1. Baltic States: Opportunities in Outsourcing & Business Transformation Eastern European Business Forum Stockholm, 25-26th November Nils Melngailis Chief Executive Officer

2. In today’s economy business models are changing towards decapitalized New Economy
Old Economy
New Economy
BRAND CAPITAL
HUMAN CAPITAL
WORKING CAPITAL
“Push” Focus
“Pull” Focus
Production Focus
Customer Focus
High
Low
PHYSICAL CAPITAL
(Outsourced Network)

3. Lattelekom is an example of a major business transformation
Before
After
Sales & marketing IT
Sales & marketing
Billing
Network Operations
Shared services (HR, project mgmt)
Network
Operations
F&A
Procurement
Transportation
Property mgmt IT
HR mgmt
Training
Network Maintenance
Call centre
services
Billing
Customer care
Property
mgmt
Fleet mgmt, leasing
Training

4. Lattelekom evolution to become a BPO provider
Internal
Business
Transformation
Cross-Border
BPO
Local BPO
Made significant investments in technology
Focus on efficiency and service quality
Contact Centre establishment
Shared Services establishment
Contact Centre e.g.:
Inquiry services
Hansabanka
Statoil / Neste (Baltic)
Kraft Foods
Governmental
Insurance
Data Centre for several external companies
Payroll Outsourcing for Statoil
Softcom Customer Care partnership
Help desk services for Dell PC users
Contact Centre for German mobile operator
Exigen Transformation partnership

5. A number of success cases signify the trend of business process & service outsourcing to Baltics along with exchange of local expertise
- Latvia as the key resource base for global IT solutions and outsourced services
- Regional lead in e-banking and remote services competence
- Customer support service in Latvia for Swedish PC users
- Accenture IT Technology Center established in Riga end of 2002, with staff of 60 professionals serving IT projects in Nordic region.
One of the earliest Scandinavian capital investments in Latvia, with “Rosme” acquisition in 1993
On Accenture more info to come from Aivis (TeliaSonera Oracle e-business solutions etc.)
- Near shore call centres in Estonia (both set up in 2001, with 170 / 70 staff)
- Accounting service centre
established in Latvia to serve 23
countries where Tele2 operates

6. Introduction to Exigen
In Brief
Private company (started in 2000)
San Francisco, California
Investor AB among investors
1100 employees & 300 customers
Operational Innovation for Services Industries
Financial Services
Communications & Media
Government
Transformation Software and Services
Business Processes
Legacy Systems
IT Development
Business based on long-term partnership around financial value creation
Pioneered the Business Process Utility™ model
Decoupling and outsourcing
Transaction processing leveraging economies of scale

7. Exigen in Latvia Recognizing Latvian advantageous position …
Exigen has developed significant resources and infrastructure in Latvia
One of the lowest labor costs in EU
Availability of qualified and well-educated IT professionals
Access to reliable infrastructure
Geographical and cultural proximity to Europe
Political stability
Government incentives for IT companies
100%= 692 Exigen developers*
Other
Lithuania
Russia
USA
Latvia
* Including a/s DATI, which is now an Exigen Group company

8. Transformation Success
Universal/Warner Music
9-year relationship
Royalty transaction processing utility
Target: USD$100+M savings
Process and Transaction Outsourcing
Prudential Securities
5-year relationship
Application outsourcing for back-office systems
Target: 35% cost reduction
Legacy System Outsourcing
EDS & Westpac
10-year relationship
Mortgage origination for 1400 person operating center
Target: 46% cost reduction
Industry Business Process Software
2000
2001
2002
2003
2004

9. Business Process Utility™ Model
Shared Royalties Processing – Exigen, Warner, Universal.
Reduced capital expenditures (short-term and long-term)
Amortize upfront and future development costs across all participants using Exigen software (1500+ person years of development) and offshore Eastern European resources
Variable cost base to utility customers
Service provider model charging per transaction
Aligned business model: variable to customer’s business, incentives for Exigen to create more value in order to increase transaction volumes
Operating cost reduction created by sharing infrastructure
Initial large-scale operation ready to process transactions for new customers
Over 30% operational cost savings

