Final Results - Part 2

British Telecommunications PLC
10 May 2001


PART 2

LINES OF BUSINESS

BT's new lines of business were established during the year ended March
31, 2001. The business structure did not exist in the previous financial year
and it has not been practical to provide comparative financial figures. The
results discussed below include our proportionate share of the results of the
ventures.

                                      
                                   
                                               
                                EBITDA (ii)            Total operating          
                                    before        profit (loss) before          
                       Total   exceptional   goodwill amortisation and
                    turnover         items           exceptional items
                          £m            £m                          £m
Year ended
March 31, 2001
BT Retail             11,813        1,188                        1,004
BT Wholesale          11,493        4,278                        2,540
BT Wireless            3,947          220                        (225)
BT Ignite              3,861           47                        (380)
Concert                2,576          170                           19
Yell                     778          223                          210
BTopenworld              212        (253)                        (296)
Eliminations and     (5,014)        1,675                          539
other (i)
Total before          29,666        7,548                        3,411
exceptional items


 (i) Includes elimination of turnover between businesses which is included
     in total turnover of the originating business.

(ii) Includes proportionate EBITDA of associates and joint ventures.

BT Retail

BT Retail achieved an operating profit of £203 million, before exceptional
items, in the fourth quarter on turnover of £2,955 million. In the year ended
March 31, 2001, BT Retail contributed a profit of £1,004 million on turnover
of £11,813 million. BT Retail's turnover is mainly derived from BT's UK fixed
network customers through the provision of fixed network call services,
exchange lines and private services. BT Retail is benefiting from growing
internet and fixed to mobile non-geographic call volumes.

BT Retail's marketing strategy has continued to focus on the development of
the BT Together range, replacing older and more complex pricing structures.
The new choices package from BT Together, launched on December 1, 2000, offers
unlimited off-peak voice and/or local internet calls for a fixed monthly fee.
By March 31, 2001, 8 million customers (40 per cent of BT Retail's residential
customer base) were benefiting from one of the BT Together choices. Business
customers are also moving on to BT Together packages, and by March 2001 more
than 330,000 businesses were benefiting from a BT Together package tailored
for their needs.

BT Retail's telemarketing strategy continues to be refocused on inbound
customer calls rather than outbound calling. This has led to substantial
improvements in customer satisfaction and significant cost savings, including
the closure of two of our five call centres.

The BT Together packages have significantly improved the main geographic
(voice) call trends on which we earn higher margins than on other calls. BT
Retail residential lines at the end of the year were 67,000 lines (0.3 per
cent) down on the March 2000 position. BT Retail business lines grew by
339,000 during the year with the digital base improving by 22 per cent.

BT Retail's programme for the smaller business (SME) customers focused on
defending and winning core business and growing new wave revenue. BT Retail is
the leading internet service provider (ISP) for SME customers in the UK. For
major business customers, the focus has been on growing the solutions
business, providing customised communications solutions for major corporate
customers in the UK. The solutions business grew by more than 25 per cent in
the year, with major contracts secured with Liverpool City Council and the
Alliance and Leicester bank in the fourth quarter.

Within our customer service organisation we have now equipped 17,000 field
engineers with laptop computers, giving them improved testing capabilities and
enabling better work distribution and management.

Our people had to deal with additional faults in autumn 2000 as a result of
exceptionally severe floods and storms in the UK; regrettably, customers had
to wait longer than would normally be expected for their service to be
restored during that difficult period.

Close to £50 million has been invested in computer technology for our
directory assistance service, enabling us to give a near instantaneous
response to customer enquiries.

BT Wholesale

BT Wholesale achieved an operating profit of £670 million in the fourth
quarter on turnover of £3,061 million. In the year ended March 31, 2001, BT
Wholesale contributed a profit of £2,540 million on turnover of £11,493
million. BT Wholesale's turnover is primarily internal to the BT group in
providing UK network services to BT Retail, BT Wireless and the other BT lines
of business. Its external turnover, which totalled £3,005 million in the year,
is derived from providing wholesale products and solutions to other operators,
including Concert, inter-connecting with BT's UK fixed network.

In November, BT Wholesale and Crown Castle UK entered into an agreement to
provide fast-track site solutions and infrastructure to 3G mobile and wireless
operators. BT and Crown Castle will jointly develop cellsites, under the
REACHservices name, enabling mobile operators to access BT Wholesale's fixed
network both from BT sites and from Crown Castle properties. This should
enable BT to unlock significant value through the development of roof-space
and surroundings of 4,000 of its exchange buildings. Three of the 3G licence
holders, including BT Cellnet, have agreed to lease sites from the combined
property portfolio.

