Interim Results

British Telecommunications PLC
8 November 2001

PART 1

                                                              November 8, 2001

SECOND QUARTER AND HALF YEAR RESULTS TO SEPTEMBER 30, 2001

BT's results for the second quarter and half year ended September 30, 2001 are
summarised in the following table. The results include those of BT Group and
mmO2.


              SECOND QUARTER AND HALF YEAR TO SEPTEMBER 30, 2001
                                               Second Quarter     Half Year
                                             2001   2000  2001    2000
Total BT                                    £m       £m     £m    £m
Group turnover                              5,304   5,020 10,758  9,752
EBITDA before exceptional items             1,463   1,573 2,996   3,091
                                            
    Group operating profit, before          448     753   967     1,508
    exceptional items

    Net interest charge                     (362)   (314) (836)   (553)

    Profit before goodwill amortisation and  219     589   405     1,226
    exceptional items and taxation

    Profit on sale of fixed asset           11      24    4,495   65
    investments and group undertakings

    Impairment and other exceptional        (1,448) -     (1,462) -
    charges

Profit (loss) before taxation               (1,349) 471   3,156   1,032
Profit (loss) after taxation                (1,476) 280   2,884   633
Earnings (loss) per share                   (17.3)p 3.5p  35.8p   7.7p
                                            
    Earnings per share before goodwill      1.1p    5.1p  1.5p    10.9p
    amortisation and exceptional items





     The results of the two new companies, BT Group and mmO2 included in the
table above, are summarised in the following tables:




              SECOND QUARTER AND HALF YEAR TO SEPTEMBER 30, 2001
                                                 Second Quarter   Half Year
                                                2001  2000  2001  2000
BT Group                                        £m     £m    £m   £m
                                                
    Group turnover                              4,557 4,259 9,055 8,258
                                                
    EBITDA before exceptional items             1,392 1,405 2,820 2,754

    Group operating profit before goodwill      664   758   1,362 1,493
    amortisation and exceptional items

BT Group is focused on the provision of voice and data services in the UK and
elsewhere in Europe. BT Group principally comprises BT Retail, BT Wholesale,
BTopenworld and BT Ignite, together with BTexact Technologies, BT Affinitis and
the Concert joint venture.




              SECOND QUARTER AND HALF YEAR TO SEPTEMBER 30, 2001
                                                  Second Quarter  Half Year
                                                 2001  2000 2001  2000
mmO2                                             £m     £m   £m   £m
                                                 
    Group turnover                               1,062 804  2,099 1,568
                                                 
    EBITDA before exceptional items              71    117  135   233

    Group operating profit (loss) before         (94)  39   (189) 84
    goodwill amortisation and exceptional items



Following the completion of the proposed demerger from BT, mmO2 a leading
provider of mobile communications services in Europe, will have wholly owned
operations serving the UK (BT Cellnet), Germany (Viag Interkom), Ireland
(Digifone), The Netherlands (Telfort Mobiel) and the Isle of Man (Manx
Telecom). mmO2 also provides mobile data services, through its Genie business
and fixed network services in the Isle of Man, through Manx Telecom.




    Chairman's statement

    Sir Christopher Bland, BT's Chairman, said:

    'The demerger of mmO2 is on schedule and received very strong support at
    our October EGM. The other elements of our restructuring are also
    progressing well: we have reduced debt in the quarter by a further £1
    billion and have announced an agreement with AT&T to unwind Concert.

    Although the general economic outlook for the second half of the financial
    year is uncertain following the events in the US on September 11, most of
    BT's businesses have strong market positions and have so far proved to be
    relatively resilient.

    We are pleased to announce the appointment to the BT Group plc Board on
    November 19, 2001 of Pierre Danon, chief executive of BT Retail, Paul
    Reynolds, chief executive of BT Wholesale and Andy Green, chief executive
    of BT Ignite.

    We are delighted to welcome to the Board three executives with extensive
    and valuable experience of the communications industry in the UK and
    Europe. Their leadership of our three major business divisions will be
    critical to the future success of BT Group and will strengthen the Board
    for the future.

We are also announcing that the contract of Philip Hampton, Group Finance
Director, will not be extended beyond November 2002 because he wishes to seek
new challenges once the demerger of mmO2 and the restructuring of BT are
complete. He will leave BT on a date to be agreed with me. We will be very
sorry to lose Philip but I understand his reasoning and I wish him all the
very best.'

Key features

Total BT

  * Concert joint venture unwind announced. Write down of £1.37 billion in
    investment values, including £1.2 billion attributable to Concert and AT&T
    Canada
  * Net debt was £16.5 billion at end of September 2001, a reduction of £1.0
     billion in the quarter following the £10.4 billion reduction in the first
    quarter
  * Shareholders approved the creation of two new listed companies through
    the demerger of BT's mobile business

