1 “Digital Communications as a main pillar of growth for the greek economy” June 2016

2 1. Digital communications on an international level

3 The global market of digital communications Source: GSMA, bn. mobile connections in 2015 – more than the Earth’s population 4,7 bn. active users 1 bn. users are expected to be added by /3 of global population will have access to 4G networks in 2020 $880 bn. in providers’ investments between 2011 and 2015 $900 bn. of additional investments by 2020 The Industry’s total revenues exceeded $1 trillion for the first time in 2015

4 The contribution of digital communications to global economy Source: GSMA, 2016 $3.1 trillion to global GDP (2015) - $3.7 trillion to global GDP by million direct jobs (2015) 15 million jobs in other sectors 3 million additional jobs by 2020 $430 bn. in tax revenues (2015) $90 bn. revenues to access the spectrum $480 bn. additional public revenues by 2020 The added value of the mobile communications’ ecosystem represents 4.2% of global GDP

5 The contribution of digital communications to the european economy Source: GSMA, million direct and 1.5 million indirect jobs (2014) 430 million subscribers (78% penetration) with 684 million connections (125% penetration ). 22% (2015), 57% (2020) of 4G penetration 0.9 GB (end of 2015), 5.8 GB (2020) monthly data usage per subscriber 68 million (2015), 182 million (2020) Μ2Μ connections 6 bn. expected turnover by ΙοΤ connections (2020), with total annual turnover (hardware, software and services) of €1.2 trillion The added value of the mobile communications’ ecosystem amounts to 3.2% of european GDP or €500 bn. (2014)

6 Digital communications are transforming the economy and society Source: GSMA, Vision Mobile 2016 The future of digital communications: e-commerce, m-commerce Big data Internet of Things (M2M) The focus is on the mobile app economy, which has created a $140 bn market. 1.3 million mobile app developers are operating in Europe- 23% of global community. Towards a hyper-connected future: people, businesses and devices

7 Digital communications and applications (e-payments) Source: ΙΟΒΕ (2015), The Shadow Economy in Europe (2013), VISA High indirect taxes lead to low collectability and expansion of the shadow economy. Tax evasion is linked to gaps in VAT collection and frequency of electronic transactions per person. (ΙΟΒΕ, 2015) 24% of greek economy does not show on official books (VISA, 2013). Digital communications support fighting tax evasion and delay in tax collection Change presupposes ensuring personal data protection and improving the trust between citizen and State

8 Digital communications and e-government Τhe system is exchanging data between independent IT systems. Its decentralized design ensures maximum security for citizens’ personal data. Mandatory digital identification allows digital signature of documents 2% of GDP ($500 million) saved by e-ID Tax returns of citizens, businesses and VAT declarations are pre-filled based on the system’s data. 20 minutes are required to start a new business through the X-Road system that is gradually extending to neighboring Finland X-Road system- Estonia has created the most integrated form of digital public administration in the EU at the cost of €60 million

9 2. Digital communications in Greece

10 Digital communications in greek economy Consumers Businesses GDP 45% price reduction in voice and 38% in data between 2010 and % increase in mobile internet usage ( ) 99.3% 3G geographical coverage & 70.2% for 4G (2016) >€400 million turnover by mobile apps development 41% of businesses provide portable devices to their personnel Industry's direct contribution to the economy Public revenues Multiplier effects on the economy Benefit for the user - productivityBenefit from the offer - multiplier effects €5.4 bn. increase in productivity through the use of mobile communications 3 rd Industry in productivity €77,000 of gross value per employee annually €2,436 million (or 1.4%) - contribution to GDP (2015) 6,821 direct jobs €418 million investments (2015) 35% increase of investments since 2014 €719 million of total investments in mobile & fixed telephony €1,165 million of contribution to public revenues (2015) € contribution from taxes and social security contributions(2015) 20.9 thousand jobs with multiplier effects on the entire economy 14.7 thousand jobs in suppliers and device traders €1,626 million contribution to GDP (multiplier effects) Creation of value for the greek economy and society

11 Total turnover in telecommunications Source: Providers' data analysis * revenues without distinction between telecommunications and pay tv A mixed picture in market segments: Voice: stable in volume, declining in revenues Data: important usage increase through mobile devices Messages: usage reduction digital tv: emerging sector with increasing penetration Mobile applications: fast development and great potential Providers: Mergers and partnerships between mobile and fixed telephony providers and promotion of bundles €4.5 bn. of revenues from telecommunications in 2015

