Pro-competitive EU Framework delivered a success story: affordability, higher speeds, more investment 2

Financial performance consistent: incumbents more profitable than entrants (Source: Webb Henderson & SPC Network) 3 Deutsche Bank forecasts incumbents’ weighted average EBIT margins to be 14.6% and 16.8% in 2013 and 2014 respectively, whilst entrants’ EBIT margin will be 11.0% and 11.9% in the same period Entrants have been investing more as percentage of sales in all of past five years. Incumbents have higher absolute investment due to larger size.

Telecoms shares are overall not underperforming (Source: Bloomberg & JP Morgan Cazenove) 4

NGA investments are increasing and on par with US 54% NGA coverage according to DAE Scoreboard (up from 49%) Comparable FTTC & FTTH coverage in EU & US (Source: FTTH Council & BCE by Telage) 5

100% NGA coverage is affordable (FTTC by Point Topic) Urban149 mn homes 71% population EUR 8 bn Semi- rural 31.4 mn homes 15% population EUR 22 bn Rural29.3 mn homes 14% population EUR 52 bn 6

Fast & superfast BB take-up is low & stagnating 7

Competition on NGA limited – hard-won liberalisation benefits at risk Entrant share of incumbent NGA lines minimal even where regulation applies (where data available) Compares with shares of 30%+ for copper lines Fibre LLU and fibre WBA in % of SMP operator’s FTTH lines Copper SLU and VDSL WBA in % of SMP operator’s FTTN lines Copper LLU and ADSL WBA in % of SMP operator’s copper lines AT0,0% 20,0% BE0,0%1,0% 4 4,9% CH0,0% no data DE0,0%<5%42,9% DKno data 24,8% ES0,0% 37,8% FR0,0%No FTTN/VDSL roll-out54,6% HU0,0%no data17,1% IE0,0% 33,5% IT0,0%No FTTN/VDSL roll-out45,7% NL5-10%0-5%26,8% PL0,0%no data22,0% PT0,0%no data21,4% RO0,0% 0,1% SEno data 33,6% TR0,0%no data UK<1%no data47,4% 8

Affordability & speed are the most important factors when choosing a BB subscription 9

Competition necessary to drive take-up of NGA networks (cf. historic development of DSL) All major leading broadband countries including Germany, France, UK and Nordics have benefited from ‘unbundling’ of the copper network Competition brought lower prices and new services (€30 triple play in France) 10

High market shares and low customer satisfaction in business services Results of end-user survey data (WIK – Jan 2013) 69% business users prefer to use a single supplier for all sites (within and cross country) and services, but only 53% of those preferring a single supplier found this was normally a practical option More than 50% of respondents cite problems sourcing fixed and mobile telephony or data from same supplier. More than 40% cite problems finding single supplier able to cover all sites or offer a consistent service across all relevant countries In 46% cases, respondents claimed it was rare to have more than 1 or 2 suppliers able to make a suitable offer Survey results consistent with 2009 end-user survey for European Regulators Group (ERG) Retail business market shares >50% - higher for multi-site business Available market share data in retail business services (eg CMT 2011) show incumbents retain >50% in most segments, with higher market shares for larger multi-site businesses 11

Market shares for multi-site business Example: Telefonica’s market share depending on number of sites and customer bill Customer Bill1 site2-5 sites6-10 sites 11 and more sites Total Less than % 1-5%<1%45-60% From 600 to %>75%5-15%<1%45-60% From to %>75%45-60%5-15%45-60% From – %>75% 25-35%45-60% From – %60-75%>75%45-60% From to %35-45%60-75% 45-60% From to %15-25%45-60%60-75%45-60% More than %15-25%25-35%>75%60-75% Total35-45%60-75% >75%45-60% Source: CMT (2011) 12