1 Global Internet Trends 04/07/06 mary.meeker@morganstanley.com brian.pitz@morganstanley.com brian.fitzgerald@morganstanley.com richard.ji@morganstanley.com Morgan Stanley does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. Customers of Morgan Stanley in the United States can receive independent, third-party research on the company or companies covered in this report, at no cost to them, where such research is available. Customers can access this independent research at www.morganstanley.com/equityresearch or can call 800-624-2063 to request a copy of this research. For analyst certification and other important disclosures, refer to the Disclosure Section

2 Internet Trends Many Things to Worry About 1) Plethora of emerging opportunities can create near-term costs 2) Increasingly competitive landscape (intramural and other) can drive uncertainty 3) Infrastructure builds can increase costs 4) Rapid growth of mobile Internet can create transitions 5) Rapid growth of emerging markets can create challenges 6) Rising competition for talent can increase costs 7) Regulatory intervention can slow momentum 8) Impact of high oil prices plus on-going threats from likes of terrorism and pandemics can create uncertainties

3 Internet Trends Many Things to Be Excited About! 1) Secular shift to IP-based digital media has tremendous momentum 2) Broadband penetration remains low 3) Online advertising spending relative to usage remains low 4) Online vs. offline commerce penetration remains low 5) Usage growth of digital content (broadband and mobile) remains robust 6) Monetization of broadband and wireless content / usage remains low 7) Global Internet usage growth (including mobile) remains healthy 8) Internet leaders have garnered significant audience / competitive advantage over the years 9) 2007 could be a year of leverage

4 Hierarchy of Needs? Self- actualization Esteem Belonging Safety Physiological Created for discussion purposes and perhaps a bit of humor. Not intended to discredit Maslows hierarchy of needs which we believe to be accurate. 1943 - Maslow 2006 - ? ;) Internet / Mobile Phone Shelter Food / Water

5 Outline 1) Public Internet Companies 2) Communications Hubs? 3) Global 4) Broadband 5) Mobile 6) VoIP 7) Video 8) Local 9) Finding 10) Emerging Trends 11) Emerging Companies 12) Closing Thoughts 13) Appendix

6 1 Public Internet Companies

7 Source: FactSet, Morgan Stanley Research. Note; Data Includes companies in the Internet & Consumer Software category, per Morgan Stanleys GTIIM (Global Tech Investor Interest Model) with >$1B market cap (as of 3/13/2006). US Companies = 82% of Global Market Value Company U.S. Market Cap ($B) Y/Y Change In Mkt Cap C2005 Rev ($MM) Y/Y Change In Rev C2005 Op Inc ($MM) C2005 Op Margin Microsoft $281,510 3% $39,788 8% $16,642 42% Google 97,820 106 6,139 92 2,129 35 AOL Time Warner 78,544 (2) 43,652 4 7,502 17 eBay 53,190 4 4,552 39 1,442 32 Yahoo! 43,119 (2) 3,696 43 1,160 31 Electronic Arts 15,656 (25) 2,862 (10) 351 12 Amazon.com 15,055 6 8,490 23 465 5 E*Trade 10,210 114 2,548 22 636 25 InterActiveCorp 9,944 (37) 5,754 (7) 345 6 Intuit 9,157 12 2,038 9 524 26 Monster.com 5,901 62 987 17 176 18 VeriSign 5,643 (22) 1,609 38 225 14 NAVTEQ 4,458 12 497 26 134 27 CheckFree 4,299 15 758 25 72 10 WebMD 3,652 32 169 26 27 16 Activision 3,480 7 1,484 9 41 3 CNET 1,954 47 353 21 41 12 ValueClick 1,629 66 304 80 79 21 aQuantive 1,587 137 308 95 61 20 THQ Interactive 1,549 33 -- -- -- -- WebEx Communications 1,457 48 -- -- -- -- Netflix 1,374 176 688 36 11 2 RealNetworks 1,327 34 325 22 (17) (5) RSA Security 1,251 6 -- -- -- -- TakeTwo Interactive 1,160 (38) 1,203 7 40 3 Internet Security Systems 1,072 12 330 14 57 17

8 US Companies = 82% of Global Market Value Company Europe Market Cap ($B) Y/Y Change In Mkt Cap C2005 Rev ($MM) Y/Y Change In Rev C2005 Op Inc ($MM) C2005 Op Margin Japan T-Online International AG $11,517 (14%) $2,730 0% $471 17% Thomson Multimedia 4,643 (38) 6,727 (38) 532 8 TPI 3,991 18 768 (7) 226 29 Eniro 1,983 7 607 (18) 128 21 Seat Pagine Gialle 1,968 2 809 0 (141) (17) Freenet.De Ag 1,577 1 845 32 -- -- Kudelski 1,490 (22) -- -- -- -- Tiscali 1,168 (20) 874 (40) (87) (10) Yahoo! Japan $38,029 1% $1,099 0% $562 51% Softbank Corp 27,785 95 7,809 0 (237) (3) Nintendo 18,443 26 4,808 0 1,041 22 Rakuten 9,903 (10) 1,099 147 295 27 Konami 3,292 17 2,432 0 263 11 Cyber Communications 1,935 198 225 0 9 4 Koei 1,457 13 263 0 88 34 Cyber Agent 1,315 16 381 57 23 6 Source: FactSet, Morgan Stanley Research. Note; Data Includes companies in the Internet & Consumer Software category, per Morgan Stanleys GTIIM (Global Tech Investor Interest Model) with >$1B market cap (as of 3/13/2006).

