BT to acquire Albacom in full

BT Group PLC
03 December 2004


December 3, 2004

                       BT TO TAKE FULL CONTROL OF ALBACOM

BT announced today that it had reached agreement with its three joint venture
partners in Albacom to increase its ownership in the company to 100%. BT will
acquire the 74% that it does not already own, from ENI, BNL and Mediaset, for a
minimum price of €116m (£80m).

BT has been committed to the Italian business communications market, and to
serving the needs of Italian corporates within the country and internationally,
since it established Albacom in 1995.

100% ownership will allow BT to offer a seamless service to its customers in
Italy, both domestically and internationally, taking full responsibility for
products delivered on an end-to-end basis. BT expects the transaction to bring
visible benefits to Albacom's customers, allowing them to benefit from the full
suite of BT's products and services and its increased focus on network-based IT
services.

This move reflects BT's strategy of establishing a pan-European presence to
service multi-site organisations, with strong local operations in key countries.
Together with its recently announced acquisition of Infonet, the integration of
Albacom will allow BT to provide an unmatched service to corporate and public
sector customers in Italy and to international businesses with operations in
Italy.

Under the terms of the transaction, BT has agreed with each of ENI, Mediaset and
BNL that BT will manage a substantial part of their communications services
needs for at least the next five years. The total annual value of these
contracts is expected to be at least €150m.

Andy Green, CEO BT Global Services, said: "This integration will be good for
Albacom, good for BT and good for our Italian customers. By fully combining our
capabilities with those of Albacom, we will be in a position to win even more
business in our target market segments and build upon the successes we are
seeing in other parts of Europe. BT is delighted that the former shareholders
will remain as customers and we are fully committed to meeting the future
communications needs of ENI, Mediaset and BNL."

Corrado Sciolla, CEO of Albacom, said: "This is excellent news for Albacom, for
our customers and for our employees. The integration of Albacom with BT, one of
the world's leading providers of global managed communications services, will
bring real opportunities for us to move forward in Italy and to increase
significantly our share of the Italian digital networking market."

Albacom will undergo a financial restructuring as part of the transaction. Each
existing shareholder will settle directly its share of Albacom's outstanding
bank loan balance. BT's 26% of this will be €65m. Albacom will retain existing
long term lease obligations of €230m.

In consideration for the 74% of Albacom not already owned, BT will pay to the
other shareholders a minimum of €116m. Of this, €55m will be deferred for five
years and may be increased if Albacom's profits in 2008/09 exceed certain target
levels. In the event that the final payment does increase, the total cost to BT
including debt will not exceed 4x 2008/09 ebitda.

BT expects to generate annual cash cost savings of at least €20m in Albacom
through the application of BT's international best practice processes and
through improved purchasing power. The restructuring process, which has already
commenced, will be led by Corrado Sciolla, who was appointed CEO of Albacom in
March 2004.

BT expects Albacom to become cashflow positive, after accounting for financing
costs associated with the transaction, during 2006/07.

The transaction is expected to be marginally dilutive to BT's earnings per share
in 2005/06, before becoming accretive during 2006/07. Any exceptional costs
associated with the transaction are expected to be reflected in the current
financial year.

The transaction, which is conditional only upon regulatory clearances, is
expected to complete in January 2005.

BT was advised on this transaction by Deutsche Bank.

About Albacom

Albacom is the second largest telecoms operator in the Italian business market,
behind Telecom Italia, with an 11% share of the data services market. Albacom
provides data transmission, voice and Internet services to more than 240,000
Italian businesses and to international companies active in Italy. Albacom's
domestic network infrastructure comprises 7,600 kilometres of wholly-owned
fibre. In addition to its head office in Milan, Albacom is represented
throughout Italy with offices in Rome, Turin, Bologna, Genoa, Padua, Florence,
Pescara, Naples and Bari. It operates its own data centres as well as a state of
the art call centre in Palermo. Albacom employs approximately 1,450 people.
Albacom was set up in September 1995 as a strategic partnership between BT and
BNL. Mediaset and ENI joined the partnership in 1996 and 1997.

Albacom reported EBITDA of €39m from revenues of €655m in the year to March
2004.

About BT

BT is one of the world's leading providers of communications solutions serving
customers in Europe, the Americas and Asia Pacific. Its principal activities
include IT and networking services, local, national and international
telecommunications services, and higher-value broadband and internet products
and services.

BT consists principally of three lines of business:

  • BT Retail, providing fixed and mobile communications services and
    solutions and IT and networking services to more than 20 million business
    and residential customers in the UK. It is also a leading UK internet
    services provider.
  • BT Wholesale, providing network services and solutions within the UK to
    more than 600 fixed and mobile operators and service providers including the
    provision of broadband, private circuits.
  • BT Global Services, providing IT and networking services internationally
    to meet the needs of multi-site organisations with European operations. BT
    Global Services operates in more than 130 countries and also offers
    international carrier services.

In the year ended 31 March 2004, BT Group's turnover was £18,519 million with
profit before goodwill amortisation, exceptional items and taxation of £2,013
million.

BT Group plc is listed on stock exchanges in London and New York. British
Telecommunications plc (BT) is a wholly-owned subsidiary of BT Group and
encompasses virtually all businesses and assets of the BT Group.

For more information, visit www.bt.com/aboutbt






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