Chairman's AGM Statement

British Telecommunications PLC
12 July 2000


Chairman's remarks at the AGM  12 July 2000 -
Manchester

Good morning, everyone.

  Welcome to BT's sixteenth Annual General
Meeting.

  We have a tradition of holding our AGM in
different parts of the UK and I'm delighted
that we are in Manchester for the first time
and pleased to see so many of you here.

  Well, by any set of measures you care to use,
it's been quite a year.

  If a week is a long time in politics, a year
in the communications industry is a
considerable time span - such is its energy and
momentum.

  Just think, for a moment, of the major
changes that your company has achieved in the
last 12 months.

* We launched Concert, our global venture with
AT&T, focused on providing seamless global
communications solutions for multinationals and
other major customers.

* We acquired the 40 per cent minority interest
in BT Cellnet, previously held by Securicor.

* We completed the first phase of the most
radical restructuring of your company in a
decade.

* Together with AT&T, we acquired a 30 per cent
stake in Japan Telecom, one of Japan's largest
telecommunications groups.

* We acquired a licence here in the UK to offer
third generation mobile multimedia services to
our customers.

* We have made significant progress in the roll-
out of ADSL capability, which will be at the
heart of 'Broadband Britain'.

*    We have made
major strides in the mobile market, winning new
customers and launching a number of new and
innovative mobile services, including Genie,
the UK's first mobile Internet service
provider.

* We've continued to build our international
family of ventures and alliances. For example,
we took the opportunity to increase our holding
in Telfort, our Dutch venture, to 100 per cent,
and acquired control of Esat Telecom Group in
the Republic of Ireland.

* It's always a pleasure to welcome new non-
executive directors to your Board and, during
the year, we were joined by Lou Hughes and
June de Moller. BT stands to benefit greatly
from the experience that they bring.

  I am pleased that, in the year, we have
grown total turnover by an unprecedented 20
per cent. Before exceptional items and the
charge for goodwill, earnings were 34.2 pence
per share for the year, a decrease of 2.3 per
cent on the previous year.

  This is a good achievement against the
background of considerable change within the
industry, the cost of building new businesses
(both in the UK and abroad) and intense
competitive pressures.

  Your Board is pleased to recommend a final
dividend of 13.2 pence per share. This gives a
total dividend for the year of 21.9 pence - an
increase of 7.4 per cent on 1998/99.

  We remain focused on creating value for
shareholders.

  In recent months, the financial markets have
reduced their perceived values for the
telecoms, media and technology sectors. This
has resulted in telecoms stock prices around
the world, including BT, falling significantly
from their peaks.

  Nevertheless, in each of the last three
calendar years, BT's total shareholder return,
which takes into account share price movement
and reinvested dividends, ranked in the top 30
of all FTSE 100 companies (see note 1 below).

  Of course, it's not just the communications
industry that is changing. So too, in quite
fundamental ways, is the way we do business
and the nature of the economy itself.

  We are at a point of inflection; the point
at which the old rules cease to apply and the
new ones are still being written.

  Some may have characterised this as a stand-
off between the old economy and the new. But the
real battle is not between established blue-
chips and start-up dot.coms. It's between those
who can change to win in the new markets and
those who cannot.

  And winning will mean making the best of both
worlds - the speed, nimbleness and ability to
enter niches of the dot.coms - combined with the
financial strength, reach, brand equity and
customer base of the blue chips.

  Take the example of e-business, which is
forecast to achieve spectacular growth in the
years ahead.

  Although there's a good deal of activity in
the business-to-consumer (B2C) market, it's in
the business-to-business (B2B) market that the e-
economy is really being kick-started.

  And the major players in that market tend to
be the established players.

  BT has recently commissioned some research
(see note 2 below) which demonstrates the role
of established brands in the e-world.

  According to the respondents, four of the five
most trusted websites in the UK are those owned
and run by well-known, established
organisations: the BBC, Virgin, W H Smith and - 
I'm happy to report - BT.

  It seems that customers do not simply abandon
their established buying habits and behaviour
the moment they go on-line.

  Indeed, in many ways, cyberspace would seem to
be like any other space.

  Respondents rated trust in a company as the
most important aspect when choosing that company
on the net - it was even more important to them
than convenience or price.

  And the fact that brand equity is vital for
generating trust on-line clearly gives what are
becoming known as 'clicks and mortar' companies
a significant headstart.

  This is where your company fits in.

  BT is well-positioned to succeed precisely
because it combines the best of both kinds of
company. It has the strength of a solid,
successful business behind it, but at the same
time has established itself as a major player in
high-growth, new wave markets such as the
Internet and mobile services.

  And it was exactly such a winning combination
of size and agility, financial clout and
entrepreneurial flair that your Chief Executive,
Sir Peter Bonfield, had in mind when he launched
a fundamental reshaping of your company this
Spring.

  And Peter will be taking you through this in a
moment.

  I spoke a moment ago about the importance of
brand and reputation. And this remains a key
preoccupation for BT.

  Because of the pervasiveness of
communications, BT is a company that has the
potential to touch millions of people's lives.
This is both a privilege and a responsibility.
And it's one that we take very seriously, both
through our community partnership programme and
through our efforts to ensure that our business
activities are as environmentally friendly as
possible.

  I am very pleased to report that, during the
past year, BT's achievements in these areas have
been widely recognised.  In the UK we won both
the Business in the Community Company of the
Year Award and the Impact on Society Award for
our community activities.

  And we achieved company-wide certification in
ISO 14001, the international environmental
management system, for our UK operations.

  As part of our contribution to marking the
millennium, we have continued to invest in the
community's future, through a programme focused
on improving people's communications skills
(both interpersonal and technical). A major part
of this programme has been Futuretalk in
Education, which uses drama and storytelling to
help schoolchildren develop the communications
skills that they are going to need in later
life.

  BT has achieved a great deal over the past
year.

  We have shown that we have the vision,
determination and flexibility to
succeed in what is probably the world's
most competitive industry.

  With your continued support, I look
forward to further progress in the year
to come.

Note 1: Datastream
Note 2: Henley Centre