Activity report 2013 by Belgacom Group

belgacom ACTIVITY REPORT 2013

WE ARE...

We are a telecommunications company operating in the Belgian and international markets. The quality of our interconnected fixed and mobile networks makes us the leading provider of telephony, Internet and television services in Belgium. ItÂ also allows us to offer anywhere and anytime access to digital data and the best multimedia content. In addition, we develop solutions to reduce our CO2 emissions, support the most vulnerable communities and promote access to the digital world for all. This is how we contribute to the economic, social and environmental development of the society in which we are rooted.

>> Discover the online version of this annual report at http://annualreport.belgacom.com

22 Creating and sharing value

Simplification at the service of the customer

CONTENT 10

Content to view, experience and share, everywhere and anytime

Fit for growth

A unique experience for each residential customer

MARKET CONTENT CONTEXT

Our networks as the backbone for new services

1 A more agile organisation

02 Chairman Interview 04 CEO Interview 06 Highlights 2013

46 Expertise appreciated inter足nationally

A single partner for our business customers

08 Key figures 2013 10 Operational context 14 Strategy 20 Simplification 22 Contribution 26 Networks 30 Human Resources 34 People Focus 38 Customer 48 Finance 50 Belgacom share 54 Corporate Governance

BELGACOM ACTIVITY REPORT 2013

Finding a good balance in a saturated market

MARKET INTERVIEW CONTEXT

BELGACOM ACTIVITY REPORT 2013

A COLLECTIVE RESPONSIBILITY Belgacom is not only a driving force of economic growth, but also of progress for Belgian society as a whole. The company’s various stakeholders rightfully have high expectations, which must be translated into a sustainable vision for the future and a growth-driven corporate strategy. For Stefaan De Clerck, Chairman of the Board of Directors, the company’s collective responsibility and the interests of its shareholders ultimately go hand in hand. We talked to him about recent changes and future challenges.

You have been Chairman of the Board of Directors since September 2013. A lot has changed over those few months... Belgacom is indeed going through a period of major changes. The technological evolution in the telecoms sector is accelerating, both in the field of mobile solutions and fixed solutions. To be able to offer our customers the highest quality and the most innovative products, we must constantly put the bar higher as a company. Continuous development is an absolute necessity. This is, therefore, a priority of our new CEO, who was appointed at the beginning of 2014. In addition, the company has a new Board of Directors, with a strong female representation. This renewal immediately creates a dynamic which benefits the good management of our company. All elements are in place again to allow Belgacom to develop a new long-term vision and set the stage for a new successful decade. Exciting months and years lie ahead of us, also in a European and international context. Now it’s a question of setting out a new course.

Why is this such a crucial period?

“ALL ELEMENTS ARE ON HAND FOR TEN NEW, SUCCESSFUL YEARS.”

On a hyperdynamic and constantly innovating market, the challenge for Belgacom is to find the right balance between investment and cost savings. On the one hand, Belgacom must not make any concessions to the investments required to prepare for the future, but on the other, the competitive environment forces us to work as efficiently as possible. That requires a simplification of processes, products and services, which in the end also benefits the customer experience and customer satisfaction.

How can the different stakeholders help achieve that successful transition? I’m a fervent advocate of dialog. Belgacom has shown that, together with its most important stakeholder, its personnel, it is able to successfully marry consultation with efficiency. For many years now, the company has experienced a remarkable climate of industrial peace, despite the difficult market conditions. We hope that in 2014 this culture of consensus will again prove its soundness.

STEFAAN DE CLERCK CHAIRMAN OF THE BOARD OF DIRECTORS

The same reasoning also applies to the majority and the minority shareholders. In the coming months the main task will be to establish a positive climate of consultation with the new government. But we also want to listen to the minority shareholders. Investments in the long term must be shouldered by everyone. Our entire strategy must be established on a solid basis that is as broad as possible. The shareholders can certainly help to show the importance of Belgacom, not just as a lever for economic growth, but also as a company that helps society move forward, with new applications, including in fields, such as service to citizens, healthcare and education. This is only possible if the company remains competitive and manages to start growing sustainably again.

Is the public shareholding a guarantee for stability? It is extremely important that the government makes sure that the telecom infrastructure and the related services are generally available to everyone, both citizens and companies. This is a collec-

tive responsibility. All companies, from start-ups to multinationals, must be able to rely on the best possible infrastructure to develop their activities. Investments in the telecom infrastructure are therefore essential for the economy as a whole. In that respect, the public shareholder must create a framework that makes such investments possible and ensure that they actually take place.

What is your view of the company today? You must get to know the company inside out to really be able to see how intensively people are working and the quality that is being delivered, while the technological sector and the regulations are rapidly changing. It is a company that must constantly have a 360° view of its broad, quickly changing environment. Despite the crisis and various profound changes, Belgacom manages to remain remarkably healthy and dynamic. This is thanks to its highly competent employees, a strong focus on the consumer and major long-term investments. Those are our assets for the future.

BELGACOM ACTIVITY REPORT 2013

MARKET INTERVIEW CONTEXT

“BELGACOM HAS SHOWN ITS ABILITY TO SUCCESSFULLY MARRY CONCERTATION WITH EFFICIENCY.”

MARKET INTERVIEW CONTEXT

BELGACOM ACTIVITY REPORT 2013

BUILDING ON OUR STRENGTHS TO GENERATE SUSTAINABLE GROWTH

4 Belgacom has all the assets to restore growth in a constantly changing market. Our vision is based on a combination of highperformance connectivity, tailored solutions, and attractive content. We perform an essential service. By bringing life to their screens, we improve the lives of consumers and businesses. This may be self-evident today, but you still need 15,000 employees to realize this daily.

DOMINIQUE LEROY CEO OF BELGACOM

What is Belgacom’s main challenge? We operate in an increasingly competitive market. Although we are seeing an increase in screens, with a real boom in sales of smartphones and tablets, the overall number of customers isn’t growing anymore. The challenge is therefore to increase the revenue per customer by offering innovative services. We have strong assets to come out on top during this pivotal period.

What are these assets? Our major investments in 3G, 4G, vectoring and the optical local loop (“Fiber to the Home”) have given us a technological advantage in fixed and mobile networks. We are also at the cutting edge of technology in the field of digital television. We have developed a vast content offer and improve it continuously. We offer access to this content on all screens, anytime, anyplace.

Consumers and businesses want solutions that make life easier on a daily basis. They want to use their different screens for entertainment, to share emotions and work smarter. The con vergence of our fixed and mobile networks brings life to all these screens. We are still far from having exploited all the possibilities in terms of content, applications and entertainment. Security is another area with great needs, both in the private sphere (personal data protection) and the professional sphere (IT security, protection against cyber-attacks, etc.). Cloud computing is also a tremendous driver of simplicity and convenience. It will become easier to share documents, videos and photos which are securely stored in a universal location and to view them on different screens, including a TV. 6,000 Belgacom customers have already tested this service.

What were the innovations in 2013 that responded to these new needs? We further improved the quality and speed of our networks. In the mobile network in particular we upgraded 3G and extended 4G coverage. 4G is like a huge motorway that you can only appreciate if you have a high-performance car. Content and applications are the things that fully exploit ultra-fast mobile broadband. The prospects are promising. In the field of healthcare, for example, we have tested a 4G in-car communication system in an ambulance. We have also launched innovative applications in digital TV, with TV Replay, and in the field of mobile payment, with Sixdots, the future Belgian standard. Finally, the success of our all-in offers for both residential and business customers shows that our convergence strategy is working.

We have set up programs to guide our employees towards a performance-based culture. The aim is to better collaborate to ensure efficiency is at the core of all our processes. This optimal collaboration will reflect on customer satisfaction and must become a source of pride for each of our employees.

The Chairman, in the previous pages, talks about the “collective responsibility” of Belgacom. What is your view of the company’s social role? Belgacom has indeed an important social role. This responsibility is part our culture. Ethical values are not dictated from above but are translated into actions in which you believe. In our case, it seems logical to contribute to social development in fields linked to our business, such as the fight against the digital divide, ecologically efficient solutions, and raising cyber security awareness. Furthermore, we remain a major sponsor of cultural and sporting events.

What does sustainable growth mean for Belgacom? A company that doesn’t grow has no future. Belgacom is a strong company that wants to revive growth. To be sustainable, this growth must strike the right balance between investment and shareholder remuneration, without forgetting its social role.

What are your priorities for the coming months? We will further simplify our structures and reduce operational costs so that we can continue to invest in meeting customer needs. Our brand image and customer satisfaction are permanent focus areas. Through our combined efforts we can win back market share, especially in the North of the country. Besides, the commercialization of all our products under the Proximus brand foreseen for the end of 2014, is an important step towards clarity in our offering and in our communication. It should be synonym for a better client service and of a brand close to and listening to its users.

“PEOPLE WANT TO USE THEIR DIFFERENT SCREENS FOR ENTERTAINMENT, TO SHARE EMOTIONS OR TO WORK SMARTER. WE GIVE THEM THE CONNECTIVITY AND THE CONTENT THAT BRINGS LIFE TO ALL THESE SCREENS.”

BELGACOM ACTIVITY REPORT 2013

What will be the new drivers of growth?

How are these priorities implemented within the company?

MARKET INTERVIEW CONTEXT

In addition, we are the only national operator that can provide integrated solutions to companies in all the different regions of the country. We make their work easier, thanks to numerous innovative services and smart interconnectivity adapted to their specific needs. We have a critical mass and a strong financial basis that other operators do not, or no longer have. But our main asset remains the skills and motivation of our 15,000 employees.

HIGHLIGHTS 2013 SIMPLIFICATION OF OUR NETWORKS

HIGHLIGHTS 2013

BELGACOM ACTIVITY REPORT 2013

Our network simplification program has reached cruising speed. We migrated more than 600,000 analog lines to new technologies, with complete transparency for the customer.

A NEW TELEVISION EXPERIENCE

The Belgacom teams in charge of entertainment services have developed a new way of experiencing television thanks to TV Replay. This new service allows viewers to replay in delayed time any TV-program broadcast in the past 36Â hours.

6 FIRST 4G OPERATOR The sustained deployment of 4G enabled us to reach a coverage of 50% by the end of 2013. This technology enables high-speed Internet access.

POINTS-OFSALE USING GREEN ENERGY In 2013, we awarded Eneco the power supply contract for our Belgacom Centers. Our points-ofsale now run entirely on renewable energy from wind power, produced in Belgium.

THE MOBILE OFFENSIVE On the residential market, we managed to win back and retain both mobile and convergent customers. On the SMEmarket, we consolidated our leadership by reducing customer churn to preprice war levels. We even regained market share!

AN INTERNATIONAL FIRST FOR BICS

Scarlet is increasingly positioning itself as a reference in low-cost telecommunications, with an attractive offer for price-sensitive consumers. After having completely revised its mobile offers, Scarlet launched a triple-play offer of Internet + TV + fixed telephony.

STRONGER TIES WITH BNP PARIBAS FORTIS

We won back BNP Paribas Fortis for mobile telephony and strengthened our ties with the banking leader by landing various contracts. We also launched a joint venture together for SixDots, the future mobile payment standard in Belgium.

HISTORIC CONTRACT FOR TELINDUS LUXEMBOURG Telindus Luxembourg concluded 2013 by signing the largest contract in its history. In partnership with IBM and as a subcontractor for telecommunication and storage infrastructures, Telindus Luxembourg became a strategic provider of Innovative Solutions for Finance (IS4F), formerly a subsidiary of Dexia Group.

TANGO IS ENTERING A NEW ERA Tango is entering the entertainment era with great strides. It develops original offerings (sports, games and music) in which entertainment is at the heart of the matter.

FLEX, A NEW WAY OF WORKING We implemented a more flexible work organization program called Flex, which allows us to work in a more agile way and more independently of our professional environment. Together we can make the difference, in a spirit of trust and accountability.

BELGACOM ACTIVITY REPORT 2013

SCARLET, THE LOW-COST REFERENCE

HIGHLIGHTS 2013

BICS, our international “carrier” subsidiary, recorded strong voice traffic growth in a declining market. For the first time, we established a 4G (LTE) roaming connection between Europe, Asia, North America and Africa.

KEY FIGURES 2013 EUR 6.318 billion >> Revenues

21.55 EUR

>> S hare price on 31/12/2013

EUR 1.713 billion

>> EBITDA

MARKET KEY FIGURES CONTEXT 2013

27%

EBITDA margin

EUR 505 million

>> Free cash-flow

(1)

777

753

972 (1)

EVOLUTION OF OUR INVESTMENTS (IN MILLION EUR)

734

BELGACOM ACTIVITY REPORT 2013

ONSUMER C BUSINESS UNIT 35% ENTERPRISE BUSINESS UNIT 34% SERVICE DELIVERY ENGINE & WHOLESALE 5% STAFF & SUPPORT 1% BELGACOM INTERNATIONAL CARRIER SERVICES 26%

including EUR 120 million for acquisition of 800 MHz license

15,699

>> Employees

2.18 EUR

>> G ross dividend per share for 2013

Subject to approval by General Shareholder Meeting

1,677,000

5,496,000 >>

Mobile clients

MOBILE

99%

1,677,000

50%

>> 11

4G coverage at end 2013

FIXED

1,479,000

Belgacom TV clients

1,314,000 >>

MARKET KEY FIGURES CONTEXT 2013

3G and 2G coverage

Pack clients

± 89%

VDSL2 coverage

93% TV coverage

WI-FI

± 800,000

Hotspots in Belgium

-63%

CO2 emissions

12,456 children

>> trained in safely using internet and new media

BELGACOM ACTIVITY REPORT 2013

1,637,000

1,590,000

1,558,000

>> Internet clients

MARKET OPERATIONAL CONTEXTCONTEXT

BELGACOM ACTIVITY REPORT 2013

FINDING A GOOD BALANCE IN A SATURATED MARKET

Everywhere in Europe telecom operators have had to face a market often nearing its saturation point. The decline of the fixed and mobile voice market, the Internet market and even the digital TV market, along with the brutal mobile telephony price erosion, have put margins under pressure. The challenge for operators will be to compensate for this downward pressure with new sources of revenue.

111%

>> P enetration rate of mobile Source : Belgacom

+72% >> S ales of tablets Source : GFK

Navigating through an adverse economic climate In 2013, operators had to come to terms with a series of constraints, especially regulatory ones (see focus on p.12). The general economic climate also played a major role. Even though the crisis is hitting Belgium less hard than other European countries, the stagnation of economic activity is weighing heavily on both households and businesses, which are tending to limit their expenditure in general, and in telecoms in particular.

Rationalization for business customers Many business customers have initiated cost-reduction programs and have preferred to postpone investments in their IT and telecom infrastructure. In a context of rationalization, public service companies are in search of a single point of contact, able to provide all IT and telecom solutions they need.

Offering a low-cost alternative in the residential market With the crisis emerged a low-cost offer. A new player, Snow (BASE), has entered this segment with an offer combining basic fixed telephony, Internet and digital television, at an aggressive price. It did not take long for Belgacom to respond, via its subsidiary Scarlet. These low-cost offers have boosted the digital TV segment, which is slowly reaching its limit in terms of number of subscribers.

Adapting to the explosive growth of data traffic Telecom operators have invested significantly in their infrastructures these past years, whether in high-speed Internet, Wi-Fi or fourth-generation mobile networks (4G). 2013 has also seen a proliferation of connected devices and applications taking advantage of the ever-larger bandwidth. The intensive use of social networks, the cloud, gaming, videoconferencing, etc. have created new drivers for growth which are still far from running at full capacity. New investments are required to support this data traffic.

Monetizing the investments in the networks European telecom operators must take on a double challenge: compensate for the declining revenue from voice and SMS by developing mobile data while avoiding that a slow-down in network investment adversely affects the customer experience. In Europe today, an imbalance can be seen between those who have made it possible for broadband and mobile Internet to become widespread and those who are taking advantage of this growth. Reference is made here to what are known as “over-thetop” players which short-circuit the traditional telecom networks by offering communication or Internet content services often free of charge, but financed by advertising, and taking advantage of the bandwidth.

80% +15%

>> P enetration rate of digital TV Source : Belgacom

>> E volution of smartphone sales

FOCUS

THE BELGIAN MARKET AND ITS REGIONAL SPECIFICITIES

>> Following a purely regional logic and strategy, the penetration of the cable operators, which is particularly extensive in Belgium, has strongly influenced the competitive landscape. In Flanders, Belgacomâ&#x20AC;&#x2122;s main competitor is the cable operator Telenet, dominating the fixed market, while in Wallonia, where Belgacom is the market leader, Voo is the main competitor. NumĂŠricable operates in some Brussels municipalities and in a small part of Hainaut. As the only quadruple-play operator on a national scale, Belgacom has well understood these regional specificities. For several years now, it has been taking these different regional needs into account in its sales strategy.

BELGACOM ACTIVITY REPORT 2013

MARKET OPERATIONAL CONTEXTCONTEXT

Source : GFK

Taking advantage of the momentum in Belgium The spectacular sales increase of smartphones (+15%) and tablets (+72%) in 2013 enables Belgium to gradually catch up with its neigbours after a backlog of mobile Internet. 38% of mobile telephones are now smartphones and mobile data use on smartphones more than doubled between 2012 and 2013, reaching on average 250 MB. The mobile experience cannot be satisfactory without fast and powerful connections. In this regard, the 4G/LTE coverage expanded in 2013. With a 50% coverage at the end of 2013, Belgacom remains ahead of the 2 other mobile operators.

FOCUS

MARKET OPERATIONAL CONTEXTCONTEXT

BELGACOM ACTIVITY REPORT 2013

At the same time, 3G coverage has been constantly extended. End 2013, Belgacom was in the lead with a 3G coverage of 99.5% (source: CommSquare) and improved the 3G network capacity, enabling speeds of up to 21 Mbps.

A REGULATORY FRAMEWORK THAT PUTS PRESSURE ON MARGINS

The telecom operators have had to incorporate into their strategies 3 major regulatory measures, on a Belgian and on a European level. >> Prolonged effects of the “new telecom law” The amendments to the telecom law, which entered into force in 2012, in particular the possibility offered to consumers and SMEs to switch operators more easily by enabling them to terminate their contract free of charge after 6 months, have continued to foster market volatility. Consumer protection remains a focus for Belgian and European political and regulatory authorities taking initiatives to increase the transparency of offerings and prices and enable customers to better manage their telecom costs. >> Roaming Roaming prices decreased again in July 2013 in compliance with the third European Regulation that entered into force mid-2012. In 2014, this service will continue to be under the scrutiny of the European authorities, which aim to establish a single European electronic communications market and intend to eliminate in the medium term the surcharges linked to roaming. >> Opening-up of the cable network In 2013, the Belgian regulators adopted decisions relating to the reference offers and wholesale prices that cable operators must apply, allowing the effective implementation of the obligations decided on in 2011, between now and the second quarter of 2014. So far, only Mobistar has expressed an interest to use the cable platform to propose a fixed offering on the market. More details on the regulatory and legislative framework can be found in the financial report.

800,000

>> W i-Fi hotspots in Belgium

Winning the mobile war If just one figure for 2013 is to be remembered, one which is indicative of the fierce competition in the mobile telephony segment, it would undoubtedly be the drop in prices of unlimited bundles for mobile voice and SMS communication. These dropped from EUR 80–90 per month to EUR 32–65 per month, in just one year. This “mobile war” is the main consequence of the “new telecom law”, which entered into force in October 2012 and which makes it easy to switch operators (see also the focus on p.12), along with the simultaneous aggressive pricing by the cable operators. This price war hits a context where penetration of mobile tele phony is reaching its saturation (111% in Q4 2013), meaning a very low growth potential.

The triple-play (fixed line + Internet + digital TV) and quadrupleplay (triple-play + mobile telephony) pack offers, including attractive unlimited fixed-line calling bundles, enabled to stabilize the fixed telephony penetration rate. Belgians remain attached to their fixed line, valuing its convenience and quality. About 7/10 Belgian households still have a fixed line. The pace of the digital TV penetration is slowing down as these services are adopted by a large majority of consumers. By placing the TV product at the heart of its multiple-play offers, Belgacom consolidated a 32% market share in digital television and a 27% share in the overall TV market by end 2013.

