1. Key Issues facing Mobile Carriers Matt Davey Deputy Managing Director OPTUS MOBILE 25 th September 2003

2. Presentation Overview The “gold rush” is over. The industry has matured and is in transition There are four key levers which mobile operators can use to increase their value –Subscriber numbers –Cost structure –ARPU –Capital efficiency With much work already in progress, we believe the most important issues going forward are: –Retail commissions and channel consolidation –Development of Non-communication data services –Capital efficiency through cooperation in non competitive arenas

3. There are many challenges as the industry undergoes transformation Mobile Operators Mobile Industry New to market growth slowing Rates expected to continue to fall Customer behaviours Still handset driven Beginning to use phone for more than just voice Technology Handset evolving rapidly to colour screens Innovative 2.5G applications being developed Competitive activity New data offers: –GPRS –1X –3G New aggressive pricing offers

4. Competition has driven pricing down while penetration growth is slowing Average rate per minute 12% annual decline Source: Merrill Lynch Global Wireless Matrix – 2/04/03

5. There are four strategic levers for operators to increase their value Strategic Levers Tactics Increase share of subscribers Capture new to market Port customers from other operators Reduce churn in base Reduce cost structure Headcount reduction / outsourcing Handset subsidies Channel costs Grow ARPU per sub Communication Entertainment News/Information Capital efficiency Sweating assets Network sharing Common platforms

6. Channel costs/commissions are costing the industry over $630M per year Industry Revenues $Billion Commission rates Percent Total Commissions $Million 1.15b 6.6b 20% 6% 230M 400M 630M

7. There are close to 3000 points of post paid distribution in Australia 1200 630 250 100 500 200 40 Post Paid Distribution outlets by State * Prepaid outlets estimated at 15000 nationally

8. We need to stimulate the market with non communication based services Key Question How do we move beyond P2P communication and stimulate new data services? What new areas can operators take share? –Entertainment (games, MMS, adult?, chat) –Information (e-mail, news, sport) –Location based services (where is, what’s on)

9. In some arenas cooperation will provide better outcomes for consumers and lower capital for operators Regional coverage M-commerce stimulation 3G migration Optus’ current statusCooperation benefit Optus continuing to roll out base-stations in regional areas 3G trial in progress Developing EFTPOS based m-payment solution Billing on behalf for 3 rd party content Enhanced coverage at lowest economic cost Closer matching of capacity to demand – lower overall prices for consumers Agreement of a common standard and approach will lead to greater take-up by merchants and consumers Key issues

10. Conclusion With slowing penetration growth and falling mobile prices the industry needs to look to other levers for on-going profit growth Consolidation of channels and a reduction in total industry commissions are areas that need to be addressed Operators will need to become increasingly sophisticated in segmentation and marketing to stimulate information and entertainment revenues to support ongoing ARPU growth There are non-competitive areas where the industry can be more efficient in its capital and/or more effective in its service delivery –Enhanced regional GSM coverage –Stimulating 3G takeup via network sharing or roaming –Developing an Australian M-commerce standard which is supported by all carriers and supports all mobile users (post & pre paid)