Maximising Margin From Mobile - September 29th 2011 Presented by Nimans Network Services & O 2 Presenters: Jamie Hullah – Nimans Network Services Sales Manager Hannah Rees – Nimans Network Services Business Development Manager Feriel Clarke – O 2 Channel Business Manager

Agenda Why O2? The network story & the UK market JUC partner, what does this mean? The Proposition Commission Marketing support Handsets

Telefónica Europe O2 plc was acquired for £17.7 billion (26 billion Euros) by Telefónica S.A. in January 2006 Combining the two created one of the world’s largest integrated telecoms operators The acquisition gave Telefónica entry to the two largest and most competitive mobile markets in Europe – the UK and Germany Telefónica is the fourth largest telecommunications company in the world – the biggest outside China Activities – mainly fixed, mobile, broadband as well as new digital services Telefónica Europe comprises businesses in the UK, Germany, Ireland, Czech Republic, Slovakia and Spain

Telefónica’s History Set up in 1924, as the Spanish subsidiary of an American corporation (ITT) Listed in the Stock Exchanges since 1925 Multi-domestic since 1989

Telefónica’s Transformation from 1984 to 2011

Central America Mexico, Guatemala, Panama, El Salvador, Nicaragua South America Argentina, Brazil, Colombia, Chile, Ecuador, Peru, Uruguay, Venezuela Europe UK, Ireland, Germany Czech Republic, Slovakia, Spain North Africa Morocco China Portugal USA Italy Where Telefónica has presence Where Telefónica operates Telefónica Presence Across the Globe

Telefónica is a leader in the Latin America Telco Market Wireline market rank Mobile market rank Total Accesses (as of Jun11) Mill. Argentina: 22.6 million Brazil: 79.8 million Central America: 7.3 million Colombia: 12.3 million Chile: 12.4 million Ecuador: 4.5 million Mexico: 21.2 million Peru: 17.5 million Uruguay: 1.8 million Venezuela: 10.4 million Argentina: 22.6 million Brazil: 79.8 million Central America: 7.3 million Colombia: 12.3 million Chile: 12.4 million Ecuador: 4.5 million Mexico: 21.2 million Peru: 17.5 million Uruguay: 1.8 million Venezuela: 10.4 million Data as of June 2011 Notes: - Central America includes Guatemala, Panama, El Salvador, Nicaragua and Costa Rica - Total accesses figure includes Narrowband Internet accesses of Terra Brazil and Terra Colombia, and Broadband Internet accesses of Terra Brazil, Telefónica de Argentina, Terra Guatemala and Terra Mexico

… and enjoys a significant footprint in Europe Data as of June 2011 Wireline market rank Mobile market rank Spain: 47.4 million UK: 22.9 million Germany: 24.0 million Ireland: 1.7 million Czech Republic: 7.7 million Slovakia: 1.0 million Total Accesses (as of Jun11) Mill.

About Telefónica Europe We provide integrated mobile, fixed and broadband services as well as new digital services and OTT routes to market. Our operating businesses are in:  Spain  United Kingdom  Ireland  Germany  Czech Republic  Slovakia Together, we’re Telefónica Europe, but customers know us as Movistar in Spain and O2 in our other operating businesses Telefónica Europe owns:  50% of the Tesco Mobile in UK and Ireland  Tchibo Mobilfunk, Fonic and HanseNet in Germany  Jajah based in Silicon Valley, California and Israel

Telefónica O2 UK O2 is the leading mobile operator in the UK with over 22 million mobile customers and 130,000 fixed broadband customers 125 million calls and 150 million text messages each day! O2 was formed in 2001 when BT demerged its mobile business, BTCellnet O2 UK is the 3rd largest operating unit within Telefónica contributing 13% of Telefónica Group Revenue O2 UK owns 50 percent of the Tesco Mobile

O2 SME Market Share O2 is clear market leader O2 has 37% of SME customer accounts O2 has 34% of SME customer connections O2 wins and retains SME business through: 1.Premium business proposition 2.Helping customers join up their communications 3.Becoming the customers trusted advisor

O2 – 2010/2011 Highlights & Awards Won the Best Network 2011 for the 4th consecutive year at the Mobile News Awards We were awarded the '2010 Best Network Award' by the readers of both Mobile Choice and What Mobile magazines. It's the third year running we've won the Mobile Choice Award. And we’ve also been awarded Know your Mobile’s Network of the Year for Which? magazine score O2 Mobile Broadband highest in its customer ratings and JD Power rates O2 in first place for O2 Mobile Broadband customer satisfaction O2voted 'Best Technology Service Provider' in Which? awards. In 2010, O2 UK was rated the 16 th Best Big Company to work for in a study published by the Sunday Times The O2 - In partnership with AEG, ‘The O2’ is most popular music venue on the planet! O2 are the first mobile company to be awarded the Carbon Trust Standard Award Telefónica is the No 1 in ‘Fortunes Worlds Most Admired Companies 2011’

O2’s network – a proven track record We’re proud of our network and care about how it’s working for you. Pedigree 26 years of experience We deliver more network capacity to more customers than anyone else A premier network-sharing partnership Part of the global Telefónica family Reliability A 99.9% availability, resilient network 99% coverage Data capacity doubling this year 3400% increase in network capacity over last 2 years Network roll out of 1550 new sites this year Honesty We never mislead our customers about speed, coverage and problems we may occasionally experience We listen to what you tell us and let you know what we’ll do in response Performance Proven track record carrying over half of the smartphone market data Voice capacity to handle 132m calls/day SMS performance to handle 5000 texts/second

