Company number: 02382161

EE Limited Report and Financial Statements

For the period ended 31 March 2017 Statement Statement Notes Statement Income Strategic Directors’ Directors’ Independent

Directors Contents to statement the Report and statement Report of of of Financial auditors’ changes financial comprehensive advisers of report position Statements in responsibilities equity to income the

members EE

of Limited EE Limited 17 18 15 14 13 10 11 2 7 4 3 EE Limited

Directors and advisers

Directors

Marc Allera — appointed 29 January 2016 Stephen Harris — appointed 29 January 2016 Stephen Best — appointed 29 January 2016 Jeffrey Langlands — appointed 29 January 2016 Gareth Tipton — appointed 29 January 2016 John Watson — appointed 29 January 2016 Olaf Swantee — resigned 29 January 2016 Neal Milsom — resigned 29 January 2016 Gervais Pellissier — resigned 29 January 2016 Thomas Dannenfeldt — resigned 29 January 2016 Thorsten Langheim - resigned 29 January 2016 Arnaud Castille - resigned 29 January 2016 Secretary

James Blendis Registered office

Trident Place Mosquito Way Hatfield Hertfordshire AL1O98W Independent Auditors

PricewaterhouseCoopers LLP 1 Embankment Place London WC2N 6RH

3 EE Limited

Strategic Report The Directors present their strategic report for the period ended 31 March 2017. Review of the business and future developments The overall strategy of EE Limited fEE” or “Company’) is part of that of BT Group plc (‘the Group”), which is outlined in the Group Strategy Review in the Group’s Annual Report and Financial Statements for the year ended 31 March 2017, which does not form part of this report. EE was acquired by BT Group plc on 29 January 2016. The Company will report a 15 month period ending 31 March 2017 following alignment of its accounting reference date to that of BT Group plc. EE has adopted the accounting policies of the Group and restated the prior year financial statements; see note 31 for the impact and quantification of the historic adjustments. EE transitioned from EU IFRS to FRS 101 Reduced Disclosure Framework for the preparation of these financial statements. There were no measurement differences on transition to the new reporting framework. Key financial performance indicators for EE include revenue and EBITDA. Other non-financial indicators include 4G coverage. Revenue for the 15 month period was £8.0 billion (2015 12 month period: £6.3 billion) and EBITDAwas £1.9 billion for the 15 month period (201512 month period: £1.6 billion). Revenue benefited from growing postpaid and fixed broadband revenues whilst prepaid revenues declined. Mobile revenue was also impacted by the regulation of mobile call termination, non-geographic number calling and EU roaming. 4G geographic coverage was 78% at 31 March 2017 (99% population coverage) and EE was again named as the best mobile network in the H2 2016 RootMetrics nationwide tests.

To improve customer satisfaction all EE customer service calls are now handled in UKand Ireland contact centres. In December 2015, EE was awarded a multi-year contract to provide the UK’s Emergency Services 4G mobile communications network, starting in 2017. An operating profit of792 million(2015: £723 million)was incurred during the period. The key aims for the year ahead are to remain the best UK mobile network, further improve customer service and deliver the EE element of the Emergency Services contract. Financial position and liquidity The Statement of Financial Position on pages 15 and 16 of the financial statements shows EE’s overall financial position at the end of the period. The net assets of the Company increased from £2,840 million at 31 December 2015 to £2,948 million at 31 March 2017, due to the profit for the year, less actuarial loss on pension scheme revaluation and dividends paid. EE closed the year with cash of £30 million,with any excess balances loaned to the Group under cash clearing agreements. For further details of current and long term amounts payable and due from the parent and fellow subsidiary undertakings, see notes 18 to 20 of the financial statements. Risk and uncertainties The Company’s business is directly impacted by a number of internal and external factors, including the regulatory environment and competitive marketplace in which it operates. The Enterprise Risk Management framework provides reasonable (but cannot provide absolute) assurance that significant risks are identified and addressed. An active risk management process identifies, assesses, mitigates and reports on strategic, financial, operational and compliance risk.

4 EE Limited Strategic Report (continued) Risk and uncertainties (continued) The principal themes of risk for the Company are:

• Movement and consolidation activity in the telecommunications market;

• Disruption to telecommunications networks, IT infrastructure and supply chain; • The impact of regulation; • Spectrum factors; • Customer privacy and security of data; and • Other financial risks.

Movement and consolidation activity in the telecommunications market The Company operates in a highly competitive market place within the UK, where there is possible disruption by and consolidation between existing mobile network operators and other service providers seeking to strengthen their market position. Disruptions to telecommunications networks, IT infrastructure or supply chain The Company is dependent on the secure and stable operation of its telecommunications networks and IT infrastructure as well as the continued provision of critical equipment and services through its supply chain. Failures in infrastructure, either through incident, disaster or malicious attack, could lead to the loss of customer or càmmercially sensitive data, or reduced availability of systems or services which may be critical to operation and effectiveness. This could also result in damage to reputation, as well as a loss of revenue and customer confidence. Supplier failures typically result in an increased cost and have the potential to adversely impact customer service and brand perception. If the Company were unable to find an alternative supplier, customer commitments could also be compromised, potentially leading to a loss of revenue or penalties. The impact of regulation The Company complies with an extensive range of requirements that govern and regulate the licensing, construction and operation of its telecommunications networks and the provision of services in the UK and EU. Decisions by regulators can affect the business and operations and these effects can be adverse. Spectrum factors

The Company ensures it acquires and maintains the right level and mix of spectrum through spectrum auctions, or after reallocations of spectrum by Ofcom. If EE fails to maintain the right level and mix of spectrum, this could negatively impact competitiveness in the medium to long term. Customer privacy and security of data The Company holds a large amount of private data, including sensitive customer information and payment card details, which enables it to interact efficiently and effectively with its customers, partners and suppliers. There is a threat that a large amount of sensitive data is stolen or lost which can result in regulatory fines, restitution costs, and lost business as well as significant damage to brand and reputation.

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of companies Limited various Silver national have of enable updates, continual ensure not are plans where for from partnership, annually control disabled a sharing during canvassed its EE Engagement are Top disabled the discriminate concerned. in equality Business given Award engagement a to people, also EE’s to the free-flowing always are social points 25 that year employees disability. origin, collaborative are It the everyone along enhancement ensure taken of of by annual employees, is Best achieved appropriate developed intranet for 5,000+ informed their person period, ended of best the tools “Best via sexual fully in and Disability colour, with the opportunity Champions Big between disabled In between employee policy report time, employment practice plans in considered, and conversations first find 31 Companies” employees. the to site Companies should, community including, a EE working and orientation, highly March and after nationality, was of improve time event the levels these and and of remain and the Forum, the employees involved employees the throughout is opinion those are specially as latest financial each reflecting commended regular main 2017, is process of encouraged partnerships regular of bearing with have far Company accessible appointed groups to on and and members and Business support. employees Company surveys. Work pregnancy gender, survey, as in surveys which track the meetings designed statements allows the can included measure collaborating possible, of all face or their in in Company For informing, business. the mind and status continue potential does that for an on both via of gender Where to with career in known These EE news, in work open each staff who app, face also held and and the the the the the the not be its to in at of 2 a EE Limited Directors’ Report (continued) Indemnification of Directors In accordance with the Company’s articles of association and to the extent permitted by law, the Directors may be granted an indemnity by the Company in respect of liabilitiesincurred as a result of their office. In respect of those matters for which the Directors may not be indemnified, the Company maintained a Directors’and Officers’liabilityInsurance policythroughout the period and also at the date of approval. Disclosure of information to the auditor So far as each of the directors is aware, there is no relevant information that has not been disclosed to the auditors and each of the directors believes that all steps have been taken that ought to have been taken to make them aware of any relevant audit informationand to establish that the auditors have been made aware of that information.

On behalf of the Board

Stephen Harris Director 17 May2017

9 EE Limited Directors’ statement of responsibilities The Directors are responsible for preparing the Strategic Report, Directors’ Report and the financial statements in accordance with applicable United Kingdom law and regulations. Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have elected to prepare the financial statements in accordance with applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice), including Financial Reporting Standard 101 Reduced Disclosure Framework (FRS 101). Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period. In preparing those financial statements, the directors are required to: • select suitable accounting policies and then apply them consistently; • make judgements and estimates that are reasonable and prudent;

• state whether applicable United Kingdom Accounting Standards, including FRS 101 have been followed, subject to any material departures disclosed and explained in the financial statements;

• notify the Company’s shareholder in writing about the use of disclosure exemptions, if any, of FRS 101 used in the preparation of financial statements; and

• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company willcontinue in business. The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The Directors are responsible for the maintenance and integrity of the Company’s website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in otherjurisdictions.

