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Emerging New Digital Valley on the Map – Lithuania

Antanas Juozas ZabulisOmnitelPresident and CEO

Conference “Lithuania in the EU: The Values We Defend, the Changes We Pursue”9 – 11 June, 2004Vilnius City Hall

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WHERE WE ARE• Knowledge economy is named strategic priority for Lithuanian

economic development • Political will, legal, social & business framework in place• Unique and effective partnership among businesses & the state• Booming ICT sector, growing exports of IT services and complex

solutions• Yet lagging country’s e-readiness but improving very rapidly

CHANGES AND STRATEGY WE PURSUE• to continue competitive growth • to leverage knowledge economy potential• to secure welfare of our people

Executive summary

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• Fastest growing economy in Europe - GDP up by 9%• # 38 Global E-readiness ranking [Economist Intelligence Unit]

– Overall ranking 5.35 (the highest - Sweden 8,7; the lowest Azerbaijan - 2,37)

• # 40 Growth Competitiveness index [World Economic Forum]

• # 40 Business Competitiveness index [World Economic Forum]

Lithuanian ICT sector

Where do we stand now?

Lithuanian e-readiness 2004

5.35

2.76

7.105.37 5.79 6.75 5.75

02468

Overallranking

Connectivity Businessenvironment

Consumer &businessadoption

Legal &policy

Social &cultural

environment

Supportinge-services

Ranking factors

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• Knowledge economy – TOP PRIORITY for country’s economic development – Lisbon Declaration– National Agreement signed on consensus basis by all political parties– Long term economic development strategy approved– Knowledge economy development strategy– Lithuanian Science & Technology White Book– E-business concept– E-Government concept

• Strategic goals by 2015 - ICT sector sales of products & services will comprise– 25% of GDP

» Share of ITC services from 6.1% in 2003 to 17.5% in 2015» Share of ITC products from 1.4% to 7.7%

– 50% of total exports

Lithuanian ICT sector

Strong political will

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Lithuanian ICT sector

Effective governing framework

Knowledge Society Council

[President]

Information society

development committee[Parlament]

Information society

development commission[Government]

Information society development committee

under the Government of Lithuania

Ministry ofTransportation

National Communications

Regulator

Ministry of Internal Affairs

Ministry of …

Ministry of Economy

Infobalt association

Alliance “Window to the Future”

Knowledge Economy

Forum

Self-governance & PPP initiatives

Public institutions & authorities

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Lithuanian ICT sector

Safe & attractive business harbour

• Legal framework in compliance with EU– Law on Electronic signatures– Law on Copyright and Related Rights– Law on Personal data protection– Law on Electronic communications

• Attractive investment climate– Active copyright agencies to protect intellectual property rights– Telecommunication market de-monopolized since 2003– Fastest growing economy with very low inflation– Investment incentives, clusters, free economic zones– Highly skilled and relatively inexpensive labour– Cultural & geographic proximity to the key markets

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Lithuanian ICT sector

Growing R&D investments

• Joint efforts of business & state on Lisbon agenda:– investment program for 3% of the state budget into R&D by 2008

– focus on investments to create the knowledge economy

• Total R&D comprised 100 mEUR in 2002 (0.69% of GDP)

Public sector investment towards knowledge economy, mEUR

7,5 9,5

23,530

42 46

0

15

30

45

60

1999 2000 2001 2002 2003 2004

EU funds

State budget

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Lithuanian ICT sector

Growth of Mobile and E-banking

Mobile penetration

0,00%10,00%20,00%30,00%40,00%50,00%60,00%70,00%80,00%90,00% • 240% growth of mobile users during

2002-2003• 200% growth of e-banking users

during last 18 months

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Lithuanian ICT sector

Knowledge society potential

• Strong study and research infrastructure with – 21 universities and colleges

» ~8,800 students– incl. 1,950 in universities & 1,000 studying for MSc degree

» ~1,200 graduates per year– 4.9% of total graduates in sciences, 20.7% of which – engineers (EU-

15: 14,6%; EU new members: 8.8%)

• Highly qualified and affordable IT specialists» Over 15,000 employed in IT sector alone

» Average annual programmer’s salary – 12,000 EUR (EU-15: ~ 60,000 EUR)

• Knowledgeable society» 40-50% of population aged 30-50 years has higher education (EU-

15: 19-22%)

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• Modern telecom infrastructure– 1Q 2004 mobile penetration of 72% per capita*

» estimated to reach 82% in 2004**– fixed line penetration of 50.2% per households

• PC ownership– 98.2% of companies with >250 employees, 84.4% of total– 27.4% of households in large cities, 19.9% of total

• Internet penetration– 95.5% of companies with >250 employees, 65.5% of total– 99% of business have web pages – 11.7% of connected households in large cities, 7.7% of total– 27% of people use Internet at least semiannually, 26% monthly,

23% weekly

Lithuanian ICT sector

Connectivity

* NRA data

** Omnitel estimate Source: Infobalt

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• Today Lithuania has most advanced fixed and mobile infrastructure in the Baltic States.

• Investments into Lithuanian Telecommunications Infrastructure made by TeliaSonera majority owned companies Omnitel and Lietuvos Telekomas:

~ 900 million Euros.• Total investments made by all Lithuanian Telecommunication

Operators:~ 1,2 billion Euros.

