Jean-Philippe Poirault, President, Network Integration Division September 18, 2008

1. IP transformation: Conquering the next-generation wireless network with end-to-end network integrationIndustry Analyst Conference – Orlando, FL Jean-Philippe Poirault, President, Network Integration Division September 18, 2008

2. Agenda • Increasing data traffic puts networks under pressure • Operators require more professional services • Transformation challenges and the value of an end-to-end integrator • Alcatel-Lucent IP transformation methodology – getting to the next-generation network • Bringing value to our customers’ transformation programs • Our approach and differentiation - why Alcatel-Lucent? • Conclusion

3. 1 Increasing data traffic puts networks under pressure

4. Total Bandwidth Mobile devices deliver communications, entertainment and information - simplicity for users delivered using complex solutions is an imperative • iPhone shocks in the macro-environment • 31% compared to 5% streaming videoiPhone users compared to average • 30% compared to 1% accessed YouTubeiPhone users compared to average • 35% compared to 3% accessed Google MapsiPhone users compared to average • 50% compared to 4% accessed social networking or blogsiPhone users compared to average • 58% compared to 6% accessed web searchiPhone users compared to average 40% 30% Percent subscribers mobile TV or video 20% 10% iPhone Average Source: MMetrics 2007 $599 2008 $199 SMALLER, CHEAPER, FASTER Improved devices, ease of use, widgets ARE driving transformation

5. Mobile data explosion requires a dramatic change in backhaul- Alcatel-Lucent experience with major incumbents • Depending on the market, a 2G iPhone user has 8 to 14 times the data usage than a non-iPhone 2G user (60Mb/sub/mo compared to 480 to 840 Mb/sub/mo) • A typical 3G iPhone user has between 3 to 5 times the usage a 2G iPhone user (2500 Mb/sub/mo) • Customer trends in converting from 2G devices to 3G along with the increased data usage will require over 3 times the bandwidth of voice on 3G networks by 2011. Total backhaul bandwidth will double by 2012 and triple by 2017. Source: Public quarterly reports and Bell Labs Business Modeling analysis & forecast

6. Operators want more services 2 Operators want more professional services

7. Operators are buying more professional services Professional Services as a % of Total Revenues, 2005-2007 (rollout services excluded) 25% Services accounted for 20% of Alcatel-Lucent revenues in 2Q08 20% 15% 10% 5% 2005 2006 2007 0% Cisco Huawei (est.) Juniper NEC Nortel Alcatel- Lucent Ericsson Professional Services CAGR Percentage growth of professional services as a % of total corporate revenues, 2005-2007 Company CAGR ’05-’07 Alcatel-Lucent 20% Ericsson Professional Services 15% Juniper 12% NEC 3% • Revenue from services for the above vendors, 2005: 16% on average • Revenue from services for the above vendors, 2007: 18% on average Sources: Alcatel-Lucent Services analysis based on external and internal sources, Aug. 2008; roll-out services not included in analysis.

8. Transformation and advanced end-user services drive demand for complex integrationExample of Alcatel-Lucent recent wins Key differentiators: E2E integration capabilities, from CPE to core network, Guaranteed Quality of video/broadcasting service in vehicles Large European operator: Fixed IMS solution implementation (50 percent integration services) North American new entrant: Advanced service offering (60 percent integration services) Key differentiators: 6 months ahead of competition in delivering integrated end user services: Pre-integrated solution, Multivendor capabilities Large European operator: Mobile IMS solution implementation (60 percent integration services) Key differentiators: Driving over 500 testing scenarios, ready to operate validation platforms, prime responsibility on 10 major telecom and IT vendors, Guaranteed service availability Sampling of Alcatel-Lucent customers with greater than 40% of business from services

9. Content editors Software editors Advertisers User-generated content A few service providers with establised brands and generating advertising or subscription revenues Professional: market places, VPN, SAAS (Salesforce.com)… The big 3: Google, MSN, Yahoo Sharing: YouTube, Flickr… Social: MySpace, FaceBook Vendor portals: iTune, OVI… P2P: eMule, Kazaa, Skype e-merchant: eBay, amazon,DELL… xxxxxxxxxxxx xxxxxxxxxxxx xxxxxxxxxxxx xxxxxxxxxxxx xxxxxxxxxxxx xxxxxxxxxxxx xxxxxxxxxxxx xxxxxxxxxxxx xxxxxxxxxxxx xxxxxxxxxxxx xxxxxxxxxxxx xxxxxxxxxxxx xxxxxxxxxxxx xxxxxxxxxxxx xxxxxxxxxxxx xxxxxxxxxxxx xxxxxxxxxxxx xxxxxxxxxxxx xxxxxxxxxxxx Market dynamics leads to market fragmentation and additional complexity;Need for technical integrationand service interoperability Telcos in-house services Hundreds of specialized Webs targeting micro-segments:the Internet Long Tail Contents: IPTV, ringtone, mobile TV… Interoprable telephony Premium calls, centrex… Interoperable messaging: email, SMS, MMS… Telco Core Network Internet pipes Mobileaccess Nomadicaccess Fixedaccess Multiple"screens" Handset TV set Portable PC Console Desktop PC PDA