10. Hansabank Group - regional leader in e-banking solutions and remote services competence
One of leading commercial bank groups in Baltics with Swedbank (FöreningsSparbanken) holding 59.7% of group's shares from 1998
The parent, Swedbank, historically emerged from several organizations, therefore faced with parallel IT systems and consolidation challenges
Hansabank, as many other Baltic counterparts, in much more advantageous position:
Different, decades younger IT solution generation from ‘90ties – no migration challenges and huge IT re-investment required
Pan-Baltic IT system built on common platform with localized services
All technological solutions built with integrated remote access for immediate practical application

11. - Over 1 000 000 pan-Baltic Hansabank Internet banking customers -
Hansabank Group - regional leader in e-banking solutions and remote services competence (continued)
Today, Hansabank is the market leader in remote banking services (attractiveness, service penetration) with superior business expertise in the region
- Over pan-Baltic Hansabank Internet banking customers -
500,000
1,000,000
1,500,000
1996
1997
1998
1999
2000
2001
2002
2003

12. Hansabank Group - regional leader in e-banking solutions and remote services competence (continued)
The Forrester Report, November 2000 lists the best European web banks:
Hansabank is the benchmark for smaller banks
The only Eastern and Central European bank to be on the list, achieving 16th place.
"Golden Spider 2002“ - the best e-commerce solution in the Baltic States by the Baltic jury & initiated by Latvian Internet Association

13. Softcom Customer Care – A pan-Baltic Call Center Company
”Each interaction between a customer and a company should be considered as a business opportunity and treated accordingly.”
Alf Sjöström, Founder & Owner of Softcom
Softcom runs Customer Care Centers to create outstanding customer relationships for its clients offering higher quality, lower costs, increased revenues and better understanding of customer needs and behavior.
Softcom has three main areas of service:
Inbound Customer Services and Support
Marketing & Sales
Customer Research and Analysis
These three basic services are combined to dramatically improve customer relationships for our clients. This is professional CRM In practice.
Through innovative services, Softcom creates and maintains competitive and profitable customer relationships for its clients

14. Softcoms has established a pan-Baltic Virtual Contact Center
9 Contact Center sites
In total 700 agents
Seamless flow of contacts between countries and locations
Call routing based upon
Language
Location
Cost to serve
Type of customer
Competence
Advanced IP-based Callcenter platform
Pan-Baltic
Virtual
Contact
Center

15. Growing Softcom business in Baltic - customer support service for Swedish and Finnish PC users
Front level support to PC users in Swedish/Finnish languages
Inbound/Outbound helpdesk call handling + s
Service launched October, 2003 with more than 40 Baltic operators by end of 2004
Fast launch: 3-4 month preparation
Bringing customer cost saving to ~30%

16. Lattelekom & its partners have the breadth and depth of capability to deliver business transformation
Business process audit
& reengineering
Process transformation outsourcing
Call center services,
Finance & support operations
transformation
Business Customer Demands
BPO
IT consulting
Desktop support
System support
Application development & support
IT Services
Hardware operations
Network operations
IT Infrastructure
Converged Offer
Infrastructure outsourcing;
Network operations
outsourcing
Networking, Data & Internet
Fixed & Mobile Voice

17. Thank You!

18. International comparison of base salaries in IT
Ref. levels
Annual Latvia
Entry level
LVL 4,800
Graduated
specialist
LVL 6,000
Principal
LVL 9,180
Lead specialist,
manager
LVL 14,100
650%
Germany
600%
550%
Finland
500%
Sweden
450%
400%
350%
300%
Russian
Federation
250%
Poland
200%
Czech
Republic
150%
Latvia
Lithuania
Slovak
Republic
100%
50% 0%
Source: UNDP Assessment of Competence Potential in the ICT Sector of Latvia, 2004

19. Similar factors account for increased call center outsourcing & CRM process transformation in Latvia & other Baltic countries
Highly qualified HR base:
Average foreign languages per pupil in Latvia higher (1.8) than in “old” EU-15 member states (1.5)
One of highest rates of students (539) per 10,000 inhabitants in Europe
Good business conditions: one of the lowest income tax in EU, 15 %
Very competitive cost structure:
10,000
20,000
30,000
40,000
50,000
Denmark
Germany
Netherlands
Belgium
Sweden
Spain
Greece
Poland
Hungary
Slovakia
Latvia
Average Gross Income for one employee
in enterprise sector, EUR/year (2002)
Source: EuroStat (long-term indicators), Central Statistical Bureau of Latvia