In today’s economy business models are changing towards decapitalized New Economy

1. Baltic States: Opportunities in Outsourcing & Business TransformationEastern European Business ForumStockholm, 25-26th NovemberNils MelngailisChief Executive Officer

2. Old Economy New Economy “Push” Focus “Pull” Focus BRAND CAPITAL Production Focus CustomerFocus HUMAN CAPITAL Low High WORKING CAPITAL High Low PHYSICALCAPITAL (Outsourced Network) In today’s economy business models are changing towards decapitalized New Economy

3. Lattelekom is an example of a major business transformation After Before IT Sales & marketing Sales & marketing Billing Network Operations Shared services (HR, project mgmt) Network Operations F&A Procurement Transportation Property mgmt Network Maintenance Call centre services IT HR mgmt Training Billing Customer care Fleet mgmt, leasing Property mgmt Training

4. Lattelekom evolution to become a BPO provider Internal Business Transformation Cross-Border BPO Local BPO • Made significant investments in technology • Focus on efficiency and service quality • Contact Centre establishment • Shared Services establishment • Contact Centre e.g.: • Inquiry services • Hansabanka • Statoil / Neste (Baltic) • Kraft Foods • Governmental • Insurance • Data Centre for several external companies • Payroll Outsourcing for Statoil • Softcom Customer Care partnership • Help desk services for Dell PC users • Contact Centre for German mobile operator • Exigen Transformation partnership

5. A number of success cases signify the trend of business process & service outsourcing to Baltics along with exchange of local expertise - Latvia as the key resource base for global IT solutions and outsourced services • - Regional lead in e-banking and remote services competence - Customer support service in Latvia for Swedish PC users - Accenture IT Technology Center established in Riga end of 2002, with staff of 60 professionals serving IT projects in Nordic region. • One of the earliest Scandinavian capital investments in Latvia, with “Rosme” acquisition in 1993 • - Near shore call centres in Estonia (both set up in 2001, with 170 / 70 staff) • - Accounting service centre • established in Latvia to serve 23 • countries where Tele2 operates

6. In Brief Private company (started in 2000) San Francisco, California Investor AB among investors 1100 employees & 300 customers Operational Innovation for Services Industries Financial Services Communications & Media Government Transformation Software and Services Business Processes Legacy Systems IT Development Business based on long-term partnership around financial value creation Pioneered the Business Process Utility™ model Decoupling and outsourcing Transaction processing leveraging economies of scale Introduction to Exigen

7. Exigen in Latvia Recognizing Latvian advantageous position … Exigen has developed significant resources and infrastructure in Latvia • One of the lowest labor costs in EU • Availability of qualified and well-educated IT professionals • Access to reliable infrastructure • Geographical and cultural proximity to Europe • Political stability • Government incentives for IT companies 100%= 692 Exigen developers* Other Lithuania Russia USA Latvia * Including a/s DATI, which is now an Exigen Group company

8. Transformation Success • Universal/Warner Music • 9-year relationship • Royalty transaction processing utility • Target: USD$100+M savings Process and Transaction Outsourcing • Prudential Securities • 5-year relationship • Application outsourcing for back-office systems • Target: 35% cost reduction Legacy System Outsourcing • EDS & Westpac • 10-year relationship • Mortgage origination for 1400 person operating center • Target: 46% cost reduction Industry BusinessProcess Software 2000 2001 2002 2003 2004

9. Business Process Utility™ Model Shared Royalties Processing – Exigen, Warner, Universal. • Reduced capital expenditures (short-term and long-term) • Amortize upfront and future development costs across all participants using Exigen software (1500+ person years of development) and offshore Eastern European resources • Variable cost base to utility customers • Service provider model charging per transaction • Aligned business model: variable to customer’s business, incentives for Exigen to create more value in order to increase transaction volumes • Operating cost reduction created by sharing infrastructure • Initial large-scale operation ready to process transactions for new customers • Over 30% operational cost savings

10. Hansabank Group - regional leader in e-banking solutions and remote services competence One of leading commercial bank groups in Baltics with Swedbank (FöreningsSparbanken) holding 59.7% of group's shares from 1998 • The parent, Swedbank, historically emerged from several organizations, therefore faced with parallel IT systems and consolidation challenges • Hansabank, as many other Baltic counterparts, in much more advantageous position: • Different, decades younger IT solution generation from ‘90ties – no migration challenges and huge IT re-investment required • Pan-Baltic IT system built on common platform with localized services • All technological solutions built with integrated remote access for immediate practical application

11. 1,500,000 1,000,000 500,000 0 1996 1997 1998 1999 2000 2001 2002 2003 Hansabank Group - regional leader in e-banking solutions and remote services competence (continued) • Today, Hansabank is the market leader in remote banking services (attractiveness, service penetration) with superior business expertise in the region - Over 1 000 000 pan-Baltic Hansabank Internet banking customers -

12. Softcom Customer Care – A pan-Baltic Call Center Company ”Each interaction between a customer and a company should be considered as a business opportunity and treated accordingly.” Alf Sjöström, Founder & Owner of Softcom • Softcom runs Customer Care Centers to create outstanding customer relationships for its clients offering higher quality, lower costs, increased revenues and better understanding of customer needs and behavior. • Softcom has three main areas of service: • Inbound Customer Services and Support • Marketing & Sales • Customer Research and Analysis • These three basic services are combined to dramatically improve customer relationships for our clients. This is professional CRM In practice. Through innovative services, Softcom creates and maintains competitive and profitable customer relationships for its clients

13. Softcomshasestablishedapan-Baltic Virtual Contact Center • 9 Contact Center sites • In total 700 agents • Seamless flow of contacts between countries and locations • Call routing based upon • Language • Location • Cost to serve • Type of customer • Competence • Advanced IP-based Callcenter platform Pan-Baltic Virtual Contact Center

14. Growing Softcom business in Baltic - customer support service for Swedish and Finnish PC users • Front level support to PC users in Swedish/Finnish languages • Inbound/Outbound helpdesk call handling + emails • Service launched October, 2003 with more than 40 Baltic operators by end of 2004 • Fast launch: 3-4 month preparation • Bringing customer cost saving to ~30%

15. Lattelekom & its partners have the breadth and depth of capability to deliver business transformation Business process audit & reengineering Process transformation outsourcing Call center services, Finance & support operations transformation Business Customer Demands BPO IT consulting Desktop support System support Application development & support IT Services Hardware operations Network operations IT Infrastructure Converged Offer Infrastructure outsourcing; Network operations outsourcing Networking, Data & Internet Fixed & Mobile Voice

16. Thank You! Nils.Melngailis@lattelekom.lv www.lattelekom.lv