Fourth Quarter Highlights

    LONDON, May 20 /PRNewswire-FirstCall/ -- BT(1) (NYSE: BTY) today announced
preliminary results for FY ending March 31, 2004.

     -- Group turnover up 1 per cent, excluding the impact of mobile
        termination rate reductions, at 4,787 million pounds sterling.
        Maintained after mobile termination rate reductions

     -- New wave turnover of 1,078 million pounds, up 38 per cent

     -- Profit before taxation, goodwill amortisation and exceptional items of
        459 million pounds, down 6 per cent.  Up 8 per cent before leaver
        costs

     -- Earnings per share before goodwill amortisation and exceptional items,
        maintained at 3.9 pence.  Up 13 per cent before leaver costs

     -- Net debt of 8,425 million pounds, 12 per cent lower than previous year

     -- ICT contract wins of 2.3 billion pounds in the quarter

     -- Broadband end users approaching 2.5 million at May 14, 2004


    Full Year Highlights

     -- Group turnover maintained, excluding the impact of mobile termination
        rate reductions, at 18,519 million pounds.  Down 1 per cent after
        mobile termination rate reductions

     -- New wave turnover of 3,387 million pounds, up 30 per cent

     -- Profit before taxation, goodwill amortisation and exceptional items of
        2,016 million pounds, up 10 per cent

     -- Earnings per share before goodwill amortisation and exceptional
        items of 16.9 pence, up 19 per cent

     -- Full year dividend of 8.5 pence per share, up 31 per cent

     -- Free cash flow before acquisitions, disposals and dividends of
        2.1 billion pounds, up 21 per cent

     -- Further significant improvements in customer satisfaction

    The full profit and loss account, cash flow statement and balance
sheet, drawn up in accordance with UK generally accepted accounting
principles, from which this information is extracted is set out on
pages 18 to 23.

    Chairman's statement
    Sir Christopher Bland, Chairman, said:
    "The group has continued to make good progress this year, and delivered
strong financial results while continuing to transform the business.  New wave
revenues, including ICT, broadband, mobility and managed services, grew by 30
per cent to 3,387 million pounds.  Earnings per share* grew by 19 per cent to
16.9 pence, almost doubling in two years.
    "We generated free cash flow of over 2 billion pounds and reduced net debt
to 8.4 billion pounds while continuing to invest for the future.  Our net debt
is now one third of the level three years ago.
    "I am pleased to announce a full year dividend of 8.5 pence which is 31
per cent up on last year and four times higher than two years ago.
    "These results demonstrate our continuing ability to reduce debt, reward
our shareholders and build for the future."

    Chief Executive's statement
    Ben Verwaayen, Chief Executive, said:
    "In our transformation process the fourth quarter was very encouraging.
The results from our new wave businesses show our strategy is working.  We
grew new wave revenues by 38 per cent in the fourth quarter which more than
offset the decline in revenue from the traditional business.  The ICT order
book continues to grow strongly with 2.3 billion pounds of orders in the
fourth quarter, taking orders for the full year to more than 7 billion pounds.
    "We are enabling broadband Britain.  We now have approaching 2.5 million
connections, a 162 per cent increase in a year.  We aim to have over 99 per
cent of the UK broadband enabled within a year, putting the UK towards the top
of the broadband league.
    "Our transformation of the business will continue to accelerate.  We
expect the environment to remain challenging but we will also increase our
investment to build on the significant progress already achieved.  Our actions
and future plans give us confidence in our strategy for the future."

     * Before goodwill amortisation and exceptional items.

                      Results for the Fourth Quarter and
                          Year Ended March 31, 2004

                        Fourth Quarter                     Year
                                           Better                      Better
                                           (worse)                     (worse)
                        2004      2003         %     2004       2003       %
                        In millions of                In millions of
                            pounds                        pounds

    Group turnover     4,787      4,778      -      18,519     18,727      (1)

    EBITDA before
     exceptional
     items             1,412      1,511     (7)      5,816      5,805       -
    EBITDA before
     exceptional
     items and
     leaver costs      1,561      1,582     (1)      6,018      6,081      (1)

    Profit before
     taxation
    - before goodwill
       amortisation
       and exceptional
       items             459        490     (6)      2,016      1,829      10
    - after goodwill
    amortisation and
    exceptional items    423      1,717    (75)      1,948      3,157     (38)

    Earnings per share
    - before goodwill
       amortisation,
       exceptional
       items and
       leaver costs     5.1p       4.5p     13       18.5p      16.5p      12
    - before goodwill
       amortisation
       and exceptional
       items            3.9p       3.9p      -       16.9p      14.2p      19
    - after goodwill
       amortisation
       and exceptional
       items            3.5p      19.1p    (82)      16.4p      31.2p     (47)

    Capital
     expenditure         844        724    (17)      2,673      2,445      (9)

    Free cash flow       819        931    (12)      2,071      1,708      21

    Net debt                                         8,425      9,573      12

    The commentary focuses on the results before goodwill amortisation and
exceptional items.  This is consistent with the way that financial performance
is measured by management and we believe allows a meaningful comparison to be
made of the trading results of the group.

              (Full Text of Announcement Available upon Request)

    Forward-looking statements - caution advised
    Certain statements in this results release 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: cash flow, earnings per share and customer satisfaction
targets; expectations regarding broadband, ICT and mobility growth, ADSL
broadband roll out, and revenues from new wave products and services; the
possible or assumed future results of operations of BT and/or its lines of
business; investment in the 21st century network and the generation of long-
term cost savings and customer benefits; and expectations regarding revenue
growth, dividend pay-out ratio, debt reduction, rewarding shareholders and
investing for the future.
    Although BT 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 BT's
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
BT's performance.  BT undertakes no obligation to update any forward-looking
statements whether as a result of new information, future events or otherwise.

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