Middle East - World Telco Summit Dubai December 7th

1. Technology cost optimization strategies Middle East Telco Summit, Dubai, December 7th, 2009 Dr. Kim Kyllesbech Larsen Network Economics, T-Mobile International

4. European telecom challenges T-Mobile International AG & Co. KG Confidential and Proprietary All rights reserved. No part of this report may be reproduced in any material form without the written permission of the copyright owner. Market saturation. Revenue growth slow-down. Opex cost keeps increasing (if left un-managed). Profitability growth will be challenging to keep Profitability growth will be challenging to keep without continuous tough cost optimization measures.

5. Profitability in mature European markets. T-Mobile International AG & Co. KG Confidential and Proprietary All rights reserved. No part of this report may be reproduced in any material form without the written permission of the copyright owner. Opex CAGR Ebitda CAGR  : Revenue growth  :Revenue decline Opex reduction compensate revenue decline Opex reduction don’t compensate revenue decline Source: ML mobile matrix Revenue don’t compensate Opex increase  2010 - 2014

6. Technology cost optimization measures? Outsourcing RAN sharing Personnel efficiency Network reduction Opex tasking Joint-venture - NetCo Near- & off-shoring Full network sharing Managed services Modernization Access reduction T-Mobile International AG & Co. KG Confidential and Proprietary All rights reserved. No part of this report may be reproduced in any material form without the written permission of the copyright owner. Reduce Capex / Activity

7. The radio access is one of the most important technology cost and investment drivers. 55% - 60% RAN & BSS Core Network 10% - 15% IT & Platforms 25% - 30% Rental & Leasing 40% Conceptual view T-Mobile International AG & Co. KG Confidential and Proprietary All rights reserved. No part of this report may be reproduced in any material form without the written permission of the copyright owner. Other Costs incl. Energy 15% Leased Lines 20% Personnel Costs 15% Services, 10% Maintenance & Repair

8. Technology cost and synergy potential. IT FTE (5%) Leased Lines (5% - 10%) IT Services (25%) Other incl. Energy (10% - 15%) NT FTE (10%) NT Services (15%) Rental/Lease (25%) Conceptual view T-Mobile International AG & Co. KG Confidential and Proprietary All rights reserved. No part of this report may be reproduced in any material form without the written permission of the copyright owner. Sourcing trade-off Sourcing trade-off General tasking: -10% pa Typically lots of small items adding up. Substantial energy savings by modernization Opex – Capex trade-off With 4G move away from conventional leased lines to fiber. Network sharing resulting in overall infrastructure reduction. Network sharing resulting in overall site location reduction / rental sharing.

9. Technology cost and synergy potential. Conceptual view T-Mobile International AG & Co. KG Confidential and Proprietary All rights reserved. No part of this report may be reproduced in any material form without the written permission of the copyright owner. €€€ (€) €€ (€) at least 35% minimum 10% pa 10% - 15% Other Minor opportunities <10% due to scale. 25% IT Services Minor opportunities <10% due to scale. 10% - 20% HC reduction Opex – Capex trade-offs 5% IT FTE More Opex – Capex trade-off Opex – Capex trade-off 5% - 10% Transmission >35% but depends on network reduction. some potential – risk for sharing 25% - 30% Rental & Leasing >35% but depends on network reduction. 15% NT Services Min. 20% - 35% typical 20% HC reduction Typically Capex commitment 10% NT FTE Network sharing Managed services Technology Opex Synergy potential

13. Summary. Network consolidation can significantly reduce Opex costs and capital requirements. However, organizational complexity, high restructuring costs and write-offs should not be ignored. Network consolidation can enable a far better network for same or better financials. Network and IT Managed services are other strategies that will provide a Telco with Opex savings. The ultimate optimization strategy is for Telco’s to create NetCo ventures sharing the total network. T-Mobile International AG & Co. KG Confidential and Proprietary All rights reserved. No part of this report may be reproduced in any material form without the written permission of the copyright owner.

14. Thank you for your attention. Contact details : [email_address] M +31 6 2409 5202 L http://www.linkedin.com/in/kimklarsen

15. Backup … profitability structure. T-Mobile International AG & Co. KG Confidential and Proprietary All rights reserved. No part of this report may be reproduced in any material form without the written permission of the copyright owner. 1 Pyramid Research & ML mobile matrix Total Revenue Technology cost (ca. 15% – 20% of Opex) Usage cost − Market invest − = EBITDA Personnel cost (ca. 25% – 40%Technology related) Other cost − − − Network depreciation (ca. 10% to 20%) − = Contribution Margin (after depreciation) Spectrum amortization − = EBIT Total Opex Margin in WEU 1 between 22% and 44% with an average of 35% Service revenue is expected to decline in most of European markets 1 . Conceptual view

17. More than 50% of all Network Related TCO comes from site-related operational and capital expenses. Backup … TCO & synergy opportunities. Site Rental Energy Operate & Maintain Leased Transmission Resources Site-related Opex Radio Node Ancillary Transmission Build / Civil Works Resources Site-related Capex Opex + Annualized Capex = TCO = Low = High Synergy Potential Antenna T-Mobile International AG & Co. KG Confidential and Proprietary All rights reserved. No part of this report may be reproduced in any material form without the written permission of the copyright owner. -

18. Backup … Why to share your network? OPEX Saving (ca. 30% pa ) Capex prevention (>30%) Personnel efficiency Network efficiency Environmental Improvements Better network & customer benefits OPEX prevention Operational efficiency Less spectrum demand Extended coverage “ cheap” M&A alternative T-Mobile International AG & Co. KG Confidential and Proprietary All rights reserved. No part of this report may be reproduced in any material form without the written permission of the copyright owner. Rollout speed

19. Backup … Why NOT to share your network? Strategic lock-in Deal complexity Asymmetric benefits High restructuring cost Coordination overhead Competitive disadvantages Integration complexity Growth limitations Asset write-off Regulatory scrutiny Loss of independence T-Mobile International AG & Co. KG Confidential and Proprietary All rights reserved. No part of this report may be reproduced in any material form without the written permission of the copyright owner. Staff resistance Dis-entanglement very complex