Belgium TV update. TV International, 15 octobre 2010

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1 Belgium TV update TV International, 15 octobre 2010 Cable subscription numbers continued to fall in 1H10 and are likely to continue to decline for several years Telenet has almost total control of cable subs in Flanders. VOO has a cable TV monopoly in Wallonia Belgacom reported fast take-up to its IPTV service, with 868,000 subs by June 2010 Belgacom launched a quadruple-play service in July 2009 through its subsidiary Scarlet. Scarlet launched an IPTV service in March 2010 Analog transmissions ceased in Flanders in November Wallonia followed in March 2010 Belgacom broadcast a live soccer match in 3D TV in May 2010 TV overview Belgium is split into two distinct linguistic and cultural groups. Of the 4.5 million TV households; around 55% are in Flanders (Flemish-speaking), 33% in Wallonia (Frenchspeaking) and 10% in Brussels. About half the homes take digital TV services. Pay TV penetration runs at 99%, with a significant number of cable TV subscribers also taking second subscriptions particularly to Belgacom's IPTV platform. Cable TV represents about 85% of pay TV subscriptions, while Belgacom's IPTV service accounts for 13% following strong growth in recent years. Cable TV penetration is one of the world's highest (84%) but is falling. Cable was traditionally regarded by consumers as a low-cost utility; though rapid digital TV growth is changing this mindset as homes pay more for value-added services. Leading cabler Telenet had 2.3 million subs by end-june 2010, almost all of which were in Flanders. The other major cable operator is Wallonia-based VOO, which has around 1.3 million subscribers. Belgacom TV had 868,000 IPTV subscriptions by mid The telco launched a range of triple- and quadruple-play offers in July 2009, including what it markets as Free TV'. According to Belgacom, subscribers save per month with the packages, equivalent to the cost of a subscription to Belgacom TV Comfort ( per month and 6 per month to rent the decoder), so justifying the free TV' tag. The quadruple-play service offers broadband (up to 18Mbps), mobile and fixed line telephony subscriptions and 70 TV channels from per month. DTH platforms TV Vlaanderen (Flanders) and TeleSAT (Wallonia) have 100,000 subscribers between them. Both are controlled by M7 Group, which is majority owned by Providence Equity Partners. Analog switch-off went ahead in Flanders in November The early ASO was assisted by the region's low dependency on analog terrestrial signals. Public broadcaster VRT operates the sole multiplex, offering three channels. In October 2008, the government announced the tender for seven further DVB multiplexes, one of which is expected to be set aside for DVB- H mobile TV. In the French-speaking south, ASO went ahead in March Pay TV platforms and operators

2 Cable After peaking at 4 million at end-2006, cable TV subscriber numbers declined to 3.7 million by 1H10. Household penetration stands at above 80% which is still one of the highest levels in the world, but well below the 90%+ penetration levels historically attained. The subscriber base fall has been caused by competition from other platforms, particularly IPTV from Belgacom. Despite the high penetration rate, cable operators face difficulties in maximizing revenues as many subscribers have proved reluctant to upgrade from their basic analog package. Cable was historically considered a utility, with low subscription fees. However, this perception is gradually changing. By end-2009, there were 1.4 million digital cable subs, up from 990,000 a year earlier. Some homes take both analog cable and IPTV or DTT signals. Major cable consolidation has taken place. Telenet accounts for 61% of cable subs (most of which are in Flanders). In October 2008, Telenet acquired cable consortium Interkabel, which served around 760,000 homes. Liberty Global holds a 48.83% stake in Telenet. The company had 2.3 million cable TV subs by mid-2010, of which 1.1 million took digital TV, under the idtv brand. Digital customers represented 48.5% of Telenet's TV subscriber base, compared with 25% at end TV churn was 8.5% in 2Q10, up from 7.7% in 2Q09. Triple-play services were taken by 30% of Telenet's customer base at mid-2010, with dualplay bringing in another 25%. Telenet had 1,174,000 broadband and 780,000 telephony subs as well as 170,000 mobile ones at June In February 2010, Telenet launched a 100Mbps fixed broadband package, using DOCSIS 3.0. The company believes that future growth revolves around mobile broadband. Telenet offers up to 180 TV and radio channels in the Brussels area, while customers in Flanders can access nearer 130 channels, including 15 HD. Telenet's digital service offers a wide range of VOD content. The operator claims that its subscribers made 32.5 million VOD transactions during 2009, up 62.5% compared with 2008 (20 million). By 1Q10, 56.2% of subs had an HD settop box installed (35.3% in 1Q09) and 62.8% had a DVR. The strong performance of its digital service and the steady growth of its triple-play subscriber base are factors behind recent ARPU growth. It reported ARPU of 35 for 2009, up by 8% from 32.5 in ARPU reached 38 in 1H10, again up 8% year-on-year. Revenues from premium subscribers increased by 48% year-on-year, from 78 million in 2008 to million in 2009 suggesting a significant increase in subscriber numbers. Further growth was evident in 1H10, with revenues from premium subscribers standing at 71.8 million (compared with 53.1 million in 1H09). Telenet reported total revenues of 1.2 billion for 2009, up 17.5% on EBITDA was million, up 20% year-on-year. Operating profit was up 25% to million. Although revenues were million in 1H10, net profit of 21.8 million represented a 54% year-on-year decline, which was partly due to a 60.1 million loss on derivatives. The Wallonia-based VOO consortium controls 35% of Belgian cable subs. In May 2007, VOO, formed by ALE-Brutele and Teledis (now Tecteo), paid million for eight

