1. User-Centric Broadband: Alcatel’s vision for growth IDATE - November 25, 2004 Philippe Germond, Alcatel

2. User-Centric Broadband: Alcatel’s vision for growth All rights reserved © 2004, Alcatel From the Internet Bubble to the Broadband World High Traffic Growth Low $ Value High Traffic Growth Low $ Value Internet wave I Internet wave II: The Broadband World High Traffic Growth High $ Value High Traffic Growth High $ Value Will the addressable $ pie grow? 3 questions for Service Providers: How will they grab a larger share of the pie? Alcatel’s “User-Centric Broadband” vision for success

3. User-Centric Broadband: Alcatel’s vision for growth All rights reserved © 2004, Alcatel Internet Wave II: The Broadband World Question #1 for Service Providers: Will the Addressable Pie Grow?

4. User-Centric Broadband: Alcatel’s vision for growth All rights reserved © 2004, Alcatel Opportunity for Voice & Data Communications: Maturing Market Source: IDATE, DigiWorld 2004 Emerging markets: growth from increased mobile penetration Developed markets Fixed telephony decreasing (fixed-mobile substitution, pricing models) Still increased mobile usage Increased broadband penetration (fixed & mobile) VoIP threat

5. User-Centric Broadband: Alcatel’s vision for growth All rights reserved © 2004, Alcatel 4.6 m 2 m 0.7 m Broadband demand has proven elastic to price decreases and bandwith growth X 3 Price dropBandwidth X 2 Users X 6 <1 k 60 k 700 k Total lines Unbundled lines X 1 k … in two years Unbundled lines 512 Kb1 Mb Example: French fixed broadband market 1 0 2 3 4 5 10 0 20 30 40 50 Mid 2002Mid 2003Mid 2004 Users (m)Monthly fees (€) € € €

6. User-Centric Broadband: Alcatel’s vision for growth All rights reserved © 2004, Alcatel 150M paid downloads (oct 04): value is ease-of-use with iPod and “clear conscience” From free dial-up access to €30/month triple play broadband service Free + Premium Services (mobile access & extra content) for specific segments (ex: avid investors) From “Free” to “Free + Premium”: customer segments pay for specific value & simplicity Future model is combination free + premium services Premium value: immediacy, personalization, richness, legal, mobile access...

7. User-Centric Broadband: Alcatel’s vision for growth All rights reserved © 2004, Alcatel A lot of unmet needs beyond access Source: Alcatel focus group research, April 2004 Hierarchy of Broadband Needs Connect Me Organize Me Entertain Me Empower Me Key Success Factors will be CUSTOMER VALUE and EASE OF USE Translating Unmet Needs into Services Examples of Services Virtual Assistant Virtual Watchman Video on demand Video on the go Message Management Automatic Synchronization Network Back-Up Video-Telephony Real-time Quality and Cost-Based Routing

8. User-Centric Broadband: Alcatel’s vision for growth All rights reserved © 2004, Alcatel Will the Addressable Pie Grow? COMMUNICATIONS *Source: ALCATEL based on various analyst sources The Opportunities in: Consumer Small & Medium Business Where is the market disruption (big opportunity to grow)? Voice and Data Communication (€1000Bn)* Voice and Data Communication (€1000Bn)*

9. User-Centric Broadband: Alcatel’s vision for growth All rights reserved © 2004, Alcatel The Opportunity for Communications Hierarchy of Broadband Needs Connect Me Organize Me Entertain Me Empower Me Will Video Communications come of age? Source: Alcatel Video Research, Dallas, Philadelphia, London, Milan; Alcatel August 2004 REMOTE MONITORING “Track what is important to me” CONTENT EXCHANGE “See what I see” EMOTION SHARING “Feel what I feel” Voice and Data Communication (€1000Bn) Voice and Data Communication (€1000Bn)

10. User-Centric Broadband: Alcatel’s vision for growth All rights reserved © 2004, Alcatel The Opportunity for Communications BROADBAND ENTERTAINMENT Connect Me Organize Me Entertain Me Empower Me Hierarchy of Broadband Needs Will Interactive Video come of age? Will Mobile Entertainment come of age? Broadcast and Content (€300Bn) Interactive Video Mobile Entertainment

