Annual report 2011

5

nice restaurantromantc evening family meal movies

What time we come to Mom’s birthday?

ANNUAL REPORT 2011

26April

5

5,478,000mobile customers (Proximus & Tango)

1,211,000Belgacom TV customers

internet customers 1,590,000

residential & business

have positively changed their opinion about

Belgacom

50%more than

of customers

numbers of packs (in thousands)

1,089870

560

302

20092008 2010 2011

DSL 3G

FON

a unique network complementarity

+150% internet on smartphone

226,000mobile data card customers

mobile internet on laptop and tablet

Belgacom TVcoverage91%

Highlights2011

Over 81% of the Belgian population can now enjoy High Definition television and fast download speeds thanks to the Broadway project.

Telindus International continues its solid growth path Telindus France acquires storage specialist Eudasys. Telindus UK takes over management of the Virgin Media network in a major outsourcing deal.

Belgacom improves its service everyday to make life easier for its customers, and promotes its SERVICING on radio and TV.

We focus on putting more SME customers on packs by including mobile in the mix, a truly all-in-one business solution, which also promotes convergence.Our company

concludes an important partnership

with Fon, the largest Wi-Fi community in

the world, with more than 500,000 Wi-Fi

hotspots accessible in Belgium.

As part of its initiatives to reduce the digital devide, Belgacom launches «Web Experts», an educational project encouraging youngsters to share their Internet knowledge with the elderly. www.webexperts.be

With Happy Time XL, our customers can now call all fixed-line and mobile numbers for free in Belgium with their fixed line after 5 p.m. and during the weekend!

Thanks to an exclusive agreement with

Deezer, Belgacom has become the first

operator in Belgium to offer online music

with unlimited access to more than 13 million

music tracks.

Customer orientation

Telindus International

Packs for SMEs

Content

HD New offer

Web Experts

Vous êtes indépendant ou dirigez une PME ?

O� re destinée aux clients professionnels, valable du 01/02/2012 au 31/03/2012 inclus pour toute nouvelle souscription d’un contrat de minimum 12 mois à ce Pack d’une valeur de € 72/mois. Celui-ci comprend une ligne téléphonique Classic, un abonnement Belgacom National No Limit Anytime, un forfait mobile Belgacom Bizz Mobile 20 et un abonnement Belgacom Bizz Internet Favorite. Grâce à ce Pack, vous béné� ciez d’une réduction de € 20/mois (équivalente au forfait Bizz Mobile 20). O� re non cumulable avec d’autres promotions sur les di� érents services du Pack. Prix HTVA. Prix et conditions applicables en Belgique pour un usage national.

Optez pour un pack professionnel

avec forfait mobile gratuit

Cloud

To support its mobile data offensive, the Enterprise Business Unit launched the CRM Mobile application, answering the needs of professionals that are interested in an end-to-end solution

Our Group has launched a new application, “TV Everywhere”, which allows customers to watch TV anywhere and on different devices. Customers can watch video on demand, TV channels and football matches sponsored by Belgacom on their PC, TV or tablet, at home or on the move.

The new Microsoft Office 365 and Mozy PC Backup: both cloud solutions took off like a rocket in less than 3 months.

BICS has transported up to 100 million SMSs per month: from Europe over Africa and the Middle East, to such exotic destinations as Fiji and Papua New Guinea.

Scarlet

BICS

The Huawei swap, the fastest upgrade performed in Europe, was finished ahead of schedule. Almost 4000 antenna sites were upgraded in 14 months.

Belgacom acquires Wireless Technologies, which owns the retail outlets of The Phone House chain in Belgium.This acquisition enables us to get even closer to our customers and respond even better to the expectations of a constantly changing telecom market.

Belgacom has concluded a DEAL with Samsung to give everybody the possibility to get online everywhere: Belgacom offers access to the Internet at home and on the move, together with a Samsung Galaxy tablet.

Mobile data

New offer

Scarlet adds data to its mobile offers. Scarlet also launches “Me & Surf” with mobile internet, offering 1GB to surf on the Proximus 3G network for EUR 15 per month.

Acquisition

Innovation

Content

30Our customers

46Our people

52 Responsible business - CSR

02Interview with Theo Dilissen

Ready to take advantage of future opportunities

04Interview with Didier Bellens

Tuning Belgacom’s fixed and mobile network into an unrivaled customer experience

06Our profile

08Operating context

18Our strenghts

62 The Belgacom share

68Corporate governance

84Management report

106 Glossary

FLAPKey financials

INTERVIEW /// page 2

Ready to take advantage of future opportunities

How did Belgacom come out of a tough economic year?In a year dominated by the economic crisis, Belgacom had a quite satisfactory 2011. As ever, our principal focus was on our customers. We have taken further strides in making things simple and accessible for our customers, and the stronger retail presence from our acquisition reinforces our in-market consolidation: maximising our leading position, and making it easier for everyone - customers and potential customers – to obtain precisely what they need.

Of course, we need to go further in being close to our customers, also at the most basic level such as reduc-ing response times in call centres. Even minor innova-tions – like giving a check call just before a technician arrives for a home appointment – are of interest to the customer. One of the highlights was that we came even closer to them through our successful bid to acquire the Phone House chain of retail outlets in Belgium. This move was yet another demonstration of how we

are putting into effect our strategy of customer focus

that we introduced two years ago. We have invested

in techniques that sensitively measure our progress

towards the targets we have set, and at board level we

ensure that progress is maintained.

We face erosion of our traditional market in the order

of 2-3% every year, and our response takes the form

of ever more effective use of resources, and ever more

attractive innovations in our expanding offer of services

and products.

We closely followed up our cost base and maintained

social peace. We invest in a good working relation

with our unions. We also respect and appreciate the

responsible social role they have been playing.

Are you still confident that our strategy is the right one?

I am. We took some daring decisions that have proved

right.

After a tough economic year, Belgacom is in good shape and fit for the future. We have the strengths we need to get through a new year.

Interview with

Theo Dilissen Chairman of the

Board of Directors

3

We have chosen a policy of judicious investment and smart cost-control, linked with selective partnerships.

For example, we engaged in a fruitful partnership with Samsung and we chose to create a real return for shareholders. As the year has demonstrated, the partnership with Samsung has delivered spectacular results for Belgacom. The same conviction underlies our approach to pricing: despite exceptional offers from competitors, our average price levels are in line with other market offers, and our packs and bundles and high-quality services retain customer loyalty while ensuring financial equilibrium for the group.

Similarly, despite the tough times, we courageously kept up our investments to the tune of EUR 777 million. Our consistent investment in fibre and the latest trans-mission technology has allowed us to launch innova-tions like IPtv, and to materialise convergence. We are right on track and right on time, bringing fibre closer to the home. Yet again, we have been ranked among the world’s leading fiber optic. We are committed to keep delivering investment at the necessary level to keep up our momentum, as we know that taking shortcuts in investment would imperil our ability to take advantage of future opportunities – as some of our competitors have been discovering for themselves.

Do customers really care about the networks?The quality of our networks may not be a concern in itself to our customers, but they certainly see the results of it in the quality and reliability of the products and services it delivers to them – whether they are part of the 1.2 million Belgacom TV subscribers, or the cus-tomers switching seamlessly from Wi-Fi to 3G on their mobile devices, while continuing to upload their files from Internet. Our reputation among business partners and investors is continually boosted by the cachet of respectability and credibility conferred by our world ranking.

How were you affected by the changing regulatory context?We continued to face regulatory pressure, which absorbs a significant portion of our profit and cash flow year after year. The abolition of the asymmetry of mobile termination rates (see p. 14) was a positive development that we had been arguing for years, yet

the level playing field that we seek with cable operators is still a long way off. Regulatory authorities are still not completely synchronised with the market realities. We will go on insisting that the same conditions be applied to all players.

What about the broader competitive context?Although we naturally focus on the market in Bel-gium, where most of our business is, we remain alert to opportunities or challenges abroad. With BICS, we have an international perspective, and much of our Tel-indus business comes from beyond Belgium. There is little evidence at present of the long predicted move towards international consolidation among operators, and indeed some of the most renowned predators are experiencing limits to their scope for action. We, by contrast, have chosen a policy of judicious investment and smart cost-control, linked with selective partner-ships. We are aware, of course, of the big moves being made by some players, particularly in Asia, and these we closely watch. So, for instance, we are monitor-ing the intentions of a Chinese operator which has now acquired a 4G licence for Belgium.

As Chairman, are you satisfied with the year?Our performance on the BEL-20 proves we are doing things properly. In a year when the market index fell by 20%, Belgacom’s shares closed the year with just a minor slippage of 3% and we were able to produce a stable dividend of EUR 2.18. Last year also saw the introduction of a number of new legal requirements on corporate governance – enhancing the rights of shareholders, bringing additional independence to remuneration mechanisms, promoting greater gender balance on boards, and greater transparency in com-pany management and supervision. Our adherence to such requirements adds to our credibility in the out-side world, and allows us to improve our performance internally.

The buy-out of The Phone House chain will enable us to get closer to our customers but also to strengthen our presence on the retail market.

Highlight 2011

annual report | belgacom | interview | FR | NL | UK |

Tuning Belgacom’s fixed and mobile network into an unrivaled customer experience

What was the dominant theme of 2011?Last year was a difficult year, yet Belgacom performed relatively well. Our number of customers, in both the residential and corporate market, rose considerably. It means we anticipated their expectations correctly and timely. The driver of this development has been the ever increasing data traffic, the success of digital TV and of packs. Here lies the exact strength of Belgacom: as a single provider we used our world-leading fixed and mobile network to create a customer experience that enables the integrated use of platforms, content and devices. It is what we call our strategy of convergence. From the point of view of the customer, this strategy means he can enjoy our services anytime, anywhere, on any device he finds appropriate in order to access his content and his applications.

Just how does Belgacom make this integration of services happen? As fixed broadband becomes increasingly a standard

in most homes, along with the related services, multiple

screens, etc, the trend to one supplier for all services is

reinforced. The digital home is becoming a reality.

We are therefore offering new possibilities that are

reinforced by strategic partnerships. Residential cus-

tomers outside their homes can benefit from mobile

internet through 3G, and from a wider Wi-Fi coverage,

thanks to our collaboration with Fon, the world’s first

global, crowd sourced Wi-Fi network. Our partnership

with Samsung helped to achieve excellent sales. In

2011 Samsung tablets sales have been exceptional in

Belgium, largely thanks to the successful pack offers

The trend to one supplier for all services is reinforced. Fixed broadband increasingly becomes a standard in most homes. Strategic partnerships are broadening Belgacom’s performance. Didier Bellens has every reason to take an ambitious view on the future.

INTERVIEW /// page 4

Interview with

Didier Bellens, President & Chief Executive Officer

Number of Belgacom TV clients from launch (in 000)

05 05 06 07 08 09 10 11june

033

140

305

506

752

975

1,211

5

How Belgacom gives back to society

• 15,788 employees and 6,000 suppliers (17,000 people) working for us

• 900 people hired

• more than EUR 900 million in the form of dividends, taxes, social security etc.

• EUR 3 million social donations to support the communities in which we operate

which make this partnership an exemplary win win. There is Deezer offering a huge base of music our customers can pick from the cloud. Not any storage capacity is needed, the choice of music can be person-alised and the music is accessible any which time one wants. We are on track with the Y-generation trend that cherishes the ability to share emotions at their conveni-ence. Those emotions can take the form of music, the proximity of friends, the exchange of experiences, feel-ing, ideas, hopes, Movie Me grants access to a cata-logue of around 500 feature films. You can watch them anytime, anywhere, on any screen you wish. The same goes for TV-programmes on TV Everywhere.

The next step in digital connectivity - to alarms, energy meters, domotics, the digital home, etc. -, which takes convergence several steps further, is now on the brink of readiness.

Is it mainly a question of new offers to customers?It is not. All through our strategy, our focus is on the customer. So for instance, we have radically improved our customer service establishing longer opening hours, shorter response times, simpler and more customer-friendly communication. All this resulted in a noticeably greater customer satisfaction.

We also look at benefits in terms of customer expe-rience. To Belgacom, it is all about functionality, easy use and how it makes people’s lives more creative, enriching, invigorating, inspiring, in how our convergent offers answers their aspirations. Better products, great connectivity and more ubiquitous service are tools to achieve this more meta goal. Our regular investment of about 12 % of revenues has enabled us to concretize the ambition of a full service ‘anywhere, anytime, any device’.

What about Belgacom’s responsibilities to the world it operates in?We aim to grow our business in a responsible and sustainable way, as we believe it has to benefit both the society and our long-term development. It goes beyond managing our own social impact and environ-mental footprint. We focus on enabling a more inclu-sive, safer and greener (e)- society. We have success-fully embedded green and people-oriented policies into our business, from reducing our own CO2 emis-sions by 62 % since 2007, to initiatives helping more people get online and enjoy the benefits of the digital society, or enabling our employees to train children on a safe use of the Internet and mobile devices. Through

our community investment initiatives, we stimulate social links between people and communities for more social cohesion.

Our efforts to become a more responsible company were recognized and Belgacom’s social responsibil-ity rating improved in 2011 as we were selected in the Ethibel Sustainability Index Europe. We will pursue our efforts in 2012, in line with our ambition to become a leading responsible business. And by ‘we’, I mean: the company and our staff, taking into account the expec-tations of our stakeholders.

How is Belgacom coping with the crisis?In 2011 we had to make some strategic choices, for which we maintained our discipline and opted not to take the easy road but to hold on to our end goal, value creation. As such we were vigilant not to overpay for Belgian football broadcasting rights. This now proves to have been the right choice since football-related churn is back to previous levels, when we had all the rights.

Yes, we look also to areas where we can also further increase our efficiency by improving our way of work-ing and our speed of implementation.

We even have the possibility of emerging stronger from the turmoil, and it is important that our own staff, customers and shareholders are aware of this. Our TV offer continues its strong growth, we further progress in mobile data and there has been a very successful take up of our packs. We invested in a higher speed and reach of VDSL and mobile networks. By the end of 2011 we reached over 81% Fiber-to-The-Curb (VDSL) service coverage and 97% 3G population coverage. This is clearly a leading world-wide position.

How do you see the future?Given our continued investments and convergence strategy we are well prepared. Our customers can expect to see Belgacom moving further ahead and developing new businesses. The way ahead will remain, as always, a blend of vision and pragmatism - all the more important in a year that will be unpre-dictable. We are not planning to throw vast sums into promotion and marketing, but will assess the competi-tive situation as it evolves, and react accordingly. We will maintain capital expenditure, but we will adjust it in light of the behaviour of major customers, who are also under the pressure to make savings. We prefer tie-ups with partners in sourcing and adjacent new service offerings which support our strategy.

annual report | belgacom | interview | FR | NL | UK |

20%of our residential customers buying a pack in 2011, included mobile in it

The Belgacom Group in a snapshot

missionBelgacom wants to be the preferred providerof intuitive end-to-end solutions combining fixed and mobile telecom, IT and media, enabling its customers to master and enrich their professio-nal and private lives in a sustainable way.

strategyBelgacom wishes to offer

the best of telecom, media and IT convergence through an unrivalled customer experience

OUR PROFILE /// page 6

business The Belgacom Group is

Belgium’s main single provider of integrated telecom services Belgacom offers quadruple-play services combining fixed-line and mobile, internet and television.

Belgacom ICT-services also offer a com-prehensive portfolio of solutions around

networks, data centers, security aspects, unified communications services, telephony mobile applications.

7annual report | belgacom | our profile | FR | NL | UK |

identityBelgacom maintains a consistent identity every day, in everything it does.

Our organization reflects the company’s focus on our customers and our convergence strategy.

Innovative

Consumer Business Unit

• Fixed Voice • Fixed Data • Mobile Voice • Mobile Data • Digital TV • Entertainment

Enterprise Business Unit

• Fixed Voice • Fixed Data • Mobile Voice • Mobile Data • ICT product/

services

Service Delivery Engine &

Wholesale • Network &

IT services • National

wholesale

Staff & Support • Finance • Services to

business • Human resources • Strategy

BICS • Joint venture

between Belgacom, Swisscom Fixnet, & MTN

• International carrier activities

Belgacom Group

organization

Belgacom strengthens its leadership in innovation,

so that it can capture growth from new fields,

bringing additional value to our customers.

Belgacom wants to grow sustainably and focus on enabling a more inclusive, safer and greener digital

society.

Responsible

Customer centric

In every act and every decision, Belgacom puts customers’ interests first and offers them simple, efficient and accessible

solutions.

8:45 a.m., OOSTENDELEO and LENART My son Lenart spends most weekends with me at theBelgian coast. I have an apartment in Ostend. Lenart hasno friends here so far, so I bought him a smart phone. He is maybe a little young for that device, I know, but under the circumstances I think it’s okay. At least he is connected with his friends all the time. Lenart is now what people call a digital native.He conjures with all them apps, helps me out when I get stuck, it’s amazing. Luckily he still fancies a brisk walk in the dunes…

OPERATING CONTEXT /// page 8

9

Are you having fun, boys? ;o)

annual report | belgacom | operating context | FR | NL | UK |


Tablets penetration

4% in residential market

15% in professional market Source: Belgacom research

Smartphones penetration

20% in residential market

34% in professional marketSource: Belgacom research

A permanent revolution in an increasingly connected world

About 10 billion mobile phones -

or the equivalent of the world’s population – will have access

to the Internet by 2016.

Source: Cisco study

11annual report | belgacom | operating context | FR | NL | UK |

Demanding and “always-on” consumersConsumers are increasingly demanding. As they search out the best price/quality ratio and the best answer to their specific needs, they expect more transparency and are prepared to make comparisons. They are ready to pay – but only for what they really choose and use. Beyond price and quality, a growing proportion of customers take account of environmental impact and social responsibil-ity when they select their supplier. In the “always on” world that technology now allows, consumers want to be able to stay in touch with their friends and family. They also want to access their entertainment, their content or their valued applications in real time, anywhere, any time and on any device they choose. Frontiers between private and professional life are blurring and employees expect to access their work environment remotely and seamlessly.

Because everything is accelerating around them, con-sumers can feel under pressure in their daily lives. They long for more free time and less complexity. They expect their suppliers to make their lives easier with simple prod-ucts and services, tailored advice and recommendations.

The ‘always-on’ world applies to the work environment too. The same needs, the same services, and the same pressures, are changing professional life. Consequently, Belgacom is responding with offers in the professional market that provide greater mobility, easy switching between devices and platforms, and packaged solutions that give customers the benefits without any of the wor-ries about configuration and computability.

Belgacom is operating in a fast-changing and complex environment: we are driven forward continually by shifts in consumer behavior, the evolution of technology, and our competitors. But we are constantly reinventing ourselves to stay ahead of changes. We possess all the assets to give us confidence in facing every challenge.

A direct impact on the telecommunications sectorMatching technologies and servicesToday we see ever faster penetration of tablets, smart-phones, and laptops that can be used on different types of network. These devices allow access and sharing for all types of multimedia content and applications that become more widely available at any time and on any network. Convergence is materializing, driven by smart devices and content. The wrap-around range of net-works (fixed, mobile 3G or soon 4G, wi-fi) make these seamless links possible on channels that were previously separate. Additionally, devices originally designed for private use become powerful enough to run business software. More and more employees want their hardware to function in both their professional and private usage leading to a blurring frontier between those two worlds.

New growth areasWhile the revenues from traditional telecom business - such as voice traffic - are decreasing, there is growth in the increasing use of entertainment and professional tools via the Internet, and in the accelerating availabil-ity of smartphones and tablets at affordable prices. To match the new opportunities, content is undergoing a change too. There is a move away from purchasing and installing content locally (film on DVD, music on a dedi-cated player, and downloaded applications). There is a corresponding move towards a concept of rental and on-line use (film or video-on-demand, streaming music, applications in the cloud). We are experiencing a boom in cloud computing and cloud entertainment. These intui-tive and friendly-to-use services are accompanied by easy access on a pay-for-what-you-use basis, while the underlying technology is managed by the partner. Boost-


ing these growth areas demands education for clients, a clear perception of the advantages, and a new degree of trust in technology.

Multi-play environmentCustomers are moving away from individual suppli-ers for individual services (phone, internet, television), and are tending instead to choose a single provider for all telecom, TV and ICT. This is not only for reasons of administrative convenience; it is also because the multi-screen availability of the same content requires a strong complementarity in the devices and networks that pro-vide connectivity. Guaranteeing a continuous stream of information and communications will be more important. Investments in the networks are key for that, since broad-band and digital TV will soon penetrate almost every home.

New customer-approachTo be relevant to their customers, suppliers need to seg-ment and personalise their offer more than ever. The “average consumer” no longer exists, and individuals in the same family require individualized treatment. Person-alization and recommendation become then very impor-tant. Content and applications are consequently driven to expand from the mainstream to embrace niche content & apps as well as mainstream. Tools to support households and individuals in taking advantage of these opportuni-ties therefore acquire new importance, such as the smart recommendation engine for selecting movies.

The competitive environment1

The competitive landscape in which Belgacom operates is characterised by the presence of strong regional cable operators, mainly focussed on offering TV and fixed line products. Belgium counts about 11 million inhabitants, and about 4.7 million households. The Belgian business market exists of over 900,000 companies, including inde-pendents, small -and medium enterprises up to large multi-nationals. The professional market evolves quickly and competition is very diversified and fragmented. Belgacom faces not only competition from local Fixed and Mobile players, but also from system integrators, IT providers and international telecom operators.

Three nation-wide mobile network players are active on the Belgian market, with the Belgacom mobile brand Proximus competing with BASE and Mobistar, sub-sidiaries from respectively KPN and France Telecom. In addition, many virtual mobile operators compete on the

mobile market. Belgacom, as the sole nation-wide Fixed -and Mobile network player, deployed a convergence strategy early on and offered multi-play packs since 2007, a strategy we saw followed recently by our com-petitors.

On fixed voice and internet marketBelgium saw the volume market penetration of Fixed, Mobile and TV services at least stable or increasing versus the prior year. Fixed Voice market penetration remained stable at 73% for the Consumer market, with Mobile-only’s at 27%. Like other European incumbents, we saw our market share in Fixed Voice further declining in 2011 to the benefit of cable, a trend we aim to slow through the revival of our Fixed Voice connection via attractive offerings. The Fixed Internet penetration rate increased to 68% of Belgian consumers, while for the Enterprise market this is 86%. In this increasingly com-petitive market, Belgacom’s total market share by end 2011 was 44.6% or 1.6pp lower than one year ago.

On mobile market Under our mobile brands e.g. Proximus, Scarlet and Mobisud we also operated in a highly penetrated mobile market. By end 2011, our total Mobile market share ended just above 40%, 0.9pp down to last year, though declining at lower pace versus 2010. This while we kept a strong position in the overall Postpaid market, in spite of a market-move to contract customers and subsidised offers by the cable competitor. Especially in the Business segment, we remain the preferred supplier for Mobile ser-vices.

On the digital TV marketThe move from analogue to digital continued, with end 2011 69% of Belgian TV viewers being digital. Belga-com is a challenger on the TV market, and has acquired a strong position since its Belgacom TV launch in 2005, this in spite of strong competition. In 2011 too, we con-tinued to take share from our cable competitors, ending 2011 with an overall TV market share of 22%, and 32% of the digital TV market.

On mobile data marketMobile data is another area in which we performed very well, as customers enjoy with Proximus the best 3G- network in Belgium, in combination with Belgacom’s high-quality WiFi network. End 2011 226,000 mobile cards were connected via laptop of tablet, leaving our competitors behind.

45% Belgacom

32% Belgacom

40% Belgacom

8% Other

5% Other

28% Base

63% Cable

47% Cable

32% Mobistar

Internet

Digital TV

Mobile

1. Source of markets shares and penetration rates: ISPA, BIPT, ECTA, com-petitor press releases and internal data or estimates

Our competitive position (market share)

13

New competitorsIn competition with rivals from beyond - the “Over-The-Top” competitors, largely international players that use our networks to provide a service to our customers - we have resisted the threat on voice and SMS by pro-active offers (such as for unlimited SMS or calls); OTT players pose a serious challenge, especially for entertainment services. At the same time, entering their playground is an opportunity for us to reach new customers.

A 4th player acquired the 4G license and might arrive in the mobile market soon. Its intentions are still unknown, but we remain alert to this.

The regulatory factorsEfficient and balanced regulation in the telecom sector is in the long term interest of Belgian consumers and companies. As the leading telecommunications operator in Belgium, Belgacom continues to experience intense regulation, but 2011 confirms the move initiated last year towards a level playing field. This context and its evolu-tion is fully explained in detail on next pages.


50% of the Belgian

households have a telecom pack (fixed

products only or with mobile included)

15% of tablet owners use

their tablet on the move via the 3G network)

Source: Belgacom research

52% of youth aged 18 to 25

years have a laptop Source: Belgacom research

The rights assets to anticipate market expectationsIn this context, we are confident that we will be able to face the upcoming challenges.We have the right strat-egy, and we have the right assets to carry it out. We know the marketplace is full of challenges, but we also know it is full of opportunities. We will not only meet the expecta-tions of the market; we will anticipate them.

MTR-Glidepath (EUR ct)

before* 01-08-10* 01-01-11* 01-01-12* 01-01-13

12

10

8

6

4

2

0


Open networks So far, only the Belgacom network has been regulated, whereas cable operators have been exempt from any obligation to share their net-work with other actors. On 1 July 2011, the Belgian media regulators (BIPT, CSA, Medien-rat and VRM) decided to regulate the dominant cable operators in their respective coverage areas and to require them to resell analogue TV, to open up their digital TV platform, and to resell broadband. Belgacom can only obtain access to analog TV. The wholesale prices of the cable operators will have to be approved by the regula-tors and the effective implementation of the obli-gations should occur in the second half of 2012.

Belgacom considers this a step forward towards a level playing field with cable but there is still an important imbalance in the proposed regulatory controls. Symmetric regulation of all infrastruc-tures is the best approach for Belgian consumers and businesses and will ensure fair competition between all operators.

Mobile termination rates (MTR)The mobile termination rates (MTR) are the fees that fixed and mobile operators must pay to other mobile operators to terminate a call on their net-work. Belgium was suffering since many years from an asymmetrical regulatory regime and Belgacom had to pay, to Mobistar and Base, much higher termination rates than what it received itself. But on 29 June 2010, the BIPT finally decided to reduce gradually the tar-iff asymmetry and to abolish it completely by 1 January 2013.

Those tariff reductions have allowed to bring Belgium back in line with the European Commis-sion recommendation and the European prac-tices in other Member States. On 14 July 2010, Mobistar and KPN Group Belgium each filed an appeal before the Brussels Appeal Court against the BIPT decision of 29 June 2010, both ask-ing the Court to suspend and annul the decision (especially regarding their own MTR tariffs). On 15 February 2011, the Court took its decision in

A fair regulation between the different actors in the telecom sector is essential to maintain, in the long term, a sound competition to the benefit of Belgian consumers and industry. To evolve towards a level playing field, Belgacom has concentrated its efforts in three key domains: (i) equal regulation of Belgacom and the cable operators (ii) the abolition of asymmetrical mobile termination rates (MTR) and (iii) a more balanced regulation concerning universal service.

BaseMobistar Proximus

Regulation

the suspension procedure, rejecting all the claims of Mobistar and KPN Group. The annulment pro-cedure is still ongoing.

The decrease in MTR is totally reflected by Bel-gacom in its fixed-to-mobile retail tariffs. Accord-ingly, Belgacom lowered its fixed-to-mobile tariffs on 1 August 2010, 1 January 2011 and 1 January 2012.

* Rates with inflation

annual report | belgacom | operating context | FR | NL | UK | 15

Lower Roaming ratesThe EU authorities introduced caps on voice roaming prices in 2007. In July 2009, they adopted revised rules (Roaming II Regulation) that cut roaming charges further so that by July 2011 the maximum roaming charge would be 35 eurocents per minute for outgoing calls and 11 eurocents for incoming calls. A retail cap of 11 eurocents (excl. VAT) combined with a whole-sale cap of 4 eurocents has also been imposed for SMS roaming as from 1 July 2009 for outgo-ing SMS. Data roaming services are regulated at wholesale level based on a price cap, calculated on a kilobyte basis. On 1 July 2011, the data roaming prices went down from 80 eurocents to 50 eurocents per Mb.

In addition, measures aimed at preventing “bill shocks” for Mobile data roaming were also implemented. As of 1 July 2010, all customers are by default on a maximum financial limit of EUR 49.85 (excl. VAT) per month for Data roam-ing, unless they opted-out.

The Roaming II regulation expires on 30 June 2012 and in July 2011, the European Commis-sion whose ultimate objective is that the differ-ence between roaming and national tariffs should approach zero by 2015 has proposed “structural solutions” to make the roaming market more competitive. European mobile operators would be required to unbundle the sale of roaming ser-vices from domestic mobile services (carrier pre-

eurocents Before* 01-Aug-10* 01-Jan-11* 01-Jan-12* 01-Jan-13Proximus 7.20 4.62 3.94 2.62 1.08Mobistar 9.02 5.05 4.29 2.79 1.08Base 11.43 5.81 4.90 3.11 1.08% change Proximus -36% -15% -34% -55%Mobistar -44% -15% -35% -58%Base -49% -16% -36% -62%Asymmetry Mobistar-Prox 25% 9% 9% 7% 0%Base-Prox 59% 26% 24% 19% 0%

Final decision on MTR

* Rates with inflation

Voice Roaming (EUR ct per minute)

beforeregulation

end Aug’07

end Aug’08

July’09 July’10 July’11

100

80

60

40

20

0

Retail outgoingWholesale outgoing Retail incoming

beforeregulation

1 July’09

SMS Roaming (EUR ct per sms)

40

30

20

10

0

1 July’111 July’101 July’09

Data Roaming (EUR ct per Mb)

Wholesale

100

80

60

40

Retailwholesale

EUR ct

35/minfor outgoing voice roaming since July ‘11

selection for roaming services) from July 2014 and to propose wholesale roaming access from July 2012. The Roaming III would also extend the current retail and wholesale price cap regime with downward glide paths for a transitory period to give the new structural changes to the roam-ing market time to be developed and imple-mented. The extended price cap regime would also include new price caps on retail charges for data roaming. The Regulation would cover a ten-year period from 1 July 2012 to 30 June 2022.

Wholesale services In 2010, the BIPT defined a cost-oriented monthly rental fee of EUR 7.78 for a full unbundled cop-per line. On 18 November 2011 the BIPT pub-lished a repair decision setting the monthly rental price at EUR 8.03 with retroactive effect on 15 August 2010 based on a ruling of the Brussels Appeal Court. Since the BRUO tariffs are a build-ing block for the BROBA tariffs, these tariffs were adapted accordingly. Belgian fixed access prices are currently at lower end of EU benchmark.

The market analysis decision of BIPT on whole-sale broadband of 1 July 2011 obliges Belga-com to provide a “multicast” functionality in the bitstream offer (to be used for broadcast). On 19 September, Belgacom submitted to the BIPT an alternative multicast solution based on shared channels (wholesale customers can use the multi cast channels that are already on the Belga-com network if they acquire the corresponding

about EUR 16.7million was made in December 2010 for the year 2011 and the third one of about EUR 16.3 million was made in December 2011 for the year 2012. An additional payment for further extension for the second period (2015-2021) will also be due except if the Constitutional Court decides otherwise.