BT Group

  * EBITDA before exceptional items maintained at £1,392 million in the
    quarter
  * Turnover increased by 7.0 per cent to £4,557 million
  * Capital expenditure on property, plant and equipment reduced by 25 per
    cent to £660 million
  * EBITDA less capital expenditure increased by £136 million to £732
    million before exceptional items
  * Launch of BT Answer 1571 with over 2 million customers signed up by
    September 30, 2001
  * ADSL roll out extends to 1,000 exchanges at September 30, 2001 covering
    60 per cent of UK households

mmO2

  * Turnover grew 13.3 per cent on a pro forma basis to £1,062 million for
    the quarter
  * Improvement in underlying EBITDA accelerated
  * Total active customer base was 16.78 million at September 30, 2001
  * Data as a percentage of service revenues was 10.7 per cent for the month
    of September and 9.9 per cent for the six months ended September 30, 2001
  * BT Cellnet service revenues grew 11.0 per cent to £614 million for the
    quarter, with a continuing reduction in post-pay churn
  * Viag Interkom's turnover increased 32 per cent on a pro forma basis to 
    £221 million for the quarter, with EBITDA losses more than halved
  * Telfort's customer base grew to 1.3 million at September 30, 2001 with
    376,000 added from the Postbank agreement
  * Digifone's customer base grew by 11 per cent to 1.1 million with the
    EBITDA margin in the quarter at 32 per cent
  * Genie WAP page impressions grew by 50 per cent over the quarter to an
    average of 150 million per month



Demerger and transformation update

At the meetings held on October 23, 2001, BT shareholders voted in favour
of the scheme of arrangement and demerger of mmO2 to create two new listed
companies and the BT Group reduction of capital. The scheme of arrangement and
reduction of capital are to be considered by the High Court in the coming days
and, if approved, the demerger is expected to become effective on November 19
and the reduction of capital on November 21. Dealings in BT Group and mmO2
shares will commence at 8.00 am on November 19 when the two companies will be
entirely separate. BT shareholders just before the demerger will receive one
BT Group plc share and one mmO2 share for each existing BT share held. It is
expected that share certificates in the two new companies will be despatched
to shareholders by November 30. The old BT share certificates will cease to
have any value at the date of the demerger.

The demerger is the latest in the series of transactions undertaken in
the last six months designed to transform the group and reduce its debt.
During this period, we have successfully raised £5.9 billion through the
rights issue which closed in June, sold our Japanese investments for £3.7
billion, sold the Yell directories business for approximately £2 billion and
completed the sale of other investments for a total of £1.5 billion. We have
announced the unwinding of the Concert joint venture and the exit from AT&T
Canada.

Additionally, we have announced that we have decided that it is not
appropriate at this time to pursue the legal separation of the BT Group's
retail and wholesale businesses.



LINES OF BUSINESS

     The results by BT line of business in the second quarter and half year
were:

Second quarter   Group   EBITDA    Group operating profit         Capital
ended September turnover           (loss) before goodwill      expenditure on
30, 2001(i)                     amortisation and exceptional  plant, equipment
                                           items                and property

                   £m        £m             £m                      £m
BT Retail          3,038     315            269                     18
BT Wholesale       3,027     991            523                     439
BT Ignite          1,131     34             (87)                    104
BTopenworld        57        (25)           (36)                    3
Other              83        77             (5)                     96
Eliminations       (2,779)   -              -                       -
(ii)
Total BT Group     4,557     1,392          664                    660
mmO2               1,062     71             (94)                   339
Discontinued       -         -              -                      -
operations
Eliminations       (315)     -              -                      -
and other (ii)
Total before       5,304     1,463          570                    999
exceptional
items




Half year      Group   EBITDA Group operating profit (loss) Capital expenditure
ended         turnover        before goodwill amortisation  on plant, equipment
September 30,                     and exceptional items        and property
2001(i)          
               £m        £m             £m                            £m
BT Retail     6,032      676            585                           48
BT Wholesale  6,016      1,951          1,010                         884
BT Ignite     2,147      70             (165)                         246
BTopenworld   103        (63)           (77)                          5
Other         187        186            9                             182
Eliminations  (5,430)    -              -                             -
(ii)
Total BT      9,055      2,820          1,362                         1,365
Group
mmO2          2,099      135            (189)                         623
Discontinued  171        41             37                            1
operations
Eliminations  (567)      -              -                             -
and other
(ii)
Total before  10,758     2,996          1,210                         1,989
exceptional
items


    (i) See note 2(a) for prior year figures

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

    BT Retail

                                  Second quarter ended        Half year ended
                                       September 30              September 30
                                  2001           2000           2001    2000
                                  £m             £m             £m      £m
Group turnover                    3,038          3,007          6,032   5,968
Gross margin                      841            943            1,713   1,795
Sales, general and administration 526            659            1,037   1,242
costs
EBITDA                            315            284            676     553
Operating profit                  269            238            585     463
Capital expenditure               18             51             48      104

Operating profit growth over the prior year has been sustained in the
quarter by control of costs under BT Retail's direct control. This has more
than offset a decline in gross margins due to price and competitive pressures.
BT Retail has contributed an operating free cash flow (EBITDA less capital
expenditure) of £297 million which is £64 million (27 per cent) better than
the corresponding quarter of the prior year. Further detail is set out in note
2.

BT Retail's turnover is mainly derived from calls, lines, private services and
total business solutions to the consumer, SME and major business markets. BT
Retail provides an end to end service to 21 million customers over 28.3
million lines in the UK. Turnover for the quarter is summarised as follows:

                                        Second quarter ended September 30
BT Retail turnover                           2001             2000
                                              £m               £m
Fixed network calls                           1,185            1,255
Exchange lines                                900              826
Private services                              131              160
Customer premises equipment supply            154              156
Other sales and services                      279              254
Total external sales                          2,649            2,651
Sales to other BT businesses, including mmO2  389              356
Total                                         3,038            3,007



The impact of pricing packages has resulted in continuing growth in customer
lines and has mitigated the decline in more profitable geographic calls.