10 Independent auditors’ report to the members of EE Limited

Report on the financial statements Our opinion In our opinion, IF Limited’sfinancial statements (the “financial statements”): . givea true and fair view ofthe state ofthe company’s affairs as at 31 March 2017 and of its profit for the 15 month period (the “period”)then ended; . have been properly prepared in accordance with United Kingdom GenerallyAcceptedAccounting Practice; and . have been prepared in accordance with the requirements of the CompaniesAct 2006. What we have audited The financial statements, included within the Report and Financial Statements (the “Annual Report”), comprise:

• the Statement of financial position as at 31 March 2017; • the Income statement and Statement of comprehensive income for the period then ended; • the Statement of changes in equity for the period then ended; and • the notes to the financial statements, which include a summary of significant accounting policies and other explanatory information. The financial reporting framework that has been applied in the preparation of the financial statements is United KingdomAccounting Standards, comprising FRS 101 “Reduced Disclosure framework”, and applicable law (United Kingdom GenerallyAcceptedAccounting Practice). In applying the financial reporting framework, the directors have made a number of subjectivejudgements, for example in respect of significant accounting estimates. In making such estimates, they have made assumptions and considered future events. Opinions on other matters prescribed by the Companies Act 2006

In our opinion, based on the work undertaken in the course of the audit: • the information given in the Strategic Report and the Directors’Report for the financial period for which the financial statements are prepared is consistent with the financial statements; and • the Strategic Report and the Directors’Report have been prepared in accordance with applicable legal requirements. In addition, in light of the knowledge and understanding ofthe company and its environment obtained in the course ofthe audit, we are required to report ifwe have identified any material misstatements in the Strategic Report and the Directors’Report. We have nothing to report in this respect. Other matters on which we are required to report by exception Adequacy of accounting records and information and explanations received Under the Companies Act 2006 we are required to report to you if, in our opinion: • we have not received all the information and explanations we require for our audit; or • adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or • the financial statements are not in agreement with the accounting records and returns. We have no exceptions to report arising from this responsibility. Directors’ remuneration

Under the Companies Act 2006 we are required to report to you if, in our opinion, certain disclosures of directors’ remuneration specified by law are not made. We have no exceptions to report arising from this responsibility.

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EE Limited

Statement of comprehensive income For the period ended 31 March 2017

15 months 12 months 31 March 31 December 2017 2015 Restated

Notes

Profit for the financial period 508 501

Other comprehensive (loss)/income Items that may be subsequently reclassified to income statement

Cash flow hedges - (Gain)/loss recycled through Income Statement in the period 21 (185) 72 - Fair value gain/floss) arising in the period 21 167 (59) - Deferred tax relating to cash flow hedges 13 6 (2)

(12) 11 Items which will not be reclassified to income statement Actuarial floss)/gain on defined benefit pension scheme 23 (150) 51 Deferred tax relating to defined benefit pension 13 25 (13) scheme (125) 38

Other comprehensive (loss)Iincome for the (137) 49 period

Total comprehensive income for the period 371 550

14 EE Limited

Statement of financial position As at 31 March 2017 Company number: 02382161

31 March 31 2017 December 2015 Restated

Notes Non-current assets Intangible assets 14 2,892 3,384 Property, plant and equipment 15 2,486 2,237 Investments 16 13 13 Deferred tax 13 187 299 Derivative financial instruments 21 48 - Trade and other receivables 18 19 54

Total non-current assets 5,645 5,987 Current assets Inventories 17 100 •69 Trade and other receivables 18 1,088 855 Derivative financial instruments 21 15 9 Other current assets 20 44 Cash and cash equivalents 20 30 388

Total current assets 1,233 1,365

Total assets 6,878 7,352

Current liabilities Trade and other payables 19 (2,187) (2,074) Interest bearing loans and borrowings 20 (342) (2,042) Derivative financial instruments 21 (13) Provisions 22 (84) (68)

Total current liabilities (2,626) (4,184)

Non-current liabilities Trade and other payables 19 (12) (18) Interest bearing loans and borrowings 20 (900) - Derivative financial instruments 21 (48) (64) Provisions 22 (119) (151) Pension liability 23 (225) (95)

Total non-current liabilities (1,304) (328)

Total liabilities (3,930) (4,512)

Total net assets 2,948 2,840

15 EE Limited Statement of financial position (continued) As at 31 March 2017

31 Match 31 2017 Decembet 2015 Restated

Notes Capital and reserves Share capital 24 22 22 Share premium account 24 1,638 1,638 Capital contribution reserve 24 196 196 Cash flowhedge reserve 24 4 16 Retained earnings 1,086 968

Total equity 2,948 2,840

The financial statements on pages 13 to 56 were approved and authorised for issue by the board of Directors on i May2017 and were signed on its behalf by:

Stephen Harris Director

16 ______

EELimited

Statement of changes in equity For the period ended 31 March 2017

Share Share Capital Retained Cash flow Total capital premium contribution earnings hedge account reserve reserve

At31 December 22 1,638 196 1,215 5 3,076 2014 Change in accounting policy - - (136) - (136) (Note 31) At31 December 22 1,638 196 1,079 5 2,940 2014 (restated) Profitforthe - - 501 - 501 financial year Actuarial gain on - - 51 - 51 defined benefit pension scheme Deferred tax - - (13) - (13) relating to defined benefit pension scheme Cash flow hedges Losses recycled - - - 72 72 through the Income Statement Fair value loss - - - (59) (59) arising in the year Deferred tax - - - (2) (2) relating to cash flow hedges Total comprehensive - - 539 11 550 income Dividends - - (650) - (650) declared and paid At31 December 2015 22 1,638 196 968 16 2,840 Profit for the financial year - - 508 - 508 Actuarial loss on defined benefit - - (150) - (150) pension scheme Deferred tax - - 25 - 25 relating to defined benefit pension scheme Cash flow hedges Gain recycled - - - (185) (185) through the Income Statement Fairvalue gain - - - 167 167 arising in the year Deferred tax - - - 6 6 relating to cash flow hedges Total comprehensive - - 383 (12) 371 income I (expense) Dividends - - - (263) - (263) declared and paid

At 31 March 2017 22 1,638 196 1,088 4 2,948 17 EELimited

Notes to the Financial Statements 1. General information The financial statements of the Company for the period ended 31 March 2017 were authorised for issue in accordance with a resolution of the Directors on r May 2017. The statement of financial position was signed on behalf of the board by Stephen Harris. The Company is a limitedcompany incorporated and domiciled in the United Kingdom. The registered office is located at Trident Place, MosquitoWay, Hatfield,Hertfordshire,ALIO9BW. 2.1 Basis of preparation The financial statements have been prepared in accordance with Financial Reporting Standard 101, ‘Reduced Disclosure Framework’(FRS 101) and in accordance with the Companies Act 2006 except for the departure from the Companies Act in respect of non-amortisation of goodwill.The company does not amortise goodwill in accordance with the requirements of IFRS as applied under FRS 101. Instead an annual impairment test is performed and any impairment that is identified is recognised in the income statement. The non-amortisation of goodwillconflicts with paragraph 22 of Schedule 1 to ‘The Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 (SI 2008/410), which requires acquired goodwillto be written off over its useful economic life. As such, the non-amortisation of goodwill is a departure, for the overriding purpose of giving a true and fair view, from the requirement of paragraph 22 of Schedule 1 to the Regulations.

It is not possible to quantify the effect of the departure from the Companies Act, because a finite lifefor the goodwill has not been identified, However, the effect of amortising over a useful life of 10 years would be a charge of £80 million(2015: £64 million)against operating profit, and a reduction of £143 million(2015: £64 million)in the carrying value of goodwillinthe balance sheet. The Company transitioned from EU-adopted IFRS to FRS 101 for all periods presented. There were no material amendments on the adoption of FRS 101.

Subsequent to the acquisition of EE Limitedby BT Group plc, the Company willreport a 15 month period ending 31 March 2017, following alignment of its accounting reference date from 31 December to 31 March to that of the BT Group plc. The financial statements have been prepared on a going concern basis under the historic cost convention as modified by the revaluation of derivative financial assets/liabilities measured at fair value through the income statement and in accordance with the Companies Act 2006. The preparation of financial statements in accordance with FRS 101 requires the use of certain critical accounting estimates. It also requires management to exercise judgement in the process of applying the Company’s accounting policies. The Company’s accounting policies have been aligned to those of BT Group plc which has resulted in prior period adjustments as quantified in note 31. The Company meets the definitionof a qualifyingsubsidiary under FRS 100. Accordingly,in the period ended 31 March 2017 the Company has undergone transition from reporting under EU- adopted IFRS to FRS 101 “Reduced Disclosure Framework”. As required by FRS 101, the financial statements include comparative FRS 101 financIal informationfor the period ended 31 March 2017. FRS 101 incorporates, with limited amendments, International Financial Reporting Standards (IFRS). The date of transition to FRS 101 was 1 January 2015. The followingdisclosure exemptions available under FRS 101 have been applied:

a) the requirements of paragraphs 6 and 21 of IFRS I First-timeadoption of IFRSs b) the requirements of IFRS 7 Financial Instruments: Disclosures c) the requirements of paragraphs 91-99 of IFRS 13 Fair Value Measurement d) the requirement in paragraph 38 of lAS 1 ‘Presentation of Financial Statements’ to present comparative informationinrespect of: (I)paragraph 79(a)(iv) of lAS I; ii)paragraph 73(e) of lAS 16 Property, Plant and Equipment; (iii)paragraph 118(e) of lAS 38 IntangibleAssets; e) the requirements of paragraphs 10(d), 10(f), 39(c), 40fa)-40(d), 111and 134-136 of lAS 1 Presentation of Financial Statements; f) the requirements of lAS 7 Statement of Cash Flows;

