Presentation at Next Generation Telecoms Summit, September 2009, Portugal.

1. Next Generation Telecoms Summit - Portugal 30. September 2009 Kim Kyllesbech Larsen (T-Mobile). T-Mobile 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.

2. Some discussion points …. Mobile broadband data is profitable (or can be made so). (data) Profitability can be optimized (but how?). Cost distribution & allocation is an important remedy for broadband data profitability assessment (though in the end total cost is what matters). Technology is important for data profitability with focus on cost & performance (e.g., network sharing & traffic management). In the end what really matters is overall profitability. T-Mobile 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.

3. Top internet applications going mobile – the demand for mobile broadband. E-mail / browse Play on-line Share photo Download music Stream music Social networks Video shows Watch movie Up-to 11 hours per week ca. 5 min per day (Free 100MB/month) 35+ min per day, 800+ mio photo & 8+ mio video uploads per month, 30+ mio mobile users 3.3 mio iPhone users ↑ (July 2008) 64 - 128 kbps stream 30+ mio accounts & 2.8+ bn songs ↑ 7 mio Hulu users (Apr’09), 325 min / viewer and an average Hulu video 10+ min 10 mio users & 700k instant watch (Jan’09) 100+ bn emails/day, 40+% > 5 MByte ↑ T-Mobile 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.

6. Western Europe mobile environment is a study in cost optimization, while exploring new growth opportunities with mobile broadband data. Financials WEU market dynamics Revenue Opex Ebitda GROWTH (APAC / CEE) OPTIMIZATION (WEU) Years Customer subscriptions ARPU Years -2.0% pa +2.4% pa Steady-state like (WEU) T-Mobile 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. -2.0% pa

7. The service revenue distribution is expected to undergo significant differences with mobile broadband deployment. 2008 (HSPA) 2012 (HSPA+/LTE) 2020+ (LTE) Revenue 1,2 1 Pyramid Research Western Europe June 2009, 2 Country by Country extrapolated and aggregated from Pyramid data. Mobile broadband data revenue will become increasingly important component of the total revenue. T-Mobile 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. 100% Data Voice & SMS 80% Data 20% Voice & SMS 90% Data 10% Data 35% > Voice & SMS 65% <

8. Mobile broadband traffic is expected to grow explosively over the next 10 years. Today 2020+ Throughput 1  100+ (CAGR 50% pa) Volume 1  300+ (CAGR 70% pa) T-Mobile 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. > > Can technology cost be controlled under such conditions?

9. The structure of profitability. Total Revenue Technology cost (ca. 15% – 20% of Opex) Usage cost − Market invest − = EBITDA Personnel Other cost − − − Network depreciation (ca. 10% to 20%) − = Contribution Margin (after depreciation) Spectrum amortization − = EBIT Total Opex WEU between 22% and 44% with an average of 35% 2 Data revenue share 1 15% and 35% incl. msg. 1 Pyramid Research Western Europe June 2009, 2 Merrill Lynch European Telecoms Matrix Q3 2009. T-Mobile 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. Conceptual view

12. Volumetric based costing (€ per Byte) is often evoked to safe-guard profitability. While the concept is straightforward to use, it is also flawed due to wrong assumption that data traffic is voice-like. It is compelling to use volumetric-based costing and pricing rationale – though it might be wrong Minimum Cost per Byte Volumetric network capacity Maximum Cost per Byte Volumetric customer demand Profitability can be “safely assumed” if the “Price per Byte” is chosen somewhere in-between Vastly different data-traffic profiles (and resulting cost) can result in the same volumetric demand. Conceptual view T-Mobile 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.