3G licence On 2 August 2011, the BIPT awarded the fourth 3G (2.1 GHz) license to Tecteo Telenet Bidco (TTB) for a total amount of 71.5 million EUR and for the same quantity of spectrum as the existing operators (2x15 MHz). The license will expire at the same date for all operators (existing and new operators) i.e. on 15 March 2021. TTB will be allowed to exercise a call option for 2G spectrum in both the 900MHz (2x4.8Mhz) and 1800MHz (2x10Mhz) bands, with frequencies expected to become available on 27 November 2015. In this case, they will have to pay an additional license fee of EUR 31.5 mil-lion. A reshuffling of this spectrum is foreseen and existing operators will have to surrender a part of their spectrum with a guarantee to keep 2x10 MHz in the 900 MHz band and 2x20 MHz in the 1800 MHz band. The 900 MHz and 1800 MHz licenses have been extended until 15 March 2021 in order to be aligned with the 2.1 GHz end date.

LTE licenceOn 16 November 2011, the BIPT adopted two decisions. The first one allows the four mobile operators to deploy UMTS/LTE in the 900 MHz, 1800 MHz and 2.1 GHz bands. The second one reviews the current allocation of the 1800 MHz spectrum so as to allow Belgacom and Mobistar to have a continuous block of 2x20 MHz (now 2x15 MHz) as from 1 July 2012 at the latest. This will allow us to opti-mize the use of the LTE technology in this band.

The 2.6 GHz spectrum auction held on 28 November 2011 by the BIPT was concluded after 4 rounds with total bids reaching EUR 77.79 mio. Belgacom acquired 2x20 MHz contiguous in the lowest part of the 2.6 GHz fre-quencies for an amount of EUR 20.22 million. The other licensees are Mobistar (2x20 MHz for EUR 20.02 million), KPN Belgium (2x15 MHz for EUR 15.04 million), BUCD bvba (45 MHz for EUR 22.51 million). Belgacom, Mobi-star and KPN Group Belgium opted for the FDD tech-nology and BUCD for the TDD technology. One block of 2x15 MHz remained unsold. The licenses are valid for 15 years, effective as of 1 July 2012. Payment will also

content rights). On 4 January 2012, the BIPT has approved this solution and Belgacom has to submit a detailed refer-ence offer.

The same market analysis imposes also an obligation of “Operational Excellence” to Belgacom and announces that BIPT will assess the status of wholesale operations at the end of 2012.

Financial collecting model for Premium Rate ServicesSince 1 April 2010, Belgacom adopted, where appropriate, a financial collecting model for part of its Premium Rate Ser-vices in which Belgacom collects from customers on behalf of a third-party content provider. This is a consequence of the circulars issued end 2009 by the Ministry of Finance concerning the application of VAT on Premium Rate Ser-vices and Tax on Chance Games. As a result, these rev-enues can no longer be considered as Belgacom revenues. This affects the reported revenues but not EBITDA.

Mobile licenses

2G licence On 18 August 2010, Belgacom filed an annulment proce-dure before the Constitutional Court against the Law of 25 March 2010 requiring the mobile operators to pay for the tacit extension of their 2G licenses. This law aimed to counter the ruling of the Appeal Court of 20 July 2009 that considered that the license was extended automatically until 2015 for free. The Constitutional Court, in an inter-mediary judgment, decided on 16 June 2011 to introduce 4 prejudicial questions to the European Court of Justice in order to ascertain whether the Belgian law complies with the interpretation of the Authorization and Framework direc-tives. Beside this annulment procedure, Belgacom initiated on 7 October 2010 an action against the Belgian State and the BIPT before the Civil Court to ensure the possibility to recover the undue license fees. In the meantime, Belga-com will comply with the payment obligations with all due reserves. The amount of EUR 74 million for Belgacom for the first period of extension of its license (until 2015) cor-responds to the original 2G license fees proportionate to the spectrum quantity and duration. Belgacom has opted for annual payments. The first one, for the amount of about EUR 12 million, was made in April 2010, the second one of


17

occur in July 2012. Belgacom has decided to pay the fee in one-shot. No coverage obligations are imposed but there is an obligation to inform the customers on the effective coverage. This band is technology neutral and tradable.

Consumer protection The draft law transposing the revised EU telecom frame-work strengthens the current consumer protection rules and introduces new measures related to contract regula-tion imposing (i) contract duration of 24 months maximum for consumers and obligation to propose a 12 month con-tract to all customers, (ii) possibility of early termination of fixed term contracts after 6 months (without any penalty except potential reimbursement of residual value of a free device) for consumers and small enterprises and (iii) spe-cific conditions applicable to the replacement of an exist-ing contract by a new fixed term contract (in particular after distant selling). The final adoption of the law is expected in the course of 2012.

Universal ServiceSince 1998, Belgacom has been subject to a broad uni-versal service obligation (USO) which is the most exten-sive regime in Europe. Belgacom has never been com-pensated for providing these services.

On 6 October 2010, the EU Court of Justice considered that the way the Belgian Law appreciates the unfair burden of the universal service is not in full accordance with the European law. Based on this, the Belgian Con-stitutional Court annulled the articles in the Belgian law regarding the funding of the social tariffs on 27 January 2011. The current system will be reviewed at the light of these decisions in the context of the new telecom law that will transpose the revised EU directives in the course of 2012.

The draft law foresees that Belgacom designation as “default” provider will end 13 months after publication of the law. The new regime will also move from a pri-ori designation of a provider to a designation if needed after a monitoring of the market for payphones, direc-tory enquiry services and paper directories. The scope of universal service will also be extended to broadband internet.

Regulation impacting financial results of BelgacomThe regulated price cuts in Mobile Termination Rates, Roaming Rates, LLU and Bitstream prices, and the move to a Financial collecting model for Premium Rate Ser-vices, had a direct impact on the revenue and EBITDA of Belgacom Group. Over the year 2011 these regula-tory measures reduced the Belgacom Group revenue by EUR 112 million, while the EBITDA was reduced by EUR 29 million. This compares to a revenue impact of EUR 121 million and an EBITDA decrease of EUR 26 million in 2010.

Since 1998, Belgacom has been subject to a broad universal service obligation (USO) which is the most extensive regime in Europe.


OUR STRENGTHS /// page 18

19

5:25 p.m., CHaUDFONTaINEJULIE Home alone. A moment of reflection. It’s so cozy snugglingup with my big cat Jules. I went to business school and work as a manager. But the one thing I am really passionate aboutis interior decoration. I finally enrolled in a course, combiningit with my full-time job. It was tough, but I did it. I have myown company website now. And it’s going well. I love to workat home. I sometimes invite people to evening sales events,and on my website I keep track of the orders I receive. I havetravelled to Paris and Milan to find out about new trends. And of course, one day, I want to complement my webshop with a real decoration shop…

Anne JulieWow nice !

I like · Share · 2 minutes ago

annual report | belgacom | our strengths | FR | NL | UK |

219,000

new Packs sold in 2011

A rich portfolio of contents, applications, partners & devices for innovative and differentiating

offers

Movie Me First move to win audiences from unmanaged networks

Improved brand preference and customer loyalty


Developing a strategy of convergence anywhere, anytime, on any device

21

From the point of view of the customer, our strategy of convergence means he can enjoy our services anytime, anywhere, on any device he finds appropriate in order to access his contents and applications. Furthermore, we strategically use value management to maximize customer profitability, we reduce the ‘time to market’, and improve our customer friendliness. Belgacom con-tinuously reinvents itself and changes its way of work-ing, in order to match its services with the evolving aspi-rations of the market.

Convergence: it’s all about the customer experienceThe boundaries are blurring between telecom and IT, fixed and mobile, communications and entertainment, households and individual customers, bilateral links and online community links, and to some extent, busi-ness and leisure. People increasingly use the same devices across applications and contents, for work and at home. What used to be merely connectivity is now connectivity and content. What used to be proprietary telecom services are now applications.

Alongside this evolution, customer aspirations are a continuous source of inspiration for Belgacom. Cus-tomers expect maximum mobility, and their private and professional lives are merging into a single stream of interactions which they wish to experience in an increas-ingly personalized way. There is no more one-size-fits-all, and there is no average customer. Belgacom finds distinct ways of evolving for distinct customers, even within the same household. Combining individual and household needs into a single experience to enable an integrated business experience is another facet of fixed-mobile convergence. Belgacom’s strategy is not about technology as such, nor is it about devices or

Belgacom goes on investing in its world-leading fixed and mobile networks. To that, it adds valuable partnerships, such as those with Samsung, Fon and Deezer. Our customers now also use our networks – Fiber, copper, Wi-Fi, 3G – for internet browsing and for digital television. This is how Belgacom creates an unrivalled, rich customer experience that enables the integrated use of platforms, high quality contents, applications and devices. It is what we call our strategy of convergence.


“For customers, true convergence is materialized through the access to their preferred contents and applications on multiple screens, wherever they are.”

Bruno Chauvat – Executive Vice President Strategy & Content

Reaction


mere connectivity; it is about anticipating, inspiring and

facilitating ways of experiencing and enriching life in an

increasingly complex world.

Belgian households and enterprises choose more and

more one single provider for their telecom, entertain-

ment and/or IT services needs. It is easier not only from

an administrative point of view, but also because of the

convergence of platforms and contents. New cross-

screen services are possible. Belgacom makes this

seamless, tailor-made experience a reality for customers

wherever they are and whenever they want, whether they

are conducting business or communicating with their

friends, easily switching from one screen to another, one

network to another. Due to the ease of this integration,

the digital divide is quickly disappearing. By combining

the full mobility of 3G mobile Internet with the ease of

nomadic Fon, the world’s first global crowd-sourced

We have something no one else has Revolution in smart devices requires integrated networks like Belgacom’s.

By combining the best Mobile, Wi-Fi, and Fixed networks together, we offer every member of the household or enterprise unique benefits and experiences: we bring access anywhere and anytime for all communications needs, at predict-able and controllable pricing.

Movie Me

23annual report | belgacom | our strengths | FR | NL | UK |

Our contents offering is in full deployment. In the following pages, we mention some beautiful launches with sport, music, cinema and professional offers.

Wi-Fi network, Belgacom customers get a concrete/tangible experience of what “everywhere” really means. After the “commercial” convergence (packs), Belgacom now offers a suite of services fully linked across plat-forms, contents and apps. It’s a new experience.

And Belgacom is the best placed to offer it. It has a world-leading fixed and mobile network and new valu-able partnerships, such as those with Samsung, Fon and Deezer, which enhance the Belgacom experience. Bel-gacom therefore has every reason to be ambitious. In the residential market, it aims to expand its market share of digital homes (i.e. households connected with digital TV and/or Internet) while in the professional market, Belga-com aims to maintain a leading position by expanding its portfolio of end-to-end solutions.

Value managementSome customers want an enriched experience and pre-mium services, and are prepared to pay for it. Others want less because they know exactly which cherry to pick. Belgacom offers both customers exactly what they want through differentiated marketing propositions. To do so, Belgacom needs to maximize the profitability of all actions (perfect equation between revenues and costs).

Belgacom also makes sure it extracts value out of its investments and management decisions and resisted subsidizing smartphones, since it considered the finan-cial commitment disproportionate. Overall, Belgacom avoided subsidizing handsets, which has proved to be quite expensive for operators, and consistently built up a rich, high-quality entertainment offer. The spending on football coverage has been reduced because the renewal of the exclusivity contract, which served its purpose well

by increasing the impact of the Belgacom TV launch, would not have brought adequate returns. Belgacom is now focusing on the best combination of international, national and local football coverage.

Reinventing ourselvesBelgacom does face threats, however. Its customers use its managed networks –fixed lines for telephony or TV, and Wi-Fi and 3G networks for internet browsing. Yet, on the web, customers encounter many other communica-tion experiences that are not dependent on Belgacom’s managed networks or its traditional business models.

Belgacom’s first move in the so-called Over-the-Top approach was the launch of Movie Me, providing cus-tomers and non-customers with access to part of the Belgacom TV catalogue through the first Belgacom TV application on Samsung Connected TVs. Non Belgacom customers can then have a first taste of the Belgacom TV experience on the competition’s internet network.

Furthermore, the aforementioned deal with Fon brought Belgacom into the world of Internet communities, offer-ing wide Wi-Fi access to customers on a reciprocal basis and, at the same time, giving new value to the fixed infra-structure. Belgacom has also shifted its approach to win audiences from unmanaged networks, turning threats into opportunities, and changing its way of working.

Belgacom did this with Fon, but also with programs such as Simple and Friendly, resulting in improved brand pref-erence and customer loyalty, and a shift in the mindset of its employees and their treatment of customers. Further-more, Belgacom is reinventing itself through a solution-centric approach for the enterprise market and by enrich-ing its offer of contents and applications on all screens.

The customer is looking for personalized experiences through interactive applications. Belgacom aims to offer him access to a wide choice of entertainment options - games, music, films, or classic television.

boosting convergence

creating value

reinventing ourselves

• seamless fixed/mobile/IT convergence enriched by contents and applications

• focus on value management

• maximizing customer profitability

• solution-centricity• enhancing customer

experience• entertainment and

applications offering• new business models• reduced time-to-

market• improved way of

working.

Overview of our strategy


Here is an overview of the offers launched by Belgacom in 2011 in entertainment and business solutions. These offerings are innovative thanks to their availability on multiple screens and networks but also because they combine universal content for households and enterprises with highly specific content for niche needs and tastes: a customizable offer which, when expanded, will make it possible to integrate all contents and applications, for both private and professional use, on the same screen.

Music everywhere! Thanks to Belgacom’s exclusive partnership with the Deezer music service, Belgacom customers have unlimited access to a music catalog of more than 13 million tracks, which they can listen to wherever they are, on a PC/Mac, smartphone or tablet.Music you choose! The Deezer music service allows customers to search by track, album and artist. Via editorial recommendations and radio sta-tions, they discover new national and international artists. Customers can make their own playlists and select their favorite albums. They can also share music with friends via social media such as Facebook. Moreover, custom-ers can access Belgacom’s exclusive music content (music videos, concert broadcasts, contests to win tickets to music events, etc.).

A stunning match performance! Belgacom claimed a new victory with its football coverage in 2011, fielding a completely new offer. And just like in any successful match, the key was teamwork: Belgacom selected complementary types of contents – interna-tional football and national, local matches. Belgacom offered the Primeira Liga (Portuguese league), the 5 Jupiler Pro League Saturday night matches, and the Belgian Division 2 with the home matches of four clubs (Antwerp, Waasland-Beveren, Charleroi and Eupen). Belgacom also broadcast the quarter-finals and semi-finals of the Copa del Rey, including the double “Cla-sico” between Real Madrid and FC Barcelona.

More to come! The best of Belgian basketball has been made available exclu-sively on Belgacom TV. And from August, the Spanish league, one the best in Europe, will be broadcasted for three consecutive seasons. Watch it any-where! This sport offer is available on TV and all other screens (mobile, tablet, laptop or smartphone) via the Belgacom’s TV Everywhere application.

More entertainment and applications to become the preferred telecom operator

Here is an overview of the offers launched by Belgacom in 2011 in entertainment and business solutions. These offerings are innovative thanks to their availability on multiple screens and networks but also because they combine universal content for households and enterprises with highly specific content for niche needs and tastes: a customizable offer which, when expanded, will make it possible to integrate all contents and applications, for both private and professional use, on the same screen.

Sport

25annual report | belgacom | our strengths | FR | NL | UK |

Floating in the Cloud! For companies, Belgacom offered a complete suite of professional software applications hosted in the cloud (i.e. on remote servers), which the user can access wherever he is located and on whatever device he is using. The success of the offers Belgacom launched in 2011 confirmed that there is massive potential in this new growth area, and convinced major business customers that Belgacom was no longer just a tele-com supplier but also a key partner of fully integrated IT solutions: CRM Mobile gave companies the chance to mobilize their sales teams and increase their efficiency on the go; Microsoft Office 365 gave end users access from the cloud to key business applications anytime, anywhere and on any device; and Mozy PC Backup guar-anteed automatic backups of critical files in Belgacom’s secure data centers.Belgacom also introduced a series of applications for specific activ-ity sectors. Publinergie helped local authorities optimize their energy use, and Corilus made the daily work of health professionals easier. Tools for professionals

Movie Your personalized movie guide! With Movie Me, customers can create their own movie pro-file and receive personal recommendations of movies from Belgacom TV catalog. Movie Me also offers a very intuitive experience with its image-based navigation and its search tool to browse the catalog. From their PC/Mac, customers can select the films they like and find them easily on their TV (in a new category called “my favorites”) thanks to the converged bookmark functional-ity. Movie Me is available on PC/Mac (via www.movieme.be) and on smartphone (by downloading the application from Android Market or App Store).Wider availability! A daring new venture was launched in October with “Movie Me for Smart TV”, the first TV application of Belgacom which provides an immediate access to a part of the Belgacom TV catalog to all users of a Samsung Connected TV, whether they are Belgacom customers or not. Users can also create an account on the Movie Me website and benefit from all its recommendations and other features, at home or on the go.

Music

2011 was only the beginning of a new content and applications era. In 2012, we will continue with new contents and applications that fit in with our strategy. We will then improve our TV offer with more diverse and exclusive contents, while enriching the customer experience on all screens through innovative functionalities.

97%3G coverage

Top Tenin the world for our optical fiber

network

-50%network outages in 2011

More than 91% TV coverage


Stable and intelligent networks for voice and data

27

Belgacom has made significant investments in its network over the past years. Our networks are therefore ready to absorb the increasing bandwidth demand for Internet and TV services. Our fixed copper access network offers a promising outlook in terms of throughput and speed. Our optical fiber network (fiber to the curb FTTC) is ranked in the top ten in the world and our high-performance mobile network provides the best 3G coverage in Belgium (97% of the country).

Thanks to our converged networks, we are able to offer services, content and applications on computers and TV sets as well as mobile devices such as smart phones and tablets – a first in Belgium. In 2011, we launched a num-ber of new services such as TV Everywhere and Deezer.

In 2011, we achieved a 50% decrease in net-work outages as a result of our three-year investment in fiber, copper, servers, software, hardware and manpower.

Fixed network achievementsIn 2011, Belgacom continued to invest heavily in its fixed network in order to improve VDSL2 coverage. By further deploying fiber to the street cabinet and installing remote optical platforms for VDSL2, the Broadway project enabled over 81% of the Belgian population to benefit from Internet bandwidths of up to 30 Mbps at end 2011. In the meantime, video compression was further enhanced, allowing VDSL2 customers to receive up to four simul-taneous TV streams.

In the framework of the Broadway project, over 17,000 km of fiber have been deployed, which positions Belgacom as the most advanced operator in Belgium in terms of its optical fiber network, and puts us in the top ten worldwide.

Belgacom is also looking at additional tools to further improve the performance of its fixed


network. In October 2011, an ambitious joint-development program agreed with Alcatel-Lucent was announced at the Broadband World Forum in Paris. This program enables Belgacom, thanks to vectoring technology, to boost the performance of its national triple-play network and provide guaranteed speeds of 50 Mbps and beyond, setting a new quality standard for Belgian citizens as of 2014.

Mobile network achievementsLast year, we began to replace the radio tech-nology of Nokia-Siemens Network (NSN) with Huawei technology. We completed this migra-tion in October 2011. We broke all European migration records by upgrading 3,835 anten-nas in 14 months. Thanks to this migration, we can offer better voice quality, a shorter call setup time, improved transmission speeds for mobile data, flexibility and adaptability to new technologies, improved operational costs, and lower energy consumption.

In addition, we won a 4G license (LTE) in a competitive bid against four competitors. This new technology will give online customers vastly improved speeds and a better experi-ence for mobile data services. As a further demonstration of Belgacom’s mobile network leadership, LTE was technically launched in June 2011 and a limited group of Belgacom business customers now benefit from the ser-vice.

Fiber investments (in EUR million)

2008 2009 2010 2011

4447.6

32

91

“Intelligent networks are also networks that work without any incidents: it may be like working in shadows, but it is vitally important.”

Geert Standaert – Executive Vice President Service Delivery Engine & Wholesale

Reaction

In 2012, Belgacom will continue to counter the indoor coverage impact due to the law in the Brus-sels-Capital Region that limits the power emission of GSM antennas to 3 volts per meter. Compliance with this norm is a gradual process that must be com-pleted by 2014.

Move to all IP programOur long-term business transformation project “Move to all IP” has three main objectives:

• A network transformation in which end-of-life leg-acy technologies will be gradually replaced by IP-based alternatives.

• An IT transformation that will increase efficiency through further automation and the reduction of manual handling time.

• The customer interaction model will shift towards cus-tomer self-management, giving the customer more control during interactions such as sales, installations and repairs. We will invest in product simplification and intuitive e-tools.

In 2011, we continued the roll out of our new sales sup-port tool and enhanced our monitoring and diagnostic services, including modem and set-top box problems.

Other achievements in 2011 were the completion of a full Ethernet backbone and the development of tools and equipment to prepare the migration towards a full IP net-work. We started the first switching outphasing and have already migrated more than 2,000 lines. This will allow us to empty the first building by end 2012. So far, EUR 154.2 million have been invested in the MaIP project, of which EUR 55 million were invested in 2011.

Customer satisfaction and simplificationIn our network and technical support department, we focused on improving customer satisfaction. In 2011, we continued actions to make the customer’s life easier.

We became more accessible, by extending the opening hours of our technical call centers. We now offer techni-cal support from 7 a.m. to 10 p.m. on weekdays to resi-dential customers, as well as during the weekend, and our professional customers can reach us 24/7. We sim-plified the home voice menu (maximum 3 options before speaking to an operator) and introduced a single phone number for all the services. Our technical call centers made strenuous efforts to answer every call within two minutes and to offer the possibility of a call-back. Cus-tomers who chose to install their modem themselves were offered personalized technical support by phone. For on-site interventions, we extended our field support services until 8 p.m. and on Saturdays. And to make life easier for our customers, we implemented a simpler and more user-friendly Belgacom TV menu and a single login for the Belgacom and Proximus e-Services.


Move to all IP investments (in EUR million)

2008 2009 2010 2011

40

5550

11

Thanks to the Broadway project over 81% of

the belgian population can now enjoy High

Definition Television and high download speeds.

Move to all IP investments (in EUR million)

2008 2009 2010 2011

40

5550

11

29

All our employees were mobilized to bring the customer satisfaction program to life, with technical teams work-ing together with Marketing and Sales to reach com-mon objectives from a customer-centric perspective. An internal charter was developed to engage all our employ-ees, backed up by powerful internal campaigns such as road shows with our external installers, golden rules and coaching, and training programs for all front-line techni-cians.

Wholesale activitiesBelgacom’s Service Delivery Engine & Wholesale depart-ment provides regulated and commercial telecommuni-cations services to other operators and service provid-ers on the Belgian market. The products and solutions offered to our wholesale customers have evolved in line with the latest technologies on the market. In the regulated environment, delivery times of our wholesale solutions, as well as our customer support, exceeded all formal obligations. We also made significant improve-ments in the commercial environment. We expanded our solution portfolio for carriers active in the profes-sional market and increased VDSL2 speed and cover-age for all active operators. Along with this infrastructure upgrade, we launched different services to support exist-ing and upcoming ICT standards on our Explore solu-tions: improved Quality of Services for VoIP and critical business applications, reporting tools, and an enhanced Service Level Agreement. These solutions will allow our wholesale customers to provide their B2B customers with the solutions they require. To give carriers more autonomy and a quicker service, we also further devel-oped the e-tools at their disposal.

During operational working groups with the BIPT (the institute that regulates Belgian telecommunication ser-vices) and Other Licensed Operators, we demonstrated our capacity for professional collaboration and an open and constructive dialog. All our efforts, combined with the close relationship model we have developed over the years, were clearly appreciated by our wholesale cus-tomers, resulting in a 85% customer satisfaction score.


Reducing our energy consumptionReducing our CO2 emissions is also one of our network management priorities. In this context, we managed to increase the energy efficiency of our data centers by 10% compared with 2007, and we will build a green data center next year. In 2011, we finalized the replace-ment of our mobile network equipment with state-of-the-art technology delivering up to 20% energy savings. The combination of our numerous energy improvement actions have resulted in EUR 8.3 million savings (cumu-lative since 2009). Our long-term objective is to improve the energy efficiency of our entire network infrastructure and data centers by 25% before 2020.

An increasingly digital worldWith the proliferation of smartphones, tablets, connected TVs, and new content and applications, we are facing growing demands for bandwidth. Traffic and speeds on Internet networks continue to increase with the growth of customized online services and content. In the always-on and increasingly mobile world that digital technology allows, Belgacom aims to become the exclusive sup-plier of telecom products, TV and multi-play services, not just for each household or business but also for each individual within that household or business. To achieve this, our key advantage over our competitors is that we have as well a fixed as a mobile network (broadband, 3G, Wi-Fi). Also, we have convergent customer databases (fixed and mobile customers) which will allow us to offer entertainment or useful services tailored to the individual preferences of customers.

We will therefore continue to invest heavily in our net-works, and to maintain them in order to offer a top-qual-ity service to our customers. We want them to become the smartest networks for sharing information and emo-tions everywhere.

20%energy savings thanks to the upgrade of our mobile network equipment

Over 17,000 km of fiber have been deployed, which positions Belgacom as the most advanced operator in Belgium in terms of its optical fiber network, and puts us in the top ten worldwide.

News We optimized our install and repair field support, by extending our services slots until 20h and on Saturday.

1:30 p.m., BRUSSELSTANIAI work in a bank. I find it a quite challenging job. Of course, the image of banks and bankers has beendamaged. Although I can understand why, it is not entirely justified, and when I discuss my job with my friends, I spend a lot of energy trying to modify the image theyhave of what I do. My boyfriend finally understands me.I can occasionally have lunch with him in the center of Brussels. But it’s actually my chat sessions with him on my way back home on the train to Namur that finally convinced him.

OUR CUSTOMERS /// page 30

31annual report | belgacom | our customers | FR | NL | UK |

Lunch at Foodmaker’s ?

Les SMS et appels illimités sont uniquement valables en Belgique, vers tous les réseaux, à l’exception des numéros spéciaux pour un usage personnel conformément aux conditions générales.

SMS illimités 24/24, vers tous les réseaux.Appels illimités pendant la semaine de 19 à 7 heures et le week-end, vers tous les réseaux.

Generation XLSMS et appels illimités

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€ 35par mois


Belgacom offered even more to its customers in 2011, and we are empowering our residential customers so as to enrich their lives, giving them access to their communications, entertainment and applications anytime, anywhere and on any device.

30% less complaints versus 2010

for fix network customers

More than 1,200,000 customers watch

Belgacom TV

Belgacom TV now also available on tablets,

laptops and smartphones

Empowering our customers to enrich their lives

The largest wi-fi network in Belgium with

500,000 hotspots


The innovations that keep us ahead of our competitors and drive our strong performance in the marketplace

The Samsung Tablet combined with fixed and mobile Internet As a perfect example of our successful tie-up with Samsung, this offer allows our customers to have a tablet + fixed Internet + mobile Internet, all for a single monthly fee. Launched in June 2011, the offer was an immediate success. This combination revealed the advantage of being a fully converged player, since our competitors found it difficult to copy our offer. Furthermore, we accompany the pack with a program of support so that the customer benefits from an offer that is simple and easy to use (see “Simplification and Customer Satisfaction”).

Free Wi-FiIn partnership with Fon, the largest Internet com-munity in the world (with four million users), the community-based Wi-Fi network of Belgacom’s cus-tomers offers free Internet outside the home. This is the perfect match between fixed and mobile Inter-net through the wireless network. In less than four months since its launch in November 2011, over 500,000 Belgacom wifi-hotspots were activated. With this number rising, Belgacom currently offers the largest wireless Internet coverage in Belgium in collaboration with Fon.

Music content (Deezer)With Deezer, Belgacom offers a unique and unlim-ited musical experience to its Internet and mobile customers, with access to more than 13 million music titles, available anywhere, anytime, and on any

device – PC, tablet or smartphone. No other opera-

tor on the Belgian market today is offering music

streaming services bundled with telecom products.

TV EverywhereThanks to this application, TV follows you every-

where: Belgacom customers can watch almost 20

of the most popular TV channels, live football, and

films on demand – even without a TV: it works on

a PC, tablet or smartphone, wherever and when-

ever they want, on the fixed network and the mobile

3G network. At the end of 2011, nearly 20% of our

Belgacom TV customers had downloaded the TV

Everywhere application. This offer combining Wi-Fi

and 3G is exclusive on the Belgian market, with simi-

lar offers being limited to Wi-Fi usage only.

Free calls to mobile networks With Happy Time XL, our customers can call more

for free. They could already call for free from their

fixed line to other fixed lines in Belgium. In 2011,

we extended free phone calls to mobile numbers,

on weekdays from 5 p.m. till 8 a.m. and around the

clock on weekends and public holidays. Hundreds of

thousands customers had activated this option within

three months of its commercial launch. This offer pos-

itively impacted customer satisfaction and the attrac-

tiveness of the fixed line, resulting in an improved

churn. A good move, as confirmed by our competitor

launching a similar offer in reaction to ours.

A useful application for mobile phones“Hello” allows customers to check their mobile,

SMS and Internet usage, providing them with a user-

friendly and transparent way to control their costs.

Building on new flexible links across our fixed and mobile networks, and on new products and partnerships, Belgacom launched successful, innovative offers throughout the year.

“The Samsung tablet combined with Internet was so successful that, at the end of 2011, we became the largest seller of Samsung tablets in Europe.”

Scott Alcott – Executive Vice President Consumer Business Unit

Reaction

Fon

Belgacom Fon free Wi-Fi access to more than 500,000 hotspotswww.belgacom.be/fon

About 9 games per weekend to watch live and exclusive.www.belgacom.be

Our new application to control your mobile consumption.

Simplification and customer satisfaction In an increasingly complex telecom world and an ever more demanding market, we want to do more than deliver innovative products and services. To this end, we launched the “Simple and Friendly” project, designed to provide our customers with products and services that are not just excellent, but also intuitive, transparent and user-friendly. We want to make sure our customers have proactive, accessible and personalized support to get the best out of their choice of Belgacom as a supplier.

We enhanced the appeal of our combined Tablet + Inter-net offer through imaginative customer care: demonstrat-ing and configuring the tablet in our shops, installing the Wi-Fi settings at the customer’s home, and proactively contacting our customers to make sure that everything was alright and that they received a first-class service. This won us new loyalty: more than 80% of our custom-ers would recommend this product to their family and friends.

In 2011, we implemented actions to simplify the lives of our customers and launched easy-to-choose products through clear promotions and transparent communi-cation. We reduced the number of call-center number options in our automatic home phone menu, did our utmost to answer within 2 min. and introduced the “call back” option at an appointed time. We simplified our website navigation and login, and developed intuitive applications and services allowing customers to person-alize and manage their services and usage. Belgacom TV was given a simpler menu, faster navigation, and a decoder reboot time of just three minutes.

We became a more accessible company by extend-ing our toll-free technical support to every day, from 7 a.m. till 10 p.m., and we provided our install and repair field services until 8 p.m. on weekdays, with repairs on Saturdays as well.