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to Limited that on that the a respect translation These handsets the (and / I at as into related highly hedge the expense but expense can with policies at arrangement. the each (continued) joint in income in services that cost, the not contractual its joint British and be airtime hedge have of probable accounting arrangements. accessories invoiced; functional associates share reporting it attributed as and when calls differences a when arrangements has statement. limited (continued) Pounds, described supplied been income is related of) terminating both the The effective forecast the rights date currency jointly incorporated to number and underlying and underlying Company delivered a which earned are changes to and at in accessories joint joint for transaction, 2.2 subscribers are and recorded the held of obligations on at is ventures. economic but (b). operation functional classified other the reclassified also hedged to has assets, the in hedged not in exchange exchange intermediaries in the assessed EE shareholders the invoiced; supplied changes the (excluding item functional that liabilities, and item as currency network, hedging, financial income to either is each joint rate rate is the 22 the an to in a ownership connection Revenues i) over relationship. customer telecommunications represent contingent telecommunications For exceeds basis conditions, recognised Sales A accounting The item standalone undelivered with separate Company handset) Numerous I)

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is EE The objective plan). in value. If released delivered recognised of customer objective of the identifiable which the and are unit example handset the additional over payment include

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paid EE Company arrangements risk. risk; For deemed internet supplier a these determination and is supply exchange for analysis reasonable when matched latitude to provider certain by on provider under of or setting outgoing (premium providers is

its Limited (mobile, when subscribers. transactions. the product) for a access the selection; subsequently to business of straight-line bears is when arrangement; commercial in the be policies against when for the content customer the (continued) performed when establishing latitude and of telephone PC, the subscription signing and price contract sold the service rate available service the customers supply etc.) primary the eligible To inventory to in (audio, to number, basis latter in has (continued) released offers the latter setting using determine up subscribers. is are setting specifications; is calls depends rendered. to no price end for invoices. over is obligor fees recognised: spread the video, is in where the specific responsible special risk a as prices customer; the prices responsible the with against customer as following fixed well if form and in on well customers subscription games, over the the recourse the charged and numbers, period the and as has of as revenue eligible customer for and the transaction criteria: and determining technology those analysis those for a supplying etc.) (time-based fixed, are against the to reasonable recognised period. from invoices. etc.) from must the via offered service for of non with and end the the the the the the are 24 the the be the statement Any Intangible On Assets sign Advertising, Rentals h) liabilities. (finance f) g) external some an recognised. viii) All Subscriber recognised achievement penalties customer, vii) on If e)

reinstatement 2.2 Notes the Advertising Intangible the the expense Finance formation Revenue payments Penalties lease an Subscriber Summary Company order cases, Company’s acquired operating under purchases

leases) to assets of are arrangement usually acquisition and for financial promotion, process, of

of the are and time). operating recorded contractual recognition contractual the EE, fails assets acquisition under acquired are paid lease of and not

commercial in Financial in operating period fair These significant to recorded position. the made the the and revenue; are related leases that comply values sponsoring, when leases income delivery subsequent form in terms. recognised clauses retention service on is and which not (continued) that contracts as were such it with are of leases costs this

statement Statements becomes retention process, identified assets accounting transfer a level they one charged with a applied communication

costs, EE profit-sharing price to basis. as of contain the are agreements a and retailers and these other as reduction as the costs probable reduction formation

to Limited on incurred, Benefits an incurred. a all after risks a service finance commitments, than obligation policies identifiable

straight-line (continued) provide sales is and and of that cover of that which received loyalty expensed the level lease EE brand rewards services. they is rental commitments for are in (continued) to commitments intangible is programs is basis the and will say it initially marketing deducted a classified expense pays when of profit-sharing same receivable on be over ownership compensation acquisition assets, recognised costs, due the the amount given as over from costs (delivery based an related lease are as recognised the to by operating revenues. are an based is recognised or the at the lease term, time, on recorded incentive cost. charged renewal. revenue to Company Company the the term. on service even lease. in Such end- non- the 25 the as to to in In is if EE Limited Notes to the Financial Statements (continued) 2.2 Summary of significant accounting policies (continued) h) Intangible assets (continued)

Spectrum — 2G & 3G The fair value of the spectrum to operate mobile telephone networks determined on the formation of EE is amortised through the income statement on a straight-line basis from the formation of EE for the remaining spectrum period.

Spectrum — 4G

The Company acquired £620 million of additional (4G) spectrum in the year ended 31 December 2013. This intangible asset was first available for use in October 2014, due to requisite technologies first being deployed in the network. Amortisation of this intangible asset commenced upon the asset being available for use, and is charged through the income statement on a straight-line basis over the remaining term of the licence (until 2033).

Other — Software and research and development costs The Company’s research and development projects mainly concern: • upgrading the network architecture or functionality; and • developing service platforms aimed at offering new services to the Company’s customers. These projects generally give rise to the development of software that does not form an integral part of the network’s tangible assets. Under lAS 38, software that machinery cannot function without, is considered integral to the related hardware and is capitalised as property, plant and equipment. When the software is not an integral part of the hardware it is treated as an intangible asset. Development costs are recognised as intangible assets when the following conditions are met:

• the intention to complete the intangible asset and use or sell it and the ability of adequate technical and financial resources for this purpose; • the probability for the intangible asset to generate future economic benefits for the Company; and

• the reliable measurement of the expenditure attributable to the intangible asset during its development. Research costs and development costs not fulfillingthe above criteria are expensed as incurred. Capitalised development costs are presented in the same way as software on the ‘intangible assets” line. They are amortised on a straight-line basis over their expected useful life generally not exceeding 3 years. Software is amortised on a straight-line basis over its expected useful life which does not exceed 5 years.

26 value have Certain which The reciprocal Hutchison except Network accounted costs. Depreciation directly The of capable representing Cost Property, recognised On where I) Other licence Purchased Expenditure Capitalised reliably not Website Other 2.2 h) Notes Property, the Intangible exceed formation cost cost Summary • • • been within The — costs — where their it period. assets estimated attributable website the the complete resources it of Licences Software development enables share plant of to arrangement, of is 3G for recognised total operating in 5 website licences tangible costs probable networks Company future of the tangible incurred is years. they the the UK separately, of plant have and then dismantling cost assets during obligation assets EE, statement Limited, the the of and are serve and (technical, equipment Financial will economic to of been revised assets, are significant in site website that assets fair and after at amortised costs includes attributed an its bringing research has the generate and to cost. capitalised when and development. contributed with values the asset (continued) incurred restore the equipment manner and of are accordingly. the and the corresponds website use to For acquired financial financial legal benefits website design the capitalised is the to removing ability depreciated Company’s on generate future and were Statements further or allocated or the accounting by components title intended a asset sell as

increase EE to development will the straight-line website. and position applied or economic to has and remaining a intangibles are Maintenance it; information be constructed Company. network the future to reliably to when construction among

been Limited share other) according successfully expected by their the the item to at have management. all additional benefits; that asset’s completed policies location with all basis share purchase measure of its (continued) and of at and costs see identifiable different and the subsequently different the date. cost. the to to restoring costs, over note has arrangement productivity developed, following Company assets repair and (continued) contributor. and be economic (continued) the or is They the 15. its useful components It consumed as condition recorded production costs also expected were property, expenditure the intention well conditions are is policy. the or lives includes site benefits initially are by This as initially then prolong Company as both necessary on expensed or capacity by Subsequent plant useful and cost, of is an when amortised recognised which are considered attributable the the provided the recognised and its each expense, and including met: life initial Company useful entity the has improvement the it as for which component equipment, is pattern additions adequate incurred, it ability over estimate located, it at life. to varies. can except to at to costs cost. does be and fair the 27 the be be in to a EE Limited Notes to the Financial Statements (continued) 2.2 Summary of significant accounting policies (continued) i) Property, plant and equipment (continued) Depreciation Property, plant and equipment are depreciated to write off their cost less any residual value on a basis that reflects the pattern in which their future economic benefits are expected to be consumed. Therefore, the straight-line basis is usually applied over the following estimated useful lives: • Freehold land: Not depreciated • Freehold buildings: 50 years • Short-term leasehold improvements: shorter of 10 years or lease term

• Network: 5 to 20 years

• Fixtures, fittings and equipment: 3 to 6 years

These useful lives are reviewed annually and are adjusted if current estimated useful lives are different from previous estimates. These changes in accounting estimates are recognised prospectively. j) Impairment of non-current assets other than goodwill In the case of a decline in the recoverable amount of an item of property, plant and equipment or an intangible asset to below its net book value, due to events or circumstances occurring during the period (such as obsolescence, physical damage, significant changes to the manner in which the asset is used, worse than expected economic performance, a drop in revenues or other external indicators) an impairment loss is recognised.

