“beyond complexity lies simplicity!” albert einstein

annual report 2006

simplicityThis title captures in a nutshell the Belgacom Group’s objectives for 2007. The telecommunications sector is particularly complex, and the number of service offerings has risen steadily in the past few years. This is why the Belgacom Group has opted for convergence and simplicity, through clear offers and transparent interactions. Our main objective is to make high-performance products with unlimited communication possibilities available for everyone.

Belg

acom

an

nual

rep

ort

2006

“beyond complexity lies simplicity!” Albert Einstein

Year ended 31 December 2004 2005 2006

Income Statement (in EUR million)

Total revenue before non-recurring items 5,540 5,458 6,100

Non-recurring revenue 0 238 0

Total revenue 5,540 5,696 6,100

EBITDA(1) before non-recurring items 2,394 2,214 2,149

EBITDA(1) 2,353 2,098 2,149

Depreciation and amortization -742 -726 -802

Operating income (EBIT) 1,611 1,372 1,347

Net fi nance revenue (costs) -27 64 104

Income before taxes 1,584 1,436 1,451

Tax expense -508 -339 -358

Minority interests 152 139 121

Net income (Group share) 922 959 973


Cash Flow and Capital Expenditures (in EUR million)

Cash fl ows from operating activities 1,899 1,883 1,643

Capital expenditures -556 -696 -676

Cash fl ows generated by / (used in) other investing activities 78 389 -2,279

Free cash fl ow(2) 1,421 1,575 -1,313

Cash fl ows used in fi nancing activities -1,658 -1,102 751

Net increase / (decrease) of cash and cash equivalents -237 473 -562

As of 31 December 2004 2005 2006

Balance sheet (in EUR million)

Balance sheet total 5,368 5,831 7,300

Non-current assets 3,963 3,808 5,504

Investments, cash and cash equivalents 406 884 327

Shareholders’ equity 2,223 2,221 2,391


Liabilities for pensions, other post-employment benefi ts and termination benefi ts 760 1,010 886

Net fi nancial position 110 534 -1,636


Data per share

Basic earnings per share (EUR) 2.57 2.78 2.87

Diluted earnings per share (EUR) 2.57 2.77 2.87

Dividend per share, gross (in EUR)(3) 1.38 1.52 1.60

Interim/special dividend per share, gross (in EUR) 0.55 0.00 0.29

Weighted average number of ordinary shares 358,612,854 345,406,186 338,621,113

As of 31 December 2004 2005 2006

Operating data

Total access channels (in thousands)(4) 5,252 5,251 5,238

Total retail and wholesale ADSL access channels (in thousands) 1,024 1,268 1,493

Active mobile customers (in thousands)(5) 4,198 4,253 4,311

Minutes transported by International Carrier Services (in billions) 6.9 9.6 12.2

Employees 16,933 16,335 18,180

RevenueThe reported Group revenue increased by 7.1%.

EBITDAThe reported EBITDAof the Group includingnon-recurring items increased by 2.4%.

Earnings per shareEarnings per share increased by 3.2% to EUR 2.87.

Net incomeNet income (Group share) amounted to EUR 973 million.

key fi gures Group fi nancials

139,665Belgacom TV customers

58,077new active customersat Proximus

Revenue 2006 by segments (before eliminations)

33% MCS

11% ICS

56% FLS

EBITDA 2006 by segments (before eliminations)

Revenue (in EUR million)

EBITDA (in EUR million)

(1) Earnings Before Interests, Taxes, Depreciation and Amortization.(2) Cash fl ow before fi nancing activities.(3) 2006 dividend to be approved by the Annual General Shareholder meeting.

(4) PSTN + ISDN BA + ISDN PRA + ADSL retail.(5) Customers who received/made a call or received/sent

an SMS over the past three months.

Net income (in EUR million)

Earnings per share (in EUR)

47% MCS

2% ICS

52% FLS

4,000

4,500

5,000

5,500

6,000

0

200

400

600

800

1,000

1,000

1,200

1,400

1,600

1,800

2,000

2,200

2,400

0

1

2

3

04 05 06

04 05 06

04 05 06

04 05 06

5,540

922

2.57

959

2.78

5,696

973

2.87

6,100

2,353

2,0982,149


Income Statement (in EUR million)

Total revenue before non-recurring items 5,540 5,458 6,100


Total revenue 5,540 5,696 6,100

EBITDA(1) before non-recurring items 2,394 2,214 2,149

EBITDA(2) 2,353 2,098 2,149

Depreciation and amortization -742 -726 -802

Operating income (EBIT) 1,611 1,372 1,347

Net fi nance revenue (costs) -27 64 104


Tax expense -508 -339 -358


Net income (Group share) 922 959 973


Cash Flow and Capital Expenditures (in EUR million)



Cash fl ows generated by / (used in) other investing activities 78 389 -2,279

Free cash fl ow(2) 1,421 1,575 -1,313


Net increase / (decrease) of cash and cash equivalents -237 473 -562

As of 31 December 2004 2005 2006

Balance sheet (in EUR million)

Balance sheet total 5,368 5,831 7,300


Investments, cash and cash equivalents 406 884 327

Shareholders’ equity 2,223 2,221 2,391


Liabilities for pensions, other post-employment benefi ts and termination benefi ts 760 1,010 886



Data per share

Basic earnings per share (EUR) 2.57 2.78 2.87

Diluted earnings per share (EUR) 2.57 2.77 2.87

Dividend per share, gross (in EUR)(3) 1.38 1.52 1.60

Interim/special dividend per share, gross (in EUR) 0.55 0.00 0.29

Weighted average number of ordinary shares 358,612,854 345,406,186 338,621,113

As of 31 December 2004 2005 2006

Operating data

Total access channels (in thousands)(4) 5,252 5,251 5,238

Total retail and wholesale ADSL access channels (in thousands) 1,024 1,268 1,493

Active mobile customers (in thousands)(5) 4,198 4,253 4,311

Minutes transported by International Carrier Services (in billions) 6.9 9.6 12.2

Employees 16,933 16,335 18,180

RevenueThe reported Group revenue increased by 7.1%.

EBITDAThe reported EBITDAof the Group includingnon-recurring items increased by 2.4%.

Earnings per shareEarnings per share increased by 3.2% to EUR 2.87.

Net incomeNet income (Group share) amounted to EUR 973 million.

key fi gures Group fi nancials

139,665Belgacom TV customers

58,077new active customersat Proximus

Revenue 2006 by segments (before eliminations)

33% MCS

11% ICS

56% FLS

EBITDA 2006 by segments (before eliminations)

Revenue (in EUR million)

EBITDA (in EUR million)

(1) Earnings Before Interests, Taxes, Depreciation and Amortization.(2) Cash fl ow before fi nancing activities.(3) 2006 dividend to be approved by the Annual General Shareholder meeting.

(4) PSTN + ISDN BA + ISDN PRA + ADSL retail.(5) Customers who received/made a call or received/sent

an SMS over the past three months.

Net income (in EUR million)

Earnings per share (in EUR)

47% MCS

2% ICS

52% FLS

4,000

4,500

5,000

5,500

6,000

0

200

400

600

800

1,000

1,000

1,200

1,400

1,600

1,800

2,000

2,200

2,400

0

1

2

3

04 05 06

04 05 06

04 05 06

04 05 06

5,540

922

2.57

959

2.78

5,696

973

2.87

6,100

2,353

2,0982,149

Contents · 1

Contents 02 > the Belgacom Group

06 > highlights 2006

08 > a message from the Chairman

10 > interview with the CEO

12 > Group strategy

16 > business update

18 > Fixed Line Services

22 > Mobile Communications Services

26 > International Carrier Services

28 > human resources

32 > corporate social responsibility

36 > corporate governance and management

48 > shareholder information

55 > fi nancial report

The Belgacom Group is the benchmark Belgian provider in the fi eld of integrated telecommu-nications services.

the Belgacom Group Company profi leThe Belgacom Group is the benchmark Belgian provider in the fi eld of integrated telecommunications services. With a history as the country’s incumbent operator, the Belgacom Group, through its strong brands of Belgacom, Proximus, Telindus and Skynet, has developed a complete range of offers and solutions. Thanks to its 18,000-strong workforce, its expertise in fi xed and mobile networks and its capacity to innovate, it is able to provide a reliable, high-quality service to all its customers – whether they are private individuals, professionals, companies or organizations.

Telephony, data exchange, interactive content, practical services, entertainment, ICT solutions, data transmission capacity – the Belgacom Group offers a complete quadruple-play solution, basedon fi xed and mobile telephony, the Internet, and television. It is committed to meeting the demands of its business and residential customers, and innovates in order to anticipate their future needs, drawing from the latest technological developments.

With a view to closing the digital gap, the Group is also devoted tothe development of e-services and to providing a comprehensive range of innovative applications.

The Belgacom Group (BELG), quoted on Euronext Brussels since March 2004, posted a total revenue of EUR 6.1 billion and a net operating profi t before depreciation and amortization (EBITDA) of EUR 2.15 billion for the fi nancial year ending 31 December 2006.

Its activities are divided into three branches:

Fixed Line Services (FLS)Within the Group, these fi xed-line activities are conducted by Belgacom, Telindus and Skynet. Together, these companies offer

2 · The Belgacom Group

residential and professional customers a complete range of voice, data transmission, and Internet access services, as well as interactive content via the Web and the interactive Belgacom TV platform.

Thanks to its sales network and websites, Belgacom has the largest commercial telecom coverage in Belgium. Belgacom is also the main Internet service provider, commanding over 50% of the residential market.

In 2006, Telindus became a wholly-owned subsidiary of Belgacom.The two companies joined forces in order to offer the best ICT solutions for large companies.

Launched in June 2005, Belgacom TV had acquired 139,665 subscribers by 31 December 2006. The successful launch of this innovative interactive television platform was recognized internationally with a special mention at the World Communication Awards 2006.

Belgacom Skynet is dedicated to the development of interactive digital media services, and provides an extensive range of Internet content and e-marketing solutions.

Finally, through its National Wholesale division, Belgacom also provides wholesale services to other telecom service providers and operators in Belgium.

Mobile Communications Services (MCS)The Belgacom Group’s mobile activities are marketed by the subsidiary Belgacom Mobile, under the Proximus brand. In August 2006, following Belgacom’s purchase of Vodafone’s 25% stake in Belgacom Mobile, the latter became a wholly-owned subsidiary of Belgacom. This acquisition does not undermine Belgacom’s commercial partnership with Vodafone: on the contrary, the cooperation was reinforced through the 5 year extension of the commercial agreement covering aspects like the

development of new and existing products (e.g. the Vodafone Live! portal) and purchase activities.

Proximus is the leading mobile telecommunications operator in Belgium, serving about 4.3 million customers, representing a market share of 45.5% of active customers on 31 December 2006.

Under the Proximus brand and Pay & Go, but also through its business partnership with Plug Mobile, Belgacom Mobile offers its residential and professional customers an extensive range of mobile telecommunications products and services, as well as the broader HSDPA coverage in Belgium. This offer includes traditional voice and data services (SMS, MMS), a broad range of mobile solutions for companies (mobile Internet, push e-mail), and roaming agreements with over 400 foreign networks in more than 200 countries.

International Carrier Services (ICS)The international carrier activities of the Belgacom Group are provided by its subsidiary ICS (International Carrier Services), 72% of which is owned by Belgacom SA and 28% by Swisscom Fixnet. This co-venture is the preferred supplier of Swisscom and the Belgacom Group as regards international connectivity services. It also provides voice and data capacity and connectivity services to telecommunications operators around the world.

Belgacom ICS is now the world’s eighth-largest voice-traffi c operator, and the world leader in the fi eld of signaling services for mobile operators.

The company is based in Brussels and has branches in Bern, Singapore, New York and Dubai.

More information: www.belgacom.be/group

> vision and mission Become a Group that offers its customers integrated high-speed solutions.

By bringing together our expertise in fi xed and mobile communications, information technology and media, we aim to offer each of our residential and professional customers a unique experience, the product of the combined talent of our teams.

The Belgacom Group · 3

In the making:a new, customer-centric structureAs announced at the end of 2006, the Belgacom Group intends to restructure internally in order to respond more effectively to customer requirements, as the telecom market continues to evolve toward convergence. With this in mind, on the heels of its acquisition of Vodafone’s 25% stake in Proximus, in September 2006, the Group launched a large-scale study workshop entitled the “Fixed-Mobile Study”. Like the Telindus and Belgacom co-venture, this acquisition allows the Group to pursue its strategy of total convergence.

To meet these requirements, the Board of Directors decided to continue with Belgacom’s transformation into an integrated operator catering to residential and professional customers. This convergent, customer-centric approach rests on four pillars: two customer-oriented entities to approach the specifi c market segments, one network and IT entity, and one entity incorporating the support services. The Group’s legal structure remains unchanged, but Belgacom’s Management Committee has been assigned new tasks, based on a more horizontal structure.

2007, a year of transitionOn 2 March 2007, the fi rst levels of this new structure, which will be operational as of 1 June 2006, were communicated to the company’s entire workforce.

The business segments (Consumer and Enterprise), and theIT department and networks (Service Delivery Engine) will be restructured into a matrix system to be superimposed on the current structure consisting of three Business units (FLS, MCS and ICS). However, all the tasks in the administrative and support departments will be progressively integrated in order to maximize their effectiveness.

More details in the Corporate Governance section.

(1) Staff & Support functions as Communication, Legal, Public Affairs, Corporate Relations, CSR report directly to the President and CEO.

(2) Bridget Cosgrave serves also as President of the Board of Belgacom ICS.

4 · The Belgacom Group

> The new structure: two customer-oriented entitiesto approach the specifi c market segments,one network and IT entity, and one entityincorporating the support services.

Chief Executive Offi cerDidier Bellens(1)

Service Delivery EngineScott Alcott

Executive Vice-President

Finance & CFORay Stewart


Human ResourcesAstrid De LathauwerExecutive Vice-President

StrategyWilliam Mosseray


ConsumerMichel Georgis


EnterpriseBridget Cosgrave(2)


Enterprise internationalRonald Everaert


The Belgacom Group · 5

The Group’s brands

Belgacom TV exceeds the objective setfor 2006, i.e.

139,665 customers.

Proximus launches Family Calls, a new, simple offer for the whole family.

100%Belgacom acquiresVodafone’s 25% sharein Proximus.

highlights 2006 January• Belgacom and Telindus announce that the takeover bid for all Telindus

shares and warrants in circulation closed successfully on 6 January 2006. 90.86% of Telindus shares were purchased under the bid.

• Belgacom Skynet acquires Extenseo, the Belgian market leader in Search Engine Marketing (SEM). Skynet thus becomes the main player in search engine solutions on the Belgian market.

• Belgacom and Skynet enhance their online music offer by forming a partnership with iTunes Music Store.

• Proximus launches M-Pay, a new system enabling payments by mobile phone.

February• MTN Group signs an outsourcing contract with Belgacom

International Carrier Services for its international voice and data traffi c.

• Belgacom presents the annual results, which correspond to market expectations with a revenue increase of 2.8%.

• Belgacom TV continues to expand its offering by launching thematic channel packages and on-demand content for its customers.

March• Telindus signs an important contract with the city of Sofi a to equip its subway with a video monitoring system.

April• Proximus simplifi es its rates for prepaid cards and introduces a single

rate for calls to all fi xed and mobile networks, plus 20% more calling credit for life.

• Belgacom TV reaches the 50,000 subscriber-mark.

May• The Belgacom Group presents convincing initial quarterly results.• In order to protect the environment, Belgacom urges its customers to

switch to the electronic bill.

6 · Highlights 2006

June• Belgacom TV celebrates its fi rst year of existence, with customer

numbers exceeding expectations: 73,653 customers.• Proximus becomes the fi rst operator to launch high-speed, mobile

Internet by enhancing its 3G network with the new HSDPA technology.

• Telindus and Belgacom expand their ICT portfolio with the new Telindus/Belgacom ICT brand.

July• Telindus acquires InfraSystems Solutions and expands to northern Europe.

August• Two years after the launch of its free blog service, Skynet registers its 100,000th blog.

• The Belgacom Group’s mid-year results are in line with expectations.• The Belgacom Board of Directors decides to grant an interim dividend of EUR 100 million and buy back company shares for a maximum amount of EUR 200 million.

• Belgacom sells its 5.8% share in Neuf Cegetel to SFR.• Belgacom acquires Vodafone’s 25% share in Proximus.

September• OneAccess, a French company, acquires the Telindus Access Products

division.• Belgacom TV already exceeds the objective set for 2006, i.e.,

102,971 customers.• Proximus acquires Euremis, the main Belgian provider of mobile sales

force solutions.

October• Belgacom completes a share buy-back for a total of EUR 200 million.

November• Omantel and Belgacom ICS sign a Memorandum of Understanding on

the development of their international carrier services for the Middle East.

• Belgacom successfully launches an inaugural bond issue (EUR 1.8 billion).

• The Belgacom Group announces good results for the third quarter, and decides to raise its forecasts.

• Proximus launches Family Calls, a new, simple offer for the whole family.

December• Eric Brant succeeds Bart Becks as head of Belgacom Skynet.• In accordance with the decision of the Board of Directors’ meeting of

August, Belgacom proceeds with the payment of an interim dividend of EUR 0.29.

• Belgacom renews its Board of Directors, which now counts 16 members instead of 18.

• The Group reveals a new internal structure, organized around four pillars: two customer-oriented entities to approach the specifi c private and professional segments, one network and IT unit, and one unit incorporating the support services.

January – Belgacom and Proximus join forces and enable customers to surf wirelessly at over 1,000 hotspots,via both networks, regardless of the user’s type of connection.February – Belgacom launches the Happy Time International rate plan, allowing customers to call aninternational destination of their choice, free of charge.February – Sybase 365 and Belgacom International Carrier Services combine the connectivity of their international SMS communities. This initiative enables the exchange of messages between over 2 billion subscribers of almost 400 mobile operators from around the world.February – Belgacom sells its remaining stake in Mobistar for a total of EUR 147,812,795.March – Belgacom kept its promises in 2006, and sees its revenue increase by 7.1%.

> highlights of early

2007

Highlights 2006 · 7

100,000thblog registered by Skynet

a message fromthe Chairman

Last year, in our previous annual report, we promised “the future… now”. And, as you can read in this 2006 annual report, we have kept this promise! Belgacom has further enhanced its offer of innovative products and services for the whole Belgian market. The Belgacom Group’s transformation in 2006 was propelled by two driving forces: convergence and a desire to better respond to our customers’ needs. Everyone within the Group can be proud of what we have achieved in 2006: we have successfully implemented these trends, by showing our energy and willingness to take the initiative in a market where competition continues to be fi erce.

Challenges and opportunitiesAs usual, the annual report is the ideal opportunity to presenta detailed picture of the highlights of the past 12 months. At the beginning of the year, Belgacom and Telindus arrived at a partnership agreement. The fi rst challenge in 2006 consistedof establishing a genuine collaboration between the two companies.

Following an exemplary alignment between the companies,our Group is able to offer customers comprehensive and integrated solutions under the new Telindus-Belgacom ICT brand. This result, which was achieved thanks to mutual trust and numerous synergies, now gives us an additional asset in the ICT sector.

The success of Belgacom TVAnother major challenge was to develop digital television. We attained this objective, since Belgacom TV has become, in the space of just a few months, a key player in the Belgian television landscape. We also managed to exceed the objectives that we set in terms of subscriber numbers. This success proves that the Group judiciously gauged the evolution of the market and technology, and that we made winning strategic choices.

8 · A message from the Chairman

As for opportunities, we demonstrated that we could seize the moment by acquiring Vodafone’s remaining 25% share in Proximus, our mobile subsidiary. The brisk completion of this operation allowed us to move one step further towards convergence.

Thanks to the involvementof everyoneAll these successes that were notched up during the year were largely due to the teams behind the Group: the teams of Belgacom, Proximus, Telindus, Win, Skynet, Belgacom ICS, and other group entities. I am aware that taking up challenges and seizing opportunities requires a daily effort and focus. Because, in our lines of business, competition is fi erce and never lets up. Being able to offer the best product at the best price, being the fastest, understanding our customers’ needs and adequately responding to them, and providing each customer with the service he/she has a right to expect, makes all the difference.

I would like to stress the importance of each one of our employeesin our company’s success: is it not said that a chain is only as strong as its weakest link? It is thanks to everyone’s efforts and involvement,at all levels, that the Group achieved good results in 2006.

Professional social partnersManaging a group such as Belgacom requires a collective commitment, every day. Flexibility, dialog and mutual understanding are some of the qualities that are essential to sound company management. That is why I would also like to highlight the contribution of our social partners: in 2006, on a daily basis, they demonstrated a constructive attitude and great professionalism, which contributed signifi cantly to social peace.

I would also like to thank all the Board members for their commitment and their accurate strategic decisions. My thanks also go to the

Belgacom Group’s management for their unremitting and determined efforts to make Belgacom a true model in the European telecom arena.

In conclusion, I would like to add that the Board of Directors, during its last meeting in 2006, approved management’s decision to continue to transform the Belgacom Group into an integrated operator.

This convergent, customer-centric approach will rest on four pillars: two customer-oriented entities to approach the specifi c market segments, one network and IT unit, and one unit incorporating the support services. In 2007, the main mission of the Belgacom Management Committee will be to see this transformation through and, above all, to bring the benefi ts of this transformation to our customers, partners, employees and shareholders.

Theo DilissenChairman of the Board of Directors

A message from the Chairman · 9

The Belgacom Group’s transformation in 2006 was propelledby two driving forces: convergence and a desire to better respond to our customers’ needs. Everyone within the Group can be proudof what we have achieved in 2006.

>

interviewwith the CEO

What were the key milestones for Belgacom in 2006?Last year was all about building up our strength at Belgacom. The acquisition of Telindus and the purchase of the 25% of Vodafone stake in Proximus clearly positioned us as the frontrunner in the Belgian market.

2006 was a year of accomplishments for Belgacom. Our operational results were beyond expectations, and we saw in real signs of how our strategic decisions of the past would turn into true advantages for the future.

We now have in-house all the resources that are necessary to meet our customers’needs, whether they be residential or corporate. And we are the only player on the Belgian market who can do this.

How did Belgacom’s different businesses perform last year?Let’s start with the Fixed Line Business, which still makes up most of our Group’s activities. Belgacom TV was clearly our star service of 2006 in this fi eld, and is a prime example of our innovative power: in a market that had become desperately stagnant due to a de facto monopoly of cable operators, Belgacom succeeded in reinventing television. Belgacom TV simply revolutionized the market. In 2006, thanks to the upsurge in video and television on demand, our customers discovered a new way of watching television. Our know-how also received international acclaim: Belgacom TV is cited as a successful pioneer in the fi eld of ADSL-delivered interactive television.

But this would not have been possible without our continuous investments in broadband over the past years. Belgacom, which was the fi rst company in Belgium to offer its customers ADSL, still commands the high-speed Internet market: 99% of Belgian households can access this service. The strategic choice we made in 2003 to invest in our Broadway project clearly demonstrates that our vision for the future was on target: our customers are indeed requiring increasingly more bandwidth and services. This is only deliverable with the deployment of VDSL and fi ber-to-the-curb. Thanks to the extension of our fi beroptic network and a national VDSL coverage of over 45%, we can meet customer demand. More than 80% of the population now has access to our TV offering. Broadband is indeed the cornerstone of future services, and Belgacom is ideally placed to offer its customers the premium platform.

Although the traditional voice business remains under pressure from both the fi xed and mobile sectors, we are relentlessly developing new sources of revenue, and keeping our costs under strict control. We have continued to launch new products and services, while simplifying our

“If we benchmark ourselves against the industry, we are a top market performer. Thanks to enthusiastic and talented teams, Belgacom has never been better positioned. We are ready for the future.”

Didier Bellens - President & CEO

>

10 · Interview with the CEO

procedures and industrial processes. Belgacom achieved this in a positive working climate, and created value for all of its stakeholders.

Taking a closer look at our mobile business, we can see that our teams are sparing no effort to maintain our market leadership. In 2006, we managed to retain our customers at Proximus, with a churn rate that decreased year-over-year from 16.6 to only 15.8%. We evidently know what our customers want and how to respond to their needs. By the end of the year, we had gained almost 60,000 new customers, and we intend to further step up our efforts to win over new customers in the years to come.

Proximus continues to be the most innovative mobile player on the Belgian market; we are the only operator to offer 3G services to our customers, covering over 80% of the Belgian population. With the demand for advanced data services growing by the day, we are keeping our lead in the corporate market.

Another achievement is our international carrier activity: in 2006, Belgacom ICS continued its transformation from a regional single-product provider into a leading international player, ready to take onall the upcoming market challenges.

Finally, I would like to point out that the acquisition of Telindus has strengthened our position in the ICT market, we can now provide our corporate customers effi ciency and a global telecom solution attuned to their specifi c needs. Belgium’s biggest 400 customers already have a single point of contact at Belgacom.

So what are the biggest challenges facing the Groupin 2007?Our biggest challenge is to keep working on enriching the diversity of our offering, to make it an even stronger pillar of our company. With an extensive range of services, which we must simplify and customize for our customers, Belgacom must become more cohesive and agile than ever.

This means that we have to revise our organization to refl ect the strategic choices we made in 2006 and operate in a new structure.To address the customer-centricity imperative, we will set up a consumer and an enterprise business unit, both of which will be fully supported by an Integrated Service Delivery Engine and a single Staff and Support unit. This transformation will take some time, but will optimize the Group’s strengths and boost our effi ciency.

Apart from this major project, we must of course continue to focus on our everyday business: in Fixed Lines, we have to keep launching

innovative new products, services and applications for our customers, particularly in the area of broadband. Mobile has to tackle the challenges posed by the changing regulatory environment and the fi erce market competition. For 2007, our priorities are still customer segmentation, multi-brand strategy and our market share leadership. Our International Carrier business continues to implement its mobile data application projects and monitor the possible consolidation of this market.

The future to me looks promising: I am convinced that in 2007, Belgacom will once again prove to be a cutting-edge, fl exible and innovative group, able to create value for its stakeholders with a focus on excellent customer service. I would therefore like to attract and retain the most talented people, and ensure that Belgacom remains an inspiring place to work.

Do you have any concluding remarks?I want to thank all our stakeholders for believing in this exceptional company. To our employees, our customers, our shareholders, we can say that we have proven it in 2006 and we will do so once more in 2007: Belgacom is forging ahead.

We have never been better positioned, we provide converged broadband solutions, we have all the strengths in-house and we havea passion for our customers. Belgacom is ready for the future.

Interview with the CEO · 11

12

Continuous self-assessment in order to adapt its structure to its changing activities. To listen, anticipate and act with a visionary spirit, to focus human and technical resources on our customers.

convergenceOne focussed strategy. Broad opportunities.

13

StrategyExposed to rapid changes since market liber-alization, Telecom companies are now facing a comprehensive sector mutation. The tradi-tional telecom sector is expanding towards media and IT and the increase in competitive pressure urges Belgacom Group to accelerate its transformation into an integrated broad-band solutions group.

Key achievementsin 2006Signifi cant steps have been accomplished over the year in order to enable this transformation. Telindus acquisition was fi nalized and an active collaboration has effectively started in order to open the door of IT integration to the Belgacom Group. Following the minority buy-out in our mobile company, Proximus, we also completed an important milestone on the road to convergence. Belgacom ICS, on its part, found new ways to grow its total traffi c through an outsourcing deal with MTN Group that permitted the newly merged Swisscom and Belgacom carrier entity to reach another level of scale.

