Telecommunications Industry Update “The New Telecom Era – Leveraging Carrier Consolidations”

1. Telecommunications Industry Update “The New Telecom Era – Leveraging Carrier Consolidations” November 17, 2005

2. WIRELINE MARKETS

3. Wireline Market Dynamics Impact of Industry Consolidation Short-Term: • Merging carriers cannot afford to lose customer base which keeps/heightens competitive environment • Flexible terms and conditions are required to mitigate risk resulting from industry consolidation and to take advantage of pricing reductions (and preserve them longer term) • Client should immediately seize opportunities to secure leading edge contracts before merger(s) consummate Long-Term: • Watch service levels during network/operational integration • Additional workforce reductions/rationalization • New culture within each carrier will shape customer experience Now is the time to perform complete market/carrier/technology due diligence

4. What Mergers Mean for Enterprises • Less true competition (in long-run) • Stabilizing (potential up-tick in) pricing • Less customization of contract terms • Changes in service and support • Expect account team changes • Non-contractual support will erode • Integration of invoicing platforms could make already-poor billing even worse • Network migration • Merger synergies will dictate migration of customers to most efficient network • Customer diversity plans (multiple carriers, different routes, etc.) will be altered • More regulation • Excuse to step away from aggressive, custom-pricing behavior • Special access (in connection with LD networks) may fall under different rules

5. Price/Volume relationship remains situational… • Commitment size or volumes do not completely dictate price • Pricing is situational, depending on the variables at that moment. Result: different prices for similar customers • Carriers will continue to look to maximize profit, with highest possible price AND minimizing rate write-down • However, better pricing with lower commitments are available, with key knowledge and application of leverage in today’s dynamic environment Contract #1 Contract #2 Price Renewing Contract Contract #3 Carrier Marketing Leading Rate Trend Volume/Commitment

6. MCI • Purchase by Verizon will compete well with SBC/AT&T • Combination of financial strength, embedded access/local relationships, and wireless will drive powerful enterprise market contender • Definite culture change for MCI (and risk to enterprise business) • Watch out for departure from aggressive pricing/contract terms (MCI legacy) • Look for MCI to remain aggressive through 2005 • Acquisition approved and executed 1st Qtr of 2006 (MCI Shareholders approved on 10/06, DOJ and FCC approved at the end of October) • Acquisition approved with only two significant concessions: • MCI/VZ will have to divest themselves of fiber into 350 buildings in the VZ territory • VZ will have to offer unbundled DSL • CA and NY are the two states left to formally approve • Diversity issue for legacy MCI companies in the northeast • Verizon will now control almost all telecom services for many clients

7. AT&T • SBC’s acquisition of AT&T will create strong company • Perhaps, stronger than many believe reasonable in terms of continued competition • Legacy AT&T value = enterprise customers and strong global network • Will focus on sticky solutions, such as managed (EVPN) networks • Culture integration (or clash) will be key • Expect deal to consummate in December 2005 (DOJ & FCC have already approved and CA is the last state needed for formal approval) • AT&T/SBC will need to divest some fiber into 350 buildings in the SBC territory • SBC will have to provide unbundled DSL • With large existing market share, the combined entity could easily disrupt many customers’ diversity and vendor-positioning strategies (e.g. – now single provider) • Clients of AT&T should anticipate some network and account support issues potentially before and after the acquisition is complete

8. Sprint Merger with Nextel created a very strong wireless combination Strongest wireless push into enterprise, although coverage not as good as Verizon or Cingular Focus on achieving merger synergies and associated debt distract from potential merger with remaining RBOC Profitability focus has pushed Sprint away from larger enterprise wins Delay in rolling out MPLS strategy has weakened Sprint’s reputation with large enterprises Look for Sprint to maintain focus on its current enterprise customers (retention), while also looking to expand wireless into current base Sprint is aggressively pushing the one contract-one account team for both their wireless and wireline services Publicly stated they will migrate their existing Frame Relay customers to their MPLS based network by end of 2007

9. Regulatory Climate • Changing times at the FCC • Kevin Martin replaced Michael Powell as Chairman • Continued push for limited/no regulation on internet services, such as VoIP • Review of 3 large mergers will take up staff’s resources in 2005/2006 • FUSF will be reviewed in 2006 (Cable Broadband currently exempt) • Focus on broadband and DSL expansion to more areas of U.S. (Just approved that DSL network providers do not have to share their networks; a big victory for the LECs)

10. KEY CONTRACT COMPONENTS FOR TODAY’S ENVIRONMENT • Flexible Revenue Commitments: • Term vs. Annual • No more than 70% of expected runrate • Degradation of service/support, pre and post merger • Stabilized pricing for all elements • Market review with remedy • Term extension options in the event prices increase • Business protections for: • Business downturn, divestiture, technology change, Technology Migration, Network optimization, etc. • Diversity (now looking at new, combined companies) • Account team support commitments • SLAs on key network metrics