10. 3 Transformation challenges and the value of an end-to-end integrator

11. Key challenges in implementing critical transformation projects Challenges Response A worldwide ecosystem of partners and pre-integrated in-house and third-party solutions: fixed and mobile, carrier and enterprise Quickly launch innovative consumer and corporate services to counteract competition Mitigate potential operational and quality risks: • in driving complex multivendor and legacysystem as well as end user services integration & interoperability • in managing interdependencies between parallel transformation work streams • in operating critical migrationsfrom legacy application systems (IN, HLR, prepaid) to next-generation platforms A worldwide network of interconnected and third-party connected IPTC competency centers and integration labs Prime roleexperience in multivendor integration and transformation projects (NGN and IMS, network consolidation, subscriber data migration, etc,…) Bridging the gap: • expertise between carrier networking and IT projects (CPE, SDP, network), • operational setup with managed services

12. Alcatel-Lucent role as the end-to-end integrator manages transformation challenges through: • Program management to plan for inter-dependencies within the program and keep the program on schedule • Supplier management to direct all third parties, including customer-contracted • Solution architecture to insure integrity of the solution, now and throughout the program while driving down total cost of ownership • End-to-end solution integration and testing including sub-system integration and testing to assure a robust solution • Solution deployment (site construction/ engineering/installation) for complete field implementation • Key performance indicators created to measure customer experience A trusted partner - putting our rich heritage, corporate breadth of experience and concrete cross-vendor integration expertise to work - driving out risk and managing complexity

13. 4 Alcatel-Lucent IP transformation methodology — getting to the next-generation network

14. Example of high-level impacts considered by our IP transformation methodologyIP backhaul transformation scenario – Capturing 30 possible transformation paths and nearly 300 process flow scenarios Scenario-1IP backhaul security treatment Ensure service continuity, minimize service interruption during transition Traffic restructuring, differentiated flows transport redundancy and fallback processes monitoring NOC readiness: performance monitoring systems

15. EIU EIU EIU EIU IP backhaul transformation scenario — example results utilizing the IP transformation methodology Alcatel-Lucent IP transformation methodology and planning drives superior TCO results: • Minimal upgrades of hardware/software on the legacy cell sites and MSC • Flexible addition of edge routers and multi-layer switches (MLS) based on service providers’ existing IP infrastructure and demand • Minimized service interruption of the physical transportation cut-over (such as T1/E1 swing) through planned maintenance windows • No changes to services offered to mobile subscribers End result: ROI Payback three to seven months PMO FMO MLS A T1/E1 T1/E1 ChSTM DMX GbE SDH/leasedlines BTS T1/E1 ChSTM BTS BTS BSC/MSC EV-DO RNC 2 Gb/s BTS Dark fiber ATM switch T1/E1 for R.99 for voice/signaling STM-1 ATM GbE DMX MLS B MSC BTS Node B RNC Future integration of optical termination into BTS w/EIU

16. Experience helping our customers transform their backhaul networks 3G/GPRS/HSPA (Europe) Customer challenge: Migrate to an IP DSLAM backhaul network to support broadband services, signal and billing traffic and 3G voice traffic. Value we brought: • End-to-end multivendor engineering and design from the B-node to the RNC. The solution included: Siemens (SDH), Huawei (node B and RNC) and Alcatel-Lucent (DSL, IP/MPLS). • Deployment and integration of the DSL backhaul solution. • Network operation utilizing our client’s tools to configure, provision and integrate all DSL connections. WiMAX (North America) Customer challenge: Achieve the best TCO solution for each backhaul using dark and metro Ethernet, microwave, fiber/microwave hybrid, or a LEC-based (T1/T3 network). Value we brought: • Plotted and analyzed all locations in 11 metro areas including more than 10,000 cell towers. • Designed solutions to meet stringent SLA and reliability requirements. • Managed multiple product vendors and suppliers. The solutions included: Ceragon, Accedian, Tellabs, Cisco. Ciena, and Alcatel-Lucent. CDMA (North America) Customer challenge: Migrate to an IP backhaul network to support broadband services and higher capacity. Value we brought: • End-to-end multivendor design and integration of the entire CDMA IP backhaul network, including element provisioning and individual base station conversions. Transformation experience across technologies and backhaul options

17. 5 Bringing value to our customers’ transformation programs

18. Large European mobile operator undertakes transformation steps Phase 1: Implement and optimize an IP/MPLS backbone Phase 2: Implement an IMS core • Customer’s current challenge: Implementing an IMS core to reduce service delivery time and offer advanced services: • Consumer: VoIP with dual ringing, address book enhanced with presence • Corporate: Converged IP Centrex-VPN, videotelephony Alcatel-Lucent added value: • Time-to-market: • Pre-integration: IMS core plus unified HSS • Several Alcatel-Lucent labs used for integration and remote connection with third-party lab • Validation tests performed in Alcatel-Lucent labs and in operator lab • Up to 80 Alcatel-Lucent engineers involved in the project • Complex multivendor interoperability and legacy system interoperability: • 18 products, IOT with eight third parties, over 50 IOT tests, over 550 integration and validation tests Partnering with our customers – Using our multivendor expertise and end-to-end integration skills to accomplish their goals