We also rewarded the loyalty of our customers through a range of attractive advantages and programs, and we continued to roll out the Premium Club loyalty program launched at the end of 2010. Premium Club is a points and advantages program for Belgacom and Proximus customers. Points can be exchanged for a selection of rewards, free calling minutes, mobile devices, vouchers and other items. We also organized a range of events in which customers could enjoy a day out with their family or friends at an attraction park (Pairi Daiza and Bobbe-jaanland in 2011) or at the movies, for a reasonable price.

We saw customer satisfaction scores rise, with a clear improvement in loyalty and brand image and 30% fewer complaints from our fix network customers.


Foot

13 million songs to listen to at home and elsewhere. www.belgacom.be

Deezer Hello!

35

We want to make sure our customers have proactive, accessible and personalized support to get the best out of their choice of Belgacom as a supplier.

35

A personalized customer approach The better we know our customers, the more efficient we can be in supplying what they want, and the better return we can make on our investment. We have there-fore developed tools for identifying targets and gaps with a new level of precision, based on socio-demographic criteria, brand preference, product penetration, market share, intent to switch, etc.

We are proud of the progress made in 2011:

• we increased our digital TV market share among sen-iors by 50% in one year, thanks to the launch of a Pack including a fixed telephone line and TV at an attractive price;

• we had great success in the youth market (12-24 years), thanks to the revamp of our Generation rate plans with unlimited calls and SMS offers, increasing our market share in that segment.

Reducing the digital divideOffering simple and accessible products is important, but we also want to make sure that customers have the skills they need to embark on the digital journey. In 2011, we launched “Webexperts”, an initiative stimulat-ing youngsters to share their Internet knowledge with the elderly. Schools or individuals can submit projects using the tutorials on www.webexperts.be, and we reward the best projects each month. After three months, more than 50 projects had already been submitted, with a major-ity coming from schools. Thanks to those projects, 700 seniors received training and have discovered the world of the Internet and its potential.

Strengthening our sales channels Belgacom has four sales channels: controlled distribution shops (Belgacom Centers and Generation Stores), con-tact centers, E-channel and uncontrolled shops.

In 2011, we focused on the reinforcement of all our chan-nels thanks to numerous traffic activations, and on opti-mizing our customer relationships through a targeted tactical approach. In the channels traditionally dedicated to fixed products, we acquired new business in mobile products, and vice-versa, too: our Belgacom Centers increased their share of the mobile postpaid channel from 31% in 2009 to 51% in 2011.

We also improved customer experience. In our Belga-com Centers we provided on-the-spot configuration of tablets and smartphones, and launched a new tool for fixing a shop appointment online. In our contact centers, we extended opening hours and drastically cut waiting times. We also strengthened the collaboration between our sales channels, thereby improving the efficiency of sales transactions. We continued our efforts to facilitate information finding, support, self-service and sales on our websites. In 2011, Online Sales increased by more than 20%.

Confident for the future

A richer multimedia experience The arrival of more and newer devices – such as TVs connected to the Internet – will strengthen the trend towards access across network platforms, everywhere and at any time. Following on from what we started in 2011, we will pursue our bid, together with privileged partnerships, to boost access to multi media content and applications across networks, and to develop and enrich new entertainment platforms.

A commercial approachIncreased market share in Internet and TV is a top prior-ity. And since multi-play customers are the most valu-able and loyal, we want to go a step further by integrating mobile products and developing a new range of Packs.

A customer approachIn 2011, we surprised our customers with unexpected “Simple and Friendly” value proposals and by occupy-

annual report | belgacom | our customers | FR | NL | UK |

The Tablet ready to use, combined with the fixed and mobile Internet of Belgacom: the perfect example of a privileged partnership with Samsung, but also of a successful convergence through our complementary networks.www.belgacom.be

Our virtual operator listens to, helps and engages with our customers on social media

EVA


ing a service territory that our competitors had ignored. In 2012, we will intensify our efforts by raising some of the indicators that are still not at the level they should be, and by deploying specific servicing approaches for high-value customers.

At the same time, we will pursue initiatives aimed at our key customer segments, and add the new criteria for obtaining value in terms of revenues, margins, and costs, while we increase efficiency and profitability.

Our sales channels

On 15 April 2011, Belgacom announced the acquisi-tion of Wireless Technology, which owns the chain of The Phone House stores in Belgium. The Phone House stores complement our current distribution network and will allow us to serve new customer segments that Bel-gacom did not reach before.

We will also capitalize on each other’s sales channels. In particular, we intend to promote the web as a channel for simple transactions, such as topping up a prepaid card, adding subscriptions and options, or ordering a move.

Social media

Given that our customers increasingly use social media to express themselves, being present in this sector is vital for a company like Belgacom.

Since 2010, Eva, our virtual operator, has been listening to and helping customers on Twitter, Facebook, the Bel-gacom Community site, and other important forums.

In 2011, Eva posted 6,920 messages and answered 95% of support requests made via social media. In 2012, we will continue to listen to, help and engage with our cus-tomers, allowing them to become more involved in the development of our products and solutions.

Tango With its Tango operation, Belgacom has a leading posi-tion in mobile prepaid in Luxemburg, and is the energetic challenger for mobile telephony, fixed telephony and Internet (3G, ADSL, VDSL and Fiber) in the residential and professional market. In 2011, we broke new ground:

• in the post-paid market, we offered bundles of voice, messaging and data and a strong portfolio with roam-

ing. Combined with the new iPhone 4S, this allowed Tango to turn in a positive performance;

• in the triple-play market (fixed + mobile telephony + Internet), we launched Tango Blue, a completely new range of ultra high-speed broadband offers on optical fiber, increasing customer access to new entertainment services, such as football from the Portuguese Primeira Liga. Our 3-play customers can now enjoy one of the best European football championships on their smart phone, tablet or PC, everywhere in Luxembourg.

• Following the growing usage of mobile internet and the powerful uptake of Smart phones, we launched our mobile App allowing customers to keeps informed of our latest offers as well as managing their subscrip-tion. This Apps is well appreciated by our customers, which is proved by the over 40.000 downloads made in 3 months.

• To capture further market share within the International community residing in Luxembourg, Tango has suc-cessfully promoted a set of mobile international calls services that allow the consumer to seamlessly call to Luxembourg or Europe. This opt-in packages delivers up to 5 hours on International calls to Europe at com-petitive prices.

In line with our group strategy, the objective for 2012 is to develop fixed and broadband offerings as a springboard for value-added entertainment services.

ScarletScarlet offers simple, functional products at the best price: Internet, fixed and mobile telephony, Belgacom TV and prepaid Mobile to Africa via its Mobisud affili-ate. Scarlet’s positioning is not geared to convergence products; instead, it develops innovative offers which, as they mature, can be introduced at Belgacom. In this way, Scarlet acts as a kind of incubator for Belgacom. The addition of Belgacom TV in 2009, together with Scarlet’s focus on having multiple play customers has consoli-dated Scarlet’s customer loyalty. In 2012, the focus will be on improving the mobile portfolio, reinforcing Scar-let’s presence in distribution channels, capitalizing on the e-channel and the web for customer contact and servic-ing, and improving installation times.

www.scarlet.be

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In 2012, we will intensify our efforts by raising some of the indicators that are still not at the level they should be, and by deploying specific servicing approaches for high-value customers.

Appels gratuits de 17 à 8 h en semaine et 24h/24 les week-ends et jours fériés vers les lignes fixes en Belgique et les numéros mobiles nationaux. En semaine, de 8 à 17 h, vous payez € 0,35/appel vers les lignes fixes en Belgique et € 0,50/appel vers les numéros mobiles nationaux. Option uniquement valable pour le téléphone fixe sur la ligne Classic. Maximum 1 option par client et utilisation uniquement à des fins privées et conformément aux conditions générales de Belgacom. Non cumulable avec d’autres options octroyant des remises sur les appels nationaux. Non valable pour des appels vers des numéros spéciaux (07x, 09xx, sauf appels de et vers le service PhoneMail).

Chez Belgacom, vous appelez désormais gratuitement de votre ligne fixe vers les numéros de GSM après 17 h et le week-end

Belgacom Happy Time XL

Free calls to fixed lines and GSM after 17h and on weekends. www.belgacom.be

Series and favorite movies of your children www.belgacom.be

Tango included VDSL/Fibber connectivity in its 3-play product “Tango Complet”.

Me & Surf, launched in 2011 by Scarlet offers 1 GB to surf on smartphone or tablet for 15 € / month

HappyTime XL


Me & Surf Tango Kids pass

Helping our professional customers do better business

On the professional market, 2011 was a strong year for Belgacom. Excluding the impact of regulations, and allowing for divestitures (Telindus Spain) and investments (Eudasys in France), we showed growth, ensuring our leadership on this market. Nevertheless, despite our good operational performance, we need to meet the challenges of a rapid transformation, as technologies merge and new business models arise.

4.6%growth revenue in ICT

in 2011

+21.7%growth revenue in mobile data

+105,000mobile customers

20,000mobile payments transactions

per day


Bizz Fusion Team


New boosts to our traditional businessWe have a strong basis in fixed and mobile networks that complement each other and provide unsurpassed cover-age and performance. This allowed us to develop pack-age deals that kept us way out in front in the traditional telecoms market and delivered solid operating results in 2011.

On the small and medium enterprises market • Our Packs for small and medium enterprises were very

successful: they brought in additional revenue, rein-forced customer loyalty, and confirmed Belgacom’s position as a single provider for all communications needs.

• In 2011, we launched a comprehensive offer including a Samsung tablet, a complete Internet solution for a flat monthly fee, unlimited calls, and the service guarantees foreseen for our professional customers.

• By the end of 2011, the total number of Forum 500 tel-ephone exchanges installed at our customers reached 40,000; this product, launched nearly 10 years ago, was the first to use both traditional and IP (Internet Protocol) telephony.

• We also wanted to strengthen our local presence and provide our SME customers the best IT and tel-ecom advice. To this end, we took significant steps to advance our multi-channel approach for ICT: after cooperating with four partners to launch Bridging ICT in 2010, we formed an additional partnership in 2011 with eight “IT Experts”. By combining our assets with those of our partners, who are strongly embedded in the local SME market, we strengthened our position in integrated telecom and IT solutions. The “IT Expert” contributes his strong relationship with the customer as an IT advisor, and Belgacom contributes its unique, convergent telecom offerings. In this way, our SME customers can take full advantage of the integration of our fixed, mobile and cloud solutions.

On the large enterprises market • We launched a new version of PubliLink, a connectivity

solution designed to meet the needs of public authori-ties. This update offers permanent availability thanks to a mobile backup and service quality guarantees defined by contract. It also makes PubliLink a gateway to new content and applications. PubliLink is now used in every province in Belgium, as well as by almost all the municipalities and social service bodies and about half of the police force.

• Another highlight of 2011 were the contracts we won with major enterprises and public institutions, such as the Belgian Federal Government with the extension of the mobile voice deal, the VDAB (fixed WAN connectiv-ity), Corelio (mobile data for tablets) and De Lijn (fixed and mobile data and voice, amongst others).

Transforming ourselvesOur operational performance helped us to maintain our lead in traditional markets. But we are seeing revenues slip, particularly for fixed and mobile voice traffic, as a result of strong regulatory and competitive pressure (see page 14). At the same time, the increasingly connected world offers a wealth of new opportunities. So while tra-ditional tele com declines, we see new business models emerging, particularly in cloud computing and mobile data. We have already started to transform our company in order to reverse the decline and return to growth. Our transformation is occurring at multiple levels: by enhanc-ing our market share of SME customers, taking the lead in the three principal areas of growth – cloud computing, mobile data and unified communications – and adopt-ing an approach centered on providing end-to-end inte-grated solutions. Examples of concrete actions taken in these growth areas are the strategic investments and commercial partnerships with two Belgian cloud startups (Dacentec & Awingu).

Thanks to our complementary fixed and mobile networks and our data centers, we are ideally placed to seize these new market opportunities. The transformation has

Bizz Fusion Team allows to share a package of minutes and SMS.

“Cloud becomes the backbone of our industry. Belgacom is uniquely positioned with its complementary networks and its Belgian-based state-of-the-art data centers.”

Bart Van Den Meersche – Executive Vice President Enterprise Business Unit

Reaction

begun, and the positive results already achieved confirm that we have chosen the right path.

Increasing our market share among SMEsThe small enterprises sector has strong growth poten-tial. Our current aim is to develop a complete connected office for the coming years. We have already redefined our broadband Internet offer, adding guaranteed services – such as repairs within eight hours – and new facilities for mobility through the Fon, Wi-Fi and 3G Proximus net-works. We also plan to include a back-up solution avail-able in the cloud. With such creative initiatives, we are strengthening our ability to meet the specific needs of SME customers and increase our market share.

Becoming a leader in three growth areasCloud computingCloud computing is expanding rapidly and represents a new, alternative IT sourcing model for businesses. Through this model, all data and applications are hosted in Belgacom’s secure, green data centers (or those of our suppliers) and connected to the customer’s PCs or smartphones via the public Internet or a secure private connection. Currently, 80% of new business software is available through a cloud model, so the user no longer needs IT knowledge for the software installation and maintenance, and his IT budget is based only on usage.

In 2011, we launched several new cloud offerings that were an immediate success:

• In June, Microsoft launched Office 365, which offers the familiar office support tools in cloud version and makes it easy for multiple users to work on the same docu-ment, wherever they are, via e-mail, web conferencing, and calendars. In September, Belgacom became the first Microsoft syndication partner in the Belgium mar-

ket, allowing us to offer customers a better service, and the success of this offer is growing.

• PC Mozy enables the automatic backup of user files (customer data, accounting, e-mails, etc.) in our secure data centers. Customers can view the restored data on any mobile device, smartphone or tablet. Since its launch, several key customers have entrusted the security of their critical data to us. The benefits of this service allow us to play a major role in the market for securing online data.

vContainer was launched during the summer. It meets the needs of customers who, for security reasons or to manage specific applications, want their own virtual environment. vContainer is highly flexible, and makes it possible to organize a virtual data center with mini-mal investment and maximum protection. Several ICT partners, public institutions and large enterprises have already opted for this service.

Mobile data and machine-to-machine Other growth areas we are developing are mobile data, with the launch of a wide range of applications to support the activities of a company and its mobile employees, and machine-to-machine, allowing permanent contact with a fleet of machines (dispensers, payment terminals, vehicles, etc.).

• The Field Force Automation solution hosted by Belga-com, in partnership with Praxedo, enables customers with field staff (technicians, delivery drivers, conveni-ence stores, etc.) to organize the planning, distribution of work orders and data collection for billing, in a sim-ple and intuitive way. This solution was launched in a test phase at the end of 2011. The mobilised Microsoft Dynamics CRM application enables sales staff to com-plete transactions and conduct other related business while they are visiting a customer, whatever the time


For a fixed monthly fee, the professional Pack combines all the tools necessary to call and stay connected at any time in the office and on the road: unlimited nationwide calling, fixed and mobile Internet with guaranteed service level and a Samsung Galaxy tablet.

Tablette incluse

41

and location. It also provides them and their manage-ment with a detailed overview of their activities.

• In 2011, Belgacom’s mobile payment system for parking places, pioneered in Antwerp in 2006, was extended to more than 20 other Belgian locations. De Panne, Genk, Anderlecht, Verviers, Liège, Sint-Truiden and Heusden-Zolder were among the authorities to adopt this innovative solution, which allows custom-ers to pay for a parking place by simply sending an SMS message to a four-digit number. Android users can download an application to make the procedure even easier. This innovation is clearly popular, judging by the more than 3.3 million SMS parking payments made in 2011. Today, Belgacom manages more than 20,000 mobile payment transactions per day, mainly for parking, De Lijn transport tickets and proximity payments based on NFC (Near Field Communica-tion) technology. We are committed to expanding our mobile payment offers with, over the longer term, the dematerialization of physical wallets and purses, and the simple payment of daily expenses with a mobile phone.

Unified communicationsThe Fixed Mobile Unification solution offered by Bel-gacom integrates fixed and mobile voice communica-tions, fax, SMS, e-mail, social messaging and video conferencing into a common platform hosted in our data centers. Through just one number and one voice-mail, the mobile user has access to all the company’s communication functions, such as identifying a calling number even when the call is forwarded, and the pos-sibility for colleagues to see whether the mobile user is free or busy.

Developing a customer approach based on solutions rather than just productsIn the past, our approach was largely product driven. Today, our starting point is no longer the product, but the customer. We are focusing on the customer’s con-cerns in managing everyday communications, and on what he needs to improve business efficiency. By work-ing with selected external partners, we are now able to offer a combination of services and products in a single end-to-end solution – along with a service guar-


Access Safety

Bizz Online Back-up An outsourced backup solution for critical data and business documents.

Bizz Online Collaboration Via their Internet connection, our customers access anywhere to their mails and documents.

antee. We are evolving from being merely a “provider” into a partner and business problem solver. To ensure the integration of new innovative solutions into a solu-tion-oriented approach, we have adapted our own work-ing methods. We have created a business development department and competence center and are developing a pool of talent skilled in thinking in terms of solutions through training and recruitment. We are also strengthen-ing our relationships with external partners, ranging from major groups such as Samsung to local businesses that are flexible, innovative, and able to rapidly develop solu-tions that meet the specific needs of the Belgian market.

Some solutions can be deployed across business sec-tors, and are called “horizontal” solutions. Others are designed for specific sectors, and are called “vertical” solutions. But all of them respond to our customers’ problems. In 2011, we started to deploy a number of “vertical” and “horizontal” solutions.

Horizontal solutionsBelgacom’s Videoconferencing In The Cloud solutions allow people to interact in a natural, human way with-out being physically in the same location. The service is based on a pay-as-you-use model and avoids the costs and inconvenience of installing and updating infrastruc-ture on site.

Other solutions described above, such as SMS parking and mobile CRM, are in essence horizontal, but can be integrated into sets of vertical solutions.

Vertical solutionsAt the end of 2011, we proposed a platform to the hold-ing company SEDIFIN, which makes it possible to detect anomalies in the consumption of gas and electricity within 27 public bodies in Wallonia. This service, called Publinergie, identifies any billing errors, notes differences in consumption from one year to another, and highlights possible malfunctioning of meters or energy wastage. Developed in partnership with Dapesco, a consult-ing firm specialized in energy optimization, this service opens up the possibilities for improved management of energy resources.

For the medical world, we launched a working platform that makes it easier for doctors to treat their patients and handle the related administration. This service is the result of a partnership between Belgacom and Corilus, which is specialized in complete IT solutions for the med-ical and paramedical sector.

On behalf of the Brussels Region tourist office, we launched VisitBrussels, in partnership with K-Company. This application is available on the App Store and gives tourists a complete overview of all there is to see and do in Belgium’s capital.

The promise of better serviceIn 2011, we made every effort to improve the everyday quality of our services and promised to make life easier for our business customers. To achieve this, we focused on three areas:• Improving the efficiency of our entire internal process-

ing, from product and solution development over the sales cycle to supply, installation, and accurate billing.

• Making our end-to-end process more responsive to demand, so as to shorten the time for activation, instal-lation and repair.

• In this perspective, further building end-to-end service level agreements.

The results were very positive. For example, in our Explore network, which ensures a secure connection between a company’s sites and its employees, we were


In 2011, we gave our account managers training on green IT and sustainability to help them better integrate this in their customer inter-actions. To engage in a discussion on this topic with our customers, we published a white paper on “Smart and Green IT” and organized customer events on this theme.

http://ict.belgacom.

be/greenict

43

able to provide consistent service throughout the year thanks to better end-to-end organization and more effi-cient planning of resources during holiday periods.

We also improved our time-to-market on other products and services, such as telephone exchanges, connec-tions, and broadband ICT solutions, including domain names and shared hosting.

For SMEs, we launched an information campaign on our improved quality of service: a single phone number for SMEs, 24h/24 telephone support for any questions or technical repairs, and a guaranteed repair time (within eight hours) in case of an Internet connection fault. Thanks to the improvements we made to the quality of our services, the results show that we surpassed our main competitors in terms of “business continuity” and “easy to do business with” and complaints decreased by 10% in the professional market.

Our priorities for 2012On the SME market, our aim is to become the preferred end-to-end business partner, with a relaunch of our broadband portfolio and the integration of mobility. We will continue to improve our quality of service with guar-antees and business continuity in case of outage. We also want to offer our customers the benefits of cloud solutions such as Office 365, CRM Mobile, Mozy PC Back-up, etc.

On the large enterprises market, we want to strengthen our leadership in converged telecom and ICT solutions and to position ourselves as the leader in cloud-based services. New innovative cloud solutions will contribute further to our revenue growth and will broaden the range of services we offer in the cloud to meet the requirements of SMEs as well as large enterprise customers. We will achieve a European first by deploying Smart Networking on our Explore service platform. Thanks to this solution, our customers will be able to give priority to critical appli-cations over other data on their network, and thereby improve the efficiency of their operations. We will also develop more solutions and vertical applications, such as the “Emergency package” – a set of fully integrated solutions to support public authorities in case of a major crisis (natural disaster, etc.) or unexpected events during mass gatherings (at festivals, amusement parks, etc.).

InternationallyIn our international approach to the market, we deploy our extensive range of products and services through Telindus International and its four affiliates, Telindus France, Telindus Luxembourg, Telindus United Kingdom and Telindus Netherlands.

Telindus International contributes to the development of the Belgacom Group on the corporate customer market, both in Belgium and abroad.

The Belgacom Group’s solution-oriented approach is co-delivered by Telindus International through a closely-linked management system.

Cloud computing is a key area in ICT development worldwide. Cloud solutions are by definition border-less. Telindus International centers its growth strategy on cloud building, developing associated security services and focusing on unified communication.

The Telindus affiliates enhanced their product and ser-vice portfolios by developing new strategic capabilities and by acquiring major customers.

• Telindus France provided a new voice and data infra-structure to one of main French trade unions. It also completed the integration of Eudasys, a specialist in the storage and data-center market.

• Telindus Luxembourg expanded its portfolio to include cloud and telecom services based on its own infra-structure, and successfully launched the brand “Tel-indus Telecom”. It won the “Best Cloud Computing Company of the Year” award, granted by a panel of 50 CIOs from all sectors of the Luxembourg market.

• Telindus Netherlands is transforming its organization, moving towards data-center services, virtualization and advanced managed services. It has acquired major ref-erence customers in the public sector.

• Telindus United Kingdom continued to form service provider partnerships, which, complemented by direct sales engagement, allowed it to penetrate the public and private sector markets. It launched a Microsoft Lync offer, enriching its unified communications service and giving customers a wider choice of integrated Uni-fied Communications solutions.


Business Magazine for top ICT ProfessionalsQ4 / October 2011 • www.onemagazine.be

DossierSmarter, greener and cheaper

Nicolas Troch, Sales Manager at Guy Troch Import

The cloud has made us a greener company

Round table: Can ICT save the planet?

How important is security at NATO? The director’s view.

The device of the moment

From consumer to company: a new device is gaining ground

The tablet is the futureThe rising popularity of tablets appears unstoppable – and logically so: a tablet is more than a mere replacement for the traditional laptop or smartphone. The device supports a new way of working and living.

Digital version One Magazine > www.onemagazine.be/

Bizz Internet, guarantees business continuity... even if case of failure.

Mag

Services

An active partnering and a sector-specific approach are needed to create market traction, build full end-to-end solutions for a specific business need, and drive innovation.

BICS is one of the world leaders in providing the vital links between telecom operators in different countries. An international call, message or data transfer reaches its destination only after transiting through the networks of one or more intermediaries. These companies trade across frontiers in voice minutes, messaging, roaming, connectivity, and mobile financial transfer services around the world.


27 billion minutes traded in 2011 (+8.5%)

1 billion SMS messages transfered

Providing vital links to telecom operators

120 new mobile data contracts


BICS currently serves operators for voice, mes-saging, GPRS roaming, and signaling (the service that exchanges information between operators in establishing a telephone call). BICS is a joint ven-ture between Belgacom, Swisscom and the mul-tinational MTN, the mobile telecommunications leader in Africa and active in 21 countries.

A strong BICS position in 2011 BICS traded 27 billion voice minutes in 2011, up 8,5% on 2010, confirming its position as the fourth largest international voice carrier in the world. It also consolidated its position as number one in the Mid-dle East and Africa market, and kept a strong position among the top three in Europe and the Asia Pacific region. In mobile data, BICS retained its worldwide leading position, with performances that outstripped expectations.

The market is evolvingVoice traffic continues to grow in volume, but stiff competition and tight regulatory pressure on roam-ing rates are pulling down revenues on this impor-tant traditional market. New players, such as Skype, Google, Viber and Rebtel, are intensifying the com-petition with services that are not dependent on managed networks – the so-called Over The Top providers (OTT).

Technology drives new business models. In 2011, 25% of BICS voice traffic was carried through IP technology (VoIP).

New growth opportunities To counter the erosion of voice revenues, BICS is exploring new territories, geographically and tech-

nologically. It is tapping into new segments, includ-ing OTT providers, broadband providers and Mobile Virtual Network Operators. These so-called MVNOs have little or no infrastructure or frequency, they buy minutes of telephony from traditional mobile opera-tors and resell them to their own customers. In 2011, BICS developed a new services portfolio providing MVNOs as of day one with the same international coverage and services as any established mobile operator. And the success of this formula has been demonstrated by the contracts it has won, such as the contract with Virgin Mobile France.

At the same time, BICS is developing value added services for voice just like it has done for mobile data. The 2011 launch of its new VAS for roaming already resulted in 27 new contracts won.

BICS priorities The main challenge will be to maintain the growth trend for BICS despite the voice market decline, by driving ever growing volumes at a marginal cost increase. We are confident that this can be achieved thanks to BICS’s global portfolio for both voice and data, combined with its wide customer base, which is particularly attractive for a hub. Besides that, our other key strength is our focused wholesale com-pany, with a successful M&A track record, which is always alert to opportunities arising from market consolidation.

In 2012, BICS’s main objectives will be to further rationalize its voice business, capitalize on its market leadership in mobile data and develop adjacent value added products and services.

BICS keeps building success and leadership in the international wholesale market, which is changing very fast and not without threats, but also with plenty of opportunities.

“ Mobile data remains our growth engine. In 2011 we signed again 120 new contracts and made a breakthrough on the MVNO market. ”

Daniel Kurgan – CEO of BICS

25%of BICS voice traffic was carried through IP technology (VoIP).

Reaction

OUR PEOPLE /// page 46

Hi grandma, we’ve arrived. Mum is going to make pancakes !!!

How much flour again for 15 pancakes?

47

Whenever we can, we escape to Wimereux: life is so pleasant there,we are close to the sea, our cottage is our home, and we are more

of a family there than anywhere else. Here, you can see us when we arrived, having fun in our small garden. My husband sent this first

snapshot immediately to my mom who, for the time being, can’t travel so far because of my dad’s illness. This way, they can share special

moments with us, and that means a lot to my dad right now. So we keep them updated!

annual report | belgacom | our people | FR | NL | UK |

2:08 p.m., WImEREUxFRANCE, ANNETTE and ELéONORE


As part of Belgacom’s convergence strategy, we already brought all our employees from the different entities together in 2010, creating a single workforce geared to delivering real results right across our entire range of operations. We also worked hard to harmonize different remuneration systems and job family descriptions. In 2011, we were able to fully focus on further developing human potential and drawing up strategic plans to meet the company’s future competence needs.

1,200 employees have changed jobs internally

900 vacancies have been filled externally

18 learning projects to help our staff develop the

necessary “simple and friendly” aptitudes

800 employees participated in the “Live my Life!”

exchange program

24 hours of training followed by each Belgacom employee (average per year)

Developping

our human potential

49

Building the workforce for the futureBuilding the skills for the future is an important challenge for Belgacom and for its employ-ees. It is crucial that our company identifies where there will be gaps or overlaps among functions in the future, and that it organizes its Human Capital Strategy and people develop-ment plans accordingly. In 2010, we launched a Strategic Workforce Plan to build the right skills for the future. In 2011, we mapped out our precise needs and started planning so as to ensure that the Group will have the human skills and resources to meet those needs. This planning will be finalized and implemented in 2012 and beyond.

A common system for performance managementUntil 2011 the former entities of the Belgacom Group had different systems for measuring their employees’ performance. This compli-cated an important process, and presented particular difficulties for managers of “mixed teams”. Now we have a single tool for the entire Group. This covers not just personal objectives, but also those of the Group, so everyone can see how they contribute to the achievement of the Group goals. Rapid feed-back from colleagues can be recorded in this tool, stimulating a culture of continuous feed-back.

Particular attention to career managementCareer management within Belgacom is just as important for the individual employee as for the company. The employee is responsible for

his or her own career, but the manager helps in the reflection process. In 2011, we acceler-ated and innovated our career management approach, with extra support and tools for employees and managers:

• A career center accessible online, with tools and information to assist in assessment and reflection.

• A talent profile tool, allowing employees to enter their profile, CV, experience, projects and aspirations.

• Dedicated career consultants specialized in counseling, to provide guidance in discuss-ing career options, identify preferences and review career objectives.

• New leadership development programs that focus on developing or improving the coach-ing skills of our team leaders.

The new career concept was promoted with the creative internal campaign “I love me”. This campaign gave new impetus to developing a more active Group culture in which employees take their career into their own hands.

Customer satisfactionTo improve customer satisfaction and engage our employees in this program, we developed staff training, provided new tools and intro-duced new working time arrangements.

• In all customer-facing departments where employees are in direct contact with the cus-tomer, we further implemented no fewer than 18 learning projects to help our staff develop the necessary aptitudes: being friendly, accessible, proactive and able to explain things in a simple way.

To improve customer satisfaction and engage our employees, we developed staff training, provided new tools and introduced new working time arrangements.


“ Our employees need to grow professionally and develop themselves on the job. Career management is about matching individual aspirations with company needs and tthat’s why we will continue to stimulate internal mobility towards jobs of the future. ”

Michel Georgis – Executive Vice President Human Resources

Reaction

In 2011, we reimbursed 1.1 million kms for business ride by bicycle and 13,500 employees now receive their payslip in electronic form.

CSR


Developing the right skills, competences and knowledge, now and for the future, is an essential part of our Human Capital strategy.

• More than 800 employees participated in the “Live my Life!” exchange program. For one day, they shadowed a customer-facing col-league, such as a contact center operator, sales team member in a Belgacom Center, or a technician on the road. Live my Life! pro-vided a rich experience that offered a behind-the-scenes look at customer contacts and showed participants how all the processes are linked together. This understanding will lead to better processes across the business units, resulting in better customer service.

• Externally, we reinforced our customer sat-isfaction focus, highlighting our Simple & Friendly attitude in the sourcing process, with attention to a customer friendly attitude that is innate rather than acquired.

The annual employee survey revealed that our people highly appreciate the efforts to improve customer satisfaction.

ElixEvery year, we conduct a wide-ranging employee survey known as Elix, which not only measures our employees’ satisfaction but also their involvement in their job and with the organization. The results and feedback from Elix are used as a basis to take action.

The results in 2011 confirmed that we are mov-ing in the right direction. This positive trend is largely the result of our efforts on career and performance management. Our focus on cus-tomer centricity - with the customer satisfac-tion program - increasingly inspires our staff to do their best for the customer (+9% vs 2010).

