Restructure Proposals

British Telecommunications PLC
10 May 2001





NR0120                                        May 10, 2001




           British Telecommunications public limited company ('BT')


 NOT FOR RELEASE, DISTRIBUTION OR PUBLICATION IN WHOLE OR IN PART IN OR INTO
                              THE UNITED STATES

                   3 FOR 10 RIGHTS ISSUE AT 300p PER SHARE

                            TO RAISE £5.9 BILLION

                         AND DEMERGER OF BT WIRELESS


Highlights:


        *      3 for 10 Rights Issue to raise £5.9 billion


        *      The issue price of 300p represents a discount of 47 per cent.
               to the closing middle market price of BT ordinary shares on 9 May
               2001


        *      Decision to create two strong and separately quoted businesses,
               BT Wireless and Future BT


        *      Sale or demerger of Yell


        *      Good progress made in debt reduction with £5.5 billion of
               disposals already agreed


        *      Dividend payments halted for the time being






        Sir Christopher Bland, Chairman of BT, said:




'It will require determined and rapid action by management to achieve the
transformation of BT; we have made a good start, the culture is changing, and
I am confident that we can complete the process in the best interests of our
shareholders, customers and staff.'


Sir Peter Bonfield, Chief Executive of BT, said:


'These actions will provide shareholders with ownership of two strong, tightly
focused, independent businesses, one high growth and the other well
established and cash generative. We have tightened our geographic focus to the
UK and Western European growth markets and our disposal programme is going
well and according to plan.

'BT Wireless's demerger represents an opportunity for BT's shareholders to
participate directly in the growth of mobile telecoms. The business is based
on 100 per cent. ownership positions in four markets which together make up 40
per cent. of Western European GDP...plus the real differentiator of Genie. BT
Wireless will start life as an independent company from an exciting position.

'In Future BT, which has a customer base of 22 million, we shall build on our
leadership position and develop our presence through four strong operating
businesses. Our key goal is to bring new partnerships and services to a larger
customer base.

'We have announced that we have agreed to sell interests in Japan, Spain and,
in principle, Malaysia for a total of almost £5 billion. With the sale or
demerger of Yell, together with property sales, there is the possibility of
more to come. Today we are announcing a £5.9 billion rights issue which will
enable us to implement these structural changes. These announcements show real
momentum in Future BT going forward.'

The Group also announces today its preliminary results for the year ended 31
March 2001.

A presentation to analysts will take place at 9.00 am today and a presentation
to the media at 11.30 am at the offices of BT, 81 Newgate Street, London EC1A
7AJ.


ENQUIRIES:


BT

Media enquiries:

Robin Pauley                         Telephone [phone]

Group Communications Director


Tim Johns                              Telephone [phone]

Director, Media Relations


BT Group Newsroom 24-hr number          Telephone [phone]


Investor Relations enquiries:               Telephone [phone]

John Brougham

Director, Investor Relations





        CAZENOVE & CO. LTD                Telephone:[phone]

        David Mayhew

        Robert Pickering


        MERRILL LYNCH INTERNATIONAL     Telephone:[phone]

        Philip Yates

        Mike Gibson


        BRUNSWICK                         Telephone: [phone]

        Alan Parker

        Jon Coles




This announcement is issued by British Telecommunications public limited
company ('BT') and the Directors of BT are the persons responsible for the
information contained in this announcement. The contents of this announcement,
which has been issued by, and is the sole responsibility of, BT, has been
approved by Cazenove & Co. Ltd and Merrill Lynch International, which are
regulated in the UK by The Securities and Futures Authority, solely for the
purposes of Section 57 of the Financial Services Act 1986. Neither this
announcement nor the information contained herein is for reference,
publication or distribution in whole or in part in or into the United States.
Any failure to comply with this restriction may constitute a violation of US
securities laws.


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.


This announcement does not constitute, or form part of, an offer or any
solicitation of an offer, for securities, and any purchase of, or application
for shares in the Rights Issue should only be made on the basis of the
information contained in the prospectus dated 10 May 2001 and any supplement
thereto and issued in connection with the Rights Issue.


This announcement is not an offer of securities for sale in the United States.
Securities may not be offered or sold in the United States unless they are
registered or are exempt from registration. BT intends to register a portion
of the securities to be issued in the rights issue in the United States. The
public offering of rights to subscribe for new BT Shares or new BT ADSs is
being made in the United States by means of a prospectus containing or
incorporating by reference detailed information about BT and its management,
as well as financial statements. Copies of the prospectus may be obtained from
BT.

           British Telecommunications public limited company ('BT')

 NOT FOR RELEASE, DISTRIBUTION OR PUBLICATION IN WHOLE OR IN PART IN OR INTO
                              THE UNITED STATES

        3 for 10 Rights Issue at 300p per share to raise £5.9 billion

                         and demerger of BT Wireless.




