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Bundling the Local Loop Financing Doina Popescu AIG New Europe Fund June, 2004

Bundling the Local Loop Financing Doina Popescu AIG New Europe Fund June, 2004. AIG New Europe Fund. Committed capital: $320 million Focus region: Primary : Poland, Romania, Czech Republic, & Hungary

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Bundling the Local Loop Financing Doina Popescu AIG New Europe Fund June, 2004

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  1. Bundling the Local Loop Financing Doina Popescu AIG New Europe Fund June, 2004 1

  2. AIG New Europe Fund Committed capital:$320 million Focus region:Primary: Poland, Romania, Czech Republic, & Hungary Secondary: Bulgaria, Croatia, Macedonia, Moldova, Slovakia, Slovenia, Ukraine, & Yugoslavia Investment thesis:Dynamic investment environment created by shift to market economies & prospective integration with EU Opportunity: • Shortage of long-term capital • FDI increases stability • Capital markets development facilitates liquidity • Consolidation & regional platforms 2

  3. Portfolio Summary Sector Diversification Country Diversification 3

  4. Company: Leading GSM provider 48% market share Orange as operator Strategy: Participate in rapidly increasing wireless penetration Retain leading market position Strong 2003 performance: Revenues over $ 527 M EBITDA margin over 50% stable ARPU despite increased penetration Subscribers over 3.7 M Orange Romania S.A. Orange Romania Subscriber Base (000’s) 4

  5. Company: Leading cable TV & Internet service provider in Romania 800,000 cable subscribers 40,000 Internet subscribers Strategy: Further consolidate market domestically and regionally Exploit economies of scale by upgrading service platforms Expand ISP/data transmission business Recent Developments: Launched IP telephony ISP division profitability ahead of plan; $20 million debt raised from EBRD to finance investments Astral Telecom S.A. Astral Subscriber Base (000’s) 5

  6. Local Loop - Legislative Framework • Legislative Framework • Law 304 / July 2003 re. Universal Service • Law 591/2002 General Framework for Communications • Law 527 /202 Access to telecom infrastructure and interconnection • Can legislation be a driver force for communication development: • Differentiate between Service providers vs. Provider of infrastructure • Consumer Centric – short term view vs. medium/ long term • Incentives for investments in infrastructure • Is the new legislation adapted for Romanian infrastructure? 6

  7. Penetration 2003 Revenues vs. Investment Investments in Backbone vs. Local Loop Telecom Market in Romania 7

  8. EU / US Local Loop Unbundling • US • Mandatory in US since 1997: approval of Telecom Act • FCC focused on voice services (UNE-P) unbundled network element platform • EU • EC Regulation – unbundled access to local loop Dec 2000 • L336/4 “in order to bring substantial reduction in costs of using Internet” 8

  9. Investors Drivers Investors: • Short Term vs. Long Term • Financial vs. Strategic Drivers • Attractive market - Return of Investment • Stable Legislative Framework – Incentives for Investments • Reasonable Competition Risks • Technological e.g. WiMAX • Legislative / Implementation 9

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