EngagementAt Belgacom, employee engagement is high on the strategic agenda. Whether it concerns

the alignment of employees with a project or involving the whole workforce in the company’s objectives, we believe that employee engage-ment is crucial for our current and future suc-cess. We define employee engagement as “people going the extra mile to meet company objectives and increase performance”. While individual employees have a role to play, we see it as the role of management to provide the tools, technology, information, support, and other resources and to create a culture that fuels engagement.

Since the end of 2010, a dedicated team within HR has focused on coordinating and stimulating engagement efforts throughout the company. In 2011, we paid particular attention to career development, the role of our team leaders, and the creation of a coaching culture.

The employee engagement survey is an impor-tant instrument for measuring commitment and defining actions to increase engagement. By addressing our employees’ concerns, we show that we listen to their needs and act accordingly.

TrainingIn a sector undergoing constant change and where intellectual capital is a prime source of innovation and growth, developing the right skills, competences and knowledge, now and for the future, is an essential part of our Human Capital strategy. Each Belgacom employee follows on average 24 hours of training per year. Belgacom has also created Training Academies in the most important customer contact fields, and in marketing and product management. This allows us to identify and measure the most important skills for each job, and to create adapted training paths for each employee. Developing leadership skills

is also essential for Belgacom because of the important role leaders play in the engagement and coaching of their team members. Several tracks have been created to ensure that the leadership style of our management corre-sponds with the new business reality.

DiversityWe strongly believe that diversity in the work-place leads to creativity and thus innovation, to better knowledge and understanding of our customers, and in the end to better business results. We are therefore also firmly committed to treating everybody equally and with respect, irrespective of their gender, race, background, education, etc.

In 2011, we decided to give extra attention to gender and ”mature workforce” management.

Gender Women occupy about 30% of the functions at Belgacom and 21% of the senior management group’s posts. Although we are among the best performing companies in this area, we want to achieve more gender balance in our com-pany and thus also at the top level. In 2011, we signed the European Code of Best Prac-tices for women in the ICT sector, confirming our ambition to promote increased participa-tion of women in this sector. We also increased awareness of the opportunities for women in our management and leadership functions, with particular attention to top management. Beyond this quantitative male/female balance, we want all our leaders to develop a more bal-anced leadership style, applying masculine as well as feminine qualities and competencies in the workplace. Our leadership development program takes this into account.

51

Belgacom encourages women to choose a career in ICT. It sponsors initiatives such as “She goes ICT” (Datanews), and promote technological studies among girls by collaborating with Agoria Technogirls.

In 2011, Belgacom was again awarded the “Quality for Equality and Diversity” label granted by the federal government. This distinction is an official recognition of the efforts made in the field of diversity.

Our priorities for 2012 In 2012 and beyond, we will ensure that we develop the right skills for the future, thanks to our strategic work plan and will give continued support to our employees in managing their careers (with a special focus on age-conscious career planning and stimulating women to apply for man-agement positions). We will also reinforce connections between our staff and our company strategy, strengthen our per-formance, and promote a culture of rec-ognition in order to increase employee engagement.


“Mature workforce” managementOur long-term goal is to encourage our staff to stay vital, active and motivated longer, by developing an age-conscious HR manage-ment. In the short term, we focus on employ-ees above the age of 50 who are assigned heavy tasks or work in sales. In 2011, we cre-ated an action plan with 42 best practices and 9 main themes, including ergonomics, health programs, career planning, and working time organization.

Top Employer in BelgiumIn 2011, Belgacom again received the Top

Employers Belgium award, which is based on

independent research and demonstrates the

quality of our HR policies and plans, particu-

larly with respect to:

• Primary (salary) and secondary (fringe ben-

efits) work conditions

• Training and development

• Opportunities for mobility

• Corporate culture

Elix results of 2011 vs. 201010,583 employees completed the surveyEmployee satisfaction: 90% (+2%)Commitment to Belgacom: +1%Job engagement: status quoLevel of participation: 63% (+1%)

Focus Technogirls

CSR /// page 52

6:55 p.m., aNTWERpMICHEL and ARTHURMy grandson Arthur is fascinated by music. He plays the piano. A buffet piano. We don’t have the space for a flugel, unfortunately. He’s the second-best in his class. I am so proud of him. Hearing and seeing him play is very emotional for me. I made a video clip of him playing a Chopin waltz. I am not much of a musician, but I can do some filming and editing. And you know what? He put it on his Facebook page. That shows how much he appreciates my work…

53

Do you come for lunch on sunday ?

annual report| belgacom | CSR | FR | NL | UK |

Responsible business

About our CSR report

Our CSR Strategy

This is Belgacom’s sixth Corporate Social Responsibility (CSR) report. It aims to provide a ba-lanced account of our performance on the socioeconomic, ethical and environmental issues which are the most relevant to Belgacom Group and its stakeholders.

Because CSR is increasingly embedded in our day-to-day activities, we no longer publish a separate CSR report and included several case studies throughout our activity report. More information is available on our web-site.

Unless otherwise stated, all data and activities are for the year 2011 and refer to the Belgacom Group as a whole.

We use the GRI G3.1 principles as a basis for deter-mining relevant content and metrics. Against the GRI

G3.1 principles, we self-declare compliance with level B requirements.

Ernst & Young gave a limited assurance on the qualitative information and on a selection of key indicators for 2011 (covering all our CSR commitments), identified by a √ in our Key Figures table available online.

At Belgacom, we recognize the need for a responsible and transparent way of managing our business vis-à-vis our stakeholders. We believe our future business suc-cess will depend on the positive impact we, through our activities, have on economic, technological and social progress, and on winning the trust of our interest groups. Corporate Social Responsibility (CSR) is therefore con-sidered a strategic management tool and a key compo-nent of our corporate mission and strategy.

Our CSR strategy enables a more inclusive, safer and greener (e)-society, while ensuring that we do business in an ethical and responsible way.

By doing this, we aim to increase our business growth and protect our reputation, while contributing to the broader economy and society as a whole. Our significant investment in Belgium’s digital infrastructure will improve access to technology at the same time as our initiatives are helping more people get online and enjoy the ben-efits of the digital society. Our green IT solutions help customers reduce costs and their environmental impact. Our new Belgacom Foundation stimulates social links between people and communities for more social cohe-sion. We also contribute to Belgian society as one of its biggest employers and by paying over EUR 900 million in taxes, social security, and dividends.

Belgacom’s social responsibility rating improved in 2011: we were selected for inclusion in the Ethibel Sustainability Index Europe and enhanced our score within the Carbon Disclosure Project. We believe we are on the right track to achieve our ambition of being recognized as a leading socially responsible company in Belgium, and will pursue our efforts in the coming years in order to create value both for our business and for society at large.

digital divide

1 Enhancing access to

communications

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

2 Encouraging a respon-

sible product use

3 Enabling a

low-carbon society

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

online safety

climate change

ageing population

Our CSR strategy

CSR /// page 54

More information on

www.belgacom.com/responsibility (CSR reports)

•KeyFigures(KPI)table •Detailsonscopeand

definitionsofourKPI’s •GRIreferencetable •Ernst&Youngassurance

statement Wewelcomeyour

feedbackonourCSRstrategyandreport

[email protected]

“We aim to grow our business in a responsible and sustainable way, as we believe it has to benefit both the society and our long-term development.“Didier Bellens - CEO Seemessageonp.5.

cha

lleng

esst

rate

gyco

mm

itmen

ts

+

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http://www.belgacom.com/be-en/annex_responsability/Resp_CSR_report.page

55annual report| belgacom | CSR | FR | NL | UK |

Managing CSROur governance model firmly embeds CSR in our group activities, and ensures that the world beyond Belgacom has a legitimate opportunity to influence our choices and priorities.

Understand our stakeholders’ expectationsWe engage with a wide range of stake-holders in order to understand their expec-tations, challenge our approach, improve our performance and build trust-based relationships. This is done in various ways, such as face-to-face meetings, satisfac-tion surveys from our employees and customers, and the Belgian public, and interactions with financial analysts. We also exchange best practices with peers through various CSR networks and part-nerships.

Focus on relevant topicsWe regularly challenge our CSR strategy to ensure we address the CSR issues that are the most relevant for our stakehold-ers and our business. This year, in internal workshops, we cross-checked our current CSR priorities against the new ISO26000 guidelines for social responsibility. We identified our most critical issues, based on the financial and reputational risks and opportunities for Belgacom on the one hand, and on our potential influence on these sustainability issues on the other. This exercise confirmed that we were addressing the right issues with our cur-rent CSR strategy. But we will ask external stakeholders to validate this in 2012. Our CSR report focuses on the most mate-rial CSR stakes for our stakeholders and for our business, identified in the top-right corner of our materiality matrix.

Embed CSR throughout the organizationOur mission, our corporate values (Respect, Can Do, Passion), our Corporate Governance Charter, our Code of Con-duct and our compliance office and poli-

cies, underpin our approach to respon-sible business and to corporate social responsibility.

Our internal governance and reporting structure is centered around three enti-ties: the Group CSR department, the CSR Steering Committee and represent-atives in each business unit implement-ing the action plans. The Vice-President in charge of CSR and the Steering Com-mittee report directly to the CEO and the Belgacom Management Committee. Our key CSR priorities are managed as a ‘corporate strategic program’, with monthly progress reports to our Belga-com Management Committee. To stress the importance of our non-financial performance, employee satisfaction and customer centricity results directly influence the variable remuneration of our top management. Our CSR govern-ance structure was not impacted by the organizational changes we experienced in 2011 and our CSR priorities remained unchanged.

Materiality matrix

Low Medium HighCurrentorpotentialimpactforBelgacom

Low

Med

ium

High

Importan

ceforstak

eholders

Waste management

Employment issues

Customer satisfaction

Ensure ICT education

Responsible purchasing

Employee volunteering

Corporate Governance and Compliance

Privacy & safe use of products

Green customer solutions

Responsible marketing

Digital inclusion & accessibility

Responsible network deployment

E-waste and handset recycling

Community investment

Fair competition

Electromagnetic fields & health

Energy & CO2

efficiency

BiodiversityWater

Our approach to CSR

More information on www.belgacom.com/

responsibility •CSRmanagement •Stakeholderdialogue •Ethics&compliance

CSR

Stakeholder engagement

Materiality assessment

CSR programs and targets per

business unit

Transparent reporting on

progress

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http://www.belgacom.com/be-en/annex_responsability/Resp_CSR_Management.page

http://www.belgacom.com/be-en/annex_organisation/Org_Corporate_governance.page

http://www.belgacom.com/be-en/annex_organisation/Org_Compliance.page

Performance overview

Our objectivesTarget date Status Our performance in 2011

CSRStRatEGYanDGovERnanCE

Continuetosharebestpractices withourinternationalsubsidiaries Yearly Best Practices workshops on energy/CO2 and

human resources management.

organizeamulti-stakeholderpanel onourCSRstrategy Dec-11

Performed an internal assessment of our material issues based on ISO26000 guidelines. Validation by external stakeholders postponed to 2012.

Ensurethatweremainincluded inEthibelInvestmentregister Yearly Included in the Ethibel Sustainability Index Europe

EnHanCInGaCCESStoCoMMUnICatIonS

Improveourcustomersatisfaction, viaimprovedserviceandsimplicity Yearly Customer satisfaction scores rised, with a clear

improvement in loyalty and brand image.

Developresponsiblemarketing andcommunicationguidelines Dec-11 Responsible guidelines included in our marketing

and communication approval processes.

Launchatleasttwonewinitiatives tobridgethedigitaldivide Dec-11 Launched 'Webexperts' and a new large-button

mobile phone.

Improvetheaccessibilityofourwebsitesforpeoplewithdisabilities Dec-11 Started to improve the accessibility of our corporate

website and will pursue efforts in 2012.

Provideatleast170,000hoursofICttrainingperyear. Yearly Provided 191,474 hours of ICT training, enhancing

the digital skills of 9,699 persons.

takenewinitiativestobridgethedigitaldivide Yearly new

EnCoURaGInGaRESPonSIBLEPRoDUCtUSE(childonlinesafetyandelectromagneticfields)

takeatleast2newinitiativestoencouragearesponsibleuseofourproducts

Dec-11

Employees trained 3,600 kids on ‘safe Internet and mobile phone use’ in schools. Informed 50,000 parents on how to choose the 1st mobile phone of their child in a responsible way.

LaunchtheEMFe-learningtoolandtakeatleastanotherinitiativetoinformcustomers

Dec-11Launched an e-learning on electromagnetic fields. Provided tips to reduce exposure to electromagnetic fields via our bill inserts.

RetrofitofourmobilenetworkintheBrusselsandFlemishregionsaslegallyrequired

Dec-15 Launched the retrofit of our mobile network to comply with strict new exposure norms.

trainatleast13,000childrenonasafeuseofInternetandmobiledevices Dec-12 new

Continuetoinformourstakeholdersonelectromagneticfieldsandhealth Yearly new

191,474 hours of ICT training

3,600 kids trained on safe Internet and mobile phone use

Key Figures

CSR /// page 56

57

EnaBLInGaLoW-CaRBonSoCIEtY

LowerourCo2emissionsby70%andimprovetheenergyefficiencyofournetworksanddatacentersby25%overtheperiod2007-2020

Dec-20

Lowered our CO2 emissions in Belgium by 62% vs 2007 (14% vs 2010).Energy efficiency targets for networks and datacenters are on track.

Launchatleast2newinitiativestohelpourcustomersbecomemoreenergy-efficient

Yearly SME account managers received training on green IT and sustainability. We published a white paper on ‘smart and green IT’.

Increasecollectionandrecyclingofoldmobiledevices

Yearly 5% increase in phones collected for reuse/recycling vs 2010.

SUPPoRtInGoURCoMMUnItIES

LaunchthenewBelgacomFoundation Dec-11The new Belgacom Foundation supported 36 innovative projects stimulating intergenerational dialogue.

Supportatleast100socialprojects Dec-11 118 social projects supported.

offeraccesstosportorculturaleventstodisadvantagedyoungstersincollaborationwithoursponsoringdepartment

YearlyWe included paralympic athletes in the Belgacom Memorial Van Damme competition and offered free entrances to disdvantaged children.

Contributetomoresocialintegrationviaourprojectsandpartnerships Yearly new

PRoMotInGaPoSItIvEWoRKInGCULtURE

Ensureeachbusinessunithasitsownskillsplan Dec-12

We mapped out our precise needs for the workforce of the future. All business units will have their skills plan by 2012.

Stimulatecareermanagementalsoformidandlatecareeremployees Dec-14 New career management approach and tools have

been launched.

Improveemployeesatisfactioneachyearandby5percentin2015vs.2010 Dec-15 Employee satisfaction increased by 2% vs. previous

year

DEvELoPInGaRESPonSIBLESUPPLYCHaIn

ExtendCSRriskassessmentforallsupplierswithaspendabove EUR125,000

Dec-11 We assessed the CSR risk of 397 suppliers, representing 31% of our total spend.

EvaluatetheCSRperformanceofdetectedmediumandhigh-risksuppliersandfollowupwith10morehigh-risksuppliers

Dec-11Pre-evaluation of 9 high risk suppliers identified in 2011. Follow up of 11 high risk suppliers identified in 2010 will be finalised in Q1 2012.

ContinuetoelaborateCSRtopicsinstrategicreviewmeetingswithkeysuppliers

Dec-11 CSR included in scorecards presented to suppliers during Vendor Performance Meetings.

Integrateadditionalsustainabilitycriteriainthesourcingplansandinourrequestforproposalsforatleast 5categories

Dec-11 Sustainability criteria integrated in RFP and sourcing plans for 5 categories

Performon-siteauditsincollaborationwithothertelecomoperators Yearly new

Includesustainablecriteriainrelevantrequestforproposals Yearly new

75% of waste recycled

40,328 mobile phones collected

90% employee satisfaction (+2%)

397 suppliers assessed on CSR risk

29% women in total workforce

-62% CO2 vs 2007

EUR 2,98 mio to support our communities


adetailedoverviewofourkeyperformanceindicatorsisavailableon

www.belgacom.com/responsibility

• Inclusion in Ethibel Sustainability Index Europe• New initiatives to get more people online, such as Webexperts• 3,600 kids trained on safe Internet and mobile phone use by

Belgacom employees• -62% of our CO2 emissions in Belgium since 2007• EUR 2.98 million invested to support our communities• +2% employee satisfaction

Delayed

Completed

On track

new New

+

http://www.belgacom.com/be-en/annex_responsability/Resp_CSR_Engagements.page

Enhancing access to communicationsWe want to enable as many people as possible to enjoy the benefits of a digital society, by improving our customer ser-vice and facilitating access to our technologies (particularly for people with special needs), while enhancing the digital skills of citizens. By developing our ICT infrastructure and the use of ICT, we increase our business growth and contribute to the broader economy and to society as a whole.

Our progress in 2011

Improving our customer satisfaction through better service and simplicity

We have seen customer satisfaction scores rising, with a clear improvement in loyalty and brand image. Com-plaints for our fixed-line business were down by 30%, and we did our utmost to answer calls to our contact centers within two minutes. Moreinformationonp.34.

Our new guidelines for “responsible marketing and communication” are included in the approval pro-cesses prior to the launch of new products and adver-tisements. This checklist reminds employees of the importance of aspects such as the accessibility, envi-ronmental impact and transparency of our products and communications.

Facilitating access to technologies for all

The share of the Belgian population that has never used the Internet decreased to 14% in 2011 (26.5% in 2008), well ahead of the European target (15% by 2015). And 60% of disadvantaged people use the Internet at least once a week, which is better than the European average (48%) – source: EC Digital Agenda Scorecard 2011. These are positive results, but we aim to continue our efforts to bridge the digital divide in Belgium.

Tom and Johan, teachers...

We further facilitated access to our technologies by expanding our network coverage (99.85% for 1Mbps broadband and the best 3G coverage in Belgium), by launching attractive offers for the elderly (with free installation and training), and by offering free wireless Internet via 500,000 Wi-Fi hotspots in Belgium. We promoted large-button phones for people with spe-cial needs. Over 350,000 customers benefit from our “social tariff”, a discounted offer for disadvantaged people, and 563 refurbished computers were donated to specialized schools and non-profit associations. We also started to enhance the accessibility of our corpo-rate and commercial websites and will pursue these efforts in 2012.

Enhancing digital skills

It is important to offer simple and accessible products, but we also want to make sure that customers have the skills they need to embark on the digital journey.

We continued to provide free Internet training and to support various ICT training centers, enabling 9,699 disadvantaged people to enhance their digital skills 191,474 hours).

9,699 disadvantaged people followed our ICT trainings

563 computers donated to schools and charities

... of a school class that trained 18 elderly people using the Webexperts program

“It was very stimulating to see our pupils in action. They were patient when explaining to the adults in detail how to use the Internet. We saw a lot of radiant faces, both among the children and the adults they assisted. In general, everyone was very enthusiastic.”

CSR /// page 58


responsibility www.webexperts.be

Inordertohelpelderlypeoplegetacquaintedwithourdigitaltechnologies,welaunched“Webexperts”,aninitiativestimulatingyoungsterstosharetheirInternetknowledgewiththeelderly.Schoolsorindividualscansubmitprojectsusingthetutorialsonwww.webexperts.be,andeachmonthwerewardthebestprojects.after threemonths,morethan50projectshadalreadybeensubmitted,withamajoritycoming fromschools.thanks to thoseprojects, 700seniors receivedtrainingandhavediscoveredtheworldoftheInternetanditspotential!

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http://www.belgacom.com/be-en/annex_responsability/Resp_Enhaincing_access_communication.page

http://ec.europa.eu/information_society/digital-agenda/scoreboard/index_en.htm

59

Encouraging a responsible product useWe encourage a responsible use of our products, and focus in particular on providing transparent information on electromagnetic fields and health and on protect-ing children online. This helps us to mitigate potential financial and reputational risks, and to build trust with our stakeholders.


Child online safety

In addition to the security mechanisms we provide on our products (parental control, anti-spam, anti-virus) and our information security management system (ISO 27001-certified), we support awareness raising and we fight online child abuse through our partnership with Child Focus, the Belgian Safe Internet Center. Belga-com employees teach online safety in schools, and we promote the use of hotlines to report offensive or harm-ful online content. Furthermore, we adhere to the Bel-gian e-safety charter and the code of conduct for safer mobile use by young teenagers and children.

Electromagnetic fields and health

Some anxieties remain about the potential effect on health of electromagnetic fields (EMF). We have taken on board these concerns by closely following scientific research in this domain, applying a responsible net-work deployment, and informing our stakeholders in a transparent way.

We provide tips to reduce exposure to electromag-netic fields via our websites and bill inserts. We also indicate the exposure level to electromagnetic fields in all our wireless devices, and provide an earpiece by default with our mobile phones. We provide transpar-ent information to our stakeholders. For this purpose, we established a new e-learning on electromagnetic fields. Also, we organize information sessions for municipalities and our employees.

Last year, we launched the retrofit of the mobile net-work in the Brussels and Flemish regions as required by the environmental legal framework. The new norm in Brussels is the strictest one in Europe.

Wouter, a Belgacom employee...

3,600 kids trained on “safe Internet use” by Belgacom employees

100% of our wireless products with a label indicating exposure to EM waves (in at least one communication channel)

... who trained kids on safe Internet use

“I found this to be a very rewarding thing to do. I was impressed by the kids, about their internet savvy as well as their eloquence. Got great interaction and feedback afterwards. I will be more than happy to repeat this. Great initiative !”



responsibility •Reviewofscientific

researchonelectromagneticfields

•E-learningonEMF

ouremployeesgavetrainingto3,600chil-dren on the safe use of the Internet andmobile phones in 64 schools across Bel-gium,incollaborationwithChildFocus(theBelgianSafeInternetCenter)andMicrosoft.Given the very positive feedback of ouremployees, the children, and the schools,thisinitiativewillbeextendedin2012.

+

http://www.belgacom.com/assets/content/e_learning_csr/EN/SCO_0001/default.htm

http://www.belgacom.com/be-en/annex_responsability/Resp_Communicating_electromagnetic_fields_and_health.page

http://www.belgacom.com/group/eu-en/annex_responsability/Resp_More_info.page?

Enabling a low carbon societyClimate change represents potential risks for our operations and at the same time enables new business opportunities. We are committed to playing an important role in preserving the environment and moving towards a low-carbon society. Our aim is to reduce our CO2 emissions by 70% by 2020 (2007 baseline), to help our customers lower their costs and environ-mental impact, and to involve our stakeholders.


Reduce our CO2 emissions in Belgium by 70% (2007-2020)

Energy efficiency is a key component of our environ-mental management system and environmental poli-cies. This year, we achieved an extra electricity saving of EUR 1.9 million in total, partly thanks to the further virtualization of our server park, the continued roll-out of free air cooling, the dismantling of old network cards, etc. The major project to replace our mobile network infrastructure was completed by the end of 2011, and will result in an annual electricity saving of about 17 GWh.

Thanks to our efforts related to efficient energy man-agement in buildings, a greener vehicle fleet (e.g. the average emission of new ordered company cars dropped to 115g CO2/km), and the continued promo-tion of public transport, our CO2 emissions in Belgium decreased by 14% compared to 2010 (-15 % for our global operations), and by 62 % compared to 2007.

The Environmental Investment Organization (EIO) ranked Belgacom first among European telcos in its

Gauthier Andries, CTO Stepstone

carbon ranking, on the basis of our scope and CO2

reduction in relation to turnover. In 2011, we produced 4 % less waste than the previous year, and 75 % of our waste was recycled or reused.

Help our customers lower their environ-mental impact

In 2011, we developed a “green ICT” training course for our SME sales managers to enable them to give our cus-tomers better information on how our products can help to increase their efficiency in terms of costs and energy. A Belgacom white paper on “green ICT” was also drawn up, with a focus on ‘a smaller ecological footprint and reduced costs, thanks to smart ICT solutions’.

Involve and raise awareness of stakehold-ers on climate change

In 2011, we became founding partner of GoodPlanet.be, a new organization which aims to raise environ-mental awareness in schools with material from French photographer and filmmaker Yann Arthus-Bertrand. We worked with several suppliers to drastically reduce the ecological impact of their products.

75% of waste recycled

-62% CO2-emissions vs 2007

40,328mobile phones collected

“Belgacom can help us increase our efficiency further and support our objectives to become even more sustainable. The main green initiative taken by Stepstone was to migrate all the applications and servers to the Belgacom data center in Machelen. As a result, our servers lose less heat and show a better energy efficiency. Secondly, we virtualized all our applications in the Belgacom data center”.

CO2-emissions in Belgium decreased with 62% vs. 2007

kTon

CO

2

CSR /// page 60


responsibility ourgreensolutions

andwhitepaperon http://ict.belgacom.be/

greenict

2007 2008 2009 2010 2011 2020 target

200

150

100

50

0

International operations Electricity - Belgium Heating - Belgium Transport*- Belgium

++

* Transport includes the CO2 of our fleet vehicles and in Belgium also business travel, employee commuting and outsourced transport for our network

http://ict.belgacom.be/en/propositions/_greenict.asp#

http://www.eio.org.uk/etindex.php?page=overview1

http://www.belgacom.com/be-en/annex_responsability/Resp_Enabling_low_carbon_society.page

61

Ethical and responsible operations

We aim to conduct our business in a responsible and ethical way vis-à-vis our employees, our suppliers and the communities in which we operate. This helps us to build trust with our stakeholders, protect our reputation, enhance employee engagement, contribute to social integration, and forge stronger links with our suppliers and communities.


Our Corporate Governance Charter, our Code of Con-duct and our compliance office and policies underpin our approach to responsible business. Seep.83,98-99.

Positive working culture

This year, we further increased employee satisfaction by 2%, launched a new career management program, initiated a plan for the future skills needed to cope with our business transformation, and started tackling our ageing workforce issue, in close collaboration with our unions. Seep.48-51.

Caring for the health and safety of our employees and suppliers is also a priority. Our policy covers all aspects related to stress, moral and sexual harassment and vio-lence. These internal proceduresare published on our intranet with advice and contact persons, along with our whistle-blowing procedure. Our proactive cam-paigns aimed at preventing accidents helped us main-tain a rather low occupational accident index (9.2).

Responsible supply chain

We have labor, ethical, safety and environmental standards for suppliers (based also on our Code of Ethical Procurement), and we monitor compliance through questionnaires and discussions with sup-pliers (during Vendor Account Meetings). Out of the

Anne-Sophie Parent, Secretary General AGE Platform

11 strategic suppliers identified at risk in 2010,

10 proved to have a lower risk rank as originally

defined after an in-depth analysis. An improvement

plan has been defined with the remaining supplier

at risk. In 2011, we assessed the CSR-related risks

of 397 suppliers with spending above EUR 125,000,

and identified 9 suppliers with potential risks, which

we will follow-up in 2012. An additional 100 suppliers

with spend above EUR 125,000 will be assessed in

2012 with our new tool, along with our strategic sup-

pliers. CSR is now included in our vendor performance

scorecards.

Supporting our communities

We invested EUR 2.98 million this year to support our

communities, through financial donations, in-kind sup-

port, and volunteering of our employees.

We launched the Belgacom Foundation, whose mis-

sion is to create, restore or strengthen social links

between people and communities. In our first exter-

nal project call, we supported 36 innovative projects

aimed at stimulating intergenerational dialogue. 563

refurbished computers were donated to schools and

social projects. Finally, we supported 49 social pro-

jects in which our employees are active as volunteers.

EUR 2.98 millioncommunity investment

90%employee satisfaction (+ 2%)

397suppliers assessed on CSR risk

“As President of the Jury of the Belgacom Foundation in 2011, I was very enthusiastic to participate in the selection of 36 valuable initiatives stimulating intergenerational dialogue in Belgium, which fit in perfectly with the 2012 European Year for Active Aging and Intergenerational Solidarity.”


More information on www.belgacom.com •CorporateGovernance

andcompliance www.belgacom.com/

responsibility www.belgacom.com/

foundation

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http://www.belgacom.com/be-en/annex_organisation/Org_Corporate_governance.page

http://www.belgacom.com/be-en/annex_responsability/Resp_Foundation.page

http://www.belgacom.com/be-en/annex_responsability/Resp_CSR_Engagements.page

http://www.belgacom.com/be-en/annex_suppliers/Sup_csr_evaluation.page

http://www.belgacom.com/be-en/annex_responsability/Resp_Promoting_positive_working_culture.page

http://www.belgacom.com/be-en/annex_responsability/Resp_Developing_responsible_supply_chain.page

http://www.belgacom.com/be-en/annex_responsability/Resp_Supporting_our_communities.page

THE BELGACOM SHARE /// page 62

4:55 p.m., LIègE gUILLEmINS FREDI am a newspaper journalist. I love to travel by train. For one thing,because in most cases, I don’t lose any precious time stuck in traffic.And I like to have people around me. Even when I am not working,I take great pleasure in observing other people, overhearing theirconversations, inventing stories about their lives, starting a novel starring the woman sitting in front of me. Sometimes I take photos with my cell phone so that later on I can recall what inspired me. I have a whole gallery of them by now: people, moods, stories. Life is fascinating when you look at it that way.

63annual report| belgacom | Belgacom share | FR | NL | UK |

@pingpongRosario 10 min

Just watched ‘your’ JT. Poor weather in Brussels

Since March 2004, Belgacom’s shares have been listed on Euronext Brussels under the ticker symbol BELG. The Belgacom share is included in the following leading indices: BEL20, EURO STOXX Telecommunications Index, STOXX Europe 600 Telecommunications index, FTSE Eurofirst 300 Telecom index and MSCI Euro.

The Belgacom share

Belgacom share performance in 2011 The Belgacom share stands for stability and reliability in insecure and volatile markets. The financial and sover-eign crisis in 2011 left many companies and industries facing considerable volatility. Benefitting from its strong financial position and its attractive shareholder return policy, the Belgacom share enjoyed a defensive status and continued to be viewed as a safe haven. In com-parison to other Belgian companies in the BEL20 and its peers in the Telecom Sector, the Belgacom share per-formed well over 2011.


Share listing

Stock market

First Market of Euronext Brussels

Ticker BELG

ISIn: BE0003810273

nationalSvMcode

3810.27

Bloomberg code

BELG BB

Thomson code:

BELG-BT

Reuterscode:

BCOM

Over the year 2011, the Belgacom share lost 3.5%, with the closing price of 30 December 2011 at EUR 24.24, while the average daily volume in 2011 rose by 8.6%. The share reached its year-high closing price of EUR 27.64 on 8 April 2011 and its lowest level on 1 Novem-ber 2011 with a closing price of EUR 21.40 as nervous-ness about the Greek sovereign crisis peaked and was reflected on the European financial markets.

The BEL20 closed the year 2011 19.2% lower versus end 2010, with Belgacom performing fifth best. The Dow Jones STOXX Europe Telecommunications Index ended 6.2% lower versus one year ago

65

“In 2011, the Belgacom share proved once more to stand for stability and reliability. It was a tough year for financial markets, yet the Belgacom share performed fairly well compared to most of the BEL20 companies and its main peers in the Telecom sector thanks to Belgacom’s solid operational result, strong financial position and attractive shareholder return.”