11. User-Centric Broadband: Alcatel’s vision for growth All rights reserved © 2004, Alcatel MORE PERSONALIZED “Primetime” becomes “My Time” From “Broadcast” to “User-Centric distribution” (ex: VoD) MORE PERSONALIZED “Primetime” becomes “My Time” From “Broadcast” to “User-Centric distribution” (ex: VoD) MORE ACCESSIBLE Entertainment goes mobile MORE ACCESSIBLE Entertainment goes mobile MORE INTERACTIVE Entertainment and Communications habits converge “View together” Mobile phone becomes remote control MORE INTERACTIVE Entertainment and Communications habits converge “View together” Mobile phone becomes remote control Source: Alcatel Video Research, Dallas, Philadelphia, London, Milan; Alcatel August 2004 Unmet User Needs in Video Entertainment: Opportunity for Broadband User-Centric Broadband Video

12. User-Centric Broadband: Alcatel’s vision for growth All rights reserved © 2004, Alcatel Service Providers and Content Providers: Alcatel Facilitates Conditions for Joint Growth Conditions for joint growth: Broadband security against piracy User-Centric Digital Rights Management Early release for Video on Demand

13. User-Centric Broadband: Alcatel’s vision for growth All rights reserved © 2004, Alcatel Will the Addressable Pie Grow? The new Consumer Market for Service Providers + COMMUNICATIONSENTERTAINMENT Broadcast and Content (€300Bn) Video Communications Interactive Video Mobile Entertainment Voice and Data Communication (€1000Bn) Voice and Data Communication (€1000Bn)

14. User-Centric Broadband: Alcatel’s vision for growth All rights reserved © 2004, Alcatel Will the Addressable Pie Grow? The Small and Medium Business (SMB) Opportunity SMB Mass Market Packs for mainly single site SMBs 1Ms SMB Mid Market Solutions for multi site SMBs 100ks SMB demand simplicity ICT integration One-stop shopping & support Telcos can leverage Brand Local footprint Need to sort out Offering (ICT bundle) Channel strategy Sources: Alcatel, Eurostat, BNP Paribas, IDC, AMI Partners, Frost&Sullivan

15. User-Centric Broadband: Alcatel’s vision for growth All rights reserved © 2004, Alcatel Question #2 for Service Providers: Internet Wave II: The Broadband World How to Grab a Larger Share of the Pie?

16. User-Centric Broadband: Alcatel’s vision for growth All rights reserved © 2004, Alcatel Broadcast and Content (€300Bn) Video Communications Interactive Video Mobile Entertainment Voice and Data Communication (€1000Bn) Voice and Data Communication (€1000Bn) New Competition for the Consumer Opportunity + COMMUNICATIONSENTERTAINMENT MS.NET MODEL CABLE OPERATORS SATELLITE BROADCASTERS CONTENT PROVIDERS

17. User-Centric Broadband: Alcatel’s vision for growth All rights reserved © 2004, Alcatel Alcatel sees 3 stages of evolution Broadband Services Broadband Services User-Centric Broadband Services User-Centric Broadband Services Multiple new Connectivity Services Multiple new Connectivity Services 2005199520002010 New Services Adoption

18. User-Centric Broadband: Alcatel’s vision for growth All rights reserved © 2004, Alcatel What consumers tell us: they want MORE DIVERSITY Hierarchy of Broadband Needs Connect Me Organize Me Entertain Me Empower Me Users want a DIVERSITY of devices and connectivity Users want a DIVERSITY of devices and connectivity + + Users want a DIVERSITY of services Users want a DIVERSITY of services Source: Alcatel focus group research, April 2004 Mobility Security Comfort Cost Optimal Trade-Off

19. User-Centric Broadband: Alcatel’s vision for growth All rights reserved © 2004, Alcatel Users demand SIMPLICITY Diversity of services, devices and connectivity creates COMPLEXITY Network will manage COMPLEXITY for the User Any device, Any broadband Single Authentication Consistent Personalization Transparent Synchronization NETWORK ORCHESTRATES for SIMPLE EXPERIENCE

