic
  conditions in the markets served by BT and its
  lines of business future regulatory actions and
  conditions in BTs operating areas, including
  competition from others in the UK and other
  international communications markets selection
  by BT and its lines of business of the
  appropriate trading and marketing models for its
  products and services fluctuations in foreign
  currency exchange rates and interest rates
  technological innovations, including the cost of
  developing new products and the need to increase
  expenditures for improving the quality of
  service prolonged adverse weather conditions
  resulting in a material increase in overtime,
  staff or other costs developments in the
  convergence of technologies the anticipated
  benefits and advantages of new technologies,
  products and services, including broadband and
  other new wave initiatives, not being realised
  the timing of entry and profitability of BT and
  its lines of business in certain communication
  markets significant changes in market shares for
  BT and its principal products and services to
  the extent that BT chooses to sell assets or
  minority interests in its subsidiaries,
  prevailing market levels for such sales general
  financial market conditions affecting BTs
  performance and the reintegration of Concert. BT
  Group undertakes no obligation to update any
  forward-looking statements, whether as a result
  of new information, future events or otherwise.

3
Broadband at the heart of BT - Bold Targets

1m _at_ 03 5m _at_ 06 Customer Satisfaction Profitabi
lity
IncreaseAttractiveness
IncreaseAvailability
IncreaseAwareness
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1m achieved early!
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Broadband market
Quarterly share of additions BT DSL vs other
Broadband

• BT marketing benefited whole Broadband market
• Wide range of suppliers
• BT growing broadband market share under strong
  competitive challenges
• BT share of total broadband additions 57 for the
  Mar 03 quarter (including NTLs midband
  customers)

6
Extending coverage
Now
Dec 03

• 70 of households now in ADSL areas
• Over 1000 triggers published to date with 40
  opened or in build
• Over 350k registrations on non-enabled exchanges

7
Awareness rising

90
67
8
Customer Dissatisfaction Improving
9
Reliability Is Improving
10
Retail Broadband Medium Term Economics (gt1M
customers) - Access only
Annual Price
Retail Connection Costs (Incl charge from
Wholesale)
c1M customers
Time

• Excludes revenue from other value added services

11
Wholesale Broadband Medium Term Economics (gt2M
customers)
Wholesale Connection Cash Costs(Incl capex for
DSLAM, Core IP etc)
Annual Price
c2M customers
Time
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Broadband at the heart of BTFast growing
untapped potential
Broadband Penetration as age of Access Lines
Dec 01
Dec 02
Source Informa Group
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Broadband 4 years from now...
DSL Customers
5 M

• c5M BT Wholesale customers
• Total UK Broadband penetration of access lines
  over 20

1 M
Time

• Circa 1bn revenue per annum
• Operating profit margin in-line with the rest of
  the business

14
Broadband at the heart of BT Extending Beyond
Access

• Enabling compelling content and applications
• Content
• Music, Video, Gaming, Education, Sports
• Business Information
• Communications
• Email, Instant Messenger, Click2Call, VoIP, Call
  Management, SMS
• Platforms
• Payment Engine, Content Distribution /
  Management, Rights Management, Security,
  Authentication, Storage, QOS

• Enabling thenetworked home / office
• Computing
• Broadband enabled PCs
• Networking
• Intelligent Hubs, WiFi, Mobile to Fixed
• Monitoring
• Alarm Monitoring
• Digital Hub
• Streamed Music, Video, Pictures, Games Consoles

Broadband access
Complete Service Assurance
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Broadband Extending Beyond Access

• Pierre Danon

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Second Phase of Broadband Adoption
Home / Office
Content / Application
5 m
Partner

• Connecting Your World Completely

• Simple and Complete

BT Yahoo Service
Home of Possibilties
2 m
Digital Home Hub
BT Broadband Partnerships
Services
1 m
BT Home Computing
BT Openworld Portal
BT Business Resource Centre
BT Openzone Mobile to Fixed
BT Business Starter Pack
BT Home Networking
Enabled
BT Email Portfolio
BT Home Monitoring
Develop
BT Communicator
BT Home Surveillance
BT Click Buy
Xbox Live
1 m
Broadband
BT Immedea
Sony PS/2
2 m
BT Internet Radio
5 m
Enable

• Beyond the Experts

17
BT Home Computing

• Broadband enabled PCs providing customers with a
  one-stop service for broadband-ready computer
  hardware and software support, with the option of
  installation by BT engineers.
• Competitively priced HP and Toshiba PCs paid
  either by credit card, consumer finance, or
  tax-efficient employee scheme saving up to 50.
• 5 Desk Tops and 3 Notebooks available, starting
  from 449.
• Wide and growing range of software and
  peripherals.
• Home Networking to be fully integrated to
  portfolio by August for Back to School bundle
  promotion.
• 3 levels of protection and service
• Essential at 2.99 per month
• Standard at 9.99 per month
• Enhanced at 13.99 per month

