OPTIMUS Disruption Along the Wireless Value Chain October, 2000

1. OPTIMUS Disruption Along the Wireless Value Chain October, 2000

2. “If you you’re not confused, you do’t know what’s going on!” Jach Welch “If you think you are in control, you’re not going fast enough!” Mario Andretti So, how do you feel today?

3. DISRUPTION ACROSS INDUSTRIES “NEW TECHNOLOGY” CHANGING THE BASIS OF COMPETITION IMPACT OF DISRUPTIVE TECHNOLOGIES UPTAKE OF NEW TECHNOLOGIES Percentage of Ownership Average Capacity (MB) Telephone(1876)93.9% 10,000 100 100 90 90 MobileInternet(2000E)25.0% 80 80 1,000 Mainframes 70 70 Cell Phone(1983)24.4% 60 60 PC(1975)20.0% 100 Internet(1991)26.0% 50 50 Minicomputers Notebook PCs 40 40 PDAs 30 30 Desktop PCs 10 Portable PCs 20 20 10 10 1 0 0 1 10 20 30 40 50 60 70 120 Number of years (year 1=year invented) Source: Clayton Christensen, The Innovator’s Dilemma. New technologies are often the source of fundamental changes in market position.

4. DISRUPTION ACROSS INDUSTRIESTHE WIRELESS INDUSTRY UPTAKE OF VARIOUS TECHNOLOGIES WORLDWIDE Subscribers (mm) 3 Year CAGR Wireless 19% Mobile internet (1) 64% M-commerce (2) 132% Source: Goldman Sachs Estimates, Cluster Analysis. (1) Based on GS US market projections and projected US share of world market (18%). (2) Based on GS Estimates, Roper Starch Worldwide trends on commerce penetration as a share of online penetration. Wireless and its extensions will face greater pressure than almost any industry.

5. 98/99 99/00 00/01 01/02 DISRUPTION IN WIRELESSIMPACT OF BANDWIDTH EXPANSION Mobile e-commerce • One-clicktransactions • Navigational aids 3.0 WirelessMultimedia384 (512)kbps widearea(2 Mbps) local WCDMA 2.4 MbpsHDR • Events-driventransactions • AOL • Online auctionbidding 2.75 WirelessInternet115/384kbpsEDGE144 kbps1XRTT Mobile Information • Email 2.0 Wireless Voice10 kbpsGSM/TDMA14.4 kbpsXXX One 2.5 Different flateon usage115 kbpsGPRS64 kbps 15-95B • Stock trading • Instant messaging • Travel reservationsand bookings • Travel updates Mobile VoiceCommercial • Location-specifictransactions • Voice • Yellow Pages PAST TODAY 2001-2002 New technologies will allow for the appearance of innovative products...

6. DISRUPTION IN WIRELESSIMPACT OF BANDWIDTH EXPANSION CONTENT VALUE “BEST IN CLASS” “MORE OF THE SAME” “LAGGARD” 2G 2.5G 3G …and there will be more and more room for differentiation. In order to guarantee a leading position in the future what should mobile operators start doing now?

7. ENABLERS CONTENT & PORTAL ACCESS CONSUMER DEVICEMANUFAC- TURERS MOBILE ISP NETWORK ACCESS DISTRI- BUTION DISRUPTION IN WIRELESSPLAYERS AND THE VALUE CHAIN APPLICA-TIONS & ENABLERS CONTENT & COMMERCE • Application developers, commerce and mobile Internet enablers • Content players, including aggregators, news, games, and other types of content • Internet service provider gives connection to mobile Internet • Wireless Transport Network and connection to customer • Resellers of mobile services • Makers of mobile devices In the old value chain, roles where clearly defined and boundaries somewhat respected.