9 US Companies = 82% of Global Market Value Company China Market Cap ($B) Y/Y Change In Mkt Cap C2005 Rev ($MM) Y/Y Change In Rev C2005 Op Inc ($MM) C2005 Op Margin S. Korea Hong Kong Netease $2,811 95% -- -- -- -- Sina.com 1,313 (19) -- -- -- -- CTrip 1,269 89 $65 60% $27 42% Tom Online 1,098 83 123 0 31 26 Tencent Holdings $2,367 99% $138 0% $54 39% NHN Corp $4,052 185% $253 0% $66 26% Ncsoft Corp. 1,265 (17) 280 0 94 34 Source: FactSet, Morgan Stanley Research. Note; Data Includes companies in the Internet & Consumer Software category, per Morgan Stanleys GTIIM (Global Tech Investor Interest Model) with >$1B market cap (as of 3/13/2006).

10 Rest of World 34% US 66% 1970 Rest of World 53% US 47% Powerful Non-US Market Capitalization Growth Source: AXA. Projected data for C2030E calculated using the rate of growth of market capitalization for Rest of World and USA since 1970. 2001 Rest of World 73% US 27% 2030E

11 US Maintains Dominance in Global Tech Company Market Capitalization Source: Morgan Stanley Technology Research. Region N. America Japan Asia Europe Total 63% 17 11 9 100% $2,455B 665B 421B 361B $3,902B -1% 3 39 -5 3% % Total Market Value Market Value (12/31/05) Y/Y Change

12 0% 20% 40% 60% 80% 100% 1998 1999 2000 2001 2002 2003 2004 2005 GeographicDistributionofTechnologyEquity andEquity-LinkedTransactionVolume($B) U.S. Europe Asia Japan $34 $109 $35 $58 $63 $55$181 $67 Source: SDC, Dealogic, Morgan Stanley; 01/31/06 Non-US Markets Gaining Share of Technology Financings 2005 US 38% Asia 33% Europe 20% Japan 9%