The trend in fixed network call volumes is illustrated in the table below:
Fixed network calls volume growth

12 months moving average volume growth (decline)
                           Sep   Jun   Mar   Dec   Sep   Jun   Mar   Dec
                           01    01    01    00    00    00    00    99
                            %     %     %     %     %     %     %     %
Non-geographic calls:
Internet related and        7    21    38    57   69    87    95    112
other
Fixed to mobile            19    24    30    36   42    46    48    49
Geographic calls:
Local                      (9)  (11)  (12)  (12)  (11)  (10)  (9)   (8)
National                   (6)   (7)   (7)   (8)  (7)   (6)   (4)   (3)
International              (1)   (2)   (3)   (5)  (6)   (5)   (3)   (2)

Overall                     0     1     2     4   5     6     7     8

In the consumer market, the successful roll out of pricing packages has
continued to achieve three objectives:

  * stabilisation of both fixed line voice market share and primary lines
    system size;
  * re-balancing from calls to access revenues; and
  * improvements in price and value for money perception at modest cost.

Turnover from fixed network calls declined by 5.6 per cent to £1,185 million
compared to the corresponding quarter of last year. Fixed network calls
comprise all calls made by customers on the BT fixed line network in the UK,
including outbound international calls, calls to mobile phones and calls to
the internet. On a twelve month moving average basis call volumes were static.

Overall, turnover from exchange lines grew by 9.0 per cent in the quarter to £
900 million. The increased turnover was the combined result of re-balancing
access line prices and growth in business lines.

The number of business lines grew by 3.1 per cent over the year to September
2001, with ISDN services being the main driver behind this growth. Despite
competition from other fixed line providers, the number of residential lines
increased marginally (by 0.5 per cent) due to a combination of BT customers
installing second lines and customers returning to BT. Residential primary
lines remained stable over the quarter compared to a decline of 120,000 lines
in the corresponding three months last year with much of this attributed to
the success of our overall approach in attracting and retaining customers.
Overall BT Retail's total fixed network lines grew by 1 per cent to 28.3
million over the year to September 30, 2001.

The combination of the above actions across calls and lines has slowed the
estimated loss of market share. In the last twelve months we estimate that BT
Retail's share of residential fixed market voice calls has declined by just 1
per cent compared to an estimated 5 per cent in the year to September 2000.

Gross margin has declined by £102 million to £841 million compared to the same
quarter last year. The increase in revenues was more than offset by higher
network provider costs, as a result of volume increases and product mix
changes. Gross margin for the six months to September 30, 2001 declined by 1.7
 percentage points compared with the same period last year. Costs for the
quarter include a one-off £30 million charge, being an estimate of prior
period price adjustments which may be due to other licensed operators, the
prices of which are subject to Oftel determination.

BT Retail's cost transformation programme seeks to produce cost savings of £
268 million during the current financial year of which £58 million was
achieved in the second quarter. In addition, compared to last year, there have
been savings in early leaver costs and a deferment of development costs which
produced a total saving of £133 million in selling, general and administration
costs compared to the corresponding quarter last year.

The number of full time employees in BT Retail at September 30, 2001 at 53,000
was approximately 5 per cent lower compared to September 30, 2000 and 1 per
cent lower than at March 31, 2001.

Operations

At the beginning of July, BT Retail launched BT Answer 1571. This is a free
service which introduces customers to BT's messaging portfolio, the cost of
which compares well with incremental turnover from increased call completion.
By the end of September, over 2 million customers had signed up for the
service.

BT Retail secured a major contract with Lloyds TSB in the quarter. The new
Digital TV partnerships with BSkyB and ITV Digital have generated over 100,000
leads for our partners in the quarter. BT Retail also launched in the quarter
the new format for customer bills.

BT Retail has maintained its market share since June 2001 in both residential
and business voice with the residential voice market share estimated at 73 per
 cent and business voice estimated at 48 per cent. The residential market
share has remained at 73 per cent for four consecutive quarters and is less
than 1 per cent down on September 2000. BT Retail's share of the business
calls market has fallen by 4 percentage points over the last 12 months. The
residential IP call market share is estimated at 75 per cent, 2 percentage
points up on September 2000, and BT Retail's business internet market share is
up 3 percentage points over the prior year.

BT Wholesale
                    Second quarter ended September 30        Half year ended
                                                               September 30
                    2001                2000                  2001      2000
                    £m                  £m                     £m        £m
Group turnover      3,027               2,842                 6,016     5,640
EBITDA              991                 1,027                 1,951     2,042
Operating profit    523                 595                   1,010     1,190
Capital expenditure 439                 533                    884      1,013

Over 70 per cent of BT Wholesale's turnover is internal to the BT group
in providing UK network services to BT Retail, mmO2 and the other BT lines of
business. Its external turnover, which totalled £843 million in the quarter,
is derived from providing wholesale products and solutions to other operators,
including Concert, inter-connecting with BT's UK fixed network.

Turnover increased 7 per cent to £3,027 million compared with the second
quarter of last year, driven by a 12 per cent growth in product volumes. Total
external revenues grew by 21 per cent in the quarter to £843 million, with
sales of private circuits to fixed operators and transit revenues being
particularly buoyant. The growth rate in certain categories of external sales
slowed in the second quarter compared to the first. The growth in revenues was
affected by the recent introduction of flat rate price packages and the impact
of Oftel price determinations. The second quarter's results include an
adjustment of £22 million to prior period billings for the estimated
retrospective effect of the expected Oftel Number Translation Services
determination, partly offset by a £5 million cost reduction effect. Revenues
from private circuit sales to mobile operators have declined as a result of
price reductions and market conditions. Internal turnover increased by 2 per
cent to £2,184 million compared with the second quarter of last year mainly
due to higher transit revenues from mmO2. Internal turnover was adversely
impacted by a reduction in payments by BT Retail estimated at £28 million for
the quarter.

