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Dublin

28th May 2009

Spectrum Liberalisation-

HarmonisationValuationRefarming

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Agenda

1.Spectrum Value – timing is everything

2.Spectrum Harmonisation

3.Re-Farming the ComReg approach, issues

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The SpectrumContext

• Significant spectrumthrough digital dividendand liberalisationavailable

• Key drivers of policyand allocation will beharmonisation andvaluation

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1. Spectrum Value – timing iseverything

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Should I bid? What should I pay?

• PwC estimate that spectrumreleased across Europe inthe could fetch €40bn or justunder €50 per subscriber

• This represents 8% ofmarket capitalisation ofleading telecom and mediacompanies

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Timing is everything: how to value spectrum inauction scenarios

• Industry convergencewidens the range ofpotential bidders, making itharder to predict

• Framework opposite makesstrategic thinking morestructured - valuation andauction strategy easier

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2. Spectrum Harmonisation

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Overview

– History of harmonisation of spectrum for mobile – GSM &UMTS

– ‘Technology neutral’ award of new spectrum – DigitalDividend

– Harmonisation is an important issue for wholecommunications sector

– Major driver of costs and ultimately value to consumers

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Regulators are moving towards a joined upapproach to the Digital Dividend

61 62 63 64 65 66 67 68 69

790 MHz 862 MHz72 MHz

Harmonised for Mobile?

SwedenFinlandFranceSwitzerlandGermanyIrelandNorwayUK

3G: 3Mps(14Mps)

LTE: 20 Mps(170Mps)

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Harmonisation influences costs and prices for mobileservices

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Significant potential economies of scale inmanufacturing telecoms equipment

Economies accounting for at least 20% savings over time (Ofcom)

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Multiple mobile frequencies drive of handsetcosts

Frequency sensitive elements of mobilephone

For iPhone 3G 16GB – 16%(IDC, Gartner, PwC)

5 transceivers to accommodatedifferent frequencies

Harmonisation influences howmany are needed

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Cheaper equipment encourages use of newspectrum and reduces network costs

Without harmonisation, DDR could be more expensive than 900MHz(Ofcom, PwC)

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3. Refarming: the ComReg options on900mhz

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Liberalisation of 900 Mhz bands in Ireland• ComReg launching into further

Consultation on two options:

– OPTION 1: Single Auction

– OPTION 2: Multi phased Auction

Regulators’ position

• Option 1 will auction all 900mhz in single auction with cap of 2X10mhz auctioned in lots of 2X5mhz

• Existing licensees would be required to sign MOU to cooperate with new licensees

• Existing licensees continue until expiration of license and if unsuccessful in auction would seek national roamingor 2g on 1800 mhz

• Option 2 achieves same aim of liberalised spectrum but with phased release of spectrum

• Legacy licensees would be required to make cases to retain 2X7.2mhz

• All remaining spectrum will be auctioned in phases

Issues

• Under phased approach ComReg signalling higher spectrum fees – even for lower allocations

• No view on the number/quality of operators appropriate to Irish market

• Allocation uncertainty will continue for prolonged period

• Individual operator strategy’s will evolve around bidding & valuation of new spectrum and retention of existingspectrum

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Dr Gary Healy – Associate Director

+353 1 792 5007gary.healy@ie.pwc.com

Gary leads the utility regulatory group in PwC’s Strategy Advisory group based in Dublin.Gary is a senior regulatory practitioner specifically dealing with economic analysis,regulatory strategy and regulatory reform. Until 2007 Mr. Healy was Director of MarketDevelopment in Ireland’s Commission for Communication Regulation (ComReg) withresponsibility for strategy development, market reviews and market intelligence. Garylectures on Business Strategy in DCU and holds a PhD in regulatory strategy and radiospectrum policy.

Aoife Teehan - ManagerAoife has seven years consulting experience across the areas of project management,change management, business process review and redesign and economic consulting.Prior to joining PwC in early 2005, she was employed for two and a half years by a Dublinbased economic consultancy firm where she specialised in competition economics. Aoifehas worked across a number of sectors including construction, financial services andinsurance.

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