13 Leading Global TMT Companies Source: 2004 data from Morgan Stanley Research TMT database. Orange represents absolute market size within a given country; company market share listed below. For ISPs, the company market shares refer to share of the ISP market, while the user numbers refer to Internet users. *Shipment units. USA 184MM 99MM 204MM 171MM 141MM 171MM users 5.8MM 878MM Pop. 294MM EchoStar - 11% Gateway - 6% NetZero/Juno - 6% China 283MM 128MM 42MM 335MM 85MM 335MM users 3.3MM 685MM Pop. 1,300MM Tongfang - 8% Japan 78MM 21MM 54MM 85MM 49MM 85MM users 7MM 645MM Pop. 128MM ACCA Networks - 10% Japan Telecom - 7% Germany 57MM 26MM 39MM 68MM 30MM 68MM users 3.1MM 96MM Pop. 83MM HP - 11% UK 33MM 15MM 26MM 54MM 30MM 54MM users 0.55MM 142MM Pop. 60MM RBS/NatWest - 16% HSBC Bank - 6% Cable SubscriptionsTelephone Lines Installed PCs Verizon - 36% Comcast - 22% Dell - 35% Citibank - 13% Bank One - 10%SBC Comm. - 31% DirecTV - 14% HP - 19% Verizon - 25% Cingular - 27% Motorola - 35% AOL/RoadRunner - 27% SBC - 38% Sprint PCS - 12% Samsung - 16% Bell South - 18% LG - 17% Comcast - 8% Verizon - 31% MBNA - 8% Qwest - 9% Time Warner - 11% Apple - 5% T-Mobile - 10% Nokia - 14% SBC Yahoo! - 6% Qwest - 9% Bank of America - 8% BellSouth - 14% Sprint - 5% Cox - 6% Lenovo - 5% Nextel - 8% Kyocera - 4% EarthLink - 5% JPMorganChase - 6% China Telecom - 60% Shanghai Cable Lenovo - 26% China Mobile - 64% Noka - 26% China Telecom - 15% ChinaNet Ind. & Comm. Bank of China Netcom - 36% Tianjin Cable Founder Elec.- 12% China Unicom - 36% Motorola - 10% China Unicom - 14% China Netcom of China - 20% China TieTong - 4% Beijing Cable Samsung - 9% China Netcom - 10% GBNet Bank of China - 18% Dell - 7% Bird - 8% China Unicom Agr. Bank of China - 14% IBM - 5% TCL - 6% China Const. Bank - 10% NTT Sky Perfect - 15% NEC - 20% NTT DoCoMo - 56% NEC - 17% @nifty - 14% NTT Regional - 43% Sumitomo Mitsui - 16% KDDI Jupiter Telecom - 8% Fujitsu - 19% KDDI (au) - 22% Panasonic - 14% SoftbankBB - 13% BB Technologies - 25% UC Card - 15% Japan Telecom Dell - 11% Vodafone - 17% Sharp - 13% NTT (OCN) - 12% Nippon Shinpan - 14% Toshiba - 8% TU-KA - 4% Sanyo - 12% NEC (biglobe) - 11% e-Access - 10% Credit Saison - 12% IBM - 7% Fujitsu - 11% KDDI (dion) - 8% UFJ Card - 9% Deutsche Telecom - 89% Kabel Deustch. - 38% Fujitsu Siemens - 21% T-Mobile - 40% Nokia - 33% T-Online - 53% Deutsche Telecom Bank. Berlin - 7% Arcor Ish (Kabel NRW) - 16% Vodafone D2 - 36% Samsung - 16% freenet.de Citibank - 6% Mobilcom Premiere World - 13% Acer - 10% E-Plus - 13% Motorola - 13% AOL Barclaycard - 6% Kabel Baden Wurt. - 9% Medion - 10% O2 - 11% Siemens - 9% Tiscalie Commerzbank - 5% EWT (UPC) - 8% Dell - 9% Sony Ericsson - 8% KarstadtQuele Bank - 4% BT Barclays Bank - 18%BT - 83% Sky Digital - 48% Dell - 29% O2 - 25% Acer - 5% Nokia - 33% Freeserve - 9% NTL/Telewest - 13% Freeview - 30% HP - 16% T-Mobile - 24% Orange - 23% MBNA - 6%NEC/Packard Bell - 5% Vodafone - 23% Motorola - 13% BT/Genie - 6% Co-operative Bank - 4%Toshiba - 5% Mobile Subscriptions Sony Ericsson - 8% LineOne - 5% Siemens - 9% AOL - 5% Samsung - 16% World Online - 6% Credit / Debit Cards DSLInternet Service Providers (ISPs) Mobile Handsets* NTL/Telewest - 22%

14 2 Communications Hubs?

15 Convergence is happening (~10% of Yahoo! IM sessions end in phone call). Opportunities exist for non-mobile players to leverage existing subscribers. Who has the most valuable customer base as transition occurs? Who will have it when it is over? Email Providers Yahoo! Mail Unique Visitors (1) (233MM) MSN Hotmail Active Accounts (2) (230MM) Google GMail Unique Visitors (1) (54MM) IM / VoIP Services MSN Messenger Active Accounts (2) (205MM) Yahoo! Messenger Unique Visitors (1) (79MM) Skype / eBay Registered Users (2) (75MM) AOL Instant Messenger Unique Visitors (1) (45MM) ICQ Unique Visitors (1) (34MM) Google Talk Unique Visitors (1) (4MM) Internet Sites Yahoo! Unique Visitors (1) (471MM) Google (1) Unique Visitors (1) (451MM) MSN Unique Visitors (1) (428MM) eBay Unique Visitors (1) (241MM) Amazon.com Active Customers (2) (52MM) MySpace.com Unique Visitors (1) (46MM) AOL Subscribers (2) (26MM) Search Engines Google Search Unique Visitors (1) (395MM) Yahoo! Search Unique Visitors (1) (243MM) (1) Source: Global Unique Visitors, comScore Media Metrix (1/06). (2) Source: Company Reports, as of CQ4:05 for eBay, Microsoft, as of CQ3:05 for others. AOL subscribers based on sum of US and Europe AOL-branded subscribers. Payments PayPal / eBay Accounts (2) (96MM) Next Generation Communications Hubs?

16 Significant Infrastructure Builds Source: Company filings, Morgan Stanley Research. Figures exclude capital expenditures from acquired companies. (1) C2003 includes $125.1MM purchase of additional office space. E = Morgan Stanley Research estimates. C2004 $319 80% $246 109% $293 (20%) $89 94% Google Y/Y Yahoo! Y/Y eBay (1) Y/Y Amazon.com Y/Y C2003 $177 375% $117 128% $365 163% $46 17% C2005 $838 163% $409 66% $338 16% $203 128% (US$ in Millions) Capital Expenditures

