Annual report 2007 by Belgacom Group

highlights > January 2007

• Thanks to a roaming agreement between Belgacom and Proximus, customers can surf wirelessly in over 1,000 hotspots, regardless of their type of connection.

> February 2007

• Sybase 365 and Belgacom ICS conclude an interconnection agreement that enables over 2 billion subscribers to exchange messages. • Belgacom sells its remaining participating interest in Mobistar.

> March 2007

• mobiSud becomes the first virtual operator (MVNO) to operate in cooperation with Proximus.

> April 2007

• The Belgacom Group launches the “Packs”, the first bundled offers between Belgacom and Proximus. • Telindus reinforces its Dutch subsidiary with the acquisition of ISIT BV.

> May 2007

annual report 2007

• MTV Networks entrusts its mobile offering to Proximus. • The Belgacom Group is awarded the “Equality Diversity” label. • The Belgacom Group wins the “Award of the European Ethernet Service Provider of the Year” in the innovation category at the Ethernet Expo Euro 2007.

> June 2007

For financial information, please contact Nancy Goossens Vice President Investor Relations Bd du Roi Albert II/Koning Albert II-laan, 27 B - 1030 Brussels Tel: + 32 2 202 82 41 Fax: + 32 2 201 54 94 E-Mail: investor.relations@belgacom.be

For further information, please contact Ingvild Van Lysebetten Vice President Group Communication Bd du Roi Albert II/Koning Albert II-laan, 27 B - 1030 Brussels Tel: + 32 2 202 40 23 Fax: + 32 2 203 65 93 E-Mail: about@belgacom.be Visit Belgacom’s website: www.belgacom.com Belgacom’s Annual Report is also published in Dutch and in French.

• The Digicel Group extends its international SMS connectivity in partnership with Belgacom ICS. • A European first: films produced and distributed by Warner Bros are made available to Belgacom TV customers at the same time as they are released on DVD. • Belgacom sets up an e-learning solution for the Saint-Luc University clinics. • The new customer-oriented organization becomes operational.

> July 2007

• Belgacom decides to offer its professional customers electronic billing free of charge. • Proximus and RSC Anderlecht launch a prepaid mobile offer called RSCA Mobile.

> August 2007

• Belgacom TV launches the “11 Multi live” service which enables customers to watch all live football matches simultaneously.

• Proximus integrates eBay in its Vodafone live! portal. • Mid-year financial results: Belgacom exceeds expectations and update guidance.

> September 2007

• Proximus launches SMS-based tickets, a first in western Europe. This initiative allows passengers of Flemish public transport company “De Lijn” to pay for their tickets by mobile phone.

> October 2007

• Belgacom TV launches two Dutch-language thematic channel packages: Select NL and Movies & Sport NL. • Proximus and Sanoma Magazines launch the first mobile offering for women. • Belgacom’s Board of Directors decides to grant its shareholders an additional remuneration of EUR 400 million.

> November 2007

• Belgacom further enhances its offering by launching the ADSL Budget rate package and announces a 99.7% population coverage rate for ADSL.

> December 2007

• The League of Families awards Belgacom the “FamilyFriendly Company” prize. • Belgacom receives the “Contact Centre Award” in recognition of the quality of its Customer Service.

> January 2008

• EDS-Telindus consortium wins new ICT contract from the Flemish administration.

> February 2008

• Belgacom acquires Scarlet SA. • The Belgian Post formalizes its intention to buy Belgacom’s shares in Certipost. • The Belgacom Group presents its annual results and winds up a very good year in a difficult economic climate.

> March 2008

• Belgacom and Proximus launch a new rate offer called Together, which allows customers to call free of charge 600 minutes every month on weekends and public holidays. • Belgacom recruits Michel De Coster for the position of Executive Vice President of the Enterprise Business unit. • The Californian investment fund Capital Income Builder acquires a 3.81% stake in Belgacom.

highlights > January 2007

• Thanks to a roaming agreement between Belgacom and Proximus, customers can surf wirelessly in over 1,000 hotspots, regardless of their type of connection.

> February 2007

> March 2007

• mobiSud becomes the first virtual operator (MVNO) to operate in cooperation with Proximus.

> April 2007

• The Belgacom Group launches the “Packs”, the first bundled offers between Belgacom and Proximus. • Telindus reinforces its Dutch subsidiary with the acquisition of ISIT BV.

> May 2007

annual report 2007

> June 2007

> July 2007

• Belgacom decides to offer its professional customers electronic billing free of charge. • Proximus and RSC Anderlecht launch a prepaid mobile offer called RSCA Mobile.

> August 2007

• Belgacom TV launches the “11 Multi live” service which enables customers to watch all live football matches simultaneously.

• Proximus integrates eBay in its Vodafone live! portal. • Mid-year financial results: Belgacom exceeds expectations and update guidance.

> September 2007

• Proximus launches SMS-based tickets, a first in western Europe. This initiative allows passengers of Flemish public transport company “De Lijn” to pay for their tickets by mobile phone.

> October 2007

> November 2007

• Belgacom further enhances its offering by launching the ADSL Budget rate package and announces a 99.7% population coverage rate for ADSL.

> December 2007

• The League of Families awards Belgacom the “FamilyFriendly Company” prize. • Belgacom receives the “Contact Centre Award” in recognition of the quality of its Customer Service.

> January 2008

• EDS-Telindus consortium wins new ICT contract from the Flemish administration.

> February 2008

> March 2008

key performance indicators

general information

Financials

Additional Information

Total revenue 2007 (in EUR million)

Net income (Group Share) (in EUR million)

Basic earning per share (in EUR)

Free Cash flow (in EUR million)

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The Company is subject to the statutory and regulatory provisions of commercial law applicable to companies limited by shares in all matters not expressly determined by (or by virtue of) the Law of 21 March 1991 or specific legislation of any kind.

As described in the Article 3 of the Articles of Association, the Company’s objects are: 1. to develop services within the field of telecommunications in Belgium or elsewhere; 2. to take all actions aimed at promoting, directly or indirectly, its activities or ensuring optimal use of its infrastructure; 3. to acquire participating interests in bodies, companies or associations – whether existing or to be created, Belgian, foreign or international, and public or private sector – that may contribute, directly or indirectly, to the achievement of its corporate objects; 4. to provide radio and television broadcasting services.

Registered Office

Disclaimer

Corporate name and legal form

Workforce 2007 (in Full Time Equivalents)

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The autonomous public-sector company Belgacom is a Société anonyme de droit public/Naamloze vennootschap van publiek recht (limited liability company under public law) as defined by the Law of 21 March 1991 on the reform of certain public sector commercial undertakings and organized under the laws of Belgium.

Boulevard du Roi Albert II/Koning Albert II-laan, 27 1030 Brussels Belgium VAT BE 0202.239.951

Brussels Register of Legal Entities Brussels Trade Registry 587.163 Consultation of the issuer’s documents The public documents concerning the issuer can be consulted at the registered office.

Date of constitution The company was established as an autonomous public sector company, governed by the Law of 19 July 1930 setting up the Belgian National Telephone and Telegraph Company, the RTT (Régie des Téléphones et Télégraphes/Regie van telegraaf en -telefoon).

Operationals

“2007 was a year full of challenges, marked by continuous competition and regulatory pressure. The Belgacom Group nevertheless managed to achieve strong financial and operational results, fully in line with the 2007 guidance. ” Ray Stewart (Executive Vice President Finance & CFO)

Year ended 31 December Key Figures (in EUR million) Total revenue before non-recurring items Non-recurring revenue Total revenue EBITDA (1) before non-recurring items EBITDA (1) Depreciation and amortization Operating income (EBIT) Net finance revenue Income before taxes Tax expense Minority interests Net income (Group share) (1) Earnings Before Interests, Taxes, Depreciation and Amortization.

2005

2006

2007

5,458 6,100 6,065 238 0 0 5,696 6,100 6,065 2,214 2,149 2,077 2,098 2,149 2,031 -726 -802 -774 1,372 1,347 1,256 64 104 1 1,436 1,451 1,258 -339 -358 -300 139 121 0 959 973 958

Thanks

to the success of the packs and the extended TV offer, the Belgacom TV customer base more than doubled. Various targeted acquisition initiatives & the launch of segmented rate plans led to a revival in new active customers. Since April 2007, several packs have been launched, combining internet with TV and/or mobile. •N ew multi-service platform driving convergence • S uccessful controlled customer migration to future-proof platform •R educing churn and source of new service revenue

+165,654 +308,796 153,000 Explore

Objects of the Company

This communication contains forward-looking statements, including statements about the Company’s beliefs and expectations. These statements are based on the Company’ s current plans, estimates and projections, as well as its expectations of external conditions and events. Forward-looking statements involve inherent risks and uncertainties and speak only as of the date they are made. The Company undertakes no duty to and will not necessarily update any of them in light of new information or future events, except to the extent required by Belgian law. The Company cautions investors that a number of important factors could cause actual results or outcomes to differ materially from those expressed in any forward-looking statements.

The transformation of Belgacom into a SA of public law was implemented by the Royal Decree of 16 December 1994, which was published in the Belgian Official Gazette on 22 December 1994, and went into effect on the same day.

customers Belgacom TV

new active mobile customers

packs sold

received the European Service Provider Innovation Award

Editor-in-chief: Ingvild Van Lysebetten Vice President Group Communication Bd du Roi Albert II/Koning Albert II-laan, 27 – B - 1030 Brussels Conception and coordination: Frédéric Herzeele - Corporate Communication Manager Franck Vanbelle - Corporate Content & Publication Manager Graphics: Chris Communications - www.chriscom.be Prepress and printing: Snel Pictures: Belgacom, Jean-Michel Byl, Stephanie Tetu

Printed on certified

paper

key performance indicators

general information

Financials

Additional Information

Total revenue 2007 (in EUR million)

Net income (Group Share) (in EUR million)

Basic earning per share (in EUR)

Free Cash flow (in EUR million)

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Boulevard du Roi Albert II/Koning Albert II-laan, 27 1030 Brussels Belgium VAT BE 0202.239.951

Brussels Register of Legal Entities Brussels Trade Registry 587.163 Consultation of the issuer’s documents The public documents concerning the issuer can be consulted at the registered office.

Operationals

2005

2006

2007

5,458 6,100 6,065 238 0 0 5,696 6,100 6,065 2,214 2,149 2,077 2,098 2,149 2,031 -726 -802 -774 1,372 1,347 1,256 64 104 1 1,436 1,451 1,258 -339 -358 -300 139 121 0 959 973 958

Thanks

+165,654 +308,796 153,000 Explore

Objects of the Company

customers Belgacom TV

new active mobile customers

packs sold

received the European Service Provider Innovation Award

Printed on certified

paper

Who are we? 02 >

the Belgacom Group

04 >

letter from the Chairman of the Board

06 >

letter from the President & CEO

08 >

the major structural changes in 2008

Our performance 10 >

Fixed Line Services

12 >

Mobile Communications Services

14 >

International Carrier Services

16 >

the Belgacom share

Our assets 20 >

our clients

26 >

our people

32 >

our network

Our responsibilities 38 >

corporate social responsibility

39 >

corporate governance

47 >

glossary 1

annual report 2007

contents

> who are we?

the Belgacom Group

Combining its strong background as a telecoms operator and the multiple talents of its teams, Belgacom Group is the principal supplier of integrated telecommunications services in Belgium. As a result of our continuous investments in leading-edge technology, we are able to offer our clients high-capacity solutions on all networks, fixed or mobile.

our mission our organisation

At the forefront of technology, we provide our clients, residential or professional, with telephone, internet and television services, at every moment of the day, wherever the place, and whatever type of equipment is being used.

To fulfil our mission, we have reviewed our entire organisation and created, in 2007, a new operating structure based on four pillars: > residential clients are taken care of by the Consumer Business Unit (CBU) > professional clients are entitled to the services of the Enterprise Business Unit (EBU) > networks and IT services are centralised within a single unit: the Service Delivery Engine (SDE) > Staff and Support (S & S) brings together all the horizontal functions that support the Groupâ&#x20AC;&#x2122;s activities Alongside, Belgacom ICS, a joint venture between Belgacom and Swisscom Fixnet, is responsible for international carrier activities. Since 2005, it has been in the worldâ&#x20AC;&#x2122;s top ten in this sector.

Our brands Belgacom, Proximus, Telindus, Skynet, Belgacom ICS, 1307, Win You can find detailed information on the Belgacom Group on our internet site:

www.belgacom.com

2 - BELGACOM GROUP ANNUAL REPORT 2007

A segmented approach to our customers

Consumer Business Unit (CBU) Number of Belgacom TV customers )+&"&&& Å )&&"&&& Å (+&"&&& Å

+ 118%

growth in Belgacom TV customers

(&&"&&& Å '+&"&&& Å '&&"&&& Å +&"&&& Å &"&&& Å

“Launched in April 2007, the packs combining television, internet and telephone are the first tangible results of convergence. Their success demonstrates that they are meeting a real need among our clients.”

Aims for 2008: to be the preferred choice for residential clients’ needs

Overview

> optimise our relations with the client

The Consumer Business Unit markets voice products and services, internet and television, both on fixed and mobile networks, for residential clients. It does this principally through the Belgacom, Proximus and Skynet brands.

> improve the relation between quality and price

Michel Georgis (Executive Vice President Consumer Business Unit & Chief Executive Officer Proximus)

> develop segmented multiplay offers > offer a better client experience > reinforce our brand image

Enterprise Business Unit (EBU) ICT revenue (in EUR million) -&& Å ,&& Å +&& Å

+ 7.5%

growth of ICT revenue

*&& Å

Aims for 2008:

(&& Å '&& Å &Å

“The launch of the Belgacom Explore platform is a major breakthrough for the development of ‘all-IP’ convergent solutions for companies. The satisfaction shown by our clients tells us we are on the right track.” Scott Alcott (Executive Vice President Service Delivery Engine, Executive Vice President (a.i.) Enterprise Business Unit, Chief Executive Officer Telindus Group)

Overview The Enterprise Business Unit meets the ICT needs of professional clients, whether they are independent workers, smaller firms or major companies. Its ICT solutions, including telephone services, are marketed mainly under the Belgacom, Proximus and Telindus brands, mainly on the Belgian market but also at international level.

> transforming ourselves from a telecoms company into a global ICT supplier > becoming the trusted partner when major firms decide to outsource > extending the market share of Belgacom Explore > putting mobile data services within reach of smaller firms > developing generic ICT solutions > consolidating the international position of Telindus

the belgacom group - 3

who are we?

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> who are we?

letter from the Chairman of the Board The annual report presents the ideal opportunity to evaluate the past year and to confirm the objectives for the year ahead. The theme of the 2006 annual report, “Beyond complexity lies simplicity!”, perfectly captures the challenges that the Belgacom Group has had to face during 2007: creating a new organisation, and simplifying the portfolio of its products and services. This has allowed us to offer a simpler and more integrated range to clients. Reinforced by these new assets, the Group achieved numerous successes and can now look confidently towards the future.

Our successes The start of 2007 was marked by the operational debut of a new decision-making structure. This has been progressively implemented across the entire Group, including Proximus and Telindus. It was a necessary step, because it will allow us from now onwards to work as a fully-integrated Group. It is also the expression of our ability to adapt ourselves to a telecommunications market which is exposed to rapid changes and increasingly competitive conditions. In parallel to this new structure, we have remodelled the Group’s activities into an organisation with a clear focus on our clients. Bringing the client even further into the centre of our strategy has logically led us to rethink our distinct product ranges. This is why, today, the Belgacom Group can no longer be considered as merely a telecommunications company, but rather as a genuine supplier of integrated solutions. And this is true as much for residential clients as for our business clients. The operational successes during the year all testify to the merits of the strategy supported by the Board and carried out by the management. We will nevertheless have to remain vigilant in the coming months and continue to ensure that the strategic aims we have agreed on are fully respected. These successes have allowed us to generate value, and to share it with our shareholders. In 2007, total shareholder remuneration represented 79% of our free cash flow - a percentage that emphasises our commitments, and demonstrates yet again that we deserve their confidence.

Teams that make the difference The men and women who make up the Belgacom Group are central to the good results of the last twelve months. It is because of their dedication, their flexibility and their readiness to cooperate that we have been able to put our strategy into place.

“This is why, today, the In the same way, it is through the efforts of every one of our salespeople, call-centre operators, installation technicians and many others that we are able to offer the best to our clients every Belgacom Group can no single day. I know they feel that they are constantly facing ever-bigger challenges. Our competitors longer be considered as are strong, and they leave us little scope for making mistakes. What makes us a winner is the passion and dynamism of our teams, making sure that all our clients can receive tailor-made merely a telecom services and the right product at the right price. munications company, The women and men of Belgacom make the difference. That is why I want to congratulate them but rather as a genuine particularly, and to thank them for all their work during 2007. supplier of integrated Responsible social partners solutions. And this is true The social dimension has always been a major concern of the Belgacom Group. We are very conscious that dialogue, consultation and flexibility are indispensable to good management of the as much for residential Group. clients as for our business It is also thanks to the support of our social partners and the climate of mutual confidence that we clients.” have been able to put our strategy into place so well.

4 - BELGACOM GROUP ANNUAL REPORT 2007

“Given all that we accomplished in 2007, I am confident that the Group has everything it needs to once again meet these challenges successfully.”

