1. TRANSPARENCY IN CORPORATE REPORTING: ASSESSING THE WORLD’S LARGEST TELECOMMUNICATIONS COMPANIES Krisztina Papp TI Hungary Budapest, 24 November 2015

2. TRAC TELECOM ABOUT THE REPORT ABOUT THE REPORT: ranking of the world’s leading publicly listed telecommunications companies based on their disclosure practices 35 companies assessed: 29 service providers, 6 equipment manufacturers taken from the 2014 Forbes Global 2000 list, from a total of 22 countries companies assessed has a total market value of appr. US$ 2 trillion METHODOLOGY: data collection: company websites and relevant embedded links data was collected between June and August 2015 TI did not investigate the accuracy or completeness of the published information companies provided methodology in advance local chapters were involved in the process following to sharing the individual data with them, companies were invited for feedback, 16 out of the 35 companies took advantage of this opportunity. As a result, improvement of the overall score was 3.8 to 4.1

3. TRAC TELECOM ABOUT THE REPORT RANKINGS/ANALYSIS: three separate company rankings for each evaluated dimension an overall transparency index EVALUATED DIMENSIONS: reporting on anti-corruption programmes demonstrates if the company has AC policy in place, shows the level of committment to AC questions are based on TI’s Business Principles for Countering Bribery, that influenced leading global AC standards: explicit commitment to AC with a policy that applies to all employees, agents, suppliers, contractors, prohibitation of facilitation payments and whistle- blower protections organisational transparency level of transparency of the company’s corporate structure disclosure of corporate holdings: complete transparency of the existence, name and location of the holding country-by-country reporting makes it possible to collect financila data across all countries of operation standards were developed to ensure sufficient information to understand the top-line revenues and expenses in a particular country of operation

4. TRAC TELECOM AVERAGE SCORE 4.1/10

5. TRAC TELECOM REPORTING ON ANTI-CORRUPTION PROGRAMMES COMPANY RANKING average result 65% three companies at the top with 100%, three with 96%, all European companies, 15 companies achieved more than 75% Asian companies ranking low average performance of service providers: 63%, of equipment manufacturers: 78%

6. TRAC TELECOM AC PROGRAMMES – ANALYSIS BY QUESTION 83% companies state publicly that they are committed to complying with laws, operate confidential reporting channels for whistleblowers at management level: 29 demonstrates commitment to AC, only 17 companies state that the code of ethics applies to their directors; 6 companies train their directors on anti-corruption 18 companies do not have a regular monitoring of the AC programme in place political donations are only reported by 15 companies

7. TRAC TELECOM ORGANISATIONAL TRANSPARENCY COMPANY RANKING average result 34% companies do not disclose enough about how they organize themselves in terms of corporate structure difficult for the public, regulators, investors to hold them account highest score 81% of Deutsche Telekom, lowest Motorola with 6% average performance of service providers: 38%, of equipment manufacturers: 18%

8. TRAC TELECOM OT – ANALYSIS BY QUESTION due to the global presence, telecoms companies have a large number of holdings and subsidiaries, most companies limit their disclosure to material/principal holdings, smaller markets are not considered to be material only 4 companies disclose full lists of their consolidated subsidiaries 27 of the 35 companies surveyed do not disclose where their subsidiaries operate companies where legislation compels the disclosure of all subsidiaries (Germany, India) regardless of materiality did better than companies from countries where the disclosure rules are less demanding (US)

9. TRAC TELECOM COUNTRY-BY-COUNTRY REPORTING COMPANY RANKING average result of 22% companies are not sharing enough financial information on their operations abroad 84% Deutsche Telecom, 1% AT&T revenues are the most often disclosed data; community contributions, profit before tax and CAPEX are the least only 4 companies reveal information on their tax payments in each of the countries they operate average performance of telecom service providers is 25%, of equipment manufacturers 10%

10. TRAC TELECOM GEOGRAPHICAL ANALYSIS 7 of the top 10 companies are from Europe 7 of the bottom 10 companies are from Asia relatively better performance of Europen companies is assumed to be due to higher level of regulation in the sector Chinese and Japanese companies generally provide little financial data relating to foreign operations, they fail to show they are taking anti-corruption measures in OT companies from the Americas perform worst, US companies are not required to report on their non-material holdings

11. TRAC TELECOM RECOMMENDATIONS The world’s largest telecom companies need to do more to make sure corruption does not infiltrate their businesses: many of the firms that scored well in this report have been involved in several major corruption scandals in recent years telecom companies must adopt strong and coherent policies and management systems to curb bribery and corruption governments must implement strong anti-corruption laws and provide the necessary resources to enforce them investors should demand that companies report more comprehensively and use this information in investment decisions the public should use, monitor, analyze and disseminate public corporate information top management and the board of the companies should be involved to ensure that anti-corruption measures are more than rhetoric – the code of ethics should explicitly apply to board and supervisory board members as well the anti-corruption policy must be monitored on a regular basis political donations must be publicly disclosed

12. TRAC TELECOM RECOMMENDATIONS Big telecoms companies are not sharing enough financial information on their operations abroad: citizens should be able to read the financial accounts of a foreign company operating in their countries EU (Accounting Directive) and US (Dodd-Frank Act) have passed new rules obliging companies in certain industries to publish what they pay abroad – recognizing the decade-long campaign to get more transparency in payments between governments and businesses EU directive adopted in October 2014, to be transposed by 6 December, 2016 requires EU companies of more than 500 employees to report on their AC programmes as part of their annual financial reporting governments should require companies to make publicly available lists of all their subsidiaries, Joint Ventures and related entities

13. TRAC TELECOM RECOMMENDATIONS Telecoms companies must take greater care on the due diligence they do on Joint Ventures partners and third parties: rapidly growing sector, 7 billion mobile subscribers and 3.2 billion internet users worldwide due to the global presence, telecoms companies often enter into Joint Ventures and have lots of subsidiaries, making it difficult to ensure high ethical standards companies often engage agents and undertake significant arrangements with third parties several recent scandals stemmed from corrupt acts by third parties exhaustive anti-corruption due diligence must be undertaken to avoid substantial regulatory and legal risks risk based due diligence of third parties

14. TRAC TELECOM RECOMMENDATIONS The telecom sector is particularly vulnerable to the risks of corruption, affects: spectrum licensing, market regulation, supply chain and third party management the spectrum licensing process which is highly complex and involves hundreds of millions of dollars from successful industry bidders to governments, poses a high risk of corruption to date there are no legally binding rules or regulations setting out transparency and accountability requirements that are applicable to the telecommunication sector worldwide regulators should require telecoms companies to apply strong anti-corruption policies and more comprehensive and transparent reporting systems to mitigate bribery and corruption risks, particularly of those companies bidding for spectrum licenses in the interest of fair competition, telecommunication companies should urge regulators to require strong corporate AC policies and transparent reporting systems from all bidders in the spectrum licensing processes

15. THANK YOU FOR YOUR ATTENTION! Q&A Krisztina Papp TI Hungary Budapest, 24 November 2015