INTRODUCTION


BT announces that it is proposing to raise approximately £5.9 billion, net of
expenses, by the issue of up to 1.976 billion new BT Shares at a price of 300
pence per share. The issue is being made by way of a rights issue to
Qualifying Shareholders on the basis of 3 new BT Shares for every 10 existing
BT Shares held at the close of business on 9 May 2001. The Issue Price of 300
pence per new BT Share represents a 47 per cent. discount to the closing
middle market price of 568.5 pence per BT Share on 9 May 2001, the last
business day before the announcement of the Rights Issue. The Rights Issue is
not being underwritten. Cazenove & Co. Ltd is sole sponsor to the Rights
Issue. Joint brokers and Joint financial advisers to the Rights Issue are
Cazenove & Co. Ltd and Merrill Lynch International.

BT is also announcing proposals to transform the Group structure including:


  * the positioning of Future BT as a focused European network and retail
    business which will include BT Retail, BTopenworld, BT Wholesale and BT
    Ignite with Concert providing international connectivity; and

  * the intention to demerge BT Wireless, which will principally comprise
    BT's wholly owned wireless businesses.


BACKGROUND TO AND REASONS FOR THE RIGHTS ISSUE

BT is one of Europe's leading communications companies offering high quality
innovative voice, broadband, data, internet and wireless services. Over the
past 18 months, BT has made significant cash investments in pursuit of growth
opportunities. BT has obtained 3G wireless licences in the key markets of the
UK, Germany and The Netherlands, and has built new IP broadband networks in
the UK and elsewhere in Europe. BT has taken full control of its fixed and
wireless operations in Germany and The Netherlands, and acquired Esat Telecom
and Esat Digifone in the Republic of Ireland. These investments have
substantially increased its net debt position from approximately £8.7 billion
on 31 March 2000 to approximately £27.9 billion on 31 March 2001.

Recognising the increasingly diversified nature of its activities, during 2000
BT embarked on a process of structural change, moving away from a
geographically based organisational structure to one which emphasises
accountability by separate lines of business. BT's objectives were to enable
each line of its business to focus on its own strategic goals and the needs of
its customers and furthermore to allow it to respond more effectively to the
rapidly changing nature of its markets.

In July 2000, BT created the following lines of business alongside its UK
communications services business:


  * BT Wireless - an international mobile business, with particular
    strengths in mobile voice, data and next generation services;


  * BT Ignite - an international data-centric, broadband IP and internet
    solutions business focused on corporate and wholesale markets;


  * BTopenworld - a mass-market internet business focused increasingly on
    broadband services; and


  * Yell - an international directories and e-commerce business.

In October 2000, management of the UK communications services business was
split as follows:


  * BT Retail - the UK's leading communications business and the prime UK
    channel to market for BT's other businesses; and


  * BT Wholesale - the provider of network services and solutions to
    communication companies, network operators and service providers,
    including BT Retail, BT Wireless and BT Ignite.

These six businesses operate alongside Concert, the global joint venture with
AT&T launched in January 2000, which is a leading global communications
provider for multinational business customers, international carriers and
ISPs.

In November 2000, BT announced details of the Group's restructuring plan which
was drawn up following the identification of the potential benefits which
should follow from a separation of the Group into a number of operating units
with defined management accountability. BT recognised the merits of separate
stock market listings, following such restructuring, to improve the focus on
value generation through the creation of distinct equity for each quoted
entity.

BT's plan was to optimise the positioning of its individual businesses within
its respective markets. BT said it would focus on Western Europe and Japan and
seek separate listings for up to 25 per cent. of BT Wireless and Yell and a
possible separate listing of BT Ignite, to be reviewed by the end of 2001. In
addition, BT described proposals to create a new holding company to enhance
corporate flexibility and provide scope for further subsidiary listings where
advantageous to shareholders. BT also detailed plans to create a new network
company, Netco, which would be both structurally and managerially separate.


Following this corporate reorganisation, and subject to the satisfactory
outcome of necessary discussions with the Government and Oftel, BT's intention
was to seek a separate listing for up to 25 per cent. of Netco.

During 2000, BT borrowed to finance acquisitions with the intention of
reducing the level of indebtedness by asset sales and other means. BT
identified the need to introduce new equity capital into the business to
support the reduction in the unsustainable level of Group debt, and BT
indicated its intention to raise new equity through the sale of minority
stakes, notably of BT Wireless.

BT's aim was to reduce the net debt of the Group by December 2001 by at least
£10 billion using the cash proceeds from the issue of equity in these various
IPOs, together with the proceeds of disposals of non-core businesses and
assets.