Similarly, the signature by trade unions of the collective agreement for 2006-2008 also represented a significant step forward in social consultation. I want therefore to thank the social partners for their effectiveness and the positive atmosphere in which the negotiations took place.

Visionary decisions I also want to thank the members of the Board for their vision, and for the rigour they have brought to the many strategic questions they have tackled with regard to the future. Finally, I must congratulate the management, which has once again shown such precision and lucidity in the major decisions it has taken. In an ever more-competitive environment, the Belgacom Group has continued to innovate, and has maintained its pioneering role.

Multiple challenges for 2008 2008 will undoubtedly be a year full of challenges: we will have to face stronger-than-ever competition on all our activity segments. I am convinced that the Group has all the assets it needs in-house to once again successfully meet these challenges.

who are we?

Driven by a pioneering spirit, we must continue our efforts in the field of convergence so that we can offer innovative solutions to each and every one of our clients. Given all that we accomplished in 2007, I am confident that the Group has everything it needs to once again meet these challenges successfully and become a real “services company”.

Theo Dilissen Chairman of the Board of Directors

letter from the chairman of the board - 5

> who are we?

letter from the President & CEO 2007 was an excellent year for the Belgacom Group. We clearly satisfied our clients - as was demonstrated by the take-up of Belgacom TV, the growth in the number of mobile clients, and the success of our multiplay packs. Our shareholders had reason for satisfaction too, with the total return that we attained. This growth is the result of providing what our clients want, across Belgacom’s unparalleled product range of fixed, mobile and television services. Increasing numbers of private individuals, businesses of all sizes and government institutions have shown their delight in our offers, by becoming and remaining clients. This success has been achieved by a combination of strategy, imagination, and focused implementation. The Belgacom Group has seized the multiple opportunities of synergy in a rapidly evolving world. Now it is uniquely positioned to deliver the benefits.

“The Belgacom Group has Synergy in organisation Belgacom Group’s suite of major brands - including Belgacom, Proximus, and Telindus - was seized the multiple reinforced by the full acquisition of Proximus in August 2006. We followed this by successfully opportunities of synergy laying the base for a new client-oriented organisation. This is integrated to ensure clear business leadership, but structured into separate units for our consumer and enterprise markets, both in a rapidly evolving drawing on a centralised management of networks and IT services. This new configuration provides world. Now it is uniquely us with an even more solid base on which we can build strong and lasting links with our clients. positioned to deliver the Synergy in products 2007 saw the convergence of technologies offering for the first time a genuinely richer client benefits.” experience. We launched the first multi-play packs into the consumer market, combining television, internet and telephony, and more than 153,000 clients responded by choosing Belgacom for at least two services in bundled offers.

Throughout the year, our new segmented approach, offering tailor-made solutions to our clients, allowed us to match client needs with the right selection from our combined product range (an ability that the purchase of Scarlet will enhance). Meanwhile, our investment in content has assured us of attractive products that bring new clients and help us retain our existing clients. Belgacom TV helped stabilise our fixed-line business, underpinning broadband growth while slowing down fixed-line losses. For our business clients, we launched Belgacom Explore - an award-winning service in the development of “all-IP” convergent solutions for companies. This had already won several major accounts by the end of 2007, and recently-added mobile capabilities are giving it a unique value for enterprise mobility. Convergence in the business market allows the client a new form of one-stop shopping for all ICT and telephony needs, while allowing us to optimise our usage of network resources. It is our ambition to become the trusted partner of the business community. The way our product range exploits convergence already differentiates us clearly from the competition. We will enjoy additional possibilities from the recent repositioning of Skynet as a cross-media platform, and the expected take-up of mobile internet. Our brands convey expertise, technology, and reliability, but above all enthusiasm to meet client needs across our entire suite of products and services.

Synergy in technology Our strategy has been much more than a response to the challenges that we could already see on the horizon as convergence started to blur the frontiers between telephone, internet and media services. What we saw was an opportunity to deliver a unique combination of offers. Belgacom saw the trend and responded rapidly by acquiring and integrating Telindus. The continuous investments we have made in leading-edge technology for our networks have given us unrivalled reach, and the ability to offer our clients high-capacity solutions on all networks, fixed or mobile. The launch of our high-capacity VDSL2 facility will make it possible to

6 - BELGACOM GROUP ANNUAL REPORT 2007

deploy IP television and High Definition television on a large scale. We will maintain our investments in migrating all our networks to a single, “all IP”, network.

Synergy within our teams None of this would have been possible without the enthusiastic engagement of our people - particularly in such an eventful year. We have successfully achieved synergies between many different cultures, to match the convergence of our products. We have created an overall framework of common commitment, while still preserving the values of each individual - as demonstrated by the award of the Equality-Diversity Label from the Belgian government. But this is a continuing task, and exploring the scope for future successes also depends on maintaining the motivation of all the people who work in the Belgacom Group.

Synergy with society At the same time, our exploration is sensitive to our responsibilities. We are not just a hightechnology company and a provider of services to the public. We are also a major employer, and a prominent member of the Belgian community. As such, we are conscious that our policies and actions need to be sustainable in the broadest sense of the term. We provide fuller information in the accompanying CSR report on how we are striving to excel in discharging these responsibilities, and in promoting an inclusive e-society.

“Our strengths are to combine creativity with rigour, our pioneering spirit with sophisticated management of risk, our investment in infrastructure with innovation in virtual services.”

Synergy with the future

Our strengths are to combine creativity with rigour, our pioneering spirit with sophisticated management of risk, our investment in infrastructure with innovation in virtual services. We move into 2008 confident that our capacity to capture synergies will consolidate our position. Across all fronts, the outlook is good.

Didier Bellens President & CEO

Our objectives for 2008 > offer simplicity and more value for money > deliver services anywhere, any time, on any device > build all-IP broadband network > ensure optimal deployment of diverse talents > foster culture change and develop change management See too on page 28

LETTER from THE PRESIDENT & CEO - 7

who are we?

Telecommunications is a longstanding need. But it is increasingly a priority for individuals, for businesses, and for society as a whole. Belgacom’s development is sensitively tuned to these evolving demands. We are committed to exploring the possibilities offered by technology and the changing market, in order to realise our vision of comprehensive telecoms services available for everyone, everywhere and on any device.

> who are we?

the major structural changes in 2008 To match the constantly evolving telecoms market, the Belgacom Group continues to adapt, invest and develop to respond to its customersâ&#x20AC;&#x2122; expectations. This rapid overview highlights some of the changes Belgacom initiated in 2007 and will pursue during 2008.

Merging support services in a single Staff & Support unit Among the changes in the transitional year of 2007, we successfully laid the base for our new client-oriented organisation by putting in place a matrix structure for our Consumer Business Unit, Enterprise Business Unit and Service Delivery Engine. In 2008, we will focus on combining the support services of all the Groupâ&#x20AC;&#x2122;s subsidiaries in a single unit, entitled Staff & Support. This merger, affecting the

You will find more information on this subject on page 28.

human resources, finance, legal, and strategy departments, as well as corporate communications, should be operational in the second half of the year. In line with Belgacom practice, this type of change is the subject of close collaboration with employee representatives in a process of open and constructive dialogue.

Belgacom ICS

Belgacom Group

Consumer Business Unit

Enterprise Business Unit

Service Delivery Engine

Staff & Support

Aligning financial reporting with the new organisation During 2008, the last elements of our new operational structure should be put into place. In parallel, we are also developing our financial reporting structure.

You will find more information on this subject on page 16.

As from the announcement of our first quarter 2008 results in May, our financial reporting will be based on the new organisation, as indicated in this table:

FLS

MCS

Consumer

ICS to match new organisation

Belgacom Group Consolidation

8 - BELGACOM GROUP ANNUAL REPORT 2007

Enterprise

In addition, in order to ensure that our results are clear and easily understood, we will continue until end 2008 to provide pro forma reporting based on the former structure, so that significant comparisons can be made. This double reporting has required a profound adaptation of our systems and working methods. A detailed presentation on these changes will be made at the Investor Day on April 16, 2008.

Service Delivery Engine

Staff & Support

Belgacom Group Consolidation

ICS

Our brands acquire new positioning The highlight of 2007, in commercial terms, was the first concrete results of the convergence of technologies: the successful launch of the first packs for residential clients, and of Belgacom Explore for our business clients. We will continue this development in 2008 while refining our range of brands.

experience across our entire suite of products and services. To achieve this, we are going to simplify their architecture and highlight the links between them, while preserving their separate identities. Just like a family, whose members share the same surname but have their own personality distinguished by their first name, our Proximus and Telindus brands continue to offer their particular form of expertise while declaring clearly that they belong to the Belgacom family.

With Belgacom and Proximus, respectively the first and second brands by value (source: Interbrand), but also thanks to the recognised expertise of Telindus as an integrator of ICT solutions, we now have a solid base for building strong and lasting links with our customers.

This is an evolution rather than a revolution. In concrete terms, as from the second quarter of 2008, a reference to the Belgacom brand will be displayed on all our products and services - fixed, mobile, television and ICT, as well as in all our communications about them.

In addition to the specific qualities our brands convey (expertise, technology, reliability…), we want them to represent a common

“Our Group’s strategy is part of an ongoing process which aims to build a company that can offer integrated broadband solutions for all our customers, whether residential or business. This strategy focuses on three areas: excellence, leadership, and sources of growth.” William Mosseray (Executive Vice President Strategy)

Three brands

One Master brand

Two Expert brands > complementary to the master brand > transfer category leadership

Strong brands in their respective segments

More info on the strategy Surf to www.belgacom.com

Unified formats

make it possible to deploy IP television and High Definition television on a large scale. We will keep up our investments in migrating all our networks to a single, “all IP”, network.

Our fixed and mobile networks, the central nervous system of our activity, will continue to evolve to offer our clients the products and services that best respond to their current and future expectations. The launch of VDSL2 will

VoD

Internet

Voice

You will find more information on this subject on page 34.

Mobile

The major structural changes in 2008 - 9

who are we?

Move to all IP

> our performance

Fixed Line Services (FLS) > Belgacom is proving to be a strong iDTV market player with very solid results for Belgacom TV, adding in total 165,654 new customers in 2007. This brought the total TV customer base to 305,319 at the end of December 2007, with an ARPU of EUR 16.1. > Since their launch in April 2007, about 153,000 packs combining internet with TV and/or mobile services were sold by Belgacom.

Belgacom’s Fixed Line business unit delivered financial results well within the guidance given to the market.

Belgacom’s Fixed Line business unit delivered financial results well within the guidance (1) given to the market. Where Belgacom expected its revenue to decrease by about 1%, the actual year-over-year decrease was 0.7%, resulting in a total revenue of EUR 3,603 million. The EBITDA margin amounted to 30.8%, and, as guided, was therefore fairly flat in relation to the 30.7% of last year. In addition, Belgacom exceeded its own customer expectations for Belgacom TV. Compared to end 2006, the Belgacom TV customer base more than doubled, reaching a total of 305,319 customers at the end of 2007, an increase of 165,654 customers compared to 2006. While Belgacom expected its TV ARPU to reach a level of at least EUR 15, the actual 2007 TV ARPU amounted to EUR 16.1.

Traditional voice ARPU TV (in EUR) (& Å ',$'

'+ Å '& Å

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Market

More info about the Belgian telecoms market can be found on page 22.

Although the trend towards fixed-line erosion continued in 2007, the impact on voice access revenue was limited to -1.8% as a result of the price increase implemented. On 1 January 2007, Belgacom applied a 2% price increase, in line with inflation, on its voice access line subscription fees (PSTN and ISDN) and traffic rates which were not covered by tariff plans. The Voice ARPU (2) for 2007 was EUR 26.6, which is only a limited decrease of 2.2% compared to last year thanks to the price increase implemented. Building on the success of its existing flat rates and as a further support for customer retention and market share of traffic, Belgacom launched the “Happy Time International” tariff plan. This new flat-rate tariff plan allows customers to make free

fixed-line calls after 5 p.m. and during weekends to a country (3) of their choice. Furthermore, Belgacom lowered the rates for the main destinations in the “Pulse International” tariff plan, which is mainly targeted at customers with a high volume of calls to international destinations. In March 2007, Belgacom launched its ADSL-without-fixed-line offer together with a residential Voice-over-IP service called “I-Talk”. For customers possessing both a PSTN and an ADSL line, the VoIP offer increases the value proposition whereas the I-Talk product is offered as a primary voice line for customers with an ADSL-without-fixed-line solution. I-Talk customers can choose between a flat-rate tariff plan or a pay-as-you-use tariff. Both offers allow Belgacom to proactively retain DSL customers and to gain new ones. Following the decision of the BIPT, mobile termination rates (4) decreased on 1 November 2006 and 1 May 2007. As a consequence, Belgacom lowered its prices for fixed-tomobile calls by 20% on 1 May 2007. Furthermore, as a result of the BIPT’s price control on the alternative (5) operators’ fixed termination rates, limiting their premium on Belgacom termination rates, Belgacom lowered its prices for customers calling these operators by 20% on 1 July 2007.

Broadband The Belgian broadband market proved to be more competitive than ever. The launch of “internet with voice” bundles and cheap internet offers by alternative operators considerably increased the pressure on Belgacom. But as the result of several well-targeted counter-measures, Belgacom continued to increase its broadband

(1) Reviewed guidance announced in August 2007. (2) Average Revenue Per User. (3) France, United Kingdom, the Netherlands, USA, Italy, Spain, Germany or Luxembourg. (4) Rates that Mobile operators charge for traffic ending on their network. (5) Telenet and Versatel.

10 - BELGACOM GROUP ANNUAL REPORT 2007

305,319

total TV customer base

In April 2007, Belgacom addressed the mobile-only market by introducing an “ADSL without-fixed-line” offer (also known as “Naked habituelles ADSL”).VosInchaînes the same month, Belgacom launched attractive packages combining internet and Digital TV, with or without a mobile voice subscription. The “Naked ADSL” offer was expanded in July with “ADSL Light-withoutfixed-line”. In December 2007, Belgacom Vos nouvelles chaînes thématiques further extended its broadband product range Nationales et internationales Sport with ADSL Budget, providing internet access at EUR 20 per month. Also, since December, Belgacom customers have been able to Cinéma combine ADSL with mobile internet. Thanks to these DSL solutions, whichInformation were introduced in response to clear customer Kids demand, Belgacom added a total of 108,797 & nature ADSL customers in 2007, bringing theCulture total broadband customer base to 1,236,645 by the end of December 2007. The monthly ADSL Residential ARPU was EUR 32.2, an increase of 2% compared to last year. This positive impact was mainly due to the price increase of ADSL tariffs introduced on 1 January 2007. In an effort to make ADSL available to even more customers, Belgacom increased the population coverage for ADSL to 99.7% of Belgian households.

Belgacom TV Belgacom TV experienced sustained high growth during 2007, especially in the second half. At the end of December 2007, Belgacom had 305,319 TV customers, an increase of 165,654 customers compared to the end of 2006.

Furthermore, Belgacom managed to combine the strong customer growth with a reduced churn rate and a continuous increase of the ARPU. The end of the “Try & Buy” offer, combined with an enhanced product offering, positively impacted the Belgacom TV ARPU, which grew from EUR 12 end 2006 to EUR 16.1 end 2007. While the first quarter of 2007 was still negatively impacted by the end of the “Try & Buy” promotions, there was a clear positive effect as of the second quarter from various actions with products, content and pricing. Voyages Besides the launch of the very popular “internet + TV” packs (6), other launches and TV product upgrades Musiquethroughout the year also proved to be successful: > “Comfort View”, a paying option enabling customers to pause, instantly rewind and Lifestyle e (Personal Video record a TV program Recording) > “Walled Garden” (Yellow/White Pages, railway timetables, holiday deals, etc.) and interactive applications (RTL à l’Infini, Blue Zone) > Additional channels (MTV, Nickelodeon, etc.) added to Classic + > Launch of “Select” (7) and “Movie & Sport” (8), two Dutch thematic channel packages and a reshuffle of the French thematic channel package > E xtension of the Video on Demand (VoD) movie catalogue (with added thematic content and an additional deal with Paramount/Dreamworks and Sony) leading to increased VoD usage > I nclusion of popular US series in the Video on Demand offering (Desperate Housewives, Grey’s Anatomy, etc.) as well as Dutch series > “Early window” deal with War ner Bros, allowing Belgacom to include blockbuster

packs sold by Belgacom

chaînes régionales

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Regulatory

More info about the regulatory context and decisions in 2007 on page 35.

(6) “Internet+TV” packs at EUR 30 (ADSL Budget), EUR 40 (ADSL Light), EUR 50 (ADSL Go), with option to include mobile services (Smile 10). (7) N ick Hits, Nick Jr, Toons TV, Jetix, TMF Party, National Geographic Wild, History Channel, Mezzo, Exqi, Hallmark and Karaoke TV. (8) NASN, Motors TV, Action Now, 13Th Street, Multi Live, MGM, and Dorcel TV.

FIXED LINE SERVICES - 11

our performance

customer base and was therefore able to keep its broadband market share fairly stable at 49%, even in the face of strong competition.

153,000

> our performance

Since its launch in February 2007, Belgacom Explore has been a great success, with many customer contracts signed.

movies in the on Demand catalogue three months after their release in cinemas > Renewed football (Jupiler League) offer with the launch of “11 MultiLive” (9) During the second quarter of 2007, Belgacom also launched intensive comparative advertising campaigns, positioning Belgacom TV as a true alternative to cable, and as the logical choice for existing and new Belgacom ADSL customers.

