1. IT&T Development and Trends in the Baltic States Nils Melngailis CEO SIA Lattelekom Baltic IT&T 2005

2. 2 Interested in Internet within 1-2 years' time? Lattelekom questionnaire (2004): 383 residential customers in 4 regions of Latvia, who currently have analogue lines

3. 3 Broadband everywhere – how do we achieve that? Business-friendly internal market and regulatory environment Increase of demand: development of e-government, e-health, e-learning and other applications (e-signature) Support the increase of public Internet access points Tax allowances for PCs and internet connections Wireless penetration Public-private partnering for electronic service delivery, as well as for business and IT sourcing

4. 4 The Baltic Region from today’s perspective Population 7.2 million ICT market EUR 3.6 billion (2004) Growth of ICT -10% (2002-2004) 3 Baltic States * Source: *Observer Latvia, 2005 ** European Information Technology Observatory, 2004 ICT market, Europe (2005) 656 billion EUR Telco market, Europe (2005) 345 billion EUR Population 296 million ICT market EUR 3.6 billion (2004) ICT market > 91 billion EUR Modern Baltic Region Europe **

5. 5 In today’s economy business models are changing towards decapitalized New Economy Old Economy New Economy BRAND CAPITAL HUMAN CAPITAL WORKING CAPITAL “Push” Focus “Pull” Focus Production FocusCustomer Focus High Low HighLow PHYSICAL CAPITAL (Outsourced Network)

6. 6 Efficiency makes the difference: outsourcing tendencies Outsourcing in Europe and USA: –City of Copenhagen - payroll and basic HR services outsourcing –Finnish Government - finance organisation and processes outsourcing –The UK Inland Revenue Office - IT outsourcing –NASA’s Marshall Space Flight Centre - IT outsourcing –Boeing - R&D outsourcing to Russia More and more enterprises focus their investments on business processes which differentiate them with their customers while outsourcing processes which do not differentiate them. The European BPO market is expected to grow to US$41B by 2007. Source: Cathy Tornbohm, Gartner

7. 7 Lattelekom is an example of a major business transformation Before After Sales & marketing Network Operations BillingCustomer care Procurement HR mgmt TransportationProperty mgmt TrainingIT Sales & marketing Call centre services Billing Training Fleet mgmt, leasing Property mgmt Shared services (HR, project mgmt) IT Network Operations Network Maintenance F&A

8. 8 Joint efforts to make the connected economy a reality Government Efficiency Legal framework Export policies Education and R&D Business Consolidation and economies of scale Partnerships Cross-border cooperation

9. Thank you Nils.Melngailis@lattelekom.lv www.lattelekom.lv