11. KEY TAKEAWAYS • Acquisitions will most likely be approved no later than the end of the first quarter 2006 • To-be-acquired LD companies still seeing difficulty in marketplace (stretch to make revenue/EBIT plans) • Therefore, competitive pricing still the rule… but with potential for short-term expense reductions if revenue not materializing • Eventual rationalization of pricing post mergers • Carrier emphasis on managed solutions, applications, and the “bundle” vs. plain transport • Further industry consolidation • Good timing for contract pricing renewal and reinforcement of service/support requirements • AT&T/SBC looking like SBC vs. MCI/Verizon which is a combo.

12. WIRELESS MARKETS Page 9

13. The Wireless (Broadband) Question A challenge in the global marketplace for the IT and Business leaders of large enterprise... • The reality of broadband wireless in terms of global scale, domestic distribution, and willingness of providers to let go of tradition • Service providers are largely inventing the same wheel • Leadership in IT infrastructure investment • Enterprise will play the lead role in installing ubiquitous wireless technology above and beyond the organization • Resolution will come from demand, invention and expectation

14. Wireless Sourcing Dynamics Legacy industry practices help drive the current state and climate Carriers: • Pricing complexity and structure is consumer-centric, and is designed to preserve a high margin environment to support expectations • “Boilerplate” environment for contracting practices – less than sophisticated against enterprise demand set for flexibility and risk mitigation • Account support and general administration is less than adequate against the requirements for successful program management • Business critical technology messaging – combined with a casual urgency in real terms • Consolidation requires a steadfast game plan for preserving base and balancing build outs • Heavy investment continues in new technology and coverage / capacity

15. Wireless Sourcing Dynamics New challenges emerge in enterprise sourcing and mobility… • Fluid environment for technology, billing, account support and application are heightened by consolidation activity • The target market for the industry – and what is driving advancement • Supporting the technology, and the associated costs / accountability • Policy, security and generating visibility • Balancing the bandwidth and application demand • The international question, and strategy • Mapping WiFi, WiMAX, RFID and other technologies • Reality versus myth • Timeline and application • A true disparity in enterprise experience across verticals and size / population

16. Mergers, Acquisitions, and New Branding Cingular / AT&T Wireless: • Continuing Orange and Blue challenges in approach, model, and support • Billing system challenges and integration efforts • Implied “instant” giant lacks in some areas of reality • Maintain a cautious eye on account support • Approach sourcing efforts aggressively Sprint / Nextel • Nextel delivers valued spectrum, heavy enterprise base and PTT powerhouse • Engineering company meets marketing company • Unique position among Tier 1 players with both wireless and wireline assets • Market leader with voice and data SLA’s – which are unfortunately diluted • Hampered by lingering (and realized) network perceptions • Be aware of migration efforts around billing and technology • Complex billing integration • PTT application users must exercise all means of communication with the combined entity Alltel / Western Wireless: • Combined network footprint, internal efficiencies and base lead to potential Tier 1 play • Niche plays in large enterprise will begin to offer compelling stories • Watch for more of this Tier 2 activity

17. Enterprise Strategies Four Key Strategy Drivers – The Foundation of Best Practices • Drive Savings: • Drive market leading price points • Utilize market leverage • Simplify the structure • Pricing and support • Terms and conditions • Flexibility / Risk Mitigation • Accountability • Simplify the Program: • Consolidate the supplier base • Address functional requirements • Take ownership of the asset • Understand the demand set • Profiles, applications • Enforce the Strategy: • Drive behavior and experience • Define and support the process • Generate leverage • Provide risk mitigation • Legal, IP, security, etc… • Set baseline for future sourcing, security, technology, process • Leverage the Technology: • Utilize established control • Map wireless to key initiatives • Drive synergy and efficiency across infrastructure • Take advantage of broader application spectrum Page 13

18. Enterprise Strategies Financial: • Eliminate as much complexity as possible in the pricing structure • Drive price points that support flexibility in application • Generate savings to assist in funding overall management strategy • Demonstrate real return on investment, and make it last across the lifecycle Contractual: • Terms and conditions that speak to the volatility of the marketplace, and the practical business environment • Look to stabilize the experience – support, MTTR, and relationships • Address changes in technology – speak in contract language ahead of the curve Operational: • Use policy as a strategic bridge to mitigate risk, drive behavior, and support the ongoing sourcing / management efforts • Maintain visibility and accountability with robust inventory / asset management • Executive sponsorship and priority Technical: • Separate the market hype from enterprise reality – plan based on good intellectual property • Utilize sourcing and policy events to generate momentum in mobility planning • Address the mobile device from a network / IT infrastructure standpoint