ICT: Integration and convergence through better services Since its launch in February 2007, Belgacom Explore has been a great success, with many customer contracts signed. Belgacom Explore is the result of a major effort to provide customers with one single, converged infrastructure based on IP and Ethernet. The Belgacom Explore platform enables customers to enjoy a wide range of existing and new services such as internet access, security, voice and video. These services can be used by both mono-site and multi-site customers. The Belgacom sectoral approach has proved to be successful, in particular with the retail sector, which resulted in many new shopping chains opting for Belgacom Explore.

Network

Belgacom continues to invest in its network in order to maintain the high quality of the services it provides and to support further product and service innovation. More info on page 34.

In May 2007, the Belgacom Explore initiative won the “European Service Provider Innovation Award” from Lightreading at the Ethernet Expo event in London. This innovation award is given to the service provider that has demonstrated the greatest sales, marketing and product innovation. Moreover, Belgacom impressed the jury by showing that Fixed, Mobile and IT can be integrated and translated into a unique proposition.

Telephone Services was launched. Belgacom Integrated Telephony Services (ITS) is aimed at professional customers who want to integrate their voice and data traffic on a single data infrastructure and, at the same time, want to benefit from a centralized and hosted IP telephony server without having to invest in their own (IP) telephony infrastructure. ITS is just one concrete example of the convergence between Belgacom and Telindus. In 2007, Telindus-Belgacom ICT continued to win major customer contracts in the ICT integration and services domain, including ING, Kinepolis and the Federal Department of Justice, to name but a few. Moreover, the important outsourcing contract issued by the Vlaamse Gemeenschap (Flemish Community), worth EUR 615 million over 7 years, was re-assigned to Telindus-EDS. This major contract shows once again the power and credibility of Belgacom in the ICT services market. In April 2007, Telindus-Belgacom ICT acquired all the shares of the privately-owned Dutch storage specialist ISIT B.V. ISIT is specialized in network-attached storage solutions, storage area networks, centralized backup/restore solutions and archiving. In addition, Belgacom launched several innovative solutions, such as the Telepresence solution, which is a high-quality videoconferencing solution.

During the second half of 2007, an end-to-end service level agreement for Integrated (9) This is a multiplex of six matches (normally played on Saturday evening) available in pay-per-view, in the “Movie & Sport” channel package and in “All foot” subscriptions.

12 - BELGACOM GROUP ANNUAL REPORT 2007

Mobile Communications Services (MCS) > Proximus added 308,796 active customers in 2007, reaching a total customer base of 4,620,232. At the same time, the churn rate was kept to an outstandingly low level of 15.7%.

Although competition was fierce and regulatory pressure increased, Proximus was able to limit the year-on-year revenue decrease to 3.8%. Excluding imposed regulatory impacts, Proximus revenue increased slightly by 0.9% thanks to the strong business performance. Through optimal cost management and implementing group synergies, Proximus limited the impact of the revenue decline and the customer acquisition strategy on EBITDA margins. The Proximus EBITDA margin for 2007 was 44.4% compared to 46.8% a year ago. Both the reported 2007 revenue and the EBITDA margin are fully in line with the guidance given to the market. Proximus’ customer-oriented approach was clearly a success. Proximus differentiates itself through its strong brand, which is recognized for its network superiority, innovative services and servicing quality, rather than for pricing. To increase new revenues, Proximus boosted the advanced data take-off, forged new partnerships and took initiatives to develop new businesses. One of Proximus’s objectives for 2007 was to maintain its position as preferred mobile operator in Belgium, across all customer segments, and to confirm its market leadership. Proximus therefore made efforts to retain existing customers while focusing on new customer acquisitions through a “best-value-for-money” offer. Various targeted acquisition initiatives and the launch of segmented rate plans led to a revival in new active customers. During 2007, Proximus’s active customer base increased by

308,796 new customers, compared with only 58,077 over 2006. As most of the acquisitions were postpaid customers (348,463), Proximus managed to improve its customer portfolio. By the end of 2007, Proximus had 4,620,232 active customers in total. However, despite the positive evolution in the number of new active customers, Proximus’s active market share declined year-over-year from 45.5% to an estimated 43.8% at the end of 2007. Since the three Belgian mobile market players use different criteria to calculate their active customer base, market shares based on number of customers become less relevant. In the absence of such information, a more accurate market position indicator is the “value market share”, based on generated Net Service Revenue. At the end of the fourth quarter of 2007, Proximus gained again in value market share, and this for the third consecutive quarter. At the end of 2007, Proximus’s value market share reached a level of 50.1%.

To increase new revenues, Proximus boosted the advanced data take-off, forged new partnerships and took initiatives to develop new businesses.

Churn (in %) (& Å '+ Å

High-quality customer portfolio

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Proximus still holds a very high-quality customer portfolio, with the highest active rate on the market. The percentage of active customers remained fairly stable at 98.1% in December 2007, compared to 98.2% at the end of December 2006.

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Various customer retention initiatives enabled Proximus to maintain an outstanding result in terms of customer churn rate, which even improved slightly from 15.8% in 2006 to 15.7% end of 2007. Attractive postpaid offers encouraged migration from prepaid to postpaid. During 2007, the number of postpaid customers

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our performance

Strong performance for Proximus

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MTR Impact ross ARPU G Credits & Discounts

(1) At 2007 half-year results, Belgacom Mobile updated its expectations for 2007 to a revenue decline of around – 4% and an EBITDA margin decline to around 44%.

MOBILE COMMUNICATIONS SERVICES - 13

> our performance

15.7% churn rate

increased by 17.6%, resulting in a postpaid/ prepaid ratio of 51/49 at the end of December 2007, compared to 46/54 a year ago. The introduction cost of new successful postpaid and prepaid offerings and the impact of regulation negatively influenced the blended net ARPU. At the end of December 2007, the blended net ARPU was EUR 34.8 for the active customer base, compared to EUR 37.7 the previous year. When excluding the regulation impact from MTR cuts and retail roaming prices, the net ARPU amounted to EUR 36.6.

Innovation in products and services Proximus strives to create superior value for its customers by addressing a range of communication needs through an appealing segmented offer. Proximus reshaped its offering in 2007 to address its customers’ demand for more simplicity and more value for money.

Simple pricing plans at home and abroad In February 2007, Proximus launched Vodafone Passport on the Belgian market. This new innovative price model offers simple and lower rates for customers making mobile calls whilst abroad. Customers pay a one-time connection charge, after which they are charged the same rate as at home. Proximus introduced a new prepaid rate plan called Pay & Go Freetime that rewards customers with a reload bonus of free calls during the weekend. Proximus also refreshed its postpaid Smile bundles, which are valid not just for calls, but also for sending SMS messages. The new Pay & Go International prepaid package enables customers to call and send (2) A total of 31 channels are available in the mobile TV offer.

14 - BELGACOM GROUP ANNUAL REPORT 2007

SMS messages to their favorite country in Europe at the national rate. In addition, for each called minute to the selected country, Pay & Go International customers automatically receive a free call minute to Proximus numbers. In 2007 several new rate plans were also introduced for business customers, offering rates adapted to their needs. Existing services such as Wireless Office were enhanced with new functions.

New mobile applications Proximus continuously invests in the development of innovative services that not only respond to customers’ needs and simplify their daily lives, but also stimulate revenue growth. At the end of 2007, more than 200,000 3G devices were detected on the Proximus 3G network, compared to just over 100,000 end 2006. Proximus extended its range of available 3G handsets and new e-mail devices (BlackBerrys, PDAs and Smartphones). Through the Vodafone live! portal, customers can access a wide range of online services. The portal’s content and design are continually updated to provide richer content and increased user-friendliness. Proximus also launched new initiatives, incorporating Flemish TV channel “Een” in its mobile television offering (2) and offering eBay users the possibility to browse for and bid on their favourite item via the portal. Proximus ventured into mobile advertising with bannering campaigns on the Vodafone live! portal. The operator also formed an exclusive partnership with be-Mobile to provide traffic information based on analyses

of anonymous mobile data. This will have a positive impact on the flow of traffic on Belgium’s road network. Since September 2007, following the success of the system allowing users to pay for parking fees via their mobile phone, Proximus has been offering customers travelling with public transport company “De Lijn” the possibility of paying for their tickets by mobile phone. The SMS-Ticketing system enables De Lijn vehicles to run more punctually. Proximus customers receive their tickets in the form of an SMS message and pay for them via their mobile phone bill or call credit. Secure payments by GSM were introduced in Belgium by the three mobile operators and Banksys. Mobile phone users can conduct secure financial transactions with their mobile as if they were using their bank cards.

Partnerships Proximus concluded valuable partnerships to reach new target groups and offer rich content to its customers. In collaboration with Maroc Telecom, Proximus launched “mobiSud”, an MVNO specifically aimed at the Maghreb community in Belgium. At the end of 2007, mobiSud had more than 41,000 customers. TMF Mobile was launched in partnership with MTV Networks, targeting mainly young people in the 14-to-24 age group. Together with RSC Anderlecht football club, Proximus launched the prepaid offering RSCA Mobile. Proximus also joined forces with Sanoma Magazines Belgium to launch the first mobile offering for women in Belgium: Flair Mobile, Libelle Mobile and Femmes d’Aujourd’hui Mobile.

International Carrier Services (ICS) > ICS Belgacom posted positive results, increasing its revenue by 1.4% and raising its EBITDA margin to 7.2%, mainly thanks to a significant increase in mobile data.

The merger of Belgacomâ&#x20AC;&#x2122;s and Swisscom Fixnetâ&#x20AC;&#x2122;s respective carrier operations into Belgacom ICS was the first consolidation agreement in Europe and provided economies of scale that allowed the new entity to enter the league of large players. The post-merger integration was successfully completed during 2007, with both networks being fully integrated through the deployment of a next-generation transmission network and switching platform. Building on this accomplishment, a re-engineering programme is being implemented to ensure that the Service Delivery Engine department operates as efficiently as possible, and is provided with the right tools and processes to enable innovation as the telecom world gradually migrates to IP.

Belgacom ICS 2007 business achievements Belgacom ICS posted positive results for voice in an extremely competitive environment, mainly driven by the continued growth in the mobile segment and by the MTN outsourcing agreement, under which Belgacom ICS provides this African group of mobile operators with international connectivity.

A successful strategic partnership with Omantel was signed in 2007.

A successful strategic partnership with Omantel was signed in 2007 and the results of the latter half of the year have increasingly reflected the positive impact of this agreement. The excellent performance was maintained in the mobile data area. Belgacom ICSâ&#x20AC;&#x2122; leadership position in the signaling market was reinforced through the extension of its network coverage. Regarding SMS, an important agreement was concluded with another hub that enhances the Belgacom ICS SMS Transit service, which now offers the best value proposition in the market. Finally, Belgacom ICS won several major capacity contracts in 2007.

7.2% Ebitda margin

INTERNATIONAL CARRIER SERVICES - 15

our performance

The successful integration of the Belgacom and Swisscom Fixnet carrier operations

> our performance

the Belgacom share Following the implementation of the new business organization, Belgacom will change its external reporting structure accordingly as from the publication of its 2008 first quarter results. The traditional segment reporting of Fixed Lines Services, Mobile Communications Services and International Carrier Services will be replaced by Belgacom’s customer-oriented segmentation: Consumer Business Unit, Enterprise Business Unit, Service Delivery Engine, Staff & Support and International Carrier Services. To lead the market through this transformation, Belgacom will host an Investor & Analyst Day on 16 April 2008.

Investor Relations The mission of the Investor Relations department (IR) is to provide Belgacom’s current and potential shareholders with the best possible communication. Through transparent and consistent dialogue with investors and financial analysts, the Group strives to ensure the financial markets understand Belgacom’s strategy and the main drivers.

“The Group considers it very important to have consistent, transparent dialogue with investors and analysts, while striving for fair share value. A primary objective of the IR department is to ensure the accessibility of the Belgacom Group’s senior management.” Nancy Goossens (Vice President Investor Relations)

An important objective of the IR department is to make the Belgacom Group’s senior management accessible to the Belgian and international investment community. A primary goal is to ensure a two-way communication, where Belgacom’s management can clarify the company’s results, strategy and decisions, and where shareholders and analysts can voice the concerns and perceptions of the market. Twice a year, following the full-year and half-year results, Belgacom organizes a road show, covering the most important money centres of Europe and the United States. In between the road shows in 2007, a wide variety of investors and analysts had the opportunity to talk to senior management in one-on-one meetings or conference calls. In addition, Belgacom participated in several major international conferences. Every two years, Belgacom organizes an Investor & Analyst day, an occasion for investors and analysts to obtain more detailed insight into different aspects of Belgacom.

16 April 2008 Investor & Analyst Day

16 - BELGACOM GROUP ANNUAL REPORT 2007

Institutional and retail shareholders alike can always count on the support of the Investor Relations team. The website (http://www. belgacom.com) is one of the communication channels to the investment world.

Changes in the share capital and number of shares On 18 October 2007, the Belgacom Board of Directors approved a share buyback for a maximum amount of EUR 230 million, within the limitations decided at the General Meeting of 11 April 2007. Therefore, the share price could not be more than 5% above the highest and 10% below the lowest closing price in the thirty-day trading period preceding the transaction. The program was launched on 13 November 2007. By end December 2007, Belgacom had bought back 2,275,112 shares at an average price of EUR 34.23. Belgacom kept the market informed on the progress of the share buyback program through interim press releases. Announcement date 24 December 2007

Million Number Average EUR of shares share price 75 2,191,112 34.24

4 February 2008

75 2,359,251

32.20

4 March 2008

80 2,488,402

31.74

230 7,038,765

32.68

Total

At year-end 2007, Belgacom held 5,953,359 treasury shares, representing 1.8% of the total number of shares. This was a result of the following actions: > on 11 April 2007, the Extraordinary General Meeting of shareholders approved the cancellation of 23,750,000 treasury shares > in the course of 2007, 134,649 treasury shares were used in a Discount Share Purchase Plan for Belgacom management > in addition, 250,761 options were exercised during 2007

and retail shareholders alike www.belgacom.com Institutional can always count on the support of the Investor Relations team. The website is one of the communication channels to the investment world. Surf to www.belgacom.com

> in 2007 Belgacom acquired a total of 2,275,112 shares through its share buyback program Treasury shares evolution Status 31 December 2006 Options exercised during 2007 Discount Purchase Plan employees Acquisition of treasury shares Cancellation of treasury shares Status 31 December 2007

27,813,657 -250,761 -134,649 2,275,112 -23,750,000 5,953,3足足足足59

The voting rights of the treasury shares are suspended by law. The dividend rights of the treasury shares acquired in 2004 are also suspended, whereas the dividend rights for shares acquired in 2005, 2006 and 2007 are cancelled. Under Belgian law, companies are prohibited from owning more than 10% of their outstanding share capital.

Stock market:

First Market of Euronext Brussels

Ticker:

BELG

ISIN:

BE0003810273

National SVM code:

3810.27

Bloomberg code:

BELG BB

Thomson code:

BELG-BT

Reuters code:

BCOM

Belgacom ownership structure Ownership on 31 December 2007

Ownership on 31 December 2007 Belgian State

% total shares

180,887,569

53.5%

% voting rights % dividend rights 54.5%

53.9%

Dividend rights 180,887,569

Belgacom

5,953,359

1.8%

0.0%

1.0%

3,192,035

Free-Float

151,184,207

44.7%

45.5%

45.1%

151,184,207

Total

338,025,135

100.0%

335,263,811

End 2005 340,394,570

End 2006 333,961,478

End 2007 332,071,776

1,476,492 341,871,062

1,867,222 335,828,700

2,074,654 334,146,430

Effective or potential voting rights Number of outstanding shares (effective voting rights attached to shares representing the capital) Future, potential or not, voting rights resulting from rights and commitments at the conversion into or the subscription for shares to be issued - Options Total shares with effective or potential voting rights

Belgian State 53.5% Belgacom 1.8% Free-Float 44.7%

our performance

Belgacom ownership

THE BELGACOM SHARE - 17

> our performance

Belgacom share compared to BEL20 index and Euro STOXX Volume

EUR 2.87 earnings per share

Belgacom share price Bel 20 - restated

Stoxx Telco - restated Belgacom Share volume

6,000,000 –

Price (in EUR) – 40. 0

5,000,000 –

– 37.5

4,000,000 –

– 35.0

3,000,000 –

– 32.5

2,000,000 –

– 30.0

1,000,000 –

– 27.5

0– 03/01

23/02

19/04

09/06

01/08

21/09

11/11

– 25.0 30/12 Source: Thomson One

Share price evolution In January 2007, the Belgacom share price reached its year high closing price at EUR 35.82. The Belgacom share was buoyed by the general increase in optimism in the Telco sector. End of January, a number of Belgacom peers announced their annual results, together with their expectations for the upcoming year. It was clear to the market that 2007 promised to be a tough year for the telecom sector due to regulation. On 2 March 2007, Belgacom announced its 2006 full year results along with the outlook for 2007. The guidance reflected continued fierce competition in the Belgian Mobile market and increasing regulatory pressure for the Mobile business. The worries of the market were reflected in the share price. However, the roadshow in March helped to reassure investors, supporting the Belgacom share price. In April, the share price ran up for the expected dividend relating to the 2006 result. The Belgacom share went ex-dividend on 17 April 2007.