BT Wholesale's operating costs rose by 11 per cent to £2,558 million
compared with the second quarter last year although comparable with the costs
incurred in the first quarter of the year. Approximately 40 per cent of these
costs are payments to other BT lines of business which amounted to £994
million in the quarter representing an increase of 11 per cent, the majority
of which was volume related. Of this total, £484 million was due to BT Retail
for field engineering services and for the cost of sales of BT Retail's
products mainly sold on to other network operators; £237 million was due to BT
Affinitis mainly for building, transport and computing services and £125
million to mmO2 largely for interconnect of calls to its customers' phones.
The principal reasons for the remaining increase in operating costs in the
quarter were:

  * higher payments to other operators for interconnect - external payments
    increased by 13 per cent to £850 million largely due to increases in the
    volume and proportion of traffic with mobile operators; and
  * depreciation costs which rose by 8 per cent to £468 million.

Further details of BT Wholesale costs are set out in note 2.

BT Wholesale's capital expenditure on plant and equipment was maintained
at £439 million consistent with the first quarter and 18 per cent lower than
in the corresponding quarter last year, in line with the planned year on year
reduction. BT Wholesale's strong cash generation capability was demonstrated
by a free operating cash flow (EBITDA less capital expenditure) of £552
million, which as a consequence of lower capital expenditure, has seen a 12
per cent growth on last year's second quarter and is £37 million higher than
that achieved in the first quarter of this year.

Digital Subscriber Line (DSL)

BT Wholesale sells DSL based solutions to other UK network operators, service
providers and corporates through three distributor channels - BT Wholesale, BT
Ignite and BT Retail. BT Wholesale has signed up 195 wholesale customers and,
at the end of September, BT had connected just under 90,000 ADSL subscribers
across this customer base. Demand doubled to about 4,000 orders a week in
mid-October as a result of BT's pricing and marketing activities.

     BT Wholesale has introduced a number of initiatives this year to help
develop the market for broadband DSL services. These include price reductions
on a range of ADSL products as well as a half price installation offer on BT
IPStream 500, the most popular broadband product. This offer runs between the
beginning of October and the end of December. Additionally, BT Wholesale
launched a national marketing campaign in September 2001 with press
advertisements listing over 60 non-BT service providers who are BT Wholesale
customers. This campaign will be underpinned with regional activities designed
to raise awareness of broadband DSL services and boost demand.

In terms of product enhancements, BT Wholesale has a number of developments in
the pipeline designed to make DSL services as simple and as attractive as
possible. Key developments include:

  * A new version of BT IPStream which will be trialled in December. This
    will have the industry standard G.DMT interface allowing customers to
    select their own modem. Currently BT combines the modem with the ADSL
    service. This new variant will also be self-install i.e. end users will be
    able to plug and play themselves rather than wait for an engineer to
    install the service for them.

  * An automated ordering system which allows wholesale customers to place
    orders directly into BT's front end systems and to track these orders
    online. This increased automation will make the end to end delivery of
    ADSL more efficient. Trials are already underway with a number of major
    customers.

In terms of availability, BT Wholesale has upgraded 1,000 exchanges for ADSL
services. These exchanges serve 60 per cent of UK households (some 13 million
homes) and 70 per cent of current internet users in the UK. This latest phase
of rollout was completed mid-September, ahead of schedule.

Internet Access Products

While the market for broadband DSL services becomes established, BT Wholesale
is also satisfying the continuing demand for dial-IP based internet access
products. A major contract has recently been signed with Tiscali UK Limited
for new unmetered dial ports. Tiscali highlighted the importance of partnering
with a supplier who could complement their network capability and deliver the
high quality of service required to meet their customer needs.

Local Loop Unbundling (LLU)

More than half of the first 16 new Local Loop Unbundling (LLU) hostels have
now been completed and operators are preparing to launch their independent
broadband offerings from these sites. We expect orders to be placed for up to
100 new sites during the remainder of the financial year.

A range of new products is being developed for the LLU market - including a
'One Stop Shop' where BT Wholesale not only supplies the room in the exchange,
but will supply, install and manage the broadband equipment on the operator's
behalf.

In September, BT Wholesale launched an electronic ordering system which allows
operators to place orders for unbundled lines over the internet or directly
from their own order management systems. This is a major milestone for the
telecommunications industry. It is believed to be the first mass market
business to business electronic ordering system deployed by any network
operator.

e-Business

BT Wholesale is assessing its channels to market and investing in

e-business channels to improve its responsiveness to competitive market needs.
As part of a strategic customer relationship management programme, BT
Wholesale is investing in developing an enterprise wide portal that will
radically transform the way we manage customer interactions. Early trials
include an e-selling initiative to sell international direct dialling minutes
(minutes with a prefix 00) through an 'auction style' interface hosted on
btwholesale.com. Five auctions have been executed in the last five months
selling a total of £4.2 million of minutes. BT Wholesale intends to use this
trial as a basis for more innovative initiatives in interactive selling and
e-commerce through btwholesale.com.