3 Wallonia-based cable operators. This extended its coverage to nearly all of the Wallonian homes, with a reported 1.3 million TV subscribers. In October 2008, the operator announced a deal with Nokia Siemens Networks to deliver a service-enabling network backbone, which heralded VOD and other interactive services. VOO also contracted OpenTV to provide a range of next-generation digital services, including HDTV, DVR and VOD. In June 2009 VOO introduced a 320GB DVR - branded VOOcorder - featuring VOD and HD functionality. Launched to compete with Belgacom's IPTV platform, it costs 6 per month to rent and carries an installation fee of 50. Brussels-based Numericable (formerly Coditel) had 131,000 cable TV subscribers at mid The operator is owned by three private equity funds: Cinven (35%), Altice (27.2%) and Carlyle Group (37.8%). The private equity firms also own French cable operators Numericable and Completel. The operator offers 16 HD channels, with seven available on the core TV Plus package In October 2008, the operator launched a 3,000-title VOD service with content from Canal Plus, TF1 and RTL, among others. Numericable Belgium has content deals with leading Hollywood studios, such as Fox, Disney and Universal. The Cablebox HD settops are provided by Thomson and include DVR functionality. The Cablebox HD has a 160GB hard drive and provides access to Numericable's VOD service. IPTV There were 3.27 million broadband subscribers by March 2010, up 7.4% year-on-year, representing household penetration of 72.6%. DSL accounts for 55.6% of all connections. Incumbent telco Belgacom controls 47% of the retail market. Belgacom's residential DSL subscriber reached 1.10 million by June The telco, 53.5%- owned by the government, has invested 440 million since 2003 on expanding its VDSL network. In late 2007 Belgacom began upgrading the network to fiber-to-the-node (FTTN) VDSL-2 as part of its Broadway infrastructure project. The operator plans to extend coverage to 80% of the population by Belgacom launched its IPTV service in June 2005, recording 868,000 subs by June 2010 (up 47% year-on-year), with 115,000 second stream. The main growth driver was the launch of triple- and quadruple-play packages in 3Q09. These are marketed as offering Free TV' because, according to Belgacom, the savings made on the broadband, fixed line and/or mobile telephony subscriptions with the packages equates to the cost of a standalone Belgacom TV Comfort subscription ( per month including decoder rental). The telco was the first operator in Belgium to launch quadruple-play in July The offer includes a mobile telephony subscription, fixed line telephony, broadband internet and 70 channels on Belgacom TV Comfort. The basic package with 12Mbps broadband speed costs per month which saves customers per month, according to Belgacom. The premium offer which comes with 18Mbps broadband for per month, which Belgacom claims represents a saving of per month. TV ARPU was 19.1 in 2Q10 compared with 20.7 in 1Q10. TV revenues were 134 million for 2009 compared with 86 million in TV revenues were up 28% year-on-year in 1H10, reaching 86 million.