Become an Integrated Broadband Solutions Groupto deliver the ultimate customer experience for consumer & enterprise segments,

thanks to diverse & talented teams

Ensure optimal deployment of talents and competences within the organization

Foster culture changeand develop change management

Grow & Transform

Become Faster and Leaner through All IP

Create Stickinessthrough Multiplay

Lead & Innovate

Lead in Voice andBroadband

Lead in ICT Service Integration

Develop Infotainment& E-Services

Excel & Delight

Become a Service and Simplicity Reference

Excel in LeveragingGroup Synergies

Maximize Convergence Value

14 · Strategy

Strategy update:a continuum in constant evolutionBecome a Group that offers its customers integrated broadband solutions.

By bringing together our expertise in fi xed and mobile communications, information technology and media, we aim to offer each of our residential and professional customers a unique experience, the product of the combined talent of our teams.

Along the priority lines that were defi ned last year, we are confi rming our focus on the following key items:• become a customer-centric organisation;• pursue cost reduction and containment at all levels;• explore group synergies;• protect core business;• develop multi-play;• launch and monetize advanced data and innovative e-services;• pursue a selective international growth.

Proposed strategy will enable us to introduce key nuances to manage the dramatic changes that the industry is undergoing and will also provide a signifi cant positive evolution of the Group’s capabilities following the successful entry into the TV market, the strengthening of our ICT competencies and the minority buy-out of Vodafone in Proximus. The new points of attention are:• simplify internally to permit offering simpler solutions to our customers;• work as an integrated group;• pursue business and processes transformation;• play a leading role in Media and ICT;• maximize the value of convergence;• focus on new business development to compensate core business

erosion.

We have adopted the temple illustrated above as an image to help in visualising our strategy formulation.

A new customer-centric organization in the makingOn December 14, 2006, we communicated our intention to pursue integrated solutions leveraging our strong brands (Belgacom, Proximus) through customer-centric business units with specifi c market segment focuses (consumer and professional).

In so doing, we are concentrating our in-house strengths in providing integrated services by combining our capabilities in fi xed-line,

IT consulting, wireless and media aggregation and distribution.Today, there are no other companies in Belgium that can matchthis four-pronged strategy based on wholly-owned assets.

The new customer segmented organisation will be put in place during the course of 2007 and with it new collaborations will emerge between the former fi xed line and mobile teams to serve our customers with more compelling offers.

The Belgacom Group will coordinate the delivery of integrated and converged solutions with the IT and Network division and support departments in order to maximize effi ciency and synergies.

Human Resources:the foundation of Belgacom Group strategyLong lasting organisations are built on solid foundations and our employees are our most valuable asset in our quest to pursue our vision.

Changes are needed at multiple levels:• reorganize different Group businesses into a new customer centric

organization;• accelerate the development of convergent solutions; and• continue on our path towards operational and fi nancial excellence.

This will only happen if accompanied by a change in mindset:the Belgacom Group needs to focus on change management and culture change as important levers in support of its strategy.

Changes in the business will also require a focus on the identifi cation and development of new skills and competencies. Employee diversity will be a key theme within the Belgacom Group for the coming years.

Excel and DelightThe focus on excellence remains a key concern for the Group.We must continue to strive for cost competitiveness. Managing costs and resources, implementing synergies in all domains and becoming leaner are top priorities on our agenda.

The Delight notion has been added to highlight the heightened focus on streamlining the business processes as foundation for buildinga customer-centric company. Our customers are asking for simplicity (clear offers, hassle-free service set-up, seamless interactions between services,…). To offer this we are looking internally at portfolio simplifi cation, processes reengineering, new servicing standards where simplicity helps increasing customer satisfaction.

Lead and InnovateAs an integrated broadband player, the ambition of Belgacom Group is to retain our leadership position in traditional core services (voice and

RoofOur Vision

FoundationsOur People

PillarsOur Strategic

Directions

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Strategy · 15

broadband) and to become leader in new markets such as Media/TV and ICT.

In today’s Telecom sector, leadership goes hand in hand with the capability to innovate. Innovation entails more than just technology.It encompasses new business models, new market propositions as well as new ways to deliver services in an integrated fashion (convergence).

The Belgacom TV launch with the development of a full eco-system around TV; Proximus’ ability to materialize new revenue streams from mobile data and Telindus moving up the value chain toward the application layer are foundations on which we build our leadership ambitions.

Telindus core business is complementary to the one of Belgacom. Combining the 2 companies is a bit like combining best of both worlds: a Belgian leader in Telecom with a European champion of the ICT landscape able to deliver our Belgian customers with a converged solution through a single interface.

Telindus joining the Group allows Belgacom to gradually evolve froman operator to a service integrator whilst Telindus itself will move-up the value chain migrating from systems integrator to sourcing partner.

Grow and TransformIn order to compensate for revenue erosion in the core business, Belgacom Group has been pursuing organic growth in Media and ICT.

Customers fi nd convenient to receive one bill or only have one contact point for several products.

Our competitors have launched a series of offers to exploit this market space and to build a stronger relationship with their customers.

We now have all the necessary means in-house to deliver a comprehensive set of solutions to our customers hoping to encourage our customers to take more services from the Group and hence to increase their loyalty.

We must undergo a deep transformation of the organisation to become more responsive to the market. Migration to “all IP” is much more than a technical evolution of our service delivery engine. It encompasses infrastructure, processes, and ultimately personnel (new skills and new competences are needed).

As organic growth might not entirely off-set the decline in core revenues, Belgacom Group must continue to pursue selective opportunities for growing the business beyond Belgium, leveraging Belgacom ICS and Telindus as main growth vectors.

Telindus is still in the process of expanding both its geographic delivery capabilities and its competencies portfolio.

Now that the merger with Swisscom’s Carrier Unit is completed, Belgacom ICS can again look beyond its current size and scope.External growth may be part of this evolution as scale still matters.

Conclusion and Business ProspectsWe remain focused to drive execution along our established strategic directions; fi nding a good balance between anticipation and fast response in the ever more converging market.

The Belgacom Group sees convergence as an opportunity if we can serve our customer with the appropriate level of dedication and convenience combining telecom, mobility, data and IT, entertainment and security.

We believe the Belgacom Group is well-placed in the convergence arena to offer our customers solutions that answer their needs based on internally mastered capabilities.

Customer centricity remains the key to adapt to our customers’ needs.

Further segmentation and simplicity efforts will be pursued in order to maximise our impact in the market whilst we constantly strive for effi ciency gains at all levels.

We are concentrating our in-house strengths in providing integrated services by combining our capabilities in fi xed-line, IT consulting, wireless and media aggregation and distribution.

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16

Technologies, like customer requirements, evolve daily, which is why the Belgacom Group strives to be proactive and provide products and solutions that meet the needs of tomorrow.

17

Business update 18 > Fixed Line Services

22 > Mobile Communications Services

26 > International Carrier Services

changeOne client. Multiple play.

18 · Business update

The Belgian Market2004 2005 2006

Households (‘000) 4,402 4,437 4,476

Market share of Households (%)

Fixed Telephony 74% 72% 72%

Belgacom 67% 64% 61%

Cable and OLO 7% 8% 11%

No Phone/mobile only 26% 28% 28%

Total Fixed Line Voice Market 2004 2005 2006

FLS Retail Voice Market share(on value)*

78.1% 77.6% 77.0%

FLS Retail Voice Traffi c Market share (on own network)

67.9% 71.3% 75.9%

* Source – Gartner.

The telecom market as a whole is stable in terms of number of customers using a fi xed line or mobile-only users. The number of Internet subscribers on the other hand, continues to grow.Broadband volumes are increasing, replacing narrowband connections.

Market share fi gures show a stable retail Broadband market amongthe main players in the different regions. In Flanders, the broadband market is mainly divided between two companies: Belgacom and Telenet. In Wallonia and Brussels, however, competition is fragmented, particularly between Cable companies, although consolidation amongst Cable companies has begun.

Stimulated by the ongoing convergence of services such as “telecom and media” via digital TV, “voice and data” via VoIP offerings and “fi xed and mobile”, market players are extending their scope to other adjacent domains.

Consumer attracted by simple and fl exible bundled offers2006 was the year in which converging operators moved towards “fl exible service offerings”. Operators responded to the evolving needs of the users with solutions ranging from “naked services” to full “quadruple play” bundles.• Mobile operators offering DSL solutions without a fi xed voice line

and pushing a “cut-the-line” strategy that encourages fi xed/mobile

substitution through their MVNO (Mobile Virtual Network Operator) offering via low-cost distribution channels.

• Cable companies are extending their service portfolio with mobile solutions, enabling them to provide full quadruple play offers.

The battle for the customer is also fought by means of new, “cheap” offers, increased bandwidths and heavy promotions. Free offers have never been offered so extensively resulting in customer migrations between telecom, cable, mobile and ICT operators.

Interactive Digital TV as new market value creatorTelevision now offers greater choice and fl exibility, all in full digital quality. Extended TV offers, with (or without) interactive andon-demand services in a complete product bundle, increased customer awareness. While retaining the customer for his access, whether it be fi xed, Internet or mobile, telecom operators have generated new market value by introducing digital TV.

Integration playing its role in the professional marketThe professional market in Belgium is undergoing a transformation to an integrated operator model, whether with mobile/fi xed data solutions or IT/Telecom solutions. Trends indicate that operators are extending their service offerings from a geographical point of view.

Operators are increasingly concentrating on small and medium business market segments through joint and bundled product offers and customized ICT packages.

A growing number of customers are requesting integrated ICT solutions and are looking for providers who can offer and integrate as many components of such solutions as possible. The ICT market is witnessing a growing demand for outsourcing, driven by a need for cost effi ciency and an increasing focus by corporate customers on their core business.

FLS, living up to expectationsFixed Line core business limits its revenue declineThe year-over-year decrease of Fixed Line Core(1) revenue was limited to 1.3%. FLS improved its revenue guidance from -3% to -2% in the course of 2006 based on better-than-expected results for the fi rst nine months.

+8.3%overall Internet revenue

Fixed Line Services (FLS)

0

500

1,000

1,500

2,000

2,500

3,000

04 05 06

2,0332,187

2,443

* In thousands of Internet connections (narrowband + broadband, residential + business customers).

Belgian Internet market*

(1) Fixed Line Core revenue is the total FLS revenue, excluding Belgacom TV, Telindus and disposed companies.

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44 44 44

56 56 56

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67.8

71.3

75.9

Business update · 19

Voice revenue, which still represents 48% of the total core revenue, shows a slower decline compared to the previous year (-6.6% versus -7.3% in 2005). This is partly attributable to the ongoing success of fl at rates and unlimited calling offers launched mid 2005. FLS’ year-on-year voice access line loss increased (162,931 equivalent lines lost compared to 149,888 in 2005), negatively impacting Voice revenue.

The monthly Voice Access ARPU(2) decreased 1.6% to EUR 14.2, driven by promotional offers and the change in product mix, while Voice Traffi c ARPU decreased 4.2% to EUR 13.0, mainly due to new rate plans, including “free calling” during off-peak hours.

FLS’ market share on the Belgacom network continued to increase during 2006 (+4.6pp. versus +3.5pp. in 2005) as did the national traffi c volumes, another illustration of the success of the FLS price packages.

FLS maintained its broadband market share in the Belgian residential retail market just above 50%. Although broader adoption of “ADSL Light” offers and promotions are driving the average ADSL ARPU down (-3.6% to EUR 31.6), a sharp focus on customer acquisition and retention via attractive offers kept the DSL customer growth trend moving at the same pace as last year (+150,618 lines versus 149,044 in 2005), resulting in an overall Internet revenue increase of 8.3%.

In this converging market where Broadband is becoming the foundation for customer stickiness, the fi ght for market leadership in this segment remains fi erce. Competitors are using different axes, whether it be pricing, bundled offers or additional Internet services.

In line with the evolution of customer behaviour and dedicated to remain competitive, Belgacom continues to offer several exclusive and free services on the adsl. be website via its subsidiary Skynet. Services include music offering in cooperation with iTunes, free domain names and digital photo prints, the football portal (www.11online.be) and free PC data back-up on the Belgacom servers.

Within the data connectivity domain, migration from LAN/WAN to Ethernet networks is ongoing generating a decline in total data revenue of 5.7%. To compensate in part this revenue decline, FLS launched:• E-learning solutions dedicated to the healthcare sector;• IP-Tel solutions requiring no investments from the customer;• Security solutions;• Data Center solutions.

Belgacom TV, a success storySeveral campaigns and promotional offers have boosted the number of Belgacom TV customers as from April 2006. This brisk pick-up meant that the 100,000 year-end target was attained earlier than expected. By the end of September, Belgacom reported 102,971 Belgacom TV customers. The enthusiasm of the Belgacom TV team paid off and led to a year-end customer base of 139,665 Belgacom TV customers, by far exceeding its guidance.

The monthly ARPU of Belgacom TV was EUR 12.0. The ARPU evolved from EUR 11.9 in the fi rst quarter to EUR 12.6 at the end of 2006 thanks to the increasing use of additional on-demand services.

By the end of 2006, the population coverage of Belgacom TV reached 79.5%, in line with the stated target.

True to the announcement a year ago, and guided by specifi c customer requirements, Belgacom has innovated and expanded its offering in 2006 to be able to meet an increasingly demanding market.An interactive TV guide, an extensive array of channels including local television content, easy navigation, parental control, and on demand programs and videos have now become an established part of TV viewing. Where soccer is concerned, everything is in place to make the 2006-2007 season even more exciting, guided by two main principles: ease of use and value for money.

On top of service optimization and in order to improve the customer reach, FLS launched Belgacom TV on “ADSL Light” in April 2006.The roll-out of a “second tv set” functionality for iDTV customers was completed at the beginning of July. In order to support the acquisition of new customers, Belgacom rebranded its TV identity and launched a new section on its website fully dedicated to digital TV, providing information on product features.

Belgacom/Telindus:a major opportunity for business customersThe corporate ICT market is quickly moving towards convergence.This creates new, exciting opportunities for end-to-end ICT solutions and outsourcing.

Following its acquisition, Telindus became the IT Services Branch of the Group, addressing top corporate customers in Belgium and abroad. Together, Belgacom and Telindus are building a Belgian champion in European ICT, presenting the market a united Connectivity andIT Service.

139,665Belgacom TV customers by end 2006

-200

-150

-100

-50

0

04 05 06

-126

-150-163

(2) Average Revenue Per User.

Voice Access Line Loss(in thousands of equilines)

Voice Traffi c Market Share(on own network) (in %)

Broadband Market Belgium(channels in %)

Relative weight of Belgacom retail volume versus Telenet in Flanders(in %)

Cable Other ADSL Belgacom Retail ADSL

Telenet Cable Belgacom Retail ADSL

Four new customer value propositions have been launched in 2006 under the “change it your way”-Telindus logo and style. These four unique selling propositions assist customers to achieve the “Real-Time Enterprise”, based on fl exible business processes. The propositions include secured & well managed infrastructure, risk management andIT governance, collaboration and integrated business applications.

The Telindus partnership allows Belgacom’s FLS division to revitalizeits position in the value chain on the Belgian market. No other company in Belgium can offer this integrated approach of capabilities, ICT know-how and international coverage.

National wholesale marketBelgacom is the leading provider of network services and solutions to telecommunication companies, including fi xed and mobile operators, ISPs and other Service Providers and resellers. In a consolidating market segment, the Belgacom wholesale department serves about 100 customers, of which 20 are interconnected with Belgacom.

In 2006, wholesale revenues increased 15.3%, mainly driven by a traffi c volume increase and a sustained demand growth for broadband and capacity. The primary focus is on delivering competitive, high – quality services, maintaining a responsive wholesale organization and making intensive use of e-tools.

Customer-centric approach pays offCustomer-segmented marketingThrough creative promotions and specifi c marketing campaigns,FLS was able to meet the expectations of existing and new customer segments. Being closer to the customer brings greater benefi tsand value, and this resulted in a higher than expected customer satisfaction level.

A higher focus on the communication means and partnerships with key players vis-à-vis our professional customers, has increased customer reach. A few examples are the adapted website with information for business customers, and the improved communication to our corporate customers with respect to the opportunities of converging data and voice technologies.

Thanks to this, many customers choose for Belgacom and its capacity to provide integrated high value services instead of only a partial service.

Customer-oriented sales channelsWithin sales, a key objective is to reach maximum market potential.A continuous optimal mix of different sales channels enabled Belgacom to reach full customer coverage. As a result of combining exclusive deals, optimizing the use of direct and indirect channels and bringing value in business partnerships, the Belgacom sales channel network is still perceived as one of its major strengths.

Optimized operationsThanks to an ongoing optimization of Belgacom’s operations related to provisioning, repair and call center activities, service levels remain highly appreciated by our customers. This is also refl ected in customer satisfaction and loyalty scores which have again exceeded expectations. Thanks to structural process enhancements driven by customer feedback and a continuous focus on quality improvement, customers showed a high level of satisfaction.

In collaboration with an independent research agency, Belgacom developed an indicator called BLiX (Belgacom Loyalty Index) which measures the Belgacom brand attractiveness and customer loyalty.

Technology and innovationBelgacom has an extensive and technologically advanced network infrastructure with national coverage, and plans to further invest in this network.

In preparation for Belgacom’s future needs, the Broadway project was launched, bringing fi ber to the street cabinet and rolling out the VDSL platform between the street cabinet and the customer. The rollout was kept on track, reaching a VDSL coverage of 45% at the end of 2006, for which EUR 103 million capex was spent in 2006.

In addition to the fi ber and VDSL investments, FLS started the rollout of ADSL2 + in the second half of 2005 in order to improve the quality and accessibility of Belgacom TV services for Belgian households.

Thanks to this combined rollout of VDSL and ADSL2 +, 79.5% of Belgian households had by the end of 2006 potential access to Belgacom TV.

Moving from basic Broadband services towards more extensive communication services (VoIP, Videotelephony), new entertainment services (iDTV, VoD) and full personalization via home networks and security, FLS will need a scalable ethernet aggregation network to

50

55

60

65

70

75

H1’05 H2’05 H1’06 H2’06

6870 71

72

BLiX (Belgacom Customer Loyalty Index)


support the huge capacities in a fl exible way. FLS therefore launched a new program in 2006 focusing on a detailed analysis on how to move to a core infrastructure based on IP.

The analysis focuses on more than just a network upgrade or expansion; it also looks at the impact on process and system optimizations.The main drivers for this study are:• uniform customer experience through all sales and contact channels;• simplifying the product portfolio;• drastic reduction of the time to market of new services;• optimization of the life cycle and streamlining of important network

and IT projects and processes to ensure high availability and stable performance;

• support for the implementation of an agile enterprise architecture.

RegulationFixed interconnectionBelgacom’s interconnection rates are regulated and fi xed in a reference offer called BRIO. For BRIO 2006, the Belgian regulator (BIPT(1)) required Belgacom to reduce its interconnection rates by approximately 6.5% versus the BRIO 2005 rates.

In its decision on the fi xed call termination market of 11 August 2006, the BIPT also imposed a price control on the alternative operators in the form of a maximum termination rate limited to a 15% premium on Belgacom’s rates. Telenet and Versatel currently charge substantially higher rates. For these operators, the BIPT decided to use a transition mechanism based on a glide path until 1 January 2009: the maximum delta authorized for Belgacom’s rates will be 370% from 1 January 2007, 190% from 1 January 2008 and 15% from 1 January 2009.

Wholesale Line Rental (WLR)In its fi nal decision of 19 June 2006 on the analysis of the fi xed retail telephony access markets, the BIPT obliged Belgacom to sell telephone subscriptions to its competitors. As requested by the BIPT, Belgacom submitted its reference offer proposal on 2 October 2006. The regulator has opted for a retail-minus approach (11% discount on Belgacom’s standard tariff). The implementation of WLR, initially scheduled for 1 April 2007, has been delayed by at least two months.

Regulatory outlook for 2007The EU is currently moving forward with a new round of regulatory framework reviews. It intends to keep the pressure at the wholesale level (e.g. broadband access and local loop unbundling), but is proposing deregulation at retail level (fi xed calls and leased lines). The exact impact of this potential retail deregulation nationally is still unclear as the market analyses on this subject have only just been fi nalized by the BIPT.

Outlook for 2007From 2007 on, the fi nancial result of Belgacom TV and Telindus will be fully integrated in the result of FLS. The 2007 guidance is therefore on the total FLS result.

Market changes are more than ever driven by multiple play, convergence and ongoing IP technology emergence. FLS constantly has to challenge itself, differentiating through quality and simplicity of services and products offered to the customers.

Therefore FLS expects its total revenue to decline between 1% and 2%, while the EBITDA margin will be kept fairly stable compared to 2006.

In 2007, Belgacom expects to add new TV customers at the same pace as 2006, with an average monthly ARPU of EUR 15.

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Q4’05 Q1’06 Q2’06 Q3’06 Q4’06

3342

74

103

140

Belgacom TV Customers(in thousands of customers)

0

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Q1’06 Q2’06 Q3’06 Q4’06

11.9

10.1

12.4 12.6

Belgacom TV ARPU(EUR/month/user)

(1) Belgian Institute for Postal services and Telecommunications.


The market todayDuring 2006, competition continued to intensify in the Belgian mobile market, not only from existing mobile operators but also from new mobile service providers and MVNOs.

The market has also seen the emergence of a new trend: a strong prepaid to postpaid conversion, with a decline in the prepaid market and a rise in the postpaid market. This change in mix has been stimulated by very attractive postpaid offers, with the lowest commitment level ever for postpaid customers.

This changing market environment has put a considerable pressure on pricing.

Proximus lives up to expectationsIn this highly competitive and maturing market, Proximus continues to focus on its long-term strategy of defending its market share by strengthening its customer-oriented approach, while avoiding a price war. The initiatives taken in the course of 2006 to defend its market share were clearly visible in the fourth quarter of 2006.

In December 2006, the active penetration rate of Belgium’s mobile telephony reached an estimated 89.7% (compared with 84.1% at the end of 2005), with an estimated 9.5 million users.

In 2006, the Proximus active customer base increased by 58,077 new customers, bringing the total number of active customers to 4,311,436. This was mainly the result of the accelerated acquisition level during the last quarter of 2006 in which 71,031 new active customers were attracted by targeted acquisition campaigns and the launch of segmented rate plans, such as Pay & Go Generation, or by the extension of the Smile 5 postpaid offer.

The increased pick-up of customers during the last quarter was not suffi cient however to prevent Proximus’ active market share to decline to 45.5% at the end of 2006. Even so, Proximus maintained its market share leadership position on the Belgian mobile market.

The fi nancial results are in line with the provided guidance. Fierce competition and the decreased Mobile Termination rates as of November 2006 led to lower revenues. The revenue decline was however limited to 2% thanks to the launch of new pricing plans and a better customer mix. Even with the revenue decline, Proximus maintained an EBITDA margin of 46.8% thanks to a strict cost control.

High-quality customer portfolioProximus still has a very high-quality customer portfolio, with the highest active rate on the market. By the end of 2006, Proximus increased its percentage of active customers to 98.2%, versus 97.9% the previous year.

Various initiatives to retain our customers led to a further reductionin terms of customer churn, which is now 15.8%, compared with 16.6% at the end of December 2005.

The number of postpaid customers increased by 206,549 year-over-year, resulting in a postpaid/prepaid ratio of 46/54 at the end of December 2006, compared to 42/58 the previous year.

The 2006 blended gross ARPU was EUR 40.9 for the active customer base, compared to EUR 41.2 in 2005. This represents an average of EUR 68.4 per postpaid customer (compared to EUR 71.9 in 2005),and EUR 19.6 per prepaid customer (versus EUR 19.9 in 2005).

The blended net ARPU (ARPU minus Credits and Discounts) for 2006 was EUR 37.7 compared to EUR 38.7 the previous year. The decrease in ARPU is due to the success of the Smile bundles for postpaid customers and the new Pay & Go price plans for prepaid customers.

A future-proof networkThe Proximus GSM/GPRS network covers more than 99% of the Belgian population. The great care invested in its confi guration and maintenance ensures fi rst-rate quality and reliability.

The Belgian player with the greatest international reach, Proximus expands its roaming coverage continuously for prepaid and postpaid customers. GPRS roaming agreements do also expand and Proximushas now 3G roaming agreements with 69 operators in 42 countries.

Proximus continues to invest in building a superior network for its customers and to reassert its position as the leading innovatorin this area.

Over a three-year period (2004-2006), Proximus invested almost EUR 200 million in its state-of-the-art 3G network, ensuring 3G leadership, covering more than 80% of the Belgian population.The Proximus 3G network coverage far exceeds the 3G legal deployment obligations. By end of 2006, more than 100,0003G devices were detected on the Proximus network.

Mobile Communications Services (MCS)


> Proximus is the fi rst and only mobile operator to offer 3G services in Belgium to both professional and residential customers.

Ever since the launch of the 3G network in 2004, Proximus has been the fi rst and only mobile operator to offer 3G services in Belgium to both professional and residential customers. The 3G Mobile TV and Music Download services available through the Vodafone live! portal are evolving rapidly. The number of Mobile TV channels has more than doubled since the launch, bringing the total number to 31 at the end of 2006. A 3G Broadband Vodafone Mobile Connect Card, using HSDPA technology and offering improved data services, was introduced for both residential and business customers. Several price plans are offered in line with the needs of these two customer segments.

With demand for handheld solutions on the rise, 3G Broadband provides important added value, allowing real-time access to e-mail, calendar and contacts. During 2006, Proximus increased the numberof mobile e-mail solutions, such as Vodafone’s Windows Mobilee-mail, and introduced new e-mail handsets (3G BlackBerry, PDAsand Smartphones).

Innovation in products & servicesIn anticipation of its customers’ demands, e.g., for more mobility and personalized services, Proximus innovates and develops its product and service range continuously, with an eye to superior quality. In a highly competitive mobile telephony market, Proximus keeps its focus on customer satisfaction and service excellence.

Simple price plans for everyoneMobile telephony rates are decreasing, and Proximus has helped shape this trend by launching new, less expensive and simplifi ed rate plans for its customers to ensure that they get the most value for their money.

After the successful launch of the “Smile” postpaid offer in 2005, Proximus also realigned its prepaid tariffs in 2006 (e.g. “Pay & Go Generation”). For its postpaid customers, the “Smile” pricing plan range has been enhanced with “Smile 5”, lowering the monthly charge to customers to EUR 5, which makes the postpaid payment method much more accessible. On top of their basic pricing plan, members of the same family can opt for the new “Family call” plan, allowing them to call home and each other for only EUR 5 a month.

2006 also saw the introduction of several new rate plans for business customers with the aim of offering rates adapted to their needs, such

as Wireless Offi ce. This allows employees to call each other free of charge in the company building on their mobile, to both fi xed and mobile numbers. The range of roaming plans for business customers was also further extended in 2006 with new attractive offers such as Vodafone World Exclusive and Vodafone Data Roaming Bundle.

Wide range of multimedia servicesThrough the Vodafone live! portal, customers can access a wide range of online services, such as ringtones, news, sports, games, music videos, fi lm trailers, and information. The portal was redesigned and is continually updated to provide richer content, including sports, Proximus is the only operator offering videos of all the goals and summaries of the Belgian football league competition.

Other new launches in 2006 included Proximus M-Pay, a new, fast and secure way of purchasing digital products online via a mobile phone or the Internet, and PlazZza, an easy-to-use search engine for mobile Internet and an innovative mobile marketing tool for companies.

