Broadband strategy update

BT Group PLC
06 November 2002

                                                                November 6, 2002



                     NEW STRATEGIC ALLIANCE WITH MICROSOFT

                       WILL BOOST BT'S BROADBAND STRATEGY

BT has become one of Microsoft's key European telecoms partners after signing a
new strategic alliance that will see the two companies collaborating on how to
bring dynamic broadband applications to the market for residential and business
customers.

The alliance - negotiated throughout the summer - has been signed by the
chief executives of both companies, Ben Verwaayen for BT and Steve Ballmer for
Microsoft Corp. This moves Microsoft's relationship with BT onto the same
footing as its other alliances in the global telecom sector - Korea Telecom in
Asia and Verizon in the US.

This announcement clearly demonstrates Microsoft's deep level of
commitment to the broadband strategy and technologies being deployed by BT. It
also builds on the partnership between BT and Microsoft on existing projects
like Xbox Live and web services.

The alliance is a marriage of BT's broadband capability and Microsoft's
strength in .Net technology. Both companies will now be putting their best
development teams to work in inventing and revolutionising communications over
broadband.

Microsoft and BT will focus their efforts on five key programmes,
developing applications for:

  • multi-media home computing
  • increasing the productivity and flexibility of large organisations
  • the new generation of mobile computing
  • .Net and web services
  • portals

Around 30 separate projects are included within the five programmes, with
details being announced as they progress. The latest of these involves
discussions with Microsoft about becoming the software and digital content
partner for BT Home Computing, the one-stop service to take the hassle out of
going online.

Steve Ballmer, chief executive of Microsoft, said: "Microsoft is strongly
committed to speeding up the adoption of broadband in the UK, and we are very
excited about BT's broadband strategy and innovative no-frills product, which we
believe is a great catalyst for broadband penetration.

"We are taking this important step because BT is a company that delivers -
it has a proactive broadband strategy and a passionate focus on customer
satisfaction. This alliance with BT is very important to Microsoft. Both our
organisations will be working hard to ensure we spot the right opportunities and
quickly bring to market great products and services that match the needs of our
customers," added Ballmer.

Ben Verwaayen, chief executive of BT Group, said: "Make no mistake, this
alliance is not window dressing. Our relationship with Microsoft in Europe is
moving on to an unprecedented and exciting level that will bring real benefits
for the customers of both companies.

"BT has accelerated on all fronts during the past year to make broadband
available to more customers across the UK. Now we want to do all we can to make
broadband as attractive as possible to potential customers, residential and
business, by giving them the compelling applications that will deliver a superb
online experience that meets their needs and aspirations. That's where this
alliance comes in.

"By combining our broadband drive with Microsoft's software capability, this
will be a formidable alliance that will transform the experience of our
broadband users."

                        --------------------------------

Inquiries about this news release should be made to the BT Group Newsroom on its
24-hour number: 020 7356 5369. From outside the UK, dial [phone]. Calls
may also be made to the BT Retail Press Office on 020 7356 4523/6045

          All BT group news releases can be accessed at our web site:

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Journalists can also contact The Microsoft Press Centre on 0870 20 77377. Lines
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