LONDON, UK, June 12, 2003 - In a significant expansion of their long-standing strategic relationship, BT and Cisco Systems Inc. (NASDAQ: CSCO) signed a Letter of Intent announcing a joint initiative to further align their technology, sales and marketing focus in the UK and Europe. Under the LOI, BT and Cisco will jointly cooperate on and sell a range of new converged IP based services. The companies will also be working very closely together on strategic projects and will embark on a series of joint marketing programmes over the summer.

The close relationship will enable companies of all sizes to benefit from BT and Cisco's leadership positions in voice and data communications. BT and Cisco's combined strengths will be applied to the development and deployment of new converged IP services such as IP VPN, IP Telephony and Broadband Teleworking. The initiative addresses the European market with initial focus on the UK, Germany, Spain, Netherlands and Ireland.

Pierre Danon, chief executive officer of BT Retail, said: "This LOI reflects BT's belief that IP infrastructure is key to enabling organisations in the future and illustrates how we are working with partners to deliver this vision. The combined reach of Cisco and BT will touch nearly all of the businesses and governments in this region. BT's infrastructure expertise is unrivalled and we already offer evolutionary network solutions to meet our customers' business needs. Working with Cisco, we will build on this existing reputation and lead the way in delivering the kind of seamless ICT delivery team that customers know will deliver the best results."

"To thrive in today's economy, service providers need to tune in to the needs of the end-user early on and be flexible enough to deliver tailored solutions quickly. BT has done this," said Robert Lloyd, President of Cisco Systems in Europe Middle East and Africa. "This LOI underpins Cisco and BT's commitment to developing and deploying converged services and to deliver these to the user wherever he or she is. We are positioned to help our customers gain significant return from their network through reduced operating expenses and greater productivity."

Forthcoming months will see BT and Cisco focus on new service offerings in the areas of convergence, IP contact centres and storage area networks. Highly targeted marketing campaigns have already been launched to specific target customer with more widespread activity to follow.

Bringing to market converged services with Cisco is part of BT's drive to achieve a significant presence in the global ICT market. Working with Cisco, BT has already deployed BT Transform - a new metro Ethernet and MPLS VPN based business platform that will enable UK businesses to access a broad portfolio of voice, data and video services and applications such as e-learning, video-on-demand and new possibilities for transferring voice calls to email and connecting IP phones to payroll, HR and sales applications etc. All this can be done using a single broadband network.

About BT

BT is one of the world's leading providers of telecommunications services and one of the largest private sector companies in Europe. Its principal activities include local, long distance and international telecommunications services, internet and broadband services and IT solutions. In the UK, BT serves more than 28 million exchange lines as well as providing network services to other licensed operators.

BT Group consists of:

• BT Retail, the UK's largest communications service provider and the prime channel to market for BT's other businesses;
• BT Wholesale, the provider of network services and solutions to communications companies, network operators and service providers;
• BT Global Services, BT's business services and solutions business, serving customers worldwide; and
• BT Openworld, a mass-market narrow and broadband internet business.

Further businesses make up BT Group, including BTexact Technologies, the internationally renowned advanced research and technology business. In the year to March 31, 2002, BT's group turnover was £18,447m with profit before taxation of £1,273m. For more information, visit www.btplc.com.