1. Views on joint dominance in European wholesale mobile access markets Paul Ryan March 2006 STRICTLY CONFIDENTIAL – to Vodafone and Polish Regulatory Authorities

2. March 2006 Vodafone 2 Issues to be discussed Background Public policy reasons not to intervene the case is not proven –Recommendation on relevant markets –Experience in other EU markets –Data required –Consumer interest

3. March 2006 Vodafone 3 Public Policy…..facilitate competition, not competitors Polish mobile market continues to attract substantial investment Poland will soon have four networks, but infrastructure investment is likely to be punished by regulated access obligations Wholesale access services –are offered in competitive markets where they add value for consumers –enable greater distribution, no evidence that Poland has a distribution issue No obvious pent-up demand from access seekers Wholesale access regulation facilitates particular competitors not competition Is Polish telecoms policy moving away from infrastructure competition? If NRA believes the current market is not competitive it needs to outline what it expects to see and why.

4. March 2006 Vodafone 4 Regulation…..requires market failure before intervention No proof of mobile market failure –1. No insurmountable entry barriers. Netia entry proves this. Similarly Hutchinson entering in other markets –Given the dynamic character of electronic communications markets, possibilities for the market to tend towards a competitive outcome, in spite of high and non-transitory barriers to entry, need to be taken into account. –2. EU mobile markets tend over time towards effective competition. –Most EU mobile access markets are competitive (see 11 th implementation report), Forward looking analysis required, failure in the wholesale market is not proven. –3. Competition law by itself is sufficient –No evidence to inadequacy, obligation to prove this. Why is Poland different? No pent-up demand from MVNO’s or service providers Regulation for “more” or “better” competition is not permitted nor legitimate

5. March 2006 Vodafone 5 Continued Mobile market growth in Poland: Development index in subs 2000-2005

6. March 2006 Vodafone 6 Polish mobile market is not an extreme case Hirfindahl Hirschman Index in subs 2005 No SMP SMP Pending

7. March 2006 Vodafone 7 Other EU markets Access market reviews –Ireland (unique case, NRA withdrew SMP finding) –France (3 firm market, effectively SMP effectively vetoed by EU) –Malta (2 firm market, no decision but no pent up demand) –Spain (3 firm SMP alleged pent up demand, appeals likely) –Portugal & others (threatened but not followed through, consolidation underway) –UK (competitive 5 firms, some deals) –Hungary (competitive 3 firms, no deals, compare to Poland ) –Italy (competitive 4 firms, no deals, weak 4 th player, compare to Poland) –Finland ( competitive, deals) –Sweden (competitive, deals, “3” few customers) –Netherlands (competitive 4 players, deals, largest firm has 50%+) Given its importance to the European economy and its dynamic nature the EU is very reluctant to see unwarranted access regulation in mobile markets. Need to show exceptional and clear market failure, such as alleged in Slovenia and Cyprus.

8. March 2006 Vodafone 8 Data Required to show market failure Joint Dominance is a very difficult concept to establish Error costs are very large for firms and consumers Focal point and retaliation mechanisms required –In Poland no explanation of focal point by NRA or NCA, hence analysis fails –NCA appears to agree that retaliation at both retail and wholesale level is not possible, hence analysis fails –in many industries which are deemed effectively competitive, firms do not invariably participate in merchant markets. (see Professor Janusz Ordover) Regulator must either show 4 th firm –will not impact on competition; or –that existing 3 firms are within the alleged equilibrium and can retaliate against each other –Must demonstrate the market failure and show what a competitive market would produce Forward looking analysis required. Recent dynamism with low cost brands and Impact of Netia are ignored Current pricing is unlikely to change from positive to adverse (next slides show pricing is “normal”)

9. March 2006 Vodafone 9 Low OECD usage basket Teligen 2004 No SMP Pending SMP

10. March 2006 Vodafone 10 Medium OECD usage basket Teligen 2004 No SMP Pending SMP

11. March 2006 Vodafone 11 High OECD usage basket Teligen 2004 No SMP Pending SMP

12. March 2006 Vodafone 12 Conclusion Clear regulatory reasons why the case is not proven –Recommendation on relevant markets, is no guide –Experience in other EU markets goes against SMP finding –11 th implementation report finds mobile access largely competitive –Data required is onerous –Economics is very difficult –Consultation process is only beginning The interests of consumers are best served by promoting competition and NOT by promoting types of competition or promoting particular competitors