20. User-Centric Broadband: Alcatel’s vision for growth All rights reserved © 2004, Alcatel Service Providers are in key position to increase CUSTOMER APPEAL & LOYALTY Service Providers’ key opportunities Service Providers’ key assets Communication Networks Customer relationship (invoice, support interactions, behavioral data) Brand Rewarding experience (Quality of Service, Choice of Connectivity, one-Stop Shopping) Single customer profile (single bill, single reference for parameters & data) Trusted Guardian (security and privacy)

21. User-Centric Broadband: Alcatel’s vision for growth All rights reserved © 2004, Alcatel Broadband Video Strategy for Service Providers: Communications enable new User Entertainment Experience Phase 3: Differentiate long-term Phase 3: Differentiate long-term USER-CENTRIC BROADBAND SERVICES Phase 1: Market entry FIXED SERVICEMOBILE SERVICE TRIPLE PLAY SERVICE BUNDLE 2.5G BASIC MOBILE VIDEO Phase 2: Secure and develop Phase 2: Secure and develop PERSONALIZED AND INTERACTIVE EXPERIENCE VIDEO-TELEPHONY INTEROPERABILITY PERSONALIZED AND INTERACTIVE EXPERIENCE VIDEO-TELEPHONY INTEROPERABILITY

22. User-Centric Broadband: Alcatel’s vision for growth All rights reserved © 2004, Alcatel Alcatel’s “User-Centric Broadband” vision for Service Provider success Internet Wave II: The Broadband World

23. User-Centric Broadband: Alcatel’s vision for growth All rights reserved © 2004, Alcatel Enabling User-Centric Broadband The best access network available for what the user needs to do here & now A service delivery platform managing a single customer profile A transport that provides the required Quality of Service Business Environment Any Content Every Terminal, Everywhere Each User Consumer Environment

24. User-Centric Broadband: Alcatel’s vision for growth All rights reserved © 2004, Alcatel User-Centric Broadband Architecture Universal Broadband Access Wireline Wireless Satellite Mobile Service Delivery Platform Service Aware Edge & Data Aware Transport Business Environment Any Content Every Terminal, Everywhere Each User Consumer Environment Integration & Operations Operations & Business Support Systems

25. User-Centric Broadband: Alcatel’s vision for growth All rights reserved © 2004, Alcatel Mastery of Key Technologies Alcatel End-to-End Integrator Business environment IP-PBX: Europe #1 Contact centers: WW #1 Voice infra: within top 4 Wireline access WW #1 Wireless access Telecom satellite: WW #1 LMDS: WW #1 Mobile access Within top 4 GSM, fastest growing Evolium JV vith Fujitsu: largest 3G installed base Service Aware Edge & Data Aware Optics Optics: WW #1 Wireless transmission: WW #1 NB switching: WW #1 ATM/FR: #2 IP multiservice routers: leader Service Delivery Platform Extensive suite Leading positions in rating, Mobile Prepaid, Video applications Services Professional services: within top 3 Network outsourcing: WW #1

26. User-Centric Broadband: Alcatel’s vision for growth All rights reserved © 2004, Alcatel France Telecom Alcatel is FT’s partner for IMS-enabled services

27. User-Centric Broadband: Alcatel’s vision for growth All rights reserved © 2004, Alcatel Alcatel and BT Speed to Market Customer Experience Cost Transformation 21CN Alcatel is BT’s partner for: 21CN Project BluePhone BT Communicator

28. User-Centric Broadband: Alcatel’s vision for growth All rights reserved © 2004, Alcatel Alcatel and SBC Alcatel is SBC’s partner for Project Lightspeed Oct. 21 st, 2004

29. User-Centric Broadband: Alcatel’s vision for growth All rights reserved © 2004, Alcatel Alcatel Broaden Your Life

30. User-Centric Broadband: Alcatel’s vision for growth All rights reserved © 2004, Alcatel www.alcatel.com