IMPLEMENTING STRUCTURAL CHANGE

Rights Issue

The weakness of the IPO market, particularly for telecommunications companies,
has caused BT to review whether the sale of equity in Yell and BT Wireless
still constitutes the best option to strengthen the Group's capital base. BT
believes that under current market conditions the price at which these shares
could be sold in an IPO would lead to an unacceptable level of dilution to BT
Shareholders as a result of the transfer of value to new investors.

BT has therefore concluded that shareholders' interests are best served by a
Rights Issue to existing BT Shareholders. The Rights Issue introduces new
equity at the Group level and permits the avoidance of any transfer of value
from existing BT Shareholders. Furthermore it enables the implementation of
structural change.

The Rights Issue is proposed to raise approximately £5.9 billion, after
expenses, which, together with the cash from disposals already announced,
should allow BT to meet its debt reduction target of £10 billion by December
2001. Any debt assumed by Yell or BT Wireless on demerger or proceeds received
from the sale of Yell will further contribute to debt reduction.

BT expects net debt to increase as a result of net cash outflows from its
planned capital expenditure and interest payments even after taking into
account proceeds from its restructuring plans. However, its debt reduction and
cash generation focus continues and its target is now to reduce net debt to
between £15 billion and £20 billion in Future BT by 31 March 2002.

BT remains committed to management actions to ensure the financial strength of
the Group. These include the Rights Issue, the demerger of BT Wireless, the
creation of a new holding company, its programme of non-core business and
asset disposals and the halt in dividend payments, described further below. BT
is also focusing capital expenditure on projects with higher and more
immediate financial returns. BT has set a target for capital expenditure of £
4.9 billion for the year ending March 2002, compared with £5.0 billion spent
by the Group in the year ended 31 March 2001, before taking into account the
capital expenditure of Viag Interkom prior to it becoming a subsidiary.


Demerger of BT Wireless

BT now intends to demerge BT Wireless, which it expects will include all of
its wireless assets in the UK (BT Cellnet), the Isle of Man (Manx Telecom
Limited), Germany (Viag Interkom), the Republic of Ireland (Esat Digifone),
and The Netherlands (Telfort). BT Wireless will also include Genie, one of
Europe's leading mobile internet portals.

BT Shareholders will benefit directly from all the value created by the BT
Wireless business and its enhanced ability to participate in any consolidation
of the European wireless sector. BT Shareholders should in due course receive
detailed proposals relating to the demerger of BT Wireless, which it is
proposed will take place towards the end of the year. As a consequence of the
demerger, BT Shareholders will become shareholders in BT Wireless and
separately in Future BT and both focused independent businesses will be
committed to value creation. BT expects both companies to be included in the
FTSE100.


Creation of a New Holding Company

BT continues with its plans to create a new holding company to give it
corporate flexibility and to facilitate other potential acquisitions,
demergers, disposals or IPOs. BT has determined that in order to demerge BT
Wireless efficiently, the new holding company structure should be put in place
at the same time as the demerger. The new holding company structure will be
implemented through a court-approved scheme of arrangement and the Board
intends to seek shareholder approval for this move at an extraordinary general
meeting expected to be held towards the end of the year.


Yell

BT is reviewing its plans for Yell and is currently considering proposals to
sell or demerge this business, pending a ruling from the Secretary of State
for Trade and Industry on a report produced by the Office of Fair Trading.


Disposals

BT continues with its programme of non-core business and asset disposals.

On 4 May 2001, BT announced that it had agreed, in principle, to sell its
interest in Maxis Communications in Malaysia for £350 million. This
transaction is subject to regulatory and other approvals.

BT announced on 2 May 2001 that it has agreed to sell its interests in Japan
Telecom, J-Phone and Airtel SA to Vodafone for £4.8 billion in cash. The
transaction values the Japanese investments at £3.7 billion and the investment
in Airtel at £1.1 billion. The overall impact of the combined transaction, net
of the costs of exercising an option in the J- Phone regional operating
companies, will be to reduce BT's net debt by £4.4 billion. Completion of this
transaction is conditional upon relevant regulatory and procedural approvals
in Europe and Japan.

BT announced on 1 May 2001 that as a result of becoming a less centralised
group it had decided to vacate and sell its headquarters in London.

In January 2001 BT announced that it was in negotiations to realise the value
of its UK property portfolio through the mechanism of a sale and lease back.
This, BT believes, should enable it to take a more flexible approach to its
office arrangements and building requirements. However, BT intends to retain
the freehold and exclusive right to occupy its operational buildings. In April
2001, Tereal Group a 50:50 joint venture between Land Securities Trillium and
the Williams Pears Group was selected as the preferred bidder for their
proposed acquisition of the BT property portfolio and the subsequent provision
of certain buildings and management services to BT.

In November 2000 BT sold its 34 per cent. interest in sunrise communications,
a telecommunication joint venture in Switzerland, for £464 million.


