N M ROTHSCHILD & SONS LIMITED March 1998

1. UMTS UK Spectrum Auction for Third Generation Mobile Communications N M ROTHSCHILD & SONS LIMITED March 1998

2. IMPORTANT NOTICE This presentation has been prepared on behalf of the Radiocommunications Agency by NM Rothschild & Sons Limited (“Rothschild”), as financial advisor in connection with the possible allocation of spectrum for UMTS (“UMTS Spectrum”) by auction (the “Auction”). The presentation (which is for information purposes only) is made available on the express understanding that it will only be used by the recipient for the sole purpose of assisting the recipient in deciding whether it wishes to proceed with a further investigation of possible participation in the Auction. The presentation is not intended to form the basis of any investment decision or other evaluation or any decision to participate in the Auction and should not be considered as a recommendation by the Secretary of State, the Radiocommunications Agency, Rothschild or its other advisors to any recipient of the presentation to participate in the Auction. Each person to whom this presentation is made available must make its own independent assessment of the potential value of an allocation of UMTS Spectrum after making such investigation as he may deem necessary in order to determine whether to participate in the Auction. All information contained in this presentation is subject to updating, modification and amendments. While the information contained in the presentation is believed to be accurate, it has not been independently verified by Rothschilds and none of the Radiocommunications Agency, Rothschild or any or any of its other advisors or any of their respective directors, partners, officers or employees make any representation or warranty (express or implied) nor accept any responsibility as to, or in relation to, the accuracy or completeness of the information contained in the presentation or any other written or oral information made available to any interested party or its advisors (and no one is authorised to do so on behalf of any of them) and any liability in respect of any such information or any inaccuracy therein, or omission therefrom, is hereby expressly disclaimed. In particular, but without prejudice to the generality of the foregoing, no representation or warranty is given as to the achievement or reasonableness of any future projections, estimates, prospects or returns contained in this presentation. The presentation does not constitute an offer or invitation to participate in the Auction, nor does it constitute the basis of any contract which may be concluded in respect of any allocation of UMTS Spectrum. Recipients are not to construe the content of this presentation, or any other communication by or on behalf of the Radiocommunications Agency, Rothschilds, or any of its other advisors, as legal, tax or other advice. Accordingly, cash recipient should consult its own professional advisors as to legal, tax and other matters concerning any potential participation in the Auction or any allocation of UMTS Spectrum.

3. Agenda • The UK Opportunity • What is UMTS? • The Current UK Market • Specific Questions • Next Steps

4. Introduction • The UK Government aims to hold an auction for licences to operate UMTS services in 155MHz of spectrum in the 2GHz band • UMTS technology offers advanced services such as real-time video conferencing, fast mobile connection to the internet and simultaneous voice and data transmission • The auction is being run by the Radiocommunications Agency (“RA”), the body which manages and allocates radio spectrum in the UK. • Rothschilds is the RA’s financial adviser in the auction • This auction offers one of the first opportunities in the world to secure spectrum for UMTS services

5. The UK Opportunity • In the first part of 1999, the UK Government intends to auction at least three new licences for the development of third generation mobile services • The United Kingdom and Japan represent the first opportunities in the world to secure spectrum specifically for UMTS / IMT 2000 - the new global standard for mobile communications • This should represent a springboard for UMTS opportunities across Eurasia and potentially the world • The United Kingdom is an ideal ‘point of entry’ for UMTS in Europe; spectrum auctions and licensing processes are expected to take place in other European countries after the UK • The auction represents an opportunity to exploit fixed / mobile convergence • Access to mobile services and spectrum will soon become a business need for software, IT and even broadcasting houses • New entrants to the UK market are actively encouraged

6. What is UMTS? • Universal Mobile Telecommunications Services (UMTS) is the European element of the global IMT-2000 family • UTRA (UMTS Terrestrial Radio Access) has been adopted in Europe as the radio interface standard, with an almost identical system in Japan • Roaming across Europe, Japan and other Asian countries should be possible, with potential for US roaming, subject to development of a common standard by the standardisation organisations (ETSI, ARIB and T1P1) • It is the evolutionary next step from ‘second generation’ digital systems and can be combined with existing GSM systems on dual band terminals • It is forecast to revolutionise mobile communications in the same way the Internet is revolutionising telecoms and IT • It should provide fast, secure and truly universal voice and data transmission (it provides up to 2Mbps), breaking down the barriers between fixed and mobile telecommunications, broadcasting and information technology

7. UMTS Services • UMTS is intended to support the following new high speed, interactive services for mobile phones, mobile terminals and laptops: • real time high quality video conferencing • fast Internet and corporate intranet access, regardless of location (Web page photo: UMTS = 0.4 secs/ GSM = 83 secs/ fixed line = 28 secs)* • broadcasting and audio on demand • on-line banking and shopping • enhanced quality voice, fax and e-mail • in-car real time navigational systems • a virtual office on one line - with simultaneous voice and data services: make calls, receive faxes and remain on office network simultaneously Working prototypes have already been developed by manufacturers * Source: UMTS Forum, Technology Aspects Group

8. Convergence • UMTS represents an opportunity to break the mould in the UK • The UMTS design offers unprecedented opportunities to build a mobile network with fixed line capabilities - including all PSTN/ISDN services • Growth of both data and mobile systems is proven separately; combined, the growthopportunities should be even greater • UMTS should permit the Virtual Home Environment (VHE) to become a reality, with just one personal identifier per subscriber, and access to UMTS facilities available to subscribers over both mobile and fixed networks