Taking advantage of opportunities “Convergent” offers to retain customers To retain a more volatile customer base, the operators use the technique of combined sales. As show by the growing percentage of “packs” in overall sales, the consumer has understood the advantage of centralizing his convergence needs - fixed and mobile, voice and data, communications and content - with just

25%

>> 2 5% of customers with Pack have also included mobile Source : Belgacom

38%

>> 3 8% of mobile owners have a smartphone Source : Belgacom market research, second semester of 2013

INTERNET

BELGACOM 44% CABLE 50% OTHERS 6%

TELEVISION

BELGACOM 32% CABLE 64% OTHERS 4%

MOBILE

BELGACOM 41% MOBISTAR 29% BASE 24% CABLE 6%

one provider. As early as in 2007, Belgacom has been a pioneer and leader in this convergence strategy, first by selling packs and then by launching convergent services, such as TV Everywhere.

Differentiating services in the cloud Cloud computing, i.e. the remote access to IT applications and services by means of just a web browser and a broadband connection, offers enormous potential to the telecom operators. From mass-market storage of family photos to the provision of solutions combining connectivity and IT aimed at SMEs to the management of ultra-high performance data centers, every customer will find way to satisfy his or her needs. The cloud is a unique opportunity for the operators to differentiate themselves by offering new, flexible and secure services.

BELGACOM ACTIVITY REPORT 2013

Stabilizing the fixed telephony market

BELGACOM COMPETITIVE POSITION (MARKET SHARE)

MARKET OPERATIONAL CONTEXTCONTEXT

This shake-up of the mobile market generated a decline in the prepaid card market, due to the greater attractiveness of the postpaid offers, and an increase in customer volatility. The latter, however, has slowed down since the third quarter of 2013.

MARKET STRATEGY CONTEXT

BELGACOM ACTIVITY REPORT 2013

FIT FOR GROWTH

>> In a hyper-connected world the customer should be able to interact via the terminal of his choice, wherever, whenever and however he wants, regardless the level of complexity of the underlying technology.

Building on our assets Belgacom has undeniable assets on which it can rely: its fixed and mobile networks, its lead in cloud computing and digital TV, its distribution network close to the customer, and above all its employees, whose expertise and capacity to adapt, enable the company to cope with difficult market conditions.

The best convergent networks Belgacom is counting more than ever on its convergence strategy to ensure sustainable growth in a complex market. In 2013, this extensive convergence of networks, content and applications led to a range of services increasingly adapted to the needs of hyper-connected customers and available on many complementary screens.

CONVERGENCE AT BELGACOM

Talented employees

PACKS

DISCOUNTS

ANYWHERE

SERVICE AVAILABLE FROM ANY NETWORK, MORE AND MORE SEAMLESSLY, ON ANY CONNECTED DEVICE

Belgacom can rely on the motivation and contribution of its 15,000 employees. We are an employer of choice which promotes innovation and mobility and aims to develop talent in the fields of the future.

Our own cloud and cyber security expertise ANYTIME

ACCESS IN A NON LINAR WAY TO ANY CONTENT

USER CENTRIC

INDIVIDUAL USER PROFILE AND PREFERENCE

SERVICING

ONE CONTACT - ONE DATABASE - ONE SYSTEM & PROCESS

Our cloud platform, managed from our own data centers, guarantees an optimal level of security for our customers. Moreover, Belgacom is developing its competence in cyber security in order to meet current needs. In this field, it has become a reference for many companies.

An advanced digital television platform Belgacom is a pioneer in digital TV services. It is the only company in Belgium that allows customers to watch TV on any device, on the fixed or mobile network, thanks to the service TV Everywhere. It is also the first operator to offer TV Replay, which allows you to watch a program up to 36 hours after it has been broadcast.

A distribution network close to the customer BELGACOM HAS ALWAYS BEEN A CONVERGENCE PIONEER AND INTENDS TO REMAIN LEADER OF CONVERGENT SERVICES, NOT JUST BY DEVELOPING PACKS BUT BY ALLOWING USERS TO ACCESS THEIR CONTENT, APPLICATIONS AND SERVICES ANY TIME, ANY PLACE, IN A PERSONALIZED WAY.

Residential and business customers have easy access to Belgacom’s competent staff, who are at their disposal in an extensive sales network composed of Belgacom Centers, indirect sales partners, call centers, and customer advisers (for key accounts).

BELGACOM ACTIVITY REPORT 2013

>> THE 29 EXPERIENCE STORES LET THE CUSTOMERS BETTER UNDERSTAND OUR PRODUCTS.

MARKET STRATEGY CONTEXT

Our main challenge is to restore sustainable growth by winning back market share (as we did with our mobile subscriptions at the end of 2013) and by emphazing even more the convergent solutions for our customers. To achieve this, we must continue to invest in our networks and platforms to respond to the needs of the future. At the same time, we are speeding up our transformation to become a more agile, differentiated company.

Customer satisfaction is based on the customer’s overall experience with our brands. Our rich convergent products and services must simplify their lives and give them the freedom to interact with the device of their choice, wherever, whenever and however they want, regardless of the level of complexity of the underlying technology. >> AS WE HAVE DONE WITH DIGITAL TV AND THE 3G AND 4G NETWORKS, WE HAVE TO ANTICIPATE TECHNOLOGICAL MIGRATIONS.

We aim to invest more in our networks, systems and services by, first and foremost, making our fixed and mobile networks increasingly intelligent and flexible. The networks, which are compatible thanks to IP technology, will be able to recognize the user and adapt his or her access to services based on his or her profile. As such, our systems enable us to personalize our offer even more, and to develop new convergent services more quickly and easily. We then need to transform Belgacom in such a way that our customers can easily contact us via digital and interactive communication means.

Belgacom hopes to simplify and optimize its work processes in order to limit the need to replace these resources. It will involve the redeployment of competencies and expertise in order to adapt to the future company needs. This transformation will allow us to keep our HR costs at a consistent level for at least the next 5 years.

BELGACOM FOCUSES ON 4 LEVERS TO BECOME MORE AGILE AND RESTORE SUSTAINABLE GROWTH

The saturation of our traditional markets forces us to adapt and focus more on reducing our operating costs. To increase profitability, it is no longer enough to invest. We also need to work on our cost structure. These savings are essential, if we want to increase our investment in our networks and solutions, restore long-term growth, and provide our shareholders with a sustainable remuneration.

Belgacom focuses on 4 levers to become more agile and restore sustainable growth Enhancing the customer experience In a sector with ongoing technological changes, Belgacom invests in services which provide real added value to consumers and businesses through strong and differentiated brands (Proximus and Scarlet). Not only is it essential to invest in innovations generating growth, but also to deploy them at the right time, among the right customers, and to communicate as effectively as possible. That is how you win or win back “profitable” market share. In this respect, the cloud is a major growth driver among both residential and business customers. For the latter, we want to become the single privileged contact for all their telecom and IT needs, with increased focus on security.

GROW

A deep transformation to anticipate the future

TRANSFORM

Belgacom is the only operator in Belgium to offer all its telecom and IT services over its own networks. In the mobile sector, we increased our investment in the 3G experience and the 4G deployment. With regard to the broadband network, we continue to develop advanced technologies to better anticipate growing Internet traffic needs and improve VDSL2.

Belgacom is a flagship company of the BEL 20, employing more than 15,000 people directly and over 11,000 indirectly. In the following years, Belgacom has to prepare for the retirement of several thousand employees.

SUSTAINABLE GROWTH CUSTOMER EXPERIENCE

EFFICIENT ORGANIZATION

GOOD TO GOLD CULTURE SIMPLIFICATION

INVEST

MARKET STRATEGY CONTEXT

BELGACOM ACTIVITY REPORT 2013

Consolidating our leadership

Making our organization more efficient

STRONG BRANDS

CONVERGENT SERVICES CONVERGENT NETWORKS AND IT

Simplifying at all levels

MARKET STRATEGY CONTEXT

Simplification also helps us reduce costs and improve the customer experience. Indeed, a simpler offer and simpler systems are less expensive to manage and guarantee the customer a better quality experience.

Standing out from the competition with differentiated brands With the convergence of fixed and mobile technologies, but also telecoms and IT, our customers are looking for a single partner, able to provide all these services. In this context, the merger of our 2 commercial brands, Belgacom and Proximus, into a single brand is a natural development, more in line with the reality of our offers and simpler for our customers. It also facilitates the management of our internal systems and our product offering.

Proximus, the banner of a single brand At the end of 2014, the Proximus brand will group our mobile technologies and solutions with our long-standing expertise in fixed telephony, ICT, Internet and digital television. With Proximus, we opt for a brand that embodies proximity – of customers to their world, and of our company to its stakeholders. Apart from Proximus, Scarlet continues to target more price- conscious customers. One brand: Proximus. One company: Belgacom Over the years, Belgacom has become a leading telecom player. Therefore, it should keep its name and status as a legal entity, as an employer, and as a listed company, not just for our employees but also for our partners, suppliers, shareholders and other stakeholders.

Building the future culture: “From Good to Gold” In order to mobilize all its forces behind common objectives, Belgacom focuses on different levers for evolving towards a company culture that rhymes with better service quality and better results. For example, as of 2014, all management members, regardless of their department, will have the same objective at Group level. The stronger collaboration between departments will improve and speed up decision-making. The aim is to develop a “From Good to Gold” culture which stimulates performance, respect, feedback and transparent communication.

Always more simplicity >> Simplification enables us to reduce costs and improve the customer experience

BELGACOM ACTIVITY REPORT 2013

Simplification is a strategic priority at all levels. First of all, Belgacom intends to significantly streamline its portfolio of products and solutions. Furthermore, the migration of a number of ageing systems to new IP technologies allowed us, particularly in 2013, to prepare the network simplification. Our internal IT systems are also the object of rationalization and efficiency programs.

CONTENT TO VIEW, EXPERIENCE AND SHARE, EVERYWHERE AND ANYTIME

Content creates added value For almost 10 years now, Belgacom has been investing not only in technology, but also in its content offer. Its goal is to permanently redefine the television consumer experience. As pioneer in Belgium and Europe, Belgacom has understood that digital TV is a natural extension of the telecom operator profession and a source of added value for its customers. In the beginning, added value was linked to digital television’s intrinsic qualities: image quality, access to an ever-growing range of programs, “on-demand” consumption, ease of recording, etc. Over the years, hundreds of thousands of Belgians have integrated digital television and a Belgacom decoder into their living rooms. This new way of watching television has now become an established part of their lives.

MARKET STRATEGY CONTEXT

BELGACOM ACTIVITY REPORT 2013

Convergence with 4 dimensions

In 2013, Belgacom again reinforced its content strategy by being a distributor, producer and co-producer all at once. Its program offering was further enhanced by new features which provide more freedom and convenience. Consumers now have access to lots of entertainment, no matter what their tastes are, what time of the day it is, where they are or what type of terminal they are using.

In pace with technological innovation, content consumption is becoming ever more intuitive and personalized. It has given material shape to the convergence strategy valued by Belgacom: subscribers can now watch what they want (for all tastes, from the most general to the most local), where they want (on a computer, TV, tablet or smartphone) and when they want (live or delayed broadcasting). A fourth dimension which is of particular importance should be added: “on the platform of their choice”. Indeed, whereas some

10,000 >> More than 10,000 titles available in video on demand

Over 70 channels in our basic Belgacom TV offer

Our exclusives on Belgacom TV >> Belgacom TV offers packs adapted to kids or fans of evergreen movies, and exclusive football and basketball content on Belgacom 11, 11+ and 5

content providers focus on closed systems, Belgacom offers the same quality of access on a maximum number of multi-brand terminals and pursues a multi-platform strategy open to all operating systems.

A customer retention argument

In 2013, Belgacom launched TV Replay in a test phase with 10,000 customers. This service makes it possible to watch any TV program up to 36 hours after broadcast, on any type of screen, from a television to a smartphone. This new service, exclusive to Belgium, and developed in close collaboration with the main Belgian broadcasters, meets the growing need of consumers to watch their favorite content whenever they want.

>> Launched in 2013, this service makes it possible to watch a program up to 36 hours after broadcast, on any type of screen

And further, the multi-screen use via the TV Everywhere offer has become more popular these past months. Belgacom offers a wider choice, with 40 or so channels available at one’s fingertips, on a smartphone or tablet. It is striking to note that the audience peaks registered on TV Everywhere occurred most frequently during live broadcasts, in particular during football matches.

An expanded offer for all tastes

Privileged partnerships

Our range of channels and channel packages has again been extended, with special attention being paid to local content. For example, we offer feature channel, Dobbit TV (devoted to DIY) and, on an exclusive basis, the Fashion One channel (dedicated to fashion and trends). In July, we launched the Multi-Channel Package, grouping the existing channel packages Kids, Entertainment, Nature & Discovery, Nostalgia, and Sport & Pleasure, together with more than 40 thematic channels in a single package. To ensure customers can easily find their bearings in our abundant range of channels and videos on demand, we further improved our personalized search and recommendation tools, to meet the most exacting requirements.

Being a content distributor and (co)producer all at once opens many doors and makes it possible to provide TV viewers and mobile Internet users a differentiated offer. Sponsoring enables us to be present at major national and local sports, music and cultural events, to share the highlights with the public and to obtain content which we subsequently distribute on different platforms. Talking sports, Belgacom highlights its privileged partnerships with Belgian basketball, football and cycling. We are also present at major music festivals of which we offer streaming broadcasts to our customers, the Ghent Film Festival, Bozar and the Queen Elisabeth musical competition. Finally, being the co-producer of more than 20 Belgian or Belgian-French films per year, enables us to be associated with several major movie pre-premières. We also organized, for the first time ever in Belgium, a pre-première video screening at the home of a Belgacom TV customer, in the presence of the film’s actors (Brasserie Romantiek in Mechelen and Stars 80 in Huy).

Football news Our football channel Belgacom 11+ covers the British League Cup. The UEFA Champions League (with its famous multi-live feature) and the best of the Spanish and Portuguese championships continue to be our established values. Our differentiated football offer includes programs dedicated to behind-the-scenes coverage of Belgian clubs, such as RSCA TV, Club TV, and Charleroi TV and of big international clubs via our exclusive partnerships with Barça TV, Real Madrid TV, Manchester United TV and Manchester City TV. In 2013, we also broadcasted exclusive content linked to our Red Devils, partners for already 20 years: the documentary Everyday Football about the everyday life of our national team and of all Belgian football protagonists, including coverage of youth team matches.

Continuous investment In the months and years to come, Belgacom will continue to invest in enhancing its content offering, both in local programs and international blockbusters. Most of these programs can be watched on demand, live or in delayed broadcasting and on a maximum number of platforms. This unique and convergent television experience is linked to our telecom operator profession. The added value of our increasingly intelligent networks becomes tangible for all our customers.

BELGACOM ACTIVITY REPORT 2013

At any time and on any type of screen

TV Replay

MARKET STRATEGY CONTEXT

Our content offer is strategic. It makes our technical expertise directly tangible to the customer. It is also crucial: on a volatile market, anytime access to extensive and varied content has become an important customer retention tool. Customers who have a unique experience, by watching a football match on their smartphone or by taking advantage of the possibilities of “smart TV” with their family, will recognize our added value. As a result, they will not want to look elsewhere. On the contrary, they will be tempted to use more programs, which increases our average revenue per customer. This content strategy allows us to establish a strong emotional link with them.

SIMPLIFICATION

BELGACOM ACTIVITY REPORT 2013

SIMPLIFICATION AT THE SERVICE OF THE CUSTOMER

In 2013 Belgacom committed itself to an ambitious simplification project. This project is one of the pillars required for the transformation of the company. Simplification aims to improve the customer experience while generating increased agility and efficiency. These 3 objectives help to reduce operational costs and will result in structural changes that will increase Belgacom’s profitability in the medium- and long-term. The simplification project covers 4 key areas.

A simplified, future-oriented products and services portfolio

600,000

>> Belgacom migrated more than 600,000 lines based on analog technologies to new standards

Our customers expect ever simpler offers. That is why Belgacom pays special attention to simplifying its commercial offers by reducing the number of options for mobile subscribers and by offering convergent “all-in packs” which meet the needs of most of its customers. For example, the number of customers subscribing to the comprehensive Internet Everywhere/Bizz Pack offer continues to grow. More previously scattered services are now grouped in one bundle, which facilitates billing and administrative follow-up, both for the customer and Belgacom. In 2013, Belgacom carried out migrations from old to future-oriented solutions. Belgacom committed itself to further simplify the structure of its products and services portfolio in order to reduce maintenance costs and further improve the customer experience.

A simplified network Simultaneously managing different generation networks is a challenge and a major cost. In 2013, Belgacom made substantial progress in simplifying its network infrastructure. This project, called Mantra, has made it possible to migrate more than 600,000 oldgeneration fixed lines to new standards. As for the backbone network, ATM lines have been replaced by solutions and technologies of the future. Belgacom will continue to dispose of old technologies and further increase the value-added services for its customers.

>> THE OPTIMIZATION OF OUR IT SYSTEMS PROVIDES A BETTER CUSTOMER EXPERIENCE.

A simplified architecture for the IT systems

Proactive replacement of 80,000 digital television decoders with more scalable models makes customers benefit from a better customer experience: TV in HD (high definition), more recording options and an interface allowing faster and easier navigation through the menus.

A rationalized number of providers Belgacom was able to reduce the number of its providers and partners for certain market segments. Reducing the number of providers has made it possible to simplify and streamline the procurement procedure, from tendering to bill management, logistics and delivery, which also results in significant savings. Finally, fewer but more strategic partnerships allow us to maintain privileged relationships with our partners. This effort will be continued in 2014.

Simplification also means nurturing a state of mind and culture

360,000

By making simplification a top priority, Belgacom has started a process of deep change in its corporate culture. This transformation process is supported and supervised at the highest level of the company. Having maximum number of employees adhering to this transformation is one of the key success factors of this project.

>> In 2013, Belgacom migrated

360,000 customers to Internet Everywhere and Bizz Pack convergent offers

MORE CLIENT ORIENTED >> More understandable >> Friendlier >> Intuitive interaction

FASTER

>> Shorter time to market >> Real time activation >> Faster problem solving

MORE EFFICIENT

>> Optimization of IT and network costs >> More efficient processes

BETTER FINANCIAL RESULTS

BELGACOM ACTIVITY REPORT 2013

AN IMPROVED CUSTOMER EXPERIENCE

SIMPLIFICATION

FOCUS

We also launched a major project to optimize our IT systems. ItÂ aims, among other things, to speed up the process of bringing new products to market, while simplifying the management of the catalog of existing products and services. In 2013, new software solutions were implemented enabling different departments to work faster and more efficiently in all stages of interaction with our customers, from the search for information about our solutions to the payment of bills or the management of customer needs.

Belgacom has been a well-known Belgian company for generations. Its importance for the economy and Belgian society as a whole continues to grow, with the increasing importance of new technologies in our lives and companies. As a leader and innovator, Belgacom takes its responsibility to society. We are convinced that our company’s success depends on our capacity to make a positive contribution to economic, social and environmental progress. We want to create value, and above all, to share that value through our infrastructure, solutions, and our employees.

A MAJOR ECONOMIC PLAYER Despite a complex market situation, we invested in 2013 EUR 972 million mainly in more performing networks. At the same time, prices of our solutions continue to drop, as such, providing access to communications to a vast majority. We are also one of the top employers in the country, with almost 15,000 employees. We believe our employees are our best asset. Every year, we invest in their development and training. In 2013, each employee followed an average of 23 hours of training!

Direct contribution In 2013, we paid EUR 1.67 billion in taxes, social contributions and dividends.

RESPONSIBILITY AT THE HEART OF OUR ACTIVITIES We acknowledge the need for responsible and transparent management of our activities towards all our stakeholders. Corporate Social Responsibility (CSR) is a strategic management tool and a key element of our corporate mission and strategy. Our CSR strategy aims to contribute towards a safer, greener, more inclusive (digital) society, while ensuring we do business in an ethical and responsible way.

OUR CSR STRATEGY

>> SMARTCAFÉS ARE ORGANIZED IN 14 POINTS-OF-SALE AND PROPOSE 13 TRAININGS ON OUR PRODUCTS AND SERVICES.