13. Main cost and investment driver for network capacity is busy hour traffic throughput – managing broadband traffic and quality of service levels will be essential to managing technology cost. Same volumetric demand can cause vastly different network cost and invest levels. TRAFFIC PROFILE 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 Hour of Day Throughput 9 HOURS 4 HOURS 1 2 Traffic profile 2 same volume as 1 but 40% higher busy hour throughput To keep same user experience in busy hour more network capacity needed Higher invest level and network OPEX required Conceptual view T-Mobile 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. Illustration of service BH throughput contribution. Every data service has a different network impact and in principle a different cost impact. Mobile TV high BW impact but relative little volume in this illustration. 60% 50% 40% 20% 8% 7% 3% 2% 2% 1% 1% 0.5% 0.5% 0.5% 0.4% 0.2% 0.2% 100% Mobile TV Premium Service Mobile TV Basic Service Bus. Full Connectivity Full Connectivity Bus. At Home Surfing Music download Bus. Email Pull Peer 2 Peer MIM Confined Connectivity Bus. Confined Connectivity Bus. Email Push Machine 2 Machine Real Ring-tones Email Pull MMS outgoing MMS incoming BH Throughput in Mbps Volume in MB Home surfing (wireless DSL) Conceptual view T-Mobile 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. Home Surfing (wireless DSL)

16. RAN is the dominant technology cost element. 60% (10% - 12%) Radio Core Network 15% IT & Platforms 25% Services, 10% Maintenance & Repair Other Costs 15% Rental & Leasing 40% Leased Lines 20% Personnel Costs 15% (Illustration) driver: (Sites) driver: (Sites, traffic) driver: (Sites, nodes) driver: (Sites, nodes) driver: (Sites, nodes, traffic) driver: (customers, traffic) driver: (customers) T-Mobile 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.

17. The cost distribution challenge is how to distribute the various cost elements across voice and data services – finding the key(s) (1 of 2) RAN 60% Core 15% IT 25% Technology Cost RAN Cost (2G & 3G sites as key) Ex. 10k locations, 6k 3G Nodes with 80% co-location ratio. IT Cost (2G & 3G customers as key) Core Cost (2G & 3G customers as key) (Illustration) T-Mobile 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.

22. The mobile data evolution towards introduction of true broadband data access and services. Multimedia cellular Enhanced mobile services Enhanced mobile multimedia Mobile broadband communication Optimised mobile multimedia Year DL Throughput 2G / GSM GPRS / EDGE / EDGE 2. 3G / UMTS Introduction of WCDMA / FDD. 3G / HSDPA Downlink enhanced WCDMA/FDD HSPA / HSPA + Downlink / Uplink enhanced with overall HSPA improvements. Mobile broadband (LTE / NGMN) Broadband radio, IP based wideband Peer to Peer. Near-future wireless cellular. 1 Ultimate performance will depend on available spectrum bandwidth and link-budget. 2000 - 2003 2003 - 2004 2005 - 2006 2007 - 2012 2010+ 32 - 128kbps 64 – 384kbps 0.384 - 4 Mbps 1 0.384 – 14.4+ Mbps 1 30+ (AVG) to 200+ (PEAK) Mbps 1 Mobile broadband Based on “NGMN” paper by J. Horn T-Mobile 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. Conceptual view GSM (GPRS / EDGE) 3G - UMTS Enhanced UMTS Optimised UMTS

23. Ideal view – the ultimate data profitability – full network sharing scenario with 1 access technology (all voice considered data). Total Revenue = Data Revenue EBITDA 40% to 55% < 7% 15% - 20% 6% - 10% 8% - 12% < 10% % of total Revenue Usage cost Market invest Personnel cost Technology cost Other cost T-Mobile 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. (Illustration) EBITDA + 35% 10% – 15% 15% - 20% 10% - 15% 10% - 15% <15% The average WEU Mobile Telco anno 2009.

24. Substantial savings from combining existing 2G, 3G and next-generation networks and jointly extending network coverage. Network sharing and in particular RAN sharing can provides substantial technology cost savings Shared backhaul Fewer sites BSC : Base station controller (2G) BTS : Base transceiver station (2G) RNC : Radio network controller (3G) nodeB BTS RNC BSC Network sharing target Fewer stations Core 2 T-Mobile 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. Shared backbone IT 1 Core 1 IT 2

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