Demerger Documentation

British Telecommunications PLC
24 September 2001



                                   September 24, 2001

BT PUBLISHES DEMERGER DOCUMENTATION - POSTING TO BT SHAREHOLDERS BEGINS TODAY

  BT today published documents relating to proposals for the demerger of its
mobile business, mmO2, and the creation of two new holding companies. Posting
 of some of these documents, including a shareholder circular describing the
             proposals to BTshareholders, will also begin today.

The demerger forms part of BT's restructuring strategy which was first
announced on May 10, 2001.

If approved, two holding companies, BT Group plc and mmO2 plc, will be
created. BT Group will comprise principally four separately managed lines of
business - BT Retail, BT Wholesale, BTopenworld, and BT Ignite - together with
its Concert joint venture. mmO2 plc will be made up of BT Cellnet, Digifone
(formerly known as Esat Digifone), Telfort Mobiel, Viag Interkom, Manx Telecom
and Genie.

Sir Christopher Bland, chairman of BT, said: 'BT shareholders will soon be
receiving details of the demerger, giving them the information necessary to
make an informed decision on the best way forward. It is important that
shareholders use their vote and I am confident they will do so to support the
demerger proposals, creating BT Group plc and mmO2 plc.

'BT Group's aim going forward will be to create value; value based on service
excellence, brand leadership, large scale networks and our extensive customer
base. We will also develop and market new, higher value broadband and Internet
products and services.'

David Varney, chairman of mmO2 plc, said: 'This is an important day for us -
it marks another milestone in the birth of mmO2, a business which will
continue to be a leading player in the European mobile industry. We are
committed to creating shareholder value as a member of the FTSE 100 by tight
management focus, growing our wholly owned businesses and continuing our
leadership in mobile data.'

Shareholder approval is being sought to implement the proposals at two
meetings, a Court Meeting and an Extraordinary General Meeting (EGM). Notices
convening these meetings, to be held in Hall 5 at the NEC, Birmingham, on
October 23, 2001, are set out in the shareholder circular. BT shareholders can
vote on the proposals by signing and completing the forms of proxy sent to
them, and returning them either by post or fax. Shareholders can also vote by
appointing a proxy, by using the Internet or by telephone, or by attending the
meeting.

If the proposals are implemented as expected, the Scheme is expected to
become effective on November 16, 2001, the demerger will become effective on
November 19, 2001 and trading in both the BT Group plc shares and mmO2 plc
shares will commence on November 19, 2001.



Notes for Editors

BT Group plc

BT Group plc will comprise principally four separately managed lines of


        business - BT Retail, BT Wholesale, BTopenworld, and BT Ignite -
        together with its Concert joint venture. BT Retail and BT Wholesale
        are well established, cash generative businesses with market leading
        positions in the UK, while BTopenworld and BT Ignite are rapidly
        developing businesses, active in the markets for Internet and data
        services, solutions and broadband.

        BT Retail is the UK's largest communications service provider, by
        market share, to residential and business markets. As at June 30,
        2001, BT Retail provided 28.2 million customer lines (exchange line
        connections) equating to a UK market share of approximately 83 per
        cent. Some nine million of these were business lines and lines for
        other service providers. In the opinion of the directors, BT's
        relationship with its customer base represents a major strength and it
        is the directors' intention to broaden the range of services offered
        by BT Group, in order to reinforce this relationship.

        BT Wholesale has the largest capacity network in the UK with the
        greatest geographical reach and customer coverage. BT Wholesale
        provides network services and solutions within the UK to
        communications companies, network operators and service providers. BT
        Wholesale aims to reduce its dependence on its regulated business and
        grow its sales to other communications companies. Its strategy is to
        provide total customer solutions, broaden its customer base, build and
        develop relationships with other parts of BT Group, other network
        operators and major communication suppliers, and establish a
        reputation for outstanding service delivery. Its investment strategy
        will satisfy demand for bandwidth and apply new technology to boost
        capacity, provide the platform for next generation products and
        services and reduce costs.