COMMITMENTS STRATEGY CHALLENGES

CONTRIBUTION

BELGACOM ACTIVITY REPORT 2013

CREATING AND SHARING VALUE

Online safety

Digital divide

Climate change

Ageing population

Enable a more inclusive, safer and greener (e)-society

1 Enhancing access to communications

2 Encouraging a responsible product use

3 Enabling a low-carbon society

4 Ethical and responsible operations (employees, suppliers, communities)

6,000

4,000

2,000

Enhancing access to communications Our significant investments in Belgiumâ&#x20AC;&#x2122;s digital infrastructure improve access to technologies and essential services, enabling people and businesses to interact while generating economic benefits. We make a special point of improving the digital literacy of citizens and helping more people connect to the Internet to enjoy the benefits of the digital society. In September 2013, we launched SmartCafĂŠ, a series of 13 training sessions on our products and services. These sessions, open to everyone, were given in 14 of our points-of-sale, and we count already more than 500 participants. >> www.belgacom.be/formation

Web Experts for sharing across generations We carried on the Web Experts initiative, which encourages young people to share their knowledge of the Internet with older people. We also continued to support various ICT training centers. In total, we helped more than 11,300 disadvantaged citizens improve their digital skills. >> www.webexperts.be

Devices for people with a disability We continued to expand our catalog of devices and applications for people with a disability. In our general catalog of mobile phones and tablets, we also created a filter which allows you to easily identify devices for people with special needs. >> www.belgacom.be/handicap >> h ttp://bit.ly/devicecatalog

Encouraging a responsible product use Since telecoms play an increasingly important role in our lives, we promote the safe and responsible use of our solutions. We focus on providing information on electromagnetic fields, and health. We are also involved in the protection of children online. This policy favours our brand image and makes Belgacom a reference partner. It allows us to develop a relationship of trust with our stakeholders.

BELGACOM ACTIVITY REPORT 2013

7,424

8,000

11,329

9,699

10,000

10,109

12,000

CONTRIBUTION

NUMBER OF DISADVANTAGED PEOPLE TRAINED ON ICT SKILLS BY BELGACOM

Cooperation with Child Focus In 2013, our employees trained over 12,000 children in 185 primary schools on the safe use of Internet, in cooperation with Child Focus (the Belgian Safe Internet Center) and Microsoft.

Exposure to electromagnetic fields As for the mobile network, we continuously extend it in a socially responsible way, in accordance with the strict regional standards on electromagnetic fields.

Enabling a low-carbon society We are determined to speed up the evolution towards a low-carbon society. Our goal is to reduce our CO2 emissions by 70% by 2020 (compared with 2007). At the same time, we help our customers reduce their own environmental impact.

Waste recycling As much as 83% of our waste is recycled, and most nonrecyclable materials is used to generate energy. In cooperation with the NGO GoodPlanet Belgium, we initiated a large-scale awareness campaign on mobile phone recycling in schools. Mobile phones contain precious metals and materials which can be given a second life.

ICT solutions good for the environment Finally, our ICT solutions, for example videoconference or the cloud help our customers save energy and reduce their CO2 emissions.

EVOLUTION OF OUR CO2 EMISSIONS

-70% TARGET

Belgacom’s energy consumption fell by more than 3% for the third consecutive year. We also managed to reduce our ecological footprint by an additional 2%. Our transparency in this regard and our performance in the fight against climate change have earned us two CDP awards (CDP is an international, notfor-profit organization providing the only global system to measure, disclose, manage and share vital environmental information). We are now among the 5 European telecom operators with the best results in this area.

-63%

CONTRIBUTION

BELGACOM ACTIVITY REPORT 2013

Energy consumption reduced by 3%

-63%

>> Since 2007, we have reduced our CO2 emissions by 63%

Ethic in our way o working We want to carry out our activities in a responsible and ethical way in relation to our employees, our suppliers, and the communities in which we operate. This helps us to build trust with our stakeholders, protect our image, improve employee engagement, contribute to social integration, and create stronger ties with our suppliers and communities. Our Corporate Governance Charter, Code of Conduct, Compliance Office, and policies underpin our approach to responsible business. The main pillars of our ethics charter:

Positive work culture We believe in the professional development of our employees. We fight against all forms of discrimination and promote a worklife balance in the workplace. To this end, in 2013 we launched the first 2 phases of a project offering our employees the possibility to work from home 2 days a week. Our promotion of a pleasant work environment has earned us the “Top Employer” title for several years (read our chapter on “A more agile organisation”).

We apply increasingly strict ethical standards for our supply chain, in close collaboration with our suppliers. By incorporating CSR standards in our buying procedures, we not only improve our brand image but also produce beneficial changes in the communities where our suppliers operate. Our suppliers must meet well-defined social, ethical, security and environmental standards. We regularly monitor compliance with these standards through surveys and dialog with our suppliers.

12,456

>> 12,456 children have been trained in safely using the Internet and new media

CSR is an integral part of our supplier’s performance reports, of the contracts and the tendering criteria. We also distributed a “Sustainability Award” to a local supplier. >> www.belgacom.com/suppliers

Supporting communities Belgacom’s contribution to society is also felt in a very concrete way in the field. In 2013, we invested over EUR 1.8 million in social action, whether through financial donations, the provision of services or volunteer initiatives by our employees. For example, we continued to provide free broadband connectivity to Bednet and Take Off to enable children with a long-term illness to stay in contact with their class at school.

More information on >> www.belgacom.com/responsibility >> Please send your comments on our CSR commitment and your opinion of this report to csr@belgacom.be

CONTRIBUTION

In 2013, 140 suppliers filled in our CSR self-assessment questionnaire, and the 59 suppliers belonging to the “medium to high risk” category have been invited to set up a corrective action plan. 38 on-site audits were carried out and shared by the “Joint Audit Cooperation” (JAC) members. Belgacom itself carried out 4 of these on-site audits.

In the beginning of 2013, we offered 2,500 nights to homeless people in one of our buildings. We also raised over EUR 70,000 in funds through our SMS services. Our sales divisions invite customers to convert the points earned through our loyalty plan, into donations for Unicef and the Foundation Against Cancer. We were able to donate more than EUR 80,000 to these associations in 2013. Over the past few years, our efforts to more concretely shape our social responsibility have been recognized by independent parties, as our integration in CSR indices, such as the Ethibel Sustainability Index, ASPI, CDP and the Triodos Sustainable Investment Universe, clearly illustrates.

BELGACOM ACTIVITY REPORT 2013

Responsible supply chain

MARKET CONTEXT NETWORKS

BELGACOM ACTIVITY REPORT 2013

OUR NETWORKS AS THE BACKBONE FOR NEW SERVICES

One of Belgacom’s most important assets is its networks. In 2013, we continuously worked on the technological development of both our fixed and our mobile networks and made serious progress in simplifying them. We also paid special attention to delivering an even higher quality service and developing new services.

82%

>> Customer satisfaction with installations

± 89% >> VDSL2 coverage

A fast high quality mobile network In 2013 Belgacom again invested substantial amounts in the quality of its network. For example, the average speed on the 3G network was increased by 60% and customers can now enjoy an average download speed of 6.2 Mbps, with peak speeds of up to 21 Mbps. In addition, we increased the capacity of the 3G network by 70% to support the particularly strong growth in mobile data use. In an independent study of Test Achats conducted in the first half of 2013, we were acknowledged as having the best quality mobile network in Belgium.

LOOK THROUGH THE EYES OF THE CUSTOMER >> ENHANCING THE CUSTOMER’S SATISFACTION IS OUR PRIORITY.

First Belgian operator with 4G coverage of 50% End-2013, Belgacom’s brand-new 4G network reached 50% of Belgium’s population.

Commitment to further extend 4G coverage In order to enable as many customers as possible to acces ultra-fast mobile Internet with 4G technology, Belgacom continues to invest in mobile coverage.

To that end, we purchased, for EUR 120 million, one of the 3 licenses auctioned by the BIPT, the telecom regulator, for use of the 800 MHz spectrum. The license is valid for 20-years and will provide better, homogenous coverage in more rural areas.

A powerful and ever-faster fixed network In 2013, Belgacom continued to extend its VDSL2 network, which now reaches +/- 89% of the Belgian population.

FOCUS

Thanks to the VDSL2 technology, a large majority of our customers can enjoy a more powerful Internet connection with an average speed of 33 Mbps along with high-definition television.

OUR COMMITMENT TOWARDS CYBER SECURITY

>> The security of our systems and data is an absolute priority for Belgacom. As market leader we have to set the example and play a pioneering role to guarantee data confidentiality and privacy protection at all times. >> In 2013, Belgacom was the victim of a hacking attack on its internal systems. This incident inevitably received much press attention, but Belgacom completely openly communicated. >> Cyber security requires constant vigilance and continuous investment to constantly optimize the security systems. A few months after this incident, Belgacom has learnt a great deal from the way in which this problem was detected and solved. This knowledge is now being shared with customers and authorities. >> This incident reinforced Belgacom’s commitment towards strong cyber security in all its aspects. The new cyber defense plan provides for a wide range of actions across different domains: setup of a series of structural measures and governance, increase of continuous awareness of our employees about the importance of cyber security, optimal protection of networks and IT platforms, and the establishment of a Cyber Defense Unit. This Unit focuses exclusively on detecting and solving cyber incidents.

In addition, the VDSL2 network is perfectly suited for new applications, such as the storage of documents, photos and videos in the cloud and personalized TV solutions such as TV Replay.

Speed boost with Dynamic Line Management In 2013, Belgacom switched its VDSL2 network into a higher gear with the help of Dynamic Line Management, an in-house developed technology. This technology continuously monitors a line’s stability and adapts it in a dynamic way to the highest technically attainable speed for that specific line. In this way, the average speed of all VDSL2 lines was increased by 30%, while one-third of all VDSL2 lines now reaches speeds of up to 50 Mbps.

Vectoring for an even better performing network Belgacom is a pioneer in vectoring, a crosstalk suppression technology which significantly improves the performance of a VDSL2 line. Belgacom closely collaborates with Alcatel-Lucent and other leading industrial partners on the development of this technology. In 2013, Belgacom became the world’s first operator to test vectoring in real-life conditions with around 1,000 users on its VDSL2 network. End December, Belgacom managed to successfully complete the development stage and activate the vectoring technology for customers who have our brand-new modem which supports these vectoring speeds. Since the beginning of 2014, Belgacom has started the rollout of vectoring on its network to let a majority of customers benefit from guaranteed speeds of 70 Mbps.

BELGACOM ACTIVITY REPORT 2013

Moreover, a solution was developed to roll out 4G in the 19 municipalities of the Brussels Capital Region. At the start of 2014, Belgacom was the first operator to launch 4G in Brussels on a first number of sites.

MARKET CONTEXT NETWORKS

The new 4G technology enables ultra-fast Internet with an average download speed of 19 Mbps, with peak speeds reaching 56 Mbps.

Internet everywhere thanks to a powerful Wi-Fi network Belgacom steadily continued the activation of Wi-Fi hotspots. By end 2013, our customers could make use of approximately 800,000 hotspots in Belgium and, through our cooperative venture with FON, even as many as 12 million hotspots worldwide.

A step forward in simplifying our networks The simplification of our networks aims to reduce our operating costs in the long run and to allow us to become a more efficient, agile company.

End-2013 we managed to migrate all 410,000 telephone lines and 240,000 data lines to new, more modern platforms. We also informed the BIPT, the telecom regulator, of our 19 technical buildings that we wish to vacate in the coming years. NETWORKS

A positive trend in 2013 was the higher level of customer satisfaction we achieved thanks to a better service delivery and the added focus on simpler, easier-to-use new products.

Rising satisfaction indicators Customer satisfaction with installations rose in 2013 to a record high of almost 82%. The reliability and stability of our networks and systems also increased by 10% compared with 2012, thereby also contributing to these good results. By simplifying our IT systems we also could increase the efficiency of our customer service (see also page p.20).

Richer TV experience In June 2013, Belgacom launched a faster, more responsive and more energy-efficient TV decoder, in order to offer customers enhanced and more personalized content. We also created Wi-Fi Bridge, allowing high-quality wireless reception of TV channels on one or more TV sets. We also made our TV Everywhere app considerably more userfriendly. It now takes only a few seconds to start the app and enjoy Belgacom TV on a smartphone or tablet.

We further enhanced Belgacom TV with the TV Replay option, enabling to watch TV programs up to 36 hours after broadcast, obviating the need to record them. In an initial phase this new option will be tested with 10,000 interested customers.

POWERFUL MOBILE A NETWORK WHEN IT MATTERS

At big events such as Rock Werchter, Dour Festival, Tomorrowland, etc., Belgacom’s mobile network once again demonstrated its quality. Even the familiar peak in calls, text messages and data traffic on New Year’s Eve passed seamlessly. That day, the network processed 30 million text messages, while the mobile data traffic doubled compared with 2012.

Further evolution of cloud offering Belgacom is constantly extending its cloud infrastructure to keep up with the growing demand from residential and business customers. The business customers offering was extended with the Office 365 package, a solution for storage, back-up and a web shop.

FOCUS

BELGACOM ACTIVITY REPORT 2013

In a first step, we started with the outphasing of old telephony and data equipment and freeing up 250,000 m² of technical space (i.e. one-fourth of our total technical space) by outphasing around 25 technical buildings.

A better service and a series of new services for our customers

ACTIVATION OF A FIRST TEST USER ON OPTICAL FIBER

In 2013, an important step was taken to installing optical fiber. For example, an optical fiber connection (“Fiber to the Home” or FTTH) was installed for the first time on the site of a test user based on a newly developed standard method. The advantage of optical fiber is that it allows a much higher network speed than copper cable.

Belgacom launched a personal cloud solution for residential customers, allowing them to save and manage contacts, photos, music and videos on a smartphone, tablet, laptop or PC. In an initial phase, this solution is being tested by 6,000 interested customers.

Moreover, Belgacom is always looking ahead to fulfill customers’ needs over 5 to 10 years. This means that Belgacom is investing today in a future with faster and smarter fixed and mobile networks. Finally, Belgacom continues to support sales and support services with new IT solutions, in order to provide our customers with even better and more efficient service in the coming years.

A “WHOLESALER” ACTIVITY WHICH IS PARTICULARLY IMPORTANT >> Though less known, Belgacom’s unique customer experience is also evident on the so-called wholesale market. Through its Carrier & Wholesale Solutions division, Belgacom provides a series of telecom solutions to many operators in Belgium: connectivity services, high-speed access (DSL), etc. >> Belgacom’s wholesaler activity has been developed following the liberalization of telecoms. To stimulate free competition, the regulator required the incumbent operator to open its networks to third parties. Over the years, Belgacom has been able to count on a growing number of customer operators, both on the corporate market and the residential market. An increasing proportion of agreements signed between operators is no longer linked to the regulatory context but is part of broader commercial partnerships. >> Facilitating partnerships with third parties One of Belgacom’s priorities as a wholesaler is to create an open model facilitating the creation of partnerships with other operators, particularly mobile virtual network operators (MVNOs), but also “over-the-top” players which offer telecom services on the Internet without going through the traditional networks. These partnerships make it possible to speed up the return on the massive investments in networks and platforms. >> Launch of SNOW Snow, a triple-play offer (television, fixed telephony and Internet) of Base became operational. It is the result of a 5-year commercial agreement between the Dutch operator KPN and Belgacom’s wholesale division.

50% >> 4G coverage

(56 Mbps peak speeds)

3.4%

>> 3.4% of Belgacom revenues are generated by the national wholesale activity

BELGACOM ACTIVITY REPORT 2013

We continuously want to improve the quality of our existing networks. We make every effort to simplify our networks and devote extra attention to simplify our products and services for our customers.

NETWORKS

Strong foundations to build the future

MARKET HUMANCONTEXT RESOURCES

BELGACOM ACTIVITY REPORT 2013

A MORE AGILE ORGANIZATION

More than ever, Belgacom needs motivated, highly productive employees to take on the challenges of a hypercompetitive market. Our structures and working methods must become more agile to meet the growing demands of our customers. Being good is not enough anymore. We need to be excellent. In 2013, the company continued to invest in developing its talent pool in order to make collaboration, trust, transparency and agility part of its DNA.

Nobody has as much impact on the performance of an employee as his or her immediate superior. In this regard, one of Belgacom’s priorities in 2013 was to reinforce the leadership skills of our managers and executive staff and their ability to adapt to change. This culture development track is being implemented top-down, from Management Committee members to field team leaders.

More accountability and mutual trust Belgacom has defined 4 pillars for managers and executive staff for their daily interaction with their employees: team spirit (sharing success as well as failure); respect and recognition; open and constructive communication; and promotion of transparency. Such a change in culture takes a number of years. In 2013, this transformation was stimulated with 2 training and awareness programs for managers and executive staff.

FOCUS

Good to Gold

A COMPANY FAVOURING DIVERSITY

>> Age diversity Belgacom considers diversity as an asset. In 2013, special emphasis was placed on age diversity. When developing HR projects, particular attention is now paid to the stage of life our employees are in rather than their age. >> Gender diversity Gender diversity is at the heart of our HR approach and has become focus of attention in the traditionally most “male dominated” departments. The SDE (networks) and EBU (business customers) divisions have, among other things, held information and awareness sessions on gender diversity and the importance of gender equality in managerial positions.

This track aims to encourage a new culture striving for excellence, as being good at what we do is no longer enough. One of Belgacom’s challenges is to put the technical skills, of which the intrinsic qualities are widely recognized, into practice. It is not just about having the know-how, but applying it within the teams on a daily basis. Since a top-down approach was chosen, Belgacom’s Management Committee first followed this program, succeeded by just over 600 team leaders in 2013. About 1,100 others will follow in 2014. This training is given by about 20 high potential managers or employees, who received special coaching to act as a link in the change process.

Lead 21 The Lead 21 program, which was launched in 2012, has been extended to all team leaders. As many as 865 employees have followed this 5-day course. The aim is to ensure that every team leader has leadership skills as well as technical competencies. Improving these skills becomes a source of motivation and of professional and personal satisfaction for those following the program.

BELGACOM ACTIVITY REPORT 2013

Team leaders as catalysts of change

MARKET HUMANCONTEXT RESOURCES

For Belgacom, its employees are its most important capital. Products can be copied, but not unique know-how and expertise. In the past, we started with the premise we first should strengthen our employees engagement. It was generally accepted that more engaged employees, would also deliver better quality work. However, this assumption was not entirely correct. For example, the creation of a work environment promoting performance is crucial. We, therefore, also measure a number of other parameters in our annual employees survey and initiate improvement actions. These actions will enable us to evolve into an agile, highly productive company that can respond effectively to rapid market changes.

>> THE FLEXIBILITY OF ALL IS A PRIORITY. THE FLEX-PROGRAM HELPS US TO CHANGE OUR WAY OF WORKING.

1,257

>> 1,257 vacancies were filled in

Initiatives such as Good to Gold and Lead 21 are long-term projects. Keen for these to have a lasting effect, Belgacom is making sure that the leadership principles learnt during the training courses are put into practice in each division, such as the creation of a network of “culture and leadership champions” in connection with the Good to Gold program. As such, each team leader makes a lasting contribution to creating a more stimulating and motivating work environment.

2013, 394 by external candidates and 863 through internal job moves

30 million

>> Belgacom invested EUR 30 million in training, i.e. 3% of its payroll

MARKET HUMANCONTEXT RESOURCES

BELGACOM ACTIVITY REPORT 2013

A department dedicated to supporting team leaders

The Human Resources department has also set up a “Team Leader Solution Center” to guide and support team leaders. The latter can turn to the Center with any questions related to the proper functioning of their teams. This department also organizes personalized or group coaching sessions, information sessions and workshops. As leaders guide and direct our staff every day, they are the force driving the change that Belgacom wants to implement.

A more flexible working environment With regard to new working methods, Belgacom intends to implement in-house the solutions it sells to its customers. The flexibility of our company and employees is therefore a priority. In 2013, we speeded up a number of processes, grouped under the “Flex” program, to make our working methods more flexible by promoting and supporting teleworking and homeworking. But it also means providing the necessary tools to evolve towards a new, digital working environment that is no longer confined to a desk and chair. To ensure this transition as harmonious as possible, our team leaders can follow a “remote leadership” training. Its purpose is to train our managers and executive staff on using new tools for communication and guidance, coaching and remote leadership.

Specific and concrete training courses Besides providing programs with a direct focus on leadership and adapting to change, Belgacom continued to invest in special training courses for a large number of targeted employees. For instance, the “Shop of the Future” courses, which help our sales staff serve customers better in our stores, and a whole series of high-level technical courses for our technicians and engineers. We also innovated with a course on the use of social media and one on managing absenteeism to increase overall efficiency of our teams.