9. UMTS - Technical standards • Data rates • Up to 384 kbps for wide area / high mobility data - sufficient for high speed quality mobile video conferencing • Up to 2 Mbps for local area / low mobility data • Comparison: fastest Internet access is currently around 56kbps on analogue systems, 128kbps on ISDN • Spectrum Allocation • 155 MHz made available; cleared by 2002 • 2x60 MHz paired, 35 MHz unpaired, both in 2GHz bands (in accordance with International Telecommunications Union) • Consensus ETSI Decision - For UTRA (UMTS Terrestrial Radio Access) • W-CDMA mandated for paired spectrum, TD/CDMA for unpaired

10. Why the United Kingdom? • The UK should form a blueprint for rolling out networks across Europe - For new entrants it will be a ‘bridgehead’ into Europe • The UK Government actively encourages a competitive market and is looking at sensible measures to remove barriers to entry • The spectrum auction will be open to all - incumbents and new entrants - on a fair basis • It is unlikely that BT and Cellnet will be permitted to bid separately • The possibility of permitting new entrants to roam onto existing networks to provide voice coverage is being investigated • Rollout obligations will be set at a realistic level (potentially 80% population or about 10% geographical coverage at 144kbps by 31 December 2007) • The UK market remains capable of much further development ….

11. The UK Market (1) • Higher penetration rates in Europe - through fixed/mobile convergence point the way to what is achievable 45% Scandinavia: High substitution of mobile for fixed Mobile Penetration (%) 40% Finland France 35% Germany Italy Spain 30% Sweden UK 25% 20% Europe: Lower penetration and substitution less advanced 15% 10% 5% 0% Jan-89 Jan-90 Jan-91 Jan-92 Jan-93 Jan-94 Jan-95 Jan-96 Jan-97 Jan-98 Source: FT Mobile Communications

12. The UK Market (2) • Whilst penetration is average for Europe, the fixed/mobile convergence uplift is yet to occur, potentially renewing the rate of market growth ... 120% Growth over last 12 months 100% Austria Greece Ireland Italy 80% Opportunity Netherlands 60% Switzerland Spain Finland 40% Germany Norway Sweden UK 20% Denmark 0% 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% 40.0% 45.0% 50.0% Mobile Penetration (1st January 1998) Source: FT Mobile Communications

13. The UK Market (3) The UK presents both fixed and mobile growth opportunities…. 45 Finland Mobile Penetration (% of population) 40 Norway Sweden 35 30 Denmark 25 Italy 20 Austria 15 Switzerland Portugal UK Ireland Germany Spain Netherlands 10 Estonia France Belgium Greece Lithuania Hungary Slovakia Czech Rep 5 Slovenia Ukraine Poland Croatia Romania Latvia Macedonia Albania 0 Bulgaria Serbia 0 10 20 30 40 50 60 70 80 Turkey Bosnia-Herz Moldova Fixed Penetration - (% of population) Belarus Source: FT Mobile Communications , Public Network Europe 1998 Year Book

14. Q & A (1) • When will UMTS be introduced in the UK? • Trials should commence in 2000, with operators beginning to roll out networks in 2002, hence the need for licensing certainty next year. Widespread availability is anticipated around 2005 • Are there operational efficiencies with GSM? • UMTS and GSM technologies may be seen as complementary rather than competing. Dual band handsets are expected to be able to route voice and low-data traffic onto GSM, retaining UMTS spectrum for high-data applications

15. Q & A (2) • When will additional spectrum for UMTS become available? • The UK intends only to allocate additional spectrum for terrestrial UMTS when it is designated by international (and preferably global) agreement. If any UMTS spectrum were to made available it would have to be allocated in a fair and transparent manner, bearing in mind the minimum spectrum required by any operator • Will refarming (spectrum re-use) be permitted? • There is no current intention to refarm existing cellular spectrum unless this is in line with international agreements. UMTS technology will only be licensed for use in spectrum designated in Europe for UMTS, which does not at present include spectrum held by the existing cellular operators

16. Q & A (3) • How many licences will there be in the UK? • Currently we anticipate between three and five • How long will the licences last? • The Government is considering suggestions ranging from 15 to 25 years • How will the auction take place? • The auction methodology is still being decided. There is likely to be a pre-qualification round in which Candidates’ financial and technical capability to roll out a network will be assessed. This would be followed by a competitive auction, probably based solely on price. The auction rules will be prescribed by Regulations issued under a Statutory Instrument further to the Wireless Telegraphy Bill 1998

17. Q & A (4) • Can licences be traded? • The Wireless Telegraphy Bill does not permit secondary trading. In any event, there are likely to be ‘use it or lose it’ roll-out obligations attached to licences to ensure that networks are built • Are consortium bids permitted? • Yes, but it is unlikely that exclusive arrangements with equipment, service or content providers will be permitted • Can I bid as part of more than one consortium? • Almost certainly not. Shareholdings in more than one consortium would risk collusion and conflicts of interest. • Who is running the auction? • The Radiocommunications Agency is responsible for the management and allocation of radio spectrum in the UK, and is thus running the auction. Rothschilds is financial adviser to the Agency.

18. Next Steps • Further information on the opportunity can be found through: • Multimedia Communications on the Move • Dedicated Auction Web-site: www.open.gov.uk/radiocom/ • Rothschilds (Gerry Spring or James Vaux): +44 171 280 5000(springg@rothschild.co.uk / vauxj@rothschild.co.uk) • Radiocommunications Agency (Jeremy Clayton) +44 171 211 0133(claytonj@ra.gtnet.gov.uk) • Membership of UMTS Auction Consultative Group