Eurotel and Český Telecom are joining forces to create the telecommunications company of the future ACCELERATE TO INCREASE OUR LEADERSHIP Prague, March 1, 2006 Analyst conference call Cautionary statement Any forward-looking statements concerning future economic and financial performance of Český Telecom, a.s. contained in this Presentation are based on assumptions and expectations of the ACCELERATE TO future development of factors having material influence on the future INCREASE OUR economic and financial performance of Český Telecom, a.s. These LEADERSHIP factors include, but are not limited to, public regulation in the telecommunications sector, future macroeconomic situation, development of market competition and related demand for telecommunications and other services. The actual development of these factors, however, may be different. Consequently, the actual future results of economic and financial performance of Český Telecom, a.s. could materially differ from those expressed in the forward-looking statements contained in this Presentation. Although Český Telecom, a.s. makes every effort to provide accurate information, we cannot accept liability for any misprints or other errors. 1 Index 01 Fixed-mobile integration strategy ACCELERATE TO INCREASE OUR • Rationale LEADERSHIP • Financial synergies 02 Implementation plan • New organizational model • Transition plan 2 01 The Board of Directors and the Supervisory Board have approved the intention to build a new integrated telecom player Telefónica O2 ACCELERATE TO INCREASE OUR Czech Republic, a.s. LEADERSHIP • Český Telecom, a.s. • Eurotel Praha, spol. s r.o. • Fixed telecommunications • Mobile telecommunications • 69.4% owned by Telefónica • 100% owned by Český Telecom, a.s. • 30.6% institutional and private investors • Integration* and change of the name from Český Telecom, a.s. is subject to approval by the Shareholder Meeting * The integration means that Eurotel will be dissolved without liquidation and wound up and, concurrently, Český Telecom will acquire all assets and liabilities of Eurotel, including all rights and obligations arising out of employment relations 3 Eurotel and Český Telecom are joining forces to create the telecommunications ACCELERATE TO INCREASE OUR LEADERSHIP company of the future • New dimension of telecom services for our customers • Unique opportunity for all of us • Historical milestone for our companies • At the forefront of convergence trends 4 01 Czech customers are interested in an integrated value proposition Segment size Percent Preference for a single vs. multiple Preference for integrated vs. Preference for tested mobile-fixed providers of telecom services separate customer interface products Segment Attractiveness* Multiple ACCELERATE TO 14 providers Preference INCREASE OUR 30 LEADERSHIP for single/ 81 Advanced 59 integrated bill telecom users Without TV 33 28 Fixed 36 Preference for 43 single point traditionalists 90 of customer 22 service Single provider Single Including TV 53 Mobile only 29 34 31 Preference for single point 85 Basic voice of sales 20 talkers Czech EU Republic average 19 * Customers answering very attractive and attractive Source: Quantitative market research in the Czech Republic, N=700; Factum Invenio – 2006; EU results from fixed- mobile market research in eight European countries – 2004 5 01 The Czech Republic is at the forefront of convergence of mobile and fixed markets Czech market is one of the most advanced in fixed- Due to late ADSL adoption also broadband market mobile substitution* is in an advanced stage of convergence Total traffic Broadband connection by access technology Billion minutes, 2004 Percent, 2004 ACCELERATE TO INCREASE OUR 18 173 109 42 223 100%= LEADERSHIP 6 7 20 29 28 29 39 37 23 Other/WiFi 56 Mobile 68 93 80 71 72 Cable 16 71 71 61 63 Fixed 32 ADSL 28 04 05 04 05 06 Czech France Spain Poland UK Czech Poland UK Spain France Republic Republic * Due to high relative penetration of mobile to fixed and competitive relative fixed-mobile prices Source: ECTA; ČTc Finance department; Pyramid research; Gartner; Company reports; NRA; IDC 6 02 Substantial financial synergies will be realized through enhanced revenues and OPEX synergies Financial impact • Expected synergies (NPV) = 2.5x savings already Revenue – • New integrated/bundled value proposition driving communicated for ČTc new value new voice and broadband sales ACCELERATE TO Group integration with proposition • Integrated business solutions for corporate INCREASE OUR Telefónica, total impact customers LEADERSHIP EUR 625 – 700 million • Neutral OIBDA impact Cross-selling through integrated sales channels in Year 1 (2006) Revenue – • with better market coverage efficient Reduced churn and improved retention in both • Confirmation