A culture of dialog >> To stimulate employee engagement and an open dialog across hierarchical lines, Belgacom has been conducting an employee satisfaction survey every year for 10 years. For 2 years now, this survey has been measuring not only employee engagement, but also strategic alignment and agility. Every year it results in specific action plans to make the necessary improvements. In 2013, this approach resulted in, among other things, interactive chat sessions with members of the Board and the development of a more open and transparent way of communicating.

The health of a company is a reflection of the health of its employees. Our Vitality program includes an intranet site with initiatives and tips on physical exercise and healthy eating, a team of employees responsible for promoting all “health” initiatives in the company, and a community for sharing ideas and suggestions.

A positive corporate culture Around 8 out of 10 employees would recommend Belgacom as a company that is good to work for and would also recommend our products and services to their family and friends. This is a good illustration of the fact that our employees are true ambassadors of our company. An increasing number of employees indicate that recognition is part of the corporate culture and that they are receive more feedback to help them improve their performance, 2 areas in which we have noted improvements of about 10% compared with 2012.

Agility as a factor of change Finally, we observed progress in the perception of our capacity to respond to change. Our employees, like Belgacom’s management, say that we must continue our efforts in this area to further increase the agility of our structures and working methods in order to prepare for the company’s future and respond to the increasing demands of our customers. Agility will therefore be a central priority in the years to come.

The training and development of employees is and remains an absolute priority for Belgacom. However, the company must also monitor the hyper-competitive market environment. To avoid diminishing profit margins and loss of competitiveness, we must keep our personnel costs under control. In order to achieve these essential cost-saving measures, we have 2 levers:

Simplify to reduce work volume We will continue with the simplification of our product lines and internal procedures, being 1 of our 4 strategic priorities. It will enable us to cut down on the work volume and the systematic replacement of employees leaving the company.

Reorganize our structures while keeping social peace A drastic simplification of some of our structures is unavoidable. Many employees will be required to show flexibility, even though we will prefer soft transitions, without jeopardizing our objectives on the development of human capital. We will continue to respect the essential principle of social dialog, as we did in the last few years, even though the market urges us to seek new balances. We will make every effort to maintain a constructive dialog with our social partners, as we did when signing the collective labor agreement for 2013-2014.

2014

Essential cost-saving measures

OUR PRIORITIES IN 2014

Our human resources management strategy is a longterm endeavor. Therefore, instead of turning our priorities upside down, we will implement measures to become even more efficient. Our greatest challenge will be to keep personnel costs under control but also to complete the transformation of our company culture. Our ambition is to make Belgacom an agile, efficient organization which is able to restore lasting growth.

BELGACOM ACTIVITY REPORT 2013

HEALTHY EMPLOYEES

This year, 72% of our employees took part in the Speak Up employee survey, measuring not only the level of employee engagement, but also strategic alignment and agility, 3 pillars with significant impact on our company’s success. The scores for these 3 pillars improved compared with 2012, especially with respect to engagement and strategic alignment, which are in line with or considerably above the telecom benchmark.

MARKET HUMANCONTEXT RESOURCES

FOCUS

Results of the 2013 Speak Up survey

>> MARIO, PETER, NICOLAS-XAVIER, OLIVIER, LUC, BRUNO, MARC, WARD AND KOEN THANKS TO OUR NETWORKS AND SOLUTIONS, WE COULD WIN MANY COMPANIES BACK.

MICHAEL AND FREYA AN EVEN MORE EFFICIENT SERVICE WITH EVEN A BIGGER SMILE IN OUR CALL CENTERS.

>> MURIEL AND FRÉDÉRIC

MOBILE OFFENSIVE TOWARDS SMEs.

>> GILLES, NADIJE AND NATALINA THIS YEAR BICS HAS DELIVERED MORE THAN 1.9 BILLION SMS WORLDWIDE.

>> LAURE-EMMANUELLE

AND MAUREEN TODAY 29 STORES BRING A NEW CUSTOMER EXPERIENCE TO LIFE.

>> DIRK

CYCLOCROSS IN OOSTMALLE OR BIG FESTIVALS, OUR MOBILE INSTALLATIONS MUST ALWAYS REMAIN RELIABLE.

>> ALEXANDRE AND GRÉGORY

THINKING OF NEW PARTNERSHIPS FOR “OVER-THE-TOP” ACTORS.

>> JOHAN, PHILIPPE AND LARS

AN EVEN MORE PERFORMING TECHNICAL SERVICE FOR MORE SATISFIED CLIENTS.

>> HILDE, PHILIPPE, WALTER AND NICOLAS

SPORTS ON TOP ON BELGACOM 5, 11, 11+.

>> RACHIDA, WESLEY, BART AND CARLY

SCARLET, SIMPLE AND ACCESSIBLE TELECOM SOLUTIONS FOR PRICE-SENSITIVE CLIENTS.

>> ILSE, GEERT AND

MURIEL BELGACOM, FAN OF THE WHOLE CLAN ;)

>> VÉRONIQUE, THIERRY AND KARL

EVEN SIMPLER IT SYSTEMS FOR A BETTER CLIENT SERVICE.

>> MARINA >> MURIEL AND AMAURY

SUPPORTERS OF THE RED DEVILS… ALREADY FOR 20 YEARS.

AT TANGO WE HAVE A REPORTING SYSTEM THAT ALLOWS US TO KNOW OUR CUSTOMERS BETTER AND TO ADAPT OUR OFFERING TO THEIR NEEDS.

>> CHRISTOPHE AND JORAN

ALWAYS MORE PERFORMING COPPER AND OPTICAL FIBER NETWORKS.

>> DEBEN, EMMANUEL

AND LUK LOOKING THROUGH THE EYES OF THE CLIENT MEANS IMPROVING HIS EXPERIENCE WITH OUR PRODUCTS.

SABINE, INGE, CORINNE, GEORGES AND RONALD TOWARDS A NEW “FLEX” WORKING ENVIRONMENT IN LINE WITH THE DIGITAL ERA.

>> FILIP, SYLVIANE AND JEAN-CHRISTOPHE

TV REPLAY, A NEW WAY TO EXPERIENCE TELEVISION.

MARKET CUSTOMER CONTEXT

BELGACOM ACTIVITY REPORT 2013

A UNIQUE EXPERIENCE FOR EACH RESIDENTIAL CUSTOMER

ONE BILL FOR THE WHOLE CLAN >> SINCE APRIL, CUSTOMERS HAVE BEEN ABLE TO ADD UP TO 6 MOBILE SUBSCRIPTIONS TO THEIR PACK, GIVING THEM A DISCOUNT OF BETWEEN EUR 5 AND 10 PER MOBILE.

The Mobile offensive Belgacom has proved it can respond very fast to the fierce competition. The operator has simplified its offering and adapted its rates to the advantage of the consumer. By highlighting the quality of our Proximus network, we have managed to drastically reduce the number of customers leaving for other operators to the level of before the mobile market disruption. The repositioning of our low-cost brand Scarlet with a new, competitive postpaid and prepaid mobile offer also proved effective to retain and attract price-sensitive customers. All these efforts have helped to achieve substantial growth in our mobile telephone subscriptions (postpaid).

MARKET CUSTOMER CONTEXT

Belgacom has managed to reap the fruits of its convergence strategy on the telecom market, which is highly competitive, especially in the mobile telephony segment. This strategy enables Belgacom to position itself more firmly as a single operator that offers access to a wide range of communication solutions and content via different fixed and mobile devices. Belgacom launched various initiatives to put into practice its strategy to bring life to screens anywhere, anytime and whenever it suits the customer. Always with the intention to make life easier for its customers.

39 Packs with added value at an attractive price Our convergence strategy has been well received by consumers, as shows the growing sales of our Internet Everywhere Packs. Our Packs today offer more value for an attractive all-in price. We have succeeded in raising our average revenue per family and are consolidating our position as a trusted partner for telecom among an increasing number of households. We also offer families extra advantages: customers can combine up to 6 mobile subscriptions in one Pack and receive a monthly discount of between 5 and 10 euro for each mobile. TV Everywhere, our service which enables customers to watch digital TV on any device, is now included in all Packs. With Scarlet Trio we have launched a convergent solution for price-conscious customers.

14.14%

2012

13.1%

14.8%

8.2%

11.8%

10.0%

20.6%

33.9%

EVOLUTION OF ENDING SUSCRIPTIONS TO MOBILE (POSTPAID)

2013

Brands to suit everyone’s needs In 2013 our marketing teams joined forces to reinforce the complementarity of our brands: Proximus for clients wanting the best mobile experience and Belgacom for those searching convergent solutions and a qualitative service. End 2014, our company will group all solutions – mobile, fixed and IT – under Proximus as the unique commercial brand (see p. 17). As such, we will keep on offering the service and reliability of Belgacom together with the quality and innovation of Proximus. As to Scarlet, this brand shall offer simple and accessible solutions for price conscious customers under its own brand.

BELGACOM ACTIVITY REPORT 2013

For Belgacom, technological advancement is not a goal in itself, but a way of responding to the needs of our diverse residential customer base, those needs being freedom, simplicity and user-friendliness. We continue to invest in ever more highly performing fixed and mobile networks and in more intuitive solutions for customers. In 2013 we continued to focus on optimizing a services offer in which every residential customer will find something to his or her taste.

Continue to strive for simplicity The words “simple” and “freedom” are characteristic of how our customer service has evolved. Our support through the contact centers and Belgacom Centers is complemented by new possibilities for online support via our website www.belgacom. be. Thanks to our site’s e-Services and the “Help and support section”, customers can find the answers to their questions whenever they want. They don’t even have to leave their home. In 2013, our website saw a significant increase in the number of satisfied customers.

Building services together with the customer

We value feedback from customers and, therefore, launched a number of services in test phase in 2013. For TV Replay (delayed viewing of a program without recording it) we started a test in November with the 3 largest Flemish media groups VMMa, VRT and SBS Belgium. It was later extended to the channels of the RTL Group and AB Group. MARKET CUSTOMER CONTEXT

BELGACOM ACTIVITY REPORT 2013

Belgacom wants to earn the trust of its customers. All our innovations are, therefore, tested thoroughly for maximum reliability and user-friendliness.

SCARLET IN THE “LOW-COST” SEGMENT >> IN 2013, BELGACOM REINFORCED THE COMPLEMENTARITY OF SCARLET ( FOR PRICE-CONSCIOUS CONSUMERS) WITH THE REST OF ITS PORTFOLIO. SCARLET ALSO REVISED ITS MOBILE SUBSCRIPTION OFFERING AND LAUNCHED THE CONVERGENT SCARLET TRIO OFFER.

870,000 >> Number of downloads of the Hello application in 2013

We also started a test phase for Belgacom Cloud, a cloud solution for residential customers. Belgacom Cloud allows customers to back up their favorite photos, videos, documents and other content, such as music in a centralized way. They have access to these media anytime, anywhere and can also easily share them with family and friends via their smartphone, laptop, tablet or even Belgacom TV. Trust also means permanently guarantee our solutions are secure. To that end, for Belgacom Cloud, we work with F-Secure, a leading international IT security provider.

Points-of-sale where the customer experience is the central focus >> TV REPLAY enables the customer to watch programs until 36 hours after broadcast and without recording them.

As soon as customers step into a Belgacom point-of-sale, they must get the attention they deserve and find the solution that best meets their needs. We have expanded our network of Experience Stores to 29 modern, attractive points-of-sale immersing customers in the world of Belgacom possibilities. Customers can easily try out products themselves and get advice from our sales teams. Customers do not want to wait longer than necessary. Therefore, we launched a new ordering system in the Belgacom Centers reducing the time to process an order, while considerably lowering the risk of errors.

Ensuring the security of people and goods Sometimes the security of goods and people is the reason of existence of our products: at the start of 2013, we launched Belgacom Home Control, a solution enabling customers to know what is happening at home anytime, anywhere via their smartphone, tablet or PC thanks to a comprehensive, simple and discrete installation, consisting of an exchange, an HD camera, a smoke detector, motion detectors, and remote controls. Since November 2013, Belgacom Home Control can even be connected to the telemonitoring system of Securitas.

Stronger Tango in Luxembourg

2014

PARTNER OF THE RED DEVILS >> BELGACOM IS THE INSEPARABLE SPONSOR OF THE RED DEVILS. AGAINST THE BACKDROP OF THE MEMORABLE QUALIFYING CAMPAIGN FOR THE WORLD CUP IN BRAZIL, WE LAUNCHED SPECIFIC INITIATIVES TO PROMOTE THE BRAND.

OUR PRIORITIES ON THE RESIDENTIAL MARKET

>> Our ambition is to further consolidate our leadership position on the Belgian market. To achieve that it is necessary to create growth by offering customers innovative solutions and keep our costs under control. In this way we will be able to safeguard the vital investments for the future and further strengthen our market share.

BELGACOM ACTIVITY REPORT 2013

MARKET CUSTOMER CONTEXT

>> Tango, the Luxembourg subsidiary of Belgacom, expanded its content offer for digital TV with new channels, a German-language interface and an extensive offering for the Portuguese community. As such Tango has emerged as a major player on the entertainment market. Belgacom’s convergence strategy is also evident in the Grand Duchy, where the TV offer is integrated in a Tango Pack.

MARKET CUSTOMER CONTEXT

BELGACOM ACTIVITY REPORT 2013

A SINGLE PARTNER FOR OUR BUSINESS CUSTOMERS

Companies today are looking for a partner they can trust. They search a partner that provides innovative and comprehensive solutions which give them the necessary peace of mind. In Belgacom they find a single partner that couples its expertise as a telecom provider with high-quality IT skills. Besides holding on to our leadership position in telecoms in 2013, we also achieved some fine results in Unified Collaboration, cloud computing and security.

Belgacom, the reference in telecoms For business customers, the difference between their telecom and IT needs is becoming blurred and loses relevance, as cloud computing and mobile applications are catching on. The self-employed, SMEs and large enterprises prefer solutions allowing them to take maximum advantage of new technologies. In this context, Belgacom’s convergence strategy is bearing more and more fruit: in 2013, the service provider remained leader in its traditional telecoms market despite a vigorous mobile market shake-up. The actions for keeping business customers were effective.

Win-back of large customers Belgacom also managed to win back quite a few customers. Large enterprises, such as BNP Paribas Fortis and bpost, put their trust in us again, returning to Belgacom for their mobile telephony. The quality of our network and service was the decisive factor for their decision.

>> TELINDUS LUXEMBOURG HAS CONCLUDED A PARTNERSHIP WITH IBM AS A SUBCONTRACTOR FOR TELECOMMUNICATION AND STORAGE INFRASTRUCTURES.

701million

>> EUR 701 million from IT revenues in 2013

Excellent growth on the IT markets MARKET CUSTOMER CONTEXT

Besides telecommunication, Belgacom is also focusing on a second pillar of its strategy, the provision of IT solutions that are closely related to Telco. The company grew in a stagnating market thanks to a series of fine projects aimed at delivering solutions instead of just selling technologies.

Total solution for the Flemish Roads and Traffic Administration A good example is the contract with the Flemish Roads and Traffic Administration for a project on automatic license plate recognition showing the combination of Belgacom’s strengths. Together with our partners, we provide a comprehensive solution which seamlessly combines the connectivity and infrastructure (the cameras) with the license plate recognition software. It also helps the traffic police carry out its prevention and control

duties, thereby facilitating road traffic analysis. The solution also promotes the exchange of information on a local, regional and national level. Thanks to the agreement between Belgacom and the Flemish Roads and Traffic Administration, the service can be extended to all Flemish cities and municipalities. Brecht and Brasschaat are already pioneering in this area.

FOCUS

Further growth of the cloud services

HISTORIC CONTRACT FOR TELINDUS LUXEMBOURG

>> Together with Belgacom, Telindus Luxembourg concluded this year by signing the most important project in its entire history. By partnering with IBM as a subcontractor for telecommunications and storage infrastructures, Telindus Luxembourg will become a strategic service and technology provider for Innovative Solutions for Finance (IS4F), which was previously part of Dexia Group in the form of ADTS, and the vehicle for servicing organisations such as Belfius Assurances, Belfius Bank, Banque International à Luxembourg (BIL), Dexia Credit Local SA, Dexia SA/NV and International Wealth Insurers (IWI). Telindus Luxembourg has wide experience in outsourcing and was already a long-term partner of ADTS. The partnership with Belgacom offers IS4F good coverage of different Belgian and Luxembourgish customers.

Two years ago, Belgacom launched the BeCloud offer. This forms the backbone of our Belgacom strategy to provide simple, intuitive IT solutions. “IT as a Service” offers many advantages, including predictability of costs. The customer pays only for the services or storage space he actually uses. Belgacom also extended its range of available infrastructure services (storage, hosting and back-up) and software applications (office automation, collaboration tools, etc.) on a “pay-as-you-use” basis. These services are progressing rapidly. The investments made in the cloud already resulted in excellent growth figures, both in terms of revenue and in terms of the number of customers hosted in the cloud. This proves that there is a real demand from companies.

+12%

>> Evolution of our revenues

from cloud services in 2013

BELGACOM ACTIVITY REPORT 2013

(+1.3% compared to 2012)

The example of Henri Essers

Appropriate answers for the work sector

MARKET CUSTOMER CONTEXT

Eric Bluart

Taxi Eric Compagnie de taxis

FOCUS

BELGACOM ACTIVITY REPORT 2013

Today, technology makes it possible to evolve towards new ways of working and collaborating. Companies want solutions that allow more flexibility and, at the same time, are secure and reliable. Inside its own walls, Belgacom is fully adopting this new way of working which offers more openness and flexibility. It can share this experience with its customers. Its always richer and diversified offer enables it to provide a wide range of connectivity, communication and collaboration tools. This new way of working is gradually less linked to a physical desk, and implies attractive growth opportunities for Belgacom.

A good example of this new way of working can be found at the company Henri Essers. Founded in 1928, it has grown into one of the most important European players in transport and logistics for the chemical and pharmaceutical industry. In the past 10 years the company has grown quickly, partly thanks to strategic international acquisitions. Belgacom and Henri Essers looked for solutions to increase productivity and stimulate a smoother collaboration between employees in different locations. They chose a solution based on Microsoft Lync, in combination with the connectivity and functionality of integrated video and contact center solutions. “The central management and deep integration with other Microsoft applications – such as Office, SharePoint, Outlook, CRM and System Center – were the deciding factors”, the customer concluded.

Christel Vansimpsen Sint-Lucie Culture de cresson

Fred Dumont

Les Collines à Domicile Traiteur et livraison

CONVERGENT SOLUTIONS TAILORED TO SMES

The self-employed and SMEs are particularly sensitive to the attractiveness of our global solutions which combine fixed and mobile telecom, and IT solutions. In 2013, the percentage of SMEs that opted for such an offer rose by more than 10%. End August, Belgacom sold its 50,000th Bizz Pack, an all-in offer with fixed and mobile telecoms, mobile Internet, collaboration tools and back-up services in the cloud. >> “Les Agisseurs” With its advertising campaign “Les Agisseurs”, Belgacom is presenting itself as a solutions provider helping SMEs to achieve their commercial objectives. Belgacom’s technological solutions save them time, which they can then spend on their core activities. In the first phase of the campaign, 15 professional challenges of small businesses from different sectors were placed in the spotlight in an attractive way. In the second phase, from November 2013 to November 2014, these businesses explain how Belgacom helps them in practice to successfully overcome their challenges.

The feedback on this innovative campaign will help Belgacom to improve its specific approach to meeting the needs of the self-employed and SMEs. The aim is also to share a number of lessons and good practices with SMEs.

>> Belgacom has chosen for new opener and flexible ways of working for its employees and can share this expertise with its clients.

+43%

>> Progression of revenues generated

by our security solutions for businesses in 2013

Innovations in mobile Internet

For a number of years now, Belgacom has been investing in sector-specific solutions, such as healthcare and transport. The aim is to create new opportunities for business customers while making life easier for consumers. In 2013, Belgacom partnered with BNP Paribas Fortis to launch a mobile virtual wallet, which, among other things, should make payments easier. The Sixdots application, now also supported by other large banks, will enable consumers to pay for products and services via their smartphone, exchange virtual discount vouchers or centralize their customers’ cards. Each payment is secured with a six-digit secret code (hence the name Sixdots). The commercial launch of Sixdots via the joint venture Belgian Mobile Wallet S.A. is scheduled for the spring 2014.