BT microCONNECT Payphones is our innovative, environmentally friendly
managed cellsite solution. It uses low powered micro cells in payphones to
relay calls between mobile phones and the mobile operators networks. The
transmitters are intended to give mobile customers in urban areas better
quality calls and increased reliability by cutting the number of blackspots.

BT Wholesale has moved closer to realising its vision of building the
most advanced all-optical network in Europe through the selection of Marconi
as its strategic technology partner. Marconi will act as sole supplier of BT's
broadband optical equipment, incorporating leading edge DWDM technology, as
well as supplying all of the existing core Synchronous Digital Hierarchy (SDH)
network. The partnership will consolidate BT Wholesale's market and technical
leadership in the area of core transmission.

Growth in UK core network traffic was met in the year to March 31, 2001 by the
cut-over of 46 trunk exchanges to Next Generation Switches (NGS) which have
double the capacity of the earlier exchanges. This brought the total of NGSs
to 57 by March 31, 2001. In less than a year, we have replaced nearly half of
the trunk switches. Plans are in place for introducing a further 13 NGSs and
for the upgrade and expansion of 27 of the switches to include core
Asynchronous Transfer Mode (ATM) switching by March 2002, which again
potentially doubles the port capacity of each switch.

Growth in demand for network bandwidth was met by fast deployment of SDH
technology with coverage from 2,123 nodes across the UK and with a capacity of
22 Terabit/s. We believe that BT is ahead of similar European operators in
large scale deployment of leading edge, high capacity, SDH and Wavelength
Division Multiplexing (WDM) technology. More than 750 nodes across the UK are
already enabled with 10 Gigabit/s systems (10 Gigabit/s is the equivalent of
more than 120,000 simultaneous voice/data calls).

BT Wholesale has continued to play a major role in the Local Loop
Unbundling (LLU) programme in the UK. BT was the first of the European
incumbent telecommunication operators to make a reference offer for the full
range of LLU products as required by the January 2001 EU regulation. We have
met the objectives set for the January to March industry trial, and are
providing a broader scope of trial than that originally agreed with Oftel. The
first co-location facilities beyond the trial were completed in April 2001.

BT Wholesale's ADSL rollout programme is progressing well. By the end of March
2001, we had enabled 839 exchanges around the UK to deliver ADSL services.
This means that 50 per cent of UK households are now in areas currently served
by an ADSL enabled exchange. We are also enhancing our node capacity to
support video service provider offerings within the M25 area around London. We
have trained 1,400 BT engineers on the new broadband technology and by the
year end we had connected 49,000 ADSL customers.

Capital expenditure for the full year of £2,273 million resulted mainly
from growth and modernisation investment programmes. The expansion of the
reach and capacity of the SDH network, the upgrade of the trunk switches to
Next Generation Switches and of the Digital Local Exchanges to enable IP
grooming and SurfTime functionality dominated expenditure on the core network.
Investment in the access network continued to be driven by demand for both new
copper and fibre lines and by quality and resilience improvement programmes.

BT Wireless

BT Wireless incurred an operating loss of £47 million before goodwill
amortisation and exceptional items on turnover of £1,057 million in the fourth
quarter. In the year ended March 31, 2001, BT Wireless incurred a loss of £225
million on turnover of £3,947 million. At March 31, 2001 BT Wireless had 16.9
million mobile subscribers of which 11.2 million are BT Cellnet's. BT
Wireless continues to build on its lead in the sale of mobile internet phones
with nearly two million customers in total, of which over one million are in
the UK. The annual results are before an exceptional charge of £43 million
relating to the write off of deferred subscriber acquisition costs; we have
aligned the method of accounting for these in all group operations. We have
also written off £43 million from Viag Interkom's redundant IT systems.

The profits, principally contributed by BT Cellnet, are more than offset
by losses incurred mainly by Viag Interkom and Telfort. BT Cellnet is the
prime contributor to BT Wireless' turnover.

BT Cellnet's customer base increased by 51 per cent over the year to
March 31, 2001 with over 0.9 million new customers added in the fourth
quarter. Its customer base comprises 7.7 million pre-pay customers and 3.5
million in post-pay customers. BT Cellnet's total turnover grew to £3,031
million for the year. Its operating profit before exceptional items was £336
million and its EBITDA was £591 million in the year ended March 31, 2001. BT
Cellnet remains the UK's leading network on international roaming coverage
with agreements with operators in 126 countries.