The recoverable amount of an asset is the higher of its fair value less costs to sell and its value in use, assessed by the discounted cash flows method, based on management’s best estimate of the set of economic conditions. The impairment loss recognised is equal to the difference between the net book value and the recoverable amount. k) Financial assets and liabilities Financial assets and liabilities are recognised initially at fair value. They are subsequently measured either at fair value or amortised cost using the effective interest method, in accordance with the lAS 39 category they belong to. The effective interest rate is the rate that discounts estimated future cash payments through the expected contractual term, or the most probable expected term of the financial instrument, to the net carrying amount of the financial liability.This calculation includes all fees and points paid or received between parties to the contract. Loans and receivables This category mainly includes trade receivables, cash, some cash collateral, as well as other loans ahd receivables. These instruments are recognised at fair value upon origination and are subsequently measured at amortised cost by the effective interest method. Short-term receivables with no stated interest rate are measured at original invoice amount unless there is any significant impact resulting from the application of an implicitinterest rate. Ifthere is any objective evidence of impairment of these assets, the value of the asset is reviewed at each balance sheet date. An impairment loss is recognised in the income statement when the financial asset carrying amount is higher than its recoverable amount.

28 EE Limited Notes to the Financial Statements (continued) 2.2 Summary of significant accounting policies (continued) k) Financial assets and liabilities (continued) Recognition and measurement of financial liabilities Financial liabilities at amortised cost With the exception of financial liabilities carried at fair value, borrowings and other financial liabilities are recognised upon origination at fair value of the sums paid or received in exchange for the liability,and subsequently measured at amortised cost using the effective interest method. Interest-free payables are booked at their nominal value. Transaction costs that are directly attributable to the acquisition or issue of the financial liabilityare deducted from the liability’scarrying value. The costs are subsequently amortised over the life of the debt, by the effective interest method. Within the Company, some financial liabilities at amortised cost, including borrowings, are subject to hedge accounting. These relate mostly to fixed rate borrowings hedged against changes in interest rate and currency value (fair value hedge) and to foreign currency borrowings in order to hedge future cash flows against changes in currency value (cash flow hedge). Derivative financial instruments and hedge accounting The Company uses derivative financial instruments such as forward currency contracts and interest rate swaps to hedge its foreign currency and interest rate risks respectively. Such derivative financial instruments are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently re-measured at fair value. Derivatives are carried as financial assets when the fair value is positive and as financial liabilities when the fair value is negative. Any gains or losses arising from changes in the fair value of derivatives are taken directly to profit or loss in the income statement except for the effective portion of cash flow hedges which is recognised in other comprehensive income. For the purposes of hedge accounting, hedges are classified as:

• Fair value hedges when hedging the exposure changes in the fair value of a recognised asset or liabilityor an unrecognised firm commitment.

• Cash flow hedges when hedging the exposure to variability in cash flows which is either attributable to a particular risk associated with a recognised asset or liabilityor a highly probable forecast transaction or the foreign currency risk in an unrecognised firm commitment. At the inception of a hedging relationship, the Company formally documents and designates the hedge relationship for which the Company wishes to apply hedge accounting and the risk management objective and strategy for undertaking the hedge. The documentation includes identification of the hedging instrument, the hedged item or transaction, the nature of the risk being hedged and how the entity will; assess the effectiveness of changes in the hedging instruments fair value in offsetting the exposure to changes in the hedged item’s fair value or the cash flows attributable to the hedged risk. Such hedges are expected to be highly effective in achieving offsetting changes in fair value or cash flows and are assessed on an ongoing basis to determine that they have actually been effective throughout the financial reporting periods for which they were designated. Cash flow hedges

The effective portion of the gain or loss on the hedging instrument is recognised directly in other comprehensive income in the cash flow hedge reserve, while any ineffective portion is recognised in the income statement. The Company uses forward currency contracts as hedges to its exposure to foreign currency risk in forecast transactions and firmcommitments. The ineffective portion relating to foreign currency contracts is recognised in finance costs.

29 EE Limited Notes to the Financial Statements (continued) 2.2 Summary of significant accounting policies (continued) k) Financial assets and liabilities (continued) Derivative financial instruments and hedge accounting (continued) Amounts recognised in other comprehensive income are transferred to profit or loss when the hedged transaction affects profit or loss, such as when the hedged financial income or expenses is recognised or when a forecast sale occurs.

If the forecast transaction or firm commitment is no longer expected to occur, the cumulative gain or loss previously recognised in equity is transferred to the income statement. If the hedging instrument expires or is sold, terminated or exercised without replacement or rollover, or if its designation as a hedge is revoked, any cumulative gain or loss previously recognised in other comprehensive income remains in other comprehensive income until the forecast transaction or firm commitment affects profit or loss.

I) Equipment inventories Network maintenance equipment and equipment to be sold to customers are stated at the lower of cost or net realisable value, taking into account expected revenues from the sale of packages comprising a mobile handset and a subscription. m) Provisions

A provision is recognised when the Company has a present obligation towards a third party and it is probable that an outflow of resources embodying economic benefits willbe required to settle the obligation. The obligation may be legal, regulatory, contractual, or it may represent a constructive obligation. Constructive obligations arise from the Company’s actions whereby an established pattern of past practice, published policies or a sufficiently specific current statement create a valid expectation on the part of other parties that the Company willdischarge certain responsibilities. The estimate of the amount of the provision corresponds to the expenditure likely to be incurred by the Company to settle its obligation. Ifa reliable estimate cannot be made of the amount of the obligation, no provision is recorded and the obligation is deemed to be a contingent liability.

Contingent liabilities are disclosed in the notes to the financial statements. They correspond to:

• possible obligations that are not recognised because their existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the Company’s control; or

• present obligations arising from past events that are not recognised because it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation or because the amount of the obligation cannot be measured with sufficient reliability. n) Employee benefits The Company operates both a defined benefit pension scheme, and a defined contribution pension scheme. Both schemes are accounted for in accordance with lAS 19: Employee benefits. Defined Contribution Scheme This scheme is open to all employees and the contributions payable are expensed to the income statement when service is rendered. Defined Benefit Scheme This scheme was closed to future accrual from 30 June 2014.

The Company’s net obligation in respect of the defined benefit scheme is calculated by estimating the amount of future benefit that employees have earned in return for their service to date. That benefit is discounted to determine its present value, and the fair value of any plan assets is deducted. The discount rate used is the yield at the reporting date on AA credit rated bonds that have maturity dates approximating the terms of the Company’s obligations. The calculation is

30 year taxable each the Deferred The available have part credits unused Deferred the Deferred purposes. between Deferred Current date. of p) amount Current o) operating The comprehensive used defined obligation recognised 2.2 recognised performed Defined n) Notes the Deferred Current Employee extent income of carrying • • income Summary • when been to reporting employees. the and profit with tax the with timing differences where in the an in recognised in income compute benefit expected income Benefit tax tax the against tax tax to charge the respect respect less that deferred enacted asset the credits temporary unused transaction, by statement. in investments in investments statement assets assets amount will tax is the assets income foreseeable of the the taxes it a asset full the date liability provided tax income. tax the allow is benefits bases which or Scheme the qualified of reflects to of of deferred fair and tax can no Financial or only in statement The relating tax and liability and assets reversal be deferred significant and deferred of amount are is substantively difference the value the longer at charge losses unused asset the be the affects of tax realised recovered to liabilities net liabilities in using in the the are recognised deferred (continued) assets utilised. future the period actuary subsidiaries, in subsidiaries, deferred deductible to (continued) and tax of interest of start service are to probable tax a can recognised tax items is extent of the tax neither the the transaction asset be will or split liabilities and those are assets Statements financial are and liabilities be of in scheme’s losses, from accounting liability tax the utilised. temporary enacted using recognised tax not charge each which costs between that recognised

utilised. EE measured taxable for or temporary the liabilities asset that that liability or reverse assets associates associates liability arising all it to the for to accounting annual method paid which arising position sufficient that is are at they is Unrecognised the

