NEW PREPAID OFFERS

1. NEW PREPAID OFFERS Market and Competition Unit TELECOMMUNICATIONS REGULATORY AUTHORITY (TRA), LEBANON September 2011

2. TABLE OF CONTENT History of mobile tariff changes New prepaid offers overview and comparison Detailed test report Conclusions and recommendations

3. Mobile Prepaid Tariff Change Timetable (2008 - 2011) Council of Ministers Decision on Network Expansion and Price decrease (No.46/2008) Council of Ministers Decision on Mobile Price Decrease (No.59/2009) Mobile Prepaid tariff changes and issuance of new MoT Distribution Guidelines & Managers’ Distribution Policies MOT’s decision to reduce off peak tariffs, all magic prepaid lines will benefit from a 20% discount on all local voice calls and SMS between 10 pm and midnight, with the discount increasing to 40% between midnight and 8am. MOT’s decision to issue new rechargeable 30-day lines available as of June 15th at reduced prices + SOS cards + new SIM cards Nov 2008 Apr 2009 Jan 2009 Sept 2010 Jun 2011

4. History of SIM cards and Recharge Vouchers for MTC (2008 - 2011) Before April 2009 After April 2009 After 15th of June 2011 SIM cards New Prepaid Packages Recharge vouchers New Prepaid Packages Note: number of min. provided that each call duration lasts exactly 60 sec. or multiple of 60 sec; recharges’ values are VAT excluded

5. TABLE OF CONTENT History of mobile tariff changes New prepaid offers overview and comparison Detailed test report Conclusions and recommendations

6. MTC Touch & Alfa have Introduced on Top of the Magic and Active Vouchers, 3 New Prepaid Plans named SSS and Waffer respectively. Waffer SIM card without initial credit and 5 days to initiate the 1st recharge While MTC touch offers the same Vouchers as Alfa, it does not offer SIM cards without Credits Note: prices above do not include VAT.

7. Closer Look at MTC Touch & Alfa Existing & Newly introduced Local Minute Call Prices and local SMS Prices * All SSS and Waffer rates are cheaper than the Regular Magic/Active rates except for this rate. Alfa and MTC should review this tariff Note: prices above do not include VAT.

8. Closer Look at MTC Touch & Alfa Existing & Newly introduced International Minute Call Prices and International SMS Prices * The SMS tariff to Int’l destination for new packages is higher than the old package for off-peak 2 hours. Alfa and MTC should review this tariff. Note: prices above do not include VAT.

9. Closer Look at Alfa and MTC Touch Terms & Conditions • Changing plans will lead to the loss of any remaining validity and credit • For Alfa, up to 3 extra consecutive recharges can be done per 30 days but only 1 will take effect, the others will be pending and activated in due time in the next 2 months; for MTC, only 1 recharge can be done per 30 days. • Credit Transfer and Ehkineh services are not available to new package users. • In case a new package subscriber needs extra credit during his active period, he can use the SOS emergency card ($3.64) that will recharge his account with an amount corresponding to 10 min peak talk time without additional validity, or change package loosing his remaining credit and validity. • The table below summarizes the stages of the new prepaid life cycle:

10. New Plans: Up to 36% drop on local minute call price, 22% on Local SMS and 10% - 25% on MMS during Peak hours. * Alfa MMS Rate was $0.36 for Local & Int’l and dropped by 25% to $0.27 Note: prices above do not include VAT.

11. End user perception of International Call Price Drop: Up to 20% on Int’l calls to most destinations and up to 19% on calls to Syria • * It is not normal that the tariff per minute for most Int’l destinations during off-peak 2 hours is cheaper than the equivalent tariff to Syria. Alfa and MTC should review this tariff. Note: prices above do not include VAT.

12. Closer Look up at International Call Price Drop: As expected only the Price of the local part of the call has witnessed a drop ranging from 17% to 38% depending on time and package * The Int’l tariff to most destination during off-peak hours should remain higher than the tariff to Syria ** Mobile operators should limit the international offer to 2 off-peak periods only (as done for national calls). If possible, to encourage subscriber consumption and avoid confusion the 2nd off peak period should end at 8:00 AM. The discount applied on the local part of the international call is the same as the one applied for regular local calls. There is only one exception related to Start peak tariff to Syria Note: prices above do not include VAT.