DIVIDENDS

As part of its debt reduction and restructuring plans, BT has decided that
there will be no final dividend in respect of the year ended 31 March 2001 and
that there will be no interim dividend for the year ending 31 March 2002. The
total cost of the dividends for the full year ended 31 March 2000 was
approximately £1.4 billion.

Future dividend policy will be decided by the individual listed companies,
taking into account their respective capital structures, cash requirements and
the markets in which they operate. The Board expects that Future BT will
recommend a final dividend in respect of the year ending 31 March 2002.


STRATEGY AND OUTLOOK

Future BT

Future BT will be a focused European network and retail business concentrating
on voice and data services. Its aim is to create value based on service
excellence, its brand leadership, its large scale networks and existing
customer base. It will also develop and market new higher value broadband and
internet products and services.

Future BT will comprise principally four separately managed lines of business,
BT Retail, BTopenworld, BT Wholesale and BT Ignite, with Concert providing
international connectivity. It will have a balanced portfolio of businesses
with well-established, market-leading and cash generative UK retail and
wholesale businesses and, in BT Ignite and BTopenworld, rapidly developing
businesses in internet solutions and broadband in the UK and elsewhere in
Europe. BT is discussing a variety of strategic alternatives to the Concert
joint venture which could include all or a substantial portion of the business
currently within BT Ignite. See 'Discussions with AT&T regarding Concert and
BT Ignite' below.

On a pro forma basis, turnover of the Future BT would have been £17.3 billion
with earnings before interest, tax, depreciation and amortisation of £5.8
billion for the year ended 31 March 2001. Through focusing capital expenditure
on projects offering higher and more immediate financial returns, BT's aim is
to reduce capital expenditure from approximately £3.9 billion in the year
ended 31 March 2001 to £3.4 billion in the year ending 31 March 2002 and BT's
expectation is for capital expenditure in the medium term to be approximately
£3.5 billion per annum. Furthermore, productivity improvements and cost
savings will be sought and initiatives to reduce costs totalling approximately
£575 million have been identified for the year ending 31 March 2002. A brief
description of each business is set out below.


BT Retail

BT Retail is the UK's largest communications service provider to the
residential and business markets and is one of the UK's leading brands. BT
Retail has more than 21 million business and residential customers in the UK.
It has an extensive product and service portfolio covering voice, data,
internet and multimedia and offers managed and packaged communications
solutions.

BT Retail's key strengths are its distribution and service capabilities and
its extensive customer base and customer relationships. It has introduced new
products (such as broadband) and innovative pricing policies (such as BT
Together). It will continue to deliver digital solutions supported by
BTopenworld and wireless solutions supported by BT Cellnet, a subsidiary of BT
Wireless. BT estimates that the total addressable market is worth £28 billion
(Source: Analysys).

The most recent Oftel statistics show that to September 2000 BT Retail had a
64 per cent. market share of UK fixed call revenue.

Since that time BT believes it has seen a slowing in the rate of loss of
market share, which declined by 4.5 percentage points in the year to September
2000. At 31 March 2001, BT Retail had 28.9 million customer lines within the
UK equating to a market share of approximately 82 per cent. The number of
exchange lines in the UK has been increasing, reflecting growth in demand for
communication services.

In a very competitive market, BT Retail's strategy is to maintain turnover and
earnings before interest, tax, depreciation and amortisation margins in the
medium term, at 2001 levels by seeking ongoing productivity improvements in
existing businesses and new business opportunities in higher value, internet
and broadband services.


BTopenworld

BTopenworld brings together BT's UK ISPs and ISP-related portals. BT believes
that BTopenworld is well positioned to meet the needs of the second internet
wave characterised by new broadband technologies that support services that
are 'always on', localised, personalised, faster and video and audio rich.
BTopenworld expects to continue to focus its ISP activities on the UK market,
benefiting from BT's brand, distribution channels and other capabilities. In
addition, BT believes there are substantial new market opportunities that
BTopenworld can address including the delivery of entertainment and other
applications/solutions to the home and office.

BTopenworld is growing fast. It is one of the UK's leading ISPs to SMEs, and
in un-metered services and is the UK's market leader for DSL broadband
services.

BTopenworld's strategy focuses on growing average revenue per customer through
added value services such as narrowband internet, fast internet and video
centric services.


BT Wholesale

BT Wholesale provides network services within the UK to communications
companies, network operators and service providers. Together BT Retail, BT
Ignite and BT Wireless currently account for some 70 per cent. of BT
Wholesale's turnover, the majority of which is subject to regulatory controls.
The Directors estimate that BT Wholesale has a 65 per cent. share of a market
valued at £17 billion and that there is a medium-term outlook for market
growth of 7 to 9 per cent. per annum.

