Mobile Access Markets throughout Europe Facts and Regulatory Aspects – Conclusions for the Polish Market Dr. Joachim Haas, MLE Vice President Regulatory Affairs T-Mobile International AG & Co. KG Warszawa, 10 March 2006

2 Summary  The Polish mobile market – Customer is King  Mobile penetration – very strong growth since 2003, but still potential for further growth  Fierce price competition lead to very low prices for mobile services  Mobile operators face a challenging investment situation  Access Regulation is a rare exception in the EU  Market 15 is effectively competitive in nearly all EU Member States  Price competition on the retail market is key indicator for effective competition on the wholesale market  EU benchmark for access regulation: Is Poland comparable?  Conclusion – Stick to competition instead of regulatory intervention  Competition warrants the best outcome on the Polish mobile market  Access agreements should create win-win situations and stick to commercial negotiations  Doing it wrong can hinder necessary investment and stop a very promising market development

3 The Polish Mobile Market – Customer is King

4 Mobile penetration is rapidly increasing in Poland Source: Era PTC, 2005  Poland has one of the fastest growing mobile markets in the whole European Union  With an increase of around 30% since 2004 Poland could already catch up with its CEE peers and close the gap  More growth ahead due to very attractive products and prices

5 Ongoing price reductions are an indicator of vital competition on the Polish market  Consumers in Poland benefited from the biggest price decreases in Europe in 2005  Prices for mobile services in Poland are now among the lowest in Europe  EU-Commission recognizes fierce price competition in Poland Source: EU-COM, European Electronic Communications Regulations and Markets 2005 (11th report, Feb. 2006)

6 Price erosion from for prepaid services shows operators competing for the lowest price on the market POP MAX Zrób to Sam Fajnie! Cały Dzień Era Love Happy Jedna Idea Mono Heyah Heyah – nowe objawy Simplus Team Simplus Team 7 Happy Taniej Orange GO Heyah „zdrabniamy” Basis: Offerts without price reductions The lowest tariffs for offnet calls are presented. Gross prices (Source: Era PTC, 2005)

7 Consumers in Poland already get a very good deal for their money spent in comparison to their peer countries Source: Merrill Lynch, Global Wireless Matrix 3Q05, , p. 2  Ratio of minutes of use (MoU) to the average revenues spent per user (ARPU) enables to compare different countries  Polish users enjoy very low prices for their minutes used (with 76 MoU the Polish ARPU is 18 U$; e.g. Czech Republic 85 MoU, ARPU 21 U$; Italy 125 MoU, 33 U$; Spain 155 MoU, 44 U$)

8 The highly competitive mobile market environment poses huge challenges on mobile operators Source: Merrill Lynch, Global Wireless Matrix 3Q05, , p. 2  Operators face low margins in a highly competitive Polish market  Revenue per minute is one of the lowest in CEE and Western Europe

9 Access Regulation is a Rare Exception in the EU

10 Market 15 is effectively competitive in nearly all EU Member States No remediesSMP¹  Remedies AustriaX CyprusX (single dominance) DenmarkX² FinlandX(X – veto EU COM) France?(X – withdrawn by NRA) HungaryX IrelandX(X – joint dominance; resolved by agreement) ItalyX Luxembourg?(X – withdrawn by NRA) NetherlandsX² Slovakia?(X – withdrawn by NRA) SloveniaX (single dominance) SpainX (joint dominance) SwedenX UKX² ¹ significant market power² remedies withdrawn after market analysis

11 EU- benchmark: regulation of market 15 is a rare exception  Spain  NRA assessment: Joint dominance for three operators; no SPs; price competition impeded;  Far lower MoU/ARPU ratio  Situation not comparable with Poland  Slovenia  NRA assessment: Single dominance (one operator 75 % market share, only two operators)  Large difference between market shares of operators  Not comparable with Poland where all operators compete for market leadership  Cyprus  NRA assessment: Single dominance (one operator with high market share; only two operators)  Large difference between market shares of operators  Not comparable with Poland where all operators compete for market leadership Only in Spain, Slovenia and Cyprus NRAs found single or joint dominance. However, situations are not comparable with Poland

12 Prices in Poland reduced 50% from 2004 to 2005 while Spanish prices stayed at the same level Source: EU-COM, European Electronic Communications Regulations and Markets 2005 (11th report, Feb. 2006)

13 Prices in Poland reduced 50% from 2004 to 2005 while Spanish prices stayed at the same level Source: EU-COM, European Electronic Communications Regulations and Markets 2005 (11th report, Feb. 2006)

14 Need for regulation on market 15 hard to prove Several NRAs decided to or were forced to withdraw their decision to regulate the access market Finland:  FICORA found single dominance of mobile operator with more than 60% market share  EU-COM vetoed the decision for failure to take market dynamics into consideration  FICORA had not referred to economic incentives to provide access to SPs and improve capacity utilisation ratios  No regulation of market 15 in Finland Ireland:  ComReg applied EU-COM “Airtours” criteria and found joint dominance; EU-COM did not veto  However, despite a long and indepth analysis by ComReg the subsequent appeal of operators has been resolved by agreement:  ComReg stepped back and agreed not to defend the case! No regulation of market 15 in Ireland France, Slovakia, Luxembourg:  ARCEP notified MVNO obligations to the EU-COM  EU-COM challenged ARCEP`s assessment.  ARCEP decided to withdraw before receiving a veto from EU-COM  Comparable situations in Slovakia and Luxembourg Spain – the latest ambiguous decision to regulate the access market:  Although GD Info and GD Comp could not agree to veto the NRA decision on EU-level, the EU- COM’s press release revealed serious doubts on the NRA’s decision

15 Price competition on retail market is key indicator of effective competition on the wholesale market Two factors decisive in assessing whether a market is effectively competitive:  Price competition or  Presence of SPs/MVNOs now or in the foreseeable future Hungary and Italy as benchmarks  NRAs - confirmed by the EU-Commission - refrained from access regulation due to price competition on the retail market irrespective of any existing SP/MVNO landscape Conclusions for the Polish market  Poland already has a fierce price competition and prices are among the lowest in Europe  4th Operator Netia auctioned UMTS licence in summer 2005 and is about to enter the market with further competition potential

16 Conclusion

17 Conclusion - Competition Warrants the Best Outcome on the Polish Mobile Market  A decision to regulate market 15 in Poland would be legally flawed because the market is effectively competitive  Prices are constantly falling due to intensive competition on retail markets  Impressive record of market penetration growth  MoU/ARPU ratio better than peers  Concerns coming along with regulatory intervention in the Polish market:  Regulation will stifle the positive development on the Polish mobile market  Risk of doing it wrong: Necessary incentives for investment in expanding innovative networks such as 3G are at stake  No incentive for voluntary wholesale agreements because of risk of annulment after regulatory intervention

Thank you for your attention Dr. Joachim Haas, MLE T-Mobile International AG & Co. KG Vice President Regulatory Affairs