Problem-free parking with Mobile-for Mobile-for, the Belgacom subsidiary specialized in solutions for mobile payments and parking tickets, recorded impressive growth in 2013. Mobile-for is reaping the fruits of an agreement for mobile parking with 22 Belgian cities, a collaboration with Flemish public transport company De Lijn for the electronic issuing of transport tickets, and innovative payment solutions for charging electric vehicles (there are already more than a 100 charging stations compatible with Mobile-for). In 2013, more than 6 million payments for mobile parking were processed via Mobile-for. The subsidiary’s ambition is to become the preferred national and international partner of mobility players in the broadest sense.

FOCUS

Sixdots as a benchmark for mobile payments

AN ENERGY-EFFICIENT DATA CENTER

In April 2013, Belgacom opened a new data center in Brussels that sets a new benchmark in energy efficiency. The new data center has a surface area of 2,250 m². Adding it, increased the total surface area of Belgacom’s data centers (15,000 m²) by 19%. The data center is managed in an environmentally-friendly and energy-efficient way. It is built according to the principles of separate cold and hot air flows, powerful cooling installations, and efficient energy use. This enables business customers to store servers/equipment with high energy consumption in the new data center. Like other Belgacom data centers, the new data center has the ISO 27001 classification Tier-III+. This means that it offers an operational reliability of 99.99% thanks to a fully redundant power supply, supported by dynamic back-up generators and a cooling system with a capacity buffer.

BELGACOM ACTIVITY REPORT 2013

The ever greater complexity of cyber-attacks and intrusions in IT systems, such as those Belgacom experienced first-hand and from which it learnt the necessary lessons and gained considerable experience (see page 27), requires ever stronger security competencies. As a telecom and IT player, Belgacom has the advantage it can offer global security services. Our Security Operations Center (SOC) monitors more than 400 million security incidents every day. It also monitors our customers’ systems around the clock. In addition, an increasing number of companies are making use of our unique expertise and entrusting Belgacom with their security. They do not have to invest in own expensive equipment or in recruiting security experts wich are hard to find. They are guaranteed Belgacom watches over their data and applications, both within the company walls and in the cloud.

MARKET CUSTOMER CONTEXT

Growing demand for top-quality security products

MARKET CUSTOMER CONTEXT

BELGACOM ACTIVITY REPORT 2013

EXPERTISE APPRECIATED INTER NATIONALLY Belgacom has leading-edge skills recognized internationally. Through the BICS joint venture, Belgacom, as a wholesaler (or “carrier”) provides a series of telecom solutions to more than 700 operators worldwide. Indeed, BICS is a highly regarded leader, both for its voice and mobile data connectivity services and its innovative value-added solutions.

28 billion

>> Minutes processed in 2013

(+3.4% compared with 2012)

26%

>> of the Belgacom Group’s revenue

A world’s first In 2013, BICS, a joint venture between Belgacom, Swisscom and MTN, was the protagonist of a world’s first: the launch of LTE (4G) roaming between Europe, Asian, North America and Africa. Worldwide, close to 250 operators have already launched 4G and want to offer their customers high-speed high quality data access. To offer them this same experience around the world requires them to establish connections with all other 4G networks and that’s where the expertise of BICS comes in. Its mission is to ensure that all types of communications are correctly routed across the different networks on an international scale. The BICS services (voice, messaging, roaming, etc.) are in a way the central interface between several hundred operators around the world.

>> BICS HAS BECOME THE “UNIQUE CONTACT” OF MANY TRANSNATIONAL OPERATORS.

In contrast to a worldwide declining voice market, BICS managed to carry more volume in voice communications. The global erosion of the voice market is both a challenge and an opportunity. The fact that some competitors in difficulty abandon their activities enables more solid operators to increase their market share. Combined with a persistent focus and constant investments in the diversification of its portfolio, this means that BICS has managed to establish itself as a “single contact” for numerous transnational operators. The company serves as a privileged “hub”, especially in Europe, Africa, the Middle East and Asia. BICS can also count on a high level of satisfaction among its customers.

RESULTS OF THE BICS SATISFACTION RESEARCH IN 2013

MARKET CUSTOMER CONTEXT

Strategic acquisitions and agreements

EXTREMELY SATISFIED 13% VERY SATISFIED 64% MODERATELY SATISFIED 19% SOMEWHAT SATISFIED 4%

In October 2013, BICS acquired Aervox, a software development company based in Madrid and specialized in roaming and messaging. The acquisition of Aervox is part of a strategy aiming to develop new interoperability features and solutions in mobile data.

End December, BICS also announced the integration of activities for international money transfers via GSM in a joint venture with MasterCard, eServGlobal and BICS. This new company will enable users to send money to and from a mobile account, from payment cards, bank accounts and foreign exchange offices, no matter where they or the recipients are. BICS also pays close attention to market developments engendered by the arrival of new “over-the-top” players from the Internet world. Through productive partnerships, the Belgacom’s subsidiary continuously increases its penetration in the OTT market.

1.666 billion >> EUR 1.666 billion of revenues in 2013 (+ 1.3% compared with 2012)

>> of the Group’s profitability (EBITDA)

New value-added services Today, satisfying customers and dealing with the pressure on roaming revenues is a challenging reality for operators. In this regard, BICS distinguished itself in 2013 through the launch of SMART Webvision. This is a “big data” analysis and monitoring web application, which allows operators roaming in 2G, 3G and 4G to monitor communication flows in real-time. The operators can, if required, make the necessary adaptations to improve the experience of their own customers in roaming and offer them tailor-made solutions.

Our priorities for the future BICS operates on an extremely competitive global market which requires a very high level of expertise. It is therefore constantly looking for highly sought-after technical talent possessing specific skills. The quality of its teams and technologies should enable BICS to stay one step ahead of its competitors and speed up the deployment of new value-added services, which complement its proven carrier services offering.

BELGACOM ACTIVITY REPORT 2013

Growth of voice traffic on a declining market

FINANCE

BELGACOM ACTIVITY REPORT 2013

MANAGING FINANCIAL MEANS MORE EFFICIENTLY

In 2013, the full impact of the mobile disruption increased pressure on revenues and overall profitability. Although Belgacomâ&#x20AC;&#x2122;s successful commercial response did limit the impact of the value destruction in the mobile market, this illustrates that the simplification and management of our cost structure are essential for preserving our market leader position and the development of our growth strategy.

Belgacom has embarked on a vast cost-optimization program these past few years. This efficiency effort has already resulted in savings but these efforts will need to be intensified going forward. The priority now is to continue this transformation and increase efforts to simplify products and processes (see page 20). In this way, the company is moving towards a culture of change and efficiency. The Wings program, launched in 2011, focuses on operational efficiency, or put simply, the optimization of each company expense. This vast plan is now deeply anchored in the organization, and, is based on 3 pillars:

Focusing on value

all levels to streamline our product portfolio, change our way of working, and increase our efficiency.

Increasing efficiency More than 80 measures have been taken at all levels to streamline our product portfolio, change our way of working, and increase our efficiency. Most of these measures focus on creating synergies between departments. It is Belgacom’s ambition to provide a flawless experience to the customer, from start to finish, in each of his contacts with the company. In this regard, the teams responsible for human resources and IT systems play a crucial role as facilitators. Indeed, a more collaborative business model implies a culture of performance and change shared by all employees, and well-oiled, interconnected IT systems. Substantial gains in efficiency have been made by setting up shared services centers which bring together a number of administrative tasks, through the optimization of the sales channels, the grouping and renegotiation of outsourcing contracts for the call centers, the optimization of team work in certain technical services and the rationalization of the utility vehicle fleet to meet real needs.

Our approach to sales channels has also been revised to make the latter more profitable and lead the customer to the most suitable channel. We encourage our customers to use our Internet services and self-service to order basic products or to find answers to their questions, while offering them a personalized service in the Belgacom points-of-sale for transactions with a higher value. The move towards a management culture based on value requires the involvement of all team leaders. This is why we regularly organize awareness-raising sessions to explain what value creation and management consists of and what its objectives are.

Building confidence in the future Belgacom’s vast efficiency program has now been integrated within the different operational departments, which are now staging posts and fully assume their role of transformation engine. We are convinced that this strategy will bear fruit in the future. In fact, our gains in efficiency allow us to continue to invest in networks in order to offer the best possible service to our customers and generate sustainable growth.

Buying better Belgacom has embarked on a global program to revise its purchasing and sourcing approach. Our principle: buy less, buy cheaper, buy better. It is not just about negotiating the best price for each individual contract; it is about developing a “procurement system” where the procurement function acts in partnership with the business and finance to create greater value. This partnership acts also on the demand side: buying less by eliminating waste, for instance by means of newly introduced sophisticated forecasting models. Managing the demand side in partnership with the business also stimulates the reflection on finding the right balance between value on the one hand, and requirement specifications on the other. It turns out that for certain deliverables, it is perfectly possible to adjust functional or technical requirements to achieve lower prices, without compromising the service level for the customer or end user. Moreover, in no way do we question the ethical and ecological standards and principles incorporated in our specifications. As we explain in our chapter on Belgacom’s contribution, our social responsibility is also reflected in our purchasing policy. The contracts concluded with new providers in so-called lower-cost countries all meet the intrinsic quality criteria with regard to ethics.

WINGS AMBITION: FUEL THE GROWTH STRATEGY THROUGH EFFICIENCY EFFICIENCY IMPROVEMENTS

VALUE SOURCING

>> 8 0+ efficiency measures

>> Buying cheaper, better, and less

>> Optimization of structural levers for cross business units synergies

>> J oint efforts of sourcing and business units

>> K ey efficiency enablers HR and IT

>> F ocus on bottom-line impact in the P&L

VALUE BASED MANAGEMENT >> T ools to manage value creation >> V alue Based Management principles

BELGACOM ACTIVITY REPORT 2013

>> M ore than 80 measures have been taken at

FINANCE

+80

Improving our knowledge of customers and taking the right measures throughout the complete customer lifecycle are important ways to steer the company from a value perspective. A refined segmentation allowed us to provide our customers with the right offer, at the right time, depending on whether the customer is more sensitive to price or seeks the most complete and high-quality service possible. Implementing value management has helped us to optimize the financial means, ensuring this way that acquisition, development and retention costs are linked to value creation. It is all about changing the approach of recent years, where value was mainly driven by a growing customer base.

Since March 2004, Belgacom’s shares have been listed on Euronext Brussels under the ticker symbol BELG. The Belgacom share is a.o. included in the following leading indices: BEL20, STOXX Europe 600 Telecommunications index, STOXX Europe 600, Bloomberg Europe Telecommunications and FTSE Eurofirst 300 index. MARKET BELGACOM CONTEXT SHARE

BELGACOM ACTIVITY REPORT 2013

BELGACOM SHARE

Belgacom share performance 2013 was a good year for the telecom sector as a whole. Compared with the overall market (SXXP index up 17.4% year-overyear), the telecom sector (SXKP index up 32.1% year-over-year) outperformed it with 14.7 p.p. Furthermore, the BEL20 closed the year 2013 18.1 % higher versus end-2012. A strong trigger for this sector outperformance came from improved sentiment around regulation and Vodafone selling its stake in Verizon to the latter, which created increased consolidation hopes in the whole sector. In comparison with this sector outperformance, the Belgacom share had a tougher year. This was caused by the mobile price war that started at the end of 2012, but also impacted 2013. The Belgacom share closed 2013 3.15% lower versus end-2012 with a closing price of EUR 21.55 on 31 December 2013. Meanwhile the average trading volume increased by 34.0%. The share reached its year-high closing price of EUR 23.25 on 9 January 2013 and its lowest level on 22 July 2013 with a closing price of EUR 16.32. 2013 saw a fairly stable start pending the kick-off of the telecom sector’s reporting season. With the announcement of the 2012 results, the market reacted disappointed to Belgacom’s outlook for 2013. This downward trend continued in March with the lower visibility on the Belgian mobile market creating further uncertainty. The Belgacom share went ex-dividend on 23 April 2013. The first-quarter results were positively received, though the market still feared mobile back book repricing risks. In anticipation of the second-quarter results, June appeared to be a stable month. This calm continued in July, but was then disrupted by a profit warning and dividend suspension by one of Belgacom’s Belgian peers, pulling down the Belgacom share to its lowest closing price of 2013. However, the Belgacom share showed outperforming second-quarter results and quickly regained ground. Besides signs of stabilisation on the Belgian mobile market, the main trigger for

SHARE QUOTATION Name

Term

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 SHARE PERFORMANCE OVER 2013 AS COMPARED TO BEL20, STOXX EURO TELECOM 600 (SXKP) AND STOXX EURO 600 (SXXP) (source: Thomson One) 29 27 25 23 21

15 02/01

02/02

02/03

02/04

02/05

02/06

02/07

02/08

02/09

Signs of stabilization in Mobile & Consolidation optimism 02/10 02/11 02/12

BEL 20 restated SXXP restated BELG SXKP restated

BELGACOM SHARE PERFORMANCE OVER 2013 AS COMPARED TO ITS EUROPEAN INCUMBENT PEERS (source: Thomson One) 38 33 26

the share recovery was the news in September that Vodafone would sell its 45% stake in Verizon Wireless to Verizon Communications Inc. This, in combination with signs of American interest in European telecom companies, further strengthened the belief that consolidation in the European telecom market would finally start to happen. This recovery was halted by disappointment with in-line third-quarter results and the renewed fear of a new mobile price war in October. In November, however, the upward movement of the share price continued and Belgacom acquired the 800 MHz spectrum at the minimum price. Finally, on 3 December, Belgacom went ex-interim dividend; this was made up for before the year end in combination with some well-received macroeconomic news flows. In this way, the Belgacom share ended 2013 3.15% lower than the year before.

23 18 13

8 02/01

02/02

02/03

02/04

02/05

HTO restated DTE restated TLSN restated TDC restated TEL restated

02/06

02/07

02/08

SCMN restated TEF restated ORA restated TIT restated BELG

02/09

02/10

02/11

02/12

TKA restated PTC restated KPN restated

BELGACOM SHARE PERFORMANCE 2009

2010

2011

20124

2013

Share price high

28.65

29.11

27.64

24.60

23.25

Share price low

21.67

24.31

21.40

20.80

16.32

Share price at 31 December

25.32

25.13

24.24

22.21

21.55

181,364,309

138,569,376

148,786,324

142,139,111

189,753,834

Share information

Annual trading volume (number of shares) Average trading volume per day (number of shares)

708,454

532,959

578,935

555,231

744,133

Number of outstanding shares

320,614,683

321,482,641

317,648,821

318,321,665

318,759,360

Weighted average number of outstanding shares

320,475,553

321,138,048

319,963,423

318,011,049

318,987,711

Key data per share as reported EBITDA1

6.14

7.56

5.93

5.55

5.33

Net Income (Group Share)1

2.82

3.94

2.36

2.24

1.98

Ordinary dividend (gross)

1.68

Interim-dividend (gross)

0.40

0.50

0.81

0.50

8.2%

8.7%

9.0%

11.2%

10.1%

8.98

6.37

10.26

9.94

10.90

EBITDA1

6.10

6.18

5.97

5.61

5.37

Net Income (Group Share)1

2.79

2.57

2.41

2.29

2.02

Price/earnings at 31 December2

9.09

9.79

10.06

9.68

10.65

Market capitalisation at 31 December (billion EUR)3

8.12

8.08

7.70

7.07

6.87

Gross dividend yield2 Price/earnings at 31 December2 Key data per share before non-recurring

Based on weighted average number of outstanding shares Based on the last closing price of the respective year 3 Calculation based on number of outstanding shares & last closing price of the respective year 4 Key data per share based on the restated 2012 figures 1 2

BELGACOM ACTIVITY REPORT 2013

Mobile price war pressure

MARKET BELGACOM CONTEXT SHARE

Our shareholders Ownership on 31 December 2013 Belgacom’s main shareholder is the Belgian government, owning 53.5% of the Belgacom shares. Belgacom itself held 5.6% of its own shares at end-2013. The free-float represents 40.9%. Of this free-float, close to a fourth is held by retail investors and the remainder essentially by institutional shareholders. Belgacom’s main institutional shareholders are located in the United States and the United Kingdom followed by Belgium and Germany.

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 as from 2005 are cancelled. MARKET BELGACOM CONTEXT SHARE

BELGACOM ACTIVITY REPORT 2013

End-2013, Belgacom held 18,820,954 treasury shares, representing 5.6% of the total number of shares. In the course of 2013, 219,935 treasury shares were used in a Discount Share Purchase Plan for Belgacom management and 662,581 options were exercised.

Under Belgian law, companies are prohibited from owning more than 20% of their outstanding share capital.

Transparency declarations According to Belgacom’s bylaws, the thresholds as from which a shareholding needs to be disclosed, have been set at 3% and 7.5%, in addition to the legal thresholds of 5% and each multiple of 5%.

On 20 March 2013, BlackRock Inc. notified that its shareholding in Belgacom SA went above the 3% threshold. With 10,321,814 Belgacom shares in its possession on 15 March 2013, BlackRock Inc. has a participation of 3.05% of the shares with voting rights emitted by Belgacom SA.

INSTITUTIONAL SHARES BY GEOGRAPHY 22% UNITED STATES 20% UNITED KINGDOM 11% BELGIUM 10% GERMANY 8% SCANDINAVIA 6% FRANCE 5% NETHERLANDS 11% REST OF WORLD 7% REST OF EUROPE

On 9 April 2013, BlackRock Inc. notified Belgacom SA that since 4 April 2013 its participation in the total amount of 338,025,135 shares with voting rights emitted by Belgacom SA went below the 3% threshold. On 13 May 2013, BlackRock Inc. notified Belgacom SA that: >> a purchase of voting rights as at trade date 6 May 2013 caused its participation in the total amount of 338,025,135 shares with voting rights emitted by Belgacom SA to reach 3.00%, with 10,152,158 shares in its possession: accordingly, BlackRock’s holding reached the 3% threshold;

(source: Shareholder analysis September 2013)

SITUATION 31 DECEMBER 2013 Belgacom ownership

% Total shares

% Voting rights

% Dividend rights

180,887,569

53.5%

56.7%

55.9%

18,820,954

5.6%

0.0%

1.3%

Free-Float

138,316,612

40.9%

43.3%

42.8%

TOTAL

338,025,135

100.0%

Belgian State Belgacom own shares

TREASURY SHARES EVOLUTION Status 31 December 2012

19,703,470

>> a sale of voting rights on 7 May 2013 caused BlackRock’s holding to cross back below the 3% threshold. On 5 November 2013, BlackRock Inc. notified Belgacom SA that: >> a purchase of voting rights as at trade date 31 October 2013 caused its participation in the total amount of 338,025,135 shares with voting rights emitted by Belgacom SA to reach the 3% threshold. On 31 October 2013, BlackRock Inc. held 10,151,240 shares or 3.00% of Belgacom’s total shares.

Options exercised during 2013

-662,581

On 2 December 2013, BlackRock Inc. notified Belgacom SA that:

Discount Purchase Plan employees

-219,935

>> a sale of voting rights on 7 November 2013 caused BlackRock’s holding to cross below the 3% threshold.

Status 31 December 2013

18,820,954

On 11 December 2013, BlackRock Inc. notified Belgacom SA that: >> a purchase of voting rights at trade date 6 December 2013 caused its participation in the total amount of 338,025,135 shares with voting rights emitted by Belgacom SA to reach 3.00%, with 10,143,633 shares in its possession: accordingly, BlackRock’s holding reached the 3% threshold.

The shareholder remuneration policy is based on a number of assumptions regarding future business and market evolutions, and may be subject to change in case of unforeseen risks or events outside the company’s control.

Shareholder return from the financial year 2013 Following the above-mentioned commitment, the Board of Directors approved in October 2013 the payment of an interim dividend of EUR 0.50 gross per share.

Belgacom SA holds 18,820,954 treasury shares, representing 5.6% of the total number of outstanding shares. The Belgian state holds 180,887,569 shares, representing 53.5% of the total number of outstanding shares.

On 27 February 2014, the Board of Directors decided to propose an ordinary dividend of EUR 1.68 per share to the Annual Shareholder Meeting of 16 April 2014. As a result, Belgacom expects a dividend of EUR 2.18 gross per share for the 2013 full-year results. After approval by the Annual Shareholder Meeting, the normal dividend will be paid on 25 April 2014, with record date on 24 April 2014 and ex-dividend date on 22 April 2014.

To Belgacom’s knowledge, no other shareholder owned 3% or more of Belgacom’s outstanding shares as at 31 December 2013.

This brings the 2013 total shareholder return to EUR 702 million, including the interim dividend.