BT Wholesale will build on its reputation for delivery of wholesale network
solutions to BT Retail and other communications companies. BT Wholesale's
strategy is to extract efficiencies from the scale and scope of its
operations, broaden its customer base and expand next generation services by,
among other things, satisfying demand for bandwidth and applying new
technology to boost capacity, broaden its product base and lower costs. BT
believes this should minimise erosion of market share and generate attractive
returns on capital.

BT Wholesale also aims to reduce its dependence on its regulated business and
grow its sales to other communications companies. The Directors estimate that
BT Wholesale currently has an external market share of 35 per cent. and is
aiming to grow turnover in this segment in excess of 25 per cent. per annum.

In the year to March 2001, the business incurred capital expenditure of £2.3
billion and anticipates that its future capital expenditure will be in the
region of £2 billion per annum over the medium term.

BT plans, through tight controls on operating costs and capital expenditure,
to ensure that the current level of free cash flow is at least maintained over
the medium term.

The decision with respect to the listing of this business will be made in
2002, and is subject to, amongst other factors, consents and the satisfactory
outcome of necessary discussions with the Government and the regulator, Oftel.


BT Ignite

BT Ignite, BT's internet solutions and broadband IP business, delivers a range
of services, including customer solutions, application service packages, web
hosting and data transport. In particular, BT Ignite's internet data centres
provide the hardware, software and high speed communications connections
required by customers to run their websites and their online business
applications, allowing these customers to focus on their core business and
meet growing requirements for e-commerce.

BT Ignite has established a strong European footprint, serving over 400,000
business customers with 52,000 route kilometres of fibre connecting 250 cities
and with 21 content hosting centres.

Across Europe BT Ignite owns its own infrastructure but is primarily a service
and marketing business using its own and BT Retail's sales force of 4,000
employees, including 2,000 solutions consultants. It sells direct to
businesses in Europe and sells to businesses in the UK through BT Retail's
sales force.

Building on its position as a leading business in the European services
market, as measured by customer and revenue base, BT Ignite plans to continue
to build its revenues from the high end of the value chain - valued added
services and complex solutions - from current levels of over 50 per cent. of
revenue. It aims to use its large sales force to add more business customers
and increase revenue per customer by selling more of these higher value
products and migrating customers towards tailored services, such as moving
customers through hosting and applications to solutions. Its strategy for
moving into profitability also includes increasing the throughput in its
existing network infrastructure of cables and data hosting to benefit from
operational gearing. BT also expects to generate synergies across BT Ignite by
establishing functional responsibilities, including single network management
and single product management across the business. BT is discussing a variety
of strategic alternatives to the Concert joint venture which could include all
or a substantial portion of the business currently within BT Ignite. See
'Discussions with AT&T regarding Concert and BT Ignite' below.

Earnings before interest, tax, depreciation and amortisation are targeted to
approach 15 to 20 per cent. of turnover over the medium term and capital
expenditure is targeted to be approximately £1 billion per annum compared to £
0.9 billion for the year ended 31 March 2001. The growth in turnover is
targeted at in excess of 15 per cent. per annum in the medium term.


Concert

Concert is the global communications joint venture owned equally by BT and AT&
T. It combines what were the trans-border assets and operations of BT and AT&
T, including their international networks, all their international traffic,
and their international products for business customers. Concert's strategy is
to build on its position as a leading global communications provider for
multinational business customers, international carriers and ISPs worldwide.
See 'Discussions with AT&T regarding Concert and BT Ignite' below.


Discussions with AT&T regarding Concert and BT Ignite

BT and AT&T are discussing ways to improve the performance of the business and
strengthen the scope of relationship between them in business services. These
discussions include a variety of strategic alternatives to the Concert joint
venture, including the sale to, or other business combination of its business
services operations with, AT&T's business services unit upon its planned
separation from the remainder of AT&T. Such a transaction could include all or
a substantial portion of BT's business services operations, including BT
Ignite and BT's interest in Concert, in exchange for some mixture of cash,
equity and/or other instruments in the combined business. These discussions
may or may not lead to any sale or other business combination and may or may
not lead to any change in the existing alliance arrangements.

As possible alternatives to such a transaction, BT has also been considering a
narrowing of Concert's business scope, as well as its termination as a joint
venture. There can be no assurances, however, that agreement could be reached
with AT&T with regard to either of such alternatives.

The Board believes that the BT Ignite and Concert businesses will generate
potentially significant value for the Group in the future. The Board will keep
under review whether this value is best achieved for shareholders by a
combination of these businesses with AT&T's business services unit, a disposal
of all or part of the businesses or their separation from BT by way of IPO or
demerger from BT. Where necessary, BT will seek the approval of its
shareholders.