12 Turnover in mobile communications Source: Providers' data analysis, Eurostat The Industry’s recession is several times higher than the economic downturn: 8 th consecutive year of decrease in revenues ( )

13 Mobile communication indexes: Data (1/2) Source: Providers' data analysis 70.8% increase in data usage (2015) Increase of revenues from data (11.1%) 70.8% increase in data usage (2015) Increase of revenues from data (11.1%) 13.8% of total revenues represent revenues from data

14 Source: Vodafone Group Mobile communication indexes: Data(2/2) Greece lags behind ΕU-28 in data usage, even in consumers owning a smartphone

15 Digital agenda: modest progress against objectives Mar 2016 Source: DESI (2016) Greece performs poorly in all objectives of the digital agenda, namely those that pertain to use of networks by citizens and SΜΕs. Between 2014 and 2016 the country improved its performance in Connectivity (from 0.33 to 0.43) and in Digital Public Services (from 0.27 to 0.46). Addition of 4G connections and VDSL services boosted Connectivity, while integration of e- Government services upgraded the country’s Digital Public Services. Greece is experiencing a digital divide: 26 th among ΕU-28 in the Digital Economy and Society Index (DESI)

16 Mar 2016 Source: DESI (2016) 3G and 4G network coverage is competitive Mobile broadband is on the rise Fixed basic broadband is satisfactory Fixed high speed broadband is short of optimum Recent increase in VDSL coverage is not yet reflected in official figures Digital agenda: networks The digital divide hinders the economy’s sustainable development

17 Mar 2016 Source: DESI (2016) Very few SΜΕs purchase (5.3%) or sell (6.1%) products online in Greece – less than three times compared to ΕU performance 1.7% turnover by e- commerce in Greece -25% in the ΕU for large businesses Only 3.4% of SΜΕs sell products and services abroad. Digital agenda: e-Commerce is still in its infancy

18 Source: DESI (2016) Businesses in Greece use less than any other ΕU country the cloud (6.5% as opposed to 20.5% in the ΕU) and e-invoicing (4.1% as opposed to 31.5% in the ΕU) Businesses in Greece are falling behind the ΕU average In terms of organisation and contact with clients: CRM, online advertising and website creation As far as suppliers are concerned: e-Supply chain Digital agenda: e-Business lagging behind

19 Digital communications: Actions and innovations Despite Greece’s overall deviation, there are individual remarkable initiatives and innovations Electronic payments Through existing mobile apps’ services Integration in SIM cards of the necessary certificates to carry out transactions Applications development In tourism and catering (reservation management), Provision of healthcare services (national prescription, appointments management), Cloud services, Use of mobile apps to manage bills Gaming and digital books ΙοΤ solutions In shipping, tourism, agricultural production & products (safety issues linked to State services’ networks) Remote interconnection and diagnostic measurements of cargo container contents(mobile asset tracking) Interconnection and management of cooling equipment (connected cabinets) Use of global SIMs for global functionality of cash. Mobile apps turnover is €400 million annually, with the following sectors of main importance: mobile payments, mobile marketing and Cloud & SaaS applications. 12 accelerators with startups each in different development phases

20 3. Development and conditions scenarios to attract investments

21 Contribution to GDP Source: Calculation of total contribution based on 2G & 3G network penetration and correlation with GDP by Gruber & Koutroumpis (2016) – Contribution analysis by Providers' data analysis and inflow-outflow analysis The Industry’s direct contribution is twice as high as the gross added value of production of chemicals, drugs and plastics (€1.25 bn.) €2.4 bn. of direct contribution of the Industry to GDP €1.6 bn. in multiplier effects €5.4 bn. contribution to productivity Contribution to productivity is comparable to banking sector’s gross added value (€5.5 bn.) or that of the agricultural sector (€5,3 bn.) 5.4% or €9.5 bn. mobile communications’ contribution to GDP

22 Contribution to public revenues Source: Providers' data analysis €1.16 bn. (2015) of the Industry’s Contribution to public revenues €103 million of additional public revenues for the spectrum. €1.16 bn. (2015) of the Industry’s Contribution to public revenues €103 million of additional public revenues for the spectrum.

