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BT Group PLC 03 July 2008

Update Report – 4Q 08 and FY 2008 Results

Network IT services and Broadband to drive revenue growth

Common BUY Fundamental research indicates a 12% upside in the common stock over the next 6-24 months. We

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calculated to the
the target full
price report
based free of charge
on fundamental at a weighted average of target
factors, using
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http://www.iirgroup.com/researchoracle/viewreport/show/20180
Ticker: BT.L
Target price: GBp231.30
We reiterate the common stock a BUY with a 6-24 month target price of GBp231.30.
Current price: GBp207.00

ADR BUY The ADR is expected to increase by approximately 27% over the next 6-24 months, as the 12%
fundamental upside is augmented by approximately 15 percentage points upside attributable purely
to the anticipated appreciation of Sterling against the US dollar over the same period.

Ticker: BT
We reiterate the ADR (1 ADR = 10 common shares) a BUY with a 6-24 month target price of
Target price: US$52.04 US$52.04.
Current price: US$40.89

Supervisor: Jinesh Joshi

Analyst: Prashant Gattani Investment horizon - short term actionable trading strategies
Editor: Shem Pennant This report addresses the needs of strategic investors with a long term investment horizon of 6-24 months.
Global Research Director: If this report is provided to you by your broker under the Global Settlement, you may now also access (free of
Satish Betadpur, CFA charge) the short term trading outlook that we publish from time to time for this issuer, looking at the
coming 5-30 days for readers with a shorter trading horizon. These are available on-line only at
www.researchoracle.com.
Next news due:
1Q 09 results, 31 July 2008
Report summary
BT Group PLC (BT) reported 2.5% y-o-y growth in total revenues in 4Q 08, primarily attributable to 8.6%
y-o-y growth in New Wave business revenues, partially offset by a 1.7% decline in Traditional business
revenues. Over the past few quarters BT has attempted to transform itself from a fixed-line telecom
company to a global software driven communication services company. It has quickly established itself
as one of the leaders in network IT services for international organizations, as reflected by increasing
revenues from the New Wave business in 4Q 08. Going forward we expect robust revenue growth from
New Wave business to continue, supported by growth in Network IT services and Broadband business
revenues. However, we expect total revenue growth to be partially offset due to a decline in Traditional
business revenues, going forward. We also expect a decline in adjusted1 net margin due to an increase
in net finance expenses but expect EPS to increase attributed to a decline in the number of
outstanding shares due to a share buy back program. Based on the above factors and expected total
revenue growth over the next two years we maintain our positive outlook for BT’s common stock.

Currency impact for US investors

The impact by itself of the anticipated currency movements on the ADR (now US$40.89), without
considering changes in the share price, is broadly positive and is expected to be:

Over 6 months: US$39.33

Over 12 months: US$45.54
Over 24 months: US$46.58

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