        BTopenworld brings together in a single business all of BT's mass
        market ISPs and Internet-related activities. It serves consumers and
        SMEs in the UK with a range of narrowband and broadband Internet
        access and related services. BTopenworld aims to generate additional
        revenues for the Group by providing customers with services that add
        value to the basic telephony service, earning subscription and
        advertising and e-commerce revenues.

        BT Ignite is BT's international, datacentric solutions and broadband
        IP business. It has established a strong European footprint, serving
        business customers with 52,000 route kilometres of fibre connecting
        250 cities and 22 content hosting centres. BT Ignite delivers a range
        of services, including customer solutions, application service
        packages, web hosting, media services and data transport. BT Ignite
        plans to continue to build its revenues from the high end of the value
        chain. Value-added services, complex business solutions, hosting and
        media distribution currently represent over 60 per cent of BT Ignite's
        turnover.

        Recent developments

        BT is continuing discussions with AT&T concerning the future of the
        Concert joint venture. Options currently being considered include
        unwinding the Concert joint venture. Other strategic alternatives to
        Concert are still being discussed, including continuation of the
        venture in a modified form. In the event that an unwinding of the
        Concert joint venture is agreed, and depending on the way that it is
        implemented, the financial effects on the Group are likely to include
        cash and non-cash restructuring costs which could be substantial.
        These discussions are dealt with in more detail in the shareholder
        circular.

        In addition, BT expects to take an impairment charge against certain
        of its other investments, including AT&T Canada, in its half year
        results to 30 September 2001, totalling approximately £500 million.
        BT's investment in AT&T Canada is discussed in more detail in the
        shareholder circular.

        BT expects to complete a sale and leaseback property transaction by 31
        December 2001, under which it expects to receive proceeds of
        approximately £2.3 billion. The Board now expects to reduce net debt
        to between £15 billion and £17 billion at 31 March 2002 on the
        assumption that the property sale and leaseback transaction has been
        completed.

        Dividends

        The Board has decided that there will be no interim dividend for the
        year ending 31 March 2002. The board of BT Group plc expects to
        recommend a final dividend for the BT Group in respect of the year
        ending 31 March 2002 and to resume regular dividend payments
        thereafter. However, the level of dividends which BT Group expects to
        pay is likely to be substantially lower than that paid by BT
        previously.

        mmO2 plc

        mmO2 plc will be made up of BT Cellnet, Digifone (formerly known as
        Esat Digifone), Telfort Mobiel, Viag Interkom, Manx Telecom and Genie.
        It is a leading player in the European mobile market and is expected
        to be a member of the FTSE 100 in the UK. The company has a strong
        European footprint of wholly owned businesses comprising established
        mobile operations in the UK and Ireland, and rapidly growing
        businesses in Germany and the Netherlands.

        mmO2 plc serves more than 16 million mobile customers in the UK,
        Germany, Ireland, the Netherlands and the Isle of Man. Together, these
        markets represent a total population of more than 160 million people.
        mmO2 plc is a leader in mobile data and Internet in Europe and is well
        positioned for GPRS and UMTS success. Genie, its mobile Internet
        portal, is already one of the leading mobile Internet businesses in
        Europe.

mmO2's strategy is to:


                -     increase its market share of higher value customers,
                especially business and high usage individuals and young
                adults, who have been early adopters of data services

                -     achieve competitive scale in Germany and the Netherlands

                -     focus on customer retention through good customer
                service and network quality

                -     reduce costs by tight budgetary control and innovative
                measures, such as the recently announced, network sharing deal
                with T-Mobile in Germany and One2One in the UK

                -     exploit opportunities for performance improvement by
                integration across mmO2 plc, helped by the focus of the new O2
                brand.

        mmO2 plc has an experienced management team and its growth will be
        underpinned by its financial flexibility, carrying approximately £500
        million of net debt on demerger, and having a funding facility of £3.5
        billion to finance the development of its business.