Notifications of important shareholdings to be made according to the Law of 2 May 2007 or Belgacom’s bylaws should be sent to:

Furthermore, Belgacom’s Board of Directors intends to continue to award Belgacom’s shareholders with an attractive and sustainable dividend. Therefore the Board of Directors intends to pay out a stable yearly dividend of EUR 1.50 per share (interim dividend of EUR 0.50 and ordinary dividend of EUR 1.00) for the next 3 years to come, provided Belgacom’s financial performance is in line with its expectations.

>> FSMA (former CBFA) on trp.fin@fsma.be >> Belgacom on investor.relations@belgacom.be

Investor Relations Belgacom Investor Relations (IR) aims at ensuring open communication with the Belgian and international investment world on a regular basis. Through transparent, consistent dialog with investors and financial analysts, the Group strives for a fair share value based on high-quality financial information.

The Belgacom IR team offers daily support to the retail and institutional shareholders as well as to the sell-side analysts. A strict quiet period is observed 4 weeks before the issuing of a quarterly report and 6 weeks before the communication of the annual results.

Shareholder remuneration Shareholder return policy Belgacom commits to an attractive shareholder remuneration policy by returning, in principle, most of its annual free cash flow (2) to its shareholders. The return of free cash flow either through dividends or share buybacks will be reviewed on an annual basis in order to keep strategic financial flexibility for future growth, organically or via

1.68 2.18

0.50

0.50 0.31

0.50

1.68 2.18

1.68 2.08 0.40

1.68 2.49

1.68 2.18

08 09

13(1)

1.68 2.18

1.60 1.89

0.50

0.29

1.52 1.52

1.38 1.93

DIVIDEND PER SHARE (IN EUR)

0.55

To keep Belgacom’s current and potential shareholders informed, Belgacom’s management speaks to the financial community on a regular basis. Each quarterly results announcement is followed by a conference call or investor/analyst presentation during which maximum time is reserved for a “questions & answers” session. Twice a year, following the full-year and half-year results, Belgacom organizes a roadshow with top management covering the most important money centres of Europe and the United States. Furthermore, Belgacom participated in several major international investment conferences. In between these events, meetings and conference calls with senior management are organized. In all these activities, management is supported by the Investor Relations team (IR).

Interim dividend Extra-ordinary dividend Normal dividend Subject to approval by General Shareholder Meeting

(1)

FINANCIAL CALENDAR 16 April 2014

Annual General Shareholder Meeting

22 April 2014

Ex-dividend listing of shares

25 April 2014

Payment of ordinary dividend

9 May 2014

Announcement of first-quarter results 2014

1 August 2014

Announcement of half-year results 2014

24 October 2014

Announcement of third-quarter results 2014

Note that these dates may be subject to change.

(2)

elgacom defines free cash flow as cash flow generated by operating activities, minus B capital expenditures and including other investing activities such as acquisitions or divestments

BELGACOM ACTIVITY REPORT 2013

>> a sale of voting rights on 26 November 2013 caused Blackrock’s holding to cross back below the 3% threshold.

selective M&A, with a clear focus on value creation. This also includes confirming appropriate levels of distributable reserves.

BELGACOM SHARE

>> a purchase of voting rights as at trade date 8 November 2013 caused its participation in the total amount of 338,025,135 shares with voting rights emitted by Belgacom SA to reach 3.01%, with 10,166,775 shares in its possession: accordingly, BlackRock’s holding moved back above the 3% threshold;

MARKET CORPORATE CONTEXT GOVERNANCE

BELGACOM ACTIVITY REPORT 2013

CORPORATE GOVERNANCE STATEMENT

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 the management. Belgacom is committed to comply with the legal and regulatory obligations and best practices.

Belgacom governance model 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; >> t he 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 President & 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 President & Chief Executive Officer in the exercise of his duties.

Designation applicable Code on Corporate Governance Belgacom designates the 2009 Belgian Code on Corporate Governance as the applicable Code.

Board of Directors As provided for in the 1991 Law, the Board of Directors is composed of: >> D irectors appointed by the Belgian State in proportion to its shareholding; >> D irectors appointed by a separate vote among the other shareholders, for the remaining seats. At least 3 of these Directors must be independent according to the criteria of article 526ter of the Belgian Company Code and the criteria of the Belgian Corporate Governance Code. The Board of Directors is composed of maximum 16 members, including the person appointed as President & Chief Executive Officer. Today the Board is composed of 14 members.

Changes in the composition of the Board of Directors The mandates of Ms. Mimi Lamote, Ms. Michèle Sioen and Mr. Michel Moll came to an end on 23 December 2012. According to the by-laws of the company, it is up to the Belgian State to renew these mandates or to replace the members. In the meantime, based on the principle of continuity, the mandates were tacitly extended. On 20 September 2013, the mandate of Mr. Michel Moll as Chairman a.i. came to an end and on 27 September 2013, the mandates of Ms. Michèle Sioen, Ms. Mimi Lamote and Mr. Michel Moll as directors came to an end. Mr. Stefaan De Clerck was appointed as director and Chairman of the Board on 20 September 2013. On 27 September 2013, Ms. Isabelle Santens and Mr. Laurent Levaux were appointed as directors. On 15 November 2013 the Belgian State put an end to the mandate of Mr. Didier Bellens as President & Chief Executive Officer. On 13 January 2014, Ms. Dominique Leroy was appointed President & Chief Executive Officer for a renewable term of 6 years.

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. The Board of Directors has adopted a 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 dialog 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 526ter of the Belgian Company Code. The Corporate Governance Charter and the Charter of the Board of Directors have been updated in February 2014 whereby the notion “conflict of interest” received a broader interpretation.

Committees of the Board of Directors In accordance with the by-laws, Belgacom has an Audit and Compliance Committee, a Nomination and Remuneration Committee and a Strategic and Business Development Committee.

Audit and Compliance Committee The Audit and Compliance Committee (ACC) consists of 5 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: >> t he financial reporting process; >> e fficiency of the systems for internal control and risk management of the company; >> t he Company’s internal audit function and its efficiency; >> t he quality, integrity and legal control of the statutory and the consolidated annual accounts and the financial statements of the Company, including the follow-up of questions and recommendations made by the auditors; >> t he relationship with the Company’s auditors and the assessment and monitoring of the independence of the auditors; >> t he Company’s compliance with legal and regulatory requirements; >> c ompliance within the Company with the Company’s Code of Conduct and the Dealing Code. The Audit and Compliance Committee meets at least once every quarter. Messrs. Pierre-Alain De Smedt (Chairman), Michel Moll (till 27 September 2013), Guido J.M. Demuynck, Oren G. Shaffer and Paul Van de Perre are the members of the Audit and Compliance Committee.

MEMBERS OF THE BOARD OF DIRECTORS APPOINTED BY THE BELGIAN STATE Name

Age

Stefaan De Clerck (1) Didier Bellens (2) Dominique Leroy (6) Theo Dilissen Martine Durez Laurent Levaux (4) Isabelle Santens (4) Paul Van de Perre Mimi Lamote (5) Michèle Sioen (5) Michel Moll (3/5)

62 58 49 59 62 58 54 60 48 47 65

Position Chairman President & CEO President & CEO Director Director Director Director Director Director Director Director

Term 2013 - 2019 2003 – 2013 2014 - 2020 2004 - 2015 1994 – 2019 2013 - 2019 2013 – 2019 1994 – 2019 2006 – 2012 2006 – 2012 1994 – 2012

Mandate as of 20 September 2013 Mandate till 15 November 2013 Mandate as Chairman a.i. till 20 September 2013 (4) Mandate as of 27 September 2013 (5) Mandate till 27 September 2013 (6) Appointed on 13 Januari 2014

Nomination and Remuneration Committee The Nomination and Remuneration Committee (NRC) consists of 5 Directors, the majority of whom must be independent. In line with its charter, this committee is chaired by the Chairman of the Board of Directors, who is an ex-officio member. The Nomination and Remuneration Committee’s role is to assist and advise the Board of Directors regarding: >> t he nomination of candidates for appointment to the Board of Directors and the Board Committees; >> t he appointment of the President & Chief Executive Officer and of the members of the Management Committee on proposal of the President & CEO;

(1)

>> t he appointment of the Secretary General;

(2) (3)

>> t he remuneration of the members of the Board of Directors and the Board Committees;

MEMBERS OF THE BOARD OF DIRECTORS APPOINTED BY THE GENERAL SHAREHOLDERS’ MEETING Name Jozef Cornu

Age 69

Position Independent director

Term 2009 - 2015

Pierre Demuelenaere

Independent director

2011 - 2017

Guido J.M. Demuynck

Independent director

2007 - 2019

Pierre-Alain De Smedt

Independent director

2004 - 2016

Carine Doutrelepont

Independent director

2004 - 2016

Oren G. Shaffer

Independent director

2004 - 2014

Lutgart Van den Berghe

Independent director

2004 - 2016

>> t he remuneration of the President & Chief Executive Officer and members of the Management Committee; >> t he review on an annual basis of the remuneration philosophy and strategy for all personnel, and specifically the compensation packages of top senior management; >> t he oversight of the decisions of the President & Chief Executive Officer with respect to the appointment, the dismissal and the compensation of management; >> t he preparation of the remuneration report and the presentation of that report at the Annual General Shareholders meeting; >> c orporate governance issues. The Nomination and Remuneration Committee meets at least 4 times a year.

BELGACOM ACTIVITY REPORT 2013

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 5 regularly scheduled meetings.

MARKET CORPORATE CONTEXT GOVERNANCE

Functioning of the Board of Directors

MEMBERS OF THE BOARD OF DIRECTORS

1. DOMINIQUE LEROY President & Chief Executive Officer and Director of Belgacom since 13 January 2014, more info see p.60 Management Committee.

MARKET CORPORATE CONTEXT GOVERNANCE

BELGACOM ACTIVITY REPORT 2013

2. STEFAAN DE CLERCK

Mr. Stefaan De Clerck is the Chairman of the Belgacom Board of Directors since 20 September, 2013. He has been Member of Parliament from October 1990 till October 2013. From June 1995 till April 1998 and from December 2008 till December 2011 he was the Belgian Minister of Justice. He has been the Mayor of the city of Kortrijk (Belgium) from January 2001 till end of December 2012. Mr. De Clerck holds a Master’s Degree in Law from the Catholic University of Leuven.

3. JOZEF CORNU Mr. Jozef Cornu embarked on his career at the Brown Boveri Research center (now ABB) in Switzerland in 1970. From 1973 until 1982 he held various positions in Bell Telephone Mfg Co, the Belgian subsidiary of the ITT Group. From 1982 to 1984 he was CEO of Mietec, a start-up semiconductor company. From 1984 to 1987 he was General Manager of Bell Telephone Mfg Co. From 1988 to 1995 he was a member of the Management Board of Alcatel NV, before assuming the post of General Manager of Alcatel Telecom from 1995 to 1999. From 2000 to 2008 he was a member of the board of Alcatel (and later Alcatel-Lucent) and advisor to the chairman until 2004. From 2006 to 2007 he was chairman of Istag (Information Society Technologies Advisory Group) of the European Union. From 2007 to 2008 he was chairman of Medea+, the European Eureka programme for research in Microelectronics. Mr. Cornu was CEO of Agfa-Gevaert from December 2007 till end of April 2010 and remains a member of its Board of Directors. He is also a non-executive director at KBC. Since November 13, 2013 Mr. Cornu is the Chief Executive Officer of the NMBS (Belgian railway). He holds a degree of civil engineer in electrical and mechanical engineering from the Catholic University of Leuven, as well as a Ph.D. in electronics from Carleton University in Ottawa, Canada.

4. THEO DILISSEN Since January 2014, Mr. Dilissen is Chairman of the Board of Directors of Swissport Belgium (Swissport is an international ground handler at airports). Since January 2011, Mr. Dilissen is member of the Board of Directors of Eurostar. Mr. Dilissen was Chairman of the Board of Directors of Belgacom from October 2004 till March 2012. From June 2010 until March 2012, he was CEO of Arcadis Belgium. From September 2005 until the end of March 2009 he was CEO and afterwards Chairman of Aviapartner. 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). He studied Sociology (Antwerp) and holds a Master in Business Administration from the Flanders Business School.

5. PIERRE DEMUELENAERE Mr. Pierre Demuelenaere is the co-founder, President & CEO of I.R.I.S. (Image Recognition Integrated Systems), a company created in 1987 to commercialise the results of his Ph.D. Mr. Demuelenaere has more than 30 years of experience in Imaging and Artificial Intelligence. He has accumulated a solid experience in technology company management, R&D management and setting up of international partnerships with US and Asian companies (HP, Kodak, Adobe, Fujitsu, Samsung, Canon…).

Throughout the years, he has remained very involved in defining the R&D vision of I.R.I.S and has contributed to the development of new technologies, new products and the filing of a number of patents. Pierre Demuelenaere received the “2001 Manager of the Year” award and I.R.I.S., the “2002 Company of the year” award. In 2008 he was designated by Data News as ICT personality of the year. He is also member of the Board of Directors of Pairi Daiza, BSB and Guberna. In 2013, Pierre Demuelenaere has successfully negotiated the acquisition of I.R.I.S. Group by Canon. The company is now member of Canon Group. Mr. Demuelenaere is a civil engineer in Microelectronics from the Université Catholique de Louvain (UCL) and received his Ph.D. in applied sciences in 1987.

6. GUIDO J.M. DEMUYNCK

10. LAURENT LEVAUX

Until December 2010, Mr. Demuynck was CEO of Liquavista. Before that he held various positions within Royal Philips Electronics NV 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.

A ‘magna cum laude’ graduate in economics at UCL (Brussels, Belgium), Mr. Laurent Levaux began his career at the age of 22 at the head of a small struggling company in Liège, at the time employing some 100 people. 4 years later the company was turned round, developed, and was merged with a large international group. He next obtained an MBA from the University of Chicago (1985) before going to work for McKinsey & Co, where he spent some 10 years, the last 4 as a partner, undertaking strategic and restructuring assignments throughout Europe.

He holds a degree in applied economics from the University of Antwerp (UFSIA) and a degree in marketing from the University of Ghent (RUG).

7. PIERRE-ALAIN DE SMEDT Mr. De Smedt is since March 2011 the Chairman of the Fédération des Entreprises de Belgique (FEB/VBO). Before and since June 2006, he was the 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 the Chairman of the Board of Deceuninck Plastics Group and a member of the Board of Alcopa (Group Moorkens) and Recticel SA. He is a graduate in engineering and economics of the University of Brussels (ULB).

8. CARINE DOUTRELEPONT 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 specialises in Information and Communication Technologies, Intellectual property, Media law, Competition matters and European law. She holds a State Ph.D in European 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. For years, she worked as an Expert for the European Commission, at the Belgian Senate and at the Belgian Competition Council. Since 2008, she is a Member of the Royal Academy of Belgium (Technology and Society Section). She is the author of several books and publications. Ms. Doutrelepont is also member of the Board of King Baudouin Foundation and of Belfius Bank.

9. MARTINE DUREZ Ms. Durez was the Chief Financial and Accounting Officer at bpost until January 2006, when she became Chairman of the Board of bpost. Ms. Durez was also Professor of Financial Management and Analysis at the University of Mons-Hainaut until 2000. She has also served as a member of the High Council of Corporate Auditors and the Committee of Accounting Standards and as a special emissary at the Cabinet for Communication and State Companies. She served as a regent of the National Bank of Belgium. Ms. Durez graduated as a Commercial Engineer and holds a Ph.D. in Applied Economics from the University of Brussels (ULB).

In March 2003, Laurent Levaux became CEO of ABX Logistics, a multinational logistics group, headquartered in Belgium, a company which suffered heavy losses since its creation in 1998. From 2003, the results have been constantly improved to reach a level amongst the best of the industry. In October 2008, ABX Logistics merged with the Danish Group DSV, quoted in Copenhagen. Since October 2008, Laurent Levaux is Chairman and CEO of Aviapartner. Aviapartner, which is headquartered in Brussels, is a leading player in ground-handling services to passengers on the European continent.

11. ISABELLE SANTENS Ms. Isabelle Santens is President and CEO of Andres NV, a Belgian fashion company that designs, produces and distributes the ladies clothing brands Xandres, Xandresxline and Hampton Bays. After studies of geography and economy at the Catholic University of Leuven, she joined Andres in 1985, became Director of Design and turned CEO in 2000. She turned the company from a mere production orientated facility to a sales & marketing driven company with focus on building strong brands and opening pilotstores. She is also a board member in several cultural institutions.

12. OREN G. SHAFFER 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 already a member of the Board of Directors at Belgacom from 1996 to 2000. He currently holds directorships at Demag Cranes AG (Germany), Intermec Inc. (USA), Terex Corp. (USA) and XPO Logistics (USA). He received a 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.

13. LUTGART VAN DEN BERGHE Ms. Lutgart Van den Berghe is Executive Director of Guberna (Belgian Governance Institute) and Extra-Ordinary Professor at the University of Ghent (B). She is a Partner of the Vlerick Business School where she served for many years as Chairman of the Competence Center “Entrepreneurship, Governance and Strategy”. She is a Member of the Belgian Commission for Corporate Governance and Non-Executive Director in several companies, such as Electrabel (B) and Belfius (B). At EcoDA (European Confederation of Directors’ Association), she is a member of the Board and chairwoman of its policy committee. Ms. Lutgart Van den Berghe is doctor in Business Economics of the University of Ghent (RUG).

14. PAUL VAN DE PERRE Mr. Van de Perre is the co-founder of GIMV (Venture Capital Firm and listed on Euronext) and was formerly a director of Sidmar (Arcelor-Mittal), Thomassen Drijver Verblifa Belgium, Sunparks (division of Sunair) and other companies. He is currently director of Greenbridge Incubator (University of Ghent), Scientific Investment Board (Universitry of Brussels), president of the Board of Directors of Thenergo (listed on Euronext), member of the Investment Committee of Participatiefonds Vlaanderen (PMV). Mr. Van de Perre is CEO of Five Financial Solutions (corporate finance) and CEO of Caesar Real Estate Fund (real estate finance). Mr. Van de Perre holds an MBA in Economics of the University of Brussels (VUB) and is a certified accountant (IAB).

BELGACOM ACTIVITY REPORT 2013

Until July 2008, he was the CEO of Kroymans Corporation BV in the Netherlands. Mr. Demuynck is also member of the Supervisory Board of Tom Tom since June 2005. As from January 2011 he joined the Supervisory Board of Apollo Vredestein BV and the Supervisory Board of Xsens BV. As from May 2011, he is also a Board member of Teleplan International NV As from January 2012 he is also Board member of Divitel BV and Aito BV.

In 1995 he joined the Executive Committee of Belgian steel group Cockerill- Sambre as head of its non-steel subsidiaries, in particular CMI, a loss-making company, where he was CEO. When he left CMI in February 2003, it was a debt-free, growing and profitable engineering and maintenance Group.

MARKET CORPORATE CONTEXT GOVERNANCE

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).

The first meeting each year reviews the performance, budgets for pay-out of bonuses 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 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. In 2013, Messrs. Stefaan De Clerck (member and Chairman as of 20 September 2013), Michel Moll (member and Chairman a.i. till 20 September 2013), Jozef Cornu, Pierre-Alain De Smedt, Ms. Martine Durez and Ms. Lutgart Van den Berghe were the members of the Nomination and Remuneration Committee.

MARKET CORPORATE CONTEXT GOVERNANCE

BELGACOM ACTIVITY REPORT 2013

Strategic and Business Development Committee

The Strategic and Business Development Committee (SBDC) consists of 6 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. 3 members must be appointed among the Directors appointed by the General Shareholders meeting. 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 programs. 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. In 2013, Messrs. Stefaan De Clerck (Chairman as of 20 September 2013), Michel Moll (Chairman a.i. till 20 September 2013), Didier Bellens (till 15 November 2013), Ms. Dominique Leroy (as of 13 January 2014), Messrs. Jozef Cornu, Theo Dilissen, Guido J.M. Demuynck and Ms. Carine Doutrelepont were the members of the Strategic and Business Development Committee.

Departure from the 2009 Belgian Corporate Governance Code Belgacom complies with the principles and provisions of the 2009 Belgian Corporate Governance Code, except provisions 4.6 and 4.7. Although provision 4.6 stipulates that mandates of Directors should not exceed 4 years, the mandates of Belgacom Directors are for 6 years as prescribed by article 18 of the 1991 Law. Where provision 4.7 states that the Board appoints its Chairman, article 18 § 5 of the 1991 Law foresees that the Chairman is appointed by the King.