BT Ignite
                                  Second quarter ended       Half year ended
                                     September 30               September 30
                                   2001           2000          2001    2000
                                   £m             £m             £m      £m
Group turnover                     1,131          820          2,147   1,572
EBITDA                             34             22           70      (17)
Group operating loss*              (87)           (50)         (165)   (151)
Share of losses of associates and
joint ventures*                    (12)           (29)         (27)    (69)
                                   
Capital expenditure                104            181          246     314

*before goodwill amortisation

BT Ignite's group turnover was £1,131 million for the second quarter, growing
by 38 per cent year on year. Excluding the effect of acquisitions, the growth
in turnover was 25 per cent. In the half year, BT Ignite's group turnover was
£2,147 million, an increase of 21 per cent on the corresponding period of last
year excluding the effect of acquisitions. This improvement was driven by the
growth of UK IP revenues as well as growth in European connectivity revenues.

Ignite Solutions turnover grew by 15 per cent to £424 million in the quarter.
Turnover in Syntegra, BT Ignite's systems integration business, grew by 10 per
cent to £145 million in the quarter. This contrasts with the year on year
growth of over 20 per cent in the first quarter and reflects the current
difficult market conditions in this area.

Turnover from European connectivity grew to £248 million in the quarter.
Excluding the acquisitions, this represented a year on year growth of 36 per
cent. UK IP and other services turnover grew by 46 per cent to £267 million in
the quarter.

BT Ignite's EBITDA was £34 million for the second quarter and £70 million for
the half year. Excluding acquisitions, this represented improvements of £25
million and £115 million, respectively, on the corresponding periods of last
year.

Ignite Solutions' EBITDA improved in the quarter by 13 per cent to £35
million. Ignite media distribution's EBITDA for the second quarter declined
from £26 million last year to £17 million. This reduction is due to the change
in status of satellite consortia, including Eutelsat and Intelsat, which were
incorporated in July 2001. From this date, BT no longer funds the consortia or
receives a share of their income. Satellite consortia income amounted to £11
million in the half year to September 30, 2001 compared with £23 million in
the corresponding period last year.

EBITDA from European connectivity was £29 million negative in the second
quarter, an increase of £7 million on the corresponding period last year. This
increase is due to the losses in BT Ignite's German operations, over which
full control was achieved in February 2001.

BT Ignite's total operating loss before goodwill amortisation and exceptional
items increased by £37 million to £87 million in the second quarter and by £14
million to £165 million in the half year. These losses were mainly incurred by
the European connectivity operations.

BT Ignite's capital expenditure was reduced by 43 per cent in the second
quarter to £104 million in line with BT's overall focus on cash flow.

Operations

BT Ignite currently serves customers in twelve countries across Europe and
connects over 250 towns and cities with over 52,000 route kilometres of fibre
(of which over 40,000 route kilometres are through our wholly owned businesses

in Europe). Its other European interests are marked by ten city fibre networks
and 20 web hosting centres with over 400,000 gross square feet of space. BT
Ignite's dial access ports total around 600,000 across the UK and continental
Europe and terminate approximately 40 per cent of the UK internet traffic.

Among the more significant product launches in value-added IP services during
the quarter was a voice over IP multi-media call service. This enables
businesses to run multi-media applications over their existing data networks.
In addition, the launch of 'iVelocity' (a content distribution network) has
enabled customers to enhance the performance of their websites.

Some 90 per cent of the current financial year's expected revenues in Ignite
Solutions are already contractually committed and the order book remains
strong, with about 50 per cent of next year's expected revenues already
committed.

Major new contracts over the period included the Bank of Ireland and NATO's
Communication, Command and Control Agency in Belgium. In Spain, BT Ignite was
recognised by the regulator as the main alternative supplier to the data
transmission market. Following the agreement between BT and Telenor, BT
Ignite's interests in Telenordia have been integrated into BT Ignite Nordics
after September 30, 2001, allowing BT Ignite to have full control of its
assets in Sweden and Finland and further enhance its European footprint.

BTopenworld
                                   Second quarter ended       Half year ended
                                        September 30            September 30
                                    2001          2000           2001    2000
                                    £m            £m              £m      £m
Group turnover                      57            33            103     59
EBITDA                              (25)          (45)          (63)    (79)
Operating loss*                     (36)          (48)          (77)    (85)
Share of losses of associates and
joint ventures*                     (2)           (9)           (6)     (45)
                                    
Capital expenditure                 3             8             5       30

*before goodwill amortisation

BTopenworld's revenue is derived principally from its UK narrowband
internet access services as well as its new UK broadband fast and always on,
internet access services. The total number of UK internet service provider
customers of BTopenworld at September 30, 2001 was approximately 1.5 million,
representing annual growth of approximately 53 per cent. With over 868,000
customers on unmetered packages on September 30, 2001, BTopenworld is the
leading UK unmetered internet access provider.

BTopenworld incurred an operating loss of £36 million on revenue of £57
million in the quarter. BTopenworld's turnover was 73 per cent up on the same
quarter last year (£33 million) and 24 per cent up on the previous quarter (£46 
million). The improvement is due to the significant growth in the
narrowband and broadband business. The operating loss in the quarter reduced
by 12 per cent compared to the previous quarter and improved by 25 per cent (£12
million) compared to the same quarter last year due to improved business
performance across the product range. BTopenworld's share of associates'
losses was £2 million which compares favourably with the same quarter last
year (£9 million). This is due to BTopenworld's recent exit from certain loss
making ventures, as well as a focus on loss reduction in the remaining
associates. Broadband revenues amounted to £9 million in the quarter,
representing an increase of 49 per cent from the June 2001 quarter. Narrowband
revenues amounted to £28 million in the quarter, an increase of 19 per cent
from the June 2001 quarter.

mmO2

Peter Erskine, mmO2's Chief Executive, said:

'During the second quarter we continued to re-focus our businesses - on
improving operational performance, on greater integration across the group,
and on developing our new mobile data products and services. This has resulted
in real progress being made during the quarter, with a significant reduction
in operating losses, an acceleration in performance at the EBITDA level and an
ongoing increase in the quality of our customer base.