23 Contribution to employment 42,500 direct and indirect jobs to the Industry in 2015 (-32% from 2010) Source: Providers' data analysis

24 Contribution to the decrease of the cost of living Consumer can enjoy better quality services at a constantly diminishing cost Source: Providers' data analysis * Change in mean value before taxes Voice(mobile telephony): -45,5% Data (mobile telephony): -38,6% Messages (mobile telephony): 52,4% Fixed telephony (subscription): -18,2% Digital tv (subscription): -46,4%

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26 Potential Contribution to GDP Source: Gruber & Koutroumpis (2016) Increase in mobile phone use has a positive impact on GDP : 4.1% contribution of mobile phones to GDP at 100% of the population and in basic voice technology (2G) 4.7% of Contribution to GDP in 3G and 5% σε 4G technologies Up to 6.7% Contribution to GDP through the use of more devices (IoT) and increase in data usage Up to 6.7% (voice, data, IoT) of Mobile communications’ contribution to GDP

27 Base stations’ licensing procedures Absence of digitization and lack of human resources at competent public services induces delays in licensing Source: ΕΕΤΤ, providers' data The most important delays pertain to Town planning, Archeological services and Regions from involved public bodies, Most involved bodies (Archeological service, Forrest Inspectorate, Regions and Town planning service) still use paper-based systems and do not use the electronic submission of applications system. Legal proceedings due to legislation uncertainties Delays in secondary law: the JMD has not been issued yet to implement the electronic submission of applications system by public services, also establishing base stations’ town planning properties. Staff deficiencies: a number of public bodies lack the necessary human resources. Result Malfunctions ~1,300 pending antenna licenses since the previous legal framework Up to 2 years of required licensing period as opposed to 4 months based on legislative framework. €28.5 million – annual cost of licensing procedures for providers or 6.8% of their total investments

28 Regulatory framework Unfriendly investment framework and increase of investment risk Problems in licensing of base stations’ existing and future network distort the market’s smooth operation, with providers investing large amounts in auctions to use the spectrum, prior to establishing a regulatory framework, making the utilization perspective uncertain. The reserve prices for spectrum are high, since they are based on final auction prices in other european countries, adjusted to per capita GDP and population. Greece’s unfavourable financial environment, as well as the country’s high risk premium, prevent funding of major investments, such as the spectrum, through debt financing from the domestic banking system or from abroad. Upcoming auctions 26 GHz (COSMOTE, VODAFONE, WIND, FORTHNET): already expired since Tender has not advanced due to lack of quorum at the ΕΕΤΤ 1,800 MHz: For VODAFONE and WIND it expires on August For COSMOTE, it expires in 2020 UMTS: Tender is scheduled for 2021 Upcoming auctions

29 National fiscal framework Fiscal environment is characterized by high taxation and constant changes Constant changes to the fiscal framework cause uncertainty to investors and undermine business planning. Greece ranks 7 th in ΕU-28 in tax rate with regard to companies (S.Α.). Small and financially poorer countries, contrarily to Greece, opt for lower tax rates, so as to attract investments from abroad. Total taxation of distributed earnings has changed 10 times [ ], with an average annual change to coefficient of 2.6%.

30 Reform of the fiscal framework Utilization of digital communications supports in the medium term reduction of tax coefficients Use of digital technology to fight tax evasion based on international practices Mandatory electronic transactions in the Public sector Mandatory electronic invoicing for all transactions Direct VAT charging and advance payment of income tax from electronic invoicing Use of Big Data to address tax evasion through automated comparison and cross-checking of incomes, expenses and assets Geographical tracking of fuel tankers’ input and output to address fuel smuggling Long term planning of tax coefficients with the aim to: Stabilize them in the short term Reduce them according to schedule in the medium term Since the targets to address tax evasion will be met.

31 Over-taxation of communications Greece ranks 1 st in ΕU-28 in taxation of mobile communications, with significant distortions caused by the special fee Source: AT Kearney, Eurostat, Digital Agenda 39%-49% - the burden from indirect taxes on the use of mobile telephony Special fee distortion: it shall lead domestic clients to turn to foreign providers through gradual abolition of roaming charges on services 30% on fixed telephony and the Internet – burden from indirect taxes 36% on pay-Tv due to indirect taxes

