TEOdirectionKęstutis ŠliužasGeneral Manager of TEO

1. Ongoing integration of technologies

3. Changing market situation

4. Demand for the new breakthrough

2. Change of customers‘ needs and expectations

Why are we changing?

IT PLAYERS

FRAGMENTED LOCAL IT

RISK FOR TELCO'S TO BECOME SUBSUPPLIERS

Opportunity to expand in SOHO/SME, fragmented space

Need to defend our core

Global IT players attacking Telco space in Large Enterprise

TELCO OPERATORS

ICT SERVICES

TELCO SERVICES

0-20 FTEsSingle location & vertical

SOHO

20-100 FTEsFew locations / verticals

Small

100-500 FTEsFew locations / verticals

Medium

500+ FTEsMany locations / verticals

Enterprise

Market: IT and telco convergence

0

500

1,000

1,500

2,000

2,500

3,000

271

501

203

428

944

246 220

495

224

320

493

217

350

916 840

303

494

189

550

954

2,5742,394

2,2732,145

356

501

159

677

2,884

1,126

38.7 %

10 %

14.5 %10.8 %

23.8 %

2009 2010 2011 2012 2013

Breakdown of 2013 revenue

Network interconnection

Leased lines

Audio-video services

Mobile voice

Internet and datacom

-25.6 %

Fixed voice

Market: situation in Lithuania

Our services in Lithuania are used by

Every second family

7 out of 10 enterprises

Highest level events

0

100

200

300

400

500

600

97 111

14.0 %

IPTV

72 63

12.9 %

DVB-T

594 553

7.0 %

Telephone lines

166 184

10.8 %

FTTH/B

181 175

3.6 %

DSL

42 83

96.4 %

Wi-Fi

31-03-2013

31-03-2014

Operating figures (in thousands)

8.5 %

22.6 %

6.3 %

7.2 %

1.8 %

0

20

40

60

80

100

0

50

100

150

200

81 80 53 50 31 24 18 16 183 169

B2C B2B B2O Q1 2013BDC, Lintel, other Q1 2014

31-03-2013

31-03-2014

Total revenueBy segments

Revenue (LTL million)

Operating expenses and cash flow (LTL million)

0

20

40

60

80

100

120

0

10

20

30

40

50

60

70

80

67.2

42.9 38.2

65.519

39.4

-3.6 %

-10.2%

7.6

20

46

104.2

108.4

Q1 2013 Q1 2014 Q1 2013 Q1 2014

3.6 %

0

20

40

60

80

100

120

0

10

20

30

40

50

60

70

80

67.2

42.9 38.2

65.519

39.4

-3.6 %

-10.2%

7.6

20

46

104.2

108.4

Q1 2013 Q1 2014 Q1 2013 Q1 2014

3.6 %

Operating expenses Cash flow

COGS

Employee-related

Other expenses

Redundancy charge

New structure of organization

New management team

Clear responsibilities and processes

Efficient organization

Simplier solutions to customers

Better customers' experience

Long-term success on telco and IT market

Program of changes

GENERAL MANAGER

BuSINESS FuNCTIONS

Business to Consumers

Technology & IT

Finance and Strategic Planning

Business to Business

SuPPORT FuNCTIONS

Risk Management

Corporate Affairs

Human Resources

Legal Affairs

Process

Internal Audit

New structure

All services under one TEO name

New, intuitive graphic user interface of IPTV service

upgraded Internet offers

E-shop of household electronic equipment

Free of charge customer care by telephones 1817 and 1816

Integrated virtual storage on TV screen

Complex telco and IT solutions

Common TEO and Omnitel proposals

What is changing?

Questions?