13. New Prepaid Plans: Analysis (1) The cost of holding a prepaid line has dropped by 55% and for almost the same total number of yearly minutes, new packages are 27% cheaper than the Magic/Active packages The table below shows the change in available minutes when holding a line for a year over different packages: Given the changes in total cost and number of minutes in each case we can conclude that the consumer is at all times benefiting from the new offers. These new offers are also providing him flexibility in terms of budget spending. Holding a Smart/Waffer $9.09 package over a year, a subscriber would benefit from 5% more minutes than a yearly Magic/Active package with a 27% discount in prices. Note: prices above do not include VAT.

14. New Prepaid Plans: Analysis (Continued) To hold a Magic/Active line over a year, a subscriber would have to purchase at least 11 vouchers of $22.73 which would cost $250.03, For the same amount, a SSS/Waffer subscriber would benefit from a much higher number of minutes over a longer period of time. Note: prices above do not include VAT.

15. TABLE OF CONTENT History of mobile tariff changes New prepaid offers overview and comparison Detailed test report Conclusions and recommendations

16. The TRA has conducted a series of tests on Alfa and MTC new prepaid offers to validate and check the terms and conditions, tariffs and user friendliness of the new offers Main features tested: • Interaction between old and new offers • Migration between available prepaid offers • New packages recharging schemes • SOS Emergency cards • New prepaid plans tariffs • New prepaid plans and Friends & Family service • End of active period notifications

17. 1- Interaction between old and new packages Tests description • New vouchers on old prepaid package • Old vouchers on new prepaid packages • New vouchers specific to one package on other new packages Test Results • A new package recharge voucher cannot be used on prepaid SIM cards with the old profile. • There is one exception for Alfa where they have a voucher of $9.09 for both packages. Alfa has produced 2 different voucher types that can work on either package with the difference that on the old package it would provide 13 days of active period while for the new package it would provide 30 days of active period • Old prepaid vouchers cannot be used on prepaid SIM cards with the new profile. The same exception applies for Alfa $9.09 vouchers as described above • The new package SOS voucher cannot be used on prepaid SIM cards with the old profile for both operators Conclusions • The interaction between old and new prepaid packages is well implemented and services are well separated • Alfa should split clearly between the $9.09 voucher of the old and new packages. The current status is misleading for the subscribers that already have a hard time understanding the new offers Note: prices above do not include VAT.

18. 2- Migration between old and new packages Tests description • Migration from new to old prepaid plan • Migration from old to new prepaid plans • Migration between new prepaid plans Test Results • Up to 4 migrations between different packages were implemented over a 1 week period of time without any problems or limitation for both operators • Across the board, upon migration from one package to another, the subscriber loses the remaining credit and validity which does not seem very fair for the subscribers • MTC: The migration process for MTC prepaid subscribers is very complex with 6 SMS steps of handshaking and notification; but the warning process is well developed and users are aware of the consequences of the migration. Once the handshaking is over, MTC resets the prepaid card allowing 5 days to recharge with correct voucher before losing the card, as if it were a new Alfa Waffer prepaid SIM card. • Alfa: The migration process is much simpler with only 1 SMS step that includes the “migrating to” recharge voucher, but the notification and warning messages about credit and validity loss are non existent. Since the migration includes the recharge, the subscribers do not have to worry about the 5 day inactive period before card expiry • In both cases, the migration process is not user friendly since it relies on SMS only with no IVR option Conclusions • The MTC 6-step SMS migration process is very complex but also very good for customer notification. MTC should align with Alfa for the recharge process to avoid the 5 days inactive period upon migration • Alfa should develop more the migration process by notifying the subscriber of the credit and validity loss before activating the migration. • Alfa and MTC develop the existing prepaid IVR to include the migration option for subscribers that find the current USSD method too difficult. The new packages IVR should be accessed using the same short number as the one used for Magic and Active packages • The offers should be reviewed so that subscribers do not lose their remaining credit and validity upon migrating from one package to another