Increased mobilityProximus is undertaking a wide range of initiatives to encourage the use of advanced data services. A growing proportion of the company’s total revenue is generated by advanced data services, and their utilization is evolving very positively. At the end of 2006, data, including advanced data, represented 19% of the total revenue.

More than ever, business customers want to choose when and where they work. They need to have access to the Internet, e-mail and applications such as company intranets and business applications while they are on the move. There is also a growing demand from residential customers for mobile connectivity: they want to be connected everywhere they go and at all times. Proximus was the fi rst mobile operator in Belgium to offer instant messaging using Windows Live Messenger on its mobile phones. This system offers the same experience to the customer using a personal computer or using his own mobile phone.

Proximus continuously invests in developing new innovative services that meet customers’ needs and simplify their everyday lives. Since September, postpaid customers have been able to pay their parking fees in Antwerp and Mortsel via their Proximus bill, and prepaid customers via their call credit, using the SMS parking service of these two cities.

+58,077new active customers in 2006

14.5

15.0

15.5

16.0

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17.0

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17.7

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16.6

15.8

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4,201 4,198

4,253

4,311

Number of active customers(in thousands) Percentage of churn


First partnership offer for residential customersIn November, in collaboration with the television channel RTL-TVI, Proximus launched Plug Mobile, its fi rst partnership offer for residential customers. Plug Mobile is an extension of Proximus’ existing brand portfolio, and addresses the Belgian French speaking youth.The introduction of Plug Mobile gives Proximus the opportunityto reach new target groups/niches and to offer new, enriched multimedia content.

Acquisition of EuremisProximus believes that partnerships in the ICT fi eld are key to providing customized solutions to cater to the diverse needs of its customers, and drive the growing mobile data & IT business. In September, Proximus acquired Euremis, the leading Belgian provider of mobile CRM solutions for the mid-market segment. Euremis will signifi cantly strengthen Proximus’ ability to offer end-to-end solutions to its business customers.

Regulatory aspectsMobile interconnection (MTR)In its ruling of 11 August, the BIPT decided to progressively decrease mobile termination rates, while maintaining the degree of asymmetry of these tariffs between the operators. The fi rst tariff decrease of 16% came into effect on 1 November; a second decrease of around 20% is planned for May 2007. In 2007, the BIPT will make an additional decision concerning the tariffs for 2008 with the aim of reaching symmetry between Proximus and Mobistar in 2008. It will also decide on whether to reduce the tariff difference with Base so that symmetry is reached soon after 2008 (unless objective cost differences beyond the operator’s control would justify a degree of asymmetry). The BIPT ruling has been appealed by all three mobile operators, but has in the meantime become applicable.

International roamingOn 12 July 2006, the European Commission issued a draft regulation on international roaming. The regulation proposes wholesale and retail price controls that would signifi cantly reduce roaming prices for end users. A regulation, unlike a directive, has immediate effect in all Member States and does not require further transposition into national law.

Wholesale prices (charges between the mobile operators) would be determined in function of the average EU mobile termination rate, where for retail tariffs a maximum mark-up percentage on the wholesale tariff would be set.

The draft put forward that wholesale regulation would apply immediately, where retail price regulation would apply 6 months afterwards. However a change in the modalities and/or timing of the regulation elements cannot be excluded.

The proposed regulation also introduces a mechanism for increasing roaming price transparency for consumers.

The draft proposal is going through the EU approval process. Changes to the draft regulation are discussed by the EU Council and the European Parliament. We expect that the regulation will be fi nalized by July 2007.

Mobile access & call originationIn November, the BIPT issued a draft decision regarding the competitiveness of the “wholesale market for mobile access & call origination”. The draft concludes that this market is competitive, and that no regulatory remedies should be imposed on any of the market players. A fi nal decision on this market is expected by mid-2007.

Regulatory outlook for 2007The BIPT is expected to announce the results of the reviewed analysis of the mobile termination rates and of the initial analysis of the mobile access & call origination market in the course of the fi rst half of 2007. By mid-2007, there will likely be more clarity on the EU regulation for international roaming.

Belgacom Mobile’s GSM license, which started in 1995, will expire in 2010 and is subject to tacit renewal in 2008. Taking the possibility to deploy UMTS technology in the GSM-frequencies into account, some changes to the initial license conditions are expected in 2007. It is also likely that new frequency allocations will occur for the 3.5 GHz and 10 GHz spectrum, as well as possible allocations for lower frequency bands specifi cally for digital broadcasting such as DVB.

At EU level, the review of the e-communications framework is likely to impact mainly spectrum management. For other elements, such as the list of markets subject to ex ante regulation and eventual new rules regarding media services, it is still unclear which fi nal decisions will be taken.


Proximus is determinedto keep its position as the preferred mobile operator in Belgium, across all customer segments.

Outlook for 2007One of Proximus’ priorities for 2007 is an increased effort to maintain and support its market leadership. Proximus is determined to keep its position as the preferred mobile operator in Belgium, across all customer segments. Therefore the main focus in 2007 will clearly be on the acquisition of new customers, while efforts to retain existing customers will continue by offering the best value for money.

Proximus believes in the importance of partnerships to offer customized services satisfying the various needs of its customers.It will therefore expand its current portfolio of partners in 2007.

Proximus will also continue to develop its portfolio of high-quality products and services, its network and its customer service. This will be accomplished through:• servicing management, improving interactions with the customer in

all types of service;• additional 3G network investments and the launch of new or

enhanced products and services;• responding to the global communication needs of our customers.

Overall, Proximus will continue to invest in its brand.

Belgacom’s acquisition of Vodafone’s 25% stake in Proximus will in time allow Proximus to offer its customers fully integrated solutions that are adapted to their lifestyle, behavior and needs, and so make their lives easier. Proximus will be able to develop joint products and services with Belgacom to respond to the market trend towards convergence. Although the impact will be limited in 2007, the fi rst steps will defi nitely be taken.

The developments in advanced data services will help Proximus to secure long-term revenue. Although voice communication is currently still the main source of revenue, it is under strong pressure owing to fi erce competition as well as to regulatory obligations to come. In 2007, Proximus will continue to develop new revenue opportunities in adjacent areas to stimulate long-term revenue growth.

While facing increasing pressure on its revenues, Proximus will continue to control its costs through the operational excellence program launched in 2005. It aims to achieve operational excellence through optimal cost management and by leveraging Group synergies.

GuidanceProximus believes that its forthcoming initiatives, continued intense competition and regulatory pressure will have an impact on its revenues and EBITDA margin.

The fi erce competition and an increased effort to maintain and support its market leadership will cause Proximus’ revenue to go down between 1% and 3%.

In addition to this, Proximus estimates that the Mobile Termination Rate decreases will have a negative impact of EUR 77 million on 2007 revenues, or -4%, and will lower the EBITDA by EUR 35 million.

Therefore Proximus estimates that its total revenue will decline between 5% and 7% while the EBITDA margin might decline to around 45%.

Proximus assumes there will be no Retail Roaming regulation impact in the course of 2007.


> Proximus will offer its customersfully integrated solutions that make their lives easier.

Belgacom ICS alreadyis the player with the largest number of direct interconnections with mobile operators across the world.

Market growthand competition evolutionBelgacom ICS operates in the global carriers’ carrier market, which can be characterized as a commodity market with low barriers to entry, and hence is affected by strong competition, overcapacity, severe downward pressure on prices and limited customer captivity. In the last years price decreases have systematically offset the continuing volume growth that has been generated by the development of mobile telephony, especially in the Middle East, Africa, the Asia-Pacifi c region, China and India.

Recent industry trends are irreversibly reshaping the telecommunication market. The adoption of IP technologies is accompanied by innovative yet disruptive business models while the introduction of converged service offerings (triple/quadruple-plays) increase the complexity within the value chain. On the other hand, as customers are reluctant to pay for low value offerings, a new wave of commoditization of basic services is taking place. In this context, incumbents and challengers are compelled to review their strategic objectives in terms of addressed market and strategic position in the value chain.

In today’s environment the largest players benefi t from economies of scale to enjoy profi table growth, whereas smaller players, under growing pressure, have to re-assess the long-term sustainability ofnon-core activities, for instance, through the redefi nition of their sourcing strategies. Recent movements in the carrier wholesale market are confi rming the trend towards consolidation.

Belgacom ICS’ recipe for success in such a dynamic yet challenging market is the relentless anticipation of changes through a visionary strategy of consolidation and insourcing, capital investment in IP-base Next Generation Networks & real-time traffi c routing infrastructure, and strategic supply relationships towards mobile operators.

Products and services In the past years Belgacom ICS has transformed itself from a regional size single product organization into a leading player ready to address all upcoming challenges in the market and notwithstanding tough competition, it can boast of an overall positive performance in 2006.

International Carrier Services (ICS)


> Unlike many telecom operators today, Belgacom ICS is constantly investing in the expansion and evolution of its transport network in order to answer its customers’ needs through adapted and improved services.

The merger of the respective carrier operations of Belgacom and Swisscom Fixnet into Belgacom ICS was the fi rst consolidation agreement in Europe, providing Belgacom ICS the economies of scale to enter the league of large players and to generate multiple synergies, worth a total of about EUR 40 million. The last cornerstone of the successful Post Merger Integration will be put in place in the fi rst quarter of 2007, when all the Swiss traffi c is moved to a new NGN switching platform.

In 2006, a revolutionary insourcing project with the MTN Group further strengthened Belgacom ICS’ market leadership in Africa. Under the agreement, this African group of mobile operators outsources its international connectivity to Belgacom ICS. Another important strategic milestone was the signing of a Memorandum of Understanding with Omantel that will enable Belgacom ICS to reinforce its presence in the fast growing Middle East region.

Meanwhile, Belgacom ICS has also been developing its mobile data business and its mobile customer base with a particular focus on growth regions such as the Middle East and Africa. Belgacom ICS already is the player with the largest number of direct interconnections with mobile operators across the world.

Belgacom ICS is among the world leaders in mobile data products and excellent results are being posted in this area. Future growth will be secured thanks to the implementation of a new SMS transit platform. Belgacom ICS recently became the biggest GRX provider worldwide (GRX is the backbone network for mobile data roaming) and is supporting the mobile operators in the deployment of HSDPA. Belgacom ICS will continue to enrich its mobile services portfolio with roaming, numbering, messaging and presence solutions targeting existing, emerging and virtual mobile network operators.

The Instant Voice product, a connectivity offering specifi cally targeting XSPs(1) and voice-over- broadband providers that leverages the Next Generation Softswitch technology, has been successfully launched.

Finally, the roll out of a new Pan-European Network using state-of-the-art optical equipment will improve the cost and performance of the Belgacom ICS network and create new business opportunities.

Technology Following the consolidation of the former Swisscom ICS traffi c and in order to secure growth and innovation, the legacy switching infrastructure has been upgraded with a next generation-based capacity extension whilst a new soft switching platform has been deployed. This New Generation Network architecture makes it possible to achieve better scalability and will allow Belgacom ICS to further aggregate traffi c as it shifts to IP while addressing the VOIP market with dedicated hosted services. The NGN technologies will also allow the development of SIP-based inter-carrier services.

Unlike many telecom operators today, Belgacom ICS is constantly investing in the expansion and evolution of its transport network in order to answer its customers’ needs through adapted and improved services. On top of this, the optimization of the two networks that were the legacy of the joint venture with Swisscom ICS has been at the origin of the roll out of the PEN4Future(2) project in 2006. Belgacom ICS has implemented in its core European backbone the fi rst Next Generation optical network, ensuring a greater fl exibility, increasingthe overall quality and supporting effi cient transport of all traffi c types at competitive prices.

Belgacom ICS’ PEN4Future links 16 network nodes in 7 European countries: Belgium, France, United Kingdom, the Netherlands, Germany, Switzerland, and Italy.

(1) Generalized acronym to describe any type of Service Provider. Example: ISPs.(2) PEN4Future: Belgacom ICS’ new optical backbone.


28

Encouraging communication, creativity and innovation. Refl ecting the values of an ever-changing society as closely as possible. The Belgacom Group has made its diverse workforce one of its main growth engines.

29

diversity

Human resourcesThe Belgacom Group is evolvingWith the acquisition of Telindus, the Belgacom Group welcomed onboard over 2,500 new employees, strengthened its position on the professional market and enhanced its international presence. This acquisition was a milestone in the implementation of our strategy to offer services and solutions that integrate telecom and IT.

Moreover, following the Group’s acquisition of Vodafone’s 25% stake in Belgacom Mobile, all Proximus employees are now also fully part of the Belgacom Group. This will ensure closer cooperation within the Group and allow us to anticipate the needs of our customers even better.

By combining the talent, expertise and creativity of its entire staff, the Belgacom Group possesses all the knowledge and skills needed to respond quickly to new market trends, which are increasingly evolving towards integrated solutions.

All different. All one.

30 · Human resources

In this context, a study was launched to examine the opportunities convergence can offer to the Belgacom Group, the synergies that can be developed between the various subsidiaries and the changes this will generate in terms of the way we serve our customers. This study has already produced some results with regard to the new structure that the Belgacom Group is preparing to introduce (see foreword by D. Bellens), and the study will be continued in 2007.

DiversityFor the Belgacom Group, diversity means working together with people who have a unique combination of talents and characteristics.

The Group’s success depends entirely on its ability to understand and anticipate customer needs, now and in the future. By creating a diverse workplace, which refl ects society as closely as possible, we will connect better with the communities we serve. It will also allow us to promote creativity and innovation, improve leadership effectiveness, create a more fulfi lling employee experience and increase customer satisfaction.

Bringing different ideas together leads to innovation, essential for staying one step ahead of the competition in a dynamic environment.

The ultimate aim of the diversity policy is to move boundaries.To successfully meet the challenges of the future, the Belgacom Group brings together the creativity, resourcefulness, know-how and insightof all its employees.

The diversity action plan will be implemented in a phased approach: create awareness, create emotions, create commitment.

The awareness phase has been characterized by the development of a dedicated website on the intranet, several communications, and the creation of a logo: All different. All One.

Although we are all different, with our own strengths and unique skills,we belong to one company, working together for the same goal.

In the next phase we will launch a varied training program for all employees, regional working groups, network initiatives and continue communication efforts to raise awareness.

The employees of the Belgacom Group come from all walks of life, from different backgrounds and cultures. The Group respects these differences and sees them as a strength.

Employee wellbeingThe balance between private life and professional life is obviously a matter of personal choice. It is the foundation for employee growth.In order to help all employees achieve that balance, the Belgacom Group offers a wide variety of different solutions, such as teleworking, holiday camps for children, a childcare service during the summer months and a sick child home-care service, numerous health care benefi ts and all kinds of social welfare benefi ts.

Room to develop oneselfEach employee has different skills and competencies, and has equal development opportunities. The Belgacom Corporate University (BCU) and the John Cordier Academy (JCA) offer a differentiated training catalog and a variety of learning methods (classroom-based, e-learning, BCU@home, etc.). In 2006, 93.6% of employees followed at least one training course, with an average of 37.5 training hours per employee.

The BCU@home program gives employees an opportunity to work on their personal development at home by means of fi ve-minute training modules which are offered as part of an extensive e-learning catalog.

In order to support and stimulate its current and future leaders,the Belgacom Group will add a third pillar to its leadership programsin 2006: House of Development 3. After leadership (House 1) and business acumen – fi nance – strategy (House 2), the emphasis this time will be on innovation, one of the major challenges of the ICT sector. This program has been developed and is run in close cooperation with senior management and two of the most renowned Belgian business schools: Vlerick Leuven Gent Management School and Solvay Business School.

Coaching, crucial in a changing environmentThe Belgacom Group believes that companies need to be able to adapt to the changing environment in order to last, and that coaching playsa central role in achieving this. Therefore, the Belgacom Group supports leading academic research into the importance & effects of coaching on sustainable entreprises. Beyond the benefi ts of coaching withina working environment, the Group also wants to contribute to society

With the introduction of “ The Tribe”, a new, light-hearted and interactive way of communicating was born. The Tribe is about eight wildly divergent characters who land in a situation in which they must fi nd ways to work and live together. Each character has their own personality and behavior.

Belgacom Group employees are regularly given a say (through voting buttons) on how the story should develop. By critically thinking about and discussing the issues raised in The Tribe with colleagues, Belgacom employees can fi nd out for themselves which working methods and approaches produce the best results, not just for the characters of The Tribe, but for the Belgacom Group as a whole.

> interactive communication

14,000

15,000

16,000

17,000

18,000

19,000

20,000

21,000

22,000

23,000

01 02 03 04 05 06*

Staff evolution

* including Telindus.

29.5% Female

70.5% Male

94.5% Native

5.5% Non-native

Staffi ng rate native/non-nativeemployees

Gender staffi ng breakdown

• 28 courses• 350 participants• 2 courses/person (average)• 720 subscriptions• 1,000 employees on a waiting list

Human resources · 31

by extending its support to research in the world of sports. Sport,we feel, is essential to the development of youth, where coaching plays a key role.

The Belgacom Chair “Building organisations that last” at Vlerick Leuven Gent Management School, will further stimulate research and teaching on the subject of building enduring working relationships and teamwork. These values have proven to be essential in the contribution to fundamental human satisfaction and to the achievement of qualitative performance.

Room for ideasTo maintain the Belgacom Group’s growth and its leading position in the telecom market, the Group must face the challenge of adjusting to anticipated trends and developments. The only way it can achieve this ambitious objective is by giving employees the necessary room for ideas. After all, it is ideas that make the world go round: all the more so in the telecom sector.

When strong ideas collide, this often leads to innovation. As an employer, the Group therefore aims to create the necessary room for ideas.

At Proximus, the launch of the “Room for Ideas” campaign served as an encouragement to all employees to think creatively, win over others to their ideas and put their ideas into practice.

Our employees can also give free reign to their creative talent outside working hours in The Pulse, free hobby workshops that stimulate our employees’ creativity and team spirit. The Pulse is an initiative that was

started by a group of enthusiastic employees and offers an impressive range of courses and workshops, from photography and video-making to painting, drama and even disco dancing.

The courses and workshops are held in the Belgacom Creativity Center, where employees can use a professional photography and video studio as well as a music studio free of charge.

Employee satisfactionThe dedication, motivation and passion of employees play a major role in the success of the Belgacom Group. Employee satisfaction is therefore a permanent concern. In 2006, a uniform group-wide employee survey was carried out for the fi rst time. This enables us to identify and take the measures that are needed.

84% of the employees are satisfi ed to work for their company within the Belgacom Group.

The Belgacom Group offers an extensive remuneration package.To make the remuneration more transparent and clear, Belgacom launched “Your reward”, an application which gives employees a personalized overview of their total remuneration at a glance.

Payroll activities have been insourced to improve quality and lower costs. In addition, Belgacom introduced the electronic pay slip.To guarantee absolute data confi dentiality, Belgacom used the expertise of Certipost, a Group subsidiary that specializes in certifi ed electronic transmissions. The electronic pay slip has been made clearer and easier to read and, what is more, saves paper!

Measures taken to raise awareness and to buildthe framework for a diverse workplace:• An internal diversity survey amongst employees• A diversity & equal opportunities policy• A non-discrimination policy & procedure• A diversity site on the Intranet• Several employee communications focusing on the

different benefi ts of diversity• All employees received a notebook, including a

2007 diversity calendar• The creation of a diversity scorecard

Planned initiatives in 2007• Launch of a training program for all employees• Launch of employee sounding boards• Develop non-discriminatory recruitment practices

that promote diversity• Launch of a women network initiative• Continue communication efforts to increase

awareness

32

Environmental awareness, attention to the needs of all stakeholders, and acting for the common good are some of the commitments made by the Belgacom Group in the area of social responsibility.

33

commitmentOne deep commitment. Living action.

CorporatesocialresponsibilityBelgacom has a long-standing tradition of social commitment.

In fact, as we showed in our recent overview, the men and women that make up our Group incorporated the concepts of respon-sibility and corporate citizenship in their daily work long ago, without these being formally imposed. Since 2006, the Group’s aim has been to go one step further by gradually integrating the principles of corporate social responsibility into the core of its activities.

The Belgacom Group concurs with and applies the defi nition of corporate social responsibility formulated in the European Commission’s Green Paper: “a concept whereby companies inte-grate social and environmental concerns in their business opera-tions and in their interaction with their stakeholders on a vol-untary basis.” The Belgacom Group has chosen the concept of

rather than merely corporate responsibility, to indicate that its policy extends beyond mere business ethics: it also incorporates the Group’s environmental responsibilities.

34 · Corporate social responsibility

Anchoring the Groupin a real action planIn its previous annual report, the Belgacom Group already indicated that it was committed to setting up a series of concrete initiatives to improve the coordination of its existing activities in the fi eld of corporate social responsibility. We are now one year down the roadand these objectives have been achieved.

In early 2006, the Belgacom Group created the position of Group CSR Director. Reporting directly to the CEO, the CSR Director’s mission is to further expand and develop the CSR program within the Belgacom Group as well as coordinate all existing and future initiatives in this fi eld, with the help of the Management Committee.

In 2006, we made an initial assessment of our progress and we have published the results in the second half of 2006. The results can be found on the website www.belgacom.be/group.

The publication of this assessment is only the beginning and our main objective remains to continue to meet and exceed the Belgacom Group stakeholders’ expectations in the fi eld of corporate social responsibility. Additionally, we intend to increase the involvement of all our employees, through CSR education made available by the Belgacom Corporate University e-learning training sessions.

An everyday commitment…The Belgacom Group is fully aware of the social aspect of telecom-munications. We want to provide as many people and organizations as possible access to the world of communications, information and entertainment, and, in so doing, improve their quality of life.

... to our customersIn this context, the Belgacom Group has developed a wide range of solutions designed to facilitate the everyday life of its customers. The teleworking and teleconference solutions are but two of these. Teleworking helps employees combine their family and working lives, and provides an alternative to the problems of mobility and urban traffi c congestion. Teleconferences enable considerable reductions in travel, time and energy.

In the fi eld of products and services, Belgacom puts its social commitment into practice by developing projects in the health sector. Intended for seniors, the “Medical Care Continuity” project, for example,

aims to develop healthcare services delivered to old people’s homes via a high-speed line.

As for price, the Belgacom Group always endeavors to offer its customers the best value for their money, regardless of the type of product. For example, we offer our customers a range of ADSL packages, adapted to every budget. In the fi eld of fi xed telephony, Belgacom devised the “Happy Time” and “Happy Time International” rate plans, which enable customers to call any destination in Belgium and certain destinations in Europe free of charge in the evening and on weekends. Not to be outdone, Proximus has launched the simple, transparent “Smile” calling packages for residential customers.

To allow both fi xed and mobile customers to determine which rate plan is best adapted to their latest calling patterns, “rate check-up” programs are also available.

Finally, the Belgacom Group signifi cantly reduces the inequalities experienced by the socially disadvantaged as regards access to communication by providing, to this group, the use fi xed and mobile telecommunications services at special reduced rates, as part of our universal services.

Finally, in the fi eld of Internet access and electronic communications, the Group wants to enable all its customers to use multimedia applications in complete security. To that end, Belgacom providese-mail boxes with anti-virus and anti-spam solutions free of charge.

… in our relationships with our suppliersThe Belgacom Group has always attached great importance to the quality of its suppliers, and particularly to their commitments to social, environmental and sustainable development standards.

The Belgacom Group requires all its suppliers to have certifi cation guaranteeing compliance with security standards.

For many years now, Proximus has applied the Code of Ethical Purchasing developed by the Vodafone Group. This code was established in agreement with suppliers and certain international non-governmental organizations. Proximus’ suppliers who adhere to this Code undertake to comply with social and environmental standards, particularly with regard to child labor, health, safety, discrimination, etc.

Finally, our purchasing policies are judged in comparison with those applied by other European telecommunication operators and with a series of international standards.

Corporate social responsibility · 35

… to protect the environmentFor a number of years, the Belgacom Group has taken up the challenge to integrate, to the best of its abilities, its activities in its natural environment. Proximus systematically ensures that its base stations are integrated as harmoniously as possible with the surrounding landscape.

In the area of energy usage, in 2005 the Belgacom Group responded to an initiative of the Belgian federal government, committing to reduce its energy usage in its administrative buildings, and reduce its vehicle fl eet by 7.5% by 2012. With the application of remote equipment management, the Belgacom Group was able to reduce fi eld service trips and thus lower its vehicle count from 7,444 in 2005 to 7,074 in 2006.

In the area of mobility, for a number of years, the Belgacom Group has been encouraging its employees to embrace the use of public transportation. It is not by coincidence that our head offi ces are located in the center of town and easily accessible by train, bus and tram.

Another important aspect of the mobility policy consists of reducing commuting by encouraging “Telesite working”. This formula allows employees to use satellite offi ces located closer to their homes.

The Belgacom Group also attaches particular importance to waste management. At the forefront of the general trend in Belgium, Belgacom applies the latest waste management measures, notably through its participation in the Recupel and Bebat programs. Similarly, the promotional efforts to encourage the use of electronic reloading systems for its Pay & Go cards (such as via cash-points or the Internet) have also had a positive impact on reducing the tonnage of household packaging waste.

Finally, for a number of years, the Group has developed a series of measures aimed at reducing paper usage. This policy is not only internal in scope: it also extends to our customers. In 2004, Belgacom launched an online billing program. Efforts were made to raise customer awareness of the opportunities that this new billing method offered, and of its positive impact on the environment. By the end of 2006, no less than 200,000 Belgacom residential customers had opted for the electronic bill.

... with regard to our employeesThe Belgacom Group is evolving in a business sector which, for years, has been marked by fi erce competition. A skilled, motivated and results-oriented workforce is one of the essential ingredients for maintaining our leadership position in this competitive environment.

This is why the Group attaches particular importance to the principle of diversity, a key factor in the shaping of a sustainable company. In keeping with this view, the Belgacom Group adopted a Diversity Charter that refl ects its commitment to respect and promote the application of the non-discrimination principle in all its forms, hiring staff whose backgrounds refl ect the diversity of Belgian society.The concept of diversity in the Belgacom Group is discussed in greater depth in the section on human resources in this annual report.

A project for the future2006 can be regarded as our transition year, in which an initial assessment was made of all the Belgacom Group’s CSR activities,and a strategy developed for the future.

In 2007, the fi rst major step in this strategy will be to conductan internal audit aimed at identifying the various measurement indicators used in the Belgacom Group.

Additionally in 2007, the Belgacom Group will publish its CSRreport, compiled in compliance with GRI guidelines (GlobalReporting Initiative). The GRI has the role of developing globally applicable directives to measure the economic, environmental,and social performance of companies. In association withthe United Nations Environment Program (UNEP), the GRI measuresthe active participation of companies, NGOs, accounting organizations, associations of business people and other stakeholders fromaround the world.

By having supported the International Polar Foundation for three years now, Belgacom is participating in explorer Alain Hubert’s efforts to save our planet. In addition to providing fi nancial backing to this organization, which aims to raise the general public’s awareness of polar exploration and the consequences of global warming, Belgacom has also invested in an electronic billing program, enabling a signifi cant reduction in paper consumption. By the end of 2006, 200,000 customers had opted for this solution.

> International Polar Foundation

36

Transparency is a fundamental value of the Belgacom Group, which is why we want to be a frontrunner in the application of legal procedures and the corporate governance best practices.

37

transparencyOne clear organization. Effective decision.

Corporate GovernanceCorporate governance aims to defi ne a set of rules and behaviours according to which companies are properly managed and controlled, the result being increased transparency. It is a system of checks and bal-ances between the shareholders, the Board of Directors and manage-ment. Belgacom is committed to be compliant with the legal, regulatory and best practice elements and more specifi cally to the best practices of Belgium’s Corporate Governance Code. Additionally it has continued to reinforce its internal compliance program.