assets. Limited to the deductible the profit probable differences an projected the calculated is be is to directly and from enacted is arises in at extent for extent differences, are operating settled, occur reviewed reporting current policies the the reporting from recovered. not on the (continued) and will and all is their taxable deductible spread profit temporary foreseeable a tax from taxable tax the that that in be taxable interests that interests business and temporary or unit by carrying based and can equity authorities. rates available deferred at period. nor substantively charge present it the date. the applying it profit systematically (continued) and is are credit each be prior temporary taxable has temporary probable temporary initial temporary that is on differences in controlled in the combination presented amounts future. will and recognised joint Actuarial joint reporting become differences, periods tax tax value method. against are carry recognition the The be profit a assets rates arrangements, arrangements, expected that enacted net differences, discount available differences differences of differences tax forward and over for are which or at gains probable date interest in taxable the (and The in and, rates are loss; the financial it the carry measured the equity of by is and defined to and rate the reassessed tax of reporting or net at goodwill probable statement working the and charge. profit apply except; will unused allow the associated that forward reduced associated temporary laws) where losses which and to obligation reporting reporting tax reverse the time will benefit future in at not all or date laws lives that that The the are tax the the are net 31 be or at of to of of of in Amortisation Add (lncome)/loss EBITDA Net Profit profit. and The resource-allocation measures investors substitute companies. performance EBITDA 4. The separable across 3. the Operationally products off national Cash q) hand. comprehensive 2.2 Deferred Deferred p) Notes finance EBITDA Segment back: current Cash Deferred same Amortisation, Company’s before Summary Company and EBITDA the is telecommunications tax because to for taxable tax used provided identifiable costs and cash income not tax and EBITDA one from assets operating the and the relating taxes a Information is by income depreciation supplies cash management equivalents EE defined of entity Company associate/joint and a may tax management. strategy, it Financial and key is by significant branded provides operating share to assets (continued) provided equivalents profit and or not an deferred measure financial communication items the the has and of or in inter-dependent be network. against statement believes network. an the profits net segments same as recognised demonstrated ii) comparable As tax Statements venture of analysis measure assess accounting cash additional statement a

operating liabilities EE tax current (losses) consequence, that This provided of authority. Due services for the changes of EBIIDA directly

defined Limited is which information income to of asset performance operating are of to its profitability considered financial other associates by unity these policies offset, and (continued) financial in in operating by (Earnings infrastructure, EBITDA tax equity. to equity similarly-titled FRS products factors results if only liabilities its position used a of Period to information customers and (continued) legally 101 the is and be activities. is 31 before to and there provided joint recognised management. a as to ended March should comprise and 1,899 1,107 i) 2017 enforceable single to 651 142 profitability a implement the ventures) (1) Interest, are indicators the measurement by can one UK in not providing group deferred not addition be cash in geographical be market, Tax, presented. considered the is right investments Year using considered of used at meaningful tax services Depreciation free statement to December bank exists ended of through the operating relates by financial roaming 1,630 2015 and 631 same 907 to to other £m area. as 89 31 and and 3 set 32 for be to of in a a 6. External Total Other Other Commercial Service Total Mobility Broadband,Wand 5. Revenue Notes External Revenue external • • • external • network revenue fees purchases centre other service operation commercial other retail to by expenses and purchases products purchases fees charges, purchases the network external outsourcing fees inter-operator and comprise: and Financial convergence and expenses, and maintenance charges purchases, commissions, IT inter-operator charges services: fees, costs and which net Statements which IT and of

and EE charges capitalised include costs; IT; include advertising,

and Limited which purchases overheads, goods (continued) include promotional, and of Period 31 outsourcing service real handsets Period March March estate sponsoring ended costs. ended 2,973 5,284 1,108 7,991 7,647 2017 2017 492 711 344 and fees, fees 31 other costs; relating equipment December2015 December2015 Year products Year to ended (Note (Note Restated technical ended Restated and 2,288 3,992 6,307 6,048 sold, 435 323 946 259 call 31) 31) 33 31 31 million The Included auditors’ services The Total 8. 7. statements Management Bad Spectrum Other Total Notes Loss Foreign Property Audit Other Other Other Auditors’ debtexpense Company Company other on other of operating operating operating in exchange disposal the as remuneration relation rates in to fees operating operating operating and these other financial the and has remuneration paid for income to of expense income brand operating are losses Financial other a taken non-current the expense statements income contract disclosed is incomelexpense fees following services borne on advantage income trade amendment. by assets in Statements provided BT payables amounts the in of

Group EELimited group the the to 12 to exemption plc, the financial its month a Company auditors recharge (continued) period statements not to in of ended disclose respect £1 Period Period Period million of 31 31 31 31 its ended March of ended March ended amounts 2017 March £000 1,602 2017 parent 2017 was 307 December the 91 50 82 84 £m - - 32 32 made audit BI paid Group to of 2015 for 31 EE 31 the 31 Year Year non-audit Year Limited. was plc. December December financial December ended ended ended £20 The 2015 2015 £000 1643 2015 34 275 105 60 71 31 52 52 5 3

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No. 1 12. Total financial The Total during Unwinding Net Group Finance Finance 11. and Foreign Finance Finance Total March Retirement The Other 10. Notes Total Pension pension Finance Restructuring receive emoluments Directors Directors’ finance finance restructuring emoluments plc 2017 the exchange costs income liabilities expense costs income to and year of benefits their (31 interest expense income the discount Stephen (calculated accordingly income consider December2015: in emoluments emoluments measured expenses gains Financial relation in cost the expenses Best, their and using form no to at Jeffrey remuneration the services from expense amortised of effective two). Statements highest defined (continued) British Langlands,

to EE interest cost the paid contribution Telecommunications has

Company Limited Director been Gareth rate) (continued) apportioned on schemes are as Tipton as incidental follows: Period and Period Period are plc. to 31 31 31 John accruing the These to ended March ended March ended March (148) (134) 5,760 5,749 £000 2017 2017 2017 their company. Watson (8) (6) 6 5 2 1 11 2 Directors other for two are duties directors employed holding 31 31 31 Year Year Year within December December December (Note Restated office at ended ended ended 6,314 6,355 £000 2015 2015 2015 36 (91) (78) by, BT 31 31) (7) (6) 41 2 1 1 4 4 comprehensive !Jferred the Deferred Deferred Deferred Total Adjustments (a) Adjustments

Income Total

13. Origination Deferred Notes (b) Impact UK Current statement Income Income

corporation Taxation deferred current of tax income tax tax tax tax

tax: to tax expense and tax tax on (income)/expense on related in income

in the rate of tax income cash actuarial respect respect charged tax reversal charged tax: comprehensive expense

change Financial to flow in tax items the of of of income (loss)/gain in in hedges previous previous on income temporary the the charged deferred in income statement income:

the Statements statement periods periods on statement or differences tax

pension EE credited statement asset of

comprehensive Limited liability of

directly (continued) to Period income Period 31 31 ended March ended 2017 March 2017 (31) (25) 143 143

141 (L - - - 1 1 31 31 Year December Year December (Note Restated ended ended 2015 2015 37 130 130 143 £m (13) 15 13 31) Em 2 Announcements effective corporation (d) corporation The Total (C) (2015: Accounting Current

Accounting periods 13. Notes Deferred rate Impact Non-deductible Change Reconciliation Taxation of tax income 20.25%) corporation of from income expense

tax to tax tax tax profit in profit

adjustments the rate tax 1 Corporation April rates in expenses (continued) were tax before the expense change multiplied tax

in Financial of 2020, that UK the the adjustments made of income 20% of will in total on income was at 20% Tax respect during by the have the (2015: income enacted tax rate the (2015:

deferred Statements effective statement an 2016 in of UK 20.25%) respect effect

previous EE tax 20.25%). on average by tax tax 6 expense the on September asset

for Limited rate of periods future Chancellor The the standard

previous (continued) of differences year 20% tax 2016. charges of is the different Period are Exchequer of 31 reconciled the ended March 2017 than 651 143 130 £m Group. 11 1 1 - of the proposed below: A standard reduction 31 Year December changes (Note Restated rate to ended 2015 3$ 631 130 133 (13) 17%, of 31) 10 - to EE Limited Notes to the Financial Statements (continued) 13. Taxation (continued) (e) Deferred tax asseU(liabil ity) The deferred tax in the statement of financial position, calculated using the appropriate prevailing corporate tax rate applicable in the period the deferred tax asset I (liability)is expected to reverse is as follows:

Period ended Year ended 31 March 31 December 2017 2015

Restated (Note 31) Deferred tax liability Accelerated tax depreciation (53) (49) Cash flow hedges (3)

(53) (52)

Period ended Year ended 31 March 31 December 2017 2015 £m Restated (Note 31) Deferred tax asset Trading tax losses 178 313 Pension scheme liabilities 37 16 Provisions deductible on a paid basis 22 22 Cash flow hedges 3

240 351

Disclosed in the statement of financial position Net deferred tax asset 187 299

The Company offsets deferred tax assets and liabilities if and only if it has a legally enforceable right to set off income tax assets and current income tax liabilities and the deferred tax assets and deferred tax liabilities relate to income taxes levied by the same tax authority. The deferred tax assets and liabilities listed above relate to income tax levied by HM Revenue and Customs in the UK. The Company expects to be able to use the deferred tax asset against future profits. Following BT’s acquisition, there is a risk that the Company’s tax losses might lapse retrospective to 5 February 2015 if it undergoes a major change in the nature or conduct of its business in the six year period ending 5 February 2018. If EE Limited’s business were subject to a major change in the nature or conduct of trade on or before 5 February 2018, these losses would be forfeited and a current tax liabilityof £273 millionwould be created. Based on activities to date and current plans, and having taken external professional advice, the directors do not consider this outcome probable.