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 Company Code, Mr. Didier Bellens declared, during the Board of Directors of 28 February 2013, to have a conflict of interest in connection with the “Employee incentive plans”, item of the agenda of this Board meeting. In accordance with article 523 of the Belgian Company Code, Ms. Lutgart Van den Berghe and Ms. Carine Doutrelepont declared, during the Board of Directors of 2 May 2013, to have a conflict of interest in connection with the “Project Idar”, item of the agenda of this Board meeting. In accordance with article 523 of the Belgian Company Code, Mr. Didier Bellens declared, during the Board of Directors of 25 July 2013, to have a conflict of interest in connection with the “Employee incentive plans”, item of the agenda of this Board meeting. In accordance with article 523 of the Belgian Company Code, Ms. Martine Durez, Ms. Mimi Lamote, Ms. Michèle Sioen, Mr. Michel Moll and Mr. Paul Van de Perre declared during the extraordinary Board of Directors of 25 September 2013, to have a conflict of interest in connection with the “Appointment new directors of the Board of Directors”, item of the agenda of this Board meeting. On 24 February 2011, the Board adopted a “related party transactions policy” which governs all transactions or other contractual relationships between the company and its board members. Belgacom has contractual relationships and is also a vendor for telephony, Internet and/or ICT services for many of the companies in which Board members have an executive or non executive mandate. These transactions take place in the ordinary course of business and at arms length. Belgacom is also a Partner of Guberna, the Belgian Institute for Directors (affiliated with Ms. Lutgart Van den Berghe who is Executive Director of Guberna), for which it has paid a fee of EUR 30,250 in 2013.

Activities Report of the Board and Committee meetingss In 2013, 8 meetings took place for the Board of Directors, 8 meetings for the Audit and Compliance Committee, 6 for the Nomination and Remuneration Committee and 3 for the Strategic and Business Development Committee. A list with the attendance of the members is included in the Remuneration Report.

Application of the measures taken by the company in order to comply with legislation on insider trading and market manipulation (market abuse)

The Board performed a self-evaluation in December 2012 in order to assess its size, composition, performance as well as the interaction with management. This exercise was conducted with the help of Spencer Stuart as external expert. Members were invited to answer an extensive questionnaire, followed by an interview between the external expert and every individual member. Starting from the conclusions and the action plan that was agreed upon after the previous evaluation, members were asked their opinion on corporate governance at Belgacom, the functioning of the Board, the Board relationships and the functioning of the committees. As an outcome, the Board decided at its meeting of 28 February 2013 to implement the following short term actions: >> having each year a yearly draft agenda for the committees; >> organise a tutorial on the role of the committees and on risk management; >> have a yearly presentation on succession planning to the Board; >> develop a reporting system, allowing the Board to follow the key business drivers of the company; >> add one meeting a year for the strategic committee.

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 6-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:

>> t he establishment of the business plan and general policy of the company; >> t he supervision of the President & Chief Executive Officer; >> a nd 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. The current President & Chief Executive Officer is Ms. Dominique Leroy. Her renewable 6-year fixed-term contract started on 13 January 2014.

Management Committee The members of the Management Committee are appointed and dismissed by the Board of Directors on proposal of the President & Chief Executive Officer, after consultation of the Nomination and Remuneration Committee. 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 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. The Belgacom Management Committee, in addition to the President & Chief Executive Officer, is composed of the following members (see table below). Name

Age

Position

Michel GEORGIS

Executive Vice President Group Human Resources

Dirk LYBAERT

Executive Vice President Corporate Affairs

Geert STANDAERT

Executive Vice President Service Delivery Engine & Wholesale

Ray STEWART

Executive Vice President Finance

Bart VAN DEN MEERSCHE

Executive Vice President Enterprise Business Unit

Phillip VANDERVOORT

Executive Vice President Consumer Business Unit

Mr. Bruno Chauvat, who was the Executive Vice President Strategy & Content left the company on 24 January 2014. Mr. Dirk Lybaert was appointed as Executive Vice President Corporate Affairs on 24 January 2014. Mr. Phillip Vandervoort was appointed as Executive Vice President Consumer Business Unit as from 1 April 2014.

BELGACOM ACTIVITY REPORT 2013

Evaluation of the Board

>> t he approval of the Management Contract with the Belgian State and changes to it;

MARKET CORPORATE CONTEXT GOVERNANCE

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 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 on p. 61).

MEMBERS OF THE BELGACOM MANAGEMENT COMMITTEE

Mr. Lybaert was since 2005 Secretary-General of Belgacom. From 1995 until 2007 he was an assistant at the Law Faculty at the University of Brussels for the course “Name Contracts”. From 2000 to 2005 he held different positions within the Legal department of Belgacom. Prior to Belgacom, he was an officer at the Federal Police, where he reached the position of Lieutenant-Colonel, director of the Anti-Terrorism Program. Mr Lybaert has Master’s degrees in Criminology, Law and Business Law, as well as degrees in Advanced Management and Social and Military Sciences.

6. GEERT STANDAERT Geert Standaert joined the Belgacom Management Committee as Executive Vice President Service Delivery Engine & Wholesale in March 2012. In this function, he oversees all IT development, service engineering, technical infrastructure and operations for the Group as well as the wholesale activities.

1. DOMINIQUE LEROY

MARKET CORPORATE CONTEXT GOVERNANCE

BELGACOM ACTIVITY REPORT 2013

Since 13 January 2014, Dominique Leroy is the CEO of Belgacom. She joined Belgacom as Vice President Sales for the Consumer Business Unit in October 2011 and was nominated Executive Vice President of the Consumer Business Unit of Belgacom in June 2012.

Prior to Belgacom, Ms. Leroy worked for 24 years at Unilever. She was Managing Director of Unilever Belux and member of Unilever’s Benelux Management Committee. She previously held various positions in marketing, finance and customer development. Ms. Leroy is member of the Boards of Tango, Scarlet and BICS and is an independent Board Member at Lotus Bakeries. Ms. Leroy holds a master in Advanced Management (Business Engineering) from the Solvay Business School.

Mr. Standaert joined the Group in 1994 and held Director positions in various disciplines, including IT, Infrastructure Operations and Data operations before becoming Vice President Customer Operations in 2007. Mr. Standaert holds a Master’s degree in Civil Engineering from the University of Ghent (RUG).

7. PHILIP VANDERVOORT Phillip Vandervoort has joined the Belgacom Group on 1/4/2014 as Executive Vice President of the Consumer Business Unit. Before he has worked with several important companies, such as Dupont de Nemours International, Union Minière, Interbrew/Inbev and, since 2007, Microsoft Corporation. Mr. Vandervoort is industrial engineer and is a bachelor in business administration.

2. MICHEL GEORGIS From June 2007 until December 2011, Michel Georgis was the Executive Vice President of the Consumer Business Unit Belgacom. Since 1 January 2012 he is the Executive Vice President Group Human Resources. He is the Chairman of the Boards of Tango Luxembourg, Scarlet NV Holland and Wireless Technologies (The Phone House) and member of the BICS and Pension Fund Boards. As of May 2005 and until the integration in January 2010, he was the CEO of Proximus (Belgacom Mobile). Prior to this position he was as of January 2004 the Chief Operations Officer at Proximus. He joined Proximus in January 2000 as Executive Vice President Sales, Marketing & Customer Operations. Michel Georgis started his career in 1977 at Coca-Cola Belgium. In 1991 he joined Interbrew, where he filled different positions before becoming Sales & Marketing Director Central & Eastern Europe. Michel Georgis holds a Master’s degree in Applied Economics from the Catholic University of Leuven.

3. RAY STEWART Ray Stewart is Executive Vice President Finance & CFO. Prior to Belgacom, from 1994 until 1997 he was the Chief Financial Officer for Matav, the incumbent telephone company in 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 a member of the Board of Directors of Nyrstar since September 2007.

4. BART VAN DEN MEERSCHE Bart Van Den Meersche is the Executive Vice President of Belgacom’s Enterprise Business Unit. Mr. Van Den Meersche joined Belgacom after 28 years of experience in the ICT sector through a professional career with IBM, of which 16 years in different Management positions, including 8 years as Country General Manager of IBM Belgium/Luxembourg. In his last year at IBM, he was Vice President Industries & Business Development IBM South-West Europe and a member of the IBM South-West Europe Executive Management Team. Bart Van Den Meersche holds a degree in Mathematics from the Catholic University of Leuven. Mr. Van Den Meersche was during 6 years President of Agoria ICT and also a member of the Board of Agoria, VOKA and VBO/FEB.

5. DIRK LYBAERT Dirk Lybaert is Executive Vice President Corporate Affairs, regrouping the following areas of responsibilities: Group Communications, Legal, Public Affairs, Regulatory, Security Governance & Investigations. He is also the Secretary of the Board of Directors of Tango Luxembourg and of the Belgacom Pension Fund, as well as member of the Board of Belgacom International Carrier Services (BICS) and of Belgacom Opal.

Board of Auditors The Board of Auditors of the company is composed as follows: >> Deloitte Auditors SC sfd SCRL, represented by Mr. Geert VERSTRAETEN also Chairman of the Board of Auditors; >> Romain LESAGE, Member of the Court of Auditors;

Deloitte Auditors SC sfd SCRL, represented by Mr. G. Verstraeten and Mr. N. Houthaeve, are 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 Deloitte, entrusted with the audit of the non-consolidated financial statements of the parent company. Mr. Lesage’s mandate will expire on 30 June 2014, the mandates of Mr. Rion, Deloitte and Callaert will expire at the annual General Shareholders Meeting in 2016.

Additional fees paid to the auditors In accordance with the provisions of Article 134 § 2 of the Belgian Company Code, Belgacom declares the supplementary fees that it granted during the 2013 financial year to two auditors, members of the Joint Auditors: Deloitte Auditors SC sfd SCRL and Luc Callaert SC sfd SPRLU. The Group spent during the year 2013 an amount of 251,595 EUR for non-mandate fees for Deloitte Auditors SC sfd SCRL, the Group’s auditors. This amount is detailed as follows: (in EUR) Other mandatory audit missions Tax advice Other missions Total

Auditor

Network of auditor

10,690

25,250

13,420 173,815 197,925

1,270 27,150 53,670

The Group also spent during the year 2013 an amount of EUR 1,627 for non-mandate fees paid to Luc Callaert SC sfd SPRLU. This amount is detailed as follows: (in EUR) Other mandatory audit missions Tax advice Other missions Total

Auditor 1,627

1,627

Government Commissioner On 17 April 2012, Mr. Michel Vanden Abeele was appointed Government Commissioner in order to supervise, in conformity with the 1991 Law, the management of Belgacom from an administrative point of view. Mr. Amaury Caprasse was appointed Deputy Government Commissioner.

Compliance Role of Compliance at Belgacom In an increasingly complex legal and regulatory context and a changing business environment as well as a difficult economic situation, 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 with the required

tools to encourage compliance, and ensuring a consistent approach to compliance within the Group. Our compliance program is a key building block for our Corporate Social Responsibility strategy (see p. 22). All employees must perform their daily activities and their business objectives according to the strictest ethical standards and principles using the company values (Respect, Can do and Passion) as guiding principle. The Code “The way we do responsible business” sets out the above-mentioned principles, and aims to inspire each employee in his daily behaviour and attitudes. The ethical behavior is not limited to the text of the Code. The Code is a summary of the main principles and is thus not exhaustive. The principles and the rules in the Code are more developed in the different internal policies and procedures. The Code is available on www.belgacom.com.

Organization of compliance activities The Compliance Office is managed by the Vice President Group Legal, 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’ “The way we do responsible business”.

The Compliance Program Ethical behavior and respect for the values are part of the compliance approach within the Belgacom Group. In line with the former years actions, the following efforts have been done in 2013, in order to improve the visibility of the Code of conduct and its policies: >> p articular emphasis was placed on information security. An important awareness campaign has been launched towards our staff through the intranet and by posters put up in all meeting rooms. This campaign has also been supported by educational films; >> i n May 2013, Belgacom opened up social media access to all of its staff. As to support this opening and to raise users’awareness about a responsible use of these new tools, several initiatives have been put in place: a policy, training, a film, questions and answers, …; >> B elgacom published a new anti-bribery policy, which is entirely in line with its Code of Conduct and which establishes a zero tolerance principle towards any form of corruption. This policy sets out, in a single document, all principles that have been developed in several other policies. The compliance domains which were the compliance focus areas for 2013 were : 1. Information security; 2. Responsible use of social media; 3. The Dealing Code; 4. Regulatory compliance; 5. Competition law; 6. Chinese walls; 7. Environment; 8. Privacy.

BELGACOM ACTIVITY REPORT 2013

>> Luc Callaert SC sfd SPRLU, represented by Luc CALLAERT.

MARKET CORPORATE CONTEXT GOVERNANCE

>> Pierre RION, Member of the Court of Auditors;

MARKET CORPORATE CONTEXT GOVERNANCE

BELGACOM ACTIVITY REPORT 2013

REMUNERATION REPORT 2013 Belgacom considers transparency on executive remuneration very important. Therefore, in conformity with the corporate governance law of April 6, 2010 and Principle 7 of the corporate governance Code 2009, the company provides the following information towards its shareholders and all other stakeholders: the description of the Directors’ remuneration and a high level explanation of the Group remuneration policy. Furthermore, it includes an analysis of our executive remuneration and provides an overview of the main provisions of the contractual relationships.

Didier Bellens was the President & CEO of Belgacom until November 2013. In January 2014, a new CEO, Dominique Leroy, has been appointed. With this nomination, a new ceiling has been defined in the executive remuneration policy of Belgacom. Belgacom’s executive remuneration policy will further take into account this new ceiling for every new member in the Management Committee. In line with the demand at the Annual Shareholders Meeting of 2013, the Board of Directors has also reviewed the remuneration of Board members and has compared this with different benchmarks. These benchmarks show that the remuneration at Belgacom is in line with the market. The Board has, however, assessed that in this period, where efforts are asked from management and from the employees, it is important to give a clear signal that Board members want to share these efforts. For that reason the Board has decided that on the remuneration of 2014 it will apply a reduction of 10 % which is in line with the proposal of the Management Committee to voluntarily reduce, for the 2013 performances of the top 170 of the company, the envelope for the individual part of their shortterm variable remuneration (bonus) by 10%.

Directors’ Remuneration

Policy of Directors’ Remuneration

ACTIVITIES REPORT AND ATTENDANCE AT BOARD AND COMMITTEE MEETINGS

Name Stefaan DE CLERCK (1) Didier BELLENS (2) Jozef CORNU Pierre DE MUELENAERE Guido DEMUYNCK Pierre-Alain DE SMEDT Theo DILISSEN Carine DOUTRELEPONT Martine DUREZ Laurent LEVAUX (4) Isabelle SANTENS (4) Oren G. SHAFFER Lutgart VAN DEN BERGHE Paul VAN DE PERRE Mimi LAMOTE (5) Michel MOLL (3/5) Michèle SIOEN (5)

Board

A&CC

SBDC

3/3

1/1 3/3 3/3

75,750 0 89,500 67,000

3/3

94,500 112,000 64,500 72,000

(total 8) (total 8) (total 6) (total 3)

4/4 6/6 8/8 8/8 8/8 7/8 6/8 8/8 8/8 2/4 3/4 7/8 8/8 8/8 4/4 4/4 4/4

6/6

8/8 7/8

6/6 3/3 2/3 6/6

82,000 16,750 21,750 82,000 82,000

8/8 6/6 8/8 3/3

Total remuneration (in EUR)

NRC

3/3

Total remuneration: telecom advantage included

2/2

87,000 40,250 113,000 40,250

A&CC: Audit and Compliance Committee; NRC: Nomination and Remuneration Committee; SBDC: Strategic and Business Development Committee Mandate as of 20 September 2013 Mandate till 15 November 2013 (3) Mandate as Chairman a.i. till 20 September 2013 (4) Mandate as of 27 September 2013 (5) Mandate till 27 September 2013 (1) (2)

The remuneration and compensation of the Directors was decided by the General Shareholders’ Meeting of 2004. The principles of this compensation did not change in 2013: 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. This fee is doubled for the Chairman. Attendance fees of EUR 2,500 are foreseen for each member of an advisory committee of the Board of Directors, with the exception of the President & CEO. For the Chairman of the respective advisory committee, 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 Chairman of the Board of Directors is also Chairman of the Joint Committee and of the Pension Fund. Ms. Martine Durez and Mr. Theo Dilissen are members of the Board of the Pension Fund. They do not receive any fees for these participations. For the execution of their Board mandates, the Directors do not receive performance-based remuneration such as bonuses or long-term incentive programs, nor do they receive benefits linked to pension plans.

Overview of Directors’ Remuneration The individual Directors’ remuneration for the fiscal year 2013, based on their activities and attendance at Board and Committee meetings, is presented in the table on the left.

Because of Belgacom’s history as a public-service company, there are some differences in its dynamics and structure, compared to the private sector. This has a considerable influence on how its remuneration policy has evolved. Belgacom Human Resources developed creative and adaptable programs to deal with its obligations related to the statutory employment status of some of its workforce, and introduced new elements that harmonised policies between civil servants and contractual employees.

Belgacom’s global reward principles To accomplish our company goals within a highly and fast changing competitive global telecom market, we need qualified, talented and engaged employees working in a high performance culture. To foster this culture, it is critical to have a competitive Global Rewards Program. The objectives of the Belgacom Global Rewards Program are: >> t o drive performance that generates long-term profitable growth; >> t o stimulate empowerment that reinforces the business strategy and desired culture; >> t o offer fair and equitable remuneration both to civil servants and to the group’s contractual employees, according to market practices; >> to recognize and reward high performance; >> t o link pay to both individual and the overall success of Belgacom; >> t o enable Belgacom to attract and retain market’s talents at all levels; >> to combine the needs and responsibilities of employees and their families with those of the company and society as a whole. Belgacom also maintains -and modernizes- powerful public sector instruments, such as work-life benefits (e.g. sick child care, hospitalisation, …) and social assistance. It is the responsibility of the Belgacom work-life department to combine the needs and responsibilities of employees and their families with those of the company and society as a whole. Over the years, Belgacom has won several awards for the continuous efforts of the company to create a balanced working environment for its staff. The Global Rewards Program keeps up and supports this goal and mission.

Executive Remuneration Objectives and the principles of Belgacom’s executive pay policy Belgacom has a balanced executive remuneration policy which rewards executives competitively and at rates which are attractive in the market, aligning the interests of management and shareholders. The company wants to attract and retain high performing top executives for its Management Committee and for its senior management. It wants to reward clear role models, who have a commitment to high performance and the company values.

Remuneration element

Description

Strategic role

Base Salary

Involves fixed cash compensation. Aims for the median of the labor market peer group. Is based on achievements of annual measures of which 30% is driven by Belgacom Group Performance; 40% by Business Unit Performance and 30% to individual leadership measures. Performance Value Plan is based on Belgacom’s Total Shareholder Return versus a predefined basket of European telecom operators.

Attraction. Rewards for performance of day to day activities.

Short–term variable pay

Long-term Incentives

Drives and rewards annual Belgacom’s performance. Drives and rewards sound strategic and business decisions for the long-term of Belgacom. Aligns interests of management and shareholders. Aligns & drives senior management’s long-term performance with shareholders’ expectations. Ensures right decisions for the success of Belgacom. Attracts and retains talents.

Definition of the level of compensation The Nomination & Remuneration Committee sets the remuneration policy for top executives and decides on the individual packages for the President & CEO and the members of the Management Committee. These are regularly verified by benchmarking executive pay against both the BEL 20 companies (Financial sector excluded) and a set of peer companies in the European Telecommunications and ICT sector. The current remuneration policy does not provide for a specific contractual claw back stipulation in favour of the company for the variable remuneration of executive managers accorded on the basis of incorrect financial information, this without deterioration of the various legal provisions applicable between the concerned individuals and the company (e.g. Acts of 7 July 1978, 12 April 1965 and 10 February 2003, concerning the claw back possibilities from employees in case of fraud, serious fault and usual minor fault, civil liability, etc.).

BELGACOM ACTIVITY REPORT 2013

Belgacom has an innovative remuneration policy which is regularly assessed and updated through close cooperation with external Human Resources fora and universities. The remuneration policies of Belgacom’s employees are defined in a process of dialog with the Board of Directors and the social partners.

