Emerging New Digital Valley on the Map – Lithuania Antanas Juozas Zabulis Omnitel President and CEO Conference “Lithuania in the EU: The Values We Defend, the Changes We Pursue” 9 – 11 June, 2004 Vilnius City Hall

Executive summary WHERE WE ARE Knowledge economy is named strategic priority for Lithuanian economic development Political will, legal, social & business framework in place Unique and effective partnership among businesses & the state Booming ICT sector, growing exports of IT services and complex solutions Yet lagging country’s e-readiness but improving very rapidly CHANGES AND STRATEGY WE PURSUE to continue competitive growth to leverage knowledge economy potential to secure welfare of our people

Lithuanian e-readiness 2004 Lithuanian ICT sector Where do we stand now? Fastest growing economy in Europe - GDP up by 9% # 38 Global E-readiness ranking [Economist Intelligence Unit] Overall ranking 5.35 (the highest - Sweden 8,7; the lowest Azerbaijan - 2,37) # 40 Growth Competitiveness index [World Economic Forum] # 40 Business Competitiveness index [World Economic Forum] Lithuanian e-readiness 2004 7.10 6.75 8 5.35 5.37 5.79 5.75 6 2.76 4 2 Overall Connectivity Business Consumer & Legal & Social & Supporting ranking environment business policy cultural e-services adoption environment Ranking factors

Lithuanian ICT sector Strong political will Knowledge economy – TOP PRIORITY for country’s economic development Lisbon Declaration National Agreement signed on consensus basis by all political parties Long term economic development strategy approved Knowledge economy development strategy Lithuanian Science & Technology White Book E-business concept E-Government concept Strategic goals by 2015 - ICT sector sales of products & services will comprise 25% of GDP Share of ITC services from 6.1% in 2003 to 17.5% in 2015 Share of ITC products from 1.4% to 7.7% 50% of total exports

Lithuanian ICT sector Effective governing framework Self-governance & PPP initiatives Public institutions & authorities Knowledge Society Council [President] Information society development commission [Government] Information society development committee [Parlament] Infobalt association Alliance “Window to the Future” National Communications Regulator Information society development committee under the Government of Lithuania Knowledge Economy Forum Ministry of Internal Affairs Ministry of Transportation Ministry of Economy Ministry of …

Legal framework in compliance with EU Lithuanian ICT sector Safe & attractive business harbour Legal framework in compliance with EU Law on Electronic signatures Law on Copyright and Related Rights Law on Personal data protection Law on Electronic communications Attractive investment climate Active copyright agencies to protect intellectual property rights Telecommunication market de-monopolized since 2003 Fastest growing economy with very low inflation Investment incentives, clusters, free economic zones Highly skilled and relatively inexpensive labour Cultural & geographic proximity to the key markets

Public sector investment towards knowledge economy, mEUR Lithuanian ICT sector Growing R&D investments Joint efforts of business & state on Lisbon agenda: investment program for 3% of the state budget into R&D by 2008 focus on investments to create the knowledge economy Total R&D comprised 100 mEUR in 2002 (0.69% of GDP) Public sector investment towards knowledge economy, mEUR 60 42 46 45 30 EU funds 23,5 30 15 9,5 7,5 State budget 1999 2000 2001 2002 2003 2004

Lithuanian ICT sector Growth of Mobile and E-banking 240% growth of mobile users during 2002-2003 200% growth of e-banking users during last 18 months

Strong study and research infrastructure with Lithuanian ICT sector Knowledge society potential Strong study and research infrastructure with 21 universities and colleges ~8,800 students incl. 1,950 in universities & 1,000 studying for MSc degree ~1,200 graduates per year 4.9% of total graduates in sciences, 20.7% of which – engineers (EU-15: 14,6%; EU new members: 8.8%) Highly qualified and affordable IT specialists Over 15,000 employed in IT sector alone Average annual programmer’s salary – 12,000 EUR (EU-15: ~ 60,000 EUR) Knowledgeable society 40-50% of population aged 30-50 years has higher education (EU-15: 19-22%)

Modern telecom infrastructure Lithuanian ICT sector Connectivity Modern telecom infrastructure 1Q 2004 mobile penetration of 72% per capita* estimated to reach 82% in 2004** fixed line penetration of 50.2% per households PC ownership 98.2% of companies with >250 employees, 84.4% of total 27.4% of households in large cities, 19.9% of total Internet penetration 95.5% of companies with >250 employees, 65.5% of total 99% of business have web pages 11.7% of connected households in large cities, 7.7% of total 27% of people use Internet at least semiannually, 26% monthly, 23% weekly * NRA data ** Omnitel estimate Source: Infobalt

Total investments made by all Lithuanian Telecommunication Operators: Lithuanian ICT sector Building Information Highway Today Lithuania has most advanced fixed and mobile infrastructure in the Baltic States. Investments into Lithuanian Telecommunications Infrastructure made by TeliaSonera majority owned companies Omnitel and Lietuvos Telekomas: ~ 900 million Euros. Total investments made by all Lithuanian Telecommunication Operators: ~ 1,2 billion Euros. To compare - total amount of all EU Structural funding planned in a Single Programming Document for the next 3 years: ~ 792 million Euros. Source: Omnitel