Ray Stewart– Executive Vice President Finance & CFO

annual report| belgacom | Belgacom share | FR | NL | UK |

2007 2008 2009 2010 2011Share information Share price high 35.82 33.31 28.65 29.11 27.64 Share price low 27.82 24.58 21.67 24.31 21.40 Share price at 31 December 33.74 27.33 25.32 25.13 24.24 Annual trading volume

(number of shares)291,898,716 281,419,643 181,364,309 138,569,376 148,786,324

Average trading volume per day (number of shares)

1,144,701 1,099,295 708,454 532,959 578,935

Number of outstanding shares 332,071,776 320,334,261 320,614,683 321,482,641 317,648,821 Weighted average number of

outstanding shares334,017,553 326,179,820 320,475,553 321,138,048 319,963,423

KeydatapershareasreportedEBITDA1 6.08 5.84 6.14 7.56 5.93Net Income (Group Share)1 2.87 2.45 2.82 3.94 2.36Ordinary dividend (gross) 1.68 1.68 1.68 1.68 1.68Interim-dividend (gross) 0.50 0.50 0.40 0.50 0.50Gross dividend yield2 6.5% 8.0% 8.2% 8.7% 9.0%Price/earnings at 31 December2 11.76 11.15 8.98 6.37 10.26Keydatapersharebeforenon-recurringEBITDA1 6.22 6.10 6.10 6.18 5.97Net Income (Group Share)1 2.96 2.71 2.79 2.57 2.41Price/earnings at 31 December2 11.40 10.09 9.09 9.79 10.06Market capitalization at 31 December (billionEUR)3

11.20 8.75 8.12 8.08 7.70

1. Based on weighted average number of outstanding shares

2. Based on share price 31 December 2011

3. Calculation based on number of outstanding shares & share price 31 December 2011

Share performance

After a positive start in 2011, the markets went down in March, driven by the uncertainty following the earthquake in Japan and the political instability in Libya. The Belga-com share went ex-dividend on 26 April 2011, and after a short recovery dropped by 5.12% on 6 May as a reac-tion to Belgacom’s profit warning announced with the first quarter 2011 results. Unfavourable macro news flows and general market concern on the Telecom sector put the Belgacom share on a further negative trend in the sec-ond quarter. During the third quarter, the financial markets

were on a roller coaster of fear and short-term relief driven by the European debt crises and the stalling US recovery. The announced Greek euro referendum provoked a seri-ous drop in the beginning of November followed by S&P downgrading Belgium near the end of November. How-ever, Belgacom’s reassuring third quarter results com-bined with the appreciated label of safer haven, and a new Belgian government caused the Belgacom share price to perform well in December.

Belgacom share performance over 2011 as compared to BEL20 and STOXX Europe 600 (source: Thomson One)

01.01 01.02 01.03 01.04 01.05 01.06 01.07 01.08 01.09 01.10 01.11 01.12

30

25

20

15

BELG-BT Close BEL 20 restated SXKP restated

Belgacom share performance over 2011 as compared to some of its peers (source: Thomson One)

01.01 01.02 01.03 01.04 01.05 01.06 01.07 01.08 01.09 01.10 01.11 01.12

30

25

20

15

BELG-BT Close MOBB-BT restated TNET-BT restated KPN-BT restated SCMN-BT restated

Reaction

Ownership on 31 December 2011

Belgacom ownership Shares % Total shares % Voting rights % Dividend rightsBelgian State 180,887,569 53.5% 57.0% 56.1%Belgacom own shares 20,376,314 6.0% 0.0% 1.5%Free-Float 136,761,252 40.5% 43.1% 42.4%totaL 338,025,135 100.0% 100.0% 100.0%

Treasury shares evolution

Status 31 December 2010 16,542,494Options exercised during 2011 -189,681Discount Purchase Plan employees -277,474Acquisition of treasury shares 4,300,975Cancellation 0Status 31 December 2011 20,376,314

Our shareholders The Belgian government remains the main shareholder, owning 53.5% of the Belgacom shares. The free-float represents 40.5%, with the main institutional sharehold-ers located in the United States, the United Kingdom, Benelux, France and Germany. End 2011, Belgacom held 20,376,314 treasury shares, representing 6.0% of the total number of shares. In the course of 2011, 277,474 treasury shares were used in a Discount Share Purchase Plan for Belgacom management and 189,681 options were exercised.

In February 2011, the Belgacom Board of Directors approved a share buyback program for a maximum amount of EUR 200 million to be carried out over the period 2011-2012. In this context, Belgacom acquired in the second and third quarter of 2011 a total of 4,300,975 treasury shares at an average price of EUR 23.25 via two tranches of each EUR 50 million.

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. However, in order to cover the outstanding stock options granted in 2010 and 2011, the Board of Directors approved the conversion of 2,025,774 treasury shares without dividend rights into treasury shares entitled to dividend rights, on 27 October 2011.

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

Transparency declarationsAccording 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 June 2011, Belgacom SA notified that its own-ership of own shares crossed the threshold of 5% of outstanding shares on 17 June 2011. As of that day, Belgacom held in the aggregate 16,901,625 shares, rep-resenting 5% of the total number of outstanding shares.

On 16 September 2011, Capital Research and Manage-ment Company notified that its shareholding in Belga-com SA went below the 3% threshold on 12 September 2011 (previous notification of 3.27% shareholding on 1 April 2010). To Belgacom’s knowledge, no other share-holder owned 3% or more of Belgacom’s outstanding shares at 31 December 2011. Notifications of important shareholdings to be made according to the Law of 2 May 2007 or Belgacom’s bylaws should be sent to FSMA (former CBFA) on [email protected] and to Belgacom on [email protected].

Share ownership

6.0% Belgacom own shares

53.5% Belgian State 40.5%

Free-Float


67annual report| belgacom | Belgacom share | FR | NL | UK |

Investor RelationsBelgacom Investor Relations (IR) aims at providing the Belgian and international investment world with an open communication on a regular basis. Through a transpar-ent and consistent dialog with investors and financial analysts, the Group strives for a fair share value based on high-quality financial information. In this context, Belga-com is proud to have received the overall Award for Best Financial Information in October 2011 from the Belgian Financial Analysts’ Association.

To keep Belgacom’s current and potential sharehold-ers informed, Belgacom’s management speaks to the financial community on a regular basis. Each quarterly results announcement is followed by a conference call 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 centers of Europe and the United States. Further-more, Belgacom participated in several major interna-tional investment conferences. In between these events, meetings and conference calls with senior management are organized. In all these activities, management is sup-ported by the Investor Relations team (IR). Furthermore, on 29 June 2011, Belgacom organized an Investor & Analyst day in Brussels, during which the focus was on market shares and the involvement of all business units therein.

The Belgacom IR team offers daily support to the retail and institutional shareholders as well as to the analysts.

A strict quiet period is observed four weeks before the issuing of a quarterly report and six weeks before the communication of the annual results.

Shareholder remuneration

Shareholder return policyBelgacom commits to an attractive shareholder remu-neration policy by returning, in principle, most of its annual free cash flow1 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 selective M&A, with a clear focus on value creation. This also includes confirming appropriate levels of distributable reserves.

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

Shareholder return from the result of 2011 Following the above-mentioned commitment, the Board of Directors approved in October 2011 the payment of an interim dividend of EUR 0.50 gross per share (net amount of EUR 0.375 per share), corresponding to a total amount of EUR 161 million. The dividend was paid on 9 Decem-ber 2011.

On 1 March 2012, the Board of Directors decided to propose an ordinary dividend of EUR 1.68 per share to the Annual Shareholder Meeting of 18 April 2012. After approval, the normal dividend will be paid on 27 April 2012, with record date on 26 April 2012 and ex-dividend date on 24 April 2012.

This brings the 2011 total dividend to EUR 692 million, including the interim dividend.

In addition to the approved share buyback (Febru-ary 2011) for a maximum amount of EUR 200 million, Belgacom acquired in the second and third quarter of 2011, 4,300,975 treasury shares for an amount of EUR 100 million.

Dividend per share (in EUR)

2004 2005 2006 2007 2008 2009 2010 2011

1.93

1.52

1.89

2.18 2.182.08

2.18 2.18

0.55

1.38

1.52

1.60

0.29

1.68

0.50

1.68

0.50

1.68

0.40

1.68

0.50

1.68

0.50

Interim dividend Extra-ordinary dividend Normal dividend

Financial calendar

18april2012

Annual General Shareholder Meeting

24april2012

Ex-dividend listing of shares

27april2012

Payment of ordinary dividend

04 May 2012

Announcement of first-quarter results 2012

27July2012

Announcement of half-year results 2012

26 October 2012

Announcement of third-quarter results 2012

Note that these dates may be subject to change.

EUR 2.18 gross dividend 2011

1. Belgacom defines free cash flow as cash flow generated by operating activities, minus capital expenditures and including other investing activi-ties such as acquisitions or divestments.

8 a.m., ZWEvEZELEJULIANAMy son Julian, while recovering from a severe flue that kept him athome for nearly a week, told me he wanted to become a doctor, like his mum. I said: why? He said: people like doctors because theycure them. I said: but a doctor can’t always cure people. He said: but you always cure people, don’t you? Then he gave me a hug. And I thought: I am a doctor and probably a good mom. There’s a lota doctor can do at home without losing touch. I wouldn’t mind Julianbecoming a doctor one day.

CORPORATE GOVERNANCE /// page 68

69annual report | belgacom | corporate governance | FR | NL | UK |

Monday 4 June 20128.30 Meet with Susan

9.30 1h Breakfast

10.00 Contact Bob

12.30 Lunch with M. Davids

13.45 Conference

18.00 Pick up Esther for piano

Mum, do not forget my swimming suit? :•)

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

Belgacom governance modelAt Belgacom, the Articles of Association are strongly influenced by the specific legal status of the company. As a limited liability company under public law, Belga-com 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 gen-

eral policy and strategy and supervises operational management;

• The creation by the Board of Directors within its struc-ture of an Audit and Compliance Committee, a Nomi-nation and Remuneration Committee and a Strategic and Business Development Committee;

• A President & Chief Executive Officer, who takes pri-mary 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 GovernanceBelgacom designates the 2009 Belgian Code on Corpo-rate Governance as the applicable Code.

Board of DirectorsAs provided for in the 1991 Law, the Board of Directors is composed of: • Directors appointed by the Belgian State in proportion

to its shareholding • Directors appointed by a separate vote among the

other shareholders, for the remaining seats. At least 3 of these Directors must be independent according to the criteria of article 526ter of the Belgian Code of Companies and the criteria of the Belgian Corporate Governance Code. The Board of Directors is com-posed of maximum 16 members, including the per-son appointed as President & Chief Executive Officer. Today the Board is composed of 14 members.

Functioning of the Board of DirectorsThe 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 five regularly scheduled meetings. The Board of

Name Age Position TermJozef Cornu 67 Independent Director 2009 - 2015Guido J.M. Demuynck 61 Independent Director 2007 - 2013Pierre Demuelenaere 53 Independent Director 2011 - 2017Pierre-Alain Desmedt 68 Independent Director 2004 - 2016Carine Doutrelepont 51 Independent Director 2004 - 2013Oren G. Shaffer 69 Independent Director 2004 - 2013Lutgart Van den Berghe 59 Independent Director 2004 - 2016

Members of the Board of Directors appointed by the General Shareholders’ meeting

Name Age Position TermTheo Dilissen 58 Chairman 2004 - 2015 (*)Didier Bellens 56 President & CEO 2003 - 2015Martine Durez 61 Director 1994 - 2012Mimi Lamote 47 Director 2006 - 2012Michèle Sioen 46 Director 2006 - 2012Michel Moll 64 Director 1994 - 2012Paul Van de Perre 59 Director 1994 - 2012

Members of the Board of Directors appointed by the Belgian State

* As Chairman until 2012

71annual report| belgacom | corporate governance | FR | NL | UK |

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 rep-resented, although for certain issues a quali-fied 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 con-structive dialogue between Directors. They should be prepared by standing or ad hoc Board Committees with significant representa-tion of non-executive, independent Directors within the meaning of Article 526ter of the Bel-gian Company Code.

All charters were updated on 24 February 2011.

Committees of the Board of DirectorsIn accordance with the bylaws, Belgacom has an Audit and Compliance Committee, a Nomi-nation and Remuneration Committee and a Strategic and Business Development Commit-tee.

Audit and Compliance CommitteeThe Audit and Compliance Committee (ACC) consists of five non-executive Directors, the majority of whom must be independent. In line with its charter, it is chaired by an independent Director.

The Audit and Compliance Committee’s role is to assist and advise the Board of Directors in its oversight of: • The financial reporting process; • Efficiency of the systems for internal control

and risk management of the company;

• The Company’s internal audit function and its efficiency;

• The 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 ques-tions and recommendations made by the auditors;

• The relationship with the Company’s auditors and the assessment and monitoring of the independence of the auditors;

• The Company’s compliance with legal and regulatory requirements;

• Compliance within the Company with the Company’s Code of Conduct and the Deal-ing Code.

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

Nomination and Remuneration CommitteeThe Nomination and Remuneration Committee (NRC) consists of five Directors, the majority of whom must be independent. In line with its charter, this committee is chaired by the Chair-man of the Board of Directors, who is an ex-officio member.

The Nomination and Remuneration Commit-tee’s role is to assist and advise the Board of Directors regarding: • The nomination of candidates for appoint-

ment to the Board of Directors and the Board Committees;

• The appointment of the President & Chief Executive Officer and of the members of the Management Committee on proposal of the President & CEO;

• The appointment of the Secretary General; • The remuneration of the members of the

Board of Directors and the Board Committees; • The remuneration of the President & Chief

Executive Officer and members of the Man-agement Committee;

• The review on an annual basis of the remu-neration philosophy and strategy for all per-sonnel, and specifically the compensation packages of top senior management;

• The oversight of the decisions of the Presi-dent & Chief Executive Officer with respect to the appointment, the dismissal and the compensation of management;

• The preparation of the remuneration report and the presentation of that report at the Annual General Shareholders meeting;

• Corporate governance issues.

The Nomination and Remuneration Committee meets at least four times a year.

The first meeting each year reviews the per-formance, budgets for payout 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 addi-tion to these meetings, the Committee organ-ises a meeting on Human Resources and a meeting on Corporate Governance.

In 2011, Mr. Theo Dilissen (Chairman), Mr. Jozef Cornu, Ms. Martine Durez, Mr. Pierre-Alain De Smedt and Ms. Lutgart Van den Berghe were the members of the Nomination and Remuneration Committee.

Strategic and Business Development CommitteeThe Strategic and Business Development Committee (SBDC) consists of six Directors. In line with its charter, the President & Chief Executive Officer and the Chairman of the Board of Directors are ex-officio members, and the Committee is chaired by the Chairman of the Board of Directors. One additional mem-

Pierre-Alain De Smedt

Didier Bellens

Martine Durez

Chairman of the Board of Directors of Belgacom since October 2004. Mr. Dilissen is since June 2010 CEO of Arcadis Belgium. Previously Mr. Dilissen was CEO, Managing Director and Vice-Chairman of Real Software and from 1989 to 2000 he was COO and member of the Board of ISS (a Danish publicly listed company). From September 2005 until the end of March 2009 he was CEO and afterwards Chair-man of Aviapartner. Since January 2011 Mr. Dilissen is also member of the Board of Directors of Eurostar. He studied Sociology and holds a Master in Business Administration.

Ms. Michele Sioen is CEO of the Sioen Industries group since 2005. She held various positions in the group from 1990 until 2005. Sioen Industries produces and processes technical textiles, is stock quoted and world market leader. Michele Sioen was president of Fedustria until 2010. She is vice president of the VBO and is a member of the board of directors of several companies: amongst others ING Belgium and D’Ieteren. She is also member of the Corporate Govern-ance Commission. Michele Sioen holds a degree in Economics and several postgraduate degrees.

President & Chief Executive Officer and Director of Belgacom since March 2003.

moreinfoseep.77 Members of the Management Committee.

Formerly, Mr. Shaffer was Vice Chairman and Chief Financial Officer of Qwest Communica-tions from 2002 to 2007 and President and Chief Operating Officer of Sorrento Networks. He was a member of the Board of Directors at Belgacom from 1996 to 2000. He currently holds directorships on various boards . He received a Bachelor of Science in business admin-istration from The University of California at Berkeley and a Master of Science in manage-ment from The Massachusetts Institute of Technology.

Ms. Durez was the Chief Financial and Accounting Officer at bpost un-til 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 Com-mittee 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 PhD in Applied Economics from the University of Brussels (ULB).

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). He is a graduate in engineering and economics of the University of Brussels (ULB).

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

Theo Dilissen


Mr. Van de Perre is the co-founder of GIMV (Venture Capital Firm) and was formerly a director of Sidmar (Arcelor). He is currently director of Grontmij NV, Greenbridge Incubator (University of Ghent) and member of the Investment Commitee of 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 and is a certified accountant (IAB).

Paul Van de Perre

Oren G. Shaffer

Michel Moll

Michèle Sioen

Members of the Board of Directors

73

Lutgart Van den Berghe

Ms. Lamote is Vice President at Grand-Vision B.V. (former Pearle Europe), Am-sterdam. She started her career in retail in 1988: she held different positions in C&A Europe. From 2001 until 2005 Ms. Mimi Lamote was General Manager of C&A Belgium-Luxembourg. From 2001 until 2004 she was member of the Board of Directors of the Federation of Enterprises in Belgium (FEB). In the same period, Mrs. Lamote was also member of the Board of Directors of Fedis (Federation of Distribu-tion). From 2005 until 2006 she was CEO of SCF (Belgium-Lithuania), listed on the Belgian stock market. From 2007 until October 2009, Ms. Lamote worked as COO in ZNA (hospital network Antwerp). She holds a master degree in Applied Economic Sciences of the University of Antwerp, a master in Retail Manage-ment of the Tias University of Tilburg and several other postgraduate degrees.

Ms. Lutgart Van den Berghe is doctor in Business Economics of the University of Ghent (B). She is Executive Director of GUBERNA (Belgian Governance Institute) and Extra-Ordinary Professor at the Uni-versity of Ghent (B). She is a Partner of the Vlerick Leuven Gent Manage-ment School where she served for many years as Chairman of the Competence Center “Entrepreneur-ship, Governance and Strategy”. She is a Member of the Belgian Commission for Corporate Govern-ance and Non-Executive Director in several international companies, such as SHV (NL) and ELECTRABEL (B). At EcoDA (European Confedera-tion of Directors’ Association), she is a Member of the Board and chair-woman of its policy committee.

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. Mr. Cornu 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.

Mr. Pierre Demuelenaere is the co-founder, President & CEO of I.R.I.S. (Image Recognition Integrated Systems), a company created in 1987 to commercialize the results of his PhD. Mr. Demuelenaere has more than 30 years of experience in Imaging and Artificial Intelli-gence. He has accumulated a solid experi-ence in technology company management, R&D management and setting up of interna-tional partnerships with US and Asian com-panies (HP, Kodak, Adobe, Fujitsu, Samsung, Canon…). He remains 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 Man-ager of the Year” award and I.R.I.S. received the «2002 Company of the year» award. He is also member of the board of directors of Pairi Daiza, BSB and Guberna. Mr. Demuelenaere is a civil engineer in Microelectronics from the Université Catholique de Louvain (UCL) and received his PhD in applied sciences in 1987.

Ms. Doutrelepont is a lawyer at the Brussels’ Bar and member of the Bar of Paris. She is the founding part-ner of the Belgian law firm Doutrelepont & Partners, which specialises in Information and Communica-tion Technologies, Intellectual property, Media law, Competition matters and European law. She holds a PhD in law from the University of Brussels (ULB). She is a Professor of Media Law, Intellectual Property Law, and European Law at the ULB Faculty of law, at the Institute for European Studies, as well as in universities in other countries. She is also President of the Information and Communication Law Centre of the ULB. For years, she worked as an Expert for the European Commission (General Directorate Internal Market), at the Belgian Senate and at the Belgian Competition 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.

Until December 2010, Mr. Demuynck was CEO of Liquavista. Before that he held various positions within Royal Philips Elec-tronics 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. In 2000, he became CEO Product Division Consumer Electron-ics 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 Divi-sion (KPN Mobiel Netherlands; Base Bel-gium, E-Plus Germany). 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 January 2012 he is also Board member of Divitel BV and Aito BV. He holds a degree in applied economics from the university of Antwerp (UFSIA) and a degree in market-ing from the University of Ghent (R.U.G).

annual report| belgacom | corporate governance | FR | NL | UK |

Jozef Cornu

Pierre Demuelenaere

Oren G. Shaffer

Carine Doutrelepont Guido J.M. Demuynck

Mimi Lamote


ber is chosen among the Directors appointed by the Belgian State. Three 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 acqui-sitions, mergers and divestments over EUR 100 million and to review large corporate restructuring programmes. If appropriate, the Board of Directors can decide on establishing a special ad hoc Committee, dealing with a specific subject, and composed of members with the appropriate experience.

In 2011, Messrs. Theo Dilissen (Chairman), Didier Bellens, Jozef Cornu, Guido J.M. Demuynck, Michel Moll and Mrs. Carine Doutrelepont were the members of the Stra-tegic and Business Development Committee.

Changes in the composition of the Board of DirectorsAt the General Shareholders Meeting of 2011. Mr. Georges Jacobs resigned as member of the Board for having reached the age limit of 70 years and was replaced by Mr. Pierre Demuelenaere.

Departure from the 2009 Belgian Corporate Governance CodeBelgacom 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 four years, the mandates of Belgacom Directors are for six 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 managersA 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 detri-ment of the Belgacom Group. In accordance with article 523 of the Belgian Companies Code, the President & CEO, Mr. Didier Bellens, declared to have a conflict of interest in con-nection with the Employee Incentive Plans of the agenda of the Board of Directors’ meeting of 24 February 2011. He is in fact a beneficiary of the Senior Management Short- & Long-term Incentive Plan 2009. He informed Belgacom’s auditor of this conflict of interest and decided not to participate in the deliberation or voting on this item.

On 24 February 2011, the Board adopted a “related party transactions policy” which gov-erns all transactions or other contractual rela-tionships 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 Mrs Lutgart Van den Berghe who is Executive Director of Guberna), for which it has paid a fee of EUR 30,250 in 2011.

Activities Report of the Board and Committee meetingsIn 2011, 7 meetings took place for the Board of Directors, 7 meetings for the Audit and Com-pliance Committee, 6 for the Nomination and Remuneration Committee and 2 for the Stra-tegic 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) In order to comply with legislation on insider dealing and market manipulation, Belgacom adopted a dealing code prior to the Initial Pub-lic Offering. This code aims to create aware-ness about possible improper conduct by employees, officers and Directors and the pos-sible 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, under-stood 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. 83).

Evaluation of the BoardGiven the fact that the Board of Directors per-formed an evaluation in 2010, no evaluation has been done in 2011. The action plan, as described in the Annual Report 2010, was fur-ther implemented in 2011.

Management

President & Chief Executive OfficerThe President & Chief Executive Officer is appointed by the Belgian State by Royal Decree deliberated in the Council.

Appointments are for a renewable six-year term, and can be terminated only by Royal Decree deliberated after discussion in the Council of Ministers. In line with the 1991 Law and the Company’s Articles of Association, the President & Chief Executive Officer is a mem-


ber of the Board of Directors. The President &

Chief Executive Officer and the Chairman of

the Board of Directors must come from differ-

ent language groups.

The President & Chief Executive Officer is

entrusted with day-today management, and

reports to the Board of Directors. In addition,

in line with the 1991 Law and the company’s

Articles of Association, the Board of Directors

may, deciding by a majority of two thirds of its

members present or represented, delegate all

or part of its powers to the President & Chief

Executive Officer, with the exception of:

• The approval of the Management Contract

with the Belgian State and changes to it;

• The establishment of the business plan and

general policy of the company;

• The supervision of the President & Chief

Executive Officer;

• And other powers explicitly reserved by law

to the Board of Directors which include, for

example, the establishment of the annual

accounts for submission to the General

Shareholders Meeting and the preparation of

merger proposals.

The Board of Directors has delegated broad

powers to the President & Chief Executive

Officer.

The current President & Chief Executive Officer is Mr. Didier Bellens. Mr. Bellens’ six-year fixed-term contract started on 1 March 2003 and was renewed in December 2008 for a new six-year term that will end on 28 Febru-ary 2015.

Management CommitteeThe 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 Exec-utive 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 disagree-ment, the view of the President & Chief Execu-tive Officer will prevail.

The Management Committee generally meets on a weekly basis.

In 2011, the Belgacom Management Commit-tee, in addition to the President & Chief Execu-tive Officer, was composed of the following members (see table below):

Name Age PositionScott Alcott 46 Executive Vice President Service Delivery EngineBart Van Den Meersche 54 Executive Vice President Enterprise Business Unit &

Chief Executive Officer of Telindus Group N.V.Michel Georgis 59 Executive Vice President Consumer Business UnitRay Stewart 63 Executive Vice President FinanceBruno Chauvat 49 Executive Vice President Strategy & Content

Members of the Management Committee

Mr. Grégoire Dallemagne left the company on 6 April 2011.

Ms. Astrid De Lathauwer left the company on 15 September 2011.

Changes in the composition of the Management Committee since 2012 Since 1 January 2012, Mr. Michel Georgis is the Executive Vice President Human Resources and Mr. Scott Alcott is the Execu-tive Vice President of the Consumer Business Unit of Belgacom.

On 1 March 2012, Mr. Geert Standaert was appointed as Executive Vice President Service Delivery Engine.

Michel Georgis

Scott Alcott Bart Van Den Meersche

Didier Bellens

Ray Stewart Bruno Chauvat


Members of the Belgacom Management Committee


Didier BellensMr. Bellens started his career at Deloitte Haskin & Sells. He held the post of financial Director of the Brussels Lambert Group until 1985, before taking on the position of Deputy Manager of the Pargesa Holding, where he was responsi-ble for the management of holdings, mergers and acquisitions. Between 1992 and 2000 he was back at the Brussels Lambert Group, as Managing Director, taking charge of the group’s strategic participations in companies such as Royale Belge, the BBL and the CLT. He played an instrumental role in the merger between AXA and Royale Belge, the change in ownership of the BBL, and the merger between the CLT and the UFA. Between 2000 and 2003, he served as CEO of the RTL Group, where he focused on the group’s international expansion. He concluded the merger with Pearson Television and launched the RTL Group on the stock market. Mr. Bellens was appointed Belgacom’s President and Chief Executive Officer for the first time in March 2003. His mandate was then renewed in March 2009 for a six-year term. Mr. Bellens is a member of the Board of Directors of BICS, Scarlet and Tango. He is also a member of the Board of Directors of AXA Belgium, VOKA (the Flemish Chamber of Commerce and Industry) and is on the steering committee of the FEB (Federation of Enterprises in Belgium). In addition, Mr. Bellens serves as independent Chairman of the Nomi-nation and Remuneration Committee, and as independent Director of the Board of Directors of the Compagnie Immobilière de Belgique. He is also advisor to CV Capital Partners and member of the International Advisory Council of the New York Stock Exchange. He is also a member of the Board of Directors of the Erasmus Foun-dation, of Business & Society and of the ULB Foundation, and serves as Vice Chairman of the Solvay Business School’s Consultative Council. Mr. Bellens holds a degree in management engi-neering from the Solvay Business School (ULB).

Scott AlcottScott Alcott was in 2011 the Executive Vice President of Belgacom’s Service Delivery Engine division. In that capacity, he oversaw all techni-cal infrastructure and operations for the group as well as wholesale activities. Previously Mr. Alcott has served as Belgacom’s Chief Operat-ing Officer Fixed Line Services, Chief Strategy Officer, Chief Information and Technology Officer,

General Manager of Marketing and Product Management, EVP (a.i.) Enterprise Business Unit and CEO (a.i.) of the Telindus Group. Prior to Belgacom, Mr. Alcott held various positions in marketing, product management and new business development for AT&T, AT&T Wireless, Ameritech and SBC. Mr. Alcott is a member of the Board of Directors of BICS, Scarlet, Calient Networks, AmCham Belgium, and the Interna-tional School of Brussels. Mr. Alcott holds a B.S. in Economics from the Wharton School at the University of Pennsylvania. Since 1 January 2012 Mr. Alcott is the Executive Vice President of the Consumer Business Unit of Belgacom.

Michel GeorgisFrom 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 Human Resources. He is also the Chairman of the Skynet and Tango Luxembourg Boards and member of the Committee for Development of Belgian Sports (Belgian Olympic Committee). As of May 2005 and until the integration in January 2010, Michel Georgis 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 posi-tions before becoming Sales & Marketing Direc-tor Central & Eastern Europe. Michel Georgis holds a Master’s degree in Applied Economics from the University of Leuven.

Ray StewartRay 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 Account-ing and a Masters of Business Administration in Finance. He is also a Certified Public Account-ant. Ray Stewart is also a member of the Board of Directors of Nyrstar since September 2007.

Bart Van Den MeerscheBart Van Den Meersche is the Executive Vice President of Belgacom’s Enterprise Business Unit. Mr. Van Den Meersche recently 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 Math-ematics from the University of Leuven. Mr. Van Den Meersche was during 6 years Presi-dent of Agoria ICT and also a member of the Board of Agoria, VOKA and VBO/FEB.

Bruno ChauvatBruno Chauvat joined the Belgacom Manage-ment Committee as Executive Vice President Strategy & Content in September 2011. Mr. Chauvat started his career in 1983 as Media Financial Analyst. Over the years he held execu-tive positions in media & telecom industries, from small entrepreneur-driven ventures to large international listed companies : Co-head of European media research at UBS, CEO of Audiofina (subsidiary of Groupe Bruxelles Lam-bert), Managing Director & Chief Strategy Officer of RTL Group, Consultant/Advisor to the CEO leading Belgacom TV Project (Belgacom Group), Founder and CEO of MusicMakesFriends.com/Playtime Luxembourg. As CEO of Broadcasting Communication & Media Consulting, he has also enabled Belgacom to settle in the past 2 years several innovating strategic partnerships (OnLive, Jinni, Softkinetic, Blinkx, Mubi, …). He is also a Board Member of Tango and Telindus Luxembourg. Mr. Chauvat holds a Master’s degree in management engineering and a Finan-cial Analyst professional certificate.


Remuneration reportBelgacom considers transparency about exec-utive remuneration very important. Therefore, the company provides the following informa-tion towards its shareholders, and all other stakeholders, in conformity with the corporate governance law of April 6, 2010 and Principle 7 of the Corporate Governance Code 2009. This implies the description of the Director’s remuneration and a high level explanation of the Group remuneration policy. Furthermore, it comprehends an analysis of our executive remuneration and provides an overview of the main provisions of the contractual relationships.

Director’s RemunerationPolicy of Director’s RemunerationThe remuneration and compensation of the Directors was decided by the General Share-holders Meeting of 2004. The principles of this compensation did not change in 2011: it foresees an annual fixed compensation of EUR 50,000 for the Chairman of the Board of Direc-tors and of EUR 25,000 for the other members of the Board of Directors, with the exception of the President & CEO.

All members of the Board of Directors, with the

exception of the President & CEO, have the

right to an attendance fee of EUR 5,000 per

attended meeting of the Board of Directors.

Attendance fees of EUR 2,500 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 attend-

ance fees are doubled.

The members also receive EUR 2,000 per year

for communication costs. For the Chairman

of the Board of Directors the communication

costs are also doubled.

The Directors do not receive performance-

based remuneration such as bonuses or long-

term share-related incentive programs, nor do

they receive benefits linked to pension plans.