Other businesses

A number of other business units including Information Systems Engineering,
fleet operations, logistics and procurement services and BT Exact
Technologies, a world renowned research and development capability, will form
part of Future BT. It is currently intended that the Group's 26 per cent.
shareholding in Cegetel, a leading French telecommunications company, be
retained within BT.


Yell

Yell is a leading provider of classified advertising directories and
associated products and services, principally to small and medium sized
enterprises and consumers in the United Kingdom and the United States. In the
2000 financial year, Yell distributed in the UK approximately 28.8 million
copies of directories to households and businesses, and published 861,000
advertisements on behalf of 417,000 advertisers. In the 2000 financial year,
Yellow Book, Yell's US business, distributed approximately 17.5 million copies
of directories to households and businesses, and published 1,155,000
advertisements on behalf of 170,000 advertisers.

BT is currently considering plans to sell or demerge this business pending a
ruling from the Secretary of State for Trade and Industry on a report produced
by the Office of Fair Trading.


BT Wireless

Following demerger, BT Wireless will provide BT Shareholders with the
opportunity to participate directly in the growth of mobile
telecommunications. It has a major European footprint with wholly owned
operations in the UK (BT Cellnet), Isle of Man (Manx Telecom), Germany (Viag
Interkom), The Netherlands (Telfort) and the Republic of Ireland (Esat
Digifone). BT Wireless also includes Genie, which is one of Europe's leading
mobile internet portals. BT Wireless has a portfolio that combines established
businesses in the UK and the Republic of Ireland, with relatively new and
immature ventures in Germany and The Netherlands which are currently loss
making but which have high growth potential.

BT Wireless now covers territories with a total population of over 161
million. At 31 March 2001, BT Cellnet had 11.2 million customers and East
Digifone had 1.1 million customers. In Germany and The Netherlands the BT
Wireless businesses have seen significant growth since launch in 1998 and at
31 March 2001 had over 3.7 million and 0.9 million customers, respectively.

At the end of March 2001 Genie had operations in six countries in Europe and
around 4 million registered users globally. BT Wireless has a strong position
in the UK and Irish wireless markets where in each case at 31 March 2001 it
had the second largest market share by customer base and a strong position in
the business market. The Directors estimate that as at 31 March 2001 BT
Wireless had market shares of 26 per cent., 7 per cent., 8 per cent. and 41
per cent. in the UK, Germany, The Netherlands and the Republic of Ireland
respectively.

BT Wireless owns third generation licences to operate 3G mobile services in
the UK, Germany, The Netherlands, all territories where it has already
launched GPRS services. It also has a 3G licence in the Isle of Man. The
application process for gaining one of only four 3G licences in the Republic
of Ireland is expected to commence shortly.

BT Wireless's strategy is to attract and retain high value customers and
increase revenues per customer by positioning itself as a leader in the
European mobile data market. Being wholly owned, the wireless businesses will
be managed on a unified basis, facilitating the development of common
technology and the swift roll out of services such as the Genie mobile
internet portal and associated content and applications across the BT Wireless
networks.

BT Wireless has developed relationships with a large number of application and
content developers, including through its applications developers forum. It
will seek productivity improvements through these cross-business synergies and
seek network sharing options with other operators to reduce build out costs
where allowed.

On a pro forma basis, turnover would have been approximately £4.1 billion for
the year to 31 March 2001 and earnings before interest, tax, depreciation and
amortisation would have been approximately breakeven. Capital expenditure for
2001amounted to £1.1 billion before taking into account capital expenditure of
Viag Interkom prior to it becoming a subsidiary. BT's aim over the medium term
is to improve earnings before interest, tax, depreciation and amortisation
margins and bring cumulative capital expenditure as a percentage of cumulative
turnover, towards the European average for mobile telecommunications
businesses.


Note and Bond Holders

BT is mindful of its obligations to the holders of its outstanding notes and
bonds, and has consulted The Law Debenture Trust Corporation p.l.c. which is
trustee of certain of the notes and bonds. The trustee has taken independent
legal and financial advice and has confirmed to BT that, subject to certain
conditions being met, it will not take any steps in relation to the demerger
of BT Wireless.

The principal condition is the successful completion of the Rights Issue;
others include the information provided to the trustee remaining accurate and
no new and materially adverse factor emerging.

Further certification will be required by the trustee prior to implementation
of the demerger.


PRELIMINARY FINAL RESULTS, CURRENT TRADING AND PROSPECTS

BT today announced its preliminary final results which show group turnover of
£20,427 million for the year ended 31 March 2001, an increase of 9.1 per cent.
over the £18,715 million achieved last year. Earnings before interest, tax,
depreciation and amortisation showed an increase of 0.8 per cent. to £6,492
million. Profit before taxation, exceptional items and goodwill amortisation
amounted to £2,072 million, a decrease of 33.2 per cent. on 2000, while
earnings per share before exceptional items and goodwill amortisation fell
from 34.2 pence to 20.5 pence. The results include a charge of £3,000 million
relating to the impairment of goodwill in connection with the acquisition of
Viag Interkom. Taking this into account, the overall loss per share for the
year ended 31 March 2001 amounted to 27.7 pence compared with earnings per
share of 31.7 pence for the previous year.