17 3 Global

18 Strong PC Unit Growth Driven Boosted by Internet & Consumer Demand Source: IDC and Morgan Stanley Research R. Runkle, K. Huberty Note: Enterprise includes large enterprises and the government vertical. SMB stands for Small Medium Business. Global Estimated PC Shipments by Segment (PC Unit Shipment Data in Millions) Total Units Y/Y Growth Enterprise SMB Consumer CQ1:04 42 17% 29% 34 37 CQ2:04 40 15% 32% 34 33 CQ3:04 45 13% 32% 33 35 CQ4:04 52 15% 28% 33 39 CQ1:05 47 13% 28% 34 37 CQ2:05 47 18% 30% 34 35 CQ3:05 53 17% 30% 33 37 CQ4:05 60 16% 27% 33 40 C2004 179 16% 30% 34 36 C2005 208 16% 29% 34 38

19 Leading TMT Markets by Category 6,2881Population 1,1984Telephone Lines $19,1686GDP per Capita 4599Cable TV Subscriptions 3,5679Credit/Debit Cards in Use 69611Installed PCs 1,58914Mobile Phones in Use 901MM18%Internet Users Market Size (MM) 2004 Growth RateCategory Source: Morgan Stanley Research; GDP figures from IMF, shown in current USD. Note: Data include totals for 50 countries in our TMT database, updated for 12/2004; GDP updated for 12/2005.

20 Morgan Stanley TMT Market Sizing Methodology We measure 2004 market sizes / growth rates for 8 core TMT-related metrics: 1) Population 2) Nominal GDP per Capita 3) Telephone Lines 4) Cable Subscriptions 5) Installed PCs 6) Mobile Phones in Use 7) Internet Users 8) Credit/Debit Cards We do this for the 50 most important economies, as measured in terms of population size, land mass, and GDP per capita.

21 Morgan Stanley TMT Market Sizing Methodology We measure market sizes and growth rates for core TMT metrics: nominal GDP per capita (USD, current); telephone lines; cable subscribers; installed PCs; mobile phones in use; Internet users and credit/debit cards in use. We do this for the 50 most important economies based on purchasing power / economic strength, as measured in terms of population size, land mass and GDP per capita. We standardized each countrys position in the global market in each category and adjusted values to reflect a positive scale. The relative ratings and ranks were then determined by calculating an average of Z-scores across categories. For each country, we calculate past / present / potential global market weightings across seven TMT metrics - we call this our relative weighting - we use it to measure / rank a countrys propensity for TMT products and services. Sample Calculation: Computing the relative weighting for US Telephone Lines and then the overall US relative weighting: 8.453.4 47,742 23,495183,688 5Z X =+= =+= weightingrelativescore Following from this, the overall US relative weighting calculation (across the seven TMT categories) for the US is 9.16, derived by the equation: [6.4+8.4+11.3+7.6+8.9+10.7+9.6] / 7 = 9.0

22 Rank Country Relative Weighting 2004 Rank Country Relative Weighting 1 2 3 4 5 6 7 8 9 10 1 2 3 4 5 6 7 8 9 10 USA China Japan Germany United Kingdom India France Italy South Korea Canada 9.0 8.2 6.5 5.7 5.5 5.3 5.2 5.2 5.1 5.1 China USA India Japan Germany United Kingdom Russia France Brazil South Korea 8.7 7.7 7.0 5.9 5.3 5.2 5.2 5.1 5.1 5.0 2010E From our database on market sizing of global TMT (Technology, Media & Telecommunications) products and services. We measure market sizes and growth rates for core TMT metrics: nominal GDP per capita (current USD); telephone lines; cable subscribers; installed PCs; mobile phones in use; Internet users and credit/debit cards in use. For each economy, we calculate past / present / potential global market weightings across seven TMT metrics - we call this our relative weighting and we use it to measure / rank a countrys propensity for TMT products and services. We do this for the 50 most important economies based on purchasing power/economic strength, as measured in terms of population size, land mass and GDP per capita. We standardized each countrys position in the global market in each category and adjusted the values to reflect a positive scale. The relative ratings and ranks were determined by calculating an average of z-scores across categories. For example, in the United States, standardized and adjusted values of 6.4 in GDP per capita, 8.4 in telephone lines, 11.3 in installed PCs, 7.6 in mobile subscribers, 8.9 in cable subscribers, 10.7 in Internet users, and 9.6 in credit/debit cards produces a relative weighting of 9.0. 2010E relative weightings derived by assuming 2003-2004 growth CAGR for each category to 2010, and ensuring category penetrations were not exceeded. China / India / Russia Likely to Continue to Make Impressive TMT Gains Source: Morgan Stanley Research. Red indicates countries moving out of the top 10 TMT countries; green indicates countries moving into the top 10. GDP figures from IMF, shown in constant USD

23 Internet Users by Region Source: Morgan Stanley Internet Research 65547Latin America5 10312236Europe2 6268224North America3 14% 11 24% 3-Year CAGR 901MM 87 308MM Internet Users C2004 TOTAL GLOBAL Rest of World Asia Pacific Region 1.3B 120 588MM Internet Users C2007E 4 1 Rank Asia Pacific Should Lead World in Internet User Growth