Belgacom governance modelAt Belgacom, the Articles of Association are strongly infl uenced by the specifi c legal status of the company. As a limited liability company under public law, Belgacom is in fi rst 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 go vernance model are:• a Board of Directors, which defi nes Belgacom’s general policy and strate gy

and supervises operational management;• the creation by the Board of Directors within its structure of an Audit and

Compliance Committee, a Nomination and Remuneration Committee and a Strategic and Business Development Committee;

• a Chief Executive Offi cer, who takes primary responsibility and ownership for operational management (including, but not limited to, day-to-day management);

• a Management Committee which assists the Chief Executive Offi cer in the exercise of his duties.

38 · Corporate governance

Board of DirectorsAs provided for in the 1991 Law, the Board of Directors is composed of:• Directors appointed by the Belgian State pro rata to its shareholding;

the aggregate number of directors being determined by the shareholders’ meeting;

• Directors appointed by a separate vote among the other shareholders, for the remaining seats.

It will be suggested to the Extraordinary Shareholders’ Meeting of April 11, 2007 to decrease the number of members of the Board of Directors in order to have no more than 16 members, including the person appointed as Chief Executive Offi cer.

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 shall meet every year in four regularly scheduled meetings. The Board of Directors must also evaluate the strategic long-term plan in an extra meeting per year.

In principle, the Board’s decisions are made by a simple majority of the directors present or represented. For certain issues, a qualifi ed majority is required. The Board of Directors has adopted a Board Charter which, together with the charters of the Board Committees, refl ects the principles by which the Board of Directors and its Committees operate. The Board Charter provides, among other things, that important decisions should have broad support, understood as a qualitative concept indicating effective decision-making within the Board of Directors following a constructive dialogue between directors. They should be prepared by standing or ad hoc Board Committees having signifi cant representation of non-executive, independent directors within the meaning of Article 524, § 4 of the Belgian Company Code.

Committees of the Board of DirectorsIn accordance with the bylaws Belgacom has an Audit and Compliance Committee, a Nomination and Remuneration Committee and a Strategic and Business Development Committee.

Audit and Compliance CommitteeThe Audit and Compliance Committee (ACC) consists of fi ve non executive directors, the majority of whom must be independent. Pursuant to 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 quality and integrity of the statutory and the consolidated annual

accounts and the fi nancial statements of the Company;

• the relationship with the Company’s statutory auditors;• the Company’s internal audit function;• the Company’s compliance with legal and regulatory requirements;

and compliance within the Company with the Company’s Code of Conduct and the Dealing Code;

• the evaluation of the risk framework and the methodology of risk assessment;

• the quality and integrity of the quarterly reporting.

The Audit and Compliance Committee meets at least once every quarter.

Mr. Philip Hampton (Chairman), Messrs. Pierre-Alain De Smedt, 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 four directors. Pursuant to its charter, this committee is chaired by the Chairman of the Board of Directors, who is an ex-offi cio member. One member is chosen among the directors appointed by the Belgian State. Two members must be appointed among the independent directors. The Nomination and Remuneration Committee’s role is to assist and advise the Board of Directors regarding:• the nomination of candidates for appointment to the Board of

Directors and the Board Committees;• the appointment of the President and Chief Executive Offi cer and

appointment by the President and Chief Executive Offi cer of the members of the Management Committee;

• 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 and Chief Executive Offi cer

and members of the Management Committee; the review on an annual basis of the remuneration philosophy and strategy of all personnel and specifi cally the compensation packages of top senior management;

• the oversight of the decisions of the President and Chief Executive Offi cer with respect to the appointment, the dismissal and the compensation of management, in order to allow the Board of Directors, when it chooses to do so, to exercise its overall supervising duties;

• corporate governance issues.

The Nomination and Remuneration Committee meets at least four times per year. The fi rst meeting intends to review the performance, budgets for payout of bonus and merits and long term and short term incentive plans. At that meeting an annual review of the philosophy

(1) Appointed by the Belgian State.(2) Appointed by the shareholders’ meeting and independent.

Members Board of Directors in 2006

Name Age PositionDirector

since Term

expires

Theo DILISSEN (1) 53 Chairman of the Board 2004 2009

Didier BELLENS (1) 51 President and CEO 2003 2009

Johny CORNILLIE (1) 55 Director 1994 2006

Didier DE BUYST (1) 40 Director 1996 2006

Pierre-Alain DE SMEDT (2) 62 Director 2004 2010

Carine DOUTRELEPONT (2) 46 Director 2004 2007

Martine DUREZ (1) 56 Director 1994 2012

Philip HAMPTON (2) 52 Director 2004 2010

Georges JACOBS (2) 66 Director 2004 2007


since Term

expires

Maurice LIPPENS (2) 63 Director 2004 2007

Michel MOLL (1) 58 Director 1994 2006

Oren G. SHAFFER (2) 64 Director 2004 2007

Robert TOLLET (1) 60 Director 2003 2009

Norbert VAN BROEKHOVEN (1) 60 Director 1994 2006

Lutgart VAN den BERGHE (2) 54 Director 2004 2010

Paul VAN de PERRE (1) 53 Director 1994 2012

Philippe VAN de VYVERE (2) 53 Director 2004 2006

Corporate governance · 39

and strategy of the remuneration will also be discussed. In a second meeting the Nomination and Remuneration Committee will fi x the performance measurement targets of the President & Chief Executive Offi cer and the members of the Management Committee through KPI’s. On top of these meetings the Committee will organize a meeting on Human Resources and a meeting on Corporate Governance.

Mr. Theo Dilissen (Chairman), Ms. Martine Durez, Mr. Georges Jacobs and Ms. Lutgart Van den Berghe are the members of the Nomination and Remuneration Committee.

Strategic and Business Development CommitteeThe Strategic and Business Development Committee (SBC) consists of fi ve directors. Pursuant to its charter, the President and Chief Executive Offi cer and the Chairman of the Board of Directors are ex offi cio members, and the committee is chaired by the Chairman of the Board of Directors. One additional member is chosen among the directors appointed by the Belgian State. Two members must be appointed among the independent directors.

The Strategic and Business Development Committee’s role is to assist and advise the Board of Directors on matters concerning the Company’s general policy and strategy, as well as on major issues regarding its strategic development. The Strategic and Business Development Committee meets at least twice a year.

Mr. Theo Dilissen (Chairman), Mr. Didier Bellens, and Messrs. Maurice Lippens and Robert Tollet are currently the members of the Strategic and Business Development Committee.

Messrs. Johny Cornillie and Oren G. Shaffer attend the meetings of the Strategic and Business Development Committee as observers.

The Board of Directors has decided to review the role and composition of the Strategic and Business Development Committee in 2007.

Changes in the composition of the Board of DirectorsOn 23 December 2006, the mandates of Ms. Martine Durez and Messrs. Johny Cornillie, Didier De Buyst, Michel Moll, Norbert Van Broekhoven and Paul Van de Perre have expired.

On 31 December 2006, the mandates of Ms. Carine Doutrelepont and Messrs. Georges Jacobs, Maurice Lippens, Oren G. Shaffer and Philippe Van de Vyvere have expired.

On 23 December 2006, the Belgian State has appointed, under an Order deliberated in Council of Ministers, Mss. Martine Durez, Mimi Lamote, Michèle Sioen and Messrs. Michel Moll and Paul Van de Perre until 23 December 2012.

On 14 December 2006, the Board of Directors has coopted Ms. Carine Doutrelepont and Messrs. Georges Jacobs, Maurice Lippens and Oren. G. Shaffer until the General Shareholders Meeting of 11 April 2007.On the same date the Board of Directors has decided to recommend these members for nomination at the General Shareholders Meeting for a new mandate until the General Shareholders Meeting of 2013.

Directors’ remunerationThe remuneration and compensation of the directors has been decided by the General Meeting of 2004. The calculation of this compensation has not changed in 2006: an annual fi xed compensation of EUR 50,000 for the Chairman of the Board of Directors and of EUR 25,000 for the other members of the Board of Directors, with the exception of the President & CEO, is foreseen. 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. Finally attendance fees of EUR 2,500 have been foreseen for each member of an advising committee to the Board of Directors, with the exception of the President & CEO. For the Chairman these attendance fees are doubled. 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 benefi ts linked to pension plans.

Transactions between the company and its board members and executive managersA general policy on confl icts of interest is applicable within the company. It prohibits the possession of fi nancial interests that may affect one’s personal judgment or professional tasks to the detriment of the Belgacom Group.

In accordance with Article 523 of the Belgian Commercial Companies Code, the President & CEO Didier Bellens declared that he had a confl ict of interest in connection with the Employee Incentive Plan item of the agenda of the Board of Directors’ meeting of 23 February 2006. He is in fact a proposed benefi ciary of the Senior Management Short & Long term Incentive Plan 2006. He has informed Belgacom’s auditor of this confl ict of interest and has decided not to participate in the deliberation or voting on such items on the agenda.

Transactions between the company and the Belgian StateThe Board of Directors has applied, per analogy, the procedure of Article 524 of the Belgian Commercial Companies Code regarding the

(Following on page 42)

(1) Appointed by the Belgian State on 23 December 2006.(2) Proposed for nomination to the shareholders’ meeting of 2007.

Current Members Board of Directors


Since Term

expires

Theo DILISSEN 53 Chairman of the Board 2004 2009

Didier BELLENS 51 President and CEO 2003 2009

Pierre-Alain DE SMEDT 62 Director 2004 2010

Carine DOUTRELEPONT (2) 46 Director 2004 2007

Martine DUREZ (1) 56 Director 1994 2012

Philip HAMPTON 52 Director 2004 2010

Georges JACOBS (2) 66 Director 2004 2007

Mimi LAMOTE (1) 42 Director 2006 2012


Since Term

expires

Maurice LIPPENS (2) 63 Director 2004 2007

Michel MOLL (1) 58 Director 1994 2012

Oren G. SHAFFER (2) 64 Director 2004 2007

Michèle SIOEN (1) 42 Director 2006 2012

Robert TOLLET (1) 60 Director 2003 2009

Lutgart VAN den BERGHE 54 Director 2004 2010

Paul VAN de PERRE (1) 53 Director 1994 2012

108

97

6

5

4

3

2

1

Current members of the Board of Directors


Theo Dilissen (1). Chairman of the Board of Directors of Belgacom since October 2004. 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). In September 2005, he was appointed as President and CEO of Aviapartner. Since October 2006, Mr. Dilissen is also independent member of the Board of Directors of Antwerp World Diamont Centre.He studied Sociology and holds a Master in Business Administration.

Didier Bellens (2). President and Chief Executive Offi cer and Director of Belgacom since March 2003. More info see p. 46, Members of the Belgacom Management Committee.

Pierre-Alain De Smedt (3). Director since March 2004. Mr. De Smedt is 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 member of the Board of Deceuninck Plastics Group, of the Compagnie Nationale à Portefeuille and of the Group Valeo. He is a graduate in engineering and economics from the University of Brussels (ULB).

Carine Doutrelepont (4). Ms. Doutrelepont is a lawyer at the Brussels’ Bar. She is the founding partner of the Belgian lawfi rm Doutrelepont & Partners, which is a member of the EEIG Afschrift, Doutrelepont & Partners, and is specializing in Information and Communication Technologies, Intellectual property, Media law, Competition matters and European law. She holds a PhD in law from the University of Brussels (ULB) and worked with the Max Planck Institute (Munich). 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 Center of the ULB.For years, she worked as an Expert for the European Commission (General Directorate Internal Market) and at the Belgian Senate.She is also a member of the Belgian Competition Authority.

Martine Durez (5). Ms. Durez was the Chief Financial and Accounting Officer at La Poste till January 2006 when she became Chairman of the Board of La Poste. Ms. Durez was also Professor of Financial Management and Analysis at the University of Mons-Hainaut till 2000. She has also served as a member of the High Council of Corporate Auditors and the Committee of Accounting Standard and as a special emissary at the Cabinet for Communication and State Companies. She serves as a regent of the National Bank of Belgium. Ms. Durez graduated as a Commercial Engineer and holds a degree in Applied Economics from the Universityof Brussels (ULB).

Philip Hampton (6). He spent the first ten years of his career at Lazard Brothers in London, New York and Paris. He then took up the positions of Finance Director for British Steel plc, British Gas plc and British Telecommunications Group plc and for Lloyds TSB Group plc. He is currently Chairman of J. Sainsbury plc. Mr. Hampton is a Chartered Accountant and holds an MBA from INSEAD, Fontainebleau.

Georges Jacobs (7). Baron Jacobs is Chairman of the Board of Directors of UCB. He started as an economist at the International Monetary Fund (USA). Later, he joined the UCB Group and was appointed Director and CEO of UCB in 1987 until 1 January 2005, when he became Chairman of the Board. Furthermore, Baron Jacobs is member and Chairman of the Board of Delhaize and a member of the Board of Bekaert and Brussels Airlines. He holds a law degree and a degree in economics, as well as a Master of Arts in Economics from the University of California, Berkeley.

Mimi Lamote (8). Until June 2006 she was CEO of SCF (Belgium-Lithuania) listed on the Belgian stock market. From 2001 until 2005 Mrs. Mimi Lamote was General Manager of C & A Belgium-Luxembourg. Since December 2006, she is President of the Social Economical Forum of the Flemish Government. 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 Distribution). She holds an university degree in Applied Economic Sciences of the University of Antwerp and a master in Retail Management of the Tias University of Tilburg.

Maurice Lippens (9). Mr. Lippens is co-founder of Fortis, the first European cross-border banking and insurance group created in 1990.He served as the executive Chairman of Fortis until 2000 and since then he is the non-executive Chairman of the Board of Directors.He is a member of the Board of several companies including Groupe Bruxelles Lambert and Total. He holds a law degree from the University of Brussels (ULB) as well as an MBA from Harvard Business School.

Michel Moll (10). He is 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.He serves as a non executive director in industrial and fi nancial companies such as Société Nationale de Construction Aérospatiale and the Belgian Corporation for International Investment (SBI). He is also a Censor of the National Bank of Belgium. Mr Moll graduated as Engineer in applied economics from the business school of the University of Louvain (UCL).

15

14

13 18

19

11

12 17

16


Oren G. Shaffer (11). He is Vice Chairman and Chief Financial Officer of Qwest Communications International Inc. Formerly, Mr. Shaffer was President and Chief Operating Officer of Sorrento Networks and from 1994 to 2000 he was Chief Financial Offi cer of Ameritech. He was a member of the Board of Directors at Belgacom from 1996 to 2000.He is a member of the Board of Intermec and the Daiwa family of NYSE listed investment funds. He holds a Bachelor of Science in business administration from The University of California at Berkeley and a Master of Science in management from The Massachusetts Institute of Technology.

Michele Sioen (12). In 1988, Ms. Sioen started her career at Atoll (IT-sector). She was appointed director of the Board of Directors of Sioen Industries in 1990 and actively joined the Sioen Industries group. Between 2000 and 2005 she was General Manager of its Coating Division. Since 2005 she is CEO of the Sioen Industries group. Furthermore, Michele Sioen is president of Febeltex Bruxelles-Wallonie since 2001 (the association of textile professionals) and also president of the social board. Ms. Sioen holds a degree in Economics and several post-university degrees.

Robert Tollet (13). Mr. Tollet is the Chairman of the Board of Directors of the Société Fédérale de Participations et d’Investissement, a public sector holding company and serves on the Board of Credibe. He is also the Chairman of the Central Council for the Economy. Mr. Tollet holds a degree in Economics and a degree in Economic Analysis and Policy from the University of Brussels (ULB).

Lutgart Van den Berghe (14). Ms. Van den Berghe holds a PhD in economics from Gent University where she is an extraordinary professor. As executive director, she heads the Competence Centre Entrepreneurship, Governance and Strategy at the Vlerick Leuven Gent Management School as well as the Belgian Governance Institute.She lecturers on Corporate Governance and serves as a non-executive director in a number of listed and non-listed multinational companies such as Electrabel, CSM (The Netherlands), SHV Holding(The Netherlands) and Solvay BV (The Netherlands).

Paul Van de Perre (15). He is the co-founder of GIMV (Venture Capital Firm) and was formerly a director of Sidmar (Arcelor). He is currently CFO and director of MethaPharma (nutraceuticals) and Greenbridge (incubator). Mr. Van de Perre is CEO of Five Financial Solutions, a division of Praxis in Management (corporate finance) and CEO of Caesar Real Estate Fund (real estate fi nance). Mr. Van de Perre holds an MBA in Economics and is a certified accountant (IAB).

Johny Cornillie (16). He is a former chief of the private office of the Minister-President of the Government of Flanders. Until 1997 he was CEO of Van Gansewinkel group and until 2002 Chairman of SEGHERS better technology group. He is currently a director of CVBA Arcofi n and NV Auxipar and advisor of international companies PSA-HNN andVan Gansewinkel Group. Mr. Cornillie graduated as an engineer in applied economics from the University of Leuven.

Didier De Buyst (17). He was CEO of Inter-Eco Group, an engineering and consultancy offi ce, from 1993 to 2003. He was also a Member ofthe Board of the Federaal Agentschap voor Nucleaire Controle (FederalAgency for Nuclear Monitoring) between 1997 and 2003 and Chairmanof the Audit Committee between 2002 and 2003. He is now mediator/arbitrator for (inter) national industrial disputes of a technological nature and is also a part-time professor at the Department of Architecture of the Universiteit Hogescholen Limburg. Mr. De Buyst is a civil engineer (with a Master in Engineering), holds a PhD in Engineering obtained in 1993 (University of Gent) and several degrees from the Vlerick Leuven Gent Management School and the Harvard Business School. Mr. De Buyst acts also as a guest lecturer in strategic management for the MBA students of the Vlerick Leuven Gent Management School.

Norbert Van Broekhoven (18). He was CEO of Van Broekhoven’s Algemene Ondernemingen NV. He is currently CEO of Actima NV and director and advisor of several Belgian companies. Mr. Van Broekhoven graduated as a civil engineer from the University of Leuven.

Philippe Van de Vyvere (19). Mr. Van de Vyvere is the founder, CEO and Chairman of Sea-Invest, Europe’s largest bulk and fruit transshipment company. He is currently a non-executive board member for ING Belgium and Immobel. Mr. Van de Vyvere holds a degree in Economics.

Directors whose term expired in 2006

Directors active in 2007.The 16th director will beappointed at the AnnualShareholder Meetingof 11 April 2007.


transfer of the claim of Belgacom (BICS) with regard to the historic debt of Congo to the Belgian State.

A Committee of three independent directors formulated on 24 August 2006 the following recommendation, after positive advice of the Belgian Export Credit Agency and Euler Hermes Credit Insurance:“The capital gain for Belgacom S.A. is nihil. For Belgacom Group, taking into account the 72% stake in BICS, the capital gain is estimated at 72% of EUR 2.0 million or EUR 1.44 million. The Committee is of the opinion that all current and future costs for recovering the debt should be born by the State. On ground of these elements and taking into account the fact that said debt has been totally written off in the BICS accounting books, the Committee recommends to the Board to assess that the contemplated transaction between the Belgian State and Belgacom (BICS), related to Congo’s debt towards Belgacom is not clearly unjust; to approve the transfer of the claim of EUR 49.6 million from BICS to the Belgian State for an amount of minimum EUR 2.0 million, taking into account that Belgacom needs to use its best endeavours that the costs of recovering the debt must be born by the Belgian State.”

In its meeting of August 24, 2006 the Board of Directors decided, “to assess that the contemplated transaction between the Belgian State and Belgacom (BICS), related to Congo’s debt towards Belgacom (BICS), is not clearly unjust; to approve the transfer of the claim of EUR 49.6 million from Belgacom ICS to the Belgian State for an amount of minimum EUR 2.0 million, taking into account that Belgacom needs to use its best endeavours to ensure that the costs of recovering the debt shall be borne by the Belgian State; to authorize the President & CEO, with power of subdelegation, to take all required measures to implement the transfer, and to this effect, to accomplish all required formalities and to sign all documents, acts and deeds.”

The report on the fi ndings of the Auditors, members of the Joint Auditors of Belgacom NV van publiek recht/Belgacom SA de droit public, dated October 20, 2006 states: “In the framework of our mission, we have performed the following procedures: a. We have obtained the Advice of the committee of three independent directors dated August 24, 2006 and compared the information with the reports of the independent experts. b. We have obtained the minutes of the Board of Directors meeting of August 24, 2006 and compared them with the data incorporated in the Advice. Based on the work performed, we report the following fi ndings: a. With respect to item a. above, we found that the information included in the Advice corresponds with the information included in the reports of the independent experts; b. With respect to item b. above, we found that the information included in the minutes of the Board of Directors meeting corresponds with the data incorporated in the Advice.”

Dealing CodeIn its meeting of 15 December 2005 the Board of Directors approved a change in the closed periods, due to the introduction of quarterly reporting: as from 2006 there is a closed period of 1 month preceding the announcement of interim results (quarterly and mid-year) and a closed period of 2 months before the announcement of the annual results.

ManagementPresident and Chief Executive Offi cerThe President and Chief Executive Offi cer is appointed by the Belgian State by Royal Decree deliberated in the Council of Ministers. Appointments are for a renewable six-year term, and can only be terminated by Royal Decree deliberated in the Council of Ministers. Pursuant to the 1991 Law and the Company’s Articles of Association, the President and Chief Executive Offi cer is a member of the Board of Directors. The President and Chief Executive Offi cer and the Chairman of the Board of Directors must come from different language groups

The President and Chief Executive Offi cer is entrusted with the day-to-day management and reports to the Board of Directors. In addition, pursuant to the 1991 Law and the company’s Articles of Association, the Board of Directors may, deciding by a majority of two thirdsof its members present or represented, delegate all or part of its powers to the President and Chief Executive Offi cer with the exception of:• the approval of the Management Contract with the Belgian State

and changes thereto;• the establishment of the business plan and general policy

of the company;• the supervision of the President and Chief Executive Offi cer;• 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 and Chief Executive Offi cer.

The current President and Chief Executive Offi cer is Mr. Didier Bellens. Mr. Bellens has a six year fi xed term contract starting as from March 1, 2003. If the employer terminates the contract prematurely, except for serious misconduct, a severance pay of 3 times annual gross salary(1) will be due.

Activity Report and Attendance at Board and Committee meetings

NameBoard

(total 6)ACC(1)

(total 5)NRC(2)

(total 6)SBC(3)

(total 4)Total

remuneration

Theo DILISSEN 6/6 6/6 4/4 EUR 164,000

Didier BELLENS 6/6 4/4 NR

Johny CORNILLIE 5/6 EUR 52,000

Didier DE BUYST 6/6 EUR 57,000

Pierre-Alain DE SMEDT 6/6 5/5 EUR 69,500

Carine DOUTRELEPONT 6/6 EUR 57,000

Martine DUREZ 6/6 5/6 EUR 69,500

Philip HAMPTON 5/6 4/5 EUR 72,000

Georges JACOBS 6/6 6/6 EUR 72,000

NameBoard

(total 6)ACC(1)

(total 5)NRC(2)

(total 6)SBC(3)

(total 4)Total

remuneration

Maurice LIPPENS 5/6 4/4 EUR 62,000

Michel MOLL 6/6 3/5 EUR 64,500

Oren G. SHAFFER 6/6 5/5 EUR 69,500

Robert TOLLET 5/6 3/4 EUR 59,500

Norbert VAN BROEKHOVEN 6/6 EUR 57,000

Lutgart VAN den BERGHE 6/6 6/6 EUR 72,000

Paul VAN de PERRE 5/6 5/5 EUR 64,500

Philippe VAN de VYVERE 3/6 EUR 42,000

(1) Basic annual salary + variable remuneration + post-employment benefi ts.

(1) ACC: Audit and Compliance Committee.(2) NRC: Nomination & Remuneration Committee.(3) SBC: Strategic and Business Development Committee.


The President & Chief Executive Offi cer is bound to a non competition clause of 12 months prohibition to work for any other mobile or fi xed licensed operator active on the Belgian market, and will receive an amount equal to one year salary as compensation.

Management CommitteeThe composition and the powers of the Management Committee are determined by the President and Chief Executive Offi cer. The Management Committee’s role is to assist the President and Chief Executive Offi cer in the exercise of his duties.

The Management Committee aims to decide by consensus, but in the event of disagreement, the view of the President and Chief Executive Offi cer will prevail. The Management Committee generally meets on a weekly basis.

The current members of the Management Committee, in addition to the President and Chief Executive Offi cer, are as follows:

Name Age PositionScott ALCOTT 40 Chief Operating Offi cer,

Fixed Line ServicesBridget P. COSGRAVE 45 Chief Executive Offi cer,

International Carrier ServicesAstrid DE LATHAUWER 43 Chief Human Resources Offi cerRonald EVERAERT 56 Chief Executive Offi cer &

Managing Director, Telindus GroupMichel GEORGIS 53 Chief Executive Offi cer,

Mobile Communications ServicesWilliam MOSSERAY 42 Chief Strategy Offi cer

Ray STEWART 57 Chief Financial Offi cer

The realignment of the Belgacom Group Organisation in orderto create an integrated broadband company results in a reassignmentof responsibilities in the Management Committee. In December 2006, the Board of Directors approved the following changes:• Michel Georgis, in addition to his responsibility as CEO of Proximus,

is appointed Executive Vice-President, Consumer Business Unit for both fi xed and mobile communications.

• Bridget Cosgrave is appointed Executive Vice-President, Enterprise Business Unit for both fi xed and mobile communications, in addition to her responsibility as Chairman of International Carrier Services.

• Ronald Everaert, as CEO of Telindus, will report to Bridget Cosgrave, and remains a member of the Management Committee.

• Scott Alcott is appointed Executive Vice-President Network and ITand will be responsible for developing the technological blueprintfor the integrated broadband company.

• Astrid De Lathauwer, Ray Stewart and William Mosseray remain in their current function. Mrs. De Lathauwer has also been appointed Change & Integration Leader and will manage the group’s transition towards an integrated broadband company.

For members of the Belgacom Management Committee the policy is to have a termination indemnity that is capped at a maximum of two years of remuneration after 12 years of service. Two members of the Management Committee have deviating clauses because of historical reasons, whereby one member will be paid 30 months gross salary upon termination, and the other member’s contract has no specifi c clause, in which case Belgian law prevails.

The members of the Belgacom Management Committee who are bound to a non-competition clause of 12 months prohibition to work for any other mobile or fi xed licensed operator active on the Belgian market, will receive an amount equal to 6 months salary as compensation.

Executive RemunerationThe Nomination & Remuneration Committee sets the remuneration policy and individual packages for the CEO and the members of the Management Committee. Belgacom has developed an executive remuneration policy which rewards executives competitively, taking into account Group, Line of Business and Individual performance. The company wants to position executive pay towards the median in the market for base salaries, and towards the upper quartile for total remuneration in case of sustained excellent performance. This positioning is verifi ed on an annual basis by the Nomination & Remuneration Committee, by benchmarking executive pay against a set of peer companies in the ICT sector, both in Belgium and in Europe. The remuneration philosophy strives to align management and shareholders’interests.

Short term employee benefi tsBase salaries of the CEO and the Management Committee are reviewed annually by the Nomination & Remuneration Committee, based on an extensive review of performance and potential assessment provided by the CEO, as well as external benchmarking data.

The annual bonus scheme rewards performance against a set of pre-defi ned key performance indicators, which are set by the Board of Directors upon advice of the Nomination & Remuneration Committee. For 2006, these performance indicators included fi nancial metrics as well as metrics related to new product introduction, customer satisfaction and employee commitment.