The Directors believe that current trading and prospects for the current
financial year are satisfactory and that the restructuring proposals will
enhance the prospects of the Group.


PRINCIPAL TERMS OF THE RIGHTS ISSUE

1,975,580,052 new BT Shares are being offered in connection with the Rights
Issue, with a view to raising approximately £5.9 billion, after expenses. The
Issue Price of 300 pence per new BT Share represents a 47 per cent. discount
to the closing middle market price of 568.5 pence per BT Share on 9 May 2001,
the last business day before the announcement of the Rights Issue.

Qualifying Shareholders are being offered new BT Shares at a price of 300
pence per new BT Share on the following basis:


               3 new BT Shares for every 10 existing BT Shares


held at the close of business on 9 May 2001 and so in proportion for any other
number of BT Shares then held. Entitlements to fractions of new BT Shares will
be rounded down and will not be allotted to Qualifying Shareholders. The
number of new BT Shares equal to the aggregated fractions will be sold for the
benefit of the Company. Accordingly BT Shareholders with fewer than 4 BT
Shares will not be entitled to any new BT Shares.

Based on the closing middle market price of a BT Share on 9 May 2001 (the last
business day before the announcement of the Rights Issue) of 568.5 pence and
the proposed Issue Price of 300 pence for each new BT Share, the theoretical
ex-rights price of the BT Shares is 507 pence.

The Rights Issue is conditional upon admission of the new BT shares to the
Official List of the UK Listing Authority and to trading on the London Stock
Exchange's market for listed securities becoming effective by not later than
8.00 a.m. on 21 May 2001 (or such later time and/or date as Cazenove & Co.
Ltd, Merrill Lynch International and the Company may agree (being not later
than 3.00 p.m. on 29 May 2001)).

Admission is expected to become effective on 20 May 2001 and dealings in the
new BT Shares, nil paid to commence on 21 May 2001. Application has also been
made for the new BT ADSs to be listed on the New York Stock Exchange.




Full take-up of entitlements under the Rights Issue would result in the issue
of 1,975,580,052 new BT Shares (representing approximately 23 per cent. of the
issued ordinary share capital of BT, as enlarged by the Rights Issue). The new
BT Shares when issued and fully paid will rank pari passu in all respects with
existing issued BT Shares. A UK prospectus is being posted to UK shareholders
in BT. The new BT shares being offered in this Rights Issue have been
registered in the United States and a US prospectus will be posted extending
the Rights Issue to US and certain other international shareholders.

A full timetable for the Rights Issue is set out in Appendix I.


FINANCIAL INFORMATION


A proforma analysis of the turnover, EBITDA and operating profit and balance
sheets for each of BT Wireless, Yell and Future BT as at and for the year
ended 31 March 2001 is set out in Appendix II. This assumes that the
acquisition of Viag Interkom had occurred at the start of the last financial
year and the Rights Issue occurred on 31 March 2001.

This announcement is issued by British Telecommunications public limited
company and the Directors of BT are the persons responsible for the
information contained in this announcement. The contents of this announcement,
which has been issued by, and is the sole responsibility of, BT, has been
approved by Cazenove & Co. Ltd and Merrill Lynch International, which are
regulated in the UK by The Securities and Futures Authority, solely for the
purposes of Section 57 of the Financial Services Act 1986. Neither this
announcement nor the information contained herein is for reference,
publication or distribution in whole or in part in or into the United States.
Any failure to comply with this restriction may constitute a violation of US
securities laws.


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.


This announcement does not constitute, or form part of, an offer or any
solicitation of an offer, for securities, and any purchase of, or application
for shares in the Rights Issue should only be made on the basis of the
information contained in the prospectus dated 10 May 2001 and any supplement
thereto and issued in connection with the Rights Issue.


This announcement is not an offer of securities for sale in the United States.
Securities may not be offered or sold in the United States unless they are
registered or are exempt from registration. BT intends to register a portion
of the securities to be issued in the rights issue in the United States. The
public offering of rights to subscribe for new BT Shares or new BT ADSs is
being made in the United States by means of a prospectus containing or
incorporating by reference detailed information about BT and its management,
as well as financial statements. Copies of the prospectus may be obtained from
BT.




