1. The European way to think the Digital World www.idate.org 3 years later… Telecom’s current state of health IDATE International Conference 2003 Yves GASSOT

2. IDATE © 2003 www.idate.org 2 IDATE International Conference 20 November 2003 Three years after the bubble burst... Where’s the growth?  Back in the black Net profits for the world’s leading carriers (Billion EUR) Source: IDATE

3. IDATE © 2003 www.idate.org 3 IDATE International Conference 20 November 2003 Evolution of European carriers’ net debt 0 10 000 20 000 30 000 40 000 50 000 60 000 70 000 80 000 Deutsche Telekom France Telecom British Telecom Telecom ItaliaTelefónicaKPN Million EUR 1Q02 2Q02 3Q02 4Q02 1Q03 2Q03

4. IDATE © 2003 www.idate.org 4 IDATE International Conference 20 November 2003 Three years later... ... But a sharp decline in growth Evolution of leading carriers’ TO (Billion EUR) Source: IDATE

5. IDATE © 2003 www.idate.org 5 IDATE International Conference 20 November 2003 Declining growth rates  North American market stalled... ... a sharp decline in Europe... ... but still steady growth in Asia-Pacific Evolution of the world market by region (constant exchange rates) Source: IDATE

6. IDATE © 2003 www.idate.org 6 IDATE International Conference 20 November 2003 The China effect… China: cellular subscribers and mobile density 0 50 100 150 200 250 300 2000200120022003 (e) 0% 5% 10% 15% 20% 25% Cellular subscribers (million)Cellular density (%) Source: IDATE

7. IDATE © 2003 www.idate.org 7 IDATE International Conference 20 November 2003 Diminishing growth Market components Source: IDATE

8. IDATE © 2003 www.idate.org 8 IDATE International Conference 20 November 2003 Successful migration to 3G Source: IDATE

9. IDATE © 2003 www.idate.org 9 IDATE International Conference 20 November 2003 Fixed: revenues and consumption dropping The internet effect... and fixed-mobile substitution Source: IDATE

10. IDATE © 2003 www.idate.org 10 IDATE International Conference 20 November 2003 What about data? ... Data market value growth on a downward trend… Evolution of the world market, by segment (constant exchange rates) Source: IDATE

11. IDATE © 2003 www.idate.org 11 IDATE International Conference 20 November 2003 Broadband: a growth relay?  Tremendous growth of broadband subscribers, thanks notably to lower tariffs. Growth of broadband subscribers Source: IDATE

12. IDATE © 2003 www.idate.org 12 IDATE International Conference 20 November 2003 Broadband: a growth relay? Broadband subscribers (DSL + Cable) per 100 inhabitants Source: IDATE

13. IDATE © 2003 www.idate.org 13 IDATE International Conference 20 November 2003 Conclusion (1) Spectacular financial revival + Clear decline in growth rates… = Threat of telecoms’ “commodization”? ... But considerable potential contingent on: -stepped-up investments in innovation, -more user-centric marketing (streamlined segmentation, bundling, user-friendly, pricing…) -pro-active partnerships with other ICT players (as opposed to being just a “pipe manager”) -regulation geared to efficient and durable competition

14. IDATE © 2003 www.idate.org 14 IDATE International Conference 20 November 2003 Conclusion (2) Hence the theme of this year’s Conference Telecom - Internet - Media: Advantage Services! Illustrated by four key areas for carriers in the 5 coming years, namely:  Winning Services 1: Corporate and business markets: How to increase revenues when tariffs are dropping ?  Winning Services 2: Beyond telephony… the next generation in Personal Communication  Winning Services 3: Mobile services in the age of 3G  Winning Services 4: Always on… at home: who will pay for what? Or how to create value on broadband networks?