(Following on page 46)

Didier Bellens. Didier Bellens was appointed as President and Chief Executive Offi cer and Director of Belgacom in March 2003. Mr. Bellens started his career at Deloitte Haskin & Sells. He was fi nancial director of the Groupe Bruxelles Lambert until 1985 before taking up the position of Deputy General Manager of the Pargesa Holding, responsible for management of holdings, mergers and acquisitions. In 1992 he returned to the Groupe Bruxelles Lambert as Managing Director, position that he occupied until 2000. In this capacity he was responsible for strategic participations in companies such as Royale Belge, BBL and CLT. He played an instrumental role in the merger of AXA with Royale Belge, the change in ownership of BBL and the merger of CLT and UFA. Between 2000 and 2003 he acted as Chief Executive Offi cer of RTL Group where he managed the company with an emphasis on international development. He concluded the merger with Pearson Television and the IPO of RTL Group. Didier Bellens is Chairman of the Board of Directors of BICS. He is member of the Board of Directors of Proximus, AXA Belgium, VOKA-Flanders’Chamber of Commerce and Industry, and the Foundation Erasme. He is member of the Management Committee of the FEB-Federation of Enterprises in Belgium. Previously, he served as member of the Board of Directors of, amongst others, IMERYS in Paris, the Banque Bruxelles Lambert, M6 in Paris and the Banque Internationale in Luxembourg. Mr. Bellens holds a degree in Economics and Business Administration from the University of Brussels (ULB). He is also advisor to CV Capital Partners.

Scott Alcott. Scott Alcott is Chief Operating Offi cer of Belgacom’s Fixed Line Services since July 2004. Previously, Mr. Alcott had served as Belgacom’s Chief Strategy Offi cer, Chief Information and Technology

Offi cer and as General Manager of Marketing and Product Management and a Director of Skynet, and a director of Belgacom’s Multimedia Venture Capital Fund. In 1995, Mr. Alcott joined Ameritech (now SBC) as Director Marketing & Product Management – Long Distance Division, and later as Director New Product Development/Packaging. Mr. Alcott holds a B.S. in Economics from the Wharton School at the University of Pennsylvania.

Bridget P. Cosgrave. Bridget P. Cosgrave has served as CEO and previously President of the International Carrier Services of Belgacom since 2001. On top of, since June 2006, Bridget is COO a.i. of Belgacom Fixed Line Services. She joined the Board of Directors of Belgacom Mobile in 2004. In 1996, she was elected and served her full term until 2001 as the Deputy Director General of the European Telecommunications Standards Institute (ETSI). From 1993 to 1996, Ms. Cosgrave was a Project Director at BT Plc. Ms. Cosgrave has a B.A. (Hons.) from Queen’s University at Kingston, Canada and an MBA from the London Business School.

Astrid De Lathauwer. Astrid De Lathauwer has served as Chief Human Resources Offi cer for Belgacom since 2002. Ms. De Lathauwer joined Belgacom in 2000 and previously held the positions of Top Group Resources & Talent Director and HR Director of Belgacom. Prior to joining Belgacom, Ms. De Lathauwer worked in marketing and human resources with AT & T and Monsanto. Ms. De Lathauwer holds a degree in History of Art from the University of Ghent and a degree in International Politics and Diplomatic Sciences from the University of Leuven.

Members of the Belgacom Management Committee


Ronald Everaert(1). Ronald Everaert joined the board of directorsof Telindus Group in 1994 and became Chairman in April 2002.On August 27, 2003 he accepted the responsibility as President and CEO of Telindus. Since February 2006 he is also member of Belgacom Management Committee. Until early 2003, Ronald Everaert held a position as President and CEO at Mercator NV, a leading fi nancial and insurance company. Prior to that he was Managing Director at A. Johnson & Co NV, the Benelux daughter of a Swedish specialty steel manufacturer. He started his career as account-offi cer at the Chase Manhattan Bank. Ronald Everaert holds a Masters in Public Administration from Ghent University (B) as well as an MBA from the Vlerick Management School (B). He is a fellow of management programs at IFL (Stockholm), AIM (Switzerland) and North Western University (Chicago). He is also Honorary Chairman of VOKA-Chamber of Commerce of East Flanders and Boardmember of the Flemish Chinese Chamber of Commerce.

Michel Georgis. Since May 2005, Michel Georgis occupies the post of CEO of Proximus. Prior to this position, he was Chief Operations Offi cer at Proximus, where he has been working since 2000. Mr Georgis started his career at Coca-Cola Belgium. In 1991 he joined Interbrew, where he fi lled different positions before becoming Sales & Marketing Director Central & Eastern Europe. Mr Georgis holds a Master’s degree in Applied Economics from the university of Leuven.

William Mosseray. William Mosseray was appointed Belgacom Chief Strategy Offi cer in July 2004, after having served as Chief Restructuring and Change Offi cer since 2002. Mr. Mosseray joined Belgacom in 1993 as Executive Advisor to the CEO, a position he occupied until 1996 when he left for the USA to join Ameritech, the leading telecom operator in the Midwest region and Belgacom’s main private shareholder. Mr. Mosseray returned to Belgacom in 1997 and successively served as General Manager for the Special Business Division, Head of Corporate Strategy & Development and Chief Human Resources Offi cer. He obtained a law degree from the KULeuven and a tax law degree from ICHEC. Mr. Mosseray also holds an MBA from the Vlerick Leuven Ghent Management School and recently completed the Stanford Executive Program at the Stanford Business School in California.

Ray Stewart. Ray Stewart has served as the Chief Financial and Administration Offi cer of Belgacom since 1997. Mr. Stewart was employed by SBC, but became an employee of Belgacom on 1 April 2004. Prior to Belgacom, from 1994 until 1997 he was the Chief Financial Offi cer for Matav which is the incumbent Telephone Company for Hungary. From 1991 to 1994 he was the Chief Financial Offi cer for Ameritech International which was the International Business Development unit for Ameritech headquartered in Chicago.He has a Business Undergraduate degree in Accounting and a Masters of Business Administration in Finance. He is also a Certifi ed Public Accountant.

(1) Since February 2006.


From left to right: William Mosseray, Didier Bellens, Ray Stewart, Michel Georgis,Astrid De Lathauwer, Bridget P. Cosgrave, Scott Alcott and Ronald Everaert.


The amount of remuneration and other benefi ts granted directly or indirectly to the members of the Belgacom Management Committee, by Belgacom or by any other undertaking belonging to the Belgacom Group is:

(Benefi t based on gross or net remuneration, depending on the type of benefi t, employer social contribution not included):

(in EUR) Presidentand CEO

Other Members of the Management Committee

Short-term employee benefi ts (1) 1,406,211 4,107,664

(1) Basic annual salary + variable remuneration.

Long term employee benefi tsLong term employee benefi ts consist of post-employment benefi ts and equity benefi ts. The members of the Management Committee participate in a complementary pension scheme. In 2006, the company contributed an amount of EUR 448,331 for the President and CEO, and an amount of EUR 854,127 for the other members of the Management Committee in insurance premiums for post-employment benefi ts.

On an annual basis the members may also receive a stock option grant. On an individual basis, the Belgacom Management Committee received the following options:

(in options) 2006

Scott ALCOTT 17,494

Bridget P. COSGRAVE 31,409

Astrid DE LATHAUWER 23,316

Ronald EVERAERT 0

Michel GEORGIS 17,249

William MOSSERAY 17,451

Ray STEWART 31,867

Didier BELLENS 0(1)

(1) Didier Bellens was granted 102,576 options in 2006 which he refused on the basis of a common agreement with the Board regarding equity ownership by the management.

Grants vest over a period of 3 years in equal instalments, and are exercisable during a period of 7 years. One member of the the Management Committee exercised 26,000 options during 2006. On a cumulative basis, the President and CEO holds 248,969 options, and the other members of the Management Committee 586,787 options.

Board of AuditorsThe Board of Auditors of the company is composed of the following persons:• ERNST & YOUNG Réviseurs d’Entreprises S.C.C./Bedrijfsrevisoren

B.C.V., represented by Marnix Van Dooren, also Chairman of the Board of Auditors;

• Romain LESAGE, Member of the Court of Auditors, Commissaire;• Pierre RION, Member of the Court of Auditors, Commissaire;• CALLENS, GUEVAR, VAN IMPE & Co S.C.C./B.C.V., represented by

Herman VAN IMPE.

Commissaire Ernst & Young is responsible for the audit of the consolidated fi nancial statements of Belgacom and its subsidiaries. The other members of the Board of Auditors are, together with Ernst & Young, entrusted with the audit of the non-consolidated fi nancial statements of the parent company. Mr. Lesage’s mandate will expire on 30 June 2008, the mandates of Mr. Rion, Ernst & Young, and Callens, Guévar, Van Impe & Co. will expire at the annual General Shareholders Meeting in 2010.

Additional fees paid to the statutory auditorsIn accordance with the provisions of Article 134 § 2 of the Belgian Companies Code, Belgacom declares the supplementary fees that it granted during the 2006 fi nancial year to two auditors, members of the Joint Auditors: Ernst & Young Réviseurs d’entreprises S.C.C. and Callens, Guevar, Van Impe & Co. S.C.C.

The Group expensed during the year 2006 an amount of EUR 298,169 for non-mandate fees for Ernst & Young Réviseurs d’entreprises S.C.C, the Group’s auditors. This amount is detailed as follows:

(in EUR) Auditor Network of auditor

Other mandatory audit missions 91,341 54,044

Tax advice 4,375 26,661

Other missions 119,464 2,284

Total 215,180 82,989

The Group also expensed during the year 2006 an amount of EUR 7,650 for non-mandate fees paid to Callens, Guevar, Van Impe & Co. S.C.C. This amount is detailed as follows:

(in EUR) Auditor

Other mandatory audit missions 5,350

Tax advice 0

Other missions 2,300

Total 7,650


Government CommissionerThe State has appointed Mr. Roger De Borger as Government Commissioner in order to supervise, in conformity with the 1991 law, the management of Belgacom from an administrative point of view.

Departure from the Belgian Corporate Governance CodeBelgacom complies with the principles and provisions of the Belgian Corporate Governance Code, except provisions 5.3/1, 5.4/1 and 8.9. Since provision 8.9 is not relevant to Belgacom, given its current shareholder structure, the Articles of Association do not provide for shareholders representing 5% of the capital to submit proposals to the Annual General Meeting. Under the Articles of Association, shareholders must represent at least one-fi fth of the company’s share capital to be entitled to do so. Contrary to provisions 5.3/1 and 5.4/1, the Company has chosen to refl ect also in the Nomination & Remuneration Committee the balance between the directors appointed by the Belgian State and the independent directors.

ComplianceRole of Compliance at BelgacomIn the context of an increasingly complex legal and regulatory environment, compliance plays an important role in the business world.

The Belgacom Group Compliance Offi ce is responsible for coordinating the compliance activities within the Belgacom Group, explaining the rules that apply, providing the requisite tools to encourage compliance by management and ensuring a consistent approach to compliance within the Group.

All employees are expected to comply with the Code of Conduct and the various policies, which are updated at regular intervals. To raise awareness of compliance, a communication campaign was launched at the beginning of 2006 whereby all the Group’s employees received a copy of the Belgacom Code of Conduct. The Top Group Resources within the Group have all signed individual agreements to comply with the Code of Conduct.

In addition to the existing helpdesk, a “Code Focus” was set up to enable employees to anonymously report any breaches of the law, the Code of Conduct or other regulations.

Organization of compliance activitiesThe Compliance Offi ce is managed by the Head of Compliance Services, who reports directly to the Chairman of the Audit and Compliance Committee (ACC). The ACC Charter determines the ACC’s responsibility in helping and advising the Board of Directors with respect to monitoring Belgacom’s compliance with the legal and regulatory requirements, as well as internal compliance with the Code of Conduct.

The Group Compliance Council is a decision-making and advisory body for the Compliance Offi ce at an operational level. The Council is chaired by the Head of Compliance Services, and is composed of compliance managers from the main subsidiaries and individuals exercising key positions within the Group.

The Compliance ProgramTen compliance domains form the pillars of the Belgacom Compliance Program:

Code of Conduct Competition law

Corporate governance Chinese walls

Compliance with rules and regulations Privacy

Accounting practice The environment

Risk management Dealing Code

These domains were determined on the basis of the company’s specifi c activities and operational environment, and are supported by a “domain owner”. In addition to these 10 domains, various policies and procedures have been drawn up in the different legal entities that relate to other subjects or explain component aspects in more detail.

A compliance structure was developed not only at group level but also in each of the main subsidiaries, each of which is headed by a compliance manager. In consultation with the domain owners and within the framework specifi ed by the Group Compliance Offi ce, the compliance manager determines the specifi c compliance approach to be adopted within his/her subsidiary. A specifi c compliance plan, which is made up of fi ve components (policy drafting, communication, training, internal control and processes, and reporting), is drawn up for each domain.

In 2006, the Head of Compliance Services presented two reports to the Audit & Compliance Committee. Special attention was given to the Dealing Code (insider trading), dawn raid procedures and the Chinese Walls. It was decided to appoint a Chinese Wall IT Offi cer for the latter. A decision was also made to conduct, twice a year, as from 2007, a survey on compliance, covering a representative sample of employees and, in the process, gather information from the employees themselves.

In addition to its coordination task, the Compliance Offi ce is also responsible for making Belgacom Group employees aware of the necessity of being fully cognizant and complying with internal and external regulations. Several campaigns promoting compliance activities within the company have been organized to raise employee awareness in this area.

48

To remain a leading supplier of integrated solutions, the Belgacom Group strives to effectively combine its human and technological resources, with an eye to creating lasting shareholder value.

valueOne shared ambition. Growing value.

49

Shareholder informationInvestor RelationsThe mission of the Investor Relations department (IR) is to provide Belgacom’s current and potential shareholders with the best possible communication. Through a transparent and consistent dialog with inves-tors and fi nancial analysts, the Group strives for a fair share value.

As enhancement of its communication process, Belgacom reports as of 2006 on a quarterly basis, giving the market more frequently updates on facts and fi gures. The 2007 reporting dates are indicated in the fi nancial calendar.

An important objective of the IR department is to make Belgacom Group’s senior management accessible to the Belgian and international investment community. A primary goal is to ensure a two-way com-munication, where Belgacom’s management can clarify the company’s results, strategies and decisions, and where shareholders and analysts can voice the concerns and perceptions of the market.

> On 11 November 2006, the Belgacom Group organized, for the fi rst time, an Investor & Analyst Day. An occasion for investors and analysts to obtain a more detailed insight into different aspects of Belgacom. This event also gave those present an opportunity to talk in person to the Group’s senior management and a number of line managers. The day started with a presentation on the results of the third quarter 2006, followed by presentations on a wide range of subjects such as Strategy, Network, Mobile regulation, Fixed-Mobile Study, etc. Most of the presentations were given by line managers, in their respective areas of expertise. The full-day webcast of the event as well as slide shows of the presentations are available on the Belgacom Investor Relations website (http://www.belgacom.be/investor). Belgacom intends to organize a similar event every two years.

Ownership on 31 December 2006

Twice a year, following the full-year and half-year results, Belgacom organizes a road show, covering the most important money centers of Europe and the United States. In between the road shows, a wide variety of investors and analysts had the opportunity to talk to senior management in one-on-one meetings or conference calls. In addition, Belgacom participated in three major international investment conferences.

Belgacom also approaches retail shareholders by participating in the yearly VFB (Vlaamse Federatie van Beleggingsclubs en Beleggers) event.

Institutional as well as retail shareholders can always count on the support of the Investor Relations team. The website (www.belgacom.be/investor) is an integral part of the communication channel to the investment world. The “Investor Corner” contains printable versions of published reports, presentations and webcasts of conferences, scripts of conference calls and much more.

Stock market: First Market of Euronext Brussels

Ticker: BELG

ISIN: BE0003810273

National SVM code: 3810.27

Bloomberg code: BELG BB

Reuters code: BCOM

Share capitalAt the end of December 2006, the capital amounted to EUR 1 billion (fully paid up), represented by 361,775,135 shares, with no nominal value and all having the same rights, provided such rights are not suspended or cancelled. The share capital has not changed over the past fi ve years.

Authorized CapitalUnder Belgian company law, Belgacom may increase or decrease its share capital by decision of the General Shareholders Meeting, taken with a majority of 75% of the votes cast, at a meeting where at least 50% of the share capital of the Company is present or represented.

On 19 February 2004, the General Shareholders Meeting authorized the Board of Directors to increase the share capital, once or several

times, by an amount not exceeding EUR 200 million (Article 5 of the Belgacom Articles of Association). The authorization includes the power to issue convertible bonds and warrants. The consideration may take any form, including contributions in cash or in kind, incorporation of reserves or issue premiums. The authorization to the Board of Directors was granted for a renewable period of fi ve years. When using its power to issue additional capital, the Board of Directors may, by a majority of two-thirds of the votes cast, restrict or withdraw the pre-emption rights of the existing shareholders. This may also be done to the benefi t of one or more specifi c persons, whether or not such persons are employees of Belgacom or one of its subsidiaries. However, in the case of warrants, such a restriction or withdrawal may not be done primarily to benefi t specifi c persons, other than employees of Belgacom or one of its subsidiaries.

The Articles of Association have also explicitly granted the Board of Directors authority to proceed with a capital increase in any form, as well as power to withdraw or restrict the pre-emption rights of the existing shareholders in that regard in the event of a public tender offer for the securities of the company.

Without such specifi c authorization in the Articles of Association, the powers granted to the Board of Directors to increase the capital would be suspended by law as soon as Belgacom received notice from the Banking, Finance and Insurance Commission of a public tender offer for the securities of the company. This specifi c authorization has been granted to the Board of Directors for a renewable period of three years, effective upon closing of the IPO (March 2004). The powers of authorized capital are limited by law in the case of a public tender offer: the issue is capped at ten percent of the shares in existence prior to the capital increase and the issue price may not be lower than the price of the tender offer.

In addition, pursuant to the 1991 Law, all issues of shares, convertible bonds or warrants are subject to prior approval by the Belgian State(by Royal Decree deliberated in the Council of Ministers). No such issues may be made to persons other than public authorities if, as a result of the issue, the public authorities’ direct participation in the share capital at the time of the issue no longer exceeds 50% of the share capital.

50 · Shareholder information

Belgian State50% + 1 share

Belgacomown shares 7.7%

Free-Float42.3%

Changes in the share capitaland number of sharesOn 25 August 2006, the Belgacom Board of Directors approved a share buyback for a maximum amount of EUR 200 million, within the limitations decided at the General Meeting of 13 April 2005. Therefore, the share price could not be more than 5% above the highest closing price in the thirty-day trading period preceding the transaction, and not more than 10% below the lowest closing price in that same thirty-day period.

The buyback started on 28 August 2006 and was completed on 11 October 2006. In total, 6,782,656 shares were bought back at an average rounded price per share of EUR 29.49.

In the course of 2006, 138,549 treasury shares were used in a Discount Share Purchase Plan for Belgacom management. In addition 211,015 options were exercised during 2006. This brings the total number of treasury shares at the end of 2006 to 27,813,657, which represents 7.7% of the total shares.

Under Belgian law, companies are prohibited from owning more than 10% of their outstanding share capital.

Treasury shares evolution

Status 31 December 2005 21,380,565

Options exercised during 2006 -211,015

Discount Purchase Plan employees -138,549

Shares bought back in 2006 6,782,656

Status 31 December 2006 27,813,657

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 in 2005 and 2006 are cancelled.

Belgacom ownership structureOwnership

Belgacom ownership Shares

% totalshares

% voting rights

% dividend rights

Belgian State 180,887,569 50.0% 54.2% 52.5%

Belgacom own shares

27,813,657 7.7% 0.0% 3.1%

Free-Float 153,073,909 42.3% 45.8% 44.4%

Total 361,775,135 100.0% 100.0% 100.0%

Effective or potential voting rights

End 2004 End 2005 End 2006

Number of outstanding shares (effective voting rights attached to shares representing the capital) 350,699,171 340,394,570 333,961,478

Future, potential or not, voting rights resulting from rights and commitments at the conversion into or the subscription for shares to be issued

- Options 1,128,500 1,476,492 1,867,222

Total shares with effective or potential voting rights 351,827,671 341,871,062 335,828,700

Shareholder information · 51

> Institutional as well as retail shareholders can always count on the support of the Investor Relations team. The website (www.belgacom.be/investor) is an integral part of the communication channel to the investment world.

22

25

28

34

31

0

4,500

4,000

3,500

3,000

2,500

2,000

1,500

1,000

500

03/01 23/02 09/06 01/08 21/0919/04 11/11 30/12

52 · Shareholder information

Share price evolutionAlthough the Belgacom share was under considerable pressure during the fi rst half of 2006, it won back ground during the second half of 2006 and outperformed the DJ STOXX Telecommunications index.

The Belgacom share price took a serious hit after the January analyst dinner in London, at which Belgacom reminded the analysts of Belgacom TV’s impact on the Fixed line services result. Analyst models were adapted, expectations lowered.

On 24 February 2006, Belgacom announces its 2005 full year result together with the 2006 guidance, which refl ected the expected fi erce competition in the Belgian telecom market in the course of 2006. This kept the share price under pressure although the market got somewhat reassured during the roadshow which took place early March.

In April, the share price ran up for the expected dividend over the 2005 result. The Belgacom share went ex-dividend on 18 April 2006. After a short uplift in April following speculation on a deal with Vodafone, the share price sank further reaching its 2006 year low on 31 May with EUR 24.6.

End of August 2006, Belgacom announced better than expected 2006 half-year results and was even able to raise somewhat the guidance for its Mobile business. In addition, Belgacom announced a EUR 200 million share buyback, an interim dividend of EUR 100 million and the agreement with Vodafone to buy their minority stake in Proximus.The market viewed this as positive, resulting in a steadily growingshare price.

The share price, which was already supported by the share buyback, increased further on the back of Belgacom’s third quarter results announced on 10 November 2006. Not only were these better than expected by the market, Belgacom also raised its full year guidance for both Fixed Line and Mobile Communication Services.

The share price reached its 2006 high on 18 December with EUR 33.8 per share. On the last trading day of 2006, the Belgacom share closed at EUR 33.37, which means a year-over-year gain of 21%.

Belgacom share informationThe Belgacom share has been listed in a total of 53 indexes, including BEL20 and the major European/telecom indexes. The table below shows the main indicators on the Belgacom share performance.

2004(22 March - 31 Dec)

2005(1 Jan - 31 Dec)

2006(1 Jan - 31 Dec)

Closing prices (in EUR)

Closing price last trading day of year 31.80 27.55 33.37

Year high 32.49 33.62 33.80

Year low 24.34 26.94 24.60

Annual trading volume(number of shares) 191,111,739 217,819,245 241,516,832

Average trading volumeper day (number of shares) 941,437 847,546 947,125

Market Capitalization31 Dec. (in EUR billion) 11.15 9.38 11.14

Key fi gures

Earnings per share (in EUR) 2.57 2.78 2.87

Ordinary dividend per share, gross (in EUR) 1.38 1.52 1.60

Extra-ordinary dividendper share, gross (in EUR) 0.55 - -

Interim dividend per share, gross (in EUR) - - 0.29

Price/Earnings ratio 31 December 12.36 9.93 11.62

Volume (in thousands)

Price (in EUR)

Belgacom share compared to BEL20 index and Euro STOXX

Belgacom share priceBel 20 - restatedStoxx Telco - restatedBelgacom share volume

Source: Bloomberg

Normal dividend Extra dividend Interim dividend

Shareholder information · 53

Shareholder remunerationReturn to shareholdersA share buyback, approved by the Board of Directors on 25 August 2006 for a maximum amount of EUR 200 million, started on 28 August 2006 and was completed on 11 October 2006. In total, 6,782,656 shares were bought back for a total amount of EUR 200 million at a rounded average price of EUR 29.49 per share. The share buyback brings the own shares to 7.7% of the total shares.

In addition to the share buyback, the Board of Directors approved on 25 August 2006 an interim dividend of EUR 100 million or EUR 0.29 gross per share. The interim dividend was paid on 6 December 2006.

The Board of Directors decided on 1 March 2007 to propose to the Annual Shareholder meeting of 11 April 2007 an ordinary dividend of EUR 552 million (EUR 1.60 dividend per share), on top of the interim dividend paid in December 2006.

Dividend policyThere are no changes in the dividend policy whereby Belgacom intends to declare and distribute an annual dividend of 50% to 60% of its annual net income. This amount may be adjusted to refl ect one-time gains or losses, and the amount of dividends declared may vary from year to year. In determining the amount of any annual dividends to propose to the shareholders, the Board of Directors will take into account the dividend payment practices of other European telecommunications operators.

The amount of any annual dividends and the determination of whether to pay dividends in any year may be affected by a number of factors, including the Group’s business prospects, cash requirements, fi nancial performance, the condition of the market and the general economic climate, and other factors, including tax and other regulatory considerations.

Financial calendar11 April 2007 Annual General Shareholder meeting

18 May 2007 Announcement of fi rst quarter results 2007

24 August 2007 Announcement of half-year results 2007

9 November 2007 Announcement of third quarter results 2007

EUR 1.60Normal dividend per share in 2006

04 05 060

0.5

1.0

1.5

2.0

2.5

1.38

0.55 0.29

1.601.52

1.38

0.55 0.29

1.601.52

Dividend per share (in EUR)

financial report 56 > Key fi gures

57 > Management report

73 > Consolidated fi nancial statements

112 > Report of the auditor

113 > Extract from the Belgian GAAP non-consolidated fi nancial statements of Belgacom SA under public law

55

56 · Belgacom annual report 2006


Income Statement (in EUR million)Total revenue before non-recurring items 5,540 5,458 6,100Non-recurring revenue 0 238 0Total revenue 5,540 5,696 6,100EBITDA (1) before non-recurring items 2,394 2,214 2,149EBITDA (1) 2,353 2,098 2,149Depreciation and amortization -742 -726 -802Operating income (EBIT) 1,611 1,372 1,347Net fi nance revenue (costs) -27 64 104Income before taxes 1,584 1,436 1,451Tax expense -508 -339 -358Minority interests 152 139 121Net income (Group share) 922 959 973


Cash Flow and Capital Expenditures (in EUR million)Cash fl ows from operating activities 1,899 1,883 1,643Capital expenditures -556 -696 -676Cash fl ows generated by / (used in) other investing activities 78 389 -2,279Free cash fl ow (2) 1,421 1,575 -1,313Cash fl ows used in fi nancing activities -1,658 -1,102 751Net increase / (decrease) of cash and cash equivalents -237 473 -562

As of 31 December 2004 2005 2006

Balance sheet (in EUR million)Balance sheet total 5,368 5,831 7,300Non-current assets 3,963 3,808 5,504Investments, cash and cash equivalents 406 884 327Shareholders’ equity 2,223 2,221 2,391Minority interests 407 370 8Liabilities for pensions, other post-employment benefi ts and termination benefi ts 760 1,010 886Net fi nancial position 110 534 -1,636


Data per shareBasic earnings per share (EUR) 2.57 2.78 2.87Diluted earnings per share (EUR) 2.57 2.77 2.87Dividend per share, gross (in EUR) (3) 1.38 1.52 1.60Interim/special dividend per share, gross (in EUR) 0.55 0.00 0.29Weighted average number of ordinary shares 358,612,854 345,406,186 338,621,113


Data on employeesNumber of employees (full-time equivalents) (4) 16,933 16,335 18,180Average number of employees over the period 17,108 16,388 18,163Total revenue before non-recurring items per employee (EUR) 323,847 333,034 335,869Total revenue per employee (EUR) 323,847 347,577 335,869EBITDA (1) before non-recurring items per employee (EUR) 139,945 135,103 118,294EBITDA (1) per employee (EUR) 137,549 128,010 118,294

(1) Earnings Before Interests, Taxes, Depreciation and Amortization.(2) Cash fl ow before fi nancing activities.(3) 2006 dividend to be approved by the Annual General Shareholder meeting.(4) 2006: Including 2,753 Telindus employees

> key fi gures

Management Report · 57

58 > Comments on consolidated figures

58 > Income statement

58 > Revenue per business segment

58 > Operating expenses before depreciation and amortization

59 > Operating income before depreciation and amortization (EBITDA)

60 > Operating income (EBIT)

60 > Net finance revenue/cost

60 > Tax expense

60 > Minority interest

60 > Net income (Group share)

60 > Balance sheet

61 > Liquidity and capital resources

61 > Cash Flow

61 > Capital expenditures

61 > Capital resources

62 > Comments on business segment figures

62 > Fixed Line Services (FLS)

64 > Mobile Communications Services (MCS)

66 > International Carrier Services (ICS)

contents

> management report

67 > Quarterly results

67 > Belgacom Group Financials

68 > Fixed line Services – financials

69 > Fixed line Services – operationals

70 > Mobile communications services – financials

70 > Mobile communications services – operationals

71 > International carrier services - financials

71 > International carrier services – operationals

72 > Other information

72 > Rights, commitments and contingencies as of 31 December 2006

72 > Use of financial instruments

72 > Research and development activities

72 > Treasury shares

72 > Major risks and uncertainties

72 > Post-balance sheet events


> comments on consolidated fi gures

Income statementTotal revenue of the Belgacom Group increased 7.1% year-over-year to EUR 6,100 million.

