Broadband with no Boundaries

1. Broadband with no Boundaries Expocomm, Buenos Aires September 2008

2. Applications predominantly in Internet Applications pre-dominantly in Internet Multitude of business models 5 Bn people connected Broadband Everywhere Our market vision of 2015 – the World connected

3. Social trends Mobile communication everywhere Richer communication Economic trends Price erosion New service Strategy Technological trends Penetration of Internet Broadband access What trends are currently changing our industry? From Voice to data Traffic ARPU Cost Requirements for higher profitabilityin the world of communication • Cheap voice for the mass market • Multimedia applications as a commodity, and mobility • High bandwidth and capacity at low cost • The current trends put operator demands in conflict with subscriber requirements: Profitability vs. The market wants ‘more for less’

4. Content • Service trends • End-user insights • Broadband service strategy development • Broadband service examples & success stories • Broadband Solutions & Evolution • Summary

5. Broadband data is the growth segment in the telecommunications market Worldwide Service Provider Revenues (bn €) CAGR 2007-10 1.230 1.180 1.130 1.080 178 154 1.020 Broad-band 130 18,6% Mobile Data 107 85 126 118 109 95 79 38 56 50 10,1% Fixed DSL+Internet 44 31 31 28 44 40 35 14,9% Fixed Data IP/Enet 482 495 468 452 436 -11,1% Fixed Data Legacy 3,1% Mobile Telephony -1,1% 352 Fixed Telephony 348 343 340 336 2006 2007 2008 2009 2010 Source: Nokia/Nokia Siemens Networks July 2007, Yankee Group Fixed Revenue

6. Mobile internet access is taking off - Worldwide 3G Penetration is hitting 15% 3G Subscriber Market Share 70% 60% Japan Korea 50% Italy 40% UK France 30% Australia 20% Portugal US 10% 0% 8 6 0 2 4 18 10 12 14 16 20 22 Quarters after Launch 3G relates to WCDMA and CDMA2000 1xEV-DO Source: Strategy Analytics 2007

7. mobiledevices(device FMC) Services become network independent mobilenetworks PLMN broad-band traffic fixednetworks Data and IP WLAN VoIP deviceFMC PSTN broad-band VoIP time Mobile devices support VoIP over WLANand affect mobile networks Broadband enables VoIP … and finally mobile broadband support VoIP as well WLAN unwires VoIP VoIP is the first service to become network independent

8. Major internet portals offer VoIP to their large active user base, threatening traditional telcos Benchmark of active user bases (subscribers in million) Top 5 internet portals (# IM and VoIP subscribers) Top 5 fixed operators (# subscribers) China Netcom 127 4) AT&T 76 4) Google 4672) NTT Corp55 5) Verizon 53 4) T-Com 50 5) eBay/Skype 212+1361) Top 5 mobile operators (# subscribers) 5) China Mobile 296 Vodafone 192 AOL 533) China Unicom 163 MSN 273) Telefonica Móviles 118 1) Members + VoIP users, 10/06 2) Site users, 10/06 3) Active IM users, 03/06 T-Mobile 92 Yahoo 223) 4) Status: 31.12.05, source: company pages5) Status: Q3/2006, source: company pages Source: Nielsen/Netratings 03/06, Nokia Siemens Networks 2007

9. Market boundaries are diminishing – different players are increasing their addressable market Typical strategies Expansion towards Quadruple-Play Offers Mobile Voice Fixed Voice Broadband Internet TV • Fixed and mobile Broadband Internet • Bundling with VoIP and home multimedia • Unification of Customer Relationship Management Hybrid provider • Mobile only broadband on the move and at home • Hybrid strategy with additional fixed broadband offer • PSTN substitution with home zone or VoIP on top of DSL Mobile provider • MVNO launch • Fixed broadband with VoIP on top as complementary voice product • IPTV based home multimedia Fixed provider ISP • MVNO launch • Fixed boadband Internet with voice flat rate on top • Own community setup Multi-play providers are often only virtually integrated, owning no or just one network, and offering services on the other side by utilizing others’ wholesale capacity.

10. Content • Service trends • End-user insights • Broadband service strategy development • Broadband service examples & success stories • Broadband Solutions & Evolution • Summary

11. WAPEDIA The next step forapplications is going mobile • Content • Self-created • Online distribution • Communities • Contact networks • Blogs • Recommending, tagging, swapping content Mobile portals Mobile broadband • Information • Search, maps • Creation • Publishing • Virtual environments • Gaming • Dating • Etc… • Commerce • Online commerce of physical and digital goods • Work • Mobile push e-mail

12. Large user segments change from being a passive consumer to an actively participating “prosumer“ • Web2.0 is deeply collaborative • Intensive communication over various channels • Media discovery • Search and social interaction are replacing media company control • Terms of consumption • Consumers can time-shift, place-shift, and device-shift content • User-generated and selected content • Value of blogs, wikis, video clips and podcasts etc) increases by tags and comments of others The users become active part of the Web2.0

13. User loyalty is strongly decreasing Likelihood of changing operator/ provider within next three months % Base: All main mobile phone users

14. Data service quality, service portfolio and service bundles are major sources of subscriber dissatisfaction Satisfaction Top 2 boxes (4-5) % Satisfaction level with current mobile operator overall and with respective aspects % Overall satisfaction Voice/ reception quality Network coverage Brand/ image of network operator Handset offerings Tariff structure and bundle offerings Customer care/ after sales service Service offerings Call cost Quality of data service (including speed) Data cost 70 74 71 65 60 57 55 55 53 49 40 31 39 21 5 3 1 33 41 17 4 1 3 33 38 17 6 2 3 31 34 27 2 1 5 28 32 22 5 2 11 26 31 25 6 3 8 26 29 23 9 4 9 23 32 27 5 1 11 22 31 29 10 4 3 21 28 25 5 1 19 17 22 26 9 4 21 N=603 5 - Very satisfied 4 3 2 1 - Not satisfied at all Don’t know/ refused Base: All main mobile phone users