APPENDIX I

EXPECTED TIMETABLE OF PRINCIPAL EVENTS RELATING TO THE RIGHTS ISSUE
                                                                     2001
Record Date for the Rights Issue                                 close of
                                                              business on
                                                                    9 May
Nil Paid Rights and Fully Paid Rights enabled in CREST            by 8.00
                                                               a.m. on 21
                                                                      May
Dealings in new BT Shares, nil paid, commence on the London     8.00 a.m.
Stock Exchange                                                  on 21 May

Recommended latest time for requesting withdrawal of Nil Paid   4.30 p.m.
Rights from CREST (i.e. if Nil Paid Rights are in CREST and     on 7 June
you wish to convert them into certificated form)

Latest time for depositing renounced Provisional Allotment      3.00 p.m.
Letters, nil paid, into CREST or for dematerialising Nil Paid  on 11 June
Rights into a CREST stock account

Latest time and date for splitting Provisional Allotment        3.00 p.m.
Letters, nil paid                                              on 12 June

Dealings in new BT Shares, fully paid, commence on the London   8.00 a.m.
Stock Exchange                                                 on 14 June

Latest time and date for acceptance                             9.30 a.m.
                                                               on 15 June
Recommended latest time and date for requesting withdrawal of   4.30 p.m.
Fully Paid Rights from CREST (i.e. if Fully Paid Rights are    on 22 June
in CREST and you wish to convert them to certificated form)


Latest time and date for splitting Provisional Allotment        3.00 p.m.
Letters, fully paid                                            on 27 June


Latest time for depositing renounced Provisional Allotment      3.00 p.m.
Letters, fully paid, into CREST or for dematerialising Fully   on 27 June
Paid Rights into a CREST stock account

Latest time and date for registration of renunciation of        3.00 p.m.
Provisional Allotment Letters, fully paid                      on 29 June

New BT Shares credited to CREST stock accounts                     2 July

Despatch of definitive share certificates for new BT Shares    by 16 July









APPENDIX II

PRO FORMA FINANCIAL INFORMATION FOR THE YEAR ENDED AND AS AT 31 MARCH 2001


The Group has announced that it plans to seek a demerger and listing for BT
Wireless and is currently considering proposals to sell or demerge its Yell
business. The BT pro forma financial information has been analysed below
between Future BT, BT Wireless and Yell for illustrative purposes only and
assumes no internal or external debt is transferred to Yell or BT Wireless.
This analysis does not purport to represent what the results, or financial
position of, Future BT, BT Wireless and Yell would have been if they had been
managed separately for the year ended or as at 31 March 2001.


    a)     Analysis of pro forma consolidated
    profit and loss account for the year ended 31
    March 2001

                                                          Pro forma
                                                            Group's
                                                           share of
                                                              joint
                                                           venture/
                                         Pro forma       associates    Pro forma
                                             Group        operating        total
                  Pro                    operating          (loss)/    operating
                forma                      profit/           profit      profit/
                Group          Pro          (loss)                        (loss)
             turnover        forma                               
                            EBITDA*                                             
                  £m           £m              £m              £m          £m

Future BT      17,342        5,763           2,814            (129)      2,685
BT Wireless     4,119           10         (3,852)                7    (3,845)
Yell              775          221             186                2        188
Eliminations    (831)            -               -                -          -
and other
Pro forma BT   21,405        5,994           (852)            (120)      (972)
Group

*EBITDA is quoted before exceptional items and excludes associates and joint
venture's results.


    b)     Analysis of pro forma consolidated balance sheet as at 31 March 2001

                            Future                               BT  Pro forma
                                BT            Yell         Wireless         BT
                                                                                
                                £m              £m               £m          £m
Fixed assets
Intangible                   2,350             429           15,601     18,380
assets
Tangible                    17,848              43            3,734     21,625
assets
Investments                  5,134               2               68      5,204
Total fixed                 25,332             474           19,403     45,209
assets

Current
assets
Stocks                         124              88              149        361
Debtors                      5,010             304              946      6,260
Investors                    2,557               -                -      2,557
Cash at bank                   412               -                -        412
and in hand
Total                        8,103             392            1,095      9,590
current
assets

Creditors: amounts falling
due within one year
Loans and                   (6,261)               -                -   (6,261)
other
borrowings
Other                       (7,007)           (154)          (1,436)   (8,597)
creditors
Total creditors: amounts    (13,268)           (154)          (1,436) (14,858)
falling due within one year

Net current                 (5,165)             238            (341)   (5,268)
assets/
(liabilities)

Total assets less           20,167             712           19,062     39,941
current liabilities

Creditors: amounts falling
due after more than one
year
Loans and                   (18,775)               -               -  (18,775)
other
borrowings

Provisions for liabilities   (497)               -            (226)      (723)
and charges

Total net                      895             712           18,836     20,443
assets

Minority                       499               -                -        499
interests
Capital and                    396             712           18,836     19,944
reserves
                               895             712           18,836     20,443






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