24 China = Most Internet + Mobile Users Engineering Grads 4:1 vs. US + Capital Flowing TMT Category Mobile Phones Cable TV Subscriptions Telephone Lines Internet Users Installed PCs Source: Morgan Stanley Research Global Ranking Units (MM) 2004 Growth 1 1 1 2 4 335 128 283 94 42 25% 16 14 18 17

25 2004 - Top TMT Countries Country 2004 Relative Weighting Population (MM) GDP per Capita Telephone Lines (MM) Installed PCs (MM) Mobile Phones in Use (MM) Cable TV Subscriptions (MM) Internet Users (MM) Credit/Debit Cards in Use (MM) 1 USA 9.0 294 $39,935 184 204 171 99 202 878 2 China 8.1 1,300 1,272 283 42 335 128 94 685 3 Japan 6.5 128 36,596 78 54 85 21 73 645 4 Germany 5.7 83 33,390 57 39 68 26 46 96 5 United Kingdom 5.5 60 35,548 33 26 54 15 35 142 6 India 5.3 1,087 622 47 13 40 49 39 38 7 France 5.2 62 32,911 34 23 42 8 25 30 8 Italy 5.2 58 29,014 27 15 54 3 29 55 9 South Korea 5.1 48 14,151 25 27 37 13 32 66 10 Canada 5.1 32 31,134 20 16 15 10 22 62 11 Brazil 5.0 176 3,325 42 19 49 2 18 175 12 Spain 5.0 41 25,320 18 10 37 3 13 95 13 Russia 5.0 142 4,087 38 19 58 10 22 24 14 Netherlands 5.0 16 37,326 10 8 14 6 11 30 15 Norway 5.0 5 54,600 3 3 4 1 3 7

26 N. America - 36% of Internet Users in 2000E; 20% in 2007E 0% 20% 40% 60% 80% 100% 2000E 2001E 2002E 2003E 2004E 2005E 2006E 2007E North America Europe Asia/Pacific Rest of World Latin America Geographic Distribution of Internet Users (MM) Source: Morgan Stanley Research. 379 482 610 761 901 1,039 1,191 1,343

27 4 Broadband

28 Global Broadband In / Entering Adoption Sweet Spot Source: Morgan Stanley Research. 0 10 20 30 40 50 60 70 80 2002 2003 2004 2005 2006E 2007E 2008E 2009E 2010E 2011E USResidentialBroadbandHouseholds (MM) 0% 10% 20% 30% 40% 50% 60% US Residential Broadband Households % of Total US Households Broadband Ramp in 25-30% Penetration Sweet Spot

29 Global Broadband Trends Broadband Data by Region, CQ4:05 Source: Morgan Stanley Research, Nick Sebrell, Paul Marsch, Richard Bilotti, Simon Flannery, Mitchell Kim. (1) Cable modem, DSL or FTTH deployments; In terms of broadband-users, we roughly estimate 2.0+ users per Internet subscription (2) Broadband subscriptions per household; data based on 2004 households from Morgan Stanleys TMT database. Using subscriber-to-user multiplier, user penetration would be higher. 414527Latin America5 251204360Europe2 321002950North America3 418MM 44 140MM Users(1) 17% 38 11% Penetration(2) 209MM 22 70MM Subscribers(1) TOTAL GLOBAL Japan Asia Pacific (ex. Japan) Region 42% 23 58% Y/Y Growth 4 1 Rank

30 5 Mobile

31 Mobile to the Max?! Blackberry Protect Your Skull While You Destroy Your Thumbs (Click to launch video clip)

32 Asia Pacific 41% Europe 19% ROW 18% N. America 11% South America 11% Mobile Subscribers 2B C2005E (2) Source: Morgan Stanley Research and Morgan Stanley Communications Equipment Research - Scott Coleman, John Marchetti. Asia Pacific 36% Europe 24% ROW 12% N. America 23% South America 5% Internet Users 1B C2005E (1) Mobile Users 2x > Than Internet Users N. America = 11% of Mobile / 23% of Internet Users

33 Source: Euromonitor, CNNIC, World Bank, Morgan Stanley Internet Research (July 2005) Mobile Users Internet Users Mobile Phone to Installed PCs Country (MM) (MM) Internet User Ratio (MM) China 363 100 3.6:1 53 US 177 211 0.8:1 207 Japan 88 78 1.1:1 55 Germany 69 51 1.4:1 39 UK 54 37 1.5:1 26 Italy 54 32 1.7:1 16 S. Korea 37 32 1.2:1 27 Mobile Leads Internet in Most Markets

34 Global Mobile Should Enter Adoption Sweet Spot in 2006 / 2007+ Source: Morgan Stanley Telecom Research Scott Coleman, John Marchetti. 0 200 400 600 800 1,000 1,200 1,400 1,600 2005E 2006E 2007E 2008E 2009E Subscribers(MM) 0% 10% 20% 30% 40% 50% 60% %ofTotalWirelessSubscribers 2.5G Subscribers 3G Subscribers % 2.5G Penetration % 3G Penetration Global 2.5G / 3G Penetration 2.5G Ramp in 25- 30% Penetration Sweet Spot