8. ENABLERS CONTENT & PORTAL ACCESS CONSUMER DEVICEMANUFAC- TURERS MOBILE ISP NETWORK ACCESS DISTRI- BUTION DISRUPTION IN WIRELESSPLAYERS AND THE VALUE CHAIN APPLICA-TIONS & ENABLERS SPECIALISED PORTAL CONTENT & COMMERCE GENERALIST PORTAL • Application developers, commerce and mobile Internet enablers • Pure content creators, including news, games, and other types of content • General interest applica-tion and content packa-gers • Internet service provider gives connection to mobile Internet • Wireless Transport Network and connection to customer • Resellers of mobile services • Makers of mobile devices • Applica-tion and content packagers focused in one area or interest As opportunities become more evident and attractive players start reaching out beyond the boundaries of their former spaces

9. CONTENT & PORTAL ACCESS ENABLERS CONSUMER DISRUPTION IN WIRELESS AVAILABLE OPTIONS EXAMPLE CONTENT & COMMERCE GENERALIST PORTAL DEVICEMANUFAC- TURERS MOBILE ISP NETWORK ACCESS DISTRI- BUTION APPLICATIONS & ENABLERS SPECIALISED PORTAL In order to secure portal power, Optimus will have to compete for the customer ownership… but ownership is not guaranteed, as customer options increase and competition intensifies.

10. DISRUPTION IN WIRELESS CURRENT SITUATION OPERATORS AS INCUMBENTS OPERATORS AS COMPETITORS COMPETITORS OPPORTUNITIES Other Operators • Content & Commerce • Data Content • Voice Content • Commerce • Voice Services • Unpenetrated Population • New Voice Opportunities • Wholesale • Carrier VAS DEFENDERS • Voice Services Provision • Network Ownership • Installed Customer Base COMPETITORS Operators have critical areas of DEFENSE and ATTACK.

11. DISRUPTION IN WIRELESS KEY ISSUES ANALYSIS ACTION ATTACK • Can we leverage off our wireless assets to enter adjacent value chains? • Where do we focus? • How do we act? DEFENSE • Will others leverage off their assets to enter our value chain? • What is at greatest risk? • How do we defend? In order to take action in all these issues, operators will need to rethink themselves, their organisation and business model

12. DISRUPTION IN WIRELESS ORGANISATION DRIVERS TODAY (2000) TOMORROW (2005) ACCESS CONTENT ACCESS CONTENT Optimus clients VALUE VALUE BALANCE VALUE Non-Optimus clients BUY ACCESS AND GET CONTENT ACCESS VS CONTENT ACCESS CONTENT ACCESS CONTENT BUY CONTENT, ACCESS IS A COMMODITY Business is driven by “access business” rules Business is driven by “content business” rules

13. THE 3G MOBILE OPERATORTHE GAP INTERNET COMPANY TRADITIONAL MOBILE OPERATOR • Business Model: • The main revenues of a TMO come from traffic and VAS • Other sources of revenues are monthly fees, activation fees and incoming interconnection tariffs • Key success factors: • Technical capabilities (coverage and network quality) • Targeted marketing • Competitive commercial offers • Business Model: • In a pure Internet company the main revenues come from VAS, e-commerce commissions and referrals and on-line advertising • In those internet companies that provide access, it could be the main source of revenue • Key success factors: • Speed to market • Content management • Personalised marketing • Customer profiling • Virtuous cycle generation (content - visits) GAP ACCESS DRIVEN ORGANISATION CONTENT DRIVEN ORGANISATION • TMO have been focused on acquiring new customers and generating traffic. • Segment-oriented approach has resulted in more complex structures, with little flexibility but with higher accountability • Successful IC are focused on content management and on reducing production cycles to shorten time to market. • This has resulted in more flexible and flatter structures that promote creativity at all levels

14. CONCLUSIONS • Latest and future technological disruption in telecoms will completely reshape not only telecommunication companies but also every single industry in the economy • Traditional firms carry the weight of their own heritage and that’s what makes them so fragile in the “new economy” battle field • Mobile operators have an enormous challenge ahead meaning that they have to learn how to manage a content driven business while getting most revenues from access • They also need to figure out how to shape “new economy” companies out of “old economy” carcasses • And finally they need to learn that their competitors are no longer other operators only but they could also be independent portals and Internet players, credit card issuers, media companies, banks, car manufactures etc.