Overview of Director’s RemunerationThe individual Director remuneration for the

fiscal year 2011, based on their activities and

attendance at Board and Committee meetings

is presented in the table below.

Remuneration Policy

Belgacom has an advanced and innova-tive remuneration policy which is regularly assessed and updated through close coopera-tion with external Human Resources fora and universities. The remuneration policies of Bel-gacom employees are determined in a process of full dialogue with the Board of Directors and the social partners.

The Belgacom remuneration policy aims at offering fair remuneration both to civil servants and to the group’s contractual employees, taking into account the performance of the employee and of the company. The evolution of total remuneration is linked to the results of the company.

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 major influence on how its remuneration policy has evolved. Belgacom Human Resources developed crea-tive and adaptable programs to deal with its obligations related to the statutory employ-

Name Board(total 7)

ACC(total 7)

NRC(total 6)

SBDC(total 2)

Total Remuneration

Theo DILISSEN 7/7 6/6 2/2 EUR 164,000Didier BELLENS 7/7 2/2 EUR 0 Jozef CORNU3 7/7 5/5 2/2 EUR 79,500 Pierre DEMUELENAERE1 4/6 EUR 39,708 Guido J.M. DEMUYNCK3 7/7 5/6 2/2 EUR 79,500 Pierre-Alain DE SMEDT3 7/7 6/7 5/5 EUR 104,500 Carine DOUTRELEPONT3 6/7 2/2 EUR 62,000 Martine DUREZ 7/7 6/6 EUR 77,000 Georges JACOBS2 1/1 1/1 EUR 16,792 Mimi LAMOTE 7/7 EUR 62,000 Michel MOLL3 7/7 7/7 2/2 EUR 84,500 Oren G. SHAFFER 7/7 7/7 EUR 82,000 Michèle SIOEN 6/7 EUR 57,000 Lutgart VAN den BERGHE 7/7 6/6 EUR 77,000 Paul VAN de PERRE 7/7 7/7 EUR 79,500

Activities report and attendance at Board and Committee meetings

1. Appointed on 13 April 20112.End of mandate on 13 April 20113.Appointed as member of the ACC or NRC or SBDC on 1 March 2011 (see section on Committees of the Board of Directors).

Total Remuneration: telecom advantage included


ment status of some of its workforce, and introduced new elements that harmonised policies between civil servants and contractual employees.

• Some powerful private sector instruments were introduced, such as performance dif-ferentiation, job classification, employee engagement and variable pay. These were superimposed on the traditional payment rules linked to statutory employment.

• Belgacom also maintains -and modernises- powerful public sector instruments, such as work-life benefits and social assistance. It is the responsibility of the Belgacom work-life department to combine the needs and responsibilities of employees and their fami-lies 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 public-sector component is also an important tool for employer branding. The objective of Bel-gacom is to treat all employees equally and to create a working environment in which any differences are acceptable to employees.

Executive RemunerationPolicy of Executive RemunerationBelgacom has a balanced executive remu-neration policy which rewards executives competitively and at rates which are attrac-tive 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.

The top executives are covered by dedicated reward programmes which focus on the prin-ciples 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 fun-damental principle of its remuneration policy is a degree of freedom for executives in choosing how they are to be rewarded.

The company wants to position top executive pay towards the median in the market for base salaries, and towards the upper quartile for total remuneration when there has been sus-tained excellent performance.

The policy aims to ensure that top performers can benefit from the growth of the company through long-term incentive plans.

The Nomination & Remuneration Committee sets the remuneration policy for top execu-tives and decides the individual packages for the President & CEO and the members of the Management Committee. These are regu-larly verified by benchmarking executive pay against both the BEL 20 companies and a set of peer companies in the ICT sector, both in Belgium and in Europe.

The current remuneration policy does not pro-vide for a specific contractual claw back stipu-lation 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 July 7, 1978, April 12 1965 and February 10, 2003 concerning the claw back possibilities from employees in case of fraud, serious fault and usual minor fault, civil liability, etc.).

No fundamental changes to the policy are foreseen for the next two years.

The relationship between the distinct remuner-ation components of the Belgacom Manage-ment Committee members and the President & CEO is illustrated in the figures alongside (figure 1).

Overview of executive remunerationThe executive Remuneration Policy is build upon fixed components, being the basic remuneration, the retirement and post employ-ment benefits and other benefits, and variable performance based components, being the short term variable remuneration and the long term share-based variable remuneration.In the frame of the application of the new cor-porate governance law the Board of Directors has approved to rebalance the short term var-iable remuneration and the Long Term share-based variable remuneration in order to obtain

Figure 1: Relative importance of the various components of remuneration (KPI’s 100% at target)

President and CEO

Belgacom Management Committee

25%

22%

0%

3%

5%

8%

25%

22%

45%

45%

Basic remuneration Short term variable remuneration Long term share-based variable remuneration Group insurance premiums Other benefits

Basic remuneration Short term variable remuneration Long term share-based variable remuneration Group insurance premiums Other benefits


an equal weight between payment after 1 year and deferred payment, as from performance year 2011.

Annual variable pay is calculated in relation to performance against Key Performance Indica-tors set by the Board of Directors upon advice of the Nomination & Remuneration Commit-tee. For 2011, these performance indicators included financial indicators as well as non-financial indicators, at both Group and Busi-ness Unit level. The achievement of these KPI’s are followed-up and communicated regularly. The results are based on audited financial fig-ures and non-financial indicators measured by internal and external agencies specialised in market and customer intelligence, of which the processes are audited on a regular basis.• The most important key financial indicator

used is the operational cash flow.• Important non-financial indicators included

are the “care and ease” indicator and the “employee loyalty index”. The “care and ease” indicator (see figure 2) supports the ambition of Belgacom to offer superior service to each customer (care) and to re-introduce a culture of superior process quality (ease). The “care indicator” measures the end-to-end satisfac-tion of our customers. The “ease indicator” measures operational excellence in our cus-tomer interactions. Satisfaction and opera-tional excellence of our interactions and channels are measured on a regular basis. Another operational indicator is the “employee loyalty index”, which each year measures employees’ organisational com-mitment and job engagement through a sur-vey. This is used as a starting point for further actions.

Basic remunerationThe basic remuneration of the Management Committee is annually reviewed by the Nomi-nation & Remuneration Committee, based on an extensive review of performance and assessment of potential provided by the Presi-dent & CEO, as well as on external benchmark-ing data.

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 President & CEO, Didier Bellens, is also a non-remuner-

ated member of the Board of Directors. Dur-ing 2011, neither the President & CEO nor the other members of the Management Commit-tee received a merit increase. Changes in the figures are the result of legal indexation in June 2011 and changes within the Management Committee composition (see basic remunera-tion chart).

Short term variable remunerationThe Belgacom Group variable pay system reflects the group values, emphasizes the strengths of the Business Units, and creates incentives for individual performance (see fig-ure 3).

The short term variable remuneration includes the actual bonus paid in the reported year 2011, for performance year 2010, through one of the options of the “Short Term Incentive Plan”. The CEO and the members of the Man-agement Committee can choose to receive the bonus in cash, or under the “Share Pur-chase Plan” or complementary pension plan.

The Discounted Share Purchase Plan provides the right to buy allocated shares at a 16.67% discount. The shares are treasury shares and are blocked for a period of two years. The employee himself finances 83.33% of the full share purchase price. The discount is financed by the employer.

The President & CEO chose to receive his bonus through a “Share Purchase Plan”. The other members of the Management Commit-tee have chosen different options.

The Short term variable remuneration of the President & CEO and the members of the Man-agement Committee decreased in comparison with last year, as a result of lower KPI results of the performance year 2010 and changes in the composition of the management team (see short term variable remuneration chart).

Long term Share-based variable remunerationOn an annual basis the members of the Man-agement Committee may also receive a stock-option grant. The options issued under this plan are subscription rights, each giving the right (for a limited period) to acquire Belgacom shares at a price equal to the value of the share at the time of grant of the options.

Figure 3: The Belgacom Management Committee policy takes into account Group, Business Unit and Individual performance

Basic remuneration (in kEUR)

CEO Management committee

2010 2011

2,597.6

938.6

2,608.9

914.7

Short term variable remuneration (in kEUR)


2010 2011

1,653.1

712.1

2,226.4

736.0

CARE

Web Distribu-tion

Install & Repair Usage Customer

Service

EASE

Web Distribu-tion

Install & Repair Usage Customer

Service

Group 30%

Business Unit 30%

Individual 40%

Result

Figure 2: Information about the “Care and Ease indicator”


To comply with the new law on corporate governance the Long Term Incentive plan has been changed as from the stock options, granted in 2011:• The vesting schedule has been updated to

a vesting of 50% after at least 2 years and 50% after at least 3 years following the grant.

• An explicit vesting condition has been installed: the closing price of the share must be higher than the exercise price minus the total amount of gross dividends attached to the shares which can be acquired through the exercising of the options.

• A 3 year cliff exercising period has been installed.

• In case of termination of the employment contract the stock options continue to vest in accordance with this vesting condi-tion. Stock options which are vested must, under penalty of forfeiture, be exercised with respect for the 3 year cliff exercising period and prior to the earlier of the expiration of 5 years following the termination of the employment contract or the expiration of the exercise period.

On an individual basis, the Management Com-mittee received the options mentioned in the table “Overview of stock option plan”.

The variation in the figures of long term share-based variable remuneration is due to changes within the composition of the Management Committee (see long term share-based vari-able remuneration chart).

Didier BELLENS

Scott ALCOTT

Bruno CHAUVAT

Grégoire DALLEMAGNE

Astrid DE LATHAUWER

Michel GEORGIS

Ray STEWART

Bart VAN DEN MEERSCHE

on January 1st, 2011, Stock options remaining from previous years:

425,266 146,001 - 111,623 139,405 136,321 242,452 -

Stock options granted during reported year

Number 111,319 39,897 - 0 42,244 56,325 77,447 55,000Exercise price (in EUR)

25.015 25.015 - 25.015 25.015 25.015 25.015 25.015

Stock options exercised during reported year

Number - 15,000 - 9,625 23,316 - 26,787 -Year of grant of options exercised

- 2005 - 2009 2006 - 2005 -

Stock options lapsed during reported year

Number Year of grant of options lapsed

totaL 536,585 170,898 - 101,998 158,333 192,646 293,112 55,000

Overview of stock option plan: President & CEO and other members of the Management Committee

Retirement and post employment benefitsThe President & CEO participates in a comple-mentary pension scheme which foresees an annual indexed contribution of EUR 77.970,53. The current members of the Management Committee have a “Defined Benefit Plan”.

Other benefitsBelgacom Group wants to stimulate its execu-tives by offering a portfolio of benefits and advantages that are competitive in the mar-ket 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.

OverviewThe table on the next page reflects the remu-neration and other benefits granted directly or indirectly to the members of the Belgacom Management Committee in 2011 by Belga-com or any other undertaking belonging to the Belgacom Group (benefit based on gross or net remuneration, depending on the type of benefit).

The year-on-year evolution of the figures is the consequence of mainly: • The reduced performances against the Key

Performance Indicators driving variable remuneration related to the performance year 2010 paid in 2011, compared to the amount of 2009 paid in 2010.

Long term share-based variable remuneration (in kEUR)


2010 2011

1,154.4

474.3

1,116.0

465.0


• the changes in the composition of the man-agement team

• the legal indexation of salaries

Main provisions of the contractual relationshipsContractual arrangement of President & CEOIn March 2009 Didier Bellens started the first year of his new six-year mandate as President & CEO. He has a contract as a self-employed executive. Nevertheless he is subject to employee 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 employ-ees is expanded/extended to those institutions of public utility and autonomous public enter-prises as well as such individuals who, in their capacity of agent and against remuneration, devote their principal activity to the day-to-day management or direction of these institutions and enterprises, to the extent no statutory pen-sion regime is applicable to these individuals”.

ClausesThe President & CEO is bound by a non-com-petition 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 rev-

Remuneration

President & CEO Other members of the Management Committee

2010 2011 2010 2011Basic remuneration 914,708 938,591 2,608,943 2,597,582Short term variable remuneration 736,046 712,056 2,226,448 1,653,134Long term Share-based variable remuneration 465,006 474,330 1,116,018 1,154,360Retirement and post-employment benefits 108,301 109,440 510,295 514,310Other benefits 9,732 9,663 185,555 203,409totaL(excl.employer’ssocialcontribution) 2,233,793 2,244,080 6,647,259 6,122,795totaL(incl.employer’ssocialcontribution) 2,561,455 2,580,147 7,718,257 7,438,289

Overview basic and variable remuneration CEO and other members of the Management Committee

enues. He will receive an amount equal to one year’s salary as compensation.

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 Bel-gian market, will receive an amount equal to six months’ salary as compensation.

Didier Bellens and Ray Stewart have a con-tractual termination clause with an indemnity of one year’s remuneration.

Scott Alcott and Michel Georgis have a con-tractual termination clause with an indemnity of one year’s remuneration plus one month pay per year of seniority acquired, with a maxi-mum of two years’ remuneration after 12 years of service.

Bart Van Den Meersche and Bruno Chauvat have a contractual termination clause with an indemnity of one year’s remuneration, compli-ant with the new corporate governance law.

Grégoire Dallemagne, who left the company in April 2011 and Astrid De Lathauwer, who left the company in September 2011, are granted an indemnity in line with their contractual ter-mination clause.

For Grégoire Dallemagne, the contractual ter-mination clause contained one year’s remuner-ation plus one month pay per year of seniority

acquired, with a maximum of two years’ remu-neration after 12 years of service. The contrac-tual termination clause of Astrid De Lathauwer contained one year’s remuneration plus one month pay per year of seniority acquired.

Board of AuditorsThe Board of Auditors of the company is com-posed 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;

• Pierre RION, Member of the Court of Auditors; • Luc Callaert SC sfd SPRLU, represented by

Luc CALLAERT

Deloitte Auditors SC sfd SCRL, represented by Mr. G. Verstraeten and Mr. L. Van Coppenolle, are responsible for the audit of the consoli-dated 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 state-ments 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 auditorsIn accordance with the provisions of Article 134 § 2 of the Belgian Companies Code, Belgacom declares the supplementary fees that it granted during the 2011 financial year to two auditors, members of the Joint Auditors: Deloitte Audi-tors SC sfd SCRL and Luc Callaert SC sfd SPRLU.

The Group spent during the year 2011 an amount of 350,863.76 EUR for non-mandate fees for Deloitte Auditors SC sfd SCRL, the Group’s auditors. This amount is detailed as follows:

in EUR Auditor Network of auditor

Other mandatory audit missions

15,330.00 10,100

Tax advice 0.00 0.00Other missions 28,794.00 296,639.76Total 44,124.00 306,739.76

The Group also spent during the year 2011 an amount of EUR 1,500 for non-mandate fees paid to Luc Callaert SC sfd SPRLU.

This amount is detailed as follows:

in EUR AuditorOther mandatory audit missions

1,500

Tax advice 0Other missions 0Total 1,500

Government CommissionerThe State has appointed Mr. Paul Vanwam-beke as Government Commissioner in order to supervise, in conformity with the 1991 Law, the management of Belgacom from an administra-tive point of view.

Compliance

Role of Compliance at BelgacomIn an increasingly complex legal and regula-tory context and a changing business environ-

ment as well as a difficult economic situation, compliance plays an important role in the busi-ness world. The Belgacom Group Compliance Office is responsible for coordinating compli-ance activities within the Belgacom Group, explaining the applicable rules, providing with the required tools to encourage compliance, and ensuring a consistent approach to com-pliance within the Group.

Our compliance program is a key building block for our Corporate Social Responsibility strategy (more infos available in the CSR section).

All employees must perform their daily activi-ties 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 busi-ness” sets out the above-mentioned princi-ples, and aims to inspire each employee in his daily behavior and attitude. The ethical behav-ior 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.

Organisation of compliance activitiesThe 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 deter-mines 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”and the various policies.

The Compliance ProgrammeEthical behavior and respect for the values are part of the compliance approach within the Belgacom Group. The revision of the compli-

ance programme launched in 2009 was con-tinued in 2011. A very particular effort was made on the visibility of the policies, as well as of the Code of conduct. A new intranet site, entitled “Ethics in practice”, mentioning all the policies classified per theme, has been launched. The Belgacom corporate site (www.belgacom.com) now contains a page fully dedicated to compliance, that provides visitors with all explanations regarding our compliance program.

The compliance domains which were the pri-oritary focus areas for 2011 were :• The Dealing Code• Regulatory compliance• Competition law• Chinese walls• Environment• Privacy• Accounting practices• Business expenses

Report on internal control and risk-management systemsBelgacom defines risk as any uncertainties impacting the achievement of its performance objectives. Taking risk is inherent in doing business and an effective internal control & risk management of those risks delivers values to the Belgacom various stakeholders.The identification and the assessment of the par-ticular risks and uncertainties which could affect Belgacom business are updated, reviewed and reported each year through an extensive Enter-prise Risk Management framework exercise.The detailed report on the assessment of the effectiveness of the internal control and risk management systems can be found on pages 98 to 103.

8:35 p.m., NEW YORKPIERREIt’s part of my job: I spend a lot of time travelling from A to B. I am currently in New York. Busy, busy, busy, all day long. No time tobe in touch with the home front. But between midnight and 1:00 a.m.,nothing comes between me and my family. It’s my quality time.And they know it. They are there for me. I always watch the Belgian news(RTBF) on my notebook and I try to catch that comedy program myeldest son is so crazy about. Somehow it brings us closer, being able totalk about the same things. And, okay, it does brighten up my sometimeslonely evenings abroad.

MANAGEMENT REPORT /// page 84

85annual report| belgacom | management report | FR | NL | UK |

Pierre 10 min

Discover the new place to be in New York

@miam

Rendez-vous à Soho à 13h30?

• Group revenue2 of EUR 6,406 million, 3% lower than previous year; -1.3% excl. regulation impact

• Group EBITDA of EUR 1,912 million, i.e. 3.7% less than for 2010; -2.2% excl. regulation impact

• Full-year EBITDA margin of 29.8%• Belgacom ended the year 2011 with EUR 788 million of Free Cash Flow

Management report1

RevenuesThe Belgacom Group ended the year 2011 with a total revenue before non-recurring items of EUR 6,406 million, which is 3% or EUR 197 million less than the previous year. This is partly caused by regulatory3 measures which reduced the 2011 Group revenue by EUR 112 million, or -1.7%. In addition, the European-wide reduction of Mobile Termina-tion Rates also impacted the revenue from BICS. Furthermore BICS revenue was nega-tively influenced by fluctuations in the dollar exchange rate. For both the Consumer and the Professional segment the pressure on revenue mainly came from the traditional Fixed and Mobile Voice business.

Revenue (in EUR million) before non-recurring items

2009 2010 2011

6,4066,6035,990

Share in 2011 Group revenue per BU

35% CBU

5% SDE&W

1% S&S

36% EBU

24% BICS

Operating expensesThe Belgacom Group’s total operating expenses for 2011 amounted to EUR 4,494 million before non-recurring items, which is a 2.7% improvement over 2010 driven by lower Cost of Sales.

The Belgacom Group ended the year 2011 with a Cost of Sales of EUR 2,517 million, i.e. 4.7% lower than the previous year. An important part of the decline is due to the favorable effect of certain regulatory meas-ures4. The remaining year-over-year decline is largely because of lower Cost of Sales from International Carrier Services (BICS), because of the lower BICS revenue.

In the course of 2011, the Belgacom Group saw its headcount further reduced, includ-ing the employees leaving under the ongoing “Tutorship” restructuring program. In addition,

Belgacom Group

the total headcount was lower as a result of some divestments. By end-2011, the Belga-com Group counted 15,788 full-time equiva-lents, or 520 fewer FTEs than one year ago.

The 2011 HR-expenses5 of EUR 1,117 mil-lion were 0.9% higher versus 2010, including a negative effect of inflation-driven wage index-ations, offsetting the benefit from the lower headcount.

The 2011 non-HR expenses6 for the Belga-com Group decreased by 1.1% to a total of EUR 860 million, including the positive effect from one-off provision reversals.

Total expenses (in EUR million) before non-recurring items

2009 2010 2011

Cost of Sales

HR costs

Non-HR costs860

1,117

2,517

870

1,107

2,642

840

1,108

4,0354,619 4,494

2,087

Headcount evolution (in FTE)

2009 2010 2011

15,78816,30816,804

1. Detailed financial results as from page 94. 2. Revenue excluding non-recurring items, and is defined as the sum of net revenue and other operating income3. Lower Mobile Termination Rates, lower Roaming rates, and the implementation of a collecting model for Premium Rate Services4. Less costs following the lower Mobile Termination Rates and the implementation of a collecting model for Premium Rate Services5. HR expenses: i.e. personnel expenses and pensions6. Other operating expenses


87

EBITDAFor 2011, Belgacom reported a Group EBITDA, before non-recurring items, of EUR 1,912 million, i.e. 3.7% less than for 2010. Regulatory measures had a negative impact for a total amount of EUR 29 million, or -1.5%. Excluding the regulation impact, the full-year EBITDA was 2.2% lower than the previous year. This led to a full-year EBITDA margin of 29.8%.

EBITDA (in EUR million) & margin before non-recurring items

2009 2010 2011

1,912

1,9841,955

32.6%30.0% 29.8%

2011 EBITDA contribution per BU (in EUR million)

1,185 EBU

-92 SDE&W

-328 S&S

122 BICS

1,025 CBU

Tax ExpenseThe 2011 full-year tax expense amounts to EUR 262 million, whereas this was EUR 233 million in 2010. The effective tax rate resulting from the application of the general principles of Belgian tax law for 2011 was 25.3%. This compares to 21.6% for 2010, which benefitted from the anticipated use of tax losses carried forward and other one-off items.

Effective tax rate*

2009 2010 2011

25.3%21.6%21.0%

* Normalized effective tax rate, excluding the non-recurring non- taxable gain of EUR 436 million.

CAPEXThe Belgacom Group invested a total of EUR 777 million in 2011, or 12.1% of its Group revenue. The investments are mainly related to increasing Belgacom’s coverage and speed for both its fixed and its mobile network, fully supporting the Group’s convergence strategy. In this regard, the Broadway project - bringing fiber-to-the-curb and installing VDSL2 - con-tinued. Belgacom spent EUR 48 million on this project in 2011, increasing the service cover-age to over 81% by year-end. Furthermore, Belgacom upgraded its Mobile Radio Access network and Mobile Backhaul. End Novem-ber 2011, Belgacom acquired 20 MHz of LTE-spectrum in the 2.6 GHz frequency band for an amount of EUR 20.22 million.

Capex (in EUR million) & Capex as % of revenue

2009 2010 2011

777

12.1%

734

11.1%

597

10.0%

2011 Capex per BU (in EUR million)

51 S&S

552 SDE&W

22 BICS 134

CBU

18 EBU

Free Cash Flow*Belgacom ended the year 2011 with EUR 788 million of Free Cash Flow, i.e. EUR 193 million lower than for 2010, which included a EUR 51 million one-off cash increase resulting from the full consolidation of BICS and lower income tax payments following the legal entity merger and positive one-offs. Furthermore, the 2011 Free Cash Flow was pressured by the lower operating result and the higher cash paid for Capex investments.

Free Cash Flow (in EUR million)

2009 2010 2011

788

980

797

* Cash Flow before financing activities

Net financial positionBelgacom’s net financial position remained very sound, with its financial debt end of 2011 at EUR 1,479 million. This corresponds to 0.8 times EBITDA (before non-recurring items), remaining one of the lowest net debt posi-tions in the European telecom sector. The Net Debt increased by EUR 28 million as the cash returned to shareholders in the form of divi-dends and share buybacks slightly exceeded the 2011 Free Cash Flow.

The outstanding gross financial debt amounted to EUR 1,972 million (re-measured at fair value), none of it maturing before December 2013.

Net financial position (in EUR million)

Net debt December

2010

FCF Dividends Dividends to non

controlling interests

Net acquisition of treasury

shares

Other Net debt December

2011

(5)(1,479)788 (701) (24) (86)(1,451)

annual report| belgacom | management report | FR | NL | UK |

Consumer Business Unit - CBU

CBU revenues For the full-year 2011, CBU reported revenues of EUR 2,288 million or a decrease of 3.3% compared to 2010. The year-over-year decline in revenue is for a large part driven by the impact of regulatory measures, reducing the 2011 revenue by EUR 54 million (-2.2%). This resulted from the carry-over effect from the implemented financial collecting model for Premium Rate Services, the further decline of the roaming tariffs, the double cut in Mobile Termination Rates and consequently the decline in fixed-to-mobile tariffs. These regu-latory measures impacted fixed voice, mobile voice and mobile data revenues.

When excluding these regulatory impacts, the underlying revenue from the consumer busi-ness unit was down 1.1% compared to the previous year as the growth from Mobile Data and TV did not fully offset the decline in tra-ditional telecom products such as Fixed and Mobile voice.

Revenue (in EUR million)

2009 2010 2011

2,2882,3682,414

CBU 2011 revenue split

31% Data (fixed & mobile)

4% Other

4% Terminals

45% Voice (fixed

& mobile)

8% Scarlet & Tango

9% TV

Belgacom’s more traditional product lines such as Fixed voice and Mobile voice con tinued to be under pressure, largely due to regulation. The share of revenue from Voice in the total consumer revenue further decreased to 45% in 2011, whereas this was 49% in 2010.

Fixed & mobile voice revenue (in EUR million)

2009 2010 2011

565

454

641

506

704

561Fixed

Mobile

The consumer segment generated EUR 454 million in revenue from Fixed voice, which is 10.2% lower compared to the previous year. The Fixed voice revenue was pressured by the ongoing erosion of voice access lines. How-ever, as a result of targeted actions to revive the fixed voice line, the line erosion over 2011 improved to a loss of 115,000 lines versus 129,000 in 2010. End 2011, CBU counted a total Fixed Voice customer base of 1,818,0009. Furthermore, the revenue from the Fixed line was pressured by the recurring discounts on multi-play Packs and some regulatory meas-ures10 but received some support of the price indexations of 1 August 2010 and 1 January 2011.

Fixed line & mobile customers (in ‘000)

3,824

2,028

3,769

1,933

3,805

1,818

Mobile

Fixed

2009 2010 2011

The EUR 565 million of revenue from Mobile Voice11, was 11.9% lower than for 2010, including a significant impact from regulatory measures12. Over 2011, the mobile customer base grew soundly by 36,000 new customers to a total of 3,805,000, compared to a decline of 54,000 customers in 2010. CBU did espe-cially well in postpaid, growing its customer base solidly by 85,000, partly driven by the growing success of Packs including mobile. This led to a further improvement in its post-paid ratio from 42.6% end of 2010 to 44.4% end of 2011. The prepaid customer base, including MVNO counted 49,000 fewer cus-tomers.

The revenue growth from Mobile data further accelerated in 2011, more than offsetting the revenue pressure on Fixed Internet, and driv-ing the share of Data in the total CBU revenue to 31% versus 28% in 2010.

Fixed & mobile data revenue (in EUR million)

2009 2010 2011

369

332

334

337

303

323

Fixed

Mobile

• 2011 revenues of EUR 2,288 million, including EUR 54 million negative regulation impact• Growth in Mobile Data and TV did not fully offset Fixed and Mobile voice decline• Growing customer base: Belgacom TV +236,000; Mobile +36,000; Internet +32,0008

• Full-year segment result of EUR 1,025 million, i.e. a 4.4% decline from 2010

8. Excluding 11,000 Internet customers (‘Internet for Employees’) that were resegmented from EBU to CBU9. Including Scarlet VoIP customers10. Implementation of a financial collecting model and lower fixed-to-mobile tariffs following the cut in mobile termination rates11. As of 2011 the allocation of Mobile Access revenue to Voice and Data was adjusted to better reflect the price plans. The 2010 revenue from Mobile Voice and Data was restated accordingly. 12. Lower roaming tariffs, a double cut in mobile termination rates and the implementation of a collecting model for Premium Rate Services


89

Full-year Mobile data13 revenues of EUR 369 million were 10.4% higher than for the prior year. Mobile data includes revenue from both SMS and non-SMS data, i.e. “ Advanced Data ”.

Revenue from SMS continued its growth trend in 2011, increasing by 8.1% compared to the previous year. This trend is driven by the con-tinued success of pricing plans including free SMS, boosting the total SMS volume by 13% to an average of 250 text messages/user/month. Advanced Data revenue growth accel-erated over 2011, up 28.5% year-over-year, driven by the strong growth in Mobile Internet and Mobile Data roaming.

The revenue from Fixed Internet saw a slight decrease of 1.4% from last year. While CBU continued to grow its Fixed Internet customer base in 2011, the revenue was impacted by the success of multi-play Packs at attractive discounts for the customer. This led to a 5% lower Broadband ARPU of EUR 26.8 for 2011. The Packs, however, provided good support to grow CBU’s Internet customer base to a total of 1,156,00014, this in spite of tough competition.

Fixed Internet customers (in ‘000)

1,1561,1131,075

2009 2010 2011

Over 2011, Belgacom TV proved once more to be very successful, its customer base growing by 236,000 customers to a total of 1,211,000, including 190,000 multi-set-top box users. This results from a very sound gross customer gain, more than offsetting the temporary higher churn due to the loss of exclusivity on Belgian soccer broadcasting rights. The TV customer gain was mainly supported by Belgacom’s attractive and well-targeted Packs including TV. As a result, Belgacom TV revenue grew to a total of EUR 208 million, up 14.3% compared to one year ago. In 2011, TV revenues repre-sented 9% of total CBU revenues.

TV revenue (in EUR million)

2009 2010 2011

208182

134

TV customers (in ‘000)

2009 2010 2011

1,211

190

1,021

975135

839

752100

652

Multiple Stream

Household

CBU operating expensesCBU’s total expenses were 2.4% down from last year. This is the result of lower Cost of Sales, which decreased year-over-year by 8% to EUR 624 million. Most of this decline was driven by a positive effect from regulatory measures15 and initiatives to improve product profitability.

Inflation-based wage indexations of October 2010 and June 2011 drove the 4.5% year-over-year increase in HR costs to EUR 340 million.

Non-HR costs for 2011 totalled EUR 299 mil-lion or 2.7% higher compared to 2010, includ-ing more outsourcing in the framework of the customer centricity project.

Total expenses (in EUR million)

2009 2010 2011

Cost of Sales

HR costs

Non-HR costs

723

345

2971,365 1,295 1,263

678

325

291

624

340

299

CBU segment result and contribution marginThe CBU full-year segment result amounted to EUR 1,025 million which is a 4.4% decline from 2010. This includes a negative regulation impact of EUR 17 million (-1.6%). The 2011 full-year contribution margin16 decreased to 44.8% from 45.3% for 2010.

Segment result (in EUR million) & margin

2009 2010 2011

1,025

44.8%

1,073

45.3%

1,048

43.4%

TangoFor the full-year 2011, Tango reported rev-enues of EUR 107 million or an increase of 8.4% compared to 2010. This growth is driven by strong sales in Luxembourg of smartphones and the iPhone, recently reinforced by the launch of the iPhone 4S. Along with the ongo-ing migration of prepaid towards postpaid offers and increased revenues from bundles, this resulted in a continued revenue increase. Furthermore, over the year 2011, Tango added 4,000 customers.