19. 3- New packages recharging scheme Tests description • Recharge more than 1 new voucher per 30 days • Test different recharging methods Test Results • Each new package has it own recharge voucher with 30 days of validity • MTC: new prepaid subscribers are allowed to recharge once every 30 days • Alfa: new prepaid subscribers can accumulate up to 4 consecutives recharges over a period of 30 days in which case the validity will be extended to 4x30 days while only the amount of 1 voucher will be activated every 30 days. The confirmation message of the 2nd recharge and onward does not give the accumulated expiry date but displays the initial expiry date (as a result of the 1st recharge) • During the active period, if a subscriber is short on credit with the selected recharge, he has 2 options: • recharge a SOS voucher that gives him 10 min of peak talk time without additional validity, or • migrate to another package where he will lose the remaining validity and credit if any • MTC offers new prepaid subscribers two recharging methods based on USSD or the Magic prepaid IVR. • For Alfa, new prepaid subscribers can use either the USSD (only option mentioned by CC and on the vouchers) or the online recharge via Alfa’s web site, or the long number prepaid IVR 03390390 that does not differentiate between Alfa Active and Waffer lines. The access to the regular prepaid IVR 1456 is prohibited. • Unlike MTC, Alfa new SIM cards are sold without initial credit with a 5 day period to make the 1st recharge in order not to lose the card. The 1st recharge uses another USSD number than the regular recharges. Conclusions • Alfa and MTC should be aligned in the number of recharges allowed during the active period • Alfa should fix the notification messages of consecutive recharges to display the accumulated expiry date • Alfa should develop the existing prepaid IVR (accessible through 1456) to include the recharging of new prepaid vouchers and display this option on the recharge vouchers. • To increase the attractiveness of new offers, both operators should allow for more than 1recharge during the active period • Using a different USSD code for the 1st recharge is very misleading for Alfa subscribers. Alfa should try to use the same code as the regular recharges (if it is not technically feasible, specify both USSD numbers on the recharge)

20. 4- SOS Emergency Cards Tests description • Recharge SOS Emergency cards on Alfa and MTC accounts • Recharge multiple SOS Emergency cards to test the limitation on the allowed number of recharges Test Results • Alfa unique SOS Emergency card can be used on any of the new plans. Upon card activation, the purchased amount is added to a sub-account where a the Active tariff per minute applies with no additional validity. The Active minute rate is applied only when main account credit is depleted. The amount provided by one SOS Emergency card is equivalent to 10 minutes of peak talk time. • For MTC, the scenario is different where the operator has issued 1 SOS Emergency card per plan. When the voucher is activated, it is not the purchased amount that is credited to the subscriber’s account but the equivalent of 10 minutes peak talk time at the new discounted rate. This is because the subscribers do not have a sub-account, and all credit is added to the main account at the new discounted rate. • The allowed number of SOS Emergency recharges per month seems unlimited, the TRA has tested up to 4 consecutive recharges successfully Conclusions • MTC should move to a single SOS Emergency card since the current 3 card system is very misleading for the subscribers where the recharged amount ($3.00, $2.50, $2.30) does not match the purchased amount ($3.64) but the equivalent of 10 minutes peak talk time. • On another hand, this system is also a waste in terms of extra printing cost and physical card distribution and management with no good reason. • For Alfa, the single SOS Emergency card gives the amount as announced but it moves to Active tariffs h which is very misleading for the subscribers who have already chosen a discounted tariff plan

21. 5- New prepaid tariff plans Tests description • Test calls to different destinations and at different time of the day • Test different recharging methods Test Results • The TRA has tested the new local and International prepaid tariffs during peak and off-peak hours as well as the Friends and Family tariffs. Mainly, the plans are working correctly and match the announced tariffs. • The TRA has noted a discrepancy in some Alfa tests where the charge of the call or the SMS seems a bit higher than what is expected. • The difference, most probably, comes from the fact that Alfa applies tariffs with 3 decimal digits while it only displays the credit with 2 decimal digits. Conclusions • Alfa should align its tariffs to the same 2 decimal digit format as the one displayed for credit enquiries as already done by MTC