of 2006 sales • investor guidance: mobile and fixed markets – Flat revenues and OIBDA • Unification of IT infrastructure and integration of network operations, maintenance OPEX and supervision synergies • Leveraging scale and elimination of duplications in support functions 7 01 This move will significantly contribute to better customer value proposition … New convergent mobile-fixed Single point of sales for all Single point of customer care products and integrated bundles telecommunication products Brand stores Telesales Call center E-care ACCELERATE TO INCREASE OUR LEADERSHIP On-line stores Sales reps E-mail Brand stores • Bundles combining mobile • Integrated sales channels • Integrated channels and fixed voice and data offering all mobile, fixed for customer care products and Internet products – Call center • Integrated price plans – Brand stores – E-care portal for families – Telesales – Brand stores • New convergent value – On-line stores –Email, etc. added services – Dealers/agents, etc. • Single bill for all products – Sales representatives 8 01 … and to the development of the Czech Information Society and Internet adoption The Czech government, parliament, and non-governmental bodies have ACCELERATE TO defined an objective to promote development of the Information Society INCREASE OUR in the Czech Republic LEADERSHIP The new integrated operator will significantly accelerate fulfilling this objective by • Introducing new innovative products combining fixed, mobile and content services • Gradually building up a unified high capacity telecommunications network This will drive the development of the Information Society and the availability and affordability of broadband Internet access for a wide range of constituencies, such as individuals, families, schools, libraries, the government, and others 9 01The new operator will bring to the customers the best of Eurotel, Český Telecom, Telefónica, and O2 Telefónica O2 Czech Republic, a.s. ACCELERATE TO The leading European communications The best combination INCREASE OUR A team between Český of growth and cash LEADERSHIP business focused on higher growth segments Telecom and O2 has been returns in the industry in the market formed to recommend in the near future a brand • Innovation • To enable our strategy based • Customer orientation customers to make on the success O2 has • Operational excellence the most of their world achieved in its markets and • People leadership and and its possibilities on the benefit from being commitment through the services part of the Telefonica • Corporate identity and we offer. communication Group – Bold, Clear, Open and Trusted Pockets of operational Leading product innovation Strong position in the corporate segment • excellence at • Flexibility and short time to market High-capacity and reliable fixed network • different • Deep customer insight and focus • departments • High-quality and broad-coverage mobile network 10 Index 01 Fixed-mobile integration strategy ACCELERATE TO INCREASE OUR • Rationale LEADERSHIP • Financial synergies 02 Implementation plan • New organizational model • Transition plan 11 02 A new integrated organization was designed with integrated business and consumer segments, IT and network operations and overall support activities Chief Officers Vice-President CEO J. Smith ACCELERATE TO INCREASE OUR Product HR & Support LEADERSHIP Wholesale Business Consumer Operations Finance Regulatory Development Services P. Jiroušek S. Kůra F. Astiaso S. Anglada P. Slováček J. Šedivý M. Bek D. Šita • Organized by customer segment to increase “commercial” focus • Integrates • Integrates currently separate and ensure superior service mobile and support functions for mobile Legal • Business division includes both Corporate and SME segments fixed and fixed to realize synergies networks and transfer best practices J. Chytil with IT to respond to the latest Transformation telecommu- & Convegence nications A. Botas trends Business Development R. Ros Public Affairs J. Kubišta Commercial area Operations Support area area 12 02 Several focus areas have been identified and they will be proactively managed from the beginning Identified focus areas Approach and tools for proactive management • Integration Office will be set up with an overall Managing the responsibility for integration process management ACCELERATE TO integration process and coordination INCREASE OUR • Dedicated Business Integration Teams and Support LEADERSHIP Integration Teams will manage integration in specific areas • Clear responsibility for delivering 2006 budget targets will be maintained and management will be properly Delivering 2006 incentivized to achieve them financial results • Controlling will play a very active role in monitoring and reporting of