1. TELECOMMUNICATIONS SECTOR: PERILS&OPPORTUNITIES IN LITHUANIA By Dainius Pupkevičius, UAB Omnitel Vice-president, CFO

2. Topics Role Regulation Future

3. TELECOMMUNICATIONS – THE MOST SIGNIFICANT PART IN “KNOWLEDGE SOCIETY” Access is key to Knowledge Society Telecommunications provide access to Knowledge ICTICT ICTICT KNOWLEDGE

4. TELECOMMUNICATIONS THE MOST SIGNIFICANT PLAYER IN: Contribution to GDP

5. TELECOMMUNICATIONS THE MOST SIGNIFICANT PLAYER IN: Contribution to the State Economy 1.Telco sector capital investment contribution to the total Lithuanian capital investments in 2001, estimates; 2. Telco sector contribution to national Budget VAT inflows in 2001, estimates; 3. Telco sector contribution to 2001 SODRA budget, estimates.

6. TELECOMMUNICATIONS THE MOST SIGNIFICANT PLAYER IN: New jobs creation

7. MARKET WITH EFFICIENT COMPETITION: - WHAT THE REGULATION SHOULD BE Regulation should be more forward looking and preventive against abuse of dominance in a pursuit of a fully competitive environment; New commercial models and services must be allowed to develop to meet changing consumers’ demand without regulatory intervention; Sector-specific regulation should be applied only for the markets which are not effectively competitive;

8. IS TELECOMMUNICATIONS’ MARKET THE MARKET WITH EFFECTIVE COMPETITION? Market is effectively competitive, if there is : Differentiation in costs structure; Competitive differentiation in products and services; Continuous decrease in wholesale and retail prices; Aggressive customer acquisition; Rapid technological evolution; Increasing demand from the customers.

9. IS TELECOMMUNICATIONS’ MARKET THE MARKET WITH EFFECTIVE COMPETITION? FIXED MARKET MOBILE MARKET VOICEDATAVOICEDATA Competitive differentiation in products and services NO YES EMERGINGEMERGING Differentiation in costs structure NO YES Continuous decrease in wholesale and retail prices NO YES Aggressive customer acquisition NO YES Rapid technological evolution YES Increasing demand from the customers NOYES

10. WHAT IS EFFICIENT REGULATION? Least objectively required - Rounding by 1 sec. requirement for LT; - Requirement to compensate invoice payment costs; - Requirement to combine statement&invoice into one document. Enhancing - Limited possibility for credit check; - Cost justification. Transparent -Dialogue between the operator community&NRA today is “UNDERCONSTRUCTION”; - Quantity of the secondary regulations should not be sacrificed for quality. Fair – technology neutral -Stricter NRA requirement to the fixed operator as to the accuracy of call duration metering; -Different service provision rules for fixed&mobile operators. Balanced - LLU vs metrology standards; -Number portability&carrier preselection. Less “politically” correct -Industry can not become a hostage of the EU requirements! EU is changing!!! -Political parties should not use regulation in a pursue of purely political goals.

11. LITHUANIAN TELECOMMUNICATIONS IN FUTURE GDP Growth forecast

12. FUTURE OF THE LITHUANIAN TELECOMMUNICATIONS Mobile penetration growth forecast

13. LITHUANIAN TELECOMMUNICATIONS 2003 market forecast* 1.Fixed market will remain in monopoly situation de facto 2.3 SMP players will be in mobile market; 3.No significant changes in 2003 Data market, in comparison to 2002. * estimates

14. IS THE ROLE OF TELCO SECTOR UNDERVALUED IN LITHUANIA ? YES è State can not settle on the responsibilities among the State institutions; è A new Telco Law has been passed in the Parliament in less than one week time! è To much ‘‘buzz’’ words, too little real tasks in the vocabulary of State officials

15. IS THE ROLE OF TELCO SECTOR UNDERVALUED IN LITHUANIA ? BECAUSE... èTelco sector – is a ‘‘stranger’’, It is a “new born” baby in the running shoes; èRole of telecommunications is sunk in the tanks of Mazeikiu Nafta; èLeast linked to the “Power Games” to compare with “Political Power” sectors: energy, agriculture, transportation, etc.

16. TELECOMMUNICATIONS IN LITHUANIA CONCLUSION Telecommunications sector is vital to the development of Knowledge Societyc and thus the Lithuanian Economy, although it’s role – not realised.

17. TELECOMMUNICATIONS IN LITHUANIA CONCLUSION Effective development of telecommunication services and effective competition is possible only under the conditions of the least objectively required. Mobile market – is the market with the effective competition