15. User experience in terms of simplicity, quality, speed and ubiquitous availability is key Prompted – Top mentions Top 3 most influential factors for using broadband content services % 66 Pricing of services Ease of access Speed of downloading Quality of image and sound Speed of browsing Up-to-date service content Popularity of services Network quality or reception Variety of content service category/ topics Knowledge of the benefits/ information of the service Speed of video/ audio streaming Variety of information within content service category Word-of-mouth of services Ability to download to phone and PC at same time/ cost 45 31 26 25 21 15 15 15 9 7 4 3 2 Base: All who have ever used any content service (184)

16. Content • Service trends • End-user insights • Broadband service strategy development • Broadband service examples & success stories • Broadband Solutions & Evolution • Summary

17. The user‘s „why, where and how“ questions have to be answered convincingly • User desired benefits • Key success factors for provider differentiation „Why should I use it?“ • Premium interactive multimedia services • Enhanced Web2.0 • Premium VoIP • Converged IPTV Staying connected with peers and personal content • „Where can I use it?“ • Ubiquitous high speed access • Always best connected - wireless and wireline • Bandwidth evolution from xDSL towards xPON • Bandwidth evolution from HSPA towards LTE & WiMAX • Best available quality and speed on most appropriate device • „How complicated is it?“ • Access independent service availability • Common access method and feature set • Call continuity between stationary and on the move • Convenient usage avoiding cognitive effort

18. Providers competitive advantage – providing premium services ubiquitously and simply How to gain competitive advantages? „Why should I use it?“ • „How complicated is it?“ Access independent service availability Premium interactive multimedia services Multi-play Ubiquitous high speed access • „How fast is it? Where can I use it?“

19. Different broadband use cases have to be covered to maximize share on subsriber‘s wallet At home / office Broadband multiplay arena Stationary Internet (incl. basic VoIP) IPTV home infotainment 40€ Inner multiplay area - Differentiation & Up Sell 20€ • Web2.0 communities • Premium VoIP • Premium content TV Internet 10€ 2€ 8€ Mobile Internet Mobile TV • Broadband ARPU estimate for • active users of the service • Average Western Europe values • Only direct revenues, no advertising considered On the move

20. Content • Service trends • End-user insights • Broadband service strategy development • Broadband service examples & success stories • Broadband Solutions & Evolution • Summary

21. Quadruple play packaging is a megatrend in the market Source: DTAG, 2006 Source: Wanadoo, 2006 Source: BT, 2005 Source: Cascade- A PCCW company @ NGN Asia, 2006

22. Content • Service trends • End-user insights • Broadband service strategy development • Broadband service examples & success stories • Broadband Solutions & Evolution • Summary

23. Price per Mbyte has to be reduced to remain profitable Trafficvolume Traffic volume Revenue Network cost (€/bit) Time Voice dominated Data dominated Source: Light Reading (adapted)

24. Availability of access highways Innovating wired and wireless access technologies and standards • GERAN evolution / HSPA & LTE •  Towards cost efficient high speed mobile access • Radio technologies for IMT-Advanced •  Increased spectral efficiency, link capacity and coverage • DSL and fiber evolution •  Towards cost efficient high speed fixed access

25. Bandwidth (bps)[peak user data rates] 10G Fixed Access FTTH155 Mbps 1G 4G 1 Gbit/s 100M Cable40-50 Mbps LTE 100 Mbit/s VDSL50 Mbps 10M HSDPA 10 Mbps ADSL3-8 Mbps 1M Mobile Access ISDN-BRI2x64+16 Kbps WCDMA 2 Mbit/s EDGE 220-384 Kbps 100k GSM 9,6 Kbps GPRS 40-75 Kbps 1990 1995 2000 2005 2010 Time Availability of access highways… in terms of bit rate, coverage, quality, security • DSL is the benchmark for end-user experience today • Requirements on network set by • Innovative services with high volume traffic (e.g. IP TV) • Interactive Web2.0 based applications • Increase bitrates on copper cables utilizing the existing infrastructure • Improve fiber optics to maximize performance-to-cost-ratio • Drive radio access evolution addressing performance and cost challenges • Build-up powerful and flexible backbones for high-volume traffic at high quality

26. Content • Service trends • End-user insights • Broadband service strategy development • Broadband service examples & success stories • Broadband Solutions & Evolution • Summary

27. Enforced competition is re-defining the market Market boundaries are diminishing, Major internet players are threatening telcos With broadband access, services become network independent. User loyalty is strongly decreasing Data service quality, service portfolio and bundles are major sources of dissatisfaction Speed, ubiquitous availability, quality of content presentation and simplicity is key Broadband everywhere…. • Premium interactive • services • Premium VoIP to address the Web2.0 paradigm shift • IPTV with personalized and interactive content • Strong user, ARPU and loyalty growth • Access independent • service availability • User is always best connected • No complexity challenges for the user • Service continuity and simple access to personal service suite • Ubiquitous high speed • access • Fast rollout of sufficient DL and UL capacity needed: VDSL/fiber and HSPA/WiMAX) • Hybrid fixed and mobile strategy for maximum revenues

28. Thank you !