In May, Belgacom announced slightly better than expected first quarter 2007 results, which resulted in a small increase in share price. From mid-July until the end of August, the share price was under considerable pressure, mainly attributable to a general malaise in the markets caused by the credit crunch. In addition, the market expected Belgacom to report weak half-year results based on the results published by Belgacom’s competitors. The Belgacom share price reached its year low on 10 August 2007, closing at EUR 27.82. End of August, the share price rose after the announcement of the 2007 half-year results, which exceeded consensus expectations (1). On top of that, Belgacom also raised its full year guidance for both Fixed Line and Mobile Communications Services. In October an additional shareholder return of EUR 400 million was announced. The market viewed this positively, resulting in a growing share price. Beginning of December the share price ran up for the payment of the interim dividend; the share went ex-dividend on 6 December 2007.

(1) Consensus: estimates on Belgacom results published by analysts covering the Belgacom share.

18 - BELGACOM GROUP ANNUAL REPORT 2007

Belgacom share information

Shareholder remuneration Return to shareholders A share buyback, approved by the Board of Directors on 18 October 2007 for a maximum amount of EUR 230 million, started on 12 November 2007 and was completed on 3 March 2008. The Board of Directors also approved on 18 October 2007 an interim dividend of EUR 170 million or EUR 0.50 gross per share. The interim dividend was paid on 6 December 2007. On 28 February 2008, the Board of Directors decided to propose an ordinary dividend of EUR 1.68 per share to the Annual Shareholder Meeting of 9 April.

Dividend policy There are no changes in the stated dividend policy whereby Belgacom intends to declare and distribute an annual dividend of 50% to 60% of its annual net income. This amount may be adjusted to reflect one-time gains or losses, and the amount of dividends declared may vary from year to year. In determining the amount of any annual dividends to

2005

2006

2007

27.55 33.62 26.94 217,819,245 847,546 9.38

33.37 33.80 24.60 241,516,832 947,125 11.14

33.74 35.82 27.82 291,898,716 1,144,701 11.20

2.78 1.52 9.93

2.87 1.60 0.29 11.62

2.87 1.68 0.50 11.76

propose to the shareholders, the Board of Directors will take into account the dividend payment practices of other European telecommunications operators. The amount of any annual dividends and the determination of whether to pay dividends in any year may be affected by a number of factors, including the Group’s business prospects, cash requirements, financial performance, the condition of the market and the general economic climate, plus other factors, such as tax and other regulatory considerations.

EUR 2.18 total dividend per share

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Financial calendar 29 February 2008 9 April 2008 16 April 2008

Announcement of full year results 2007 Annual General Shareholder meeting Investor & Analyst Day

16 May 2008

Announcement of first quarter results 2008 25 July 2008 Announcement of half-year results 2008 7 November 2008 Announcement of third quarter results 2008

our performance

Closing prices (in EUR) Closing price last trading day of year Year high Year low Annual Trading volume (number of shares) Average trading volume per day (number of shares) Market Capitalization 31 Dec. (billion EUR) Key figures Earnings per share (in EUR) Ordinary dividend per share, gross (in EUR) Extra-ordinary dividend per share, gross (in EUR) Interim dividend per share, gross (in EUR) Price/Earnings ratio 31 December

THE BELGACOM SHARE - 19

Delight 9:30 TV guide

For the continuous update on the daily programs, check the TV guide on www.belgacomtv.be.

16:35 Mobile TV

Mobile TV on your mobile phone keeps you updated on the latest news.

Belgacom TV, the interactive platform Launched in June 2005, the Belgacom TV platform had attracted 305,319 subscribers by 31 December 2007. A truly interactive platform, it not only offers many traditional and thematic channels but also an impressive catalog of Videos on Demand. Not to mention the possibility to record and pause live programs with the Comfort View services.

19:30 Video on Demand

our assets

Choose from the 800 Videos on Demand (VoD), a great way to relax with the family.

â&#x20AC;&#x153;Belgacom TV made a breakthrough in the digital television market. In 2007, for the first time in 16 years, the number of cable subscribers decreased.â&#x20AC;? Jean-Charles De Keyser (Vice President Integrated Media Unit)

> our assets

our clients Our achievements in 2007 > Our new operational units, CBU and EBU, are in place. > The first convergent offers have been launched, via the packs and Belgacom Explore. > Simplification, innovation, one-stop-shopping and value for money are our buzzwords for meeting the demands of our customers. > A solution for each customer via our segmented offers.

The residential market: making ourselves the preferred provider for residential customers The residential market Penetration as % of households (H2 2007) Fixed-line (1) Cable (2) PC (3)

“Reinforcing transparency. The quality of our mobile network is one of our strong points. However despite all our efforts, technical incidents can occur and cause partial failures. In this case, as soon as the network is restored, we send an apology SMS to the impacted customers. This initiative is aimed at reinforcing transparency and helps build trust.” Catherine Deltenre (Vice President Customer Experience & Intelligence)

Penetration total active cards/inhabitants in % (H2 2007) Mobile

74 89 63

100

Penetration as conn./households in % (H2 2007) Internet (4) 47.3 Broadband (5) 44.1 ADSL (6) 26.7

In 2007, the first bundled solutions appeared on the telecom and television market. On the voice market, fixed telephony competitors continued to launch aggressive offers in order to increase their market share. Mobile telephony operators also launched new solutions, including offers promoting mobile-only products. Customers have a wider choice of suppliers and communication services, and clearly show a growing interest in mobile data services and broadband. Meanwhile, a new trend is developing among mobile phone users: having a second SIM card. This has raised the penetration rate of mobile phone cards to 100.0%, compared with 89.7% a year ago. At the end of 2007, the number of SIM cards in Belgium was estimated at 10,543,098. The internet market continued to grow in 2007. This was due partly to the launch of (1) Of residential households, Company research. (2) Cable customers, Company research. (3) Company research. (4) Residential connections ISPA/households. (5) Residential Broadband connections ISPA/households. (6) Residential ADSL RT + WS/households.

22 - BELGACOM GROUP ANNUAL REPORT 2007

new offers at the lower end of the market, and partly to the success of combinations of internet with other services. At the end of 2007, 94% of residential internet connections were broadband connections. The penetration rate of digital television was estimated at 22% at the end of 2007, compared with 12% in 2006. 2007 saw a consolidation of the cable television market, with cable operator Alé-Brutélé and eight other Walloon cable operators joining forces in Brussels and Wallonia to operate under the single “VOO” brand. High Definition television achieved a modest breakthrough in Belgium in 2007, and should really take off in 2008, particularly because of the Olympic Games.

Our response: convergence and segmentation The Group correctly perceived and responded to market demands in 2007, as shown by the success of the packs, the increase in Belgacom TV customers, and the number of new mobile customers. Convergence resulted from the expertise of Belgacom and Proximus, as the Group based its strategy on products offering a combination of telephony, internet access and television via fixed-line or mobile technologies. Those full combinations are unique on the Belgian markets. This was achieved as much through the packs as through rate plans. The common element in all our solutions is to offer customers a quality of service at the right price. This was reflected in all our commercial relations with our customers.

Oufti, the first regional offer of Proximus After several surveys, it was apparent that the mobile market in the Liège region still needed to be conquered. In 2007, Proximus therefore launched a rate offer specific to Liège and its surrounding region. This regional approach, baptized Oufti, is the first of its kind and is geared towards the specific needs of a local population. It is aimed in particular at young people through Pay & Go Generation products. A partnership was launched with the regional press to boost the product’s visibility.

Special attention was devoted in our points of sale in 2007 to focus on the accessibility and presentation of the entire range of the Group’s products. Training for our point of sale teams equipped them to answer questions from customers on any of our products, whether fixed or mobile. Our commercial websites, www.belgacom.be and www.proximus.be were also given a thorough makeover, with the accent on convergence. These two sites have a similar navigation system and product presentation, so as to offer a coherent experience to all users. Online purchases were simplified, and exclusive “web deals” were launched including free delivery and special offers.

Customer service The possibilities for customers to manage their own accounts and options were also enhanced, via a dedicated customer space, and online support was reinforced. Across the board, we invested in efforts to provide better support to our customers, particularly in the call centres. IT systems and procedures were optimized, and employees received continuous training to help them serve our customers more efficiently. These efforts were recognized when the Belgacom call centres received the 2007 Belgian Contact Centres Award.

Listening to our customers In 2007, we put in place procedures to monitor customer opinion on products and services and on the quality of service offered during each contact (with our shops, customer

service, technicians, etc.). This direct feedback from customers is vital for our improvement. An internal Customer Experience unit acts as a customer advocate in large-scale projects and coordinates an interdepartmental programme aimed at eliminating areas of dissatisfaction. However, to become a completely customeroriented company, the participation of every employee within the group is required. Like any change in culture, this is a long-term program, which will take several years.

A targeted marketing strategy Segmented offers During 2007, in addition to the launch of the multiplay packs, our marketing strategy was driven by our ambition to offer solutions specifically adapted to each customer. This was translated into a stronger segmentation of offers, mainly through partnerships in mobile telephony (mobiSud, RSCA Mobile, Flair Mobile, Libelle Mobile, etc.) but also through a regional market approach with the Oufti (1) campaign. Significant resources have been deployed to support the campaigns and local promotional offers aimed at developing customer loyalty in the long-term, especially in the youth segment.

our assets

Points of sale

The launch of offers such as ADSL Budget or ADSL without a fixed line are other examples of this segmentation approach. On the fixed-line market, examples include the “Happy Time International” and “Pulse” rate plans. Emphasis was also placed on innovation, particularly through the project on the SMS

For more info, surf to www.belgacom.be www.proximus.be

(1) Wow in walloon language.

OUR CLIENTS - 23

> our assets

Our call centres win the Contact Centre Award 2007

We took on a major challenge by setting what might seem contradictory objectives: > reduction of calls > increase in revenue > greater customer satisfaction > improved efficiency These efforts recently earned the 2007 award for Belgium’s best contact centre.

payment system for buying tickets in the Flemish public transport network “De Lijn” and the e-learning solution launched with the St-Luc university hospital.

The customer-oriented organization guarantees fast and flexible delivery, greater adaptability, and a matrix structure focused on markets, solutions and services.

The corporate market: to be the privileged partner of companies for voice, data and ICT

A single point of contact Each large customer is assigned a single account manager, who is able to call on a team of specialists to meet the specific needs of each client. Already, many customers are appreciative of the Belgacom Group to improve the quality of the service offered.

Increased integration and convergence on the corporate market

Objectives for 2008 residential market In 2008, we will pursue our strategy to make the Group’s products and services the preferred choice of residential customers. > improve the accessibility of our products > offer high added value, while enhancing customer experience > simplify our product portfolio and brands. We will progressively bring together our three strong brands – Belgacom, Proximus and Telindus – in the spirit of convergence to share a common experience. Like the members of a family who are united by surname but distinguished as individuals by their first name, our Proximus and Telindus brands will continue to offer their specific expertise, but will make it clear that they are part of the Belgacom family.

24 - BELGACOM GROUP ANNUAL REPORT 2007

Convergence is also a key element of the corporate market for ICT services in Belgium. The convergence of voice and data solutions, along with the integration of IT and telecoms, has become crucial in current circumstances. Several studies estimated a shortfall of 10,000 computer specialists in Belgium in 2007. Practically every company will therefore face shortages, and the demand for ICT outsourcing will grow. In the corporate market, competition is becoming increasingly international.

Our response in 2007 The best of all worlds The combination of the skills of Belgacom, Proximus and Telindus will make the Belgacom Group the ideal partner for helping our corporate customers become true real-time enterprises. A segmented organization At Belgacom, each business customer is unique. To enable us to offer each company the best possible service, the enterprise business unit (EBU) is divided into three segments: corporate customers, enterprise customers and SMEs.

The cornerstone - Belgacom Explore The cornerstone of this system is Belgacom Explore, the platform that gives our customers - fixed or mobile - access to all the services of Belgacom, Proximus and Telindus. The networks are integrated into a single, forward-looking infrastructure which ensures the evolution from basic connectivity to an intelligent services platform. The customer no longer has to choose between different technologies, but can simply select the best solution from everything that is on offer. In May 2007, the Belgacom Explore initiative received LightReading’s “European service provider innovation award” during the Ethernet Expo in London. A high-quality outsourcing solution As many studies show, outsourcing needs are continually growing. Strengthened by the integration of Telindus in the Group, we now rank among the top three outsourcing companies in Belgium. Our expertise is recognized on the ICT services market, as demonstrated by the

Number 1 for the more than 100 employees companies

According to a survey by Data News among companies with more than 100 employees, Belgacom remains the number one operator in Belgium for fixed telephony, mobile telephony, the internet and data. Telindus Belgacom ICT is the leading network integrator. Surf to www.belgacom.com

To offer even more services, in April 2007, Telindus acquired the privately-owned Dutch data storage specialist, ISIT SA. This company is specialized in network storage solutions, centralized backup/restore solutions and archiving. Feedback from the customer Our constant search to improve our services also benefits from the numerous suggestions and comments in the feedback from our customers, which we use as a basis for developing our strategy. In this way, the customer has an important guiding influence on our new initiatives.

Our international activities Belgacom International Carrier Services (Belgacom ICS) Belgacom ICS, a joint venture with Swisscom Fixnet, acts as the international arm of

national and international operators. Not only do we offer high-quality bandwidth solutions, but we also take care of international needs in voice and data: the collection and termination of traffic on a global level, and the handling of SMS, MMS, GPRS roaming and signalling. The demand for wholesale carrier services continues to grow rapidly, boosted by economic growth in China, India and the Asia-Pacific region, as well as in the Middle East and certain parts of Africa. We have also formed partnerships with MTN and Omantel.

“This award recognizes all the call centres of the Belgacom Group.” Geert De Jonghe (Vice President Customer Care)

Telindus International Telindus also offers ICT solutions at international level through its subsidiaries established in a dozen countries, including the Netherlands, France, China, Italy and Spain.

Objectives for 2008 PROFESSIONaL market In 2008, we will pursue our transformation from a telecom provider to a supplier of global ICT solutions. > continue the deployment of the Belgacom Explore platform > become the trusted ICT partner for SME and large companies > offer tailor made solutions to enable our clients to concentrate on their core business > develop our targeted approach for specific sectors of activity as finance, education, defence

OUR CLIENTS - 25

our assets

important subcontract awarded to TelindusEDS by the Flemish Community.

DeliVER Our “6 pack” approach Belgacom is the only player on the market that can offer clients voice access to the internet and television, whether they are at home or on the go. It’s what we call our “6 pack” approach. Customers who purchase one of those packs save at two levels, i.e., time-wise, by buying everything in one go, and money wise, because the combined products are less expensive than if bought individually. Launched in April 2007, the multiplay packs had already attracted 153,000 customers by the end of 2007.

10:30

SMILE calling package

Opt for an Internet + TV + mobile pack with a SMILE calling package. Call from your mobile phone and keep your budget under control.

“Our packs combine the best of fixed and mobile for an advantageous price.” Koen Tackx (Vice President Marketing Consumer Market)

16:24 ADSL Go

19:30 Belgacom TV

If youâ&#x20AC;&#x2122;ve always dreamed of singing on stage, you can practice now with Karaoke TV, one of Belgacom TVâ&#x20AC;&#x2122;s 80 channels.

our assets

Are you an online video game geek? Then surf to the Arena 51 portal for the wildest games ever, via your high-speed ADSL Go internet access.

> our assets

our people Our achievements in 2007 > Thanks to the efforts and adaptability of our staff, we realised our vision of bringing all Group activities within a single client-focused organisation. > Implementing the new organisation entailed important changes in our internal communications tools. > Our diversity policy won the Belgian government’s Equality-Diversity Label award. > Our staff are central to our strategy. That is why we will continue to invest in the Group’s human capital. The Belgacom Group had 17,833 employees on 31 December 2007. 2007 was really a milestone year. Not only did the Group attain a new scale, through Telindus and Belgacom Mobile acquisitions. It also rose to the challenge of its new dimensions, by devising a new structure to take full advantage of the possibilities for real convergence.

“The ‘Family Friendly Firms’ prize (Entreprises Familles Admises) awarded by the Ligue des Familles is a reward for the efforts of the Group to offer a balanced working environment for our staff.” Astrid De Lathauwer (Executive Vice President Human Resources)

This new structure allows us to maximise the synergies among all our staff so that all their competences and skills can reinforce the client-orientation focus of our entire business. It was progressively implemented across three of the four new entities it created - the Consumer Business Unit (CBU), the Enterprise Business Unit (EBU) and the Service Delivery Engine (SDE). The fourth element, integrating all our Staff & Support teams within a single entity, is gradually being brought into operation during 2008. In this configuration, our teams right across the Group, from marketing and sales to engineers and technicians, will benefit from coordinated support and operate according to common processes and rules. The real triumph is that these changes have produced tangible results for our residential and business clients, with the launch of our first convergent products.