39 which Fully No Impairment Included The At differences The At31 profits At 14. Amortisation: relationships December Net Additions Net At31 Charge March fe) Disposals Disposals Deferred 13. Cost: Notes Accelerated Tax Deferred Pensions Provisions 31 31 indicators Deferred book book Intangible trading Taxation deferred amortised losses are March December2015 March December2015 arising 2017 during above value value still to tax tax 2015 and tax arising test carried 2017 2017 at tax of the in capital from in (credit)/expense tax the post-employment at at are a impairment use. losses (continued) the assets for asseU(liabitity) group assets 31 31 period liability the Financial fully forward on income goodwill allowances same are all level). amortised in Property, available were trade. statement: respect and identified. medical (continued) ______Statements assets intangible for Plant of

Goodwill EE indefinite accelerated benefits with 637 637 637 and 637 £m assets - - -

- Limited - - an equipment carry original (continued) ______Spectrum capital forward (2,427) (1,967) 2,335 4,302 1,875 4,302 cost (460) £m and Period allowances - - - of and intangible £627 ended ______Software may March million 1,243 2017 1,142 143 135 (865) (734) (137) 408 378 only 112 relates £m (11) 31 4 4 assets 6 (2015: be ______to offset (including Other taxable £554 £m (1) (3) (2) 31 4 2 5 against 5 - - - Year December million) (Note Restated temporary customer ______ended (3,295) (2,702) 2015 2,892 taxable 3,384 40 6,187 6,086 Total 130 120 (599) 31) £m 112 £m (11) 2 5 3 6 As Assets sites. assets million) civil Fully share Included operation The Included network The Network million At At31 December Net March At31 15. Net period Charge Additions Notes Disposals Depreciation: At31 Disposals Cost: 31 at engineering book book Company carrying Property, depreciated of March 31 December2015 March2017 December2015 (2015: 2017. under which under assets. during MBNL in above Share value value to March is 2015 network £542 2017 value the £5 are construction. construction and the network at at Arrangement for are million). 2017, plant still 31 31 assets million Financial Hutchison 4G of assets fully in plant rural assets. included use. and ______depreciated at Freehold This is buildings and sites. 31 equipment land £130 3G (10) includes within equipment March 41 38 46 Statements 51 (8) (2) (5) UK The 4 & - million Limited

assets EELimited Net Network 2017 ______improvements assets Book (restated held Short share with leasehold (restated Value assets (109) under located 138 142 (20) (92) £m (continued) term 29 50 an (4) a 3 2015: - 3G original of finance 2015: are the on network £122 ______£615 (Note Restated both Company’s Network (1,969) (1,564) £521 2,084 cost 2,351 4,320 3,648 leases (472) million), 740 (68) 67 31) million unilateral and of million) at £638 the investment which ______(2015: ______31 Fixtures costs and and (Note million March Restated fittings is 155 145 £232 (87) (14) (83) shared of (11) is 62 68 21 10 the 31) backhaul in & 2017 shown (2015: Company’s this million) network ______was shared within £249 (2,173) (1,749) 2,237 2,486 4,659 3,986 and Total (508) 41 761 £0 of (88) 84 EE Limited Notes to the Financial Statements (continued) 16. Investments The companies in which the Company has an interest at the period-end are as follows:

Country of Principal Name Shareholding Registered address incorporation activities

Finance Trident Place, Mosquito Way, EE Finance Plc UK 100% Hatfield, Hertfordshire,AL1O Company 9BW Mainline Communication Trident Place, Mosquito Way, Communications UK 100% Hatfield, Hertfordshire, ALl 0 Distribution Group Limited 9BW

Mainline Digital Communication Trident Piace, Mosquito Way, Communications UK 100% Hatfield, Hertfordshire,AL1O Distribution Limited * 9BW

Mobilise Telecoms Trident Place, Mosquito Way, Limited * UK Dormant 100% Hatfield, Hertfordshire,ALiO 9BW

M-viron Limited * Trident Place, Mosquito Way, UK Dormant 100% Hatfield, Hertfordshire, AL10 9BW

Mainline Limited * Trident Place, Mosquito Way, UK Dormant 100% Hatfield, Hertfordshire, AL10 9BW

Tower B, 7th Floor, Dlf infinity Orange Services India Management Tower, India 100% Private Limited support Gurgaon, 12200-2 India

EE Communications 24 18th Street Menlo Park (South Africa) South Africa Dormant 100% Pretoria Proprietary Limited 0081

EE Pension Trustee Trident Place, Mosquito Way, UK Pension Trustee 100% Hatfield, Hertfordshire, AL1O Limited 9BW

Orange FURBS Trident Place, Mosquito Way, Trustees UK Pension Trustee 100% Hatfield, Hertfordshire, AL1O Limited * 9BW

Orange Personal Trident Place, Mosquito Way, Communications UK Dormant 100% Hatfield, Hertfordshire,ALJO Services Limited 9BW

Trident Place, Mosquito Way, EE (Group) Limited * UK Dormant 100% Hatfield, Hertfordshire,AL1O 98W

42 All consolidation. The Balance Disposal Impairment Increase Balance 16. Notes * Spectrum Communications Digital Distribution Midland Network Mobile Limited* Skeegle Skeegle Skeegle Limited EEServices Everywhere Everything Orange Limited Name shareholdings Subsidiaries Company Investments Mobile at at Broadband of in * to Home App Operations Limited Holdings the the investment Limited investment in Limited the The Limited investment Limited accounts end Limited* beginning are UK are remaining of Financial held (continued) investments the in in for by the of year the in UK UK UK UK UK UK UK UK UK Country incorporation subsidiary Mobile the the investments year year year year Statements in Broadband of ordinary

entities EE are 4G by services for Corrective Communication Communication Distribution Distribution In In In Dormant Dormant activities Dormant Principal shares. deployment liquidation liquidation liquidation Freeview held

(800 Limited Network MHz) under affected (continued) support Limited of historic 25% 35% 50% 100% 100% 100% 100% Shareholding 100% 100% as cost. 31 a joint March operation, W1U 83 6 NG4 W1U Buckinghamshire, Nottingham, Business Unit W1U Lion WIU 55 55 9BW Trident 55 9BW Trident Hatfield, Trident Hatfield, 9BW Hatfield, Registered 2017 Anglo Baker Baker Baker Baker 13 13 1 Road, 2JY 6AG 7EU 7EU 7EU Colwick Place, Place, Place, Office Hertfordshire, Hertfordshire, Hertfordshire, Street, Street, Street, Park Street, entitling Amersham, Nouinghamshire, 31 Park, Mosquito Mosquito address Mosquito Quays, Colwick, London, London, London, London, December HP7 67 partial ALl AL1O AL1O White 9FB 2015 Way, Way, Way, 43 0 13 19 (3) (5) 2 Trade Amounts Other cost. There 18. Total million). Non-current: Other Trade Current: Prepaid value

Total 17. Notes Gross Provision Inventories Trade Inventories trade The receivables inventories receivables receivables receivables is value external This no

owed to for amount and of and material

obsolescence the includes handsets other by purchases are at other group

of Financial the receivables stated difference inventory write-downs and lower undertakings receivables after accessories of included between

provisions Statements cost on . new

and EE within the inventory net for

balance Limited impairment realisable

external (continued) of2 sheet purchases million of value £72 31 31 31 (2015: March March2017 March2017 million of was inventory 1,088 £2 2017 250 207 629 (2015: 100 £m 100 £1,764 118 (18) 19 2 million). £96 and million million). their 31 31 31 (2015: replacement December December December (Note Restated 2015 2015 2015 44 £1,290 855 691 154 (17) £m 54 10 69 69 86 31) Amount 20. Net Cash Non-current Cash Amount Financial Finance Cash Current Other Non-current:

VAT 19. Amounts Notes Other Trade Interest Othertaxes Deferred Employee Current: financial Borrowings Trade payable & collateral collateral payables cash owed owed payable lease liabilities

income to owed related debt and

equivalents the to to liability paid received to group group other group

payables Financial and undertakings undertakings undertakings net payables

financial

Statements EE

debt

Limited (continued) 31 31 March2017 March2017 31 1,212 March 2017 2,187 1,499 900 312 342 292 (30) £m 50 282 216 126 12 52 10 - - 1 I 31 31 31 December December December (Note Restated 1,614 2,046 1,614 2,042 (388) 2,074 2015 1,524 45 (44) 2015 2015 250 186 4 67 18 35 - 31) - 11 I - Total Total Other Designated Other Non-current Current Designated Derivative All Total of and derivative Other 21. Total Designated Non-current Other Current Notes Designated Derivative interest the foreign Derivative non-current current non-current current Companys to financial and liabilities assets in in exchange in in derivative derivative the a a a a foreign cash cash cash cash derivative derivative Financial Financial financial instruments flow flow flow flow exchange contracts liabilities assets hedge hedge hedge hedge liabilities assets assets instruments which are at Statements the and estimated are

balance EE liabilities

held Limited using sheet at are fair (continued) discounted date. held value. at The amortised cash fair 31 31 flow values March March 2017 2017 (48) (48) (13) Em Em cost 48 48 15 (8) (5) models 8 7 of with outstanding and the market exception 31 31 December December swaps rates 2015 2015 46 (64) (64) Em Em of 9 9 EE Limited Notes to the Financial Statements (continued) 21. Derivative Financial instruments (continued) Hedging activities

Derivatives may qualify as hedges for accounting purposes ifthey meet the criteria for designation as fair value hedges or cash flow hedges in accordance with 1AS39.