19. European mobile operator becoming a converged service provider Mobile network acquiring ISP assets Converged service provider Customer’s challenge: Quickly launch converged services to counteract competition Alcatel-Lucent added value: • Impact analysis on network, pros and cons of implementation options: • Support of other operator subscribers (IP address), support of corporate customers (VPN options) • Introduction of new boxes (IAD/STB) • Introduction of new IPTV platform • End-to-end solution validation • Assessment and validation of test bed end-to-end architecture, including test tools, designed by the client • Optimize the architecture with regard to functional, performance and quality objectives • Recommendation on non-regression tests, robustness tests • Impact analysis on operational processes: provisioning, assurance and billing • CPE proactive monitoring • Provisioning of new SDSL interfaces for corporate customers • Extranet implementation to allow VPN self-configuration, self-monitoring Helping our customer expand their service offerings

20. 6 Our approach and differentiation Why Alcatel-Lucent?

21. Field-proven experience in holistically managing cross-domain Interdependencies • Hundreds of business modeling and consulting engagements and program assessments delivered by Bell Labs • Ability to optimize cost structures for legacy and NGN networks with network support and operations practices • IP transformation methodology details the end-to-end process to de-risk transformation and migration and streamline planning • Transformation experts in all key domains • Over 1000 PMI certified project managers Program management Business transformation Services transformation Network transformation Enabling rapid service creation • Number one in OSS/BSS (Gartner Group) • Over 120 OSS/BSS clients globally • Service delivery environment expertise – applying network expertise to the IT domain Stakeholder engagement Designing and implementing IP networks • IP Transformation Centers are centers of excellence for Integration and Migration, over €75 million invested • Innovative, Bell Labs design methods for application-driven NGNs Managing external expectations and relationships • Proven ability to reduce costs of managing operators by at least 50 percent through proactive approach The most experience, proven methods, cross-domain expertise

22. Putting our intellectual property, innovation and key investments to work:Driving out risk and managing transformation • IP Transformation Methodology (IPTM)Documents scenarios for transformation and related planning for inter-dependencies associated with each move • Multi-service network design (MSND)Application-driven design methods optimizing investments and ensuring QoS • VORTÉ Automating the subscriber data generation through the conversion of the legacy data • Transformation cost modelPredicting interim capital and operating expense increases related to transformation and associated cash flows • Revenue variability analysis modelUnderstanding impact of top-line value projections • Migration workflow managementCapturing and implementing business rules for migration

23. Interoperability Solution level testing OSS/BSS(fulfillment, assurance, billing) Robustness Scalability Security Leveraging our network of IP transformation centers • Hands-on experience with leading transformation programs • Repeatable methodologies and best practices • Centers of excellence for integration and migration • Pre-integrated solutions including networks and applications for triple play, IMS and more • A multi-discipline network of IP transformation domain 3000 experts Americas Murray Hill, NJ Europe, Middle East & Africa Antwerp, Belgium Asia and Pacific Singapore, Singapore Making transformation predictable and improving time to market

24. Alcatel-Lucent A Strong Player In A Converged World – Nothing Better Than Experience • SDE-based triple-play and IMS • IMS and Triple-Play end-to-end deployment • Blended applications across voice, video & data • Enterprise FMC & BB Talk • Converged IMS & circuit-based voice & MM • End-to-end service integration BT AT&T O2 • IMS replacing Legacy • Prime integrator for All-IP network • PSTN replacement • IMS deployment IMS KPN TRIPLE-PLAY IMS T-Mobile Service Transformation NGN   Orange Enablers Mobile-MM IMS Vodafone SingTel TRIPLE-PLAY Mobile-MM Mobile-MM Telefonica Cingular  3 • IMS-based Services Transformation • IMS-based converged voice • Blended data-centric applications using IMS • Fixed-Mobile IP Services Transformation • End-to-end mobile and fixed network transformation • Full voice migration from legacy to IP Telecom New Zealand TNZ

25. 7 Conclusion

26. Alcatel-Lucent: Experienced, innovative and prepared • Partnering with our customers • Continuously innovating • IPTM: IP transformation methodology, IPR & tools for fixed and mobile operators • Broad ecosystem of partners built upon reference architectures • Pre-integrated solutions enabling reduced time-to-market and risk mitigation • Global network of competency centers, combined expertise in solution architecture and business consultancy (IT & Telecom) • KPN: voice emulation and IP Centrex • Telstra: Titan phase 1 successfully achieved • AT&T: IMS/consumer VoIP and video share • BT: migration • Belgacom: IMS implementation • ICO: MobileTV • Entel PCS: In-building optimization, over 60 sites Industry and public sector: • UTAH Medical Facility (Sprint) in-building coverage • Transpower in New Zealand • Various in-building service continuity projects Large oil companies in Middle East • Operational excellence • IPTCs: Belgium, Singapore and the United States • Expanding test libraries for IP transformation, triple play, mobile TV, etc,.. Complexity is driving the need for a true integrator – We have a proven record of success

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