32 Re-assessment of special fee A 50% reduction of the special fee can maximize public revenues and boost the Industry’s competitiveness in Greece Change of special fee from its current level Amounts in million €-100%-50%-40%-30%-20%-10%0%10%20%30%40%50% VAT Special fee Providers’ social security contributions (employer & employees) Suppliers and traders’ social security contributions (employer & employees) Providers’ income tax (companies and employees) Suppliers and traders’ income tax (companies and employees) Other taxes and fees Total1,146.51,166.21,167.61,168.11,167.81,166.61,164.51,161.61,157.81,153.21,147.71,141.4 Multiplier effects on public revenues Grand total with multiplier effects1,937.31,954.81,954.71,953.51,951.11,947.51,942.71,936.71,929.61,921.21,911.71,901.0 Difference in public revenues from current level without multiplier effects Difference in public revenues from current level with multiplier effects Safeguarding of total public revenues, preventing consumers from turning to providers outside Greece, so as to avoid the special fee burden Enhancing data usage and adoption of new technologies by households and businesses, supporting innovation and development.

33 Convergence scenarios with the ΕU-28: Development goals Three scenarios on network penetration rate and economy projection by 2020 * ‘What is the impact of mobile telephony on economic growth’, Deloitte, GSMA, Cisco, November 2012 Scenarios’ attributes: State’s degree of support to removing obstacles in taxation system and regulatory framework and formulating an integrated digital strategy Index to assess the development of DC: rate of change in data penetration per subscriber (GB/user) Correlation with the economy: rate of change in data penetration is tied to the development of the economy: 0.5%* increase in rate of change of per capita GDP with every doubling of data usage

34 Development of next generation networks contributes to increase of GDP +2.2% increase of GDP or €4.49 bn. and a €2,.6 bn. increase in public revenues by 2020, if Greece converges with the ΕU and removes obstacles to investment Condition: action by the State to improve the investment framework Multiple benefits for the economy, thanks to improvements in the country’s investment, regulatory and macroeconomic framework Difference between the optimistic scenario and the pessimistic scenario: €2.29 bn. GDP €1.05 bn. public revenues

35 4. Proposal: National Plan for digital development

36 Proposal: National Plan for Digital Development Adoption of a National Plan for Digital Development in Greece ( ) Άξονες παρεμβάσεων Strengthening the necessary wired and wireless broadband networks as a prerequisite for developing innovative services. Establishing a suitable institutional, investment and taxation framework, which shall foster both development and use of networks and DC services. Provide incentives to adopt innovative DC services (local government bodies, companies, citizens) as well as actions to promote research, education and smart-up entrepreneurship. National priority - digital communications as the driving force for growth and social progress Consultation with all stakeholders concerned National priority - digital communications as the driving force for growth and social progress Consultation with all stakeholders concerned INFRASTRUCTURE INSTITUTIONAL FRAMEWORK INCENTIVES

37 National Plan for Digital Policy: Outlines and Actions Line of action1.Infrastructure2. Institutional framework3. Incentives Current situation Telecommunications infrastructure in Greece show an asymmetrical picture. A delay in investments in new generation networks (VDSL) and optical fiber networks (FTTH) is observed. The fourth-generation mobile networks (4G) exceeds the European average in the coverage percentage. Use of mobile broadband remains at the lowest position in the ΕU* In fixed broadband, Greece is approaching the average (66% vs. 72%). The low rate of mobile broadband use is associated with high indirect taxation. Greece lags far behind in the adoption and use of advanced DC services. The use of e- commerce is sluggish*, as well as the use of cloud services*, e-banking* and electronic receipts* Subject– Objective CREATION AND SUPPORT OF THE NECESSARY INFRASTRUCTURE PROMOTING THE USE OF DC BY CONSUMERS AND BUSINESSES INTEGRATION IN ECONOMY AND SOCIETY Indicative Actions and Policies 1.Extension of DC networks 1.Creation of S.G. of Digital Policy 2.Addressing outstanding institutional issues 3.Removal of administrative obstacles 4.Managing the spectrum 5.Removing fiscal distortions 6.Utilization of EU funds 1. Incentives to citizens and businesses 2. Incentives to local government bodies 3. Utilization of DC by the Public administration 4. Promotion of research and education 5. Support for entrepreneurship Investments in new technologies, greater coverage and increased capacities and speeds emerge as top priorities. Information actions and incentives for the use of new digital technologies by consumers and businesses are a priority. Policies that facilitate the development of innovative services in priority areas and promotion of their adoption by the public administration, businesses and consumers are a prerequisite for digital development. *44% versus 75% in the ΕU ** 1.7% in Greece versus 25% in the ΕΕ, *** 6.5% versus 20.5%, ****21% versus 57%, ***** 4% versus 31%).