Cash flow hedges V

Instruments designated in a cash flow hedge included cross-currency swaps hedging Euro denominated borrowings. These were de-designated on 7 February 2017 when the Euro denominated borrowings were replaced with sterling denominated borrowings.

Forward exchange contracts hedging forecast foreign denominated purchases, denominated in US Dollar and Euro currencies 12 months forward have been designated as cash flow hedges. The related cash flows willbe recognised in the income statement over this period.

Allcash flow hedges were fully effective in the period. Gains and losses associated with hedging activities are as follows:

31 March 31 December 2017 2015 £m

(Gain)/Ioss recycled through income statement (185) 72

Gain/(loss) recognised rn equity during the year 167 (59)

Deferred tax relating to cash flow hedges 6 (2)

(12) 11

The losses recycled through the income statement have been taken through finance expense £3 million (2015: £43 million), external purchases gain £54 million (2015: £27 million loss) and other operating expense gain £134 million (2015: £2 million loss). Other derivatives The Company’s policy is not to use derivatives for speculative purposes. However, due to the complex nature of hedge accounting under 1AS39, some derivatives do not qualify for hedge accounting, or are specifically not designated as a hedge where natural offset is more appropriate. Derivative instruments that do not qualify for hedge accounting are classified as hedge for trading and hedge at fair value through profit and loss under IAS39.

47 EE Limited Notes to the Financial Statements (continued) 22. Provisions

Network Onerous share and Leases ARC other Total £m £m At31 December2015 55 98 66 219 Increase in period 52 5 7 64 Decrease in period (15) (5) (3) (23) Utilisation (38) (9) (18) (65) Discount unwind 2 4 2 8 At31 March2017 56 93 54 203

Analysis of provisions by maturity: At31 March2017 Short term 30 30 24 84 Long term 26 63 30 119 56 93 54 203 At31 December2015 Short term 23 27 18 68 Long term 32 71 48 151 55 98 66 219

Onerous lease provision This represents the rent and rates for surplus leasehold properties less any anticipated income from sub-letting the properties. The future obligations, for periods up to 20 years, under the lease contracts being the difference between rentals paid and the sub lease rentals received have been provided for at their net present value. Asset Retirement Obligation (ARO) The Company is required to dismantle equipment and restore sites and properties under operating leases. The ARC provision is based on the best estimate of the amount required to settle the obligation. It is discounted by applying a discount rate that reflects the passage of time. This estimate is revised annually and adjusted against the asset to which it relates, which is then subject to an impairment assessment. These costs are expected to be incurred over a period of up to 50 years. Network share and other This represents future operational costs and vacant site rentals arising from restructuring obligations relating to network share agreements. The liabilities have been discounted to present value. These costs are expected to be incurred over a period of up to 15 years. Also included are the costs of employee redundancy or one-off costs following restructuring within the Company. These costs are expected to be incurred within 12 months of recognition of the provision.

48 EE Limited Notes to the Financial Statements (continued) 23. Pensions The Company operates the EE Pension Scheme fEEPS), which has a final salary defined benefit section that was closed to future benefit accrual in 2014 and a defined contribution section which is open to new joiners. Assets are held in a separately administered trust.

The EEPS is administered by a separate board of trustee, EE Pension Trustee Limited, which is legally separate from the Company. The trustees are composed of representatives of both the employer and employees. The Trustees are required by law to act in the interest of all relevant beneficiaries and are responsible for the investment policy with regard to the assets plus the day to day administration of the benefits. Defined contribution section The pension cost for the defined contribution scheme, which represents contributions payable by the Company, amounted to £29 million (2015: £23 million). Included in other creditors is £4 million (2015: £2 million) in respect of contributions payable to the scheme. Defined benefit section The lAS 19 liabilities are measured as the present value of the estimated future benefit cash flows to be paid, calculated using the projected unit credit method. These calculations are performed by a professionally qualified independent actuary. Profile of the Scheme The estimated duration of the defined benefit liabilities, which is an indicator of the weighted average term of the liabilities, is around 30 years although the benefits are expected to be paid over more than 70 years. The majority of the liabilities relate to non-pensioners. Amounts recognised on the balance sheet The amounts recognised in the balance sheet are determined as follows:

31 March 31 December 2017 2015

Value of assets 748 570 Present value of scheme liabilities (973) (665)

a Deficit (225) (95)

Net pension deficit . (225) (95) a There is no limiting effect of the asset ceiling as any accounting surplus is deemed to be recoverable due to the economic benefits available in the form of future refunds or reductions to future contributions.

49 The Asset 65 Total The published experience The Based difference. Mortality margin The estimated similar rated Future follows: Current The Key

23. Notes Pension Pension CPI RPI Discount C) A) B) Assumed are fair discount RPI Pensions inflation actuarial inflation main Cash Corporate Unquoted Global Property Investments mortality corporate allocation as on pensioners profile below value pensioners Projections increases increases inflation

follows: to the rate by cash to financial and through equities be

UK the rate lAS of RPI to assumptions 0.5% assumption bonds. bonds, flows cash the investments the actuarial (continued) assumption 19 assumption taking (member

quoted Financial (accrued (accrued higher assumptions assets model EEPS longevity appropriate equivalents for derivatives a until into profession’s in scheme of with to age uses after before 31 account the active was was assumptions, a March a corporate 40 Scheme

used 6 Statements scaling 1.25% the and set set April with 6 today) markets 2019 April market by Continuous by

hedge EE S2PA in a 2006) per applying reference the factors, analysed similar 2006) bond the year forecasts funds mortality

actuarial Limited forecast yield profile long-term projected Mortality

and (continued) by to curve asset a and valuation future tables, to life curve the improvement Investigation independent expectancies constructed benefit category EEPS. improvements of taking of forecast cash the are CPI account 31 pension based estimates (by parameter). flows for shown 31 has RPI March 2017 utilising EEPS 2.0 2.5 2.6 3.2 3.2 March Years 31 based 2017 been for 24.9 23.3 inflation, on below. of March scheme 2017 a the of 748 392 143 members 211 scheme the assessed the the 2 on yield CMI applied 31 scheme’s expected 31 a were 31 December on model December with 2014 aged December at AA 50 as to 2015 Years a a 2015 24.7 22.5 2.2 2.2 4.1 3.0 3.1 2015 % 570 326 153 84 7 EE Limited Notes to the Financial Statements (continued) 23. Pensions (continued) The scheme assets do not include any of the Company’s own financial instruments, or any property occupied by the Company.

Movements in defined benefit plan assets and liabilities The table below shows the movements on the plan assets and liabilities and shows where they are reflected in the financial statements.

Assets Liabilities Deficit

At 1 January 2015 542 (701) (159) Operating cost: current service cost & PPF levy - (1) (1) Financing cost: Interest on net defined benefit liability 20 (26) (6) Included in the Company performance statements 20 (27) (7) Return on plan assets below the amount included in the group (5) (5) income statement Actuarial gain arising from changes in financial assumptions - 49 49 Actuarial gain arising from changes in demographic - 7 7 assumptions Actuarial gain arising from experience adjustments - - - Included in the statement of comprehensive income (5) 56 51 Deficit contributions by employer 20 - 20 Benefits paid (7) 7 - At 31 December 2015 570 (665) (95) Operating cost: current service cost & PPF levy - - - Financing cost: Interest on net defined benefit liability 28 (33) (5) Included in the Company performance statements 28 (33) (5) Return on plan assets above the amount included in the group 138 - 138 income statement Actuarial loss arising from changes in financial assumptions - (383) (383) Actuarial gain arising from changes in demographic - 72 72 assumptions Actuarial gain arising from experience adjustments - 23 23 Included in the statement of comprehensive income 138 (288) (150) Deficit contributions by employer 25 - 25 Benefits paid (13) 13 - At 31 March 2017 748 (973) (225)

Risk exposure from the EEPS The assumptions on the discount rate, inflation and life expectancy all have a significant effect on the measurement of the scheme liabilities. The table below provides an indication of the sensitivity of the lAS 19 pension liabilities at 31 March 2017:

(Increase)/Decrease in liabilities

1% fall in discount rate (350) 1% fall in RPI inflation only 120 1% fall in CPI inflation only 145 One year increase to life expectancy (30)

The sensitivity analyses above are limited as the movements described would not happen in isolation.