35 Mobile Next Internet Opportunity Networked personal computer (thanks to broadband adoption) still has lots of evolutionary running room In 5th major computing cycle - Mobile Internet If past is prologue, Mobile Internet will likely be bigger (based on aggregate wealth creation) and have more reach (based on global users) than cycles that have come before it ~2B global mobile phones in use > ~1B Internet users in 2005 $19B in global Mobile Internet premium services revenue comparable to Internet advertising revenue in 2005 Source: Morgan Stanley Research.

36 Mobile A New Computing Cycle Mobile Internet represents a new computing cycle Mainframe Minicomputer PC PC Internet Mobile Internet Unlike past cycles, US is follower, not leader 89% of mobile subscribers, 93% of Mobile Internet users in non-US markets; China is #1 Uncharted / new sources of usage generated for / from Mobile Internet platform What will be the dominant killer application for the mobile consumer? E-mail? SMS? Ringtones? Games? Search? Blogs? Location-Based Services? Why now? 1) handsets becoming small functional computers; 2) cheaper / faster / more data; 3) more content 334MM (48%) of handsets shipped (18% of base) Mobile Internet ready (can run Java or BREW applications), 2005E 374MM subscribers (20%) with 2.5G (~50Kbps) or 3G (~300Kbps) network access; 61MM 3G subscribers (3%) have broadband-like services (browsing, full track music) Mobile content improving steadily - consumers are spending billions on it

37 Global Data Tell Story 2.1B Mobiles 3.5x number of PCs, growing at 20% Y/Y vs. 12% for PCs $1 Trillion Mobile carrier revenue was $600B+ (and rising) of the $1T+ telecom market in 2004 (Yankee 11/04) Asia & Europe 10x US Asia / Pacific + Europe have 7x mobile subscribers (Morgan Stanley), 10x mobile data users than N. America (Informa 5/05) China China Mobile - $2.8B mobile data revenue (+103% Y/Y, CH1:05), 20% of total revenue (vs. 7% average for US carriers) $171MM China Mobile ring back revenue, +961% Y/Y; #1 song had 5MM mobile downloads, comparable to #1 CD album Wireless VoIP 75MM Skype users as of 12/05 fastest product ramp ever? dual mode WiFi / GSM handsets shipping now MVNOs MVNOs taking off worldwide, Virgin Mobile USA (3MM subscribers) buys voice / data transport from Sprint

38 Global Data Tell Story Cameras 75% of cameras shipped (300MM) to be in mobile phones in 2005E (ex. disposables, Mobile Imaging Report 2005) $50B+ Messaging 1.1T SMSs sent with $50B in revenue in 2004 (Informa 5/05); more emails sent in Japan via mobile phone than PC (DoCoMo 2005) $3B Music $3B annualized ringtone sales (Informa 5/05) - vs. 1B cumulative iTunes songs sales (1/06); 50x more full track music & ringtones downloads done via mobile than PC in Japan Content VeriSigns Jamba exceeded $530MM (+194% Y/Y) in 2005 revenue Games $1.8B to be spent on mobile gaming in 2005E, up 42% Y/Y (MS Research) Commerce 3MM+ NTT DoCoMo wallet phone users (CQ1:05) used pre-paid technology on mobile phones to complete transactions Mobile community leader SMS.ac exceeds 40MM users (6/05)Community

39 Business Leaders Tell Story Mobile phones are more than a billion smart computers we cant ignore that may create a software spiral like that of PC over the next 10 years. - Paul Otellini, Intel CEO We really believe we are on the cusp of a whole new era of mobile computing. - Steve Ballmer, Microsoft CEO This is much bigger than what we saw 10 years ago [with the PC Internet]. - Jonathan Sacks, MFORMA CEO Most peoples first computing experience will be via a cell phone. - Eric Rudder, SVP, Technical Strategy, Microsoft

40 Mobile Internet Is Here $19B+ Revenue (+23% Y/Y in 2005E) Mobile Internet with $19B in 2005E revenue is already as big as online advertising but with smaller wealth creation Transport (1) Voice Data Handsets (2) Mobile Internet Premium Services (3) Online Advertising (4) 2005E 2009E CAGR $529 55 124 19 $19 $559 61 102 45 $46 1% 2 (5) 24 25% Transport growth hurt declining prices / slowing subscriber growth Handset revenue growth decelerating hurt by declining ASPs not offset by volume growth Mobile Internet premium services expected to grow steadily, in-line with online advertising biggest threat to forecast could come from mobile content piracy (1) Informa (5/05). (2) Frost & Sullivan (5/05). (3) Source: Morgan Stanley Research, total market. (4) Source: PriceWaterhouseCoopers (6/05). Global Revenue (US$ in Billions)