Data now represents 10.7 per cent of our service revenues and, with the recent
launch of new devices and services, we are well placed to take advantage of
this important growth market.

This has been an exciting quarter for mmO2 as we move towards our future as an
independent entity. We have achieved a number of definitive milestones and
believe mmO2 has the platform to deliver improved revenue and EBITDA growth.
We continue to focus on achieving these goals and delivering improved
shareholder value.'
                                Second quarter ended          Half year ended
                                    September 30                 September 30
                                  2001           2000(a)        2001   2000(a)
                                             pro forma               pro forma
                                   £m          £m              £m       £m

Group turnover                     1,062       937             2,099    1,837
EBITDA before exceptional          71          (13)            135      (27)
items
Operating loss*                    (94)        (127)           (189)    (255)
Capital expenditure                339         313              623     588

*before goodwill amortisation and exceptional items

Note (a): The results of the second quarter and half-year ended September 30,
2000 have been shown on a pro forma basis to include 3 months and 6 months
respectively of all the operating entities of mmO2 as though they were
wholly-owned subsidiaries for the whole of those periods.

Turnover in mmO2 was £1,062 million in the quarter, a 13 per cent
increase over the same quarter in the previous year, reflecting strong year on
year subscriber growth.

EBITDA before exceptional items was £71 million, compared to a loss of £13
million in the same quarter last year. A large proportion of the subscriber
acquisition costs of Telfort's Postbank agreement was incurred during the
quarter, reducing EBITDA by £24 million.

The second quarter operating loss, before goodwill amortisation and
exceptional items, was £94 million compared to a loss of £127 million in the
same period last year.

Total capital expenditure during the quarter was £339 million, £26 million
higher than in the same period last year.

BT Cellnet

Cellnet's service revenues, generated from customers' use of Cellnet's mobile
network, were £614 million for the second quarter, an 11 per cent increase on
the second quarter last year. Total revenue increased by £12 million to £675
million.

Cellnet's second quarter EBITDA was £161 million and the EBITDA margin was 24
per cent. Cellnet incurred a one-off bad debt of £12 million in the quarter
and this reduced the EBITDA margin by just under 2 per cent.

Cellnet's total customer numbers remained broadly flat during the quarter, at
just under 11 million. This reflected our continuing focus on improving the
quality of both our pre-pay and post-pay customer bases. The total number of
WAP unique visitors increased to 820,000 at September 30, from 788,000 at June
30.

Although Cellnet's share of gross customer additions was stable, and post-pay
customer churn continued to fall to 36 per cent, churn rates remained above
target. This is being addressed by extending Cellnet's effective large
customer retention programmes, First and Select, to a wider range of
subscribers.

In its drive for enhanced operational performance, Cellnet continued to
deliver material cost savings in the quarter, with a 3 per cent reduction in
combined headcount and contractor numbers. Further operating cost reductions
are expected to be realised this financial year, including savings from joint
procurement with other mmO2 businesses.

At the end of the quarter, Cellnet launched its new RIM Blackberry
product into the business market, and unveiled the O2xda, a pocket PC based
device which will be available from early 2002. These initiatives are the next
steps in Cellnet's drive to leverage its strong presence in the business
market, and generate revenue growth from higher ARPU and lower churn.

Cellnet's capital expenditure in the second quarter was £135 million,
compared to £113 million in the same quarter last year. This mainly comprised
network capacity in congested areas and enhanced GPRS functionality.

Viag Interkom

Viag's revenues increased by 32 per cent over the same quarter in the
previous year, to £221 million. Its EBITDA loss reduced to £48 million, from £
108 million last year. In the half year, the EBITDA losses reduced from £215
million to £114 million.

Total customer numbers remained broadly flat during the quarter, as a
result of further review of the customer base and refocusing the offer away
from lower ARPU groups and towards higher value consumers and the corporate
and SME segment.

Viag's gross customer additions in the quarter remained steady at
approximately 100,000 per month, with more than 45 per cent of these being
post-pay. Around two-thirds of new post-pay customers are subscribing to
Viag's differentiated Genion Home location-based product, which generates
significantly higher ARPU than other post-pay customers. Genion is also
starting to be taken up by corporate customers, including BMW.

Viag increased the drive to reduce its cost base during the quarter, with
combined headcount and contractor numbers being reduced by 7 per cent and
significant potential savings in IT costs identified. Viag too expects to
realise further savings from joint procurement within mmO2.

Capital expenditure was £82 million in the quarter, £15 million lower
than the same quarter last year. Spending on 2G network build-out is now being
significantly reduced, as the current roaming agreement enables Viag to
provide nationwide coverage for its 2G service.

Telfort

Telfort's revenues increased to £49 million from £28 million in the same
quarter last year. Its EBITDA loss increased to £37 million from £20 million
last time, due to £24 million of Postbank subscriber acquisition costs being
incurred in the quarter.

