Kabel Deutschland The Future of Cable in Germany Ernst Uhlig / Director Level November 2003 Köln

Kabel Deutschland The Future of Cable in Germany, Köln Seite 2 Level 4 strategy - agenda Market environment and challenges Strategic weapons and options

Kabel Deutschland The Future of Cable in Germany, Köln Seite 3 What does the industry structure and dynamics look like today? How severe is the HL4 challenge? Is it getting worse or better? What is the economic impact on KDG? Market environment and challenges – key questions

Kabel Deutschland The Future of Cable in Germany, Köln Seite 4 Effects of price increase loss of subscribers Growing density of L4 networks increasing risk of L3 overbuild Growing urgency to act

Kabel Deutschland The Future of Cable in Germany, Köln Seite 5 Market environment and challenge - issues Customers & market L 4 competitors Pricing & Economics Subscriber development Market structure & shares Regional differences

Kabel Deutschland The Future of Cable in Germany, Köln Seite 6 Growth potential from new households limited Number of households in Germany – 1998: Mio. – 1999: Mio. – 2000: Mio. – 2001: Mio. Only slight increase of total number Number of new houses: 2002: 0,290 Mio.

Kabel Deutschland The Future of Cable in Germany, Köln Seite 7 Total number of private households 2003: Mio. Equipment of private households with: – Personal Computer:57,2 % – Internet Usage:36,0 % – TV:95,9 % – DVD-Player:14,1 % – Video Recorder:68,9 % Already overall high penetration with Multimedia equipment – still increasing The structure of the German market

Kabel Deutschland The Future of Cable in Germany, Köln Seite 8 Number of households (WE) by region Schleswig Holstein Mio Mecklenburg Vorpommern Mio Hamburg Mio Nieder- sachsen Mio Bremen Mio Berlin Mio Brandenburg Mio Thüringen Mio Sachsen Mio Sachsen-Anh Mio Rheinland- Pfalz Mio Saarland Mio Bayern Mio Baden- Württe mberg Hessen Reg1Reg2Reg3Reg4Reg7Reg9 KBWiesyish Mio Mio Mio Mio Mio Mio Mio Mio Mio NRW GNP – Gross National Product ( Year 2000, EU = 100) GNP 111,8 ranking 2 GNP 99,6 ranking 3 GNP 84,2 ranking 5 GNP 69,6 ranking 6 GNP 96,7 ranking 4 GNP 124,0 ranking 1 GNP 120,8 GNP 142,6 GNP 119,8 Regional break-down of the German market

Kabel Deutschland The Future of Cable in Germany, Köln Seite 9 Share of cable / satellite / terrestrial in KDG regions

Kabel Deutschland The Future of Cable in Germany, Köln Seite 10 LE4 and housing associations L3 operator (KDG) L4 operator (e.g., TC, PC, ewt, Bosch) Housing companies / associations TV households / end customers Own head end

Kabel Deutschland The Future of Cable in Germany, Köln Seite 11 Types of customer relationships Numbers of subscribers in Mio. / WE

Kabel Deutschland The Future of Cable in Germany, Köln Seite 12 Market environment and challenge - issues Customers & market L 4 competitors Pricing & Economics Subscriber development Market structure & shares Regional differences TV value chain

Kabel Deutschland The Future of Cable in Germany, Köln Seite 13 TV value chain Content creation Channel programing Network operations Signal delivery LE3 Inhouse network LE4 Marketing Customer service Billing Set Top Box Cable modem Studios & ChannelsL3-Operator N4-Operator Plan Build Operate Acquisition Retention Technical/product service Billing/collection Rental/ Provisioning TV Household/ Customer

Kabel Deutschland The Future of Cable in Germany, Köln Seite 14 Market environment and challenge - issues Customers & market L competitors Pricing & Economics Tariff structure Tariffs for L4 Relative economics Subscriber development Market structure & shares Regional differences TV value chain

Kabel Deutschland The Future of Cable in Germany, Köln Seite 15 Before Nov 02 After Nov standard market individual market standard market: average price increase 26 % individual market: average price increase 33 % – not linear Pricing – before and after November 02 All prices are Pauschal

Kabel Deutschland The Future of Cable in Germany, Köln Seite 16 Level 4 strategy - agenda Market environment and challenges Strategic weapons and options

Kabel Deutschland The Future of Cable in Germany, Köln Seite 17 What are our basic options to master the challenges? What are our relative competitive advantages? Strategic weapons and options – key questions

Kabel Deutschland The Future of Cable in Germany, Köln Seite 18 Strengthen cable against alternative media Market digital programmes Offer new interactive services in defined areas Basic Options Berlin and Munich

Kabel Deutschland The Future of Cable in Germany, Köln Seite 19 Cooperation models for Digital TV with LE4 Source:Marketing working group, Solon *Optional **for acquisition support StrongWeak Profit interest Level 4 (incl. B1) Interest in customer relationship Active sales support Segments and positions Housing Associations / Property Management / Others Professional Level 4Other L4 Demanding additional digital TV offers Prof. Housing Associations Property Mgmt / Others Transport modelSales partner modelReseller model One time acquisition fee** * Revenue share "Transport" Revenue share "Operations" Cooperation models *