Excluding non-recurring revenue, and adjusted for the contribution of entities disposed of in 2005 and new entities acquired in 2006, the Group’s revenue decreased 0.9% (EUR 51 million) to EUR 5,399 million.

Fixed Line Services revenue increased 22.6%. 2005 however includes reve-nues from disposed companies, whereas the revenue of 2006 includes the revenue contribution of Telindus Group. When adjusted for these disposed companies in 2005 and the revenue contribution of Telindus in 2006, the FLS revenue decreased 0.8%. The revenue was mainly impacted by a decline in traditional voice services, partially offset by the growth in broadband and national wholesale products.

Mobile Communications Services total revenue evolution was impacted by new, cheaper pricing plans, but the decrease was limited to 2.0%. Net

Service revenue declined 2.2%, mainly driven by higher credits and discounts granted within the framework of the Market Share Leadership Program, which resulted in positive customer indicators such as a net increase of customers, a higher percentage of active customers and a reduced churn rate.

International Carrier Services revenue increased 3.2%. This is the result of a signifi cant volume increase following the joint venture with Swisscom Fixnet AG and the outsourcing deal with MTN, effective since July 2005 and February 2006 respectively.

Revenue per business segment

Year ended 31 December

2004 2005 2006 Variance 2006 versus 2005 (in EUR million) (%) (in EUR million) (%) (in EUR million) (%) (%)

Fixed Line Services 3,092 56 2,961 54 3,630 59 22.6

Mobile Communications Services 2,239 40 2,181 40 2,136 35 -2.0

International Carrier Services 645 12 713 13 736 12 3.2

Intersegment eliminations -435 -8 -396 -7 -401 -7 1.1

Total 5,540 100 5,458 100 6,100 100 11.8


Total 5,540 5,696 6,100 7.1

Operating expenses before depreciation and amortization

Year ended 31 December Variance 2006(in EUR million) 2004 2005 2006 versus 2005

Costs of materials and charges to revenue 1,461 1,555 2,005 28.9%

Personnel expenses and pensions 993 957 1,106 15.5%

Other operating expenses 693 731 841 15.0%

Total 3,146 3,244 3,952 21.8%

Non-recurring expenses 41 355 0 -

Total 3,187 3,598 3,952 9.8%

The Group’s operating income before depreciation and amortization increased 2.4% to EUR 2,149 million. However, excluding non-recurring items (1) recorded in 2005, and adjusted for the contribution of 2006 new entities, the Group EBITDA decreased 4.0% (EUR 88 million) to EUR 2,121 million.

(1) In the fi rst half of 2005, a non-recurring revenue of EUR 238 million was booked related to the gain on the disposal of shares in Belgacom Directory Services SA. In the second half of 2005 a non-recurring expense of EUR 355 million was booked related to the termination benefi ts and other related costs in the frame of the collective agreement in respect of the work organisation.


Overall personnel expenses and pensions increased in 2006 by EUR 149 million or 15.5%. However, this increase was mainly driven by the acquisi-tion of Telindus, employing 2,753 full-time equivalents at the end of 2006.

On the other hand, 908 full-time equivalents left Belgacom in the course of 2006 within the framework of restructuring programs (564 full-time equivalents, mainly linked to BeST and the 2005 labor agreement) and natural attrition (344 full-time equivalents).

Adjusted for the contribution of entities disposed of in 2005 and new entities acquired in 2006, personnel expenses and pensions decreased 2.9% (EUR 28 million).

Other operating expensesOther operating expenses increased by 15.0% (EUR 110 million). When adjusted for the disposal of consolidated companies and the contribution of new entities acquired in 2006, other operating expenses increased 4.7% or EUR 35 million. The major driver of this increase is the cost related to the further development of Belgacom TV in 2006.

Costs of materials and charges to revenue Costs of materials and charges to revenue increased 28.9% (EUR 450 million), including the signifi cant contribution of new entities acquired in 2006. Adjusted for the contribution of entities disposed of in 2005 and new entities acquired in 2006, the costs of materials increased 1.9% or EUR 30 million. This increase was partly driven by the costs related to the revenue growth in the International Carrier Services segment. In the Mobile segment, higher interconnection and commission expenses were offset by lower roaming-out and handset costs, while within the Fixed Line segment, costs of materials and charges to revenue increased despite the revenue decline, due to the product mix evolution (growth of transit traffi c within National Wholesale, additional costs related to Belgacom TV, etc.).

Personnel expenses and pensions


(in EUR million) 2004 2005 2006

Salaries and wages 746 717 832

Social security expenses 163 163 194

Pension costs 17 16 19

Post-employment benefi ts other than pensions and termination benefi ts 39 40 31

Other personnel expenses 27 21 29

Total 993 957 1,106

Number of employees at year end (full-time equivalents) (1) 16,933 16,335 18,180

(1) Number of full-time equivalents, calculated on the basis of the consolidation percentage of subsidiaries owned less than 100%.

Operating income before depreciation and amortization (EBITDA)



Fixed Line Services 1,257 53 1,147 52 1,116 52 -2.7

Mobile Communications Services 1,135 47 1,041 47 1,000 47 -3.9

International Carrier Services 2 0 27 1 33 2 23.1

Intersegment eliminations 0 0 -1 0 0 0 -16.2

Total 2,394 100 2,214 100 2,149 100 -3.0


Non-recurring expenses -41 -355 0 -100.0

Total 2,353 2,098 2,149 2.4


The EBITDA of Fixed Line Services, excluding non-recurring items, decreased 2.7% compared to 2005. When adjusted for the disposal of consolidated companies and the contribution of new entities, the FLS EBITDA decreased 4.7%.

Mobile Communications Services EBITDA decreased 3.9% year-over-year, driven by higher credits and discounts granted to customers, partly compensated by strict cost control through operational excellence.

International Carrier Services EBITDA increased by EUR 6 million year-over-year as a consequence of increased volume and cost synergies resulting from the joint venture with Swisscom, combined with a better transit margin.

Operating income (EBIT) The operating income of the group decreased 1.8% to EUR 1,347 million, driven by the EBITDA evolution. When excluding non-recurring items, the Group operating income decreased 9.5% (EUR 141 million).

Net fi nance revenue/costThe improvement of the net fi nance revenue from EUR 64 million in 2005 to EUR 104 million in 2006 is the result of the increase of gains realized on the disposal of associates and other participating interests.

Indeed, in 2005 Belgacom disposed of its interests in satellite companies and its minority stake in Alert Services Holding following the exercise of its put option, resulting in a total gain of EUR 62 million. In 2006, gains on disposal amounted to EUR 122 million, including a gain of EUR 118 million on the disposal of Neuf Cégétel shares.

Tax expenseThe effective tax rate of the years 2005 and 2006, 23.57% and 24.65% respectively, is lower than the tax rate applicable in Belgium, 33.99%, due to non-taxable income from the disposals of consolidated and non-consolidated companies.

Minority interestThe Group’s main minority interest was Vodafone’s 25% stake in Belgacom Mobile, until this interest was acquired early November 2006.

Net income (Group share)Net income (Group share) increased from EUR 959 million in 2005 to EUR 973 million in 2006, favorably impacted by a positive evolution of the fi nancial result and lower minority interests in 2006.

Balance sheetThe acquisition of Telindus Group and the Vodafone share in Belgacom Mobile in 2006 have had a signifi cant infl uence on the evolution of the Group’s balance sheet.

Goodwill was recognized on the 2006 balance sheet primarily due to the above mentioned acquisitions.

Intangible assets and property, plant and equipment are the Group’s main assets. Year-over-year, despite the acquisition of Telindus Group, intan-

gible assets are decreasing, and property, plant and equipment are increasing very slightly due to depreciation and amortization being higher than capital expenditures. In 2005 and 2006, the capital expenditures principally concerned investments in the “Broadway project” (infrastruc-ture enabling VDSL services to be offered), Belgacom TV and the 3G mobile network. The increase in intangible assets for 2005 was due to the acquisition of Belgacom TV broadcasting rights, including the soccer rights from the Belgian Football League.

Deferred income tax assets relate mainly to tax losses carried forward that Belgacom SA has accumulated, amongst others, as a result of the non-recurring expenses related to the BeST restructuring program launched in 2002, the transfer of the pension obligations for statutory employees in 2003 and the provision recorded in 2005 resulting from the collective agreement in respect of the work organization. Based on Belga-com’s current business plan, such tax losses will be utilized during the coming years.

Trade receivables increased signifi cantly in 2006 due to the acquisition of Telindus Group.

Year-over-year, the evolution of cash and cash equivalents results from a different evolution of the cash provided by operating activities and the cash used for investing and fi nancing activities. In 2006, the Group real-ized signifi cant acquisitions only partly fi nanced through debt. This evolu-tion is presented in the consolidated cash fl ow statement of the consolidated fi nancial statements.

Shareholders’ equity increased in 2006 primarily due to net income being higher than decreases resulting from the dividends payments and the share buy-back. The decrease of minority interests is a result of the acqui-sition of Vodafone’s shares in Belgacom Mobile. These impacts are presented in the consolidated statement of changes in equity of the consolidated fi nancial statements.

In order to fi nance the purchase of Vodafone’s 25% stake in Belgacom Mobile for an amount of EUR 2 billion, Belgacom issued a EUR 1,650 million bond.

In 2004 and 2006, the liability for pensions, other post-retirement benefi ts and termination benefi ts decreased, due to the fact that payments exceeded the costs incurred for the year. This liability increased in 2005 following the establishment of a liability to cover the commitments made by the Group in a collective agreement which far exceeded the pension payments, other post-employment benefi ts and termination benefi ts for the year.

Trade payables increased in 2005 principally due to the acquisition of soccer and broadcasting rights, with an installment schedule extending beyond one year. The increase of trade payables in 2006 resulted from the acquisition of Telindus Group.


Liquidity and capital resourcesCash Flow

As of 31 December

(in EUR million) 2004 2005 2006



Cash fl ows from/(used in) other investing activities 78 389 -2,279

Cash fl ow before fi nancingactivities or “Free cash fl ow” 1,421 1,575 -1,313


Net increase/(decrease) of cashand cash equivalents -237 473 -562

Capital expenditures



Fixed Line Services 338 61 488 70 448 66 -8.2

Mobile Communications Services 205 37 195 28 214 32 9.4

International Carrier Services (1) 13 2 19 3 15 2 -22.1

Intersegment eliminations (1) 0 0 -6 -1 0 0 -100.0

Total 556 100 696 100 676 100 -2.9

(1) 2005 includes IRU - Irrevocable right of use of the Belgacom network.

Cash infl ows from operating activities generated in 2006 (EUR 1,643 million) were lower than in the previous year (EUR 1,883 million) as a result of a lower EBITDA and the acquisition in 2005 of Belgacom TV broadcasting rights, including Belgian soccer rights, payable in three years.

Exceptionally in 2006, the cash infl ows were not suffi cient to fi nance the other investing activities of the year as the Group made some signifi cant acquisitions: Telindus Group for EUR 584 million and Vodafone’s share in Belgacom Mobile for EUR 2 billion.

Cash received from the disposal of consolidated and other participating interests decreased from EUR 373 million in 2005 to EUR 272 million in 2006.

The Group fi nanced the 2006 net cash needs by decreasing the net cash position and by issuing a EUR 1,650 million bond.

The 2006 capital expenditures of Fixed Line Services decreased 8.2% year-over-year (EUR 40 million) as 2005 was highly impacted by the acquisition of Belgacom TV broadcasting rights, including Belgian soccer rights. Capital expenditures in 2006 include EUR 99 million investment related to Belgacom TV, EUR 33.5 million capital expenditure for Telindus and EUR 103 million for Broadway investments.

Mobile Communications Services capital expenditures grew 9.4% year-over-year (EUR 18 million), mainly driven by higher 3G-related invest-ments to increase the population coverage (a total investment of EUR 79.5 million in 2006).

International Carrier Services capital expenditures decreased year-over-year by EUR 4.2 million. However, the 2005 capital expenditures were impacted by the right to use the Belgacom network (IRU) after the transfer of ICS activities to the subsidiary Belgacom International Carrier Services. Excluding the IRU of EUR 6.2 million, capital expenditures increased EUR 2.0 million to EUR 15 million, mainly driven by new network investments.

Capital resourcesAs a rule, the Group mainly fi nances its development with the cash fl ows from its operations. The Group also has a USD 2.5 billion Euro Medium Term Note (“EMTN”) program and a EUR 1 billion Commercial Paper (“CP”) program. At 31 December 2006, there was an outstanding balance of EUR 1,650 million under the EMTN program, corresponding to the unsubordinated debentures newly issued in 2006 to fi nance the acquisi-tion of minority interests in Belgacom Mobile, with an average remaining maturity of 7 years. At 31 December 2006, there was no outstanding balance under the CP Program. The Group is also backed by long-term credit facilities of EUR 586 million and short-term credit facilities of EUR 518 million. These facilities are provided by a diversifi ed group of banks. At 31 December 2006, there was no outstanding balance under the long-term facilities and an outstanding balance of EUR 43 million under the short-term facilities.


> comments on business segment fi gures

Fixed Line Services (FLS) Year ended 31 December

(in EUR million) 2005 2006 Variance

Total segment revenue 2,961 3,630 22.6%

Costs of materials and charges to revenue -591 -1,038 75.7%

Personnel expenses and pensions -788 -938 19.0%

Other operating expenses -435 -538 23.7%

Total operating expenses before depreciation and amortization -1,814 -2,514 38.6%

Total segment result (1) 1,147 1,116 -2.7%

Segment result margin 38.7% 30.7% -8.0 p.p.

Non-recurring revenue 238 0

Non-recurring expense -355 0

Operating income before depreciation and amortization 1,031 1,116 8.3%

Depreciation and amortization -492 -568 15.5%

Operating income 538 547 1.7%

(1) Operating income before depreciation and amortization and before non-recurring revenue and expenses.

Year ended 31 December 2006

FLS Core Belgacom Telindus FLS Total(in EUR million) TV

Total Revenue 2,912 15 702 3,630

Operating Expenses before depreciation and amortization -1,786 -53 -675 -2,514

EBITDA 1,127 -38 27 1,116

EBITDA margin (in %) 38.7 - 3.9 30.7


2005 2006 Variance Variance(in EUR million) (%)

FLS Core 2,951 2,912 -1.3 -38

Voice Access 781 739 -5.3 -42

Voice Traffi c 717 659 -8.0 -58

Internet 429 464 8.3 35

Data 215 203 -5.7 -12

Terminals 161 148 -7.6 -12

Other retail (1) 244 239 -2.2 -5

National Wholesale 390 449 15.3 60

Others 15 11 -27.7 -4

Disposed companies 8 0 - -8

Telindus 0 702 - 702

Belgacom TV 2 15 - 13

Total revenue beforenon-recurring items (2) 2,961 3,630 22.6 669

(1) Other retail mainly includes revenues from international activities and fi xed business subsidiaries.

(2) Some minor product defi nitions were changed in 2005. Figures of the previous year have been restated accordingly.

Segment revenueTotal FLS revenue before non-recurring items increased 22.6% year-over-year (EUR 669 million). However, this includes the contribution of Telindus acquired in January 2006. The Telindus Group revenue contribution amounted to EUR 702 million, which represents 19.3% of the total FLS revenue.

When adjusted for the disposal of consolidated companies in 2005 and the contribution of new entities in 2006, FLS revenue decreased 0.8% (EUR 27 million).

The FLS core revenue decrease was limited to 1.3% (EUR 38 million).

Although traditional fi xed voice access and traffi c services continued to be impacted by competitive pressure and substitution, the year-over-year revenue decline was reduced from 7.3% last year to 6.6% in 2006 thanks to the launch mid-2005 of fl at rates and unlimited calling offers.

Internet revenues (dial-up and broadband access and connectivity) grew 8.3% year-over-year, primarily as a result of the broadband retail line increase which showed a growth of 150,618 lines in 2006.

On the data revenue side, the 5.7% year-over-year decline was mainly driven by the decrease of leased line revenue due to the switch to DSL-solutions.

National Wholesale revenue increased 15.3% year-over-year thanks to the growth of carrier broadband lines as well as increased transit traffi c.

The decrease in Other revenue was mainly driven by declining satellite activities.


Operating expenses before depreciation and amortizationAdjusted for the contribution of new entities acquired in 2006, FLS oper-ating expenses before depreciation and amortization increased 1.6% year-over-year (EUR 29 million).

Despite the revenue decline, the costs of materials and charges to revenue grew due to the product mix evolution (transit traffi c growth within National Wholesale, additional costs related to Belgacom TV, etc.).

As regards the other costs, the reduction of personnel expenses and pensions (EUR 26 million, positively infl uenced by headcount reductions but negatively impacted by the annual increases in salary levels) was offset by increasing other operating expenses (EUR 28 million, mainly costs related to the further development of Belgacom TV in 2006).

Operating income before depreciation and amortization (EBITDA)Total FLS EBITDA increased 8.3% year-over-year to EUR 1,116 million. Excluding non-recurring items recorded in 2005, and adjusted for the disposal of consolidated companies and new entities acquired in 2006, FLS EBITDA decreased 4.7% (EUR 54 million).

With 38.7%, the EBITDA margin of FLS’ core business was kept stable compared to the 38.7% margin of 2005.

Although the number of Belgacom TV customers by the end of 2006 was far above expectations, Belgacom managed to keep costs under control. During 2006, Belgacom TV had a dilutive impact of EUR 38 million on the FLS EBITDA, fully in line with the higher end of the range given as guid-ance to the market.

Telindus contributed EUR 27 million to the FLS EBITDA, with a yearly EBITDA margin of 3.9%.

Operating income (EBIT)FLS operating income increased 1.7% year-over-year to EUR 547 million. Excluding non-recurring items recorded in 2005, and adjusted for the disposal of consolidated companies and new entities acquired in 2006, the FLS EBIT decreased 11.2% (EUR 73 million). In addition to the EBITDA decline as compared with 2005, the adjusted depreciation increased 4%, mainly driven by the amortization of soccer and other broadcasting rights acquired for Belgacom TV since July 2005.

OperationalsFlat rate plans for voice traffi c launched mid-2005 enabled FLS to increase its voice traffi c market share on the Belgacom network by 4.6 p.p. in 2006, a higher growth than the gain of 3.5 p.p. in 2005.

However, despite the success of fl at-rate offers, yearly voice access line loss increased compared to last year. In 2006, Belgacom lost 162,931 lines compared to 149,888 equivalent lines in 2005. The line losses mostly affected the residential segment.

Voice access ARPU decreased 1.6% to EUR 14.2, driven by periodical customer promotions and changes in the product mix, while the traffi c ARPU year-over-year showed a 4.2% decline, mainly as a result of the new

Total access channels (in thousands)

Total retail and wholesale ADSL access channels (in thousands) (1)

rate plans, including ‘free’ calling during off-peak hours. The traffi c ARPU year-over-year decrease slowed down over the last two quarters.

During 2006, FLS signed up 139,665 Belgacom TV customers with an ARPU of EUR 12 over the full year. Thanks to an increasing paying customer base and the usage of ‘on demand’ services, the ARPU increased from EUR 11.9 in the fi rst quarter of 2006 to EUR 12.6 in the last quarter.


2005 2006 Variance

Number of access channels(in thousands)

Residential

PSTN 3,064 2,920 -4.7%

ISDN 370 360 -2.7%

ADSL, VDSL 852 985 15.6%

Total 4,287 4,265 -0.5%

Business

PSTN 254 247 -2.7%

ISDN 585 584 -0.2%

ADSL, VDSL 125 142 14.1%

Total 964 973 1.0%

Traffi c (in millions of minutes)

Residential

National 4,949 5,374 8.6%

Fixed to Mobile 803 778 -3.2%

International 352 344 -2.3%

Total 6,105 6,496 6.4%

Business

National 1,966 1,801 -8.4%

Fixed to Mobile 505 484 -4.2%

International 397 369 -7.0%

Total 2,868 2,654 -7.5%

ARPU (in EUR)

ARPU Voice Access (1) 14.5 14.2 -1.6%

ARPU Voice Traffi c (2) 13.5 13.0 -4.2%

ARPU ADSL Residential (3) 32.7 31.6 -3.6%

ARPU Net Belgacom TV (4) - 12.0 -

(1) ARPU Voice Access is equal to total voice access revenue, excluding activation revenue, divided by the average voice access channels for the period considered, divided by the number of months in that same period.

(2) ARPU Voice Traffi c is equal to total voice traffi c revenue, excluding payphone traffi c revenue, divided by the average voice access channels for the period considered, divided by the number of months in that same period.

(3) ARPU ADSL Residential is equal to total ADSL revenue divided by the average number of ADSL lines for the period considered, divided by the number of months in that same period, for the residential segment.

(4) Net ARPU Belgacom TV includes only customer-related revenue and takes into account promotional offers.

(1) Including National Wholesale unbundled lines.


Segment revenueWith EUR 2,136 million, the year-over-year decrease of MCS’ total revenue was limited to 2.0%, in line with the full year guidance.

Total service revenue decreased only slightly year-over-year thanks to the growing data services revenue, driven by higher advanced data revenue. In 2006, data, including advanced data services, represented 20.0% of the Net Service revenue, 2.5 p.p. ahead compared to last year.

Voice services revenue decreased 2.9% year-over-year, mainly explained by lower access revenue due to the shift to new bundled pricing plans, lower roaming-in revenue and the impact of lower termination rates as of November.

The additional negative impact of credits and discounts granted in 2006 in the framework of the Market Share Leadership Program, led to a Net Service revenue decline of 2.2%.

Handset revenue slightly declined compared to 2005 as the higher prices for 3G-related handsets did not fully offset the lower volumes.

Operating expenses before depreciation and amortizationMCS operating expenses before depreciation and amortization decreased 0.3% year-over-year. Within the section “cost of materials and charges to revenue”, higher interconnection and commission costs were offset by lower roaming-out and handset costs.

Despite increases related to the Universal Service Obligation contribution and higher external fees, the overall level of costs was contained thanks to the operational excellence program.

Operating income before depreciation and amortization (EBITDA)MCS EBITDA decreased 3.9% year-over-year (EUR 41 million), mainly caused by the revenue decline.

Thanks to effi cient cost control, Proximus limited the year-over-year EBITDA margin decline to under 1 p.p., i.e. 46.8%.

Operating income (EBIT)MCS operating income decreased 4.9% year-over-year to EUR 786 million.

OperationalsContinued efforts in the Market share leadership program led to an overall positive impact on the main customer performance indicators.

Despite the competitive pressure, Proximus was able to improve its customer base by 58,077 active customers, which is even more than the 55,606 active customers added during 2005.

Besides an increased customer activity rate reaching 98.2% in 2006, Proximus also enhanced the quality of its customer portfolio. The postpaid/prepaid ratio was improved to 46/54 from 42/58 in 2005. Proximus also succeeded in lowering churn from 16.6% in 2005 to 15.8% in 2006.

Active mobile customers (in thousands)

Mobile Communications Services (MCS) Year ended 31 December


Total segment revenue 2,181 2,136 -2.0%

Costs of materials and charges to revenue -688 -683 -0.6%

Personnel expenses and pensions -149 -147 -0.9%

Other operating expenses -304 -305 0.6%

Total operating expenses before depreciation and amortization -1,140 -1,136 -0.3%

Total segment result (1) 1,041 1,000 -3.9%

Segment result margin 47.7% 46.8% -0.9 p.p.

Depreciation and amortization -214 -214 -0.1%

Operating income 827 786 -4.9%

(1) Operating income before depreciation and amortization.


2005 2006 Variance Variance(in EUR million) (%)

Voice services (1) 1,839 1,786 -2.9% -53

Data services (1) 364 406 11.7% 42

Total Service revenue 2,203 2,192 -0.5% -11

Credits and discounts -126 -162 -27.9% -35

Net Service revenue 2,077 2,030 -2.2% -46

Handsets 87 86 -1.6% -1

Other revenue 17 20 17.2% 3

Total revenue 2,181 2,136 -2.0% -44

(1) Including roaming-in.



2005 2006 Variance

Number of active customers (1)

(in thousands) 4,253 4,311 1.4%

Prepaid 2,475 2,327 -6.0%

Postpaid 1,778 1,985 11.6%

Active customers as a percentageof total customers (2) 97.9% 98.2% 0.2 p.p.

Annualized churn rate (3)

(blended - variance in p.p.) 16.6% 15.8% -0.8 p.p.

ARPU (4) (in EUR)

Prepaid 19.9 19.6 -1.8%

Postpaid 71.9 68.4 -4.9%

Blended 41.2 40.9 -0.9%

Blended voice 34.3 33.2 -3.1%

Blended data 6.9 7.6 10.2%

Net ARPU (5) (in EUR)

Prepaid 18.1 17.6 -3.1%

Postpaid 68.5 63.8 -6.8%

Blended 38.7 37.7 -2.7%

Market share of active customers (6)

Prepaid 46.6% 43.0% -3.5 p.p.

Postpaid 51.1% 48.8% -2.4 p.p.

Total 48.4% 45.5% -2.9 p.p.

UoU (7) (units) 213.6 218.9 2.5%

MoU (8) (min) 165.8 164.1 -1.0%

SMS (9) (units) 47.8 54.8 14.7%

(1) Active customers are customers who have made or received at least one call or sent or received at least one SMS in the last three months.

(2) Percentage based on total number of Belgacom Mobile SIM cards in circulation.(3) Annualized churn is the total annualized number of SIM cards disconnected 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 customers for that same period.

(4) ARPU has been calculated on the basis of monthly averages for the period indicated. Monthly blended ARPU is total service revenues, excluding roaming-in and activation revenues, divided by Belgacom Mobile’s active postpaid and prepaid customer base for that period.

