Agreement

British Telecommunications PLC
17 August 2000


         BT AGREES TO TAKE CONTROL OF VIAG INTERKOM

BT today announced that it has reached an agreement which

enables it to take control of Viag Interkom, the German fixed

and mobile operator which is currently bidding for a German

UMTS licence.

     This move is part of BT's strategy of gaining increased

participation in the fastest growing markets and sectors. It

strengthens BT's position in Germany, the largest national

communications market in Europe.

     An agreement with E.ON allows BT to buy E.ON's 45 per

cent stake in Viag Interkom by means of a call option priced

at Euro 6.65 billion payable in the middle of next year.   BT

already owns 45 per cent of Viag Interkom having been a

strategic partner in the business since its creation in 1995.

Telenor, which has a 10 per cent stake in Viag Interkom, has

given its support to the agreement.

     Sir Peter Bonfield, BT's chief executive, said: 'With

its strength in mobile, Internet and new technology fixed

network assets, Viag Interkom is strongly positioned as a

dynamic new-wave player in one of Europe's fastest growing

national markets. Having been a partner in the business from

the start we are delighted to be moving to majority ownership

and control.  With the recent increase in our ownership to

100 per cent in the Dutch operator Telfort, and our position

alongside Telenor in Esat in Ireland, together with our other

interests, we are clearly demonstrating that Europe is BT's

home market.'

     The agreement enables the maximisation of Viag

Interkom's contribution to the European ambitions of BT

Wireless, Ignite and BTopenworld, and forms a key element in

enabling BT to deliver against the strategic objectives it

announced in April 2000.

     Sir Peter said: 'Our strategy has seen early local

investments grow significantly and rapidly, creating

considerable value.  Taking opportunities to buy up where the

terms are right not only creates shareholder value but also

adds to BT's flexibility.'

     'We are looking forward to working with the management

team to grow Viag Interkom even faster. New, exciting

opportunities for the business and its employees include very

real operational and procurement synergies, possible multi-

market products and further rapid progress in mobile Internet

deployment.  Viag Interkom will remain a German business

based in Munich.'

     BT was advised by Rothschild.



Notes 
Agreement with E.ON

The agreement with E.ON is for put and call arrangements in
respect of E.ON's 45 per cent interest in Viag Interkom.
     BT will be able to secure a controlling shareholding of
up to 90 per cent between January and July 2001. The price
for BT's call option over E.ON's 45 per cent interest is Euro
6.65 billion, payable in cash.  E.ON has a put option priced
slightly lower. This payment combined with the Euro 2.1
billion invested to date, will make a total investment by BT
in Viag Interkom of Euro 8.8 billion for a 90 per cent
holding.

Telenor has given its consent to the agreement with E.ON and
a separate agreement with Telenor has been reached under
which it may decide to sell its stake in Viag Interkom, or BT
may decide to buy it in due course. The arrangements with
Telenor envisage similar put and call terms to those with
E.ON under the option agreement. However, Telenor has made no
decision to sell and the two parties remain important
strategic partners.

Viag Interkom is a major mobile and fixed line operator in
Germany.  Currently, it has  over 2 million mobile
subscribers and expects to reach at least 3.5 million by the
end of 2000.  Viag Interkom's internet business, Interkom
Online, now has 590,000 active  customers.  Viag Interkom has
over 1500 business customers. It is currently extending its
service to SMEs through the roll out of Wireless Local Loop
(WLL) for local access, having won the largest number of WLL
licences in Germany. The headquarters of Viag Interkom will
remain in Munich.

At 31 December 1999, Viag Interkom's net assets were Euro 1.7
billion  and it recorded a loss of Euro 817 million  for  the
year then ended.

Viag Interkom inquiries: Peik von Bestenbostel - 00 49 89
2442 1200

BT

British Telecommunications plc is one of the world's leading
providers of telecommunications services. Its principal
activities include local, long distance and international
telecommunications services, mobile communications, Internet
services and IT solutions.  BT is expanding its presence
overseas rapidly and has operations in more than 30 countries
worldwide, with ventures in the Republic of Ireland, France,
Switzerland, Spain, Germany, Italy, the Netherlands, Sweden,
New Zealand, Japan, Singapore, Malaysia, Korea, Latin America
and India.  BT and AT&T have also created Concert, the
leading global telecommunications company serving multi-
national business customers, international carriers and
Internet service providers worldwide.

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