Viag Interkom had a 3.7 million mobile customer base at March 31, 2001,
with 0.6 million net additions in the fourth quarter and 2.4 million net
additions in the year. The results continue to be affected by the costs
associated with the higher number of mobile customers and aggressive handset
subsidies in the German market. The mobile business is also suffering from a
significant shift to pre-paid customers, leading to less revenue being
generated on average from each customer. Viag Interkom has around 7 per cent
of the German mobile market.

Genie, our global mobile internet portal, which is now part of BT
Wireless, made a small contribution to turnover. Genie experienced losses in
its start up phase with an operating loss of £138 million on turnover of £13
million in the year. At March 31, 2001, Genie had about 4 million registered
customers world-wide, more than trebling its registrations since April 1,
2000.

BT Ignite

BT Ignite was formed in July 2000 to exploit the growth potential in
value added broadband and IP (internet) services businesses. BT Ignite is able
to provide a wide range of IP and data services, including broadband networks,
internet services, web-content hosting, media services, application service
provision and complex solutions and systems integration. BT Ignite has a
presence in over 250 towns and cities across Europe. New investment in 21
regional data centres supports web data servers, content hosting and
application service provision businesses.

BT Ignite's operations, including interests in ventures, cover 12
countries serviced by an integrated broadband enabled IP network covering more
than 52,000 kms.

Turnover in BT Ignite was £1,145 million for the fourth quarter with an
operating loss before goodwill amortisation of £90 million. In the year, BT
Ignite's turnover was £3,861 million with a loss of £380 million.

Approximately 60 per cent of BT Ignite's turnover is derived from the high end
value-added IP business (managed IP, complex solutions and systems integration
and outsourcing), content hosting, media services and application service
provision (ASP).

BT Ignite Solutions and Syntegra offer e-commerce consultancy and
platform development, customer relationship management, large scale systems
integration and applications development. Turnover from these services of £
2,082 million has increased at over 24 per cent in the year ended March 31,
2001. Turnover from broadband services and higher value added internet
services grew to £612 million.

BTopenworld

BTopenworld incurred an operating loss of £90 million on turnover of £68
million in the fourth quarter. In the year it incurred a loss of £296 million
on turnover of £212 million. BTopenworld's turnover is derived principally
from its UK and continental European narrowband internet access products.

The UK broadband enhanced internet service, a new line of business, made a
small contribution to turnover. A significant proportion of BTopenworld's
losses were incurred in the development and launch of its UK broadband product
range and the development of a small number of internet destination sites. The
total number of equity internet service provider customers of BTopenworld at
March 31, 2001 was approximately 2.6 million, representing growth of
approximately 60 per cent since April 1, 2000. With over 650,000 customers on
unmetered packages at March 31, 2001, BTopenworld is a leading UK unmetered
internet access provider.

Yell

Yell contributed an operating profit before goodwill amortisation of £63
million on turnover of £236 million in the fourth quarter. In the year, Yell
achieved a profit of £210 million on turnover of £778 million. The results
include its US operations in its first full year.

Concert

Concert's operating loss before goodwill amortisation and exceptional
items attributable to BT for the three months ended March 31, 2001 was £89
million, reducing the share of profit for the year to £19 million. Concert is
operating in a highly competitive international market and the recent fall in
prices for carrying international traffic contributed to the loss for the
fourth quarter. BT and AT&T are actively discussing various options relating
to Concert, including ways to improve the performance of the business and
strengthen the relationship. Concert management are taking action to reduce
costs.

Prospects

The current trading and the prospects for the financial year are satisfactory.

____________________________________________________________________

The Annual Report and Form 20-F is expected to be published on June 4, 2001.

The Annual General Meeting of British Telecommunications plc will be held
in Nottingham on July 18, 2001.

GROUP PROFIT AND LOSS ACCOUNT

for the three months and year ended March 31, 2001

                                       Fourth quarter            Year ended
                                       ended March 31             March 31
                                     2001        2000         2001        2000
                               Notes   £m          £m           £m          £m

Total turnover                   3   7,747       6,002      29,666       21,903
Group's share of associates      3 (2,512)     (1,435)     (9,937)      (3,364)
and joint ventures turnover
                                      
    Trading between group and          187         176         698          176
    principal joint venture

Group turnover                       5,422       4,743      20,427       18,715
Other operating income           4     139         132         393          242
Operating costs                  5 (7,944)     (4,074)    (20,759)     (15,359)