(5) Net ARPU is equal to ARPU minus credits and discounts.(6) 2005 Belgacom Mobile estimate replaced by actual fi gure.(7) UoU (Units of use): voice minutes of use + SMS (where 1 SMS equals 1 minute) per active

customer per month.(8) MoU (Minutes of Use): duration of all calls from or to Proximus, per active customer and per

month.(9) SMS: number of SMS messages per active customer per month.


Minutes transported by ICS(in billions)

In 2006, ICS revenue increased 3.2% compared to the previous year.

Voice revenue growth was mainly the result of higher fi xed inbound/outbound volumes generated by the Swiss partner and the outsourcing agreement signed in February 2006 with the MTN Group, a leading provider of cellular and communications services in Africa.

Non-voice revenue increased 14.4%. However, in 2005 it included a gain of EUR 3.8 million resulting from Swisscom Fixnet AG’s contribution of assets measured at fair value, which was higher than the share of assets disposed of and measured at historical cost. Independently of this, non-voice revenue increased 28% thanks to a signifi cant increase of mobile data revenues, mainly driven by SMS and signaling products.

Operating expenses before depreciation and amortizationICS operating expenses before depreciation and amortization increased year-over-year 2.4%, primarily due to higher charges to revenue following the revenue growth. Other operating expenses decreased 7% mainly due to cost synergies resulting from the joint venture.

Operating income before depreciation and amortization (EBITDA)In 2006, ICS EBITDA amounted to EUR 33 million, an increase of 23% compared with the previous year. 2005 however, was favorably impacted by settlements with foreign operators and a EUR 3.8 million gain. Inde-pendently of this, the ICS EBITDA showed an increase of 67%, thanks to the additional business from the Swiss partner, the outsourcing deal with the MTN Group, the stronger transit unit margin and the increase in mobile data.

Depreciation and amortizationAs was the case in 2005, depreciation in 2006 was also impacted by the review of the useful lifetime of some assets to refl ect new technologies. The level of depreciation and amortization costs in 2006 therefore remained stable compared to previous year.

Operating income (EBIT)The ICS EBIT was EUR 13 million, an increase of EUR 6 million compared to 2005.

International Carrier Services (ICS) (2)



Total segment revenue 713 736 3.2%

Costs of materials and charges to revenue -621 -641 3.2%

Personnel expenses and pensions -20 -20 0.3%

Other operating expenses -44 -41 -7.3%

Total operating expenses before depreciation and amortization -686 -703 2.4%

Total segment result (3) 27 33 23.1%

Segment result margin 3.8% 4.5% 0.7 p.p.

Depreciation and amortization -20 -20 0.1%

Operating income 7 13 90.9%

(3) Operating income before depreciation and amortization.

Segment revenue



Voice 675 693 2.6%

Non Voice 38 43 14.4%

Total revenues 713 736 3.2%


(in billion of minutes) 2005 2006 Variance

Total 9.57 12.21 27.5%

Total to fi xed destination 4.94 6.10 23.4%

Total to mobile destination 4.63 6.11 31.9%

BICS volumes included at 100%, for the comparison.

(1) BICS volumes included at 100%, from 1 July 2005 on, for the comparison.

fi xedmobile

(2) The year-over-year comparison of ICS results is affected by Swisscom Fixnet AG’s contribution of its international carrier activities to Belgacom International Carrier Services SA (BICS), in exchange for 28% ownership and joint control with the Belgacom Group, effective since 1 July 2005. Since that date, revenues and expenses of the ICS segment have been proportionally consolidated at 72%.


Belgacom Group Financials Quarters 2005 Quarters 2006

(in EUR million) 1 2 3 4 1 2 3 4

Group fi nancials

Total revenue before non-recurring items 1,339 1,370 1,388 1,361 1,507 1,525 1,535 1,533

Non-recurring revenue 238 0 0 0 0 0 0 0

Total revenue 1,577 1,370 1,388 1,361 1,507 1,525 1,535 1,533

EBITDA before non-recurring items 575 578 557 503 545 565 536 502

EBITDA 814 578 557 149 545 565 536 502

Depreciation and amortization -168 -174 -189 -195 -196 -203 -200 -203

Operating income (EBIT) 646 404 369 -47 349 362 337 299

Net fi nance revenue (costs) 13 42 0 9 5 -1 60 41

Income before taxes 659 446 369 -37 354 361 396 340

Tax expense -128 -122 -112 23 -103 -104 -91 -59

Net Income 532 323 257 -14 251 257 305 281

Minority interests 38 37 33 32 36 37 37 11

Net income (Group share) 494 286 224 -45 215 219 268 270

Total revenue per business segment

Fixed Line Services 753 746 724 739 909 905 890 925

Mobile Communications Services 530 555 553 543 527 542 547 520

International Carrier Services 158 175 200 180 172 178 199 187

Intersegment eliminations -102 -106 -89 -100 -101 -100 -101 -99

Total 1,339 1,370 1,388 1,361 1,507 1,525 1,535 1,533

EBITDA per business segment




Intersegment eliminations 0 0 0 0 0 0 0 0

Total 575 578 557 503 545 565 536 502

Capital expenditures per business segment




Intersegment eliminations -6 0 0 0 0 0 0 0

Total 101 125 237 234 120 166 158 232

> quarterly results


Fixed line Services – fi nancials Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 (in EUR million) 2005 2005 2005 2005 2005 2006 2006 2006 2006 2006

FLS Core 750 741 723 737 2,951 728 742 713 729 2,912

Voice Access 199 196 194 192 781 187 187 183 182 739

Voice Traffi c 190 186 168 174 717 172 166 158 163 659

Internet 105 107 107 109 429 111 116 118 120 464

Data 52 53 53 57 215 53 54 48 47 203

Terminals 41 39 40 41 161 38 36 38 39 151

Other retail 65 61 65 52 244 53 67 53 63 236

National Wholesale 94 95 94 108 390 112 113 112 113 449

Others 3 4 2 5 15 3 3 3 2 11

Disposed companies 3 5 0 0 8 0 0 0 0 0

Telindus 0 0 0 0 0 179 160 172 191 702

Belgacom TV 0 0 1 2 2 2 4 4 5 15

Total revenue before non-recurring items 753 746 724 739 2,961 909 905 890 925 3,630

Q1 Q2 Q3 Q4(in EUR million) 2006 2006 2006 2006 2006

Total FLS (without recurring items)

Revenue 909 905 890 925 3,630

Operating Expenses before depreciation and amortization -632 -614 -623 -646 -2,514

EBITDA 277 292 267 280 1,116

EBITDA margin (in %) 30.5 32.2 30.0 30.2 30.7

FLS Core

Revenue 728 742 713 729 2,912

Operating Expenses before depreciation and amortization -447 -450 -443 -446 -1,786

EBITDA 282 292 271 283 1,127

EBITDA margin (in %) 38.7 39.4 37.9 38.8 38.7

Belgacom TV

Revenue 2 4 4 5 15

Operating Expenses before depreciation and amortization -13 -15 -11 -15 -53

EBITDA -11 -11 -7 -9 -38

EBITDA margin (in %) - - - - -

Telindus

Revenue 179 160 172 191 702

Operating Expenses before depreciation and amortization -172 -149 -169 -185 -675

EBITDA 6 11 3 7 27

EBITDA margin (in %) 3.5 6.9 1.9 3.4 3.9


Fixed line Services – operationals Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2005 2005 2005 2005 2005 2006 2006 2006 2006 2006

Number of access channels (in thousands)

Residential

PSTN 3,145 3,102 3,073 3,064 3,064 3,042 2,988 2,951 2,920 2,920

ISDN 375 374 372 370 370 368 366 363 360 360

ADSL, VDSL 759 785 813 852 852 895 922 948 985 985

Total 4,279 4,261 4,258 4,287 4,287 4,305 4,276 4,262 4,265 4,265

Business

PSTN 263 261 259 254 254 252 250 249 247 247

ISDN 597 591 589 585 585 585 584 585 584 584

ADSL, VDSL 111 116 119 125 125 130 135 138 142 142

Total 971 968 967 964 964 967 969 972 973 973

Traffi c (in millions of minutes)

Residential

National 1,249 1,171 1,171 1,358 4,949 1,406 1,326 1,259 1,382 5,374

Fixed to Mobile 199 208 193 203 803 198 203 187 190 778

International 91 88 84 89 352 90 87 82 85 344

Total 1,539 1,468 1,448 1,650 6,105 1,694 1,616 1,529 1,657 6,496

Business

National 531 510 449 476 1,966 492 454 414 442 1,801

Fixed to Mobile 130 132 119 125 505 127 123 113 120 484

International 104 105 93 94 397 98 93 87 91 369

Total 765 747 661 695 2,868 717 670 614 653 2,654

ARPU (in EUR)

ARPU Voice Access 14.6 14.5 14.5 14.5 14.5 14.2 14.3 14.2 14.2 14.2

ARPU Voice Traffi c 14.2 13.9 12.7 13.3 13.5 13.3 13.0 12.5 13.0 13.0

ARPU ADSL Residential 33.3 33.4 32.7 31.9 32.7 30.7 31.8 31.8 31.7 31.6

ARPU Net Belgacom TV - - n.r. n.r. n.r. 11.9 10.1 12.4 12.6 12.0


Mobile communications services – fi nancials Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 (in EUR million) 2005 2005 2005 2005 2005 2006 2006 2006 2006 2006

Voice services (1) 444 473 472 450 1,839 441 461 456 428 1,786

Data services (1) 85 91 96 92 364 92 96 103 116 406

Total Service revenue 529 565 568 542 2,203 533 557 559 543 2,192

Credits and discounts -21 -34 -42 -29 -126 -33 -43 -35 -50 -162

Net Service revenue 508 530 525 513 2,077 500 514 523 493 2,030

Handsets 18 20 23 26 87 22 23 18 22 86

Other revenue 4 4 5 4 17 4 5 6 5 20

Total revenue 530 555 553 543 2,181 527 542 547 520 2,136

(1) Including roaming-in

Mobile communications services – operationals Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2005 2005 2005 2005 2005 2006 2006 2006 2006 2006

Number of active customers (in thousands) 4,195 4,214 4,228 4,253 4,253 4,260 4,253 4,240 4,311 4,311

Prepaid 2,485 2,492 2,485 2,475 2,475 2,447 2,407 2,346 2,327 2,327

Postpaid 1,710 1,722 1,742 1,778 1,778 1,813 1,846 1,894 1,985 1,985

Percentage active customers

on total customers 97.7% 97.8% 98.0% 98.2% 97.9% 98.2% 97.9% 97.9% 98.7% 98.2%

Annualized churn rate

(blended - variance in p.p.) 18.1% 16.1% 16.2% 16.2% 16.6% 15.6% 15.1% 16.7% 16.2% 15.8%

ARPU (in EUR)

Prepaid 19.3 20.3 21.1 19.1 19.9 18.3 20.2 20.0 20.0 19.6

Postpaid 69.1 74.8 73.5 70.3 71.9 69.3 69.7 69.7 65.1 68.4

Blended 39.6 42.5 42.5 40.3 41.2 39.8 41.5 41.9 40.3 40.9

Blended voice 33.1 35.5 35.3 33.4 34.3 32.9 34.3 34.1 31.7 33.2

Blended data 6.5 7.0 7.3 6.9 6.9 6.9 7.2 7.8 8.7 7.6

Net ARPU (in EUR)

Prepaid 18.1 18.0 18.3 18.1 18.1 17.1 17.9 18.4 16.8 17.6

Postpaid 66.9 71.4 69.4 66.2 68.5 64.8 65.0 65.4 60.3 63.8

Blended 38.0 39.8 39.2 38.0 38.7 37.2 38.2 39.1 36.4 37.7

Market share of active customers *

Prepaid 45.9% 45.9% 46.0% 46.6% 46.6% 46.3% 46.0% 45.2% 43.0% 43.0%

Postpaid 54.2% 53.3% 52.5% 51.1% 51.1% 50.1% 48.9% 47.9% 48.8% 48.8%

Total 48.9% 48.7% 48.5% 48.4% 48.4% 47.9% 47.3% 46.4% 45.5% 45.5%

UoU (units) 208.7 221.2 210.9 214.3 213.6 208.6 218.6 211.9 230.7 218.9

MoU (min) 162.6 172.7 162.3 165.6 165.8 160.6 169.1 160.3 164.3 164.1

SMS (units) 46.0 48.4 48.6 48.7 47.8 48.0 49.5 51.6 64.4 54.8

(1) Estimation based on quarterly results as communicated by competition.


International carrier services - fi nancials Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 (in EUR million) 2005 2005 2005 2005 2005 2006 2006 2006 2006 2006

Voice 151 169 186 169 675 163 167 187 176 693

Non Voice 7 6 14 10 38 9 10 12 11 43

Total revenues 158 175 200 180 713 172 178 199 187 736

International carrier services – operationals Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

(in billion of minutes) 2005 2005 2005 2005 2005 2006 2006 2006 2006 2006 (1)

Total 1.72 1.86 3.07 2.93 9.57 2.87 2.92 3.18 3.24 12.21

Total fi xed 0.86 0.88 1.60 1.59 4.94 1.55 1.47 1.50 1.58 6.10

Total mobile 0.86 0.97 1.46 1.33 4.63 1.31 1.45 1.68 1.66 6.11

(1) BICS volumes included at 100%, for the comparison.


Rights, commitments and contingencies as of 31 December 2006Disclosures related to rights, commitments and contingencies are reported in note 35 of the consolidated fi nancial statements.

Use of fi nancial instrumentsDisclosures related to the use of fi nancial instruments are reported in note 22 of the consolidated fi nancial statements.

Research and development activitiesIn 2006, the research and development activities were mainly focused on:

• Improving existing services such as fast Internet and television over IP in terms of providing additional functionalities and solutions without internal cabling;

• Creating new services such as Voice over IP, Fixed and Mobile conver-gence;

• Improving communication and sales channels towards customers (Belgacom website, TV content, etc.)

• Introducing new technologies (such as Ethernet) throughout the whole network, new xDSL developments, DWDM, and SOA architecture.

The Group is working together with universities and industrial partners on a new Multimedia Content Distribution Platform and a number of other projects in the fi elds of video, multimedia and home networking.

Finally, the Group is participating in various projects at the I.B.B.T. (Inter-disciplinair Instituut voor Breedband Technologie – Interdisciplinary Insti-tute for Broadband Technology). This institute was set up by the Flemish government with the aim of developing information and communication technology (ICT), with special emphasis on broadband access applica-tions.

Treasury sharesDisclosures related to treasury shares are reported in note 16 of the consolidated fi nancial statements.

Major risks and uncertaintiesThe Group’s future revenues and profi ts depend on market growth, tech-nology evolution as well as the continuing strong competition in Belgium reinforced by the presence of MVNO’s. This competition could lead to further tariff reductions with possible supplementary promotions.

The Group will continue to build a superior offer for its customers through servicing management and through the development of new products and services. This will be done through additional investments.

Moreover, thanks to the acquisition of the Vodafone 25% stake in Belgacom Mobile SA, the Group will be able to offer fully integrated solu-tions, to develop joint products and services to respond to market evolu-tion towards convergence.

Some of the tariffs are subject to approval by or are determined by the B.I.P.T. (Belgian telecom regulator) and the European Commission, which may have an infl uence on pricing, revenues and profi ts.

Post-balance sheet eventsDisclosures related to post-balance sheet events are reported in note 43 of the consolidated fi nancial statements.

> other information

99 > Note 20. Other current payables

99 > Note 21. Derivatives

100 > Note 22. Financial risk management objectives and policies

102 > Note 23. Net revenue

102 > Note 24. Other operating revenue

102 > Note 25. Non-recurring revenue

102 > Note 26. Costs of materials and charges to revenue

102 > Note 27. Personnel expenses and pensions

102 > Note 28. Other operating expenses

103 > Note 29. Non-recurring expenses

103 > Note 30. Depreciation and amortization

103 > Note 31. Net finance income/(costs)

103 > Note 32. Earnings per share

103 > Note 33. Dividends paid and proposed

104 > Note 34. Related party disclosures

105 > Note 35. Rights, commitments and contingent liabilities

106 > Note 36. Cross-border lease arrangements

107 > Note 37. Net financial positionof the Group

107 > Note 38. Fair value of financial instruments

108 > Note 39. Share-based Payment

109 > Note 40. Relationship with the auditors

109 > Note 41. Segment reporting

111 > Note 42. Recent IFRS pronouncements

111 > Note 43. Post balance sheet events

74 > Consolidated income statement

75 > Consolidated balance sheet

76 > Consolidated cash flow statement

77 > Consolidated statement of changes in equity

78 > Notes to the consolidated financial statements

78 > Note 1. Corporate information

78 > Note 2. Significant accounting policies

83 > Note 3. Goodwill

84 > Note 4. Intangible assets with finite useful life

85 > Note 5. Property, plant and equipment

86 > Note 6. Investments in subsidiaries and joint ventures

90 > Note 7. Enterprises accounted for under the equity method

91 > Note 8. Other participating interests

91 > Note 9. Income taxes

93 > Note 10. Assets and liabilities for pensions, other post-employment benefits and termination benefits

96 > Note 11. Other non-current assets

96 > Note 12. Trade receivables

96 > Note 13. Other current assets

96 > Note 14. Investments

96 > Note 15. Cash and cash equivalents

96 > Note 16. Equity

97 > Note 17. Interest-bearing liabilities

99 > Note 18. Provisions

99 > Note 19. Other non-current payables

Consolidated fi nancial statements · 73

contents

> consolidated fi nancial statements


(in EUR million) Note 2004 2005 2006

Net revenue 23 5,415 5,384 6,022

Other operating revenue 24 125 74 78

Non-recurring revenue 25 0 238 0

Total revenue 5,540 5,696 6,100

Costs of materials and charges to revenue 26 -1,461 -1,555 -2,005

Personnel expenses and pensions 27 -993 -957 -1,106

Other operating expenses 28 -693 -731 -841

Non-recurring expenses 29 -41 -355 0

Total operating expenses before depreciation and amortization -3,187 -3,598 -3,952

Operating income before depreciation and amortization 2,353 2,098 2,149

Depreciation and amortization 30 -742 -726 -802

Operating income 1,611 1,372 1,347

Finance revenue 37 90 154

Finance costs -64 -26 -50

Net fi nance revenue/(costs) 31 -27 64 104

Loss from enterprises accounted for using the equity method 7 -1 0 0


Tax expense 9 -508 -339 -358

Net income 1,075 1,098 1,093

Minority interests 16 152 139 121

Net income (group share) 922 959 973

Basic earnings per share (in EUR) 32 2.57 2.78 2.87

Diluted earnings per share (in EUR) 32 2.57 2.77 2.87

Weighted average number of ordinary shares 32 358,612,854 345,406,186 338,621,113

Weighted average number of ordinary shares for diluted earnings per share 32 358,698,931 345,572,258 338,774,209

> consolidated income statement (year ended 31 December)



ASSETS


Goodwill 3 30 0 1,760

Intangible assets with fi nite useful life 4 471 602 590

Property, plant and equipment 5 2,658 2,497 2,527

Enterprises accounted for under the equity method 7 26 0 0

Other participating interests 8 211 198 234

Deferred income tax assets 9 476 440 351

Pension assets 10 6 5 5

Other non-current assets 11 86 65 36

Current assets 1,405 2,022 1,796

Inventories 53 61 83

Trade receivables 12 844 947 1,207

Current income tax assets 9 50 67 97

Other current assets 13 52 64 81

Investments 14 81 86 91

Cash and cash equivalents 15 325 798 236

Total assets 5,368 5,831 7,300

LIABILITIES AND EQUITY

Equity 16 2,630 2,591 2,399

Shareholders’ equity 16 2,223 2,221 2,391

Issued capital 1,000 1,000 1,000

Treasury shares -271 -564 -754

Restricted reserve 100 100 100

Remeasurement to fair value 59 68 68

Stock compensation 2 4 5

Retained earnings 1,332 1,614 1,972

Foreign currency translation 0 0 1

Minority interests 16 407 370 8

Non-current liabilities 1,294 1,542 3,053

Interest-bearing liabilities 17 303 296 1,917

Liability for pensions, other post-employment benefi ts and termination benefi ts 10 760 1,010 886

Provisions 18 191 193 208

Deferred income tax liabilities 9 38 42 38

Other non-current payables 19 2 1 4

Current liabilities 1,445 1,698 1,848

Interest-bearing liabilities 17 58 111 71

Trade payables 782 1,038 1,086

Income tax payables 9 224 202 189

Other current payables 20 381 347 502

Total liabilities and equity 5,368 5,831 7,300

> consolidated balance sheet (as of 31 December)



Cash fl ow from operating activitiesNet income (group share) 922 959 973Adjustments for:• Minority interests 16 152 139 121• Depreciation and amortization on intangible assets and property, plant and equipment 4, 5 742 726 802• Increase of impairment on intangible assets and property, plant and equipment 4, 5 20 5 16• Increase of provisions 9 21 36• Deferred tax expense 9 162 39 75• Increase of impairment on participating interests 22 0 0• Loss from investments accounted for using the equity method 7 1 0 0• Fair value adjustments on fi nancial instruments 7 3 -12• Gain on disposal of consolidated companies 6 0 -249 0• Gain on disposal of other participating interests and enterprises accounted for using the equity method 31 -1 -63 -122• Gain on disposal of property, plant and equipment -37 -12 -15• Other non-cash movements -13 3 2Operating cash fl ow before working capital changes 1,988 1,570 1,876

Decrease/(increase) in inventories -4 -10 12Decrease/(increase) in trade receivables 29 -169 -22Increase in current income tax assets -15 -17 -26Decrease/(increase) in other current assets 0 -13 5Increase/(decrease) in trade payables -28 336 -70Increase/(decrease) in income tax payables 26 -18 -16Increase/(decrease) in other current payables 11 -23 36Increase/(decrease) in net liability for pensions, other post-employment benefi ts and termination benefi ts 10 -79 249 -128Decrease in other non-current payables and provisions -30 -22 -24Decrease/(increase) in working capital, net of acquisitions and disposals of subsidiaries -88 313 -234

Net cash fl ow provided by operating activities (1) 1,899 1,883 1,643

Cash fl ow from investing activitiesPurchase of intangible assets and property, plant and equipment 3, 4, 5 -556 -696 -676Cash paid for acquisitions of other participating interests 0 -9 0Cash paid for consolidated companies, net of cash acquired 0 0 -2,592Dividends received from non-consolidated companies 31 15 0 7Cash received from sales of consolidated companies, net of cash disposed of 6 0 237 0Cash received from sales of intangible assets and property, plant and equipment 60 26 34Cash received from sales of other participating interests and enterprises accountedfor using the equity method and from other non-current assets 4 136 272Net cash used in investing activities -478 -308 -2,955

Cash fl ow before fi nancing activities 1,421 1,575 -1,313

Cash fl ow from fi nancing activitiesDividends paid to shareholders 33 -395 -679 -614Dividends paid to minority interests 16 -192 -176 -8Net acquisition of treasury shares -883 -292 -191Purchase of investments -43 -9 -4Increase of shareholders’ equity 0 1 0Issuance/(repayment) of long term debt -142 -56 1,635Issuance/(repayment) of short term debt -3 110 -67Net cash provided by/(used in) fi nancing activities -1,658 -1,102 751

Net increase/(decrease) of cash and cash equivalents -237 473 -562

Cash and cash equivalents at 1 January 562 325 798

Cash and cash equivalents at 31 December 15 325 798 236

(1) Net cash fl ow from operating activities includes the following cash movements: Interest paid -34 -21 -23 Interest received 17 22 18 Income taxes paid -239 -316 -313

> consolidated cash fl ow statement (year ended 31 December)


> consolidated statement of changes in equity

Foreign Remeasu- Stock Share- Issued Treasury Restricted currency rement to Compen- Retained holders’ Minority Total(in EUR million) capital shares reserve translation fair value sation Earnings Equity interests Equity

Balance at 31 December 2003 1,000 -325 100 32 0 0 1,742 2,548 446 2,995Fair value changes in available-for-sale investments 0 0 0 28 0 0 0 28 0 28Equity changes not recognised in the income statement 0 0 0 28 0 0 0 28 0 28Net income 0 0 0 0 0 0 922 922 152 1,075Total recognised income and expense 0 0 0 28 0 0 922 950 152 1,102

Dividends to shareholders (relating to 2003) 0 0 0 0 0 0 -395 -395 0 -395Dividends of subsidiaries to minority interests 0 0 0 0 0 0 0 0 -192 -192Treasury shares• Price adjustment on treasury shares acquired in 2003 0 22 0 0 0 0 0 22 0 22• Cancellation of treasury shares acquired in 2003 0 303 0 0 0 0 -303 0 0 0• Acquisition of treasury shares 0 -950 0 0 0 0 0 -950 0 -950• Sale of treasury shares under a discounted share purchase plan 0 45 0 0 0 0 0 45 0 45• Cancellation of treasury shares acquired in 2004 0 633 0 0 0 0 -633 0 0 0Stock options• Stock options granted and accepted 0 0 0 0 0 5 0 5 0 5• Deferred stock compensation 0 0 0 0 0 -5 0 -5 0 -5• Amortization deferred stock compensation 0 0 0 0 0 2 0 2 0 2Total transactions with equity holders 0 54 0 0 0 2 -1,332 -1,276 -192 -1,468

Balance at 31 December 2004 1,000 -271 100 59 0 2 1,332 2,223 407 2,630Fair value changes in available-for-sale investments 0 0 0 8 0 0 0 8 0 8Equity changes not recognised in the income statement 0 0 0 8 0 0 0 8 0 8Net income 0 0 0 0 0 0 959 959 139 1,098Total recognised income and expense 0 0 0 8 0 0 959 967 139 1,106

Dividends to shareholders (relating to 2004) 0 0 0 0 0 0 -679 -679 0 -679Dividends of subsidiaries to minority interests 0 0 0 0 0 0 0 0 -176 -176Treasury shares• Exercise of stock options 0 4 0 0 0 0 0 4 0 4• Acquisition of treasury shares 0 -300 0 0 0 0 0 -300 0 -300• Sale of treasury shares under a discounted share purchase plan 0 3 0 0 0 0 1 4 0 4Stock options• Stock options granted and accepted 0 0 0 0 0 1 0 1 0 1• Deferred stock compensation 0 0 0 0 0 -1 0 -1 0 -1• Amortization deferred stock compensation 0 0 0 0 0 2 0 2 0 2• Exercise of stock options 0 0 0 0 0 -1 1 0 0 0Total transactions with equity holders 0 -292 0 0 0 1 -677 -968 -176 -1,145

Balance at 31 December 2005 1,000 -564 100 68 0 4 1,614 2,221 370 2,591Fair value changes in available-for-sale investments 0 0 0 1 0 0 0 1 0 1Currency translation differences 0 0 0 0 1 0 0 1 0 1Equity changes not recognised in the income statement 0 0 0 1 1 0 0 1 0 1Net income 0 0 0 0 0 0 973 973 121 1,093Total recognised income and expense 0 0 0 1 1 0 973 974 121 1,095

Dividends to shareholders (relating to 2005) 0 0 0 0 0 0 -517 -517 0 -517Interim dividends to shareholders (relating to 2006) 0 0 0 0 0 0 -97 -97 0 -97Dividends of subsidiaries to minority interests 0 0 0 0 0 0 0 0 -8 -8Acquisition of minority interests 0 0 0 0 0 0 0 0 -474 -474Treasury shares• Exercise of stock options 0 6 0 0 0 0 0 5 0 5• Acquisition of treasury shares 0 -200 0 0 0 0 0 -200 0 -200• Sale of treasury shares under a discounted share purchase plan 0 4 0 0 0 0 0 4 0 4Stock options• Stock options granted and accepted 0 0 0 0 0 1 0 1 0 1• Deferred stock compensation 0 0 0 0 0 -1 0 -1 0 -1• Amortization deferred stock compensation 0 0 0 0 0 2 0 2 0 2• Exercise of stock options 0 0 0 0 0 -1 1 0 0 0Total transactions with equity holders 0 -191 0 0 0 1 -614 -804 -482 -1,286

Balance at 31 December 2006 1,000 -754 100 68 1 5 1,972 2,391 8 2,399


Note 1. Corporate informationThe consolidated fi nancial statements of Belgacom SA (hereafter “the Group”) at 31 December 2006, 2005 and 2004 were approved by the Board of Directors on 1 March 2007.