22. 6- Interaction between new prepaid offers and the Friends & Family (F&F) service Tests description • Test the interaction between the new prepaid offers and the F&F service. Test Results • MTC has a synchronization problem between its prepaid system and its F&F system. When a F&F prepaid subscriber migrates from a plan to another and tries, within the same day, to subscribe again to the F&F service, the F&F service subscription does not work well (the system charges the subscriber for preferred number registration and charges the subscription twice). • When accessing MTC’s IVR for subscribing to the F&F service, the notification process is not clear and well developed. When the subscriber enters the F&F menu, the service is automatically activated and the credit is depleted without prior notification of the cost and request for confirmation from the subscriber. • Alfa’s F&F system works better in this regard, the confirmation process is well developed but there is no mention of the cost of the service before the subscriber’s confirmation Conclusions • MTC should fix the synchronization issue between the prepaid and the F&F systems. A subscriber should freely be able to subscribe to the F&F service once his migration is complete. • MTC should develop the IVR to notify the subscriber of the cost of the service and ask for confirmation before activating the service • Alfa should also develop the IVR to notify the subscriber of the cost of the service before asking for confirmation

23. 7- End of period notifications Tests description • Test SMS notification messages during last days of active period and 1st day of inactive period • Test voice notifications on call during last days of active period and 1st day of inactive period Test Results • SMS notifications during last days of active period: • MTC sends 1 SMS in Arabic and 1 in English for the last 3 days of active period • Alfa sends only 1 SMS in Arabic for the last 3 days of the active period • Voice on call notifications during the last days of Active period: • MTC plays a voice notification in chosen language for each call during the last 2 days of active period • Alfa does not play any on call voice notification during the active period • SMS notifications at the beginning of inactive period: • MTC does not send any SMS notification during inactive period • Alfa sends 1 SMS in Arabic on 1st day of inactive period indicating the expiry date and the voucher type to recharge • Voice on call notifications during inactive period: • MTC plays a voice message in selected language requesting to recharge • Alfa plays a more detailed message in Arabic requesting to recharge through USSD or IVR 1456 • Alfa sends all end of period SMS notifications to subscribers that have accumulated more than 1 recharge, at the end of 1st period. Conclusions • SMS notifications: • Alfa should use the English language as well as the Arabic language for all SMS automatic notifications • MTC should send 2 SMS (Arabic and English) on 1st day of inactive period indicating expiry date & voucher type to recharge • Voice on call notifications: • Alfa should develop voice on call notifications in chosen language for the last 2 days of active period • Both operators should restrict the on call notifications to the 1st call of the day (max. up to the 2nd call) • For Inactive period, Alfa should play the message in chosen language and remove the mention of IVR 1456 until it is available to new Waffer subscribers (It is through this IVR that subscribers will be able to select their preferred language) • It is very important to note that all this notification process is very stressful for subscribers since they cannot recharge before entering the inactive period. This shows the importance to allow for the ability to recharge during the active period • Alfa should correct the end of active period SMS notification to subscribers that have accumulated more than 1 recharge in order to inform them that they have started their new cycle. There is no need to send SMS end of period notifications ahead of time

24. TABLE OF CONTENT History of mobile tariff changes New prepaid offers overview and comparison Detailed test report Conclusions and recommendations