The top executives are covered by dedicated reward programs which focus on the principles of Belgacom’s strategy to consistently reward high performance by individuals and by the company. To distinguish itself from other employers, Belgacom seeks to excel in the total package it offers, by providing not only cash but also numerous other benefits. A fundamental principle of its remuneration policy is a degree of freedom for executives in choosing how they want to be rewarded.

MARKET CORPORATE CONTEXT GOVERNANCE

Remuneration Policy

Key performance indicators at Group level: >> T he key financial indicator used is the operational cash flow. >> I mportant non-financial indicators included are Simplicity and Customer Experience measuring the progress made in the simplification and optimization of processes and the customer’s user experience and Cost transformation measuring efficiency improvement in cost management. >> A nother operational indicator is the “employee engagement index”, which each year measures employees’ organizational commitment, job engagement, strategic alignment and agility amongst Belgacom’s employees.

Policy of executive remuneration

>> T he key performance indicators concern amongst others convergence, value management, solution centricity, the transformation of the fix and mobile network and the number of new customers in voice, fix, internet and TV business.

Basic remuneration

60% BASIC REMUNERATION 34% SHORT-TERM VARIABLE REMUNERATION 5.5% GROUP INSURANCE PREMIUMS 0.5% OTHER BENEFITS

BELGACOM MANAGEMENT COMMITTEE 46% BASIC REMUNERATION 20% SHORT-TERM VARIABLE REMUNERATION 20% LONG-TERM VARIABLE REMUNERATION 12% GROUP INSURANCE PREMIUMS 2% OTHER BENEFITS

* Former President & CEO Long-term Variable remuneration forfeit due to termination of employment contract in 2013

Overview of executive remuneration The executive remuneration policy is built upon fixed components, being the basic remuneration, the retirement and post-employment benefits and other benefits, and variable performance based components, being the short-term variable remuneration and the long-term variable remuneration. Annual variable pay is calculated in relation to performance against Key Performance Indicators set by the Board of Directors upon advice of the Nomination & Remuneration Committee. For 2013, these performance indicators included financial indicators as well as non-financial indicators, at both Group and Business Unit level. The achievement of these KPI’s are followed-up and communicated regularly. The results are based on audited financial figures and non-financial indicators measured by internal and external agencies specialized in market and customer intelligence, of which the processes are audited on a regular basis.

The basic remuneration comprises the base salary earned in the position of the President & CEO and the members of the Management Committee for the reported year. The former President & CEO, Didier Bellens, was also a non-remunerated member of the Board of Directors. During 2013, the members of the Management Committee haven’t received any merit increase. Changes in the figures are mainly the result of legal indexation in January 2013 and changes within the Management Committee composition.

Short-term variable remuneration BASIC REMUNERATION (IN THOUSANDS EUR) BEFORE EMPLOYER’S SOCIAL CONTRIBUTION

2012

2,751.0

FORMER PRESIDENT & CEO *

The basic remuneration of the Management Committee is annually reviewed by the Nomination & Remuneration Committee, based on an extensive review of performance and assessment of potential provided by the President & CEO, as well as on external benchmarking data. The company wants to position top executive pay towards the median of the market.

1,026.73

FIGURE 1 : RELATIVE IMPORTANCE OF THE VARIOUS COMPONENTS OF REMUNERATION (KPI’S 100% AT TARGET)

2,760.2

Key performance indicators at Business Unit level

963.10

MARKET CORPORATE CONTEXT GOVERNANCE

BELGACOM ACTIVITY REPORT 2013

The relationship between the distinct remuneration components of the Belgacom Management Committee members and the former President & CEO is illustrated in the figures below. The figures show the effective and relative importance of the various components of remuneration paid in 2013.

2013

FORMER PRESIDENT & CEO * MANAGEMENT COMMITTEE **

* The variance 2012/13 is explained by the index and the pay-out on 11 months i.o. 12 but vacation pay for 2014 had to be paid upon departure ** T he variance 2012/13 is explained by changes within Belgacom Management Committee

The company wants to position top executive short-term variable remuneration for the achievement of targets at 100%. In case of sustained excellent performance at company, business unit and individual level, the short-term variable remuneration can go above the 100% with a cap at 200%. The Belgacom Group variable pay system reflects the group values, emphasizes the strengths of the Business Units, and creates incentives for individual performance.

FIGURE 2: THE BELGACOM MANAGEMENT COMMITTEE POLICY TAKES INTO ACCOUNT GROUP, BUSINESS UNIT AND INDIVIDUAL PERFORMANCE

RESULT

The short-term variable remuneration includes the actual bonus paid in the reported year 2013, for performance year 2012. A linear pay-out curve with an upper and lower limit is adopted for each component of the short-term variable remuneration.

FIGURE 3: SHORT-TERM VARIABLE REMUNERATION: PAY-OUT CURVE % 250 200 150 100 50 0 UNDER LIMIT

TARGET

UPPER LIMIT

This curve determines the short-term variable remuneration that is granted to the members of the Management Committee, based on the effective result of each KPI. For the former President & CEO in 2013 this is capped at 150 %. The result is indeed calculated based on a predefined formula which takes into account the different KPI’s at predefined weights. For the short-term variable remuneration 2013, related to performance year 2012, the following Group KPI’s were defined:

The short-term variable remuneration is paid through one of the options of the “Short-Term Incentive Plan”. The President & CEO and the members of the Management Committee can choose to receive their short-term variable remuneration in cash bonus or under the “Discounted Share Purchase Plan”. The Discounted Share Purchase Plan provides the right to buy allocated shares at a 16.66% discount. The value of this 16.66% discount is equal to the gross value of the short-term incentives result. The executive himself finances 83.34% of the full share purchase price, requiring a significant personal investment. The shares are treasury shares and are blocked for a period of two years. The former President & CEO chose to receive his short-term variable remuneration through the Discounted Share Purchase Plan. The majority of the Management Committee has opted for a cash bonus. The short-term variable remuneration of the former President & CEO increased in line with his performance in 2012 while for the members of the Management Committee it decreased in comparison with last year. The decrease for the members of the Management Committee is mainly due to changes in the composition of the Management Committee.

>> free cash flow; >> cost transformation;

As from performance year 2013, although the parameters taken into consideration in the formula defining the short-term variable remuneration granted to the President & CEO and to the members of the Management Committee remain unchanged, their weight has been reviewed so that the impact of the Group KPI prevails the individual and Business Unit KPI’s.

2012

1,190.1 581.1

On top of the business and company results, the individual performance weights for 30% of the overall short-term pay-out level. Individual performance is evaluated versus pre-defined measurable objectives.

SHORT-TERM VARIABLE REMUNERATION (IN THOUSANDS EUR) BEFORE EMPLOYER’S SOCIAL CONTRIBUTION

1,393.1

>> employee engagement index.

513.7

>> simplicity & customer experience;

2013

FORMER PRESIDENT & CEO MANAGEMENT COMMITTEE

BELGACOM ACTIVITY REPORT 2013

INDIVIDUAL 30%

MARKET CORPORATE CONTEXT GOVERNANCE

BUSINESS UNIT 40%

GROUP 30%

Long-term variable remuneration

LONG-TERM PERFORMANCE VALUE PLAN (IN THOUSANDS EUR) BEFORE EMPLOYER’S SOCIAL CONTRIBUTION

1,188

In 2013, Belgacom launched a new long-term incentive plan for its Executives, the “Long-Term Performance Value Plan” replacing the “Stock Options Plan”. This new plan has been developed to keep our executive remuneration policy balanced and attractive, as well as compliant with the shareholders’ expectations.

Belgacom’s Performance Value Plan aims to be fully performance driven and transparent, aligned on market best practices and is inspired from Long-Term Incentive Plans used by other European Telecommunications companies.

FORMER PRESIDENT & CEO * MANAGEMENT COMMITTEE

MARKET CORPORATE CONTEXT GOVERNANCE

BELGACOM ACTIVITY REPORT 2013

Therefore, Total Shareholder Return has been selected as performance criteria to drive expected Long-Term Performance of our executives and to align it with the interests of the shareholders.

* Rights are forfeited due to ending of CEO’s employment contract

Belgacom’s Total Shareholder Return will be measured against the respective Total Shareholder Return of a basket of 12 other European telecom operators for the first time at the end of a 3 years performance cycle.

Pay-out Level

Under this Long-Term Performance Value Plan, the granted awards are blocked for a period of 3 years, after which the Performance Values vest. After this period, the possible exercising rights depend on the performance of Belgacom’s Total Shareholder Return compared to a group of peer companies.

The pay-out level has been designed in line with the “pay for performance” principle and depends on the short-term variable remuneration and Belgacom’s performance. The design of the Long-Term Performance Value Plan ensures that executives are rewarded for “above median” returns while there will be limited or no reward for “below median” returns.

COMPANIES INCLUDED IN THE BASKET ARE Deutsche Telekom Telekom Austria Group Telefonica KPN Portugal Telecom TeliaSonera

Vodafone BT Telecom Italia TDC Swisscom France Telecom

Pay-out Options The members of the Management Committee can choose between 3 different pay-out options being cash, Discounted Shares Purchase Plan, and Belgacom’s shares. These options cannot be combined and the preferred pay-out option has to be made at the date of grant and is irreversible. In 2013, all members of the Management Committee have chosen for cash as pay-out option. This implies employer social contributions to be taken into account. A year-over-year overview of the evolution on Long-Term Performance Value Plan cannot be provided due to the change in Long-Term Incentive Plan design. From 2004 until 2012, stock options have been granted to the former President & CEO, and the members of the Management Committee. Hereafter, an overview of the remaining stock option plan for the former President & CEO and other members of the Management Committee is available.

OVERVIEW OF THE FORMER LONG-TERM VARIABLE REMUNERATION Didier Bellens

Bruno Chauvat

Michel Georgis

Dominique Leroy

Geert Standaert

Ray Stewart

Bart Van Den Meersche

on January 1st, 2013, Stock options remaining from previous years:

585,774

258,503

12,665

33,443

297,278

70,000

Number Year of grant of options exercised Number Stock options lapsed during Year of grant of reported year options lapsed Number Stock options forfeited Year of grant of during reported year options forfeited TOTAL

107,686 2009

47,486 2006 & 2009

0 -

4,148 2009

51,453 2009

0 -

478,088 2007-8, 2010-11-12 0

211,017

12,665

29,295

245,825

70,000

Stock options exercised during reported year

OVERVIEW BASIC AND VARIABLE REMUNERATION OF THE FORMER PRESIDENT & CEO AND OTHER MEMBERS OF THE MANAGEMENT COMMITTEE

2012

2013

2012

2013

963,096 513,715 534,614 0 113,032 14,773 2,139,230 344,906 2,484,136

1,026,727 581,115 0 0 97,804 11,607 1,717,253 365,967 2,083,220

2,760,207 1,393,093 692,913 0 538,377 154,819 5,539,409 1,349,802 6,889,211

2,751,044 1,190,971 0 1,188,272 755,028 120,204 6,005,519 1,673,311 7,678,830

Retirement and post-employment benefits The former President & CEO was participating in a complementary pension scheme which foresaw an annual contribution of EUR 73,495.42, yearly indexed. The current members of the Management Committee have a “Defined Benefit Plan”.

Other benefits Belgacom Group wants to stimulate its executives by offering a portfolio of benefits and advantages that are competitive in the market place. The President & CEO and the other members of the Management Committee receive benefits on top of their remuneration, including medical insurance, car and other benefits in kind.

Overview The table below reflects the remuneration and other benefits paid directly or indirectly to the members of the Belgacom Management Committee in 2013 by Belgacom or any other undertaking belonging to the Belgacom Group (benefit based on gross or net remuneration, depending on the type of benefit). The year-over-year evolution of the figures is mainly the consequence of: >> the changes in the composition of the management team; >> the legal indexation of salaries (January 2013); >> the limited acceptance rate of the stock option plan 2012; >> the new Long-Term Performance Value Plan design.

Other members of the Management Committee

Main provisions of the contractual relationships Contractual arrangement of former President & CEO In March 2009, Didier Bellens started the first year of his new six-year mandate as President & CEO. He had a contract as a self-employed executive. Nevertheless, he was subject to employee’s social security charges, in line with Article 11 § 1 of the Royal Decree of November 28, 1969. This article states that “the application of the law on the social security system for employees is expanded/extended to those institutions of public utility and autonomous public enterprises as well as such individuals who, in their capacity of agent and against remuneration, devote their principal activity to the dayto-day management or direction of these institutions and enterprises, to the extent no statutory pension regime is applicable to these individuals”. The former President & CEO’s employment contract ended in November 2013. There was no pay-out of any severance pay.

Clauses The former President & CEO was bound by a non-competition clause, prohibiting him for 12 months after leaving the group from working for a competitor of Belgacom Group in Belgium and in those countries where Belgacom Group generates at least 5% of its consolidated revenues. If activated by Belgacom, he would have received an amount equal to one year’s salary as compensation. This clause has not been activated upon departure of the former President & CEO. The members of the Management Committee, who are bound by a non-competition clause prohibiting them for 12 months after leaving the group from working for any other mobile or fixed licensed operator active on the Belgian market, will receive an amount equal to 6 months’ salary as compensation. Dominique Leroy, Bruno Chauvat, Geert Standaert, Ray Stewart and Bart Van Den Meersche have a contractual termination clause with an indemnity of 1 year’s remuneration. Michel Georgis has a contractual termination clause with an indemnity of 1 year’s remuneration plus 1 month pay per year of seniority acquired, with a maximum of two years’ remuneration after 12 years of service.

BELGACOM ACTIVITY REPORT 2013

Basic remuneration Short-term variable remuneration Long-term share-based variable remuneration Long-Term Performance Value based variable remuneration Retirement and post-employment benefits Other benefits TOTAL (excl. employer’s social contribution) Employer’s social contribution TOTAL (incl. employer’s social contribution)

Former President & CEO

MARKET CORPORATE CONTEXT GOVERNANCE

Remuneration

GENERAL INFORMATION Corporate name and legal form

For further information

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.

Dirk Lybaert Executive Vice President Corporate Affairs Bd. du Roi Albert II/Koning Albert II-laan, 27 B - 1030 Brussels Tel: +32 2 202 16 48 E-Mail: hello@belgacom.be

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.

INFORMATIONS GÉNÉRALES

BELGACOM ACTIVITY REPORT 2013

Registered Office

Belgacom SA under public law Bd. du Roi Albert II 27 B - 1030 Brussels VAT BE 0202.239.951 Brussels Register of Legal Entities

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). 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.

Objectives of the Company As described in 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.

Disclaimer 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.

For CSR information Xavier Dekeuleneer Head of Corporate Social Responsibility Bd. du Roi Albert II/Koning Albert II-laan 27 B - 1030 Brussels Tel: +32 2 202 93 67 E-Mail: csr@belgacom.be

For financial information 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

Our report is printed on Satimat Green coated paper, made out of 60% recycled fibers, 40% FSC virgin fibers. Vegetable-based ink and non-solvent adhesives are used. The printing plates and ink recipients are recycled. The waste paper is collected and then compressed and recycled by authorised bodies. The printer is FSC and PEFC certified. Editor-in-chief: Dirk Lybaert Executive Vice President Corporate Affairs Bd. du Roi Albert II/Koning Albert II-laan 27 B - 1030 Bruxelles Conception and coordination: Anne-Françoise Streel Corporate Communication Project Manager Design and prepress: Chris Communications www.chriscom.be Printing: Snel Pictures: Jean-Michel Byl, Getty images, Istock and Belgacom Visit Belgacom’s website: www.belgacom.com Belgacom’s annual report is also published in Dutch and in French.

GLOSSARY ISO 27001 – Security Management Standard: the basic objective of the standard is to help establish and maintain an effective information management system, using a continual improvement approach 3G – Mobile network of the third generation (UMTS – Universal Mobile Telecommunications System), allowing both voice and data transmission with higher throughput

ISO 9001 – Standard that provides a set of standardized requirements for a quality management system IT – Information Technology

4G – Mobile network of the fourth generation, allowing data transmission with very higher throughput

LAN – Local Area Network

Belgacom TV ARPU – Includes only customer-related revenue and takes into account promotional offers, divided by the number of households with Belgacom TV

M2M – Machine-to-Machine

BIPT – Belgian Institute for Postal services and Telecommunications

Mobile active customers – Includes voice and data cards. Active customers are customers who have made or received at least one call or sent or received at least one SMS message in the last three months. Prepaid customers and MVNO customers are fully segmented as CBU customers.

Broadband ARPU – Total ADSL revenue, divided by the average number of ADSL lines for the period considered, divided by the number of months in that same period Broadband lines CBU – Includes the Belgian residential lines of Scarlet as from Q1 2009 Broadway project – Project launched end 2003, deploying a fiber network (fiber-to-the-street cabinet) and VDSL, which today allows for speeds up to 30 Mbps. As such this project is an important enabler for fast Internet and Belgacom TV CBU – The Consumer Business Unit takes care of our residential customers

LTE – Long Term Evolution MaIP – Move to All IP

Mobile churn rate – The total number of SIM cards disconnected from the Proximus network (including the total number of port-outs due to mobile number portability) during the given period, divided by the average number of customers for that same period Monthly net ARPU – Equal to total mobile voice and mobile data revenues, divided by the average number of active mobile customers for that period. The ARPU is calculated on the basis of the monthly averages for the period indicated.

Cloud computing – The word “computing” refers to the technology which helps to manage information better and the term “cloud” refers to the storage of the data on the Internet. The computer systems which once used to be installed within the company itself now operate from outside it at external data centers. This means that companies only use the services available on these computer systems, without having to worry about maintaining the equipment themselves

MoU (Minutes of Use) – Duration of all calls from or to Proximus, per active voice customer, per month

CSR – Corporate Social Responsibility

NGO – Non-governmental organization. Legally constituted, nongovernmental organizations are created by natural or legal persons with no participation or representation of any government

CWS – Carrier and Wholesale Technologies DSL – Digital Subscriber Line (DSL) is a family of technologies that provides digital data transmission over the wires of a local telephone network Dual Carrier – a 3G feature that doubles the download speed of compatible devices to a maximum theoretical speed of 42 Mbps by combining data transmitted on 2 frequencies. EBITDA – Earnings before Interest, Taxes, Depreciation, and Amortization EBU – The Enterprise Business Unit provides services to our professional customers Fixed Voice ARPU – Total voice revenue, excluding activation and payphone-related revenue, divided by the average voice access channels for the period considered, divided by the number of months in that same period FSC – Forest Stewardship Council is an international NGO and a certification system that provides internationally recognized standardsetting, trademark assurance and accreditation services to companies, organizations, and communities interested in responsible forestry. The FSC label provides a credible link between responsible production and consumption of forest products, enabling consumers and businesses to make purchasing decisions that benefit people and the environment as well as providing ongoing business value

MTN – The MTN Group Limited is a multinational telecommunications group, operating in 21 countries across Africa and the Middle East MTR – Mobile Termination Rate NFC – Near Field Communication

PUE – Power Usage Effectiveness is a metric used to determine the energy efficiency of a data center. PUE is determined by dividing the amount of power entering a data center by the power used to run the computer infrastructure within it. PUE is therefore expressed as a ratio, with overall efficiency improving as the quotient decreases toward 1 S&S – The Staff & Support Unit brings together all the horizontal functions that support the Group’s activities SAR – Specific Absorption Rate: unit for measuring the quantity of electromagnetic energy that is absorbed by the human body when a mobile phone is used. The maximum allowed SAR in Europe is 2 W/kg in accordance with the ICNIRP guidelines SDE&W – Service Delivery Engine & Wholesale groups together the network and IT services and offers services to other operators and suppliers SIP – Session Initiation Protocol SME – Small and Medium Enterprises UoU (Units of Use) – Voice minutes of use + SMS (where one SMS equals one minute) per active customer per month USO – Universal Service Obligation

HDTV – High Definition television

VDSL & VDSL2 – Very High Rate Digital Subscriber Line is a high-speed broadband access technology which uses the existing copper wire infrastructure. VDSL2 is the successor of VDSL

HR – Human Resources

VOD – Video On Demand

ICT – Information and Communication Technologies

VoIP – Voice over Internet Protocol

IDTV – Interactive Digital Television

WAN – Wide Area Network

IP network – An IP network is a computer network made of devices that support the Internet Protocol (IP)

WIFi – Local wireless network

HD – High-Definition

IPTV – Internet Protocol Television is a system through which digital television service is delivered using the architecture and networking methods of the Internet Protocol Suite over a packet-switched network infrastructure ISO 14001 – Standard that provides the requirements for an environmental management system

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