41 Broadband vs. Mobile Internet Revenue Composition Source: Left Chart - Morgan Stanley Research estimates: includes revenue from Google, eBay, Yahoo!, Yahoo! Japan, Amazon.com, T-Online, InterActive, Time Warner (AOL only, ex-access), Microsoft (MSN only, ex-access), and Rakuten. CQ3:05 annualized revenue for Rakuten, and T-Online. Right Chart Morgan Stanley Research estimates, Global Data. Informa (5/05), Ovum (5/05). (1) Personalization includes ringtones, wallpapers, and screensavers. If SMS / MMS were added to Mobile Internetit would add $55B to total revenue and would account for 74% of total revenue. Mobile Internet - Revenue Composition C2005E - $19B Enterprise Services 10% Search / 411 16% Other Info & Infotainment 24% Games 10% Music & Video 4% Gambling 1% Personalization (1) 35% Commerce 61% Payments 3% Advertising 36% Top 10 Internet Companies - Revenue Composition C2005 - $42B Broadband vs. Mobile Internet Revenue Composition [ask vlad Broadband Vendor / Seller Pays Mobile User PaysMake Up on Volume?!

42 Type of content users expect to access within 12 months Games / Ringtones / Music - Most Popular Source: LogicaCMG 6/05. * includes screen savers. ** includes movie previews 83811Full feature films 107725Video clips** 13131656Multimedia images* 13101229Sports clips 23151531News 28131555Music 25272073Ring tones 30%11%15%49%Games South America (%) North America (%) Europe (%) Asia Pacific (%)

43 0 100 200 300 400 500 600 700 800 900 Mobile Subscribers Mobile Internet Users Subscribers(MM) Asia Pacific Europe North America South America Africa / Middle East 20% 12% 7% 5 10 15 20 25 Mobile Data as % of Revenue (leading carrier in region) Asia / Europe Lead Mobile Internet Adoption + Carrier Revenue Source: Informa 5/05. Mobile Internet user defined as someone who regularly uses data (including SMS) a minimum of once per week, whether for internet browsing or regular push services to their terminal. For right chart, leading carriers by wireless subscribers in Asia Pacific, Europe, and North America are China Mobile, Vodafone, and Cingular, respectively.

44 Complexity of Mobile Internet Simple ecosystem Microsoft Windows operating system and Intel x86 architecture create standardized development platform for applications and content PC Internet Mobile Internet Complex ecosystem Different handsets support different network standards (CDMA, GSM, HSDPA) Handset replacement cycle time shrinking from 26 to 18 months (1) Fragmented, proprietary operating system landscape (Java, Brew) Multiple processor architectures (TI, Samsung, Intel) (1) Source: Frost & Sullivan (2005).

45 Melon Unlimited MP3 Downloads KRW4,500/mo ($4.60/mo) Cizle Movie Preview, Reservation and VOD viewing GXG Mobile Games KRW14,000/mo ($14.30/mo) Korea Mobile Broadband Sets Standard

46 China Internet Companies Diversified Revenue Mix Source: Morgan Stanley Research, company data. Based on CQ3:05 earnings results for Baidu, Shanda, NetEase, SINA, Tom Online, Tencent, Sohu, The9, Linktone, KongZhong, 51job, Ctrip, and Hurray. Companies selected based on market capitalization as of 2/13/06. Gaming 27% Advertising 28% MVAS 31% Others 14% Revenue Composition - Top 13 China Internet Companies CQ3 Annualized - $2B

47 Mobile Internet Food Chain US Example 2 billion people globally with mobile devices buy mobile content from 2 primary sources Wireless Carriers Portals, Websites, Media who in turn may obtain content from content providers with the help of billing / payment processors / infrastructure providers Source: Motricity, Morgan Stanley Research.

48 Off-Portal Sales Have Grown Share, at Margin Source: qPass Customer Data (1/06). Non-operator = 3rd party mobile content vendor, such as Jamster. On-portal = content purchased via non- operators WAP site or Web site. Off-portal = not sanctioned by the operator or available via the operators deck of content. qPass Global Non-Operator Storefront Sales While most content transactions in US are consummated on carrier portal, we are likely to see value of this screen real estate reduced, as users navigate directly to content, but expanded / independent mobile payment systems are key. Similar trends played out on Internet, with homepage advertising for large sites.