New communication tools

34 hours

average training time per employee per year

28 - BELGACOM GROUP ANNUAL REPORT 2007

Throughout the year, these profound structural changes were mirrored by adaptations in our internal communication tools, and accompanied by major campaigns to help our staff to make the link with their daily work. Among the internal communication tools, each of the two principal channels of information, the intranet sites and business

magazines of the different entities, has been unified at Group level. A new Group intranet has been created, and an initial review is aimed at providing access to the most frequently-used applications and to construct a common identity for all the Group’s subsidiaries. The creation of a Human Resources Corner has allowed us to centralise all the Human Resources service’s information and IT tools for all employees, and a unique telephone number - 0800 ALL HR - has been put into service. 2007 also saw the birth of a new magazine for internal communications, “You-nited”, aimed at all the Group’s employees.

Anticipating needs In the constantly-evolving world of telecoms, we have to anticipate future needs in order to consistently offer high-quality products and services to our clients. To do this, we have to continually adapt our personnel, so as to meet our needs for flexibility, expertise and skills. Mobility within the Group is a tool which allows us to ensure our teams are the right size. In 2007, more than 600 people changed job on a voluntary basis. This mobility allows each member of staff to use his or her skills to the maximum while constructing a career within the group. The statutory employees benefit from an external mobility programme within various public administrations, as explained below. In 2007, there were 1,782 natural departures (FTE) from the Group’s staff, while 204 decided to take advantage of the “tutorship” scheme allowing them to gradually phase out

Young Potentials

The Belgacom Group is ambitiously reinforcing its Young Potentials program, which is reflected in its recruitment of 50 young talents for the year 2008. For 18 months, they will work on the successful completion of a number of projects assigned to them in the Group. Surf to www.belgacom.com

In this context, the Belgacom Group has been providing funding for several months for the Chair of Professor Herman Van den Broeck at the Vlerick Leuven Gent Management School, who is a specialist in business coaching. Support from the Group has also made possible the publication of a book on coaching in sport, “Le coaching, ça marque!” [“Coaching - that shows!”]. A limited edition for the Belgacom Group, illustrated with drawings by

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Age pyramid on 31/12/2007 '"(&& '"&&& .&& ,&& *&& (&& 67

Statutory and contractual workforce

4 6.5% Statutory 53.5% Contractual

OUR PEOPLE - 29

our assets

Our staff are our own front-line ambassadors. So they are naturally at the forefront of our concerns. To improve working conditions, we put the accent in 2007 on the importance of good coaching. People who are coached with respect in a spirit of positive emulation want to get really involved - a benefit for the company, which can count on staff who feel good about themselves and who are proud of their company.

Among the many customised training opportunities, the Customer Communication Excellence programme aims at making communication between our staff and our clients even more effective. Via a global training project involving a mix of team leaders and managers, we have constructed a positive dynamic that has led to an improvement in communication with our clients in all our sales channels.

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Coaching and training

The training of our staff is central to our human resources policy. Everyone within the Group has numerous opportunities for their own personal development. The Belgacom Corporate University (BCU) and the John Cordier Academy (JCA) offer a wide range of training possibilities through various methods (in class, e-learning, BCU@home...). In 2007, 89% of our staff followed a training course, averaging 34 hours per employee per year.

Staff evolution

And because we are convinced of the benefits that young people can bring us, we have given 25 recent graduates the opportunity to work within the Group through a programme called Young Potentials. This allows them to work within the different departments of the Group for 18 months before choosing a function in their preferred domain. In 2008 we will double the size of this programme, extending it to 50 recent graduates, and taking advantage of new forms of contact with potential candidates including social networking sites and interactive platforms such as Second Life.

employees’ children, was distributed specially to the Group’s team leaders.

of work towards the end of their career. To ensure necessary staff renewal, the Group conducted a targeted external recruitment campaign which led to the engagement of 1,387 new staff.

You-nited

All the Belgacom entities now form a single Group. From now on, all the employees of the Group will therefore receive the same magazine. In this company magazine, employees will find reports on Belgacom’s areas of expertise and team events, but also anecdotes, testimonials and descriptions of our products and services. In other words, it has everything that drives a group and the people who work in it. The play on words in the title reflects the aim of this magazine: to talk about You, the employees of a single United group.

The many aspects of diversity

“Accompanying change is one of the essential tasks of internal communication. This is why we have launched a new Group intranet and brought the various company publications together at Group level.” Ingvild Van Lysebetten (Vice President Group Communication)

Just like Belgian society at large, the Belgacom Group is a mixture of people of different origins and of all types. These differences constitute an invaluable asset for the Group. We are convinced that making a virtue of diversity in the workplace helps stimulate creativity and innovation, makes leadership more effective, and provides our staff with a richer professional experience. Our actions to promote diversity throughout the year included our Diversity Week. To promote equality of treatment between men and women, the Group launched a series of structural initiatives internally and externally. Particular attention was given to improving the man/woman ratio within management. The percentage of women in the management is now 16%. The Belgacom Group does not wish to impose quotas, but aims to encourage mentalities to evolve and to raise awareness of diversity among its workforce. In addition, the Belgacom Group also launched the Women in Corporation project - a network of women within the Group. This initiative aims to bring together businesswomen with differing roles and responsibilities and provide them with a platform for personal and professional development through leadership, recognition, and the creation of a network of contacts.

To learn more about our diversity initiatives, or about The Pulse, we invite you to read our Corporate Social Responsibility report.

30 - BELGACOM GROUP ANNUAL REPORT 2007

These diversity initiatives won recognition in 2007. On behalf of the Belgacom Group, Didier Bellens received the Equality Diversity Label that rewards companies actively engaged in promoting and introducing diversity and equality in their economic, social and commercial strategies.

The Belgacom Group pursued for the second year its initiative with The Pulse - an impressive range of courses and workshops launched by the staff in 2006.

External mobility and social dialogue Social dialogue and cooperation are keys to the success of a company. Throughout the year, we put the accent on mobility in negotiations with our social partners, Selor (the government and public services selection bureau) and the Belgian state. These negotiations led to the signature of an agreement ratified in July by Belgium’s principal labour relations organ, the Comité National Paritaire. The agreement gives full-time Belgacom statutory employees the chance to diversify their professional experience by exercising a new job in various areas of public administration. Within the Group, Belgacom and Proximus also reached agreements with representative trade unions on collective agreements for 2006-2008. In Belgacom S.A., this new agreement represents a significant advance in employee benefits. Key elements include: > salary reviews for certain functions > allowing compensatory time off for certain staff members and the possibility of work exemption for staff on fixed-term contracts At Proximus, the main elements of the agreement relate to: > setting up a new model to identify training needs > full reimbursement of journeys to and from work on public transport (SNCB, STIB, TEC, De Lijn)

On behalf of the Belgacom Group, Didier Bellens received the Equality Diversity Label that rewards companies actively engaged in promoting and introducing diversity and equality in their economic, social and commercial strategies.

> a bonus of up to EUR 18/month for Customer Service and Business Service staff with additional language skills > a study on the possibility of implementing the Belgacom Teleworking Policy

These results make us determined to intensify our communication with our staff throughout 2008, to accompany and explain the changes even more clearly.

Work-life balance and personal development for employees

To support the implementation of the Group’s commercial strategy, change management will be one of the essential tasks for the human resources department in 2008. We shall be focusing on: > integrating the different support functions in a single entity within the Group > developing a motivating work environment > identifying and developing new aptitudes among our staff > seeking out new talent > pursuing our diversity policy

For many years, Belgacom has taken new initiatives to promote work-life balance among its workforce. The Work Life Unit has created and organised a series of major events. For example, the Belgacom Group Fun Day 2007 brought together 13,000 employees from all the subsidiaries. The end-of-year party for employees’ children welcomed 3,900 children. The crowning achievement of our human resources department in 2007 was the award for the first time of the “Family-friendly Firms” prize (Entreprises Familles Admises) from the Belgian League for Families (Ligue des Familles).

Staff satisfaction The motivation and involvement of our staff are other key factors in Belgacom Group’s success. For the second time, we organised a global satisfaction survey for all employees of the Group. Even in a year with as many changes as 2007, the results of the survey show that the staff understand that our working methods have to respond to our clients’ evolving needs. Nevertheless, at the individual level, questions remain as to the impact of these changes on daily life within the company. Many employees still have difficulties in finding their bearings, especially in the subsidiaries.

Our challenges for 2008

OBJECTIVES 2008 > integrate the different support departments in a single legal entity > create a working environment that will motivate every member of staff > attract, retain and develop the talents we will need for tomorrow > achieve internal operational excellence in human resources, through simplified and integrated procedures and tools, and increased competences > take an active part in the creation and implementation of the commercial strategy

OUR PEOPLE - 31

our assets

Diversity label

EXPLORE 08:30

Support Service

Belgacom Exploreâ&#x20AC;&#x2122;s support service: always ready to help you with your technical questions.

12:50 IP network

The IP networkâ&#x20AC;&#x2122;s faster payment processing reduces waiting times considerably.

16:30

High-speed internet access

High-speed internet access allows you to view your stock levels in real time.

Belgacom Explore Our forward-looking infrastructure

our assets

With Belgacom Explore, companies benefit from a single platform for all their requirements. This enables them to improve their productivity (by speeding up access to data such as stock levels), and to reduce costs and devote more time to their customers. A prime example is the company AS Adventure, which adopted this solution for its 22 points-of-sale in Belgium.

â&#x20AC;&#x153;Our job? To take care of all the ICT and telephony requirements of companies, to enable them to focus on their core business.â&#x20AC;? Jan De Schepper (Chief Executive Officer Telindus N.V.)

> our assets

our network Our achievements in 2007 > The different networks are the backbone of our activities. > Whether fixed or mobile, these networks allow us to generate the connectivity that is indispensable for the products and services that we offer our customers. > Since the needs of our customers continue to evolve, we are constantly investing in the future. > Within the Belgacom Group, the new Service Delivery Engine (SDE) entity is responsible for managing all of the networks and for IT development.

Continuation of the Broadway project

“With the progressive rollout of VDSL2, we will be able to offer our customers High Definition television.” Scott Alcott (Executive Vice President Service Delivery Engine, Executive Vice President (a.i.) Enterprise Business Unit, Chief Executive Officer Telindus Group)

During 2007, we continued to develop our fiber optic network and to deploy VDSL technology by investing over EUR 109 million (capex). Within a year, VDSL coverage had increased from 45% to 59%. The development of optical fiber in the access network is part of the Broadway project launched in 2003. This project has to prepare the Belgacom Group to meet the needs of its customers by giving them access to a network which supports existing and future integrated quadruple-play solutions. In November 2007, we reached a new stage in the Broadway project with the deployment of VDSL2 technology. To achieve this, VDSL2 required the installation of 10,000 km of optical fiber and over 4,000 km of trenches. On the client side, there is no need for important modifications.

An ultra high-speed network Through VDSL2 technology, the Belgacom Group aims to provide Belgium with an ultra high-speed network with a large data transmission capacity. This evolution enables surfing at speeds of up to 20 Mbps via the Ethernet protocol, the provision of Belgacom TV on several television sets, not to mention High Definition television. In this area, our objective is to cover 61% of Belgian households by Spring 2008.

99.7%

ADSL coverage by end 2007

34 - BELGACOM GROUP ANNUAL REPORT 2007

The new platforms As regards television, in 2007, Belgacom also invested in the iDTV platform and its related equipment. The aim of this investment was to ensure the scalability of the television platform, to attract new customers and to

promote the use of television services, especially Video on Demand (VoD) and the Comfort View services. Finally, we should mention the commercial deployment of the VoIP platform, as well as the implementation of a new order management system at national level.

A high-quality connection for all Bridging the digital divide is also one of our main priorities. In the course of November 2007, we therefore increased the ADSL coverage in Belgium. This initiative was partly in response to the growing need for connectivity and partly a result of the Belgacom Group’s ambition to give everyone the opportunity to benefit from high-speed internet technologies. Coverage has now reached an impressive 99.7% of the households, thanks to the introduction of a new technology in the network called Reach Extended ADSL (RE ADSL). This technology is specially designed to cover large distances on a traditional copper pair. In fact, traditional ADSL technology loses some of its effectiveness as the distance between the user and the distribution frame (DSLAM) increases. The RE ADSL technology allows greater distances to be covered. This means we can offer broadband internet access to more customers, especially in rural areas.

Installation on the customer’s premises Besides developing the network, SDE also has the important task of performing the installations, for both residential and professional customers, as well as any necessary repairs. To that end, this entity employs

The Service Delivery Engine’s tasks

Continued development of our 3G network Our network infrastructures for mobile telephony also underwent numerous upgrades, both in terms of quality and capacity. More than three years after the launch of its 3G (UMTS) network, Proximus is still the Belgian leader in this field, with a coverage rate of over 80% of households. This coverage is far above the legal deployment obligations imposed by the BIPT. In 2007, we upgraded our 3G network with HSDPA technology in order to offer a download speed of 3.6 Mbps. To enable as many of our customers as possible to benefit from the latest, state-of-the art mobile telephony technologies we also extended our range of mobile devices which enable access to the 3G network.

For example, with the 3G Broadband Vodafone Mobile Connect Card and the USB modem, our residential and professional customers can have wireless access to high-speed internet via their laptop even when they are on the move.

Managing the Group’s internal networks Another important task of the SDE entity is to manage the Group’s internal networks. To this end, one of the objectives of 2007 was to effectively meet the connectivity needs of employees in all the subsidiaries. The SDE teams set up the ONE infrastructure, a concept network which allows all employees, from all the subsidiaries, to connect to their own network in any of the Belgacom Group buildings.

A complex regulatory framework Summary of the general framework The liberalization of the telecom market, which was initiated in 1998 by the European Union, was finalized in 2001. A regulatory framework defining the rules imposed on the operators was established in order to allow competition to develop fully and fairly, to fulfil certain public interest tasks and to protect consumer interests. In Belgium, the Belgian Institute for Postal Services and Telecommunications (BIPT) was entrusted with these market regulation tasks. In 2003, a new European framework was drawn up, focusing on four key areas: > market analysis by the BIPT > infrastructure competition > technological neutrality > convergence (including radio transmission)

Broadway in a few figures for 2007 > 900 km of trenches > 3,500 km of optical fiber installed > 3,900 ROP cabinets finalized

OUR NETWORK - 35

our assets

2,310 experienced technicians, assisted by external teams as required. In 2007, these teams performed as many as 1,357,000 interventions, especially for: > installing Belgacom TV > setting up the equipment required for receiving Jupiler League matches > ensuring the connectivity of the polling stations during the federal elections > adapting the networks for the launch of Belgacom Explore > offering remote maintenance services Throughout the year, we tried to improve the speed and quality of our interventions by introducing a new work process, increasing remote interventions and automating tasks. To prepare the teams for future needs, a major training program was launched to improve skills related to IP and ICT technologies.

This entity employs 7,813 FTEs from Belgacom, Proximus and Telindus, which makes it the largest entity of the Group. Its main tasks are to: > ensure the construction, development and management of the network and IT systems > provide services to other operators (OLOs) > provide ICT solutions and technical support to the Group > carry out the installation and repair of Group products and services on our customers’ premises

> our assets

Making life easier for our customers

The SDE entity also develops solutions aimed at making life easier for its customers. For instance, our employees have set up “do-it-yourself” services for Belgacom TV. These services enable our customers to carry out their own installation in a simple way, thanks to “Zero Touch Provisioning” technology.

Surf to www.belgacom.com

The decisions that had an impact on our business in 2007

“We have to transform our network into an All IP architecture to offer our customers fully integrated voice, data and media services.” Wim De Meyer (Vice President Business Transformation)

On the fixed-line market Fixed-line interconnection The BIPT(1) reduced Belgacom’s fixed-line interconnection rates by 3.5% in June 2007. The other operators are authorized to charge prices up to 15% higher than Belgacom’s rates, except for Telenet and Versatel who were authorized to charge a supplementary 370% in 2007. This price supplement will be lowered to 190% in 2008 and to 15% on 1 January 2009. Local loop services (unbundling and binary rate access) The BIPT lowered the rental charge for an unbundled local loop from EUR 11.26 to EUR 9.29 in July 2007. This reduction was also reflected in the binary access rental charges (and now in the absolute price difference between the unbundling and the binary rate access). The European Commission supported the BIPT’s proposal to extend the obligation to Belgacom to allow access to VDSL technology. The judgments relating to the implementation of this obligation should be rendered some time in 2008.

80%

3G-coverage by end 2007

Entry into effect of the cooperation agreement on regulation The cooperation agreement organizing the cooperation between the federal, regional and community authorities with regard to regulatory decisions on the infrastructure of electronic communications entered into effect in September 2007. EU analysis of the regulatory framework The European Commission has announced its proposals to reform the current regulatory (1) Belgian Institute for Postal Services and Telecommunications. (2) Significant Market Power.

36 - BELGACOM GROUP ANNUAL REPORT 2007

framework. The main changes proposed are those relating to the creation of an EU agency (the European Electronic Communications Market Authority) aimed at improving regulation harmonization and including functional separation as a potential remedy for SMP operators. The Commission is expecting this new framework to be in place in 2010-2011. The Commission has also decided to reduce by 50% the number of markets – and retail markets in particular – likely to be subject to ex-ante regulation. Nevertheless, it intends to maintain pressure at the wholesale level (e.g., the fixed and mobile termination markets, the local loop unbundling market and wholesale broadband access).