Further information on the demerger

BT Group shares and mmO2 shares will each have their own market

price. Both BT Group shares and mmO2 shares will be traded on the London Stock
Exchange and their ADSs will be traded on the New York Stock Exchange. No
application is being made for either BT Group shares or mmO2 shares to be
listed in Japan.


        The Court Meeting, which will be held at the direction of the Court,
        has been convened for 10.30 am on October 23, 2001 to enable BT
        shareholders to vote on the Scheme of Arrangement ('Scheme').



        EGM

        The EGM, to be held immediately following the end of the Court
        Meeting, is being convened to ask BT shareholders to consider
        resolutions to give effect to the Scheme and approve the demerger. BT
        shareholders will also be asked to approve the mmO2 share schemes.
        Shareholder approval is not being sought for the BT Group share
        schemes since they are substantially the same as the BT share schemes
        for which approval has already been obtained where required.

The proposals include a capital reduction in BT Group plc, following the
demerger, in order to increase the level of reserves available for future
distributions to shareholders or to facilitate future transactions.
Shareholders will be asked to approve this at the EGM and the Court will be
asked to confirm the reduction on November 20,2001 (to take effect on November
21, 2001).


        Tax

        For the purposes of UK taxation of capital gains ('CGT'), the Scheme
        should constitute a scheme of reconstruction. Clearance has been
        obtained from the Inland Revenue in respect of the Scheme under
        section 138 of the Taxation of Chargeable Gains Act 1992 ('TCGA').
        Accordingly, a BT shareholder will not be treated as making a disposal
        for CGT purposes of his BT shares as a result of receiving mmO2 shares
        under the Scheme, and so no chargeable gain or allowable loss will
        arise on the cancellation of BT shares and the issue of mmO2 shares to
        him or her. Such mmO2 shares will be treated as the same asset as the
        BT shares, acquired on the same date and for the same consideration as
        the BT shares were acquired.

Clearance has been obtained from the Inland Revenue under section 138


        TCGA in respect of the demerger. Accordingly, a holder of mmO2 shares
        will not be treated as making a disposal for CGT purposes when he or
        she receives BT Group shares pursuant to the demerger. Any gain or
        loss which would otherwise have arisen on a part disposal of mmO2
        shares will be 'rolled over' into the BT Group shares received by the
        shareholder pursuant to the demerger. Such BT Group shares will be
        treated as the same asset as the mmO2 shares, acquired on the same
        date and for the same consideration as the mmO2 shares were acquired.
        Accordingly, following the Scheme and the demerger, a shareholder's
        original base cost in his/her BT shares will be apportioned between
        his/her mmO2 shares and his/her BT Group shares by reference to the
        market quotations of the mmO2 shares and the BT Group shares on the
        first day of dealings in such shares as derived from the Official
        List.



     Shareholder Helpline

     A shareholder helpline has been set up on Freefone 0808 100 4141. This

        operates between 8.30 am and 8.30 pm, Monday to Friday, and 10.00 am
        to 4.30 pm on Saturdays, Sundays and UK public holidays. For legal
        reasons the helpline will not be able to provide advice on the merits
        of BT's proposals or to provide financial advice.



The contents of this press announcement, which has been issued by, and is the
sole responsibility of, British Telecommunications public limited company, has
been approved by Cazenove & Co. Ltd which is regulated in the UK by The
Securities and Futures Authority, solely for the purposes of Section 57 of the
Financial Services Act 1986. Prices and values of, and income from, shares may
go down as well as up and an investor may not get back the amount invested. It
should be noted that past performance is no guide to future performance.
Persons needing advice should consult an independent financial adviser.

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].
All news releases can be accessed at our web site:

                      http://www.groupbt.com/mediacentre

Broadcasts of interviews in video, audio and text with Sir Christopher Bland,
   Sir Peter Bonfield, Pierre Danon, Paul Reynolds, David Varney and Peter
 Erskine will be available on www.cantos.com and www.bt.com from 7.00am on 24
                               September 2001.