51 EE Limited Notes to the Financial Statements (continued) 23. Pensions (continued) EEPS funding The triennial valuation is carried out for the trustees by a professionally qualified independent actuary. The purpose of the valuation is to design a funding plan to ensure that the EEPS has sufficient funds available to meet future benefit payments. The latest funding valuation was performed as at 31 December 2015, and agreed in March 2017. This showed a funding deficit of £141 million. The valuation methodology for funding purposes, which is based on prudent assumptions, is broadly as follows: • assets are valued at market value at the valuation date; and • liabilities are measured on a prudent actuarial funding basis using the projected unit credit method and discounted to their present value.

The Company will contribute £1.7 million each month until March 2018 (inclusive) and £1.9 million each month thereafter until November 2020 to fund the deficit. The next funding valuation willhave an effective date of no later than 31 December 2018.

24. Share capital and reserves

Movement in reserves is shown in the statement of changes in equity.

Share capital 31 March 31 December 2017 2015 £m

Issued and fully paid 22,050,306 Ordinary shares of £1 each 22

11,025,153 Ordinary ‘A’shares of £1 each 11

11,025,153 Ordinary ‘B’shares of £1 each 11

22 22

During February 2016 the ordinary A and ordinary B shares were re-designated as ordinary shares, which carry equal voting rights and no contractual right to receive payment.

Share premium account On 23 March 2010 a special resolution was passed to reduce the share premium account at that time. On 24 March 2010 a share premium of £1 638 million was recognised. Capital contribution reserve The capital contribution reserve relates to a cash contribution from EE’s previous shareholders without the issue of additional shares. Cash flow hedge reserve The Company uses hedge accounting for its foreign currency transactions. The effective part of the hedged item is taken to the cash flow hedge reserve.

52 EE Limited Notes to the Financial Statements (continued) 25. Dividends paid Period ended Year ended 31 31 March December 2017 2015 Em £m

Dividends declared and paid 263 650

Dividend per share (El share) £11.93 £29.48

26. Capital and financial commitments Finance leases Future minimum lease payments under finance leases and hire purchase contracts are as follows: 31 March 31 December 2017 2015

Not later than one year - 2 After one year but not more than five years - 2 Afterfive years -

- 4

The present value of minimum lease payments is analysed as follows: 31 March 31 December 2017 2015 Em Not later than one year - 2 After one year but not more than five years - 2 After five years -

- 4

Operating leases Future minimum rentals payable under non-cancellable operating leases are as follows: 31 March 31 December 2017 2015 Em. Not later than one year 236 240 After one year but not more than five years 618 679 After five years 297 329

1,151 1,248

Operating leases primarily relate to mast sites, office space and retail shops.

Lease payments for operating leases expensed in the period was £355 million (year ended 31 December 2015: £282 million). Purchase commitments The Company has £398 millionof device commitments (2015: £252 million).

53 EE Limited Notes to the Financial Statements (continued) 26. Capital and financial commitments (continued) Capital commitments The Company has £411 million of capital commitments at 31 March 2017 (2015: £437 million), including its share of the MBNLjoint arrangements capital commitments of £19 million (2015: £27 million). Other commitments

The Company has £283 millionof service commitment at 31 March 2017 (2015: £532 million). Contingent liabilities Phones 4U

In December 2016 the administrators of Phones 4U Limited (P4U) started legal proceedings in the High Court in the United Kingdom against the Company, claiming £66 million in payments under a retail trading agreement, which relate to a revenue share for certain customers prior to P4U’s insolvency. The Company is contesting these claims and have brought counter-claims against P4U, including damages arising from P4U ceasing trading. The administrators have also indicated an intention to start separate High Court proceedings, alleging the Company and other mobile network operators colluded to procure P4U’s insolvency. The Company also dispute these allegations. Hutchison 3G Limited

In May 2016 Hutchison 3G Limited (H3G) brought legal proceedings in the High Court in the United Kingdom against the Company, alleging breach of contract relating to alleged delays in the roll out of certain free carrier coverage to H3G. H3G is entitled to this free carrier coverage under arrangements agreed following the merger of Orange and I-Mobile, predecessors of the Company. The litigation is also at a relatively early stage and the Company is contesting the claims. H3G claims damages relating to loss of business of £167 million, although the Company disputes that there is a basis for the claim and the substantiation of the claimed damages.

27. Events after the reporting period No events noted.

28. Ultimate Parent Undertaking The immediate parent undertaking is British Telecommunications Plc (UK), a company incorporated in England &Wales.

The ultimate parent company and controlling party is BI Group Plc (UK), a company incorporated in England & Wales. BT Group Plc is the parent of the largest and BT plc is the parent of the smallest group to consolidate these financial statements. The consolidated financial statements of the ultimate parent company BT Group Plc, are available on the group website, www.btplc.com or from the Company Secretary at the registered office, 81 Newgate Street, London, ECIA 7AJ.

29. Transition to FRS 101 This is the first year that the Company has presented results under FRS1O1. The last financial statements under IFRS were for the year ended 31 December 2015, with the date of transition being 1 January 2015. The Company is included in the consolidated financial statements of BT Group Plc.

A reconciliation of profit for the financial year ended 31 December 2015 and the total equity as at 1 January 2015 and 31 December 2015 between IFRS, as previously reported, and FRS 101 is not required as there were no material recognition or measurement differences.

54 EE Limited Notes to the Financial Statements (continued) 30. Related party transactions During the period the Company received income of £0 million (2015: £15 million) and incurred expenditure of £5 million (2015: £82 million) with Orange S.A, joint parent (50%) of EE Limited for the period 1 January 2016 to 29 January 2016.

During the period the Company received income of £0 million (f2015: £11 million) and incurred expenditure of £14 million (2015: £158 million), with Deutsche Telekom A.G., joint parent (50%) of EE Limited for the period 1 January 2016 to 29 January 2016.

During the period the Company received income of £4 million (2015: £4 million) and incurred expenditure of £44 million (2015: £45 million) with MBNL, a joint operation 50% owned by EE Limited. At the period-end £10 million (2015: £10 million) was outstanding and £19 million (2015: £26 million)was due from MBNL. In addition the Company has issued a Shareholder loan facility of £151 million (2015: £151 million). The receivable is unsecured and no guarantees have been received.

During the period the Company received income of £9 million (2015: £6 million) and incurred expenditure of £22 million (2015: £21 million)with Midland Communications Distribution Limited, a 35% joint venture. At the period-end £1 million (2015: £0 million) was outstanding and £1 million (2015: £1 million) was due from Midland Communications Distribution Limited. The receivable is unsecured and no guarantees have been received.

During the period the Company incurred expenditure of £2 million (2015: £2 million) with Digital Mobile Spectrum Limited, a 25% associate.

55 EE Limited Notes to the Financial Statements (continued) 31. Change in accounting policy During the period, the Company aligned its accounting policies to that of BT Group plc, the ultimate parent company. EE offers technology and airtime funds as incentives to business customers. The accounting policy has been aligned to recognise the fund in the income statement immediately, previously the funds were deferred and recognised over the contract term. Equipment and leased line connection fees have historically been capitalised as PPE upon dispatch I connection, the accounting policies have been aligned to recognise cost through the income statement upon dispatch / connection.

Prepayments in relation to network maintenance are recognised as operating costs under BT Group plc accounting policy. The impact of the voluntary changes in accounting policies on each line item of the primary financial statements is shown in the table below:

As reported Adjustments Restated

2015 2014 2013 2015 2014 2013 2015 2014 2013

12 12 12 12 12 12 12 12 12 months months months months months months months months months to3l to3l to3l to3l to3l to3l to3l to3l to3l December December December December December December December December December

£m

Revenue 6,311 6,327 6,482 (4) (12) (10) 6,307 6,315 6,472

External (3,954) (4,160) (4,309) (38) (26) (27) (3,992) (4,186) (4,336) purchases

Amortisation (935) (916) (934) 28 20 16 (907) (896) (918) and Depreciation

ProfiU(loss) 512 - 175 (11) (18) (21) 501 (18) 154

Property, 2,346 2,337 2,313 (109) (96) (90) 2,237 2,241 2,223 Plant and Equipment

Deferred tax 268 417 425 31 28 24 299 445 449 asset

Inventories 66 76 85 3 0 0 69 76 85

Trade and 928 994 1,147 (73) (71) (42) 855 923 1,105 other receivables

Trade and (2,075) (2,234) (2,152) 1 3 1 (2,074) (2,231) (2,151) other payables

Retained 1,115 1,215 1,809 (147) (136) (107) 968 1,079 1,702 earnings

56