• To compare - total amount of all EU Structural funding planned in a Single Programming Document for the next 3 years:

~ 792 million Euros.

Source: Omnitel

Lithuanian ICT sector

Building Information Highway

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• First in Lithuanian to introduce GSM (1995)

• First commercial Internet provider (1995)

• One of the first in the world to introduce GPRS (2001), as well as MMS, Bluetooth (2002)

• The first in the world to launch and operate Motorola’s latest base stations Horizon II (2003)

• The 4th company in Europe and the 7th in the world to have implemented on its network the latest GPRS technology CS3/CS4 (2003). GPRS data transfer rates are increased up to 70%

• GSM Association Worldwide Awards Nominee (2003, 2004)

• UMTS trial (2004)

Role of Omnitel

Bringing innovations to the Country

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• Omnitel portal www.omni.lt – the most popular multi-channel personalized portal providing most convenient electronic communication tools, opportunities to manage GSM services, information and electronic entertainment.

• ‘SIM plus’ card with particularly broad possibilities, enabling each subscriber to personalize services received.

• EXTRA ID - reusable pre-paid card, e-ticket and e-discounts.• Electronic Pre-paid top-up (via SMS, ATM, ID cards, Internet) reached 36% of total top-

up amount.• Omnitel introduced a project e-city with to transfer city communications to the electronic

environment.• Mobile parking in Vilnius and Kaunas.

• Service of monitoring moving objects, using GPS satellite positioning system, and their control.

• Household information management system 'House' developed for monitoring, testing and receiving information to the mobile phone on the status of household energy, heating, water supply and other equipment.

• Omnitel mobile data messaging exceeds Eastern Europe average by more than 200% and Western Europe average by 30%

Source: Omnitel

Role of Omnitel

Constant Innovation

14 Source: Omnitel

Role of Omnitel

Growth of non–voice services

Omnitel non-voice revenue development

0%10%20%30%40%50%60%70%80%90%

100%

Voice revenues

Non-voice revenues

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• Knowledge Society Development Initiative was initiated in 2002 by leading ITT companies and Banks

• The Goal – to reach EU average Internet penetration level in Lithuania (39% in 2002)

• Now it is main Public/Private Knowledge Society program with central and local Governments and leading ITT Business acting together

• More than 170 free Inter access points established

• 20 000 adults trained on Internet basics

• Internet penetration growth from 10% up to 21% was achieved only in three quarters!

Key challenge

Internet Connectivity – how to break through?

Private & Public partnership - “Window to the future”

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• Expansion of the project using Budged and EU Structural funds:

1000 Public Access Points to be Established 300 000 Adults trained Free distance learning and e-services content on

Internet

• Personal Income Tax Deduction when buying PC and Internet to the households

• According TNS Gallup Lithuania had the fastest Internet penetration growth rate (25%) between EU accession countries during 2002-2003 (for the same period Estonia Internet penetration growth was 9,1%, Latvia - 9,5%)

• Unique model of effective Business and Governement Partnership respected by experts and top official of World Bank, EU Commission DG Information Society and UNESCO

Key challenge

Internet Connectivity – how to break through?

Private & Public partnership - “Window to the future”

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• Total ICT sector valued at ~1,237 mEUR» 7.5% of the Lithuanian GDP

• Growth by 27-30% in 2002-2003 » GDP grew in 2003 by 9%

• Export of ICT services grew by 28.6% to 45 mEUR» Total country’s exports grew by 9.1%

Source: Infobalt

Lithuanian ICT sector

Booming sector within booming economy

Lithuanian ICT market 2003 est., mEUR

26%

24%50%

Equipment, solutions & other IT Communications

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• 10 out of 18 top Baltic IT companies are in Lithuania• Top 10 companies increased their exports from 40% to

80% in 2003

Lithuanian ICT sector

Key players

Source: Prime Investment, company reports, Omnitel estimates, Infobalt

Largest Lithuanian IT company sales 2003, mEUR

55

19

8

16

9

0 10 20 30 40 50 60

Sonex group

Alna group

Informacines technologijos

Blue Bridge

New Vision

0 10 20 30 40 50 60

IT service revenues Other revenues Total sales

Lithuanian telecommunication company sales 2003 est., mEUR

109

58

235

223

5

Lietuvos

Telekomas

(TeliaSonera)

Bite

(TDC)

Tele2 Other

Omnitel

(TeliaSonera)

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Lithuanian ICT sector

Key IT exporters & their clients

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Lithuanian ICT sector

Lithuanian ICT sector success factors

• Highly educated and skilled workforce• Adaptiveness

• Northern Europe culture

• European business ethics

• Very quality conscious

• Versatile in English, Russian, German and Polish

• Low cost

• Good understanding of eastern neighbors culture mentality(Russia, Ukraine, Belarus)• Ability to employ IT workforce from Belarus, Russia and Ukraine• Investments into Quality assurance and project management• Strategic focus in competitive advantage areas• Proactive exploration of foreign markets

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“Lithuania is one of the potential markets for transfer of IT product development from Western countries”

Gartner

What is next?

“Lithuania has the potential to become the “Sunrise Valley of Europe” and to make its presence felt both in Europe and in

the global market.”UNCTAD/WTO International trade center (World Trade Organization)

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THANK YOU!