The Postbank agreement added 376,000 active customers to Telfort's
subscriber base in the second quarter, and these new Postbank customers
accounted for 29 per cent of Telfort's total subscriber base of just under 1.3
million at September 30. The Postbank agreement includes facilities for
customers to carry out mobile banking transactions.

Telfort's capital expenditure in the quarter was £31 million, down from £58
million in the same period last year.

Digifone

Revenues in the quarter increased by £21 million over the same quarter
last year, to £98 million, reflecting strong year-on-year subscriber growth.
EBITDA more than doubled over the same period last year, to £31 million. The
EBITDA margin was just under 32 per cent, an increase of three percentage
points over the first quarter.

Digifone's net additions during the second quarter were 100,000 pre-pay
and 8,000 post-pay customers. The total subscriber base is 1.1 million.
Digifone retains its strong presence in the business market.

Digifone's capital expenditure in the second quarter reduced to £25
million from £31 million in the comparable period last year. This reflects the
high population coverage now achieved, and the shift in network development to
infill in areas of high traffic.

Genie


Genie reported revenues of £28 million in the second quarter, up from £1
million in the comparable period last year, when Genie was in start up phase.
Genie's EBITDA loss was £22 million, down from £31 million in the same quarter
last year.

Genie is reducing the geographic scope of its activities, so that it is
now focusing mainly on the mmO2 footprint. The business has also aligned its
data content and applications development activity with mmO2's target market
segments.

Genie is an important part of mmO2's drive to build on its strong
position in mobile data and its capital expenditure reflects this focus, at £
30 million in the quarter compared to £7 million in the same period last year.

At September 30, 2001, there were 5.8 million web portal registered
accounts, an increase of 9 per cent over the last quarter. Genie's WAP service
continued to grow reaching an average of 150 million WAP page impressions a
month from July to September 2001, an increase of 50 per cent over the last
quarter.

Outlook

Going forward, mmO2 will benefit from the actions taken to date. In the
second half of the financial year the group will continue to focus on
operational performance, pursue the benefits of full ownership and control of
all its businesses, and leverage its strong position in development and
delivery of mobile data solutions.

We believe these factors will drive increased revenues, from new subscribers
and higher ARPU, generate further cost savings and deliver margin improvement
across all mmO2's businesses, resulting in further growth in the underlying
EBITDA run rate.

The management team is aware of the actions in order to deliver the goals of
improved performance and growth in shareholder value. A number of operational
improvements were achieved in the second quarter and, recognising the current
challenging business environment, management will continue to pursue further
improvements in the second half.



GROUP RESULTS

BT incurred a loss per share of 17.3 pence for the second quarter to
September 30, 2001. This loss included exceptional charges relating to the
unwind of the Concert joint venture, impairment charges against BT's other
investments and demerger costs. Before exceptional items and goodwill
amortisation, BT's earnings per share for the quarter were 1.1 pence compared
with 5.1 pence per share in the corresponding quarter last year.

BT's EBITDA in the second quarter before exceptional items was £110
million lower than the prior year. This arises from losses arising at the
German operations where BT took control in February 2001 and the absence of a
profit from the operations sold in June 2001; adjusting for these items EBITDA
(before exceptional items) was steady in both BT Group and mmO2. Higher
depreciation costs, BT's share of Concert's losses and higher interest costs
result in profit before goodwill amortisation, exceptional items and taxation
for the second quarter being £370 million lower than the prior year.

The number of people employed by BT at September 30, 2001 was 131,700 of
which 15,900 were in mmO2. We have identified productivity improvements and
cost savings to reduce costs by approximately £575 million in BT Group in the
current financial year. We are on track to achieve these savings. We have
recently imposed a recruitment freeze which will enable us to meet our
targeted staff reductions this year.

BT's share of its ventures' operating profits for the quarter was £11
million before goodwill amortisation and exceptional items. BT Group continues
to hold a 26 per cent interest in Cegetel which contributed £51 million to
total operating profit before goodwill amortisation. The results include BT's
share of Concert's operating losses.

Concert

Concert's loss attributable to BT in the quarter was £40 million,
compared to a profit of £46 million in the prior year and down from £81
million in the June 2001 quarter. Concert's results have been impacted by
market pricing pressures and an increase in industry capacity, while network
costs have remained fairly constant. Concert has also been impacted by
weakness in sales from its non-parental global distributors and its wholesale
operations.

Unwind of Concert joint venture and BT's exit from AT&T Canada

On October 16, 2001, BT and AT&T announced the unwind of Concert, their
international joint venture. Its businesses, customer accounts and networks
will be returning to the two parent companies with BT and AT&T each taking
ownership of substantially those parts of Concert originally contributed by
them. The working capital and other liabilities of Concert will be divided
equally between BT and AT&T with the exception that BT will receive an
additional $400 million (£275 million) reflecting the allocation of the
businesses.

BT and AT&T will also, at completion, terminate their Canadian joint
venture agreement under which BT was committed to participate in AT&T's future
obligation to acquire all of the publicly traded shares of AT&T Canada. AT&T
will take full ownership of BT's interest in the Canadian joint venture and in
AT&T Canada, and will assume full responsibility for all future obligations of
the joint venture. BT will cease to have any interest in AT&T Canada, and will
be released from its future expenditure commitment associated with AT&T
Canada.