On the mobile market Regulation had a significant impact on the company’s results for 2007 because of several reductions of the mobile termination rates and the introduction of the regulation on international roaming tariffs for voice services. In accordance with the obligations ordered by the BIPT in August 2006, the three mobile operators again lowered their mobile termination rates on 1 May 2007. In 2007, regulation had a negative impact of EUR 80 million on mobile revenue and EUR 30 million on EBITDA. In December 2007, the BIPT made a new decision on the future regulation of mobile termination rates. This new decision, in compliance with the severe comments of the European Commission and the national competition authority, aims to reduce the proportional differences between the termination rates applied by the three operators. Initially, the maximum rates as at 1 February

Fixed-line investments: from copper to fiberoptic…

Available from exchange

* + ,

1 1980s – 90s: 600 exchanges interconnected by fiberoptic via two separate paths 2 1990s: installation of 400 LDCs (mini-exchanges near customer) 3 1995 on: fiberoptic loops for professional customers (industrial parks) 4 2003 on: installation of ROPs near customers “Broadway” : transmission speed with VDSL access is much higher than with ADSL

Clients Available from ROP

The regulation of international roaming voice services, introduced in stages since mid-2007, came fully into force in October 2007. The regulation imposes maximum tariffs for calls made and received abroad, as well as for international wholesale roaming services offered to other operators. For 2007, the regulation on roaming had a negative impact of EUR 21 million on revenues and EUR 14 million on EBITDA. The government approved a Royal Decree authorizing the use of 3G-UMTS technology in the 900 MHz frequency spectrum (“reorganization”) as from mid-2008. Base requested that this Decree be suspended but its appeal was dismissed by the courts. The EU plans with regard to the digital divide focus on the broadcasting services, with schedules and various spectrum authorization programs.

Challenges in 2008 Whether one takes stock of the past months or already looks ahead to the challenges in 2008, convergence is present at all levels. It is the focal point of the new products and services that we propose to our customers. 2007 was partly devoted to defining a “Move to all-IP” strategy for the fixed and mobile networks and the computer systems. In 2008, we will move to the implementation phase.

Offer any service anytime, anywhere, through any device. That is what our customers currently demand and that is the goal we must strive for. If we accept this fact, we must change our activities considerably. To achieve this, we must transform our network into an all-IP architecture. This is essential if we wish to provide a customer experience that perfectly integrates our voice, media and data services. In fact, we are the only operator in the Belgian market with all the assets required to propose a differentiated and segmented offer to our customers. We will continue to develop the network of the future and will be offering a number of innovative services such as High Definition television from a unified platform.

How we see healthy competition Another major challenge concerns the regulatory framework. As we have explained, the activities of the Group are subject to complex regulation, both at the Belgian and the European level. We are convinced that healthy and fair competition is a source of emulation for companies and progress for customers. Unfortunately, this competition is considerably distorted since not all market players are placed on an equal footing. After all, the cable operators who also offer telephony services and internet connectivity, are not subject to any regulation, especially with regard to the obligation to open up infrastructure and the imposition of minimum rates. We are convinced that healthy competition can only be achieved if a stable and fair framework is imposed which takes all the market players into account. We will continue to appeal for this to the various authorities.

Objectives 2008 > implement a new relationship model with the customer, placing emphasis on quality of service, partnerships and self-management > continue the technological transformation to simplify the networks (VDSL2, 3G, All IP, Fiber to the Home) and the optimization of processes > adapt staff and the management model to the technological evolutions > continue our efforts to ensure that a stable and fair regulatory framework is put in place

OUR NETWORK - 37

our assets

2008 changed to 8.54 cents per minute for Proximus, 9.42 cents per minute for Mobistar and 11.03 cents per minute for Base. Base immediately lodged an appeal requesting that the courts suspend this decision. The BIPT still has to confirm its final position on this new rate reduction which would come into effect on 1 July 2008 and would introduce full symmetry between Proximus’ and Mobistar’s rates and reduce to 10% the difference in relation to Base.

Borne

> our responsibilities

corporate social responsibility During the last two decades, information and communication technologies have deeply transformed our everyday life. The Belgacom Group has always been conscious of its responsibility as a leading player in the Belgian telecommunications sector. That is why corporate social responsibility (CSR) has been a constant priority, even though we did not formalize this until last year, when we published our first CSR report for 2006.

Strategy and governance Our CSR strategy, developed in 2007, aims to make the Belgacom Group one of the leading companies in this field in Belgium. Our approach is therefore based on strict ethical guidelines regarding the way we conduct our activities, and on constructive dialog with all our stakeholders in order to better understand and address their concerns.

“The publication of our annual report in a new format, including our report on social responsibility, reflects our willingness to incorporate our CSR approach in the Group’s overall strategy.” Concetta Fagard (Vice President Group Corporate Social Responsibility)

To achieve our objective, our strategy is based on two clear commitments: to promote an e-society which benefits the greatest number of people and to facilitate sustainable growth. Put more simply, the Belgacom Group aims to develop products, services and technologies that are accessible to all, regardless of the age or ability of the users, and which respect the environment. As regards governance, we have developed an internal reporting structure that is based on two clearly defined entities: the CSR department and the CSR Operating Committee (CSR Opco). These two entities are managed by the Group CSR Vice President, who reports directly to the CEO and the Group’s Management Committee.

Concrete commitments For a more comprehensive overview of all the CSR activities managed by the Belgacom Group, we invite you to consult our CSR report included in the annual report. You can also view our CSR commitments on www.belgacom.com.

38 - BELGACOM GROUP ANNUAL REPORT 2007

To define the scope of our corporate social responsibility and translate our strategy into an action plan, we conducted a comparative study of the problems taken into account by other telecom companies which are recognized as leaders in CSR internationally, and we consulted our main stakeholders (customers, employees, political and regulatory authorities, investors and sector-specific organizations). Finally, we interviewed the members of Group’s Management Committee.

This process has enabled us to develop six commitments at Group level: > improve access to communications > win customer confidence > guarantee transparent communication regarding health and online security > integrate corporate social responsibility into the company culture > improve the Belgacom Group’s efficiency in energy consumption and CO2 emission > invest in the community These commitments were unanimously approved by the Management Committee on 11 February 2008. They will be assumed by each Management Committee member and translated into activities by the CSR department and CSR Opco.

Daily management In order to possess a management tool that best reflects the Belgacom Group’s organizational structure, our CSR team will develop, in the course of 2008, a CSR management model whose goal will be to measure our main social and environmental impact in a consistent manner. This management system will also allow us to determine the general direction and performance indicators in social responsibility.

Communicating and raising awareness To raise our employees’awareness of the importance of social responsibility (besides through our existing training courses), we have decided to more actively communicate our CSR commitment through the various internal communication channels available to the Group.

corporate governance Corporate governance aims to define a set of rules and behaviours according to which companies are properly managed and controlled, with the objective of increasing transparency. It is a system of checks and balances between the shareholders, the Board of Directors and management. Belgacom is committed to comply with the legal, regulatory, and more specifically to the best practices of Belgium’s Corporate Governance Code. Additionally it has continued to reinforce its internal compliance program.

At Belgacom, the Articles of Association are strongly influenced by the specific legal status of the company. As a limited liability company under public law, Belgacom is in the first instance governed by the Law of 21 March 1991 on autonomous public sector enterprises (“the 1991 Law”). For matters not explicitly regulated otherwise by the 1991 Law, Belgacom is governed by Belgian corporate law. The key features of Belgacom’s governance model are: > a Board of Directors, which defines Belgacom’s general policy and strategy and supervises operational management > the creation by the Board of Directors within its structure of an Audit and Compliance Committee, a Nomination and Remuneration Committee and a Strategic and Business Development Committee > a Chief Executive Officer, who takes primary responsibility and ownership for operational management (including, but not limited to, day-to-day management) > a Management Committee, which assists the Chief Executive Officer in the exercise of his duties

Board of Directors As provided for in the 1991 Law, the Board of Directors is composed of: > Directors appointed by the Belgian state in proportion to its shareholding > Directors appointed by a separate vote among the other shareholders, for the remaining seats. These directors are independent according to the criteria of article 524 of the Belgian Code of Companies and the criteria of the Belgian Corporate Governance Code

The Extraordinary Shareholders’ Meeting of April 11, 2007 decided to decrease the number of members of the Board of Directors from 18 to 16, including the person appointed as Chief Executive Officer.

Functioning of the Board of Directors The Board of Directors meets whenever the interests of the company so require or at the request of at least two directors. In principle, the Board of Directors meets every year in four regularly scheduled meetings. The Board of Directors must also evaluate the strategic long-term plan in an extra meeting each year. In general, the Board’s decisions are made by simple majority of the directors present or represented, although for certain issues a qualified majority is required.

“Belgacom is committed to complying with the legal and regulatory framework and with the best practices of Belgium’s Corporate Governance Code. At the same time, it has to continue to reinforce its internal compliance program.” Saskia Mermans (Vice President Group Legal)

The Board of Directors has adopted a Board Charter which, together with the charters of the Board Committees, reflects the principles by which the Board of Directors and its Committees operate. The Board Charter provides, among other things, that important decisions should have broad support, understood as a qualitative concept indicating effective decision-making within the Board of Directors following a constructive dialogue between directors. They should be prepared by standing or ad hoc Board Committees with significant representation of non-executive, independent directors within the meaning of Article 524, § 4 of the Belgian Company Code. All charters were updated on January 2, 2008.

our responsibilities

Belgacom governance model

Committees of the Board of Directors In accordance with bylaws, Belgacom has an Audit and Compliance Committee, a

CORPORATE GOVERNANCE - 39

> our responsibilities

Members of the Board of Directors Theo Dilissen (1). Chairman of the Board of Directors of Belgacom since October 2004. Previously Mr. Dilissen was CEO, Managing Director and Vice-Chairman of Real Software and from 1989 to 2000 he was COO and member of the Board of ISS (a Danish publicly listed company). From September 2005 till the end of January 2008 he was President & CEO of Aviapartner. Since then he is Executive Chairman. Since October 2006, Mr. Dilissen is also independent member of the Board of Directors of Antwerp World Diamond Centre. He studied Sociology and holds a Master in Business Administration. Didier Bellens (2). President & Chief Executive Officer and Director of Belgacom since March 2003. More info see p. 45, Members of the Belgacom Management Committee. Guido J.M. Demuynck (3). Mr. Demuynck held various positions within Philips from 1976 till 2002. Amongst others, he was Vice President Marketing Audio in the USA, CEO of Philips in South Korea, General Manager Line of Business Portable Audio in Hong Kong, CEO Group Audio in Hong Kong. In 2000, he became CEO Product Division Consumer Electronics in Amsterdam and member of the Group Management Committee of Philips. In 2003, Mr. Demuynck joined Royal KPN where he became member of the Board of Management and CEO of the Mobile Division (KPN Mobiel Netherlands; Base Belgium, E-Plus Germany). Since June 2006, he is CEO of Kroymans Corporation BV in the Netherlands. Mr. Demuynck is also member of the Supervisory Board of Tom Tom since June 2005. Pierre-Alain De Smedt (4). Mr. De Smedt is Chairman of Febiac (Fédération belge de l’Automobile et du Cycle). From 1999 till end of 2004 he was Executive Vice President of Renault. He was chairman of Autolatina, VAG and Ford’s joint venture subsidiary in Latin America. He served as Chairman of Volkswagen Brazil and Argentina before being appointed as Chairman of Seat. Mr. De Smedt is member of the Board of Deceuninck Plastics Group, of the Compagnie Nationale à Portefeuille and of the Group Valeo. He is a graduate in engineering and economics from the University of Brussels (ULB). Carine Doutrelepont (5). Ms. Doutrelepont is a lawyer at the Brussels’ Bar and member of the Bar of Paris. She is the founding partner of the Belgian law firm Doutrelepont & Partners, which is

40 - BELGACOM GROUP ANNUAL REPORT 2007

specializing in Information and Communication Technologies, Intellectual property, Media law, Competition matters and European law. She holds a PhD in law from the University of Brussels (ULB). She is a Professor of Media Law, Intellectual Property Law, and European Law at the ULB Faculty of law, at the Institute for European Studies, as well as in universities in other countries. She is also President of the Information and Communication Law Centre of the ULB. For years, she worked as an Expert for the European Commission (General Directorate Internal Market), at the Belgian Senate and at the Belgian Competition Authority. She is the author of several books and publications. Martine Durez (6). Ms. Durez was the Chief Financial and Accounting Officer at La Poste till January 2006 when she became Chairman of the Board of La Poste. Ms. Durez was also Professor of Financial Management and Analysis at the University of MonsHainaut till 2000. She has also served as a member of the High Council of Corporate Auditors and the Committee of Accounting Standard and as a special emissary at the Cabinet for Communication and State Companies. She serves as a regent of the National Bank of Belgium. Ms. Durez graduated as a Commercial Engineer and holds a degree in Applied Economics from the University of Brussels (ULB). Philip Hampton (7). Mr. Hampton spent the first ten years of his career at Lazard Brothers in London, New York and Paris. He then took up the positions of Finance Director for British Steel plc, British Gas plc and British Telecommunications Group plc and for Lloyds TSB Group plc. He is currently Chairman of J. Sainsbury plc. Mr. Hampton is a Chartered Accountant and holds an MBA from INSEAD, Fontainebleau. Georges Jacobs (8). Baron Jacobs is Chairman of the Board of Directors of UCB. He started as an economist at the International Monetary Fund (USA). Later, he joined the UCB Group and was appointed Director and CEO of UCB in 1987 until 1 January 2005, when he became Chairman of the Board. Furthermore, Baron Jacobs is member and Chairman of the Board of Delhaize and a member of the Board of Brussels Airlines. He holds a law degree and a degree in economics from UCL, as well as a Master of Arts in Economics from the University of California, Berkeley.

Mimi Lamote (9). Since February 2007, Ms. Lamote is member of the management team of ZNA (hospital network Antwerp), where she is responsible for human resources, communication and facilitary services. Until June 2006 she was CEO of SCF (BelgiumLithuania) listed on the Belgian stock market. From 2001 until 2005 Ms. Mimi Lamote was General Manager of C & A BelgiumLuxembourg. From 2001 until 2004 she was member of the Board of Directors of the Federation of Enterprises in Belgium (FEB). In the same period, Mrs. Lamote was also member of the Board of Directors of Fedis (Federation of Distribution). She holds a university degree in Applied Economic Sciences of the University of Antwerp and a master in Retail Management of the Tias University of Tilburg.

Bachelor of Science in business administration from The University of California at Berkeley and a Master of Science in management from The Massachusetts Institute of Technology.

Maurice Lippens (10). Mr. Lippens is co-founder of Fortis, the first European cross-border banking and insurance group created in 1990. He served as the executive Chairman of Fortis until 2000 and since then he is the non-executive Chairman of the Board of Directors. He is a member of the Board of several companies including Groupe Bruxelles Lambert. He holds a law degree from the University of Brussels (ULB) as well as an MBA from Harvard Business School.

Robert Tollet (14). Mr. Tollet is the Chairman of the Board of Directors of the Société Fédérale de Participations et d’Investissement, a public sector holding company. He is also the Chairman of the Central Council for the Economy. Mr. Tollet holds a degree in Economics and a degree in Economic Analysis and Policy from the University of Brussels (ULB).

Oren G. Shaffer (12). Mr. Shaffer is Chairman of Virgocap Inc. Formerly, Mr. Shaffer was Vice Chairman and Chief Financial Officer of Qwest Communications from 2002 to 2007 and President and Chief Operating Officer of Sorrento Networks. He was a member of the Board of Directors at Belgacom from 1996 to 2000. He is a member of the Board of Intermec and Terex Corporation. He holds a

Paul Van de Perre (15). Mr. Van de Perre is the co-founder of GIMV (Venture Capital Firm) and was formerly a director of Sidmar (Arcelor). He is currently director of Grontmij NV and Greenbridge Incubator (University of Ghent). Mr. Van de Perre is CEO of Five Financial Solutions, a division of Praxis in Management (corporate finance) and CEO of Caesar Real Estate Fund (real estate finance). Mr. Van de Perre holds an MBA in Economics and is a certified accountant (IAB). Lutgart Van den Berghe (16). Ms. Van den Berghe holds a PhD in economics from Gent University where she is an extraordinary professor. As executive director, she heads the Competence Centre Entrepreneurship, Governance and Strategy at the Vlerick Leuven Gent Management School as well as GUBERNA. She lecturers on Corporate Governance and serves as a non-executive director in a number of listed and non-listed multinational companies such as Electrabel, CSM (The Netherlands), SHV Holding (The Netherlands).

CORPORATE GOVERNANCE - 41

our responsibilities

Michel Moll (11). Mr. Moll serves as a non executive director in industrial and financial companies such as Société Nationale de Construction Aérospatiale and the Belgian Corporation for International Investment (SBI). He is also a Censor of the National Bank of Belgium. Until April 2007 he was President & CEO of the limited company BATS (Belgian Advanced Technology Systems), specialized in Security Electronics, in Liège. Until December 2005, Mr. Moll was President of the venture company BRUFICOM and before that he was manager and director of the National Investment Corporation (SNI) in Brussels. Mr Moll graduated as Engineer in applied economics from the business school of the University of Louvain (UCL).