Belgacom SA is a “Limited Liability Company of Public Law” registered in Belgium. The transformation of Belgacom SA from “Autonomous State Company” into a “Limited Liability Company of Public Law” was imple-mented by the Royal Decree of 16 December, 1994. Belgacom SA headquar-ters are located at Boulevard du Roi Albert II, 27 1030 Brussels, Belgium.

The main activities of the Group are: Fixed Line Services, Mobile Commu-nications Services and International Carrier Services. Further information concerning the business segments is included under note 41.

The number of employees of the Group (in full time equivalents) amounted to 18,180 at 31 December 2006, 16,335 at 31 December 2005 and 16,933 at 31 December 2004. For the year 2006, the average number of headcount of the Group was 113 management personnel, 15,559 employees, 2,702 workers and 13 of other categories.

Note 2. Signifi cant accounting policiesBasis of preparationThe accompanying consolidated fi nancial statements as of 31 December 2006 and for the year then ended have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as adopted for use in the European Union. In addition, the Group has early adopted IFRS 2 “Share-Based Payment” in 2004. The Group did not early adopt any other IASB standards or interpretations.

The consolidated fi nancial statements have been prepared on an historical cost basis, except for the measurement at fair value of derivatives and available-for-sale fi nancial assets. The carrying values of assets and liabili-ties that are hedged with fair-value hedges are adjusted to record the change in the fair value attributable to the risks that are being hedged.

Changes in accounting policiesThe accounting policies applied are consistent with those of the previous fi nan-cial years except that the Group applied the new or revised IFRS standards and interpretations as adopted by the European Union that became mandatory on or after 1 January 2006. Some minor changes in accounting policies resulted from the revised IAS 19 (“Employee Benefi ts”), IAS 21 (“Effects of Changes in Foreign Exchange Rates”), IAS 39 (“Financial Instruments: Recognition and Measurement”) and the new interpretations, IFRIC 4 (“Determining whether an Arrangement Contains a Lease”) and IFRIC 6 (“Liabilities Arising from Partici-pating in a Specifi c Market – Waste Electrical and Electronic Equipment”). The initial application of these revised or new interpretations did not have an effect on the fi nancial statements for the current period or each other period presented. They did however give rise to additional disclosures.

Basis of consolidationThe consolidated fi nancial statements comprise the fi nancial statements of Belgacom SA and its subsidiaries and joint ventures as well as the

Group’s share of results in associates. Notes 6 and 7 list the Group’s subsidiaries, joint ventures and associates.

Subsidiaries are those entities controlled by the Group. Control exists when Belgacom has the power to govern the fi nancial and operating poli-cies of an entity so as to obtain benefi ts from its activities. The invest-ments in subsidiaries are consolidated from the date on which control is transferred to the Group and cease to be consolidated from the date on which control is transferred out of the Group. Inter-company balances and transactions, and resulting unrealized profi ts or losses between Group companies are eliminated in consolidation. When necessary, accounting policies of subsidiaries are adjusted to ensure that the consolidated fi nan-cial statements are prepared using uniform accounting policies.

Companies that are jointly controlled (defi ned as those entities in which the Group has joint control through a contractual arrangement requiring unanimous consent of the parties sharing control) are included using the proportionate consolidation method, from the date on which joint control is established and until the date on which the Group ceases to have joint control over the joint venture. The Group’s share of the assets, liabilities, expenses, income and cash-fl ow of joint ventures are combined on a line-by-line basis with similar items in the consolidated fi nancial statements. The Group’s proportionate share of the inter-company balance and trans-actions and resulting unrealized profi ts or losses between Group compa-nies and jointly controlled entities are eliminated in consolidation.

Associated companies in which the Group has a signifi cant infl uence, defi ned as an investee in which Belgacom has the power to participate in its fi nancial and operating policy decisions (but not to control the investee), are accounted for using the equity method. Under that method, the investments held in associates are initially recorded at cost and the carrying amount is subsequently adjusted to recognize the Group’s share in the profi t or losses of the associate as from the date of acquisition. These investments and the equity share of results for the period are shown in the balance sheet and income statement as investments in enterprises accounted for under the equity method and share in the result of the enterprises accounted for using the equity method, respectively.

Subsidiaries and joint ventures acquired and held exclusively with a view of disposal within twelve months are consolidated and presented in the balance sheet as assets and liabilities held for sale.

JudgmentsIn the process of applying the Group’s accounting policies, management has made the following judgments, apart from those involving estima-tions, which have the most signifi cant effect on the amounts recognized in the fi nancial statements:

Cross-border lease arrangementsThe Group holds several cross-border lease arrangements with foreign investors relating to part of its fi xed and mobile switches equipment. The Group determined that these arrangements in substance do not involve a lease and that the related lease debts and deposits must not be recognized in the fi nancial statements because they do not meet the defi nition of an asset and a liability under IFRS. More details are given in note 36.

> notes to the consolidated fi nancial statements


Acquisition of minority interests in Belgacom MobileThe Group acquired the remaining minority interests in Belgacom Mobile SA. The Group elected to record the excess of the acquisition price over the balance of minority interests at acquisition date as goodwill in the balance sheet.

Estimation uncertaintyEstimates that have been made at each reporting date refl ect conditions that existed at those dates (e.g. market prices, interest rates and foreign exchange rates). Although these estimates are based on management’s best knowledge of current events and actions that the Group may under-take, actual results may differ from those estimates.

The key assumptions concerning the future and other key sources of esti-mation uncertainty at the balance sheet date, that may have a signifi cant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next fi nancial year, are discussed in note 3 (Goodwill), note 8 (Other participating interests) and note 10 (Assets and liabilities for pensions, other post-employment benefi ts and termination benefi ts).

Foreign currency translationForeign currency transactionsThe presentation currency for the Group is the Euro. Foreign currency transactions are translated, on initial recognition, at the foreign exchange rate prevailing at the date of the transaction. Monetary assets and liabili-ties denominated in foreign currencies are translated into the functional currency of the entity at the balance sheet date using the exchange rate at that date. Net exchange differences on the translation of monetary assets and liabilities are classifi ed in “other operating expenses” in the income statement in the period in which they arise.

Foreign operationsSome foreign subsidiaries and joint-ventures operating in non-EURO coun-tries are considered as foreign operations that are integral to the operations of the reporting enterprise. Therefore, monetary assets and liabilities are translated using the exchange rate at balance sheet date, non-monetary assets and liabilities are translated at the historical exchange rate, except for non-monetary items that are measured at fair value in the domestic currency that are translated at the exchange rate when the fair value was determined. Revenue and expenses of these entities are translated at the weighted average exchange rate. The resulting exchange differences are classifi ed in “other operating expenses” in the income statement.

For other foreign subsidiaries and joint-ventures operating in non-EURO countries, assets and liabilities are translated using the exchange rate at balance sheet date. Revenue and expenses of these entities are translated at the weighted average exchange rate. The resulting exchange differences are taken directly to a separate component of equity. On disposal of such entity, the deferred cumulative amount recognized in equity relating to that particular foreign operation is recognized in the income statement.

All exchange differences arising from a monetary item that forms part of the Group’s net investment in such entity are recognized in the same separate component of equity.

GoodwillThe excess of consideration paid over the Group’s interest in the net fair value of identifi able assets, liabilities and contingent liabilities acquired in business combinations (“Goodwill”) is recognized as an asset. Goodwill arising from business combinations that occurred prior to 31 March 2004 have been amortized until 31 December 2004 over their estimated life-time varying from 5 years to 15 years. Such goodwill is stated at cost less accumulated amortization and impairment losses. The amortization of goodwill until 31 December 2004 is classifi ed in “depreciation and amor-tization” in the income statement. As of 2005, this goodwill is no longer amortized but is subject to an annual impairment test.

Goodwill arising from business combinations that occurred after 31 March 2004 is stated at cost less accumulated impairment losses.

Intangible assets with fi nite useful lifeIntangible assets consist primarily of the Global System for Mobile communication (“GSM”) license, the Universal Mobile Telecommunication System (“UMTS”) license, internally developed software, customer bases and trade names acquired in business combinations and other intangible assets such as football rights and broadcasting rights and externally developed software.

The Group capitalizes certain costs incurred in connection with developing or purchasing software for internal use when they meet the criteria set out in IAS 38. Capitalized software costs are included in internally generated and other intangible assets and are amortized over three to fi ve years.

Intangible assets with fi nite life acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a busi-ness combination is their fair value at the date of acquisition.

Intangible assets with fi nite useful life are stated at cost less accumulated amortization and impairment losses. The residual value of such intangible assets is assumed to be zero. Customer bases and trade names acquired in business combinations are amortized on the basis of the expected pattern of economic benefi ts over their estimated useful life. GSM and UMTS licences, other intangible assets and internally generated assets with fi nite useful life are amortized on a straight-line basis over their estimated useful life. Amortization commences when the intangible asset is ready for its intended use.

The useful life of the GSM and UMTS intangible assets has been deter-mined based on the license terms.

The useful life of football rights and broadcasting rights has been deter-mined based on the term of the individual underlying contracts.

The useful lives are assigned as follows:

(in years) Useful life

GSM/UMTS licenses 15 to 20

Customer bases and trade names acquired 3 to 5

Other intangible assets and internally generated assets, including software 3 to 20

The amortization period and the amortization method for an intangible asset with fi nite useful life is reviewed at least at each fi nancial year-end. Changes in the expected useful life or the expected pattern of consump-tion of future economic benefi ts embodied in the asset are accounted for by changing the amortization period or method, as appropriate, and treated as changes in accounting estimates.

Property, plant and equipmentProperty, plant and equipment are stated at cost less accumulated depre-ciation and accumulated impairment losses. The cost of additions and substantial improvements to property, plant and equipment is capitalized. The cost of maintenance and repairs of property, plant and equipment is charged to operating expenses when they do not extend the life of the asset or do not signifi cantly increase its capacity to generate revenue. The cost of an item of property, plant and equipment includes the costs of its dismantlement, removal or restoration, the obligation for which the Group incurs as a consequence of installing the item.

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefi ts are expected from its use or disposal. Any gain or loss arising on de-recognition of the asset (calcu-lated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the income statement in the year the asset is derecognised.

Depreciation of an asset begins when the asset is ready for its intended use. Depreciation is calculated using the straight-line method over the estimated useful life of the asset.


The useful lives are assigned as follows:

(in years) Useful life

Land and buildings

• Land indefi nite

• Buildings and constructions 5 to 33

Technical and network equipment

• Switches 3 to 10

• Cables and Operational support systems 4 to 20

• Transmission 4 to 10

• Equipment installed at client premises 2 to 5

• Equipment for data transfer business and for commercial use 3 to 5

• Mobile antennas 6

Furniture and vehicles

• Furniture and offi ce equipment 3 to 10

• Vehicles 4 to 5

Other tangible assets 2 to 33

Leasehold improvements are depreciated over the shorter of their esti-mated useful life or the remaining term of the lease.

The asset’s residual values, useful life and depreciation methods are reviewed, and adjusted if appropriate, at each fi nancial year end.

Costs of material, personnel expenses and other operating expenses are shown net of work performed by the enterprise that is capitalized in respect of network construction.

Interests incurred during the construction process of assets are not capi-talised but immediately expensed.

Impairment of assetsThe Group reviews its assets at each balance sheet date for any indication of impairment.

The Group compares at least once a year the carrying value with the esti-mated recoverable amount of intangible assets under construction and cash generating units including goodwill. The Group performs this annual impairment test during the fourth quarter of each year.

When indication of impairment exists or when annual impairment testing for an asset or a cash generating unit is required, an impairment loss is recognized when the carrying value of the asset or cash generating unit exceeds the estimated recoverable amount, being the higher of the asset’s or cash generating unit’s fair value less costs to sell and its value in use for the Group.

In assessing value in use, the estimated future cash fl ows are discounted to their present value using a pre-tax discount rate that refl ects current market assessments of the time value of money and the risks specifi c to the asset or cash generating unit.

Impairment losses on goodwill, intangible assets and property, plant and equipment are recorded in operating expenses. An assessment is made at each balance sheet date as to whether there is any indication that previ-ously recognized impairment losses may no longer exist or may have decreased. If such indication exists, the recoverable amount is estimated. A previously recognized impairment loss is reversed only if there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognized. If that is the case, impairment losses in respect of assets other than goodwill are reversed in order to increase the carrying amount of the asset to its recoverable amount. That increased amount cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognized for the asset in prior years. Such reversal is recognized in the income statement in operating expenses.

Deferred taxationDeferred taxation is provided for all temporary differences between the carrying amount of assets and liabilities in the consolidated balance sheet

and their respective taxation bases. Deferred taxation is not provided on differences relating to goodwill for which amortization is not deductible for taxation purposes.

Deferred tax assets associated to deductible temporary differences and unused tax losses carried forward are recognized to the extent that it is probable that taxable profi t will be available against which the deductible temporary difference or the unused tax losses can be utilized.

The carrying amount of deferred income tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that suffi cient taxable profi t will be available to allow all or part of the deferred income tax asset to be utilized. Unrecognized deferred income tax assets are reassessed at each balance sheet date and are recognized to the extent that it has become probable that future taxable profi t will allow the deferred tax asset to be recovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset will be realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance sheet date.

Provision for taxation that could arise if undistributed retained profi t of certain subsidiaries is remitted to the parent company, is only made where a decision has been taken to remit such retained profi t, i.e., where the subsidiary intends to distribute a dividend.

Pensions, other post-employment benefi ts and termination benefi tsThe Group operates several defi ned benefi t pension plans to which the contributions are made through separately managed funds. The Group also agreed to provide additional post-employment benefi ts to certain employees. The cost of providing benefi ts under the plans is determined separately for each plan using the projected credit unit actuarial valuation method. Actuarial gains and losses are recognized as income or expense when the cumulative unrecognized gains or losses for an individual plan at the end of the previous reporting period exceed 10% of the higher of the present value of the defi ned benefi t obligation and the fair value of plan assets at the beginning of the year. This excess is recognized over the average remaining service life of the employees participating in the indi-vidual plan.

The Group operates several restructuring programs that involve termina-tion benefi ts or other forms of additional compensation. The actuarial gains and losses on these liabilities are recognized in the income state-ment when incurred.

The total expense recognized in the income statement is classifi ed in personnel expenses and pensions, except the interest cost of the liability for termination benefi ts and additional compensations resulting from the collective labour agreement of 2005 that is classifi ed as fi nance cost.

Short term and long term employee benefi tsThe cost of all short-term and long-term employee benefi ts, such as sala-ries, employee entitlements to leave pay, bonuses, medical aid and other contributions, are recognized during the period in which the employee renders the related service. The Group recognizes those costs only when it has a present legal or constructive obligation to make such payment and a reliable estimate of the liability can be made.

Financial instrumentsFair value of fi nancial instrumentsThe following methods and assumptions were used to estimate the fair value of fi nancial instruments:• for investments in quoted companies and mutual funds, the fair value is

their quoted price;• for investments in non-quoted companies, fair value is estimated by

reference to recent sale transactions on the shares of these non-quoted companies and, in the absence of such transactions, by using different valuation techniques such as discounted future cash fl ow models and multiples methods;

• for investments in non-quoted companies for which no fair value can be reliably determined, fair value is based on the historical acquisition cost, adjusted for impairment losses, if any;


• for long term debts carrying a fl oating interest rate, the amortized cost is assumed to approximate fair value;

• for long term debts carrying a fi xed interest rate, the fair value is deter-mined based on the market value when available or otherwise based on the discounted future cash fl ows;

• for trade receivables, trade payables, other current assets and current liabilities, the carrying amounts reported in the balance sheet approxi-mate their fair value considering their short maturity;

• for cash and cash equivalents, the carrying amounts reported in the balance sheet approximate their fair value considering their short maturity;

• for derivatives, fair values have been estimated by using different valua-tion techniques, in particular the discounting of future cash fl ows.

Criteria for initial recognition and for de-recognition of fi nancial assets and liabilitiesFinancial instruments are initially recognized when the Group becomes party to the contractual terms of the instruments. Normal purchases and sales of fi nancial assets are accounted for at their settlement dates.

Financial assets (or a portion thereof) are de-recognized when the Group realizes the rights to the benefi ts specifi ed in the contract, the rights expire or the Group surrenders or otherwise loses control of the contrac-tual rights that comprise the fi nancial asset. Financial liabilities (or a portion thereof) are de-recognized when the obligation specifi ed in the contract is discharged, cancelled or expires.

Criteria for offsetting fi nancial assets and liabilitiesWhere a legally enforceable right of offset exists for recognized fi nancial assets and liabilities, and there is an intention to settle the liability and realize the asset simultaneously, or to settle on a net basis, all related fi nancial effects are offset.

Criteria for classifying fi nancial instruments as held to maturitySome fi nancial instruments are classifi ed as held to maturity based on the ability and the intention of the Group to keep these instruments until maturity. The Group has already a large experience of respecting that statement. This is reinforced by the fact that the fi nancial instruments classifi ed as held to maturity are very short term.

Other participating interestsOther participating interests are equity instruments in entities that are not subsidiaries, joint ventures or associates. They are initially recognized at cost, being the fair value of the consideration given and including acquisition costs associated with the investment. These interests are clas-sifi ed as available-for-sale fi nancial assets in the balance sheet.

After initial recognition, other participating interests are carried at fair value, with recognition of the changes in fair value directly in equity, until the fi nancial asset is sold, collected or otherwise disposed of, or until the asset is determined to be impaired, at which time the cumulative gain or loss previously reported in equity is included in fi nancial income or expenses. Impairment losses are classifi ed in fi nancial expenses.

Other non-current fi nancial assetsOther non-current fi nancial assets include derivatives (see below), long-term interest-bearing receivables such as loans to joint-ventures, personnel and cash guarantees and long-term investments such as notes and purchased bonds. Long-term receivables are accounted for as loans and receivables originated by the Group and are carried at amortized cost. Long-term investments are classifi ed as held-to-maturity and are carried at amortized cost. An impairment loss is recorded when the carrying amount is greater than the estimated recoverable amount, and is classi-fi ed in fi nancial expenses.

Trade receivables and other current assetsTrade receivables and other current assets are shown on the balance sheet at nominal value (generally, the original invoice amount) less the allowance for doubtful debts. Such allowance is recorded in operating expenses when

it is probable that the company will not be able to collect all amounts due. Allowances are calculated on an individual basis, and on a portfolio basis for groups of receivables that are not individually identifi ed as impaired.

InvestmentsInvestments include shares, fi xed income securities and deposits with a maturity greater than three months but less than one year.

Shares are initially recognized at cost, being the fair value of the consider-ation given and including acquisition costs associated with the invest-ment. After initial recognition, shares are treated as available-for-sale, with re-measurement to fair value recorded directly in equity until the investment is sold, collected or otherwise disposed of or until the asset is determined to be impaired, at which time the cumulative gain or loss previously reported in equity is included in fi nancial income or expenses. Impairment losses are classifi ed in fi nancial expenses.

Fixed income securities are initially recognized at cost, being the fair value of the consideration given and including acquisition costs associated with the investment. After initial recognition, fi xed income securities that are classifi ed as available-for-sale, are measured at fair value, with gains and losses on re-measurement recognized in equity until the investment is sold, collected or otherwise disposed of or until the asset is determined to be impaired, at which time the cumulative gain or loss reported in equity is included in fi nancial income or expenses. Impairment losses are classi-fi ed in fi nancial expenses. Fixed income securities that are intended to be held-to-maturity are measured at amortized cost, using the effective interest rate method.

Deposits are considered as held-to-maturity and measured at amortized cost.

Cash and cash equivalentsCash and cash equivalents include cash, current bank accounts and invest-ments with an original maturity of less than three months, and that are highly liquid.

Cash and cash equivalents are carried at amortized cost. An impairment loss is recorded in fi nancial expense when the recoverable amount at the balance sheet date is lower than the carrying amount.

Interest-bearing liabilitiesAll loans and borrowings are initially recognized at cost, being the fair value of the consideration received, net of issuance costs associated with the borrowings.

After initial recognition, debts not hedged are measured at amortized cost using the effective interest rate method, with amortization of discounts or premiums through the income statement.

Debts that are hedged with interest rate swaps (IRS) and interest rate and currency swaps (IRCS) for fair value hedge purposes are re-measured to the extent of the risk being hedged. The gain or loss attributable to the hedged risk resulting from re-measurement to fair value is recognized in fi nancial income or expense.

DerivativesThe Group makes use of derivatives such as IRS, IRCS, forward foreign exchange contracts and currency options to reduce its risks associated with interest rate and foreign currency fl uctuations on underlying assets, liabilities and anticipated transactions. The derivatives are carried at fair value under the captions other assets (non-current and current), interest-bearing liabilities (non-current and current) and other payables (non-current and current).

Any gains or losses arising from changes in fair value on derivatives during the year that do not qualify for hedge accounting are taken directly to the income statement.

The Group uses IRS and IRCS to reduce its exposure to interest rate and foreign currency fl uctuations on long-term debts. The interest coupons receivable and payable under the terms of these swaps are accrued over the period to which the coupon relates.


The table below summarizes the relationship between hedged items and hedging instruments:

Hedging Hedged Type of hedge Risk(s) beinginstrument item relationship hedged

Interest rate Fixed rate Fair value Currency andand currency debt in foreign interest rate riskswap currency

Interest rate Fixed rate Fair value Interest rate riskswap debt

Interest rate Future issuance Cash fl ow Interest rate risk swap of fi xed rate debt

Most of these swaps qualify as fair value hedges and remain within the effectiveness limits of 80% - 125%, so their revaluation matches the revalu-ation of the hedged items that both are recorded via the income statement.

Some IRS qualify as cash fl ow hedge. In this case, the effective portion of the gain or loss on the hedging instrument is recognized directly in equity, while any ineffective portion is recognized immediately in the income statement. Amounts taken to equity are transferred to the income state-ment when the hedged transaction affects the income statement.

The Group does not hold or issue derivative fi nancial instruments for trading purposes but some of its derivative contracts do not meet the criteria set by IAS 39 to be considered as hedges and are therefore treated as derivatives held-for-trading, with changes in fair value recorded in the income statement.

The Group uses currency options and forward foreign exchange contracts to manage its foreign currency exposure arising from operational contracts. Nevertheless, since the matching between these instruments and the underlying exposure is not suffi ciently effective, or the effective-ness cannot be easily demonstrated, these instruments are not accounted for as hedges and are consequently carried at fair value, with changes in fair value recognized in the income statement.

Some debts issued by the Group include embedded derivatives. Such derivatives are separated from their host contract and carried at fair value with changes in fair value recognized in the income statement. The mark-to-market effects on these embedded derivatives is neutralised by those on other derivatives.

InventoriesInventories are stated at the lower of cost and net realizable value.

Cost is determined based on the weighted average cost method except for IT equipments (FIFO method) and goods purchased for resale as part of specifi c construction contracts (individual purchase price).

For construction contracts, the percentage of completion method is applied. The stage of completion is measured by reference to the amount of contract costs incurred for work performed at balance sheet date in proportion to the estimated total costs for the contract. Contract cost includes all expenditures directly related to the specifi c contract and an allocation of fi xed and variable overheads incurred in connection with contract activities based on normal operating capacity.

LeasesLeases through which the Group acquires the right to use assets and the leasing company retains substantially all the risks and the benefi ts of ownership of the asset are classifi ed as operating leases. Operating lease payments are recognized as an expense in the income statement on a straight-line basis over the lease term.

ProvisionsProvisions are recognized when the Group has a present legal or construc-tive obligation resulting from past events, for which it is probable that an outfl ow of resources embodying economic benefi ts will be required to settle the obligation and a reliable estimate of the amount of the obliga-tion can be made. A past event is deemed to give rise to a present obliga-tion if, taking into account the available evidence, it is more likely than not that a present obligation exists at the balance sheet date.

Certain assets and improvements that are situated on property owned by third parties must eventually be dismantled, and the property must be restored to its original condition. The estimated costs associated with dismantling and restorations are recorded under property, plant and equipment and depreciated over the useful life of the asset. The total esti-mated cost required for dismantling and restoration, discounted to its present value, is recorded under provisions. Where discounting is used, the increase in the provision due to the passage in time is recognized in fi nan-cial expense in the income statement.

Assets held for saleNon-current assets held for sale are recorded at the lower of their carrying value or fair value less costs to sell, and are classifi ed as current assets.

Share based paymentsThe fair value of share options issued under the Group’s Employee Stock Option Plans is determined at grant date taking into account the terms and conditions upon which the options are granted, and by using a valuation technique that is consistent with generally accepted valuation methodolo-gies for pricing fi nancial instruments, and that incorporates all factors and assumptions that knowledgeable, willing market participants would consider in setting the price. The fair value of the share options is recog-nized in personnel expenses over their vesting period, together with an increase of the caption “stock compensation” of the shareholders’ equity for the equity part and an increase of a dividend liability for the dividend part. When the share options give right to dividends declared after granting the options, the fair value of this right is re-measured annually.

Revenue and operating expensesRevenue is recognized to the extent that it is probable that the economic benefi ts will fl ow to the Group and the revenue can be reliably measured. Specifi c revenue streams and related recognition criteria are as follows:• Revenue from wireline, carrier and mobile traffi c is recognized on usage.• Revenue from connection fees and installation fees is recognized in

income at the time of connection or installation.• Revenue from sales of communication equipment is recognized upon

delivery to the third party distributors or upon delivery by the own Belgacom shops to the end-customer.

• Revenues relating to the monthly rent or access fees, which are appli-cable to wireline and mobile revenues are recognized in the period in which the services are provided.

• Subscription fees are recognized as revenue over the subscription period on a pro-rata basis.

• Prepaid revenue such as revenue from pre-paid fi xed and mobile phone cards is deferred and recognized based on usage of the cards.

• Revenue is recognised net of expenses when the Group acts as an agent.• The cost of loyalty programs in respect of third party products granted

is recorded in the income statement on the line item “cost of materials and charges to revenue”. Accruals for loyalty programs are recorded at cost at balance sheet date.

The Group’s consolidated income statement presents operating expenses by nature. Operating expenses are reported net of work performed by the enterprise that is capitalized.

The costs of materials and charges to revenues include the costs for purchases of materials and services directly related to revenue.

Costs for commissions to dealers, advertising costs and other marketing costs are expensed as incurred.

Non-recurring revenues and operating expenses include gains or losses on the disposal of consolidated companies exceeding individually EUR 5 million in a particular year and costs of restructuring programs.


Note 3. Goodwill(in EUR million) Goodwill

As of 1 January 2004 net of accumulated amortization and impairment 38

Amortization charge for the year -8

As of 31 December 2004 net of accumulated amortization and impairment 