Role of Omnitel Bringing innovations to the Country First in Lithuanian to introduce GSM (1995) First commercial Internet provider (1995) One of the first in the world to introduce GPRS (2001), as well as MMS, Bluetooth (2002) The first in the world to launch and operate Motorola’s latest base stations Horizon II (2003) The 4th company in Europe and the 7th in the world to have implemented on its network the latest GPRS technology CS3/CS4 (2003). GPRS data transfer rates are increased up to 70% GSM Association Worldwide Awards Nominee (2003, 2004) UMTS trial (2004)

Role of Omnitel Constant Innovation Omnitel portal www.omni.lt – the most popular multi-channel personalized portal providing most convenient electronic communication tools, opportunities to manage GSM services, information and electronic entertainment. ‘SIM plus’ card with particularly broad possibilities, enabling each subscriber to personalize services received. EXTRA ID - reusable pre-paid card, e-ticket and e-discounts. Electronic Pre-paid top-up (via SMS, ATM, ID cards, Internet) reached 36% of total top-up amount. Omnitel introduced a project e-city with to transfer city communications to the electronic environment. Mobile parking in Vilnius and Kaunas. Service of monitoring moving objects, using GPS satellite positioning system, and their control. Household information management system 'House' developed for monitoring, testing and receiving information to the mobile phone on the status of household energy, heating, water supply and other equipment. Omnitel mobile data messaging exceeds Eastern Europe average by more than 200% and Western Europe average by 30% Source: Omnitel

Role of Omnitel Growth of non–voice services Source: Omnitel

Private & Public partnership - “Window to the future” Key challenge Internet Connectivity – how to break through? Private & Public partnership - “Window to the future” Knowledge Society Development Initiative was initiated in 2002 by leading ITT companies and Banks The Goal – to reach EU average Internet penetration level in Lithuania (39% in 2002) Now it is main Public/Private Knowledge Society program with central and local Governments and leading ITT Business acting together More than 170 free Inter access points established 20 000 adults trained on Internet basics Internet penetration growth from 10% up to 21% was achieved only in three quarters!

Private & Public partnership - “Window to the future” Key challenge Internet Connectivity – how to break through? Private & Public partnership - “Window to the future” Expansion of the project using Budged and EU Structural funds: 1000 Public Access Points to be Established 300 000 Adults trained Free distance learning and e-services content on Internet Personal Income Tax Deduction when buying PC and Internet to the households According TNS Gallup Lithuania had the fastest Internet penetration growth rate (25%) between EU accession countries during 2002-2003 (for the same period Estonia Internet penetration growth was 9,1%, Latvia - 9,5%) Unique model of effective Business and Governement Partnership respected by experts and top official of World Bank, EU Commission DG Information Society and UNESCO

Total ICT sector valued at ~1,237 mEUR Growth by 27-30% in 2002-2003 Lithuanian ICT sector Booming sector within booming economy Total ICT sector valued at ~1,237 mEUR 7.5% of the Lithuanian GDP Growth by 27-30% in 2002-2003 GDP grew in 2003 by 9% Export of ICT services grew by 28.6% to 45 mEUR Total country’s exports grew by 9.1% Source: Infobalt

Largest Lithuanian IT company sales 2003, mEUR Lithuanian ICT sector Key players 10 out of 18 top Baltic IT companies are in Lithuania Top 10 companies increased their exports from 40% to 80% in 2003 Largest Lithuanian IT company sales 2003, mEUR 55 19 8 16 9 10 20 30 40 50 60 Sonex group Alna group Informacines technologijos Blue Bridge New Vision IT service revenues Lithuanian telecommunication company sales 2003 est., mEUR Tele2 5 Other 58 Bite (TDC) Omnitel (TeliaSonera) 109 223 Lietuvos Telekomas (TeliaSonera) Other revenues Total sales 235 Source: Prime Investment, company reports, Omnitel estimates, Infobalt

Lithuanian ICT sector Key IT exporters & their clients

Lithuanian ICT sector Lithuanian ICT sector success factors Highly educated and skilled workforce Adaptiveness Northern Europe culture European business ethics Very quality conscious Versatile in English, Russian, German and Polish Low cost Good understanding of eastern neighbors culture mentality(Russia, Ukraine, Belarus) Ability to employ IT workforce from Belarus, Russia and Ukraine Investments into Quality assurance and project management Strategic focus in competitive advantage areas Proactive exploration of foreign markets

UNCTAD/WTO International trade center (World Trade Organization) What is next? “Lithuania is one of the potential markets for transfer of IT product development from Western countries” Gartner “Lithuania has the potential to become the “Sunrise Valley of Europe” and to make its presence felt both in Europe and in the global market.” UNCTAD/WTO International trade center (World Trade Organization)

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