2009 2010 2011

107

99

93

Tango Mobile customers (in ‘000)

2009 2010 2011

264260

259

13. As of 2011 the allocation of Mobile Access revenue to Voice and Data was adjusted to better reflect the price plans. The 2010 revenue from Mobile Voice and Data was restated accordingly.

14. Including 11,000 Internet customers (‘Internet for Employees’) that were resegmented from EBU to CBU 15. Implementation of a collecting model and the cut in mobile termination rates16. Belgacom does not apply a full cost allocation. Network and IT costs are therefore mainly centralized within SDE&W


Enterprise Business Unit - EBU• Total underlying revenue remained nearly flat to 2010 • Organically, the revenue from ICT was up by 4.6% over the previous year• Non-SMS mobile data revenue grew by 21.7% to EUR 118 million• 2011 segment result totals EUR 1,185 million, which is 2.2% less than the previous year

EBU revenues Over the year 2011 Belgacom’s professional customer segment generated EUR 2,349 mil-lion in revenue, i.e. 3.0% lower than for 2010. This decline is partly explained by the divest-ment of Telindus Spain, partially compensated by the acquisition of Eudasys by Telindus France. Organically, i.e. excluding the M&A impact, the revenue erosion was limited to -2.0% and was mainly caused by regulatory measures, lowering EBU’s 2011 revenue by EUR 45 million or -1.9%. Leaving aside the M&A and regulation impact, the underlying rev-enue from EBU remained nearly flat to 2010. The underlying revenue showed an improving trend over the quarters as the growth in Mobile Data and ICT increasingly offsets the pressure on Fixed and Mobile Voice.


2009 2010 2011

2,3492,4212,501

EBU 2011 revenue split

26% Data

1% Other

4% Terminals

40% Voice

30% ICT

The traditional voice products, both Fixed and Mobile, continued to feel pressure from regu-latory measures, i.e. from the lowered Mobile Termination Rates, the resulting lower Fixed-to-Mobile rates and the cut in Roaming rates. In 2011, Fixed and Mobile Voice represented 40% of the total EBU revenue, whereas this was 43% for the previous year.

Fixed & mobile voice revenue (in EUR million)

2009 2010 2011

448

496

500

539

560

574

Fixed

Mobile

In 2011, EBU generated EUR 496 million in revenue from Fixed Voice, which is 7.9% lower than for 2010. This is in part due to the lowered Fixed-to-Mobile rates, and in part due to the continued erosion of Fixed Voice lines.

In 2011 EBU’s Fixed Voice line base eroded by 55,000 lines to a total of 1,385,000. The price indexations of 1 August 2010 and 1 January 2011 gave some support. Nevertheless, the 2011 Fixed Voice ARPU17 fell by 4.2% to EUR 28.7.

Revenue from Mobile Voice for the year 2011 amounted to EUR 448 million, 10.4% lower compared to 2010. Regulatory price decreases in Mobile Termination and Roam-ing rates further impacted the Mobile Voice revenue, along with continued price erosion as a result of the successful uptake of Mobile pricing plans including free Voice minutes and the fierce competition in the Corporate Mobile Market. The price pressure was however partly compensated by a solid customer growth of 105,000 active Mobile customers18, ending 2011 with a total of 1,408,000 Mobile custom-ers. Usage per customer was 0.9% lower from the previous year with an average usage of 319 minutes per month.

Fixed line & mobile customers (in ‘000)

1,235

1,491

1,303

1,441

1,408

1,385

Mobile

Fixed

2009 2010 2011

17. Average revenue per user on a monthly basis18. Including Mobile Voice, Mobile Data and M2M cards


91

19. Including impact from resegmentation of 11,000 Broadband customers (Internet for Employees) to CBU20. Salaries were indexed by 2% on 1 October 2010 and 1 June 2011 for Belgacom SA employees, and on 1 January 2011 for all other employees 21. Belgacom does not apply a full cost allocation. Network and IT costs are therefore mainly centralized within SDE&W

In 2011 EBU reported EUR 697 million reve-nue from ICT, compared to EUR 692 million in 2010. The variance was however impacted by the divestiture of Telindus Spain and the acqui-sition of Eudasys by Telindus France. Organi-cally, the revenue from ICT was up by 4.6% over the previous year, which is an improve-ment to the 3.3% growth seen in 2010, in spite of the unfavorable economic and financial cli-mate of 2011.

ICT revenue (in EUR million)

2009 2010 2011

697692670

Mobile Data revenue continued its growth trend in 2011, up by 15.4% to EUR 216 milion. The revenue from Mobile Data includes both revenue from SMS and revenue from non-SMS Data (Advanced Mobile Data).

Revenue from SMS grew by 8.7% year-over-year to EUR 98 million for 2011. The usage per customer increased by 14% to a total of 89 text messages per user per month.

Non-SMS Mobile Data revenue grew by 21.7% to EUR 118 million. The growth in Advanced Mobile Data revenue results from a strongly increasing customer base for Mobile Internet and a solid growth in Mobile Data Roaming.

For 2011, EBU reported Fixed data revenue of EUR 389 million, which is slighly down compared to last year. Revenue from Data connectivity did not fully offset the slightly

eroding revenue from Fixed Internet. In a

highly competitive and saturated professional

Internet market, EBU kept its Fixed Internet

customer base fairly flat, ending the year 2011

with 434,00019 Internet customers with an

ARPU of EUR 39.2.

Fixed & mobile data revenue (in EUR million)

2009 2010 2011

216

389

187

392

184

401

Fixed

Mobile

Fixed internet customers (in ‘000)

2009 2010 2011

434445446

EBU operating expenses EBU ended the year 2011 with EUR 639 million Cost of Sales, i.e. 6.7% less than for 2010.

The lowered Mobile Termination rates for all

Belgian Mobile operators positively impacted

EBU’s costs for terminating mobile calls on

alternative mobile networks. In addition, EBU

had less Cost of Sales due to the divestment

of Telindus Spain.

Compared to 2010, EBU’s HR-expenses

went up 1.6% to EUR 381 million, with sala-

ries impacted by inflation-based wage indexa-

tions20.

For 2011, EBU reported a total non-HR expense of EUR 144 million, i.e. 3.4% less than the previous year. The non-HR costs include some fluctuations in foreign currency effects.


2009 2010 2011

Cost of Sales

HR costs

Non-HR costs

748

379

142

685

375

149

639

381

144

1,2101,2691,164

EBU segment result and contribution margin The EBU segment result for full-year 2011 totals EUR 1,185 million, which is 2.2% or EUR 27 million less than the previous year. This includes a EUR 7 million negative impact from Regulation, and a net negative impact from the divestment and acquisition within the ICT domain. The contribution margin21

increased slightly to 50.4% in 2011.

Segment result (in EUR million) & margin

2009 2010 2011

1,185

50.4%

1,212

50.0%

1,231

49.2%


Service Delivery Engine & Wholesale – SDE&W

Staff & Support – S&S

SDE&W revenues Revenue within the SDE&W segment relates mainly to wholesale activities from Belgacom. Over the full-year 2011 the SDE&W revenues amounted to EUR 318 million, or 6.9% below those of 2010. This includes the negative effect from some regulatory22 measures, lowering the SDE&W revenue by EUR 13 million in 2011. The remaining decline is due to a lower vol-ume of leased lines and decreases in Roaming prices.


2009 2010 2011

318342

386

S&S revenuesStaff and Support reported EUR 47 million of revenues for the year 2011. The increase over last year, however, is the result of the account-ing of internal revenue, which was neutralized on a Group level.


2009 2010 2011

47

3533

SDE&W operating expensesTotal operating expenses for 2011 of EUR 410 million, were 9% lower versus 2010. Over 2011 the SDE&W cost of sales strongly declined by 21% to EUR 36 million, mainly as a result of the positive effect of some regulatory measures.

The positive effect from lower headcount on HR expenses fully offset the inflation-based salary indexations, leading to a 1.8% lower HR-expense for 2011.

The non-HR expenses of EUR 175 million for the full year 2011 were significantly lower com-pared to the previous year as 2010 included costs linked to the swap of the Mobile Radio Access network, whereas the 2011 expense benefitted from positive one-offs resulting from provision reversals due to litigation set-tlements.

S&S operating expensesTotal operating expenses were up by 5% to EUR 374 million, driven by non-HR expenses that included some internal costs, neutralized on a Group level, and one-offs. HR expenses were 3% down as the lower headcount offset the impact of wage indexations.


2009 2010 2011

160

215

165

192

166

204

Non-HR

HR

370 358 374


2009 2010 2011

Cost of Sales

HR costs

Non-HR costs 185

193

72

202

203

46

175

199

36

22. First quarter variance was still impacted by the introduction of a financial collecting model for Premium Rate Services as of April 2010; other regulatory impacts come from Mobile Termination Rates and lowered Local Loop Unbundling and Bitstream prices


93

International Carrier Services - BICS• Solid volume growth: > 27 billion Voice minutes traded, non-Voice volume up 34% • Volume-driven revenue growth only partly offset the negative MTR and currency effect • 2011 gross margin slightly down from 2010

ICS revenuesICS operated in an increasingly competitive market while its revenue was pressured by the European-wide decrease of Mobile Termina-tion Rates and by a negative currency effect as the average dollar rate weakened year-over-year. Volumes, however, continued to grow solidly, with Voice volumes up 8.5% to more than 27 billion minutes traded, while non-Voice volume growth accelerated to 34%. The volume-driven revenue growth, however, only partly offset the negative MTR and currency effect. Over full-year 2011, ICS generated rev-enue of EUR 1,562 million, i.e. 3% below 2010.

`

Revenue (in EUR million) Before non-recurring items

2009 2010 2011

1,5621,610

892

ICS gross marginICS reported for full-year 2011 a gross mar-gin of EUR 244 million. The growing non-Voice gross margin offset for a large part the decrease in Voice gross margin, resulting in an overall limited decline of ICS’s gross margin by 1.1%. Voice unit margins were pressured by the intense competition in the International Carrier market, as well as by the high fluctua-tions in the EUR/USD exchange rate. Non-voice margins, however, grew 10% year-over-year as a result of the increasing leadership of ICS in mobile data.

Gross margin (in EUR million)

2009 2010 2011

224226

143

ICS EBITDA and marginThe reported EBITDA of ICS for 2011 of EUR 122 million was 6.1% down compared to last year due to the pressure on gross margins and higher non-HR costs, partly offset by lower HR-expenses.

The 2011 EBITDA margin of 7.8% remained nearly flat to last year as a result of the solid performance of the non-voice business.

EBITDA (in EUR million) & margin

2009 2010 2011

122

7.8%

129

8.0%

78

8.7%

ICS VolumesVolumes continued to grow in 2011 with voice volumes up 8.5%, while non-voice volumes grew almost 34% year-over-year.

Volumes (in million)

2009 2010 2011

1,074

27,442

800

25,290

549

19,316Voice

Non-Voice


Quarterly results as reported


1. Before non-recurring items

(EUR million) Q110 Q210 Q310 Q410 2010 Q111 Q211 Q311 Q411 2011Revenues 1 1,641 1,664 1,640 1,658 6,603 1,583 1,612 1,596 1,616 6,406 Consumer Business Unit 590 592 585 600 2,368 565 579 571 572 2,288 Enterprise business unit 615 610 590 606 2,421 593 593 572 591 2,349 Service Delivery Engine & Wholesale 94 85 79 83 342 81 80 77 80 318 Staff&Support 10 7 10 7 35 8 7 25 8 47 International Carrier Services 378 414 415 402 1,610 372 388 401 401 1,562 Intersegment eliminations -47 -45 -40 -39 -172 -36 -36 -51 -36 -159Costs of materials and charges to revenues -662 -674 -651 -655 -2,642 -609 -621 -633 -655 -2,517Personnel expenses and pensions -274 -275 -281 -278 -1,107 -274 -282 -278 -283 -1,117Other operating expenses -210 -212 -218 -230 -870 -220 -196 -213 -232 -860EBITDA before non-recurring items 495 503 490 495 1,984 480 512 472 446 1,912Segment EBITDA margin 1 30.2% 30.2% 29.9% 29.9% 30.0% 30.3% 31.8% 29.6% 27.6% 29.8%Non recurring items 436 1 0 8 444 0 -18 0 4 -15Ebitda 931 504 490 503 2,428 480 494 472 450 1,897

Group - Financials

(EUR million) Q110 Q210 Q310 Q410 2010 Q111 Q211 Q311 Q411 2011Revenues 590 592 585 600 2,368 565 579 571 572 2,288 From Fixed 291 280 281 288 1,139 281 278 271 269 1,099 Voice 133 125 124 124 506 118 115 111 110 454 Data 85 85 84 83 337 85 83 82 82 332 TV 44 43 46 49 182 51 53 51 53 208 Terminals (excl, TV) 8 7 8 7 31 7 6 7 7 26 Scarlet 21 20 19 23 84 21 21 20 18 79 From Mobile 279 288 285 290 1,142 265 279 279 280 1,104 Voice 158 165 162 156 641 139 147 143 136 565 Data 83 82 82 88 334 87 92 93 97 369 Terminals (excl, TV) 15 16 17 21 68 14 14 16 19 63 Tango 24 25 25 25 99 25 26 28 28 107 Other 21 24 19 23 87 19 23 21 23 86Costs of materials and charges to revenues -180 -171 -158 -169 -678 -149 -149 -158 -168 -624Personnel expenses and pensions -81 -81 -82 -82 -325 -83 -85 -86 -87 -340Other operating expenses -65 -73 -70 -83 -291 -70 -74 -71 -84 -299Segment result 264 267 276 266 1,073 264 271 257 233 1,025Segment Contribution margin 44.7% 45.1% 47.1% 44.3% 45.3% 46.7% 46.8% 45.0% 40.8% 44.8%

CBU - Financials

(EUR million) Q110 Q210 Q310 Q410 2010 Q111 Q211 Q311 Q411 2011Group Capex 154 222 139 219 734 173 161 163 279 777 Consumer Business Unit 49 19 11 54 132 44 27 24 40 134 Enterprise Business Unit 2 3 7 7 20 4 4 3 8 18 Service Delivery Engine & Wholesale 96 180 96 121 492 115 119 125 193 552 Staff & Support 5 13 19 26 62 7 9 9 26 51 International Carrier Services 2 8 6 11 27 3 2 3 14 22

Group - Capex


1. Prepaid includes Mobisud customers that were previously reported as MVNO customers 2. Q4 2011 impacted by clean-up of inactive prepaid cards. This clean-up has no impact on the number of active customers & prepaid net adds.3. Mobile ARPU’s 2010 have been adapted to reflect the change in mobile access revenue allocation4. MoU reflect the duration of all calls from or to Proximus/voice customer/per month. In 2011 the definition of voice customers has been fine-tuned to exclude all data cards. 2010 MoU have been

adapted accordingly.

Q110 Q210 Q310 Q410 2010 Q111 Q211 Q311 Q411 2011FROM FIXED

Number of access channels (thousands) 3,120 3,098 3,076 3,046 3,046 3,028 3,006 2,977 2,974 2,974 PSTN 1,904 1,877 1,850 1,817 1,817 1,781 1,756 1,728 1,712 1,712 ISDN 32 31 30 28 28 27 26 25 24 24 IP 93 92 90 88 88 88 88 86 83 83 ADSL, VDSL 1,091 1,099 1,107 1,113 1,113 1,131 1,136 1,138 1,156 1,156Traffic (millions of minutes) 1,178 1,052 1,004 1,140 4,374 1,061 977 936 1,036 4,011 National 976 857 824 942 3,599 875 795 765 821 3,256 Fixed to Mobile 104 103 94 102 404 95 96 89 123 402 International 98 91 86 96 371 91 87 82 92 352TV (thousands) 814 868 920 975 975 1,029 1,087 1,139 1,211 1,211 TV - households 713 753 795 839 839 879 925 963 1,021 1,021 of which multiple settop boxes 100 115 125 135 135 149 162 176 190 190ARPU (EUR) ARPU Voice 21.2 20.3 20.3 20.9 20.7 20.2 20.0 19.7 19.8 19.9 ARPU broadband 28.7 28.5 28.1 27.6 28.2 27.6 27.0 26.7 26.1 26.8 ARPU Belgacom TV 20.7 19.1 19.3 19.7 19.7 19.4 19.2 17.8 17.5 18.4

FROM MOBILE

Number of active customers (thousands) 3,739 3,745 3,773 3,769 3,769 3,723 3,726 3,774 3,805 3,805 Prepaid 1 2,201 2,188 2,199 2,165 2,165 2,117 2,096 2,111 2,116 2,116 Postpaid 1,538 1,557 1,573 1,604 1,604 1,606 1,630 1,663 1,690 1,690Annualized churn rate (blended - variance in p.p.) 2 20.9% 20.1% 21.8% 22.8% 21.4% 21.3% 20.4% 20.4% 25.2% 21.8%Net ARPU (EUR) 3

Prepaid 14.3 15.0 14.7 15.3 14.8 14.1 15.3 14.4 14.9 14.7 Postpaid 32.5 32.9 32.1 31.4 32.2 29.2 30.0 30.0 28.6 29.5 Blended 21.5 22.3 21.8 22.0 21.9 20.5 21.6 21.1 20.7 21.0 Blended voice 14.2 15.0 14.6 14.2 14.5 12.7 13.4 12.9 12.2 12.8 Blended data 7.3 7.3 7.2 7.8 7.4 7.8 8.2 8.2 8.5 8.2UoU (units) 318.0 335.1 307.1 345.3 326.5 338.0 357.5 335.4 373.3 351.6MoU (min) 4 104.4 110.5 105.9 107.5 107.0 102.2 106.6 103.6 103.8 104.3SMS (units) 215.2 226.5 203.5 240.5 221.6 238.7 254.1 235.1 273.0 250.5

CBU Operationals


1. Mobile ARPU’s 2010 have been adapted to reflect the change in mobile access revenue allocation.2. MoU reflect the duration of all calls from or to Proximus/voice customer/per month. In 2011 the definition of voice customers has been fine-tuned to exclude all data cards. 2010 MoU have been

adapted accordingly.

(EUR million) Q110 Q210 Q310 Q410 2010 Q111 Q211 Q311 Q411 2011Revenues 615 610 590 606 2,421 593 593 572 591 2,349 From fixed 432 425 413 427 1,697 420 417 398 420 1,655 Voice 141 136 130 132 539 128 125 121 122 496 Data 99 98 98 98 392 98 97 96 97 389 Terminals 18 18 19 18 74 18 18 18 18 72 ICT 174 172 166 179 692 175 177 163 182 697 From Mobile 177 180 174 170 702 169 171 169 168 677 Voice 129 130 123 119 500 115 115 110 108 448 Data 45 48 47 47 187 50 53 56 57 216 Terminals 3 3 3 5 15 4 3 3 3 13 Other 6 5 3 8 23 4 5 5 4 17Costs of materials and charges to revenues -183 -175 -163 -164 -685 -162 -160 -154 -164 -639Personnel expenses and pensions -91 -93 -96 -95 -375 -94 -98 -93 -96 -381Other operating expenses -36 -35 -39 -40 -149 -37 -37 -34 -36 -144Segment result 306 308 292 306 1,212 300 298 291 296 1,185Segment Contribution margin 49.7% 50.4% 49.5% 50.6% 50.0% 50.6% 50.3% 50.9% 50.0% 50.4%

EBU - Financials

Q110 Q210 Q310 Q410 2010 Q111 Q211 Q311 Q411 2011FROM FIXED

Number of access channels (thousands) 1,922 1,912 1,901 1,886 1,886 1,861 1,849 1,834 1,820 1,820 PSTN 647 644 641 636 636 631 627 622 618 618 ISDN 818 810 801 791 791 781 771 763 752 752 IP 11 12 12 13 13 13 14 15 15 15 ADSL, VDSL 445 446 446 445 445 436 436 434 434 434Traffic (millions of minutes) 848 790 727 781 3,145 782 732 672 716 2,901 National 579 529 487 529 2,123 526 485 445 476 1,932 Fixed to Mobile 173 168 153 165 660 165 160 147 160 633 International 96 93 86 87 362 90 86 80 80 336ARPU (EUR) ARPU Voice 30.9 30.2 29.0 29.7 30.0 29.1 28.9 28.1 28.6 28.7 ARPU Broadband 39.4 39.1 39.0 38.7 39.1 39.6 39.3 39.1 38.9 39.2

FROM MOBILE

Number of active customers (thousands) 1,252 1,271 1,286 1,303 1,303 1,327 1,357 1,380 1,408 1,408 Postpaid 1,252 1,271 1,286 1,303 1,303 1,327 1,357 1,380 1,408 1,408Annualized churn rate (blended - variance in p.p.) 10.6% 10.9% 10.0% 10.8% 10.6% 11.1% 10.8% 9.4% 10.2% 10.3%Net ARPU (EUR) 1

Postpaid 46.9 47.0 44.7 42.8 45.3 41.8 41.9 40.6 39.5 41.0 Postpaid voice 34.7 34.4 32.3 30.8 33.0 29.2 28.7 26.9 25.9 27.6 Postpaid data 12.2 12.6 12.5 12.1 12.3 12.6 13.2 13.8 13.7 13.3UoU (units) 360.7 363.6 345.3 372.8 361.3 356.5 369.6 343.3 363.4 358.8MoU (min) 2 322.0 324.3 308.3 330.5 321.8 317.1 328.3 305.0 322.8 318.9SMS (units) 74.6 77.0 74.7 85.5 78.1 83.7 90.1 87.3 95.6 89.4

EBU - Operationals


(EUR million) Q110 Q210 Q310 Q410 2010 Q111 Q211 Q311 Q411 2011Revenues 94 85 79 83 342 81 80 77 80 318Costs of materials and charges to revenues -15 -10 -10 -10 -46 -9 -9 -9 -9 -36Personnel expenses and pensions -51 -48 -53 -50 -203 -49 -50 -50 -50 -199Other operating expenses -50 -50 -52 -50 -202 -52 -33 -48 -42 -175Segment result -23 -23 -36 -27 -109 -29 -12 -30 -21 -92

SDE&W - Financials

(EUR million) Q110 Q210 Q310 Q410 2010 Q111 Q211 Q311 Q411 2011Revenues 10 7 10 7 35 8 7 25 8 47Costs of materials and charges to revenues 1 0 0 0 1 0 0 0 -1 -1Personnel expenses and pensions -41 -43 -41 -40 -165 -39 -40 -40 -40 -160Other operating expenses -50 -45 -45 -52 -192 -47 -41 -66 -61 -215Segment result -80 -80 -75 -85 -320 -79 -74 -81 -95 -328

S&S - Financials

(EUR million) Q110 Q210 Q310 Q410 2010 Q111 Q211 Q311 Q411 2011Revenues 378 414 415 402 1,610 372 388 401 401 1,562Costs of materials and charges to revenues -325 -359 -356 -344 -1,383 -320 -333 -342 -342 -1,338Personnel expenses and pensions -10 -9 -9 -10 -39 -10 -9 -9 -9 -37Other operating expenses -15 -15 -16 -12 -58 -18 -17 -15 -16 -65Segment result 28 32 34 36 129 24 29 35 33 122Segment EBITDA margin 7.4% 7.7% 8.1% 8.9% 8.0% 6.5% 7.5% 8.7% 8.3% 7.8%

ICS - Financials

Volumes (in million) Q110 Q210 Q310 Q410 2010 Q111 Q211 Q311 Q411 2011Voice 5,922 6,254 6,433 6,680 25,290 6,574 6,997 6,853 7,018 27,442Non-Voice (SMS/MMS) 168 188 209 235 800 230 253 276 315 1,074

ICS - Operationals

The detailed Consolidated Financial Statements prepared under International Financial Reporting Standards can be consulted on the Belgacom website annualreport.belgacom.com

The detailed Consolidated Financial Statements prepared under International Financial Reporting Standards can be consulted on the Belgacom website annualreport.belgacom.com

Internal control and risk management systemsThe Belgacom Board of Directors is responsible for the assessment of the effectiveness of the systems for internal control and risk management. Belgacom has set up an internal control system based on the COSO model, i.e. the internal control integrated framework and enterprise risk management published by the Committee of Sponsoring Organisation of the Treadway Commission (“COSO”). This COSO methodology is based on five areas: the control environment, risk analysis, control activities, information & communication and monitoring.

Belgacom’s internal control system is characterized by an organization with a clear definition of responsibili-ties, next to sufficient resources and expertise, and also appropriate information systems, procedures and prac-tices. Obviously, Belgacom cannot guarantee that this internal control will be sufficient in all circumstances as risks of misuse of assets or misstatements can never be totally eliminated. However, Belgacom organizes a continuous review and follow-up of all the components of its internal controls and risk management systems to ensure they remain adequate.

Belgacom considers the timely delivery to all its internal and external stakeholders of complete, reliable and rele-vant financial information in conformity with International Financial Reporting Standards (IFRS) and with other additional Belgian disclosure requirements as an essen-tial element of management and governance. Therefore, Belgacom has organized its internal control and risk management systems over its financial reporting in order to ensure this objective is met.

1. Control environment

1.1 Organization of internal control In accordance with the bylaws, Belgacom has an Audit and Compliance Committee (A&CC), which consists of five non-executive Directors, the majority of whom must be independent. In line with its charter, it is chaired by an independent Director.

The members of the A&CC have sufficient expertise in financial matters to discharge their functions. Its Chair-

man, Mr. Pierre-Alain De Smedt, is competent in account-

ing and auditing. He is a “licenciate” in commercial and

financial sciences. He occupied during his career several

functions as CFO, CEO and COO. Amongst his non-

executive functions he is also member of the Audit Com-

mittee of Avis Europe.

The A&CC’s role is to assist and advise the Board of

Directors in its oversight on (i) the financial reporting pro-

cess, (ii) the efficiency of the systems for internal control

and risk management of Belgacom, (iii) the Belgacom

internal audit function and its efficiency, (iv) the quality,

integrity and legal control of the statutory and the con-

solidated financial statements of Belgacom, including

the follow up of questions and recommendations made

by the auditors, (v) the relationship with the Company’s

auditors and the assessment and monitoring of the inde-

pendence of the auditors, (vi) Belgacom’s compliance

with legal and regulatory requirements, (vii) the compli-

ance within the organization with Belgacom’s Code of

Conduct and the Dealing Code.

The A&CC meets at least once every quarter.

1.2. Ethics The Board of Directors has approved a Corporate Gov-

ernance Charter and a Code of Conduct “The way we do

responsible business”. All employees must perform their

daily activities and their business objectives according

the strictest ethical standards and principles, using the

company values (Respect, Can do and Passion) as guid-

ing principle.


99

The Code “The way we do responsible business”, which is available on www.belgacom.com, sets out the above-men-tioned principles, and aims to inspire each employee in his or her daily behaviour and attitudes. The ethical behaviour is not limited to the text of the Code. The Code is a sum-mary of the main principles and is thus not exhaustive.

In addition, Belgacom in general and the Finance depart-ment in particular have a tradition of a high importance to compliance and a strict adherence to a timely and quali-tatively reporting.

1.3. Policies and proceduresThe principles and the rules in the Code “The way we do responsible business” are further elaborated in the different internal policies and procedures. These Group policies and procedures are available on the Belgacom intranet-sites. Every policy has an owner, who regularly reviews and updates if necessary. Periodically, and at the time of an update, an appropriate communication is organized.

In the financial reporting domain, general and more detailed accounting principles, guidelines and instruc-tions are summarized in the accounting manuals and other reference material available on the Belgacom intranet-sites. In addition, the Corporate Accounting department regularly organizes internal accounting semi-nars to update finance and non-finance staff on account-ing policies and procedures.

1.4. Roles & responsibilitiesBelgacom’s internal control system benefits from the fact that throughout the whole organization, roles and respon-sibilities are clearly defined. Every business unit, division and department has its vision, mission and responsibili-ties, while on individual level, everybody has a clear job description and objectives.

The main role of the Finance Division is to support the divisions and affiliates by providing accurate, reliable and timely financial information for decision making, to moni-tor the business profitability and to manage effectively corporate financial services. The establishment of the external financial reporting falls under the responsibility of the Corporate Accounting department.

The team of the Corporate Accounting department assumes this accounting responsibility for the mother company Belgacom and the major Belgian compa-nies, but also provides the central support to the other accounting teams.

For this centralized support, the organization is struc-tured according to the major (financial) processes. These major processes include capital expenditures and assets, inventories, contracts in progress & revenue recognition, financial accounting, operational expendi-tures, provisions & litigations, payroll, post-employment benefits and taxes. This centralized support organized around specific processes and IFRS standards allows for in depth accounting expertise and ensures compliance with group guidelines.

The consolidation of all different legal entities into the Consolidated Financial Statements of the Belgacom Group is realized centrally. The Consolidation department defines and distributes information relating to the imple-mentation of accounting standards, procedures, princi-ples and rules. It also monitors changes in regulations to ensure that the financial statements continue to be pre-pared in accordance with IFRS, as adopted by the Euro-pean Union. The monthly instructions for consolidation set forth not only the schedules for preparing account-ing information for reporting purposes, but also includes detailed deadlines and items requiring particular atten-tion, such as complex issues or new internal guidelines.

1.5. Skills & expertiseAdequate staffing is a matter to which Belgacom pays careful attention. This requires not only sufficient head-count, but also the adequate skills and expertise. These requirements are taken into account in the hiring pro-cess, and subsequently in the coaching and formation activities, facilitated and organized by the Belgacom Corporate University.

For financial reporting purposes, a specific formation cycle was put in place, whereby junior as well as sen-ior staff must participate. These internally and externally organized accounting seminars cover not only IFRS but local accounting rules & regulations, Tax and Company law & regulations as well. In addition, the knowledge and


expertise is also kept up to date and extended for more specific domains for which staff is responsible (revenue assurance, pension administration, financial products, etc.) through attendance to seminars and self-study. Furthermore, employees also attend general formations session on Belgacom new business product & services.

2. Risk analysis Belgacom believes that risk management is fundamental to corporate governance and the development of sus-tainable business. The group has adopted a risk phi-losophy that is aimed at maximising business success and shareholder value by effectively balancing risk and reward.

The objective of risk management is not only to safe-guard the Group’s assets and financial strength but also to protect Belgacom’s reputation.

Financial risk management objectives and policies are reported in note 31 of the consolidated financial state-ments. Risks related to important ongoing claims and judicial procedures are reported in note 33 of these state-ments. The Enterprise and financial reporting risks are detailed below. The related mitigating factors and con-trol measures are described under caption 3.

2.1. Enterprise risksThe Group’s Enterprise Risk Management (ERM) cov-ers the full spectrum of risks (“potential adverse events”) and uncertainties that Belgacom could encounter. Bel-gacom ERM is a structured and consistent framework for assessing, responding to and reporting on risks that could affect the achievement of company strategic development objectives. It seeks to maximise value for shareholders by aligning risk management with the cor-porate strategy, assessing the emerging risk from regu-lation, new technologies or the market, and developing risk tolerance and mitigating strategies. Belgacom ERM is reviewed and updated every year since 2006. This risk assessment and evaluation takes place as an integral part of Belgacom annual strategic planning cycle. The resulting report on major risks and uncertainties is then reviewed by the management committee, the CEO and the A&CC.

Among the risks identified in the ERM exercise of 2011, the following risk categories were prioritized: changing

business model, dependence on rightfully skilled per-sonnel, the competitive environment, dependency on equipment and technology.