Group operating profit (loss)      (2,383)         801          61        3,598
Group's share of operating       6    (72)        (68)       (397)        (400)
losses of associates and joint
ventures
Total operating profit (loss)      (2,455)         733       (336)        3,198

Profit on sale of fixed asset    7      54          36         619          126
investments and group
undertakings
Net interest payable             9   (422)       (140)     (1,314)        (382)

Profit (loss) before taxation      (2,823)         629     (1,031)        2,942

Profit before goodwill          10     319         742       2,072        3,100
amortisation, exceptional
items and taxation

Taxation                              (96)       (192)       (652)        (897)

Profit (loss) after taxation       (2,919)         437     (1,683)        2,045
Minority interests                    (15)           6       (127)           10
Profit (loss) attributable to      (2,934)         443     (1,810)        2,055
shareholders

Dividends                        8                           (571)      (1,426)
Retained profit (transfer from                             (2,381)          629
reserves) for the financial
year

Earnings (loss) per share       10
- basic                            (44.9)p        6.8p     (27.7)p        31.7p
                                                               
- diluted                          (44.9)p        6.7p     (27.7)p        30.9p
                                                               

Earnings per share before

Goodwill amortisation and       10
exceptional items
- basic                               3.0p        8.4p         20.5p      34.2p
- diluted                             3.0p        8.2p         20.2p      33.4p



GROUP CASH FLOW STATEMENT

for the three months and year ended March 31, 2001

                       Fourth quarter           Year ended
                       ended March 31             March 31
                     2001        2000        2001        2000
                       £m          £m          £m          £m
                    
    Net cash        2,186       1,517       5,887       5,849
    inflow from
    operating
    activities
    (note 11)
                        
    Dividends from      1           1          10           5
    associates and
    joint ventures
                    
    Net cash        (112)          10       (727)       (163)
    inflow                                  
    (outflow) from
    returns on
    investments
    and servicing
    of finance

Taxation paid       (423)       (898)       (669)     (1,311)

Purchase of          (12)           -     (4,208)           -
intangible fixed
assets
Purchase of       (1,428)       (920)     (4,756)     (3,568)
tangible fixed
assets
                       
    Net sale           43       (165)          82       (327)
    (purchase) of
    fixed asset
    investments

Sale of tangible      365          59         440         143
fixed assets
                  
    Net cash      (1,032)     (1,026)     (8,442)     (3,752)
    outflow for
    capital
    expenditure
    and financial
    investment

Acquisitions      (8,889)       (548)    (14,501)     (7,165)
Disposals             157         581         747         760
                  
    Net cash      (8,732)          33    (13,754)     (6,405)
    inflow
    (outflow) for
    acquisitions
    and disposals

Equity dividends    (569)       (565)     (1,432)     (1,364)
paid
                  
    Cash outflow  (8,681)       (928)    (19,127)     (7,141)
    before use of
    liquid
    resources and
    financing

Management of       4,489         463       (480)       1,236
liquid resources

Issue of ordinary       3           3         149         127
share capital
Issue of shares to      -           -          36         432
minorities
New loans           6,030           -      14,552       1,473
Repayment of loans    (2)       (204)       (225)       (587)
Net movement on   (1,967)         670       5,223       4,514
short-term
borrowings
                    
    Net cash        4,064         469      19,735       5,959
    inflow from
    financing

Increase            (128)           4         128          54
(decrease) in cash

Increase in net   (8,678)       (925)    (18,942)     (6,582)
debt (note 14)


GROUP BALANCE SHEET

at March 31, 2001
                                                      2001             2000
                                                        £m               £m
Fixed assets
Intangible assets (note 13)                           18,380           5,777
Tangible assets                                       21,625          18,163
Investments                                            5,204           5,878
                                                      45,209          29,818
Current assets
Stocks                                                   361             225
Debtors                                                6,260           5,241
Investments                                            2,557           2,051
Cash at bank and in hand                                 412             253
                                                       9,590           7,770
Creditors: amounts falling due within one year
Loans and other borrowings                            12,136           5,650
Other creditors                                        8,597           9,235
                                                      20,733          14,885

Net current liabilities                             (11,143)         (7,115)

Total assets less current liabilities                 34,066          22,703

Creditors: amounts falling due after

    more than one year

Loans and other borrowings                            18,775           5,354

Provisions for liabilities and charges (note 15)         723           1,056

Minority interests                                       499             498

Capital and reserves
Called up share capital                                1,646           1,627
Reserves (note 16)                                    12,423          14,168

Total equity shareholders' funds                      14,069          15,795

                                                      34,066          22,703


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