Michèle Sioen (13). Ms. Sioen started her career in 1988 at an IT company. Two years later she was appointed director of the Board of Directors of Sioen Industries and actively joined the Sioen Industries group. The group produces and processes technical textiles, designs and manufactures personal protective clothing and produces fine chemicals. Since 2005 Ms. Sioen is CEO of the Sioen Industries group. Furthermore, Michèle Sioen is president of Fedustria (the Belgian association of textile- wood and furniture industries). She holds a degree in Economics and several postuniversity degrees.

> our responsibilities

Members of the Board of Directors appointed by the Belgian State Name Theo DILISSEN Didier BELLENS Martine DUREZ Mimi LAMOTE Michel MOLL Michèle SIOEN Robert TOLLET Paul VAN de PERRE

Age 54 52 57 43 59 43 61 55

Position Chairman of the Board President & CEO Director Director Director Director Director Director

Nomination and Remuneration Committee and a Strategic and Business Development Committee.

Members of the Board of Directors appointed by the shareholders’ meeting and independent Term since expires 2004 2009 2003 2009 1994 2012 2006 2012 1994 2012 2006 2012 2003 2009 1994 2012

Name

Age

Position

Guido J.M. DEMUYNCK Pierre-Alain DE SMEDT Carine DOUTRELEPONT Philip HAMPTON George JACOBS Maurice LIPPENS Oren G. SHAFFER Lutgart VAN den BERGHE

57 63 47 54 67 64 65 56

Director Director Director Director Director Director Director Director

Two members must be appointed among the independent directors.

The Audit and Compliance Committee meets at least once every quarter. Mr. Philip Hampton (Chairman), Messrs. Pierre-Alain De Smedt, Michel Moll, Oren G. Shaffer and Paul Van de Perre are the members of the Audit and Compliance Committee.

The Nomination and Remuneration Committee’s role is to assist and advise the Board of Directors regarding: > the nomination of candidates for appointment to the Board of Directors and the Board Committees > the appointment of the President & Chief Executive Officer and appointment by the President & Chief Executive Officer of the members of the Management Committee > the appointment of the Secretary General > the remuneration of the members of the Board of Directors and the Board Committees > the remuneration of the President & Chief Executive Officer and members of the Management Committee > the review on an annual basis of the remuneration philosophy and strategy for all personnel, and specifically the compensation packages of top senior management > the oversight of the decisions of the President & Chief Executive Officer with respect to the appointment, the dismissal and the compensation of management, in order to allow the Board of Directors, when it chooses to do so, to exercise its overall supervising duties > corporate governance issues

Nomination and Remuneration Committee The Nomination and Remuneration Committee (NRC) consists of four directors. In line with its charter, this committee is chaired by the Chairman of the Board of Directors, who is an ex-officio member. One member is chosen among the directors appointed by the Belgian State.

The Nomination and Remuneration Committee meets at least four times a year. The first meeting each year reviews the performance, budgets for payout of bonus and merits, and long-term and short-term incentive plans. At that meeting an annual review of the philosophy and strategy of the remuneration is also discussed. At the second meeting the Nomination and Remuneration

Audit and Compliance Committee The Audit and Compliance Committee (ACC) consists of five non-executive directors, the majority of whom must be independent. In line with its charter, it is chaired by an independent director. The Audit and Compliance Committee’s role is to assist and advise the Board of Directors in its oversight of: > the quality and integrity of the statutory and the consolidated annual accounts and the financial statements of the Company > the relationship with the Company’s statutory auditors > the Company’s internal audit function > the Company’s compliance with legal and regulatory requirements; and compliance within the Company with the Company’s Code of Conduct and the Dealing Code > the evaluation of the risk framework and the methodology of risk assessment > the quality and integrity of quarterly reporting

42 - BELGACOM GROUP ANNUAL REPORT 2007

since

Term expires

2007 2004 2007 2004 2007 2007 2007 2004

2013 2010 2013 2010 2013 2013 2013 2010

Committee fixes the performance measurement targets of the President & Chief Executive Officer and the members of the Management Committee through Key Performance Indicators. In addition to these meetings, the Committee organizes a meeting on Human Resources and a meeting on Corporate Governance. Mr. Theo Dilissen (Chairman), Ms. Martine Durez, Mr. Georges Jacobs and Ms. Lutgart Van den Berghe are the members of the Nomination and Remuneration Committee. Strategic and Business Development Committee The Strategic and Business Development Committee (SBC) consists of six directors. In line with its charter, the President & Chief Executive Officer and the Chairman of the Board of Directors are ex-officio members, and the committee is chaired by the Chairman of the Board of Directors. One additional member is chosen among the directors appointed by the Belgian State. Three members must be appointed among the independent directors. The Board of Directors reviewed the role and composition of the Strategic and Business Development Committee at its meeting of March 1, 2007. The Strategic and Business Development Committee’s role is to review envisaged acquisitions, mergers and divestments over EUR 100 million and to review large corporate restructuring programmes. If appropriate, the Board of Directors can decide on establishing a special ad hoc Committee, dealing with a specific subject, and composed of members with the appropriate experience. Mr. Theo Dilissen (Chairman), Mr. Didier Bellens, and Messrs. Guido J.M. Demuynck, Maurice

Activity Report and Attendance at Board and Committee meetings Board ACC NRC SBDC TOTAL Name (total 5) (total 5) (total 6) (total 2) REMUNERATION Theo DILISSEN 2/5 4/6 2/2 104,000 Didier BELLENS 5/5 2/2 0 Guido J.M. DEMUYNCK 4/5 2/2 44,208 Pierre-Alain DE SMEDT 5/5 5/5 64,500 Carine DOUTRELEPONT 5/5 52,000 Martine DUREZ 5/5 6/6 67,000 Philip HAMPTON 5/5 5/5 77,000 Georges JACOBS 5/5 6/6 67,000

Changes in the composition of the Board of Directors On April 11, 2007, the General Shareholders Meeting appointed Ms. Carine Doutrelepont and Messrs. Georges Jacobs, Maurice Lippens, Oren G. Shaffer and Guido J.M. Demuynck for a period which will expire at the General Shareholders Meeting of 2013.

Directors’ remuneration The remuneration and compensation of the directors was decided by the General Meeting of 2004. The calculation of this compensation did not change in 2007: it foresees an annual fixed compensation of EUR 50,000 for the Chairman of the Board of Directors and of EUR 25,000 for the other members of the Board of Directors, with the exception of the President & CEO. All members of the Board of Directors, with the exception of the President & CEO, have the right to an attendance fee of EUR 5,000 per attended meeting of the Board of Directors. Attendance fees of EUR 2,500 have been foreseen for each member of an advisory committee to the Board of Directors, with the exception of the President & CEO. For the Chairman these attendance fees are doubled. The members also receive EUR 2,000 per year for communication costs. For the Chairman of the Board of Directors the communication costs are also doubled. The directors do not receive performance-based remuneration such as bonuses or long-term share-related incentive programmes, nor do they receive benefits linked to pension plans.

Transactions between the company and its Board Members and executive managers A general policy on conflicts of interest applies within the company. It prohibits the possession of financial interests that may affect personal judgment or professional tasks to the detriment of the Belgacom Group. In accordance with Article 523 of the Belgian Commercial Companies Code, the President & CEO Didier Bellens declared that he had a conflict of interest in connection with the Employee Incentive Plan item of the agenda of the Board of Directors’ meeting of 1 March 2007. He is in fact a proposed beneficiary of the Senior Management Short- & Long-term Incentive Plan 2006. He informed Belgacom’s auditor of this conflict of interest and decided not to participate in the deliberation or voting on this item.

by employees, officers and directors and the possible sanctions. This dealing code has been widely communicated and is available to all employees. A list of key persons is kept, and all directors and key employees were requested to sign an affidavit that they had read, understood and agreed to comply with the dealing code. Closed periods (including prohibited periods) are defined, and any deal must be communicated to and cleared by the Head of Compliance Services before transaction (see “Compliance” section below).

In accordance with Article 523 of the Belgian Commercial Companies Code, Ms. M. Durez declared that she had a conflict of interest in connection with the Certipost item of the agenda of the Board of Directors’ meeting of 20 December 2007. She informed Belgacom’s auditor of this conflict of interest and decided not to participate in the deliberation or voting on this item.

our responsibilities

Lippens, Robert Tollet and Oren G. Shaffer are currently the members of the Strategic and Business Development Committee.

Board ACC NRC SBDC TOTAL Name (total 5) (total 5) (total 6) (total 2) REMUNERATION Mimi LAMOTE 5/5 52,000 Maurice LIPPENS 5/5 0/2 52,000 Michel MOLL 5/5 3/5 74,500 Oren G. SHAFFER 5/5 4/5 2/2 67,000 Michèle SIOEN 5/5 52,000 Robert TOLLET 5/5 2/2 57,000 Lutgart VAN den BERGHE 5/5 6/6 67,000 Paul VAN de PERRE 5/5 4/5 62,000

Application of the measures taken by the company in order to comply with legislation on insider trading and market manipulation (market abuse) In order to comply with legislation on insider dealing and market manipulation, Belgacom adopted a dealing code prior to the Initial Public Offering. This code aims to create awareness about possible improper conduct

CORPORATE GOVERNANCE - 43

> our responsibilities

Management President & Chief Executive Officer The President & Chief Executive Officer is appointed by the Belgian State by Royal Decree deliberated in the Council. Appointments are for a renewable six-year term, and can be terminated only by Royal Decree deliberated after discussion in the Council of Ministers. In line with the 1991 Law and the Company’s Articles of Association, the President & Chief Executive Officer is a member of the Board of Directors. The President & Chief Executive Officer and the Chairman of the Board of Directors must come from different language groups. The President & Chief Executive Officer is entrusted with day-to-day management, and reports to the Board of Directors. In addition, in line with the 1991 Law and the company’s Articles of Association, the Board of Directors may, deciding by a majority of two thirds of its members present or represented, delegate all or part of its powers to the President & Chief Executive Officer, with the exception of: > the approval of the Management Contract with the Belgian State and changes to it > the establishment of the business plan and general policy of the company > the supervision of the President & Chief Executive Officer > and other powers explicitly reserved by law to the Board of Directors which include, for example, the establishment of the annual accounts for submission to the General Shareholders Meeting and the preparation of merger proposals The Board of Directors has delegated broad powers to the President & Chief Executive Officer.

Mrs. Bridget Cosgrave resigned in October 2007 from all formal functions and mandates she held in the Belgacom Group.

The President & Chief Executive Officer is bound by a non-competition clause of 12 months prohibition from working for any other mobile or fixed licensed operator active on the Belgian market, and will receive an amount equal to one year’s salary as compensation.

Mr. Everaert also resigned in December 2007 from all formal functions and mandates he held in the Belgacom Group but will continue to assist Belgacom in developing new markets opportunities related to the ICT activity. The members of the Belgacom Management Committee, except one, have a contractual termination clause with a maximum indemnity of two years of remuneration after 12 years of service. The other member has no specific clause, in which case Belgian law prevails.

Management Committee The composition and the powers of the Management Committee are determined by the President & Chief Executive Officer. The Management Committee’s role is to assist the President & Chief Executive Officer in the exercise of his duties.

The members of the Belgacom Management Committee, who are bound by a non-competition clause of 12 months prohibition from working for any other mobile or fixed licensed operator active on the Belgian market, will receive an amount equal to six months salary as compensation.

The Management Committee aims to decide by consensus, but in the event of disagreement, the view of the President & Chief Executive Officer will prevail. The Management Committee generally meets on a weekly basis.

Management Committee Name Scott ALCOTT Astrid DE LATHAUWER Michel GEORGIS

Age 41 44 54

William MOSSERAY Ray STEWART Bridget COSGRAVE (until Oct. 22) Ronald EVERAERT (until Dec. 31)

43 58 46 57

(1) Basic annual salary + variable remuneration + post-employment benefits.

44 - BELGACOM GROUP ANNUAL REPORT 2007

In 2007, the Belgacom Management Committee was composed of the following members, in addition to the President & Chief Executive Officer (see table below).

The current President & Chief Executive Officer is Mr. Didier Bellens. Mr. Bellens’ six-year fixed-term contract started as from March 1, 2003. If the employer terminates the contract prematurely, except for serious misconduct, a severance pay of three times annual gross salary (1) will be due.

Position Executive Vice President Service Delivery Engine Executive Vice President Human Resources Executive Vice President Consumer Business Unit & Chief Executive Officer Proximus Executive Vice President Strategy Executive Vice President Finance Executive Vice President Enterprise Business Unit Executive Vice President EBU International

Members of the Belgacom Management Committee

Scott Alcott (2). Scott Alcott is the Executive Vice President of the Service Delivery Engine entity and also acts as Executive Vice President (a.i.) Entreprise Business Unit and as CEO (a.i.) of the Telindus Group. Previously, Mr. Alcott had served as Chief Operating Officer of Belgacom’s Fixed Line Services, Chief Strategy Officer, Chief Information and Technology Officer, General Manager of Marketing and Product Management and as Director of Skynet and Director of Belgacom’s Multimedia Venture Capital Fund. In 1995, Mr. Alcott joined Ameritech (now SBC) as Director Marketing & Product Management - Long Distance Division, and later as Director New Product Development/Packaging. Mr. Alcott holds a B.S. in Economics from the Wharton School at the University of Pennsylvania.

Astrid De Lathauwer (3). Astrid De Lathauwer is the Executive Vice President Human Resources. Ms. De Lathauwer joined Belgacom in 2000 and previously held the positions of Top Group Resources & Talent Director and HR Director of Belgacom. Prior to joining Belgacom, Ms. De Lathauwer worked in marketing and human resources with AT & T and Monsanto. Ms. De Lathauwer holds a degree in History of Art from the University of Ghent and a degree in International Politics and Diplomatic Sciences from the University of Leuven. Michel Georgis (4). Michel Georgis is the Executive Vice President of the Consumer Business Unit. As from May 2005, Michel Georgis continues to occupy the function of CEO of Proximus. Prior to this position, he was Chief Operations Officer at Proximus, where he has been working since 2000. Mr Georgis started his career at Coca-Cola Belgium. In 1991 he joined Interbrew, where he filled different positions before becoming Sales & Marketing Director Central & Eastern Europe. He is Chairman of the board of Skynet. Mr Georgis holds a Master’s degree in Applied Economics from the University of Leuven. William Mosseray (5) is the Executive Vice President Strategy for the Belgacom Group. Previously he held various executive positions within Belgacom in the following fields: human resources, restructuring & change management and general management. Mr. Mosseray joined Belgacom in 1993 as Executive Advisor to the CEO. In 1996-1997 he worked for Ameritech, at that time the leading telecom operator in the Midwest region and Belgacom’s main private shareholder. William Mosseray obtained a law degree from the KULeuven and a tax law degree from ICHEC. Mr. Mosseray also holds an MBA from the Vlerick Leuven Ghent Management School and completed the Stanford Executive Program at the Stanford Business School in California. Ray Stewart (6). Ray Stewart is Executive Vice President Finance & CFO. Previously he has served as the Chief Financial and Administration Officer of Belgacom. Mr. Stewart was employed by SBC, but became an employee of Belgacom on 1 April 2004. Prior to Belgacom, from 1994 until 1997 he was the Chief Financial Officer for Matav which is the incumbent Telephone Company for Hungary. From 1991 to 1994 he was the Chief Financial Officer for Ameritech International which was the International Business Development unit for Ameritech headquartered in Chicago. He has a Business Undergraduate degree in Accounting and a Masters of Business Administration in Finance. He is also a Certified Public Accountant. Ray Stewart is also member of the Board of directors of Nyrstar since September 2007.

CORPORATE GOVERNANCE - 45

our responsibilities

Didier Bellens (1). Didier Bellens was appointed as President & Chief Executive Officer of Belgacom in March 2003. Mr. Bellens started his career at Deloitte Haskin & Sells. He was financial director of the Groupe Bruxelles Lambert until 1985 before taking up the position of Deputy General Manager of the Pargesa Holding, responsible for management of holdings, mergers and acquisitions. In 1992 he returned to the Groupe Bruxelles Lambert as Managing Director, position that he occupied until 2000. In this capacity he was responsible for strategic participations in companies such as Royale Belge, BBL and CLT. He played an instrumental role in the merger of AXA with Royale Belge, the change in ownership of BBL and the merger of CLT and UFA. Between 2000 and 2003 he acted as Chief Executive Officer of RTL Group where he managed the company with an emphasis on international development. He concluded the merger with Pearson Television and the IPO of RTL Group. Didier Bellens is member of the Board of Directors of Belgacom ICS, Telindus Group, Proximus, AXA Belgium, VOKA-Flanders’ Chamber of Commerce and Industry, and the Foundation Erasme. He is member of the Management Committee of the FEB-Federation of Enterprises in Belgium. He also serves as independent Chairman of the Appointments and Remuneration Committee, and as independent Director of the Audit Committee and of the Board of Directors of the Compagnie Immobilière de Belgique. In addition, he is Vice Chairman of the Solvay Business School’s Consultative Council. Previously, he served as member of the Board of Directors of, amongst others, IMERYS in Paris, the Banque Bruxelles Lambert, M6 in Paris and the Banque Internationale in Luxembourg. Mr. Bellens holds a degree in Economics and Business Administration from the University of Brussels (ULB). He is also advisor to CV Capital Partners.