Leading the market More businesses are with O2 than any other mobile operator Best mobile Network 2011 (3rd Year Running) Best Broadband Network 2011 (3 nd year running) Number 1 for brand consideration

O2 (UK) The Network Story Network Evolution Building on our innovative deployment of 6 sector cell sites, creating capacity wherever its needed. Sustained investment in our core network, leveraging our joint venture with Vodafone: Cornerstone U900: Introducing super-fast 3G by pioneering the rollout of 900MHz in the UK. Wi-Fi: Thinking ahead of the market to bring a richer, seamless, experience to life. Cornerstone

Network Evolution – U900 Increased 3G Data Coverage Increases Availability and Capacity of 3G High Speed Data Better In-Building Coverage

Network Evolution – WiFi An investment of £10 million 14,000 hotspots by the end of 2013 A free-to-all, seamless, quality experience.

Network Revolution LTE – Under Starters Orders Spectrum auctions scheduled for spring O2(UK) Trials have been a great success Trial network carried more data than the whole of our 3G network in its busy hour. Data speeds in excess of 150Mbps experienced. O2(UK) are ready to go.

Networks: Building for now. Planning for the future Cornerstone 6 Sector Cells U900 Femto Cells 4G Wi-Fi

In Summary Smart Phones continue to drive network growth. 3G at 900MHz (U900) is on its way, changing the way our customers experience high speed data. Wi-Fi – We’re innovating to build a multilayer network strategy that gives a great seamless experience over many technologies. LTE/4G is a step change – Telefonica-O2 UK is prepared to lead the way. The customer experience remains at the heart of what we do. One philosophy for our Network We remain the number one network of choice We never mislead our customers on coverage or speed We listen to and act on what our customers tell us they want We lead the industry in rolling out the most sophisticated technology

Network in Manchester – O2’s investment 80 O2 Think Big projects in the North West £32.9 network investment in Manchester in 2010 £500m UK investment planned for O2 stores in Greater Manchester 1322 O2 employees in Greater Manchester

... Data usage in Manchester has more than doubled over the last 12 months

O2 already has the fastest webpage download speed in 12 out of 13 key cities measured in the UK O2 offers a webpage download speed of 1.4 seconds in Manchester making O2 the fastest operator in the city Ofcom report puts us at number one for Mobile Broadband performance Fast 3G 900 live in Manchester Investment is already providing a better experience for customers today

Nimans is an O 2 JUC Partner What does this mean? Nimans is able to offer a ‘true wholesale’ model Resellers retain customer ownership Even as a bureau reseller – true wholesale As an existing Communications Partner – fixed, mobile, broadband etc BE Wholesale – coming soon! Access to business tariffs, special offers & Marketing support Access to all major handset brands inc iPhone & BlackBerry

The Proposition - DISE DISE: End user retail rate Partner discount applied (% off retail) Single & Share tariffs Minute, text and data bolt-ons (inc BlackBerry BIS/BES & BES Express) Mobile broadband Daily CDRs

Voice Tariff Inclusive minutesMonthly chargeInclusive texts No of users (Adding extra minutes increases the number of additional users you can connect on shared tariffs) Business Single £ Business Single £30 Unlimited 1 Business Single £401 Business Single MaxUnlimited£551 Business Share £ Business Share £ Business Share £ Business Share £ Additional users can be added to Share tariffsShared£15SharedN/A DISE – bundled tariffs

ABS – Best For Business Best For Business – Zero line rental: Resellers billed at wholesale rates £20 upfront commission on every voice connection £80 commission on every Blackberry connection £20 anniversary award at month 13 (this is on a matrix and can be between £10 and £35 but this is the average) 20% discount off all UK calls 25% revenue share on UK calls* (This gives a total discount of 40% on UK rates) ITS offers a 5% discount Roamed calls offers a 5% discount * 01/02 numbers and cross network mobile calls only

Commission - DISE Connection bonus Connection bonus dependent on % discount BlackBerry connection commission Porting commission All of the above are bespoke to the deal and reseller requirements I.e. some resellers have forgone all/some of their connection bonus to bring down the costs of handsets Commercials differ for Bureau resellers Contact us now for more details on commission.

Marketing Support Access to O 2 ’s sales website: On line Marketing toolkit Access to accredited logos Brand guidelines Link to order merchandise and order stands On line learning – BlackBerry, networks Network story Sign off required!! Bespoke Marketing support from Network Services

Handsets Access to handsets: All major handsets iPhone 4 and BlackBerry Nokia, Sony Ericsson, Motorola, Samsung, LG & HTC Leasing options

Handset leasing Leasing examples: 10 x iPhone month = £220.89/month plus VAT 10 x BlackBerry Bold 9900 = £207.51/month plus VAT

Coming soon… New BlackBerry handsets BlackBerry® Torch 9810BlackBerry® Torch 9860BlackBerry® Curve 9360BlackBerry® Entry-Level Touch

Contact Network Services for: Engagement process – Contract to become a mobile partner More information on our mobile proposition Collateral and supporting documentation Commercials & price books Marketing support Meetings Tel: And finally…

Look out for our BE Wholesale launch webinar on 11th October at 10.30, Invite going out tomorrow (30/09), contact us for further details Introducing BE Wholesale

Q & A