1. Telecoms Business and the EU – An Operators Perspective John Munnery

2. Our Experience 14 years in South East Europe 16 years in Mobile; plus substantial fixed experience Where – Bulgaria, Macedonia, Serbia, Croatia, Georgia For who: BT, C&W, Deutsche Telecom/Matav, Soros, BTC and others Boutique consultancy, forming teams as necessary, or cooperating with other lead consultancies

3. EU Practice – a pragmatic view Breaking of monopolies and cartels Best deal for customers - consultation Sector Development Effective regulation through an empowered Civil Service New entrants encouraged, but trend is towards consolidation either in national groupings, or international product service lines

4. The Telecoms Market in Bulgaria Total value around 1.3 billion Euro 500 million BTC 700 million Mobile 100 million rest (ISPs, Cable, calling card) Issue is more about redistribution of incomes than fighting for the limited growth in the market (driven primarily by GDP growth ) Is anyone not for sale? New entrants open the market, but trends are towards consolidation, either along international product service lines, or local groupings (possibly only way in BG to get critical mass)

5. Monopoly and Cartel Issues in BG Two operators with SMP – one in Mobile, other in fixed Third substantial player in mobile close behind All three account for +/- 90% of BG telecoms revenues Sector growth is limited to GDP + a bit Fight is for revenue redistribution/protection which is determining the strategy of the big players Impact of fixed rebalancing Informal cartels in Mobile – no one wants to reduce prices There is enough Mobile and fixed backbone capacity in place for many, many years – new infrastructure/opportunities needed only for the last mile Impact of new technologies – Wimax, PMP in particular; exclusion of operators with SMP

6. The Achilles Heels Poor fixed network in BG has resulted in mobile substitution; may be beyond recovery; EU former incumbents are running fast to stand still Fight for 100% on-net traffic – artificially high cross-operator charges; key regulatory/competition issue BTC making positive steps – but may be too little too late; limited reach of services such as DSL; party line problems Privatisation is taking some time to turn BTC round; unlike elsewhere not protected by monopoly Existing mobile businesses have vulnerabilities – relatively high tariffs and little revenue growth. Will seek to extend market to retain revenues Short term business objectives

7. Key Issues Local loop unbundling – but don’t forget the Mobile local loop! Domestic access – BTC, Gas, Electricity, CATV; who can afford the investment and who can offer quality? Breaking of the Mobile Cartel – business pressures on GSM1, 2 and 3 unlikely to drive down prices; and 3G process did not bring in a new entrant; answer may be mandatory service provision/MVNO operations There is sufficient transmission infrastructure in BG for all possible demands for the next 10 years – the access technology (outside mobile) is the issue – how do entrepreneurial operators get into this?

8. Areas for Growth Data explosion in customer numbers and data transmission needs – BG is hungry; but penetration of PCs is low, so there are limits “Internet is Free” attitude; but corporate sector is becoming demanding in price and quality Schools programme will drive expectations But majority of market is hungry for cheap voices and SMS (and SMS is a data service) BTC rebalancing offers opportunities

9. Key Issues for BG Revenue redistribution is a greater driver that growth alone; and the near monopolies have little growth potential Competition fed by consolidation – present situation is “divide and rule” Long-term business view would help The giants have vulnerabilities New licences should be awarded to companies with no SMP Continued regulatory pressure needed to open up networks and allow successful models to be imported from other European countries How are the customers’ view heard – need for lobby – Telecoms Users’ Association