Changing business model: As a telecom company, Belgacom operates in a dynamic environment that changes rapidly driven by new tech-nological developments and ever changing customer demand. In response, Belgacom’s business model is changing too. It is moving further away from its tradi-tional business, dominated by voice services with high margins. Instead, it is increasingly embracing alternative communications such as WiFi, Mobile Internet and VoIP. This development could potentially impact Belgacom’s future revenue and profit from billing by item, such as voice minutes or SMS.

The International Carrier Services segment too is subject to this changing business model, and could see its rev-enue from Voice traffic under pressure as IP technology makes inroads into traditional communications.

The rapid pace of the technological evolution requires internal innovation to be fast as well, which can be pre-vented by long internal development times hence stalling the launch of new services.

Dependence in rightfully skilled personnel: Belgacom depends heavily on the people who work for it: key management, technical employees with the right skills, and well-trained sales people with a detailed knowledge of the Belgacom products and services. Rapid changes in technology and the ceaseless evolu-tion in products and services imply constant shifts in demand for skills, and without effective provisions being made, could leave Belgacom with an inadequate pool of talent. Within the Enterprise segment, for instance, the focus on delivering full end-to-end services increases the need for staff with specific skills and expertise.

Competitive environment: Belgium is a small country with only a few large telecom players, among which Belgacom is the incumbent. In such circumstances, market value is vulnerable to disrup-tive behavior among competitors. A new market entrant or radical price competition could cost Belgacom market share and revenues. For instance, a rapid transposition of an European directive on customer protection might see the Belgian government limit the contract duration of the customer to six months (rather than 12 months), which


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might intensify competitive pressure. Belgacom, how-ever, has always adopted a rational pricing strategy and will continue to be disciplined in its customer offerings.

In the fixed business, cable companies are Belgacom’s main competitors. Competition in the mobile market may become more intense now that Telenet Tecteo Bidco (which brings together Telenet and Voo) have obtained a mobile 3G-license.

In addition, the value of voice services is further chal-lenged by OTT (Over The Top) players such as Skype on mobile.

New OTT players could also put ICS’ revenues under pressure, with Skype, Google, Viber and Rebtel exerting competition and squeezing Voice-traffic margins.

Dependence on equipment and technology: The business of Belgacom heavily depends on technical infrastructure such as telecommunication equipment and IT-platforms. Any technical failure could lead to business interruption, potentially with financial consequences and a reputation impact. Belgacom has a nation-wide access network, of which part is in place since a long time – the so-called legacy copper network. Ageing copper cables could increase fault rates and decrease performance. The Mobile network might be subject to technical fail-ures, affecting the quality of service or causing temporary service interruptions, leading to customer dissatisfac-tion.

Another priority is the transformation program “Move-to-all-IP”, which could be subject to delayed implemen-tation and consequently delayed savings from the out-phasing of technical buildings.

2.2. Financial reporting risksIn the area of financial reporting, in addition to the gen-eral enterprise risks also impacting the financial report-ing (e.g. personnel), the major risks identified include: new transactions and evolving accounting standards, changes in tax law and regulations, and the financial statement closing process.

New transactions and evolving accounting stand-ards: New transactions could have a significant impact on the financial statements, either directly in the income statement or in the notes. An inappropriate accounting

treatment could result in financial statements which do not provide a true and fair view any more. Changes in legislation (e.g. pension age, customer protection) could also significantly impact the reported financials. New accounting standards can require the gathering of new information and the adaption of complex (billing) sys-tems. If not timely and adequately foreseen, the reliability of the financials is put at risk.

Changes in tax law and regulations: Changes in tax laws and regulations (corporate income tax, VAT,...) or in their application by the tax authorities could significantly impact the financial statements. To ensure compliance, it is often required to set additional administrative processes up in a short timeframe to col-lect relevant information or to implement updates to existing IT systems (e.g. billing systems).

Financial statement closing process: The delivery of timely and reliable financial statements remains dependent from an adequate financial state-ment closing process.

3. Risk mitigation factors and control measures Belgacom mitigation response strategies depend on the nature of the risk and may often combine various actions, including insurance, increased vendors SLA’S/ liabilities, credit scoring, risk avoidance or active risk management through people, processes and systems.

The cost of risk mitigation is considered in determin-ing response strategies. Certain risks are consciously accepted based on their potential limited impact on the Belgacom organization and/or their low level of mate-riality. Risk such as political, economic, regulatory are beyond Belgacom control and mitigation is limited to responsive actions to limit their impact.

3.1. Enterprise risksFrom the identified risks in the 2011 exercise, the follow-ing risk mitigation factors have been identified and con-trol measures have been taken:

Changing business model: To mitigate any negative effect on the Belgacom Group revenue and its business segments, Belgacom has cho-sen to pioneer new technologies and to offer customers the emerging advantage of convergence - for example by


deploying a country-wide hotspot network in partnership with FON. Belgacom has introduced new pricing plans that match its customers demand for these new ways of communicating – for example with packages of unlimited SMS together with voice and mobile data capacity. In the Enterprise business segment too, where Voice busi-ness is contracting, new business models have been developed to compensate, such as cloud computing.

ICS is also pro-actively exploring new territories, geo-graphically and technologically.

Dependence in rightfully skilled personnel: Belga-com’s future success will be influenced by its ability to attract and retain highly qualified employees. Con-sequently, to tackle new needs in skills, the Human Resources department has developed customized pro-grams, such as Strategic Workforce planning, or the pro-gram for young potentials.

Competitive environment: Belgacom is deliberately differentiating itself from the competition, by leveraging its virtualized entertainment offers in the private market and its cloud computing services for professionals. Simultaneously, Belgacom continues to develop its broadband coverage to give its customers the best internet experience. Belgacom has also drawn inspiration from OTT players, launching a content offer adapted to ‘Connected TV’s’, available for non-Belgacom customers as well.

Dependence on equipment and technology: Rolling-out a fiber-to-the-curb network was one of Bel-gacom’s key priorities over the last years, while old cop-per cables are being replaced and new technologies show a promising evolutionary path for the last mile in copper.

Belgacom made the further improvement in the stabil-ity of its mobile network a priority as well. The “Network Resilience Program” has boosted the ability to keep the network in operation in the event of failures. In 2011, Belgacom cut the incidence of network problems in half.

To prevent problems in the supply chain, Belgacom monitors strictly its service and licence agreements with suppliers and vendors.

3.2. Financial reporting risksIn the area of financial reporting, the following mitigating factors have been identified and control measures have been taken:

New transactions and evolving standards: It is the responsibility of the Corporate Accounting department to follow the evolution in area of evolving standard (both local GAAP and IFRS). Changes are iden-tified, and the impact on the Belgacom financial report-ing is proactively analysed.

For every new type of transaction (e.g. new product, new employee benefit, business combination), an in depth analysis from a financial reporting, risk manage-ment, treasury and tax point of view is performed. In addition, the development requirements for the financial systems are timely defined and compliance with internal and external standards is guaranteed. Emphasis is on the development of preventive controls and setting up reporting tools that enable posteriori controls.

On a regular base, the A&CC is informed about new upcoming financial reporting standards and their poten-tial impact on the Belgacom Group financials.

Changes in tax law and regulations: The tax department continuously follows potential changes in tax law and regulations as well as interpreta-tions of existing tax laws by the tax authorities. Based on laws, doctrine, case law and political statements as well as draft laws available etc., an impact analysis is made from a financial perspective and as well as from an operational point of view.

Financial statement closing process: Clear roles and responsibilities in the Closing Process of the Group Financial Statement have been defined. Dur-ing the monthly, quarterly, half-yearly and annual finan-cial statement closing processes, there is a continuous monitoring on the different steps. In addition, different controls are performed to ensure quality and compliance with internal and external requirements and guidelines.

For Belgacom and its major affiliates, a very detailed closing calendar is established, which includes in detail cross-divisional preparatory meetings, deadlines for end-ing of specific processes, exact date and hours when IT sub-systems are locked, validation meetings and report-ing deliverables.

For every process and sub-process, different controls are performed, including preventive controls, where information is tested before being processed, as well as detective controls, where the outcome of the processing is being analysed and confirmed. Specific attention is given to reasonableness tests, where financial informa-tion is being analysed by more underlying operational



drivers, and coherence tests, where financial information from different areas is brought together to confirm results or trends, etc.. Tests on individual accounting entries are performed for material or non-recurrent transactions and on a sample basis for others. The combination of all these tests provides sufficient assurance on the reliability of the financials.

4. Information and communication

4.1. Financial reporting IT systemsThe accounting records of the Company and most of its affiliates are kept on large integrated IT systems. Opera-tional processes are often integrated in the same system (e.g. supply chain management, payroll). For the billing systems, which are not integrated, adequate interfaces and a monitoring system have been developed. For the consolidation purposes, a specific consolidation tool is used.

The organizational set-up and access management are designed to support an adequate segregation of duties, prevent unauthorized access to the sensitive information and prevent unauthorized changes. The set-up of the system is regularly subject to the review by the internal audit department or external auditors.

4.2. Effective Internal communicationMost of the accounting records today are kept under IFRS as well as local GAAP. In general, financial Informa-tion delivered to management and used for budgeting, forecasting and controlling activities is established under IFRS. A common financial language used throughout the organization positively contributes to an effective and efficient communication.

4.3. Reporting and validation of the financial results

The financial results are internally reported and validated on different levels. On the level of processes, there are validation meetings with the business process owners. On the level of the major affiliates, a validation meeting is organized with the accounting and controlling respon-sible. On Belgacom group level, the consolidated results are split per segments. For every segment, the analysis and validation usually includes comparison with histori-cal figures, as well as budget-actual and forecast-actual

analysis. Validation requires (absences of) variances to be analysed and satisfactorily explained.

Afterwards, the financial information is reported and explained to the Belgacom Management Committee (monthly) and presented to the A&CC (quarterly).

5. Supervision and assessment of internal controlThe effectiveness and efficiency of the internal control are regularly assessed in different ways and by different parties:

• Each owner is responsible for reviewing and improving its business activities on a regular basis: this includes a.o. the process documentation, reporting on indica-tors and monitoring of those.

• In order to have an objective review and evaluation of the activities of each organization department, Bel-gacom’s Internal Audit department conducts regular audits across the company’ operations. The independ-ence of Internal Audit is ensured via its direct reporting line to the Chairman of the A&CC. Audit assignments performed may have a specific financial processes scope but will also assess the effectiveness and effi-ciency of the operations and the compliance towards the applicable laws or rules.

• The A&CC reviews the quarterly interim reporting and the specific accounting methods. The main disputes and risks facing the Group are considered; the recom-mendations of internal audit are followed-up; the com-pliance within the company with the Code of Conduct and Dealing Code is regularly discussed.

• Except for some very small foreign affiliates, all legal entities of the Belgacom Group are subject to an exter-nal audit. In general, this audit includes an assess-ment of the internal control, and leads to an opinion on the statutory financials and on the (half-yearly and annual) financials reported to Belgacom for consolida-tion. In case the external audit reveals a weakness or identifies opportunities to further improve the internal control, recommendations are made to management. These recommendations, the related action plan and implementation status are at least annually reported to the A&CC.


Rights, commitments and contingencies as of 31 December 2011Disclosures related to rights, commitments and contin-gencies are reported in note 33 of the consolidated finan-cial statements.

Use of financial instruments Disclosures related to the use of financial instruments are reported in note 31 of the consolidated financial state-ments.

Circumstances which may considerably impact the development of the GroupCircumstances which may considerably impact the development of the Group are reported in the section internal control and risk management systems of the management report.

Research and development activitiesIn general, the research and development activities cover 4 key steps in the adoption cycle of a technology or of a service based on technology:

• Study of the technology’s potential: determination of the technological and commercial opportunities and its positioning in the technology portfolio;

• Introduction of the technology: as the technology is selected, an engineered solution is necessary for deployment, exploitation and day-to-day management;

• Evolution of the technology: once deployed, the tech-nology will continue to evolve in accordance with its potential and market demand;

• The preparation of the introduction of new services.

In 2011, the research and development activities covered the following:

• Study of the potential of new technologies:

- Further detailed studies on solutions to migrate from traditional technologies to a fully IP based network. More specifically the solutions for replacing PSTN

and ISDN (Access Gateway, ISDN Access Devices) were investigated on their technical, economical and operational feasibility, and preparations have been started for the future introduction of IPv6 in the data network.

- Fibre to the Home study (FTTH): technical and eco-nomic studies have been further conducted to deter-mine the most appropriate evolution path, taking into account evolution of users’ bandwidth needs.

- Study of the solutions to optimize the data traffic han-dling on fixed networks, in order to ensure the best Quality of Service.

- Belgacom has a continuous focus on the “Green” aspect. With “Green ICT” and “ICT for Green”, Bel-gacom actively participates in reducing our own envi-ronmental impact, as well as the impact of others. Several areas are being investigated (e-prescription, smart grids, ...)

• Introduction of new technologies:

- The mobile technology of the next generation - LTE (Long Term Evolution) - was introduced by Belga-com in 2011, providing customers even much higher download and upload throughput.

- Furthermore “Quality of Service” has been developed and even higher data-rates have been implemented on the 3G network in order to further improve cus-tomer experience.

- By implementing FON, Belgacom enlarged signifi-cantly the possibility to access fixed internet outside the own residence.

• Evolution of the technology in terms of improvement and existing services extension such as:

- The IPTV platform (TV over IP) has been further enriched and improved with a new user interface and new possibilities to record TV programs. It has become possible to watch TV on multiple screens: apart from a TV screen, it is now also possible to watch TV programs on laptop, smartphone and tab-let.

- VDSL2: this technology continues to be deployed and additional functionalities are being analysed and developed to further increase its potential. New pro-

Other information

105

files have been introduced to extend the coverage for HD Television. Belgacom went also in a partnership with Alcatel Lucent to jointly develop improvements on VDSL2 technology (Vectoring), which will further enhance the capacity and throughput of the VDSL2 network.

• The preparation of the introduction of new services:

- Belgacom completed the roll-out of a fiber-based pilot network in Kortrijk. Test users were provided with high-speed access. As such a “Living Lab” has been created which will enable application developers to test new applications and services in a real-life envi-ronment with a representative number of test users.

- In the area of mobile payments (using a mobile phone to pay for a wide range of services), Belgacom has taken multiple initiatives in developing new services - i.e. Belgacom launched the possibility to pay parking sessions by scanning QR codes.

- Belgacom is developing a Cloud infrastructure offer-ing on-demand integrated business services, and an open API framework providing access to unique functions of our network in an easy and structured way. This allows third parties in a partnership model to create new innovative services and drive new rev-enues through their own brands.

Belgacom collaborates with universities, industrial part-ners and several other bodies, such as I.B.B.T. (Interdis-ciplinair Instituut voor Breedband Technologie), I.W.T. (Agentschap voor Innovatie door Wetenschap en Tech-nologie) and the H.G.I. (Home Gateway Initiative Forum). Belgacom takes part in several User Committees for S.B.O. (Strategisch Basis Onderzoek) research projects.

Treasury shares Disclosures related to treasury shares are reported in note 15 of the consolidated financial statements.

Major risks and uncertainties Major risks and uncertainties are reported in the section internal control and risk management systems of the management report.

Capital management The purpose of the Group’s capital management is to maintain net financial debt and equity ratios that allow for security of liquidity at all times via flexible access to capital markets, in order to be able to finance strategic projects and to offer an attractive remuneration to share-holders. The latter was updated by the Belgacom Board of Directors of 25 February 2010 and Belgacom now commits to return, in principle, most of its annual con-solidated cash flow before financing activities (or “Free Cash Flow”), 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 selective merger and acquisition projects, with a clear focus on value creation. This also includes confirming appropriate levels of distributable reserves.

Over the two periods presented, the Group didn’t issue new shares or any other dilutive instrument.

Post-balance sheet events Disclosures related to post-balance sheet events are reported in notes 33 and 39 of the consolidated financial statements.

On behalf of the Board of Directors, Brussels, 1 March 2012.

Didier BELLENS President & CEO

Michel MollDirector


2G – Mobile network of the second generation (GSM), allowing both voice and data transmis-sion with low throughput

3G – Mobile network of the third generation (UMTS – Universal Mobile Tele communications System), allowing both voice and data trans-mission with higher throughput

Annualized mobile churn rate – The total annualized number of SIM cards discon-nected from the Belgacom Mobile network (including the total number of port-outs due to mobile number portability) during the given period, divided by the average number of cus-tomers for that same period

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

BICS – Belgacom International Carrier Ser-vices is a joint venture between Belgacom, Swisscom Fixnet, and MTN, and is responsible for international carrier activities

BIPT – Belgian Institute for Postal services and Telecommunications

Broadband ARPU – Total ADSL re venue, divided by the average number of ADSL lines for the period consi dered, divided by the num-ber 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

CEP – Code of Ethical Purchasing

Cloud computing – The word “computing” refers to the technology which helps to man-age information better and the term “cloud” refers to the storage of the data on the Inter-net. The computer systems which once used

to be installed within the company itself now operate from outside it at external data cent-ers. This means that companies only use the services available on these computer systems, without having to worry about maintaining the equipment themselves

CRF – Corporate Research Foundation

CSR – Corporate Social Responsibility

CWS – Carrier and Wholesale Technologies

DECT – Digital Enhanced Cordless Tele phone – home cordless phone

DSL – Digital Subscriber Line (DSL) is a fam-ily of technologies that provides digital data transmission over the wires of a local tele-phone network

EBITDA – Earnings before Interest, Taxes, Depreciation, and Amortization

EBU – The Enterprise Business Unit provides services to our professional customers

ELIx – Employee Loyalty Index

EMF – Electromagnetic Fields. Propagation of electric and magnetic energy through the air

ETNO – European Telecommunications Net-work Operators’ Association is the principal policy group for European electronic commu-nications network operators. ETNO’s primary purpose is to establish a constructive dialogue between its member companies and decision-makers and other actors involved in the devel-opment of the European Information Society to the benefit of users

Fixed Voice ARPU – Total voice re venue, 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 inter-national NGO and a certification system that provides internationally reco gnized standard-setting, trademark assurance and accredita-tion 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

GeSI – Global e-Sustainability Initiative brings together leading ICT companies – including telecommunications service providers and manufacturers as well as industry associa-tions – and non-governmental organizations committed to achieving sustainability objec-tives through innovative technology. GeSI fosters global and open cooperation, informs the public of its members’ voluntary actions to improve their sustainability performance, and promotes technologies that foster sustainable development

GHG Protocol – The Greenhouse Gas Pro-tocol is the most widely used international accounting tool for government and business leaders to understand, quantify, and manage greenhouse gas emissions

GRI – Global Reporting Initiative. This frame-work sets out the principles and indicators that organizations can use to measure and report their economic, environmental, and social per-formance. In addition to the criteria described in the chapter “About our CSR Reporting”, GRI relies on the following criteria:

Balance – The report reflects positive and negative aspects of the organization’s per-formance to enable a reasoned assessment of overall performance. The report discloses both favorable and unfavorable results and topics

Comparability – The reported informa-tion is presented in a manner that enables stakeholders to analyze changes in the organization’s performance over time, and could support analysis relative to other organizations. The report and the informa-tion contained within it can be compared on a year-to-year basis

Timeliness – Reporting occurs on a regu-lar schedule and information is available in time for stakeholders to make informed decisions

GLOSSARY /// page 106

Glossary

Clarity – Information is made available in a manner that is understandable and accessible to stakeholders using the report

Accuracy – The reported information should be sufficiently accurate and detailed for stakeholders to assess the reporting organization’s performance

Reliability – Information and processes used in the preparation of a report should be gathered, recorded, compiled, analyzed, and disclosed in a way that could be subject to examination and that establishes the qua-lity and materiality of the information

G-Xchange – G-Xchange, Inc. (GXI) is a wholly-owned subsidiary and the mobile com-merce arm of Globe Tele coms, a leading tel-ecom service provider in the Philippines

HD – High-Definition

HDTV – High Definition television

HR – Human Resources

ICNIRP – International Committee on Non Ionising Radiation Protection

ICT – Information and Communication Tech-nologies

IDTV – Interactive Digital Television

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

IPP – Investors in People: standard making it possible to build up a complete picture of how a business is mana ging its people and where it can make improvements

IPTV – Internet Protocol Television is a sys-tem through which digital television service is delivered using the architecture and network-ing methods of the Internet Protocol Suite over a packet-switched network infrastructure

IPX – Internetwork Packet Exchange

ISAT – The Interactive online Self Assessment Tool is a tool that enables employees to meas-ure their stress level, determine the factors that cause and maintain stress, and thus help them, with their managers, to solve the issue

ISO 14001 – Standard that provides the requirements for an environmental manage-ment system

ISO 27001 – Security Management Stand-ard: the basic objective of the standard is to help establish and maintain an effective infor-mation management system, using a continual improvement approach

ISO 9001 – Standard that provides a set of standardized requirements for a quality man-agement system

ISP – Internet Service Provider

IT – Information Technology

LAN – Local Area Network

LTE – Long Term Evolution

M2M – Machine-to-Machine

MaIP – Move to All IP

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. Pre-paid customers and MVNO customers are fully segmented as CBU customers

Mobile net ARPU – Calculated on the basis of monthly averages for the period indicated

Monthly net ARPU – Equal to total mobile voice and mobile data revenues, divided by the average number of active mobile custom-ers for that period

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

MTN – The MTN Group Limited is a multina-tional telecommunications group, operating in 21 countries across Africa and the Middle East

MTR – Mobile Termination Rate

NFC – Near Field Communication

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

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 quo-tient 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 accord-ance with the ICNIRP guidelines

SDE&W – Service Delivery Engine & Whole-sale groups together the network and IT ser-vices 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

VDSL – Very High Rate Digital Subscriber Line (advanced version of ADSL)

VDSL2 – Very High Speed Digital Subscriber Line 2 is an access technology that exploits the existing infrastructure of copper wires

VOD – Video On Demand

VoIP – Voice over Internet Protocol

WAN – Wide Area Network

WEEE – The Waste Electrical and Electronic Equipment Directive (WEEE Directive – EU) aims to reduce the amount of electrical and electronic equipment being produced and to encourage everyone to reuse, recycle and recover it

WIFi – Local wireless network

107annual report| belgacom | glossary | FR | NL | UK |

General information

Editor-in-chief:Philip NeytVice President Public Affairs and M&A Bd du Roi Albert II/Koning Albert II-laan, 27B - 1030 BrusselsConception and coordination:Anne-Françoise Streel Corporate Communication Project ManagerDesign and prepress: Chris Communicationswww.chriscom.bePrinting: SnelPictures: Jean-Michel Byl, Arnaud Ghys, Getty images, Corbis Reporters and Belgacom

visitBelgacom’swebsite: www.belgacom.comBelgacom’sannualreportisalso published in Dutch and in French.

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 authorized bodies. The printer is FSC and PEFC certified.

Corporate name and legal formThe autonomous public-sector company Belgacom is a Société anonyme de droit public/Naamloze vennootsc-hap 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 undertak-ings and organized under the laws of Belgium.

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.

Registered OfficeBelgacom 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 documentsThe public documents concerning the issuer can be con-sulted at the registered office.

Date of constitutionThe 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 Télég-raphes/Regie van Tele graaf en -Telefoon).

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

Objectives of the CompanyAs described in Article 3 of the Articles of Association, the Company’s objects are:1. to develop services within the field of telecommunica-

tions in Belgium or elsewhere;2. to take all actions aimed at promoting, directly or indi-

rectly, its activities or ensuring optimal use of its infra-structure;

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.

DisclaimerThis communication contains forward-looking state-ments, including statements about the Company’s beliefs and expectations. These statements are based on the Company’s current plans, estimates and projec-tions, 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 infor-mation 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 further information:Philip Neyt Vice President Public Affairs and M&A Bd du Roi Albert II/Koning Albert II-laan, 27 B - 1030 Brussels Tel: +32 2 202 86 84 E-Mail: [email protected]

For CSR information:Loïc Van Cutsem Corporate Social Responsibility Manager Bd du Roi Albert II/Koning Albert II-laan, 27 B - 1030 Brussels Tel: +32 2 202 93 55 E-Mail: [email protected]

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: [email protected]

Full Year

Income Statement (EUR million) 2004 2005 2006 2007 2008 2009 2010 2011Total income before non-recurring items 5,540 5,458 6,100 6,065 5,978 5,990 6,603 6,406Non-recurring income 0 238 0 0 8 74 436 11Total income 5,540 5,696 6,100 6,065 5,986 6,065 7,040 6,417EBITDA(1) before non-recurring items 2,394 2,214 2,149 2,077 1,990 1,955 1,984 1,912EBITDA(1) 2,353 2,098 2,149 2,031 1,905 1,967 2,428 1,897Depreciation and amortization -742 -726 -802 -774 -743 -706 -809 -756Operating income (EBIT) 1,611 1,372 1,347 1,256 1,161 1,261 1,619 1,141Net finance income / (costs) -27 64 104 1 -109 -117 -102 -106Income before taxes 1,584 1,436 1,451 1,258 1,053 1,144 1,517 1,035Tax expense -508 -339 -358 -300 -254 -241 -233 -262Non-controlling interests 152 139 121 0 -1 -1 17 17Net income (Group share) 922 959 973 958 800 904 1,266 756

Full Year

Cash flows and Capital Expenditures (EUR million) 2004 2005 2006 2007 2008 2009 2010 2011Cash flows from operating activities 1,899 1,883 1,643 1,581 1,552 1,406 1,666 1,551Cash paid for acquisitions of intangible assets and property, plant and equipment

-556 -696 -676 -625 -764 -597 -734 -757

Cash flows from / (used in) other investing activities

78 389 -2,279 255 -380 -12 48 -7

Free cash flow(2) 1,421 1,575 -1,313 1,210 409 797 980 788Cash flows from / (used in) financing activities

-1,658 -1,102 751 -720 -570 -1,030 -728 -1,051

Net increase / (decrease) of cash and cash equivalents

-237 473 -562 490 -161 -233 252 -264

As of 31 December

Balance sheet (EUR million) 2004 2005 2006 2007 2008 2009 2010 2011Balance sheet total 5,368 5,831 7,300 7,325 7,782 7,450 8,511 8,312Non-current assets 3,963 3,808 5,504 5,072 5,564 5,505 6,185 6,217Investments, cash and cash equivalents 406 884 327 785 618 408 627 356Shareholders' equity 2,223 2,221 2,391 2,520 2,271 2,521 3,108 3,078Non-controlling interests 407 370 8 6 5 7 235 225Liabilities for pensions, other post-employ-ment benefits and termination benefits

760 1,010 886 831 777 677 565 479

Net financial position 110 534 -1,636 -1,167 -1,835 -1,716 -1,451 -1,479

Full Year

Belgacom share - key figures 2004 2005 2006 2007 2008 2009 2010 2011Basic earnings per share (EUR) 2.57 2.78 2.87 2.87 2.45 2.82 3.94 2.36Weighted average number of ordinary shares(3)

358,612,854 345,406,186 338,621,113 334,017,553 326,179,820 320,475,553 321,138,048 319,963,423

Share buyback (EUR million) 0 300 200 78 352 0 0 100

Full Year

Data on employees 2004 2005 2006 2007 2008 2009 2010 2011Number of employees (full-time equivalents)

16,933 16,335 18,180 17,833 17,371 16,804 16,308 15,788

Average number of employees over the period

17,108 16,388 18,163 17,920 17,465 16,878 16,270 15,699

Total income before non-recurring items per employee (EUR)

323,847 333,034 335,869 338,441 342,291 354,917 405,859 408,046

Total income per employee (EUR) 323,847 347,577 335,869 338,441 342,746 359,322 432,685 408,760EBITDA(1) before non-recurring items per employee (EUR)

139,945 135,103 118,294 115,883 113,934 115,849 121,953 121,764

EBITDA(1) per employee (EUR) 139,945 135,103 118,294 113,320 109,058 116,551 149,247 120,834

Full Year

Ratio's 2004 2005 2006 2007 2008 2009 2010 2011Return on Equity(4) 42.6% 43.1% 40.7% 38.8% 37.5% 35.6% 30.9% 24.9%Gross margin(5) 73.6% 71.5% 67.1% 66.8% 67.0% 65.2% 60.0% 60.7%Net debt / EBITDA before non-recurring items

0.0 -0.2 0.8 0.6 0.9 0.9 0.7 0.8

1. Earnings Before Interests, Taxes, Depreciation and Amortization.2. Cash flow before financing activities.3. i.e. excluding Treasury shares

Financial Key Figures

4. The net income and the Shareholders’ equity are adjusted to exclude the non-recurring income /expenses and the related tax impacts.

5. The gross margin is adjusted to exclude non-recurring income.

Key Financial events

2004

2008

2009

20102011

2005 Belgacom IPO Extensive launch Broadway project (Fibre & VDSL)

2006

2007

Launch Belgacom TV Exclusive broadcasting rights for Belgian soccer Disposal of shares in Eutelsat Belgacom ICS concludes Joint Venture with Swisscom ICS, proportionally consolidated

Belgacom sells Belgacom Directory Services, Expercom and liquidated Infosources

Acquisition of Telindus Group Sale of stake in Neuf Cégétel Launch of EUR 1.65 billion bond Acquisition of Vodafone’s 25% share in Proximus

ICS outsourcing deal with MTN

Remaining stake in Mobistar (acquired via Telindus group transaction) sold

Acquisition of Dutch storage specialist ISIT Divesture of all non-core presences of Telindus International

Acquisition of Scarlet, Tango and Mobile-for

Exclusive broadcasting rights for Belgian soccer BICS and MTN combine their International Carrier

Services Activity of WIN SA sold

Integration of Belgacom and some of its subsidiaries in one legal entity – impacting segments but neutral on Group level

BICS fully consolidated following acquisition of control, effective as from 1 January 2010

Belgacom concludes strategic partnerships with OnLive (gaming), Jinni (search engine) and In3Dept systems (3D-gesture recognition)

Telindus France acquires Eudasys Divesture Telindus Spain Belgacom acquires 4G-license Belgacom issues new 7-year senior unsecured institutional bond for EUR 500 million

Successful early bond buyback operation, followed by redemption in cash of remaining balance of the November 2011 EUR 775 million notes

2009 2010 2011

2009 2010 2011

2009 2010 2011

2009 2010 2011

Key figures

Revenue (in EUR million) before non-recurring items

6,4066,6035,990

2011 Capex per BU (in EUR million)

51 S&S

552 SDE&W

22 BICS 134

CBU

18 EBU

Free Cash Flow (in EUR million)

788

980

797

Net financial position (in EUR million)

Net debt December

2010

FCF Dividends Dividends to non

controlling interests

Net acquisition of treasury

shares

Other Net debt December

2011

(5) (1,479)788 (701) (24) (86)(1,451)

EBITDA (in EUR million) before non-recurring items

Share in 2011 Group revenue per BU

2011 EBITDA contribution per BU (in EUR million)

Capex (in EUR million)

1,912

1,9841,955

35% CBU

36% EBU

24% BICS

1,185 EBU

-92 SDE&W

-328 S&S

122 BICS

1,025 CBU

777734

597

5% SDE&W

1% S&S

12.1%

29.8%

of revenue invested

EBITDA margin

6.4revenueEUR billion

788free cash flow EUR million

Discover the online version of this annual report at annualreport.belgacom.com

Documents

Annual report 2011