> our responsibilities

Executive Remuneration The Nomination & Remuneration Committee sets the remuneration policy and individual packages for the President & CEO and the members of the Management Committee. Belgacom has developed an executive remuneration policy which rewards executives competitively, taking into account Group, Line of Business and Individual performance. The company wants to position executive pay towards the median in the market for base salaries, and towards the upper quartile for total remuneration in case of sustained excellent performance. This positioning is verified on a regular basis by the Nomination & Remuneration Committee, by benchmarking executive pay against a set of peer companies in the ICT sector, both in Belgium and in Europe. The remuneration philosophy strives to align management and shareholders’ interests. Short term employee benefits Base salaries of the President & CEO and the Management Committee are reviewed annually by the Nomination & Remuneration Committee, based on an extensive review of performance and potential assessment provided by the President & CEO, as well as external benchmarking data. The annual bonus scheme rewards perfor mance against a set of pre-defined Key Performance Indicators, which are set by the Board of Directors upon advice of the Nomination & Remuneration Committee. For 2007, these performance indicators included financial metrics as well as metrics related to new product introduction, customer satisfaction and employee commitment. The amount of remuneration and other benefits granted directly or indirectly to the members of the Belgacom Management Committee in 2007, by Belgacom or by any other undertaking belonging to the Belgacom Group is (benefit based on gross or net remuneration, depending on the type of benefit, employer social contribution not included): (1) Basic annual salary + variable remuneration. (2) Including the promised incentives contractually granted in March 2003.

46 - BELGACOM GROUP ANNUAL REPORT 2007

President (in EUR) & CEO Short-term employee 1,794,002 (2) benefits (1)

Other Members of the Management Committee 3,004,283

Long-term employee benefits Long-term employee benefits consist of post-employment benefits and equity benefits. The members of the Management Committee participate in a complementary pension scheme. In 2007, the company contributed an amount of EUR 903,480 for the President & CEO, and an amount of EUR 1,928,428 for the other members of the Management Committee in insurance premiums for post-employment benefits. On an annual basis the members may also receive a stock-option grant. On an individual basis, the Belgacom Management Committee received the following options: (in options) Scott ALCOTT Bridget COSGRAVE Astrid DE LATHAUWER Ronald EVERAERT Michel GEORGIS William MOSSERAY Ray STEWART Didier BELLENS

2007 13,949 21,561 16,325 0 11,965 12,218 22,312 39,767

Grants vest over a period of three years in equal instalments, and are exercisable during a period of seven years. 54,532 options were exercised during 2007 by the members of the Management Committee. On a cumulative basis, the President & CEO still holds 288,376 options, and current other members of the Management Committee 383,282 options. Termination benefits Total termination benefits of EUR 3,330,221 are accrued or paid for Ms Cosgrave and Mr. Everaert.

Board of Auditors The Board of Auditors of the company is composed as follows:

> E RNST & YOUNG Réviseurs d’Entreprises S.C.C./Bedrijfsrevisoren B.C.V., represented by Marnix Van Dooren, also Chairman of the Board of Auditors >R omain LESAGE, Member of the Court of Auditors > P ierre RION, Member of the Court of Auditors > CALLENS, GUEVAR, VAN IMPE & Co S.C.C./B.C.V., represented by Herman VAN IMPE Ernst & Young is responsible for the audit of the consolidated financial statements of Belgacom and its subsidiaries. The other members of the Board of Auditors are, together with Ernst & Young, entrusted with the audit of the non-consolidated financial statements of the parent company. Mr. Lesage’s mandate will expire on 30 June 2008, the mandates of Mr. Rion, Ernst & Young, and Callens, Guévar, Van Impe & Co. will expire at the annual General Shareholders Meeting in 2010.

Additional fees paid to the statutory auditors In accordance with the provisions of Article 134 § 2 of the Belgian Companies Code, Belgacom declares the supplementary fees that it granted during the 2007 financial year to two auditors, members of the Joint Auditors: Ernst & Young Réviseurs d’entreprises S.C.C. and Callens, Guevar, Van Impe & Co. S.C.C. The Group expensed during the year 2007 an amount of EUR 399,963 for non-mandate fees for Ernst & Young Réviseurs d’entreprises S.C.C, the Group’s auditors. This amount is detailed as follows: (in EUR) Other mandatory audit missions Tax advice Other missions Total

Auditor 32,885

Network of auditor 23,775

0 322,028 354,913

20,735 540 45,050

(in EUR) Other mandatory audit missions Tax advice Other missions Total

Auditor 593 0 4,200 4,793

Government Commissioner The State has appointed Mr. Roger De Borger as Government Commissioner in order to supervise, in conformity with the 1991 law, the management of Belgacom from an administrative point of view.

Departure from the Belgian Corporate Governance Code Belgacom complies with the principles and provisions of the Belgian Corporate Governance Code, except provisions 4.6, 5.3/1, 5.4/1 and 8.9. Although provision 4.6 stipulates that mandates of directors should not exceed four years, the mandates of Belgacom directors are for six years as prescribed by article 18 of the 1991 Law. Contrary to provisions 5.3/1 and 5.4/1, the Company has chosen to reflect also in the Nomination & Remuneration Committee the balance between the directors appointed by the Belgian State and the independent directors. Since provision 8.9 is not relevant to Belgacom, given its current shareholder structure, the Articles of Association do not provide for shareholders representing 5% of the capital to submit proposals to the Annual General Meeting. Under the Articles of Association, shareholders must represent at least one-fifth of the company’s share capital to be entitled to do so.

Compliance Role of Compliance at Belgacom In an increasingly complex legal and regulatory context and a changing business

environment, compliance plays an important role in the business world. The Belgacom Group Compliance Office is responsible for coordinating compliance activities within the Belgacom Group, explaining the applicable rules, providing management with the required tools to encourage compliance, and ensuring a consistent approach to compliance within the Group. All employees are expected to comply with the Code of Conduct and the various policies as they are updated. Also in 2007, to raise awareness, the Top Group Resources within the Group signed, as role-models, a “Code of Conduct Acknowledgement and Conflict of Interest Statement”. This commitment will be renewed every year. Moreover, two surveys on compliance have been conducted, covering a representative sample of employees. This tells us about compliance awareness among the staff and enables us to improve the organization of the compliance function within the Belgacom Group. In addition to the existing helpdesk, a “Code Focus” allowed employees to report any breaches of the law, the Code of Conduct or other regulations.

Organization of compliance activities The Compliance Office is managed by the Head of Compliance Services, who reports directly to the Chairman of the Audit and Compliance Committee (ACC). The ACC Charter determines the ACC’s responsibility in helping and advising the Board of Directors with respect to monitoring Belgacom’s compliance with the legal and regulatory requirements, as well as internal compliance with the Code of Conduct. The Group Compliance Council is a decisionmaking and advisory body for the Compliance Office at an operational level. The Council is chaired by the Head of Compliance Services, and is composed of compliance managers from the main subsidiaries and individuals exercising key positions within the Group.

The Compliance Program Ten compliance domains form the pillars of the Belgacom Compliance Program: > Code of Conduct > Corporate governance > Regulatory compliance > Accounting practices > Risk management > Competition law > Chinese walls > Privacy > Environment > Dealing Code These domains were determined on the basis of the company’s specific activities and operational environment, and are overseen by a “domain owner”. In addition to these ten domains, other policies and procedures have been drawn up in the distinct legal entities, relating to other subjects or providing more detailed explanations. A compliance structure was developed not only at group level but also in each of the main subsidiaries, each of which is headed by a compliance manager. In consultation with the domain owners and within the framework specified by the Group Compliance Office, the compliance manager determines the specific compliance approach to be adopted within his/ her subsidiary. A specific compliance plan, with five components (policy drafting, communication, training, internal control and processes, and reporting), is drawn up for each domain. However, given the current organizational changes in the Belgacom Group, a new structure has been developed for 2008 onwards, striving for a compliance organization at group level based upon Key Group Policies. In 2007, the Head of Compliance Services reported twice to the Audit & Compliance Committee. In addition to its coordination task, the Compliance Office is also responsible for ensuring Belgacom Group employees recognise the need to be fully aware of and to comply with internal and external regulations. Several awareness-raising campaigns promoting employee compliance activities within the company have been organized.

CORPORATE GOVERNANCE - 47

our responsibilities

The Group also expended during the year 2007 an amount of EUR 4,793 for non-mandate fees paid to Callens, Guevar, Van Impe & Co. S.C.C. This amount is detailed as follows:

glossary 3G Third-generation mobile telephony, better known as UMTS (Universal Mobile Telecommunications System). ADSL (Asymmetric Digital Subscriber Line): Technology which allows a high-speed, point-to-point digital connection over a copper pair. ADSL2 + Advanced version of ADSL, which allows a bandwidth of up to 15 Mbps. ARPU (Average Revenue Per Unit): An indicator for determining a customer’s profitability. ATM (Asynchronous Transfer Mode): A technique enabling high-speed transfer of digital data. It consists in dividing information flow (voice, data and image) into fixed-size packets, known as «cells». BROBA (Belgacom Reference Offer for Bitstream Access): Belgacom’s reference offer for binary rate access. BRUO (Belgacom Reference Unbundling Offer): Belgacom’s reference offer for local loop unbundling. Backbone A high bandwidth line which acts as the mainstay linking access providers to the world network. Bilan (Belgacom Interconnection of LAN): A total telecom solution based on the Internet Protocol (IP), Frame Relay and ATM networks. Blog A website on which one or several persons express their views on a regular basis. Broadband A high-bandwidth network capable of transmitting large data flows. CDMA (Code Division Multiple Access): A digital technique in which different conversations can be transmitted simultaneously and are differentiated by being tagged with a code. DRM (Digital Rights Management): An access control technology whose purpose is to limit usage of digital media or devices. DECT (Digital Enhanced Cordless Telephone): European digital-radio transmission standard for mobile or fixed telephony (local wireless loop). DVB-H (Digital Video Broadcasting - Handheld): Digital, microwave radio broadcasting system intended for reception on handheld devices. DVB-T (Digital Video Broadcast - Terrestrial): Broadcasting standard (signal transmission) of digital television via radio waves. EDGE (Enhanced Data Rates for Global Evolution): Intermediate technology halfway between GSM and UMTS. EPG (Electronic Program Guide): Standard enabling the broadcasting, in teletext mode, of scheduled television programs in the form of an on-screen interactive guide. Frame Relay Data transmission protocol that divides a physical communications line into several virtual channels. GPRS (General Packet Radio Service): A second-generation mobile telephony standard. It enables direct internet access and data exchange at speeds 18 times faster than those of the GSM protocol and allows volume-based pricing. GSM (Global System for Mobile Communications): An abbreviation which is often synonymous, in common parlance, with the mobile telephone or terminal. It is actually a European standard for a common digital cellular telephony system. HDTV (High Definition Television): High-resolution television, a sound and image quality standard. HSDPA (High Speed Downlink Packet Access): A protocol for mobile telephony, sometimes called 3.5 G or even 3 G +. ICT (Information and Communication Technologies): generally refers to the new technologies used in the processing and transmission of mainly IT, internet and fixed and mobile telephony data. IP (Internet Protocol): A protocol for transmitting data packets, used for routing and transporting messages via the internet. IP VPN (IP Virtual Private Network): A VPN offers the advantages of a private network (security, etc.) while using public infrastructures. The user thereby saves on network management and infrastructure costs. ISDN (Integrated Services Digital Network): A fully digitized fiber-optic network enabling simultaneous, high-speed transmission of voice, text, data and images (still or animated). ISP (Internet Service Provider): An organization that offers a connection to the internet computer network. LAN (Local Area Network): A computer network on a relatively limited geographical scale, e.g., a computer room, a specific house, a building or a company site. MPEG2/MPEG4 (Moving Picture Experts Group): Standard for video compression. MPEG-4, which is more powerful (delivers the same quality as MPEG-2 with smaller packets of data), is the standard of the future for digital television applications. Moblog Content posted on the internet from a mobile device, such as a cellular telephone or personal digital assistant (PDA).

48 - BELGACOM GROUP ANNUAL REPORT 2007

MVNO (Mobile Virtual Network Operator): A mobile telephony operator that buys wholesale minutes from wireless carriers, and then repackages them for sale to its customers under its own brand. NTSC (National Television System Committee): A standard for color video coding developed in the USA in the 1950s. Designed for video formats of 525 lines/60 Hz. This standard is used in North America and parts of South America and Asia. PABX (Private Automatic Branch eXchange): A company exchange around which the company’s internal telephone network is organized. It also enables data transmission. PAL (Phase Alternative Lines): A color television process used in Europe, delivering 625 lines/50 Hz, 25 images per second. Quadruple Play A combined offer consisting of fixed and mobile telephony, internet and television services from a high-speed access. RTT RTT: Régie des Télégraphes et Téléphones (the national telegraph and telephone company). SDSL (Symmetric Digital Subscriber Line): Technology that transports data at speeds of up to 2.3 Mbps, upstream and downstream. SECAM (Séquentiel Couleur à Mémoire - Sequential Color with Memory): A standard for color video coding invented by Henri de France and introduced in 1967. Designed for video formats of 625 lines/50 Hz. Established mainly in France, former Eastern European countries, countries in the former USSR and the Middle East. Streaming A technique for downloading multimedia files enabling surfers to read the file in real-time, without waiting for full download. This is the case, for example, with sound or video on the internet. TCP-IP (Transmission Control Protocol - Internet Protocol): A protocol used in conjunction with Internet Protocol (IP) to transmit data in billing units (datagrams or packets) between computers via the internet. IP processes the actual delivery of data, whereas TCP ensures the follow-up of individual units of data to ensure they are routed efficiently over the internet. TNT (Télévision Numérique Terrestre - Terrestrial Digital Television): A method for transmitting digital programs via radio waves. MPEG compression makes it possible to broadcast five or six stations on one channel, compared to only one with analog technology. Triple Play A combined offer consisting of fixed telephony, internet and television from a high-speed access. UMTS (Universal Mobile Telecommunication System): A third-generation telecommunications system capable of providing multimedia services at a very high speed. VDSL (Very High Rate Digital Subscriber Line): An advanced version of ADSL, which allows a bandwidth of up to 20 Mbps. VPN (Virtual Private Network): A private network whose architecture is based on the use of the TCP-IP protocol. VoD (Video on Demand): An interactive video system, with the same functionalities as a VCR, which allows users to order films or television programs remotely and against payment. VoIP (Voice over Internet Protocol): A technique for transmitting voice conversations over the internet or any other network supporting the TCP/ IP protocol. WDM ([Dense] Wavelength Division Multiplexing): A technique enabling several independent flows of digital information to coexist on the same optical fiber. Wi-Fi WiFi stands for wireless fidelity. WiFi technology enables short-range, wireless, high-speed surfing via a hotspot. Wimax (Worldwide Interoperability for Microwave Access): A wireless communication protocol intended for establishing connections over longer distances than with WiFi and with a greater number of simultaneous connections. Wireless LAN A computer network on a relatively limited geographical scale that interconnects different workstations via radio waves.

key performance indicators

general information

Financials

Additional Information

Total revenue 2007 (in EUR million)

Net income (Group Share) (in EUR million)

Basic earning per share (in EUR)

Free Cash flow (in EUR million)

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Boulevard du Roi Albert II/Koning Albert II-laan, 27 1030 Brussels Belgium VAT BE 0202.239.951

Brussels Register of Legal Entities Brussels Trade Registry 587.163 Consultation of the issuer’s documents The public documents concerning the issuer can be consulted at the registered office.

Operationals

2005

2006

2007

5,458 6,100 6,065 238 0 0 5,696 6,100 6,065 2,214 2,149 2,077 2,098 2,149 2,031 -726 -802 -774 1,372 1,347 1,256 64 104 1 1,436 1,451 1,258 -339 -358 -300 139 121 0 959 973 958

Thanks

+165,654 +308,796 153,000 Explore

Objects of the Company

customers Belgacom TV

new active mobile customers

packs sold

received the European Service Provider Innovation Award

Printed on certified

paper

highlights > January 2007

• Thanks to a roaming agreement between Belgacom and Proximus, customers can surf wirelessly in over 1,000 hotspots, regardless of their type of connection.

> February 2007

> March 2007

• mobiSud becomes the first virtual operator (MVNO) to operate in cooperation with Proximus.

> April 2007

• The Belgacom Group launches the “Packs”, the first bundled offers between Belgacom and Proximus. • Telindus reinforces its Dutch subsidiary with the acquisition of ISIT BV.

> May 2007

annual report 2007

> June 2007

> July 2007

• Belgacom decides to offer its professional customers electronic billing free of charge. • Proximus and RSC Anderlecht launch a prepaid mobile offer called RSCA Mobile.

> August 2007

• Belgacom TV launches the “11 Multi live” service which enables customers to watch all live football matches simultaneously.

• Proximus integrates eBay in its Vodafone live! portal. • Mid-year financial results: Belgacom exceeds expectations and update guidance.

> September 2007

• Proximus launches SMS-based tickets, a first in western Europe. This initiative allows passengers of Flemish public transport company “De Lijn” to pay for their tickets by mobile phone.

> October 2007

> November 2007

• Belgacom further enhances its offering by launching the ADSL Budget rate package and announces a 99.7% population coverage rate for ADSL.

> December 2007

• The League of Families awards Belgacom the “FamilyFriendly Company” prize. • Belgacom receives the “Contact Centre Award” in recognition of the quality of its Customer Service.

> January 2008

• EDS-Telindus consortium wins new ICT contract from the Flemish administration.

> February 2008

> March 2008