As a result, BT has written down in the second quarter the carrying value
of its investments in both Concert and AT&T Canada at September 30, 2001.
These were originally £1,236 million and £347 million respectively, before the
write-down. The exceptional impairment charge of £1.2 billion against these
investments comprises the elimination of BT's £347 million interest in AT&T
Canada, all of BT's share of Concert's goodwill, approximately £260 million,
and a write-down in the region of £825 million in tangible fixed assets,
mainly submarine cables, to be transferred to BT, offset in part by
approximately $400 million (£275 million) to be received from AT&T.

Some 2,000 people are expected to join BT after the unwind of Concert but
it is also expected that the unwind will result in up to 2,300 job losses in
the joint venture. Consequently, BT expects to recognise further exceptional
restructuring charges of around £200 million for its share of redundancy and
other unwind costs and additional transition costs. These costs are expected
to be incurred principally in the second half of BT's current financial year.

The transaction is expected to close during the first half of the 2002
calendar year.

Impairment of other investments

In recent months the global marketplace of the telecoms and IT sector has
changed radically and, whilst we assess that many of BT's investments have a
current value in excess of BT's original investment, there are a number of
other investments whose values have been impaired. We have therefore taken an
exceptional impairment charge of £221 million against our other investments in
the second quarter, £157 million of which relates to Impsat, an Argentinean
based alternative network operator. The Board will continue to review the
value of BT's investments in the light of these changing market conditions and
the assimilation of BT's share of the Concert activities into the BT Group.

Interest

Net interest, including BT's share of its ventures' interest charge, rose
to £362 million in the second quarter, an increase of £48 million on the
corresponding quarter last year but a reduction of £112 million on the first
quarter of this year. This reflects the significant reduction in net debt in
the first quarter, following the increase in debt in the 2001 financial year.

Taxation

The tax charge of £127 million for the quarter is based on profit before
taxation before the exceptional write down of assets.

Dividends

The Board confirms that BT will not be paying an interim dividend in the
current financial year. After the demerger, BT Group expects to recommend and
pay a final dividend for the year and to resume regular dividend payments
thereafter. However, the level of dividends BT Group expects to pay is likely
to be substantially lower than that paid by BT previously. mmO2 does not
anticipate paying a dividend for the foreseeable future.

Earnings (loss) per share

BT's loss per share for the quarter ended September 30, 2001 was 17.3
pence based on a loss before taxation of £1,349 million. This loss included
the following exceptional items:

Exceptional items for periods to September 30, 2001        Quarter   Half year
                                                             £m         £m
Impairment of Concert and                                 (1,153)   (1,153)

    AT&T Canada investments

Impairment of other investments                           (221)     (221)
Costs related to mmO2 demerger                            (74)      (88)
Total impairment and other exceptional charges            (1,448)   (1,462)
Profit on disposal of investments                         11        4,495
Net exceptional credits (charges)                         (1,437)   3,033

Earnings per share before these exceptional items and goodwill amortisation
were 1.1 pence compared with 5.1 pence in the second quarter of the last
financial year. Earnings per share of continuing operations of BT Group on
this basis of 2.4 pence compared with earnings of 5.3 pence in the comparable
period. The lower earnings in the current period were mainly due to higher
interest charges following BT's acquisition of businesses and third generation
licences over the past year, and losses incurred by the Concert global venture
and Viag Interkom.

Cash flow and net debt

Cash inflow from operating activities amounted to £1,433 million in the
quarter ended September 30, 2001 bringing the total for the half year to £
2,687 million.

Capital expenditure payments totalled £1,204 million in the second
quarter, giving the total for the half year of £2,240 million.

Net debt at September 30, 2001 was £16.5 billion, compared with £17.5
billion at June 30, 2001 and £27.9 billion at March 31, 2001. The reduction in
net debt in the second quarter was a further £952 million after the £10.4
billion reduction in the first quarter chiefly realised through the rights
issue, and the sale of our Japanese investments and our directories business,
Yell. The second quarter reduction was achieved through the sale of our
interest in Rogers Wireless and receipt of the final instalment from the sale
of the Japanese investments.

The cash receipts are being applied in repaying short-term borrowings
under our commercial paper and medium-term note programmes as they mature.

On demerger, mmO2 will have net debt of approximately £500 million, and
the BT Group will retain the remainder of the net debt. At March 31, 2002, BT
Group expects to have net debt in the range of £15 billion to £17 billion on
the assumption that the property sale and leaseback transaction referred to
below is completed by then.

mmO2 has credit facilities in place which will enable it to draw down up
to £3.5 billion in finance after the demerger.

In December 2001, BT Group will make special and deficiency contributions
to the BT Pension Scheme totalling approximately £600 million in respect of
redundancies which occurred in 2000 and the pension fund deficit at

December 1999 under the rules of the scheme. These payments will be charged
against the pensions provision in the balance sheet and will not directly
affect the profit and loss account.

Property transaction

On May 9, 2001, BT selected Telereal Group Limited ('Telereal') as
preferred bidder for the acquisition of a substantial part of BT's property
portfolio and the subsequent provision of accommodation services back to BT.
On June 12, 2001, BT and Telereal entered into a legal agreement for the
acquisition and subsequent service provision subject to conditions precedent,
being primarily conditions relating to satisfactory funding and the
finalisation of transactional commercial documentation. Detailed commercial
and legal negotiations continue.

Telereal Group Limited is a 50:50 joint venture between Land Securities
Trillium Limited and William Pears Family Holdings Limited. BT expects to
complete the sale of the property portfolio by December 31, 2001. The
transaction, on completion, is expected to raise approximately £2.3 billion.

_________________________________________________________________


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