49 But Off-Portal Distribution Varies by Geography Source: Yankee Group (2004), as quoted by qPass (4/05) http://www.qpass.com/connections/april2005/offportal.html. Off-Portal Revenue Share in Europe and the US In Europe, where carriers partner with a greater number of content providers with their transparent billing systems, 70% of revenue is generated off-portal In US, where access to transparent billing by content providers is limited and where content provision is not generally enabled off-portal, 30% of revenue is generated off-portal 0 10 20 30 40 50 60 70 80% 2004 2005 2006 2007 2008 EU US

50 Mobile Content Value Chain Fighting Over End-User Wallet Share As content becomes richer, content owners may gain leverage / revenue share over time Shift to real tones from polyphonic ringtones may potentially squeeze middlemen, increasing content owner / label share Carriers, who possess extensive customer relationships (including billing) and distribution channels, are also likely to demand higher share of pie and fight to protect walled garden fees In US, carriers make ~20-30% for on-portal content, and potentially make less from off-portal content, per qPass However, owing to differences in platform (on-portal vs. off-portal), content (polyphonic ringtone, mastertone ringtone, game), and service level (billing, customer service, marketing), carrier fees can vary from 5-40% Source: Morgan Stanley Research and qPass (2005).

51 Walled Garden Different Philosophies 1) Cingular If a customer wants to do it [access content off Cingulars deck], we need a darn good reason to block them. [Cingular services] should win on their merits, we want to be very open. - Jim Ryan, VP Cingular Data Cingular allows access to any web site, and more notably allows content downloads from any source, even those that bypass Cingular billing 2) Verizon Wireless Verizon is very particular and careful [about the content it selects], we are not interested in opening that up. Jim Straight, VP Verizon Wireless Data Verizon Wireless recently moved to block access to any website except those accessible via Verizons deck; content downloads allowed only using Verizon billing and from Verizon deck 3) China Mobile China Mobile retains significant control over what content is offered, but is moving toward a more open and flexible walled garden approach: service providers choose to keep 85%, 70% or 50% of revenues depending on what level of service they want from China Mobile: 1) billing, 2) customer service, 3) marketing

52 Leading Global Wireless / Wireline Carriers Skype / eBay = #8 Company Region Subscribers (MM) Market Cap ($B) China Mobile Vodafone (1) China Unicom Telefonica Moviles America Movil T-Mobile Orange NTT Cingular SBC (2) Verizon (2) NTT DoCoMo Verizon Wireless Sprint / Nextel Telecom Italia Mobile (1) China Europe / Japan China Europe / LatAm LatAm Europe / USA Europe Japan USA USA USA Japan USA USA Europe / LatAm 247 171 121 90 93 87 84 56 54 49 49 50 51 47 44 $94 131 11 46 59 71 59 66 NA 92 95 67 NA 71 52 Source: Morgan Stanley Telecom Research: Lina Choi, Nick Delfas, Simon Flannery. Note: Subscriber data based on most recent quarter. (1) As of CQ3:05. (2) Subscribers given as access lines. Total switched access lines do not include DSL. (3) Subscriber figure for Skype is registered user amount as of CQ4:05. Y/Y Growth 21% 13 15 26 53 12 16 (6) 10 (6) (7) 5 17 18 19 Type Wireless Wireless Wireless Wireless Wireless Wireless Wireless Wireline Wireless Wireline Wireline Wireless Wireless Wireless Wireless Skype (3) 75MM Registered Users (+277% Y/Y) Average Growth: 12%

53 Leading Global Wireless / Wireline Carriers ARPU Splits Company ARPU Voice ARPU Data ARPUType Source: Morgan Stanley Telecom Research: Lina Choi, Nick Delfas, Simon Flannery. Note: Data from CQ4:05. Vodafone estimated on UK, Spain, Germany, Italy and UK average. For Telefonica Moviles and Telecom Italia Mobile, only domestic operations considered. Orange estimated on UK and France averages. Verizon and AT&T do not break out ARPU for wireline segments. Sprint / Nextel NTT DoCoMo T-Mobile Cingular Verizon Wireless Telefonica Moviles Orange Vodafone Telecom Italia Mobile NTT America Movil China Mobile China Unicom AT&T Verizon Wireless Wireless Wireless Wireless Wireless Wireless Wireless Wireless Wireless Wireline Wireless Wireless Wireless Wireline Wireline % Revenue from Voice % Revenue from Data $62 59 52 49 49 40 38 37 35 23 15 10 6 -- -- $56 43 47 44 45 34 -- 30 29 -- 14 8 5 -- -- $6 16 5 5 4 6 -- 7 6 -- 1 2 1 -- -- 90% 74 83 90 90 86 -- 82 74 -- 90 80 86 -- -- 10% 26 17 10 10 14 -- 18 16 -- 10 20 14 -- --

54 China Mobile (the Company) Mobile Internet Ecosystem 247MM mobile subscribers (+21% Y/Y, C2005) $6B in data revenue (+59% Y/Y to 21% of revenue, C2005) - components include SMS & MMS ($3B in 2005), IVR, WAP and color Ringtones Mobile music is gaining momentum, color Ringtones downloaded 300MM+ times in C2005 Creation of powerful MVAS ecosystem - 80-85% revenue share with Mobile Internet companies (such as Tom Online) 70%+ of content for China Mobile is purchased off deck (vs.