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BT Home Networking

• BT Home Networking delivers the markets first
  plug and play home network solution to share a
  single broadband connection across up to 10 PCs
  plus share access to files and a single printer
• BT Voyager 2000 wireless modem
• Starting price 149
• BT Home Network 1200
• Complete networking solution
• wireless/phone line/ethernet
• Provides parental controls
• 199 for 2 PC solution
• Wireless upgrade available at 39.99
• BT Openzone free trial included

19
BT Home Monitoring

• BT Home Monitoring launched May 2003
• BT Home monitor incl.12 months monitoring for
  299.99
• Wire free, self-install internet based monitoring
  and event alerts via text message, e-mail and
  phone
• Sponsorship of the 2003 Neighbourhood Watch Awards

20
Broadband Entertainment

• Broadband is revolutionising gaming and for the
  first time, XBox gamers are able to play
  opponents anywhere in the world in real time
• XBox Live launched in the UK and BT Openworld
  are their launch ADSL partner distributing
  Openworld/Xbox branded CDs across 44 Comet stores
  throughout 2003

• Digital Media Player launches Summer 2003
• Stream music from broadband enabled PC to any
  room in the house
• Priced at 159.99 (incl. VAT)
• Recent winner Best of Innovations award at the
  Consumer Electronics Show in Las Vegas

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Futures - Digital Home Hub

• Simply connects all home devices such as PCs,
  laptops, TVs
• Link to the services of today and tomorrow,
  managed centrally
• Download a film and view
• on the TV or PC
• Store all home media
• archives
• Control all home utilities
• and security centrally
• Integrate telecommunication
• services

22
BT Broadband Partnerships

• Partnership model which stimulates third-party
  sales of Broadband (33 increase April to May
  with over 18,000 sales to date)
• New launch page released March
• Partners include
• Sky
• Microsoft MSN 8
• Yahoo Plus
• BBC
• MasterCard
• Channel4
• ebay
• Comet
• Carphone Warehouse
• Airmiles
• .over 80 in total

23
BT Business Resource Centre

• Drive Broadband acquisition, retention and
  high-margin revenues by extending into equipment,
  support services and web based business tools
• Build on BT Business Starter Pack success 87,000
  units sold at 10 per month
• Position BT as the leading UK onlineresource
  centre for business toolsbuilding on our
  excellence in
• Internet Access
• Service and Support
• Platform Integration
• Sales Distribution
• Leverages BT Brand

Tools to manage my business
Trade online
Basic online presence
Collaborate and Share
Secure management of data
Customer Migration Path
Secure use of the Internet
Communicate
Flexible access to the Internet
Good Quality access to the Internet
Help Me To Understand How The Internet Can Help
My Business Succeed
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BT Communication Client

• BT developing Total Communication Client, a new
  service that will manage all home communications
  from the PC
• Extending the strategic partnership with Yahoo to
  provide BT with an Instant Messenger capability
  to a new suite of communication services
• Instant Messenger
• Voice over IP
• Click2Call
• Call Management
• SMS
• Central Personal Address Book

25
BT Immedea Platform

• BT Click Buy is proving the market for enabling
  platforms
• BT Immedea (with 21CN) is next phase offering
  Content Management, Content Distribution, Rights
  Management, Security / Authentication, Video,
  Music Software Streaming, QOS
• This platform and 21CN delivers an increasingly
  media rich range of services across and between
  devices to meet emerging customer needs

Content management
Ingestion
Contribution network
-
Productisation
-
-

• Supplying content

-
Quality of service
Store
-
Digital rights management
Manage
-
Share
Customer services inc. Billing

• Consuming content

Use
Purchase
Access
Download
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BT Yahoo Service

• A fully integrated service that combines the
  market leading features of the next generation of
  Yahoo for the same price of BT Openworlds
  existing consumer service.
• A co-named, highly integrated
• service
• access, billing, customer
• communications, first line
• customer support from BT
• portal content and applications
• from Yahoo!
• covering both narrowband and
• broadband consumer services
• Specifically created for broadband
• Better than Yahoo Plus
• Exclusive to BT Yahoo in the UK

27
BT Yahoo Service

• Duncan Ingram

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Summary

• Achieving volumes
• Step changes in
• service
• satisfaction
• economics
• Strategy to extend beyond access
• partnerships to enable best in class offering at
  lower cost
• targeting value added services to increase
  Broadband ARPU by c20 in the medium term

broadband at the heart of BT
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Broadband Q A