Opening the International Broadband Bottleneck 8th Arab Telecom & Internet Forum Maan Al Sabi Director, Business Development, MEA FLAG Telecom FLAG Telecom Ltd. Commercial In Confidence

FLAG Telecom Ltd. Commercial In Confidence 1 Internet Growth Fuelling Broadband Demand

FLAG Telecom Ltd. Commercial In Confidence 2 A Shift in User Behavioural Patterns Average monthly usage per user is significantly higher for broadband users Hours online per month for broadband users is 27% higher than narrowband users 1 Sessions per month for broadband users is 37% higher than narrowband users 1 Page Views per month for broadband users is 17% higher than narrowband users 1 Broadband users use the Internet more frequently than narrowband users 69% of broadband users go online every day, as opposed to 51% for narrowband users 2 Broadband users use bandwidth-intensive applications more frequently than narrowband users 38% of broadband users stream audio, as opposed to 15% of dialup users 2 32% of broadband users watch videos online compared to only 9% of dialup users 2 Average amount of data each subscriber is downloading is growing, more so for broadband users 1 Jupiter Media Metrix; McKinsey Analysis 2 Pew Internet and American Life Project 2004

FLAG Telecom Ltd. Commercial In Confidence 3 IP Traffic Mix is Changing IP Traffic by Application Type, P2P Traffic by File Type, 2004

FLAG Telecom Ltd. Commercial In Confidence 4 Opportunities in the Middle East Internet penetration levels in the region remain considerably below penetration levels in more mature markets Many countries in the region have yet to cross the 10% penetration mark Ongoing liberalisation of telecommunications and the emergence of competition in key markets of the region is helping to overcome key inhibitors to growth for the region Affordability – total cost of ownership to end user as share of wallet remains high Availability – infrastructure and access network pervasiveness is weak in many countries Quality – available international bandwidth per 100 inhabitants is on average generally lower than 2% of the world’s highest Thriving economies are attracting international investments MNC community is strongly growing Aggressive changes in policy environments aim to establish the region as a viable option for off-shore BPO International Broadband systems such as FALCON will unlock direct international access for the first time New opportunities will be created by new geographies

FLAG Telecom Ltd. Commercial In Confidence 5 FALCON

FLAG Telecom Ltd. Commercial In Confidence 6 Broadband Access to Global Markets FLAG’s Partner Programme Partnership model provides a transparent extension of enterprise- class services into key international locations in Europe, US and Asia Pacific over each other’s networks, enabling us both to better respond to the global connectivity requirements of our customers. Traffic delivery is both way – we both benefit. End-to-end (PoP to customer premise) connectivity is delivered via a straightforward network-to-network interconnect (NNI). This model applies to key, in-demand services (e.g. IPLC, VPN and Ethernet)

FLAG Telecom Ltd. Commercial In Confidence 7 FLAG’s Partner Programme Middle East Focus FLAG seeks to develop as many partnerships as possible with telecom operators and service providers in the Middle East with the aim of enhancing: Accessibility of key regional business centres to the world Availability of advanced international connectivity services to regional enterprises FLAG’s proposition to Partners is a simple, non-threatening, and low-risk arrangement Immediate access to distant geographies via each other’s network with little capital outlay Transparent service delivery – Partner retain full ownership of, and contact with their own end-customers. The other partner provides ‘invisible’ traffic delivery. The partnership is mutually non-exclusive Partners will be able to grow their revenues in the international data services market, by winning enterprise customer bids with off-net international components Partners will be able to extend their product offering beyond their home market across the FLAG global footprint Simple mechanism to bundle and sell each other’s national / international services Includes access to key business centres across four continents Partners will be able to build up their inbound revenue streams when FLAG uses their domestic / regional network as a termination point for traffic sourced in other continents

FLAG Telecom Ltd. Commercial In Confidence 8 Telecom Egypt – FLAG Partnership A Success Story One of our first partners and most successful to date – our FEA landing party Operate VPOP with FLAG on a revenue share basis Established in 2000 with agreed success criteria for TE Direct connectivity to Egypt from any global destination Reduced capital exposure (don’t pay for international capacity until customer pays) Local demand increased to over 5-Gbps Contributed to value of TE ahead of privatisation and liberalisation Win – Win for FLAG and Telecom Egypt Direct connectivity to Egypt from any global destination One stop shop for ISPs and MNCs – provisioning, customer care, management, billing Quality of transport improved dramatically – generated >80% of the internet traffic out of Egypt Created high degree of TRUST between the 2 companies – led to advanced service rollout FLAG assists TE with in-region staff – fully staffed office to assist local customers Extremely successful and has been replicated in other countries

FLAG Telecom Ltd. Commercial In Confidence 9 Summary Middle East region is set for explosive traffic growth driven by demand for international business solutions and new IP applications Increased competition in supply will facilitate huge growth Local – Rollout of broadband networks and improved local infrastructure International – Local access to cost-effective high capacity global transport systems e.g. Falcon Partnership approach is the way forward It is essential that domestic carriers and international service providers work hand in hand to meet more demanding customer requirements for global solutions

FLAG Telecom Ltd. Commercial In Confidence 10 Thank You