25. TRA recommendations: To benefit of all the above mentioned advantages of an increase in mobile penetration, operators should review the new prepaid offers, the old existing services, the communication plan and distribution channels Commercial terms and conditions of new prepaid offers • The new prepaid offers should be reviewed so that: • subscribers are allowed to recharge more than once per month, thus accumulating validity as well as credit • subscribers do not loose their remaining credit and validity upon migrating from one package to another • The SOS Emergency card minute price should be the same as the chosen plan. • To support the uptake of the new offers, the operators should: • Program the progressive cancellation of the Credit Transfer service • once the new offers uptake is well on its way, boost it by cancelling the old prepaid service, and introducing a new bunch of Prepaid Tariff Plans that are suitable for the youth and different low income market segments. • Adjust some Tariffs to be coherent with all plans • New Int’l tariffs to most destinations for off-peak - 2 period should remain higher than the equivalent tariff to Syria • Friends & Family tariffs of the Start/Waffer $9.09 packages during off-peak 1 (22:00 – 24:00) and off-peak 2 hours (24:00 – 08:00) should be lower than the Magic/Active equivalent tariffs. • Int’l SMS tariff of all new packages for off-peak 2 hours (24:00 – 08:00) are expected to be all to be cheaper than the Active/Magic rates (few of the new prices are not) • Mobile operators should limit the international offer to 2 off-peak periods only (as done for national calls). If possible, to encourage subscriber consumption and avoid confusion the 2nd off peak period should end at 8:00 AM Communication and Distribution • The communication of the offers, and the distribution channels should both be well developed: • Operators should launch an intensive and very attractive communication campaign where subscribers are well aware of the new offers and the fact that they are cheaper than the existing ones • Operators should also review the current distribution policy and include good sales margins (in terms of volumes sold and related commissions) and all the right incentives for distributors to promote the new offers • Operators should provide extensive training and good support on new offers to the distributors, PoS and Customer Care • Operators should develop their own shops and certified outlets network to have a better control over sales • Distribution KPIs should be set and strictly supervised by the OSB.

26. TRA recommendations 1/2: both operators have to fix some technical implementation issues to make the new offers more attractive and simple to use • Alfa: to split clearly between the old $9.09 voucher and the new one. Having both working on both plans is misleading. • Migration Process: • MTC: the 6-step SMS migration process is very complex and should, as in the case of Alfa, end with immediate recharge to avoid the 5 days inactive period after migration • Alfa: to develop the migration process by including subscriber notification of credit and validity loss before activating the migration • Prepaid IVR: • Alfa and MTC: develop the prepaid IVR to include the option to migrate through the IVR. Some subscribers find the current way too complex • Alfa: develop the existing prepaid IVR to include the recharging and language selection for new prepaid vouchers • In both cases, Alfa and MTC should use the same short number to access the new packages IVR as the one currently used for Active/Magic IVR. • Alfa: use the same USSD code for the 1st recharge and the regular ones. The current method to use a different code for the 1st recharge is very misleading for subscribers • MTC: as for Alfa, MTC should provide only 1 SOS Emergency card. The current system with 3 different cards is very misleading for subscribers where the recharged amount ($3.00, $2.50, $2.30) does not match the purchased amount ($3.64) but the equivalent of 10 minutes peak talk time • Alfa: should align the prepaid tariffs to the same format as the one displayed for credit enquiries (i.e. 2 decimal digits) • Prepaid services: • MTC: fix the synchronization issue between the prepaid and the F&F systems. A subscriber should freely be able to subscribe to the F&F service once his migration is complete • MTC: develop the prepaid IVR to notify the subscriber of the cost of the service and ask for confirmation before activating the service • Alfa: develop the prepaid IVR to notify the subscriber of the cost of the service before asking for confirmation • Alfa and MTC should be aligned in the number of recharges allowed during the active period • Alfa should fix the notification messages of consecutive recharges to display the accumulated expiry date Technical implementation issues

27. TRA recommendations 2/2: both operators have to fix some technical implementation issues to make the new offers more attractive and simple to use • SMS end of period notifications: • Alfa should use the English language as well as the Arabic language for all SMS automatic notifications • MTC should send 2 SMS (Arabic and English) on 1st day of inactive period indicating expiry date & voucher type to recharge • Voice end of period on call notifications: • Alfa should develop voice on call notifications in chosen language for the last 2 days of active period • Both operators should restrict the on call notifications to the 1st call of the day (max. up to the 2nd call) • For Inactive period, Alfa should play the message in chosen language instead of Arabic and remove the mention of IVR 1456 until it is available to new Waffer subscribers (It is through this IVR that subscribers will be able to select their preferred language) • It is very important to note that all this notification process is very stressful for subscribers since they cannot recharge before entering the inactive period. This shows the importance to allow for the ability to recharge during the active period • Alfa should correct the end of active period SMS notification to subscribers that have accumulated more than 1 recharge in order to inform them that they have started their new cycle. Technical implementation issues

28. TABLE OF CONTENT History of mobile tariff changes New prepaid offers overview and comparison Detailed test report Conclusions and recommendations