4 Belgacom aims to convert cable TV subscribers to its triple-play packages. Jean-Charles De Keyser, head of Belgacom TV, stated that around two-thirds of cable TV users also taking Belgacom TV had cancelled their cable TV subscriptions. Belgacom claims 32% of Belgium's digital TV subs (and 17% of all pay TV homes) and wants 50% in the long term. The telco reported that 88% of households could access its IPTV platform, while 68.8% could also receive its HDTV service by end In August 2005 Belgacom acquired the rights to three seasons of the national soccer competition, the Jupiler League, for 36 million. Despite some commentators expressing doubts as to the sustainability of renewing the rights at a higher cost, Belgacom secured coverage for the seasons in June The latest deal cost 44.7 million and requires Belgacom to share highlights with FTA broadcasters VRT and RTBF. The All Foot channel screens three live matches per week in HD. The Comfort TV package includes one free match per week. Subscribers can pay 9.95 per month to gain access to all the matches of a particular team via the My Club service. Belgacom's VOD service offers 700 movies and concerts, with adult content and TV series also available. New films cost In addition, the RTL á l'infini Sélection SVOD service gives subscribers access to RTL programming for 5.95 per month. Belgacom broadcast a live soccer match in 3D TV in May 2010 to cafes and bars. Belgacom has 15 HD TV channels and 70 HD VOD titles. Belgacom's HDTV service uses Ruckus Wireless' MediaFlex n wireless transmission system. The service also uses technology from Ekinops and See Telecom to transport content. Nokia Siemens Networks provides its IPTV solution for Belgacom TV and its settops are MPEG-4 compatible. Belgacom subsidiary, Scarlet offers a quadruple-play package for 50 per month. The Scarlet One package includes 20Mbps broadband and a repackaged version of Belgacom's IPTV service. Scarlet launched a 23-channel IPTV platform in March Owned by Alpha Networks, Billi launched a triple play offering in March 2010, featuring 50 digital channels and including time-shift and DVR functions. It is the first converged operator to launch its Unlimited' triple-play service, designed to challenge the traditional operators by offering IPTV, unlimited internet (24Mbps connection) and unlimited national landline telephony for per month. Satellite With such high cable penetration and IPTV growing fast, there appears little room for pay DTH. However, M7 Group launched its second DTH platform (TeleSAT for French-speakers) in December TV Vlaanderen launched a service aimed at the Flemish population in June M7 has 100,000 subs across its two platforms in Belgium, although some are used for secondary sets. Providence Equity Partners controls M7 group. The bulk of premium sports and movie rights are owned by Telenet and Belgacom, limiting TV Vlaanderen's ability to develop premium services. However, the operator intends to add more premium content once it has increased its subscriber base. The DTH operator launched eight HDTV channels in April An additional five can be received free of charge via the

5 Astra satellite system. DTT High cable penetration and other platform launches limit the scope for DTT. While there are infrastructure difficulties for DTT, with relatively few rooftop aerials, the country's flat topography facilitates relatively inexpensive universal coverage. The Flemish region switched off analog transmissions in November 2008, and Wallonia followed in March Both platforms use the DVB-T standard. In Flanders, public broadcaster VRT sold 49% of its terrestrial transmission network to Norkring in December VRT retains the other 51% stake, although Norkring has the option of ultimately increasing its stake to 75%. VRT operates the sole multiplex in the region, transmitting three channels. In October 2008, the Flemish government announced plans to open a tender for seven DVB multiplexes and one DAB multiplex. The authorities reportedly planned to issue all the TV multiplexes to one party, with one multiplex set aside for DVB-H. In total, the Flanders region will have eight digital TV multiplexes and three digital radio multiplexes. RTBF launched DTT services in Wallonia in November The single multiplex broadcasts La Une, La Deux, La Trois (also known as RTBFSat) and Euronews. TV5 Monde and cultural channel Arte joined the platform in March Fig. 1: Belgium, split of TV households by platform, Year-end data Television households (000s) Analog terrestrial Analog satellite Analog cable Digital cable IPTV Pay digital satellite Free digital satellite Primary digital terrestrial Television households (%) Analog terrestrial 8% 7% 7% 5% 4% 1% 0% Analog satellite 0% 0% 0% 0% 0% 0% 0% Analog cable 89% 90% 88% 81% 73% 65% 52% Digital cable 3% 3% 4% 11% 17% 22% 32% IPTV 0% 0% 0% 2% 5% 9% 13% Pay digital satellite 0% 0% 0% 1% 1% 1% 2% Free digital satellite 0% 0% 0% 0% 0% 0% 0% Primary digital terrestrial 0% 0% 0% 0% 1% 1% 1% Source: Informa Telecoms & Media

6 Fig. 2: Belgium, Telenet operating data, H H10 Telenet subscribers by service (000s) Total cable TV subs of which digital Internet (cable broadband) Telephony Triple-play customers Mobile telephony Services per customer relationship 1,42 1,50 1,60 1,67 1,79 1,85 Telenet financial highlights ( mil.) Continuing operations revenues 733,5 813,5 931, , ,4 638,6 EBITDA ,9 505,6 607,7 329,6 Gross profit 276,8 302,8 378,4 429,6 508,5 275,5 Operating profit 131,2 143,8 205,2 238,7 298,5 170,8 Income/(loss) before tax ,8-6,7 47,1 144,4 40,6 Net income/(loss) -76,7 5,5 20,7-15,2 233,1 21,8 Telenet revenues by service ( mil.) Basic cable TV 198,6 199,4 221,7 244,3 322,3 162,7 Premium cable TV 51,8 47,3 62,8 78,0 115,4 71,8 Distributors/other (cable) 17,2 36,8 35,3 29,8 56,5 28,4 Residential broadband Internet 231,1 268,6 324,4 353,7 402,0 213,1 Residential telephony 160,9 183,3 200,5 210,8 224,3 123,2 Business services (Telenet Solutions) 73,9 78, ,9 39,4 Source: Telenet