- 1 -© STL Limited • Proprietary and Confidential Exclusively licensed to the person named on pages 1 & 2 of this report.

The Telco 2.0TM Two-Sided Telecoms Market Opportunity Report

“Sizing the $125Bn Platform Services Opportunity”

Analysis Methodology, Sample Results and Validation Example

- 2 -© STL Limited • Proprietary and Confidential Exclusively licensed to the person named on pages 1 & 2 of this report.

In this Report we size each of the VAS platform’s service capabilities in detail

The Seven Service Capabilities

SIZING THE SEVEN SERVICE CAPABILITIES

Covered for Each Service Capability

• Overall service capability sizing by vertical industry

• Background information from public information

• Key STL Partners assumptions

• ‘Sanity checks’ for estimates

Identity, Authen-

tication & Security

Advertising, Marketing Services & Business

Intelligence

E-Commerce Sales

Order Fulfilment -

Offline

Order Fulfilment –

Online (Electronic content)

Billing & Payments

Customer Support

These are covered for each service capability over the next 40 pages of the Report.

- 3 -© STL Limited • Proprietary and Confidential Exclusively licensed to the person named on pages 1 & 2 of this report.

Using government economic data, we have calculated the size of each of the 7 service capabilities across each vertical industry in the UK, Europe & the US

SIZING THE PLATFORM OPPORTUNITY: SUMMARY

Office of National Statistics – UK National AccountsUK

Vertical Industry Revenues

EuroStat – European Business Facts & FiguresEurope

US Bureau of Economic Statistics – GDP by Industry Stats

US

UK economic output split by industry (classified according to the EU NACE standards) which allows detailed analysis and permitting minimisation of double counting as one industries outputs are used as an input to another.

Economic output by industry across all 27 country members. It also uses the NACE classification to allow a comparison and reconciliation to the UK figures.

US data split by industry and in the detailed input/output format similar to the UK data. There are small differences in the classification of industries with the US NAICS.

Horizontal Service Capability Market for each Vertical Industry

Estimates of % of vertical industry revenue spent on each service capability

For example:Percentage of Financial intermediation (except insurance and pension funding) revenues spent on Identity, Authentication & Security services estimated at 1% = £880m

Potential opportunity for Telco Platform

Estimates of % of service capability market available to Telco platform

For example:Percentage of Financial intermediation (except insurance and pension funding) revenues spent on TELCO Identity, Authentication & Security services platform estimated at 0.1% = £88m

In other words:Telco platform could potentially capture 10% of all Identity, Authentication & Security services in Financial Intermediation

Checks & Balances

Validate sizing against industry data and/or sensible cross-checks

For example:£880m spent on Identity, Authentication & Security for Financial Intermediation = £22 per adult per year in the UK across retail and business banking, mortgage lending, credit cards etc. £88m for Telco platform = £2.20 per adult per year

Note: See Appendix for detailed industry classifications and groupings used in our analysis.

- 4 -© STL Limited • Proprietary and Confidential Exclusively licensed to the person named on pages 1 & 2 of this report.

We calculate that three service capabilities could generate 73% ($90 billion) of the total platform revenue in 2017

• Advertising, Marketing Services and Business Intelligence (the one area that many operators are currently focused on) is the largest single service capability…

• …but represents less than 30% of the total opportunity

• Billing and Payments and Customer Care are both substantial opportunities for operators:• $26 billion each

• Some service capabilities are smaller but enable others:• Identity, Authentication & Security are

required to deliver advertising, E-Commerce sales, Billing & Payments etc.

• E-Commerce Sales drives On-line order fulfilment and billing & payments

SIZING THE PLATFORM OPPORTUNITY: SUMMARY

- 5 -© STL Limited • Proprietary and Confidential Exclusively licensed to the person named on pages 1 & 2 of this report.

We tested our calculations for Identity, Authentication & Security in two vertical industries and believe we have been conservative in our assumptions

Financial Intermediation, except Insurance and Pension Funding

• In the UK in 2004, the total industry generated revenues of £88 billion ($176 billion) which we expect to grow to £127 billion ($254 billion) by 2017 (assuming a 2.2% compound annual growth rate going forward)

• We estimate that the amount spent on Identity, Authentication and Security by the Financial Services industry amounts to 1% of this total revenue:• 1% x $176 billion = $1.76 billion in 2004• 1% x $254 billion = $2.54 billion in 2017

• The adult population in the UK is around 40 million which means that Financial Services institutions spent around $44 per adult per year on identity, authentication and security systems in 2004 and around $64 in 2017 to cover all retail and business banking products (current accounts, savings accounts, mortgages, personal loans, credit cards etc.)

• Much of this expenditure is on proprietary internal systems and processes and so we calculate that a Telco platform could only capture 10% of the available revenues spent on Identity, Authentication and Security:• 10% x $1.76 billion = $176 million in 2004• 10% x $2.54 billion = $254 million in 2017

• Thus, we calculate that the Financial Services community could thus spend only $4.40 per adult per year in 2004 and $6.35 in 2017 on a Telco platform offering identity, authentication and security services

Public Administration: UK Passports

• The issue of passports is essentially an exercise in identity, authentication and security by governments

• This, and identity card schemes, are areas where we forecast operators could have a role to play

• In the UK, in 2006 the government charged £72 per new or replaced passport and £46 per amended passport and generated total fees of £346 million ($792 million)

• Complexity (and cost) is increasing with the introduction of biometric passports• Launched the Passport Validation Service

(PVS) with public and private sector customers, including the introduction of a call centre facility

• We assume the total Identity, Authentication and Security opportunity for operators in Public Administration and Defence is 0.05% of the total value of the industry: a tiny fraction

SIZING THE SEVEN SERVICE CAPABILITIES – IDENTITY, AUTHENTICATION AND SECURITY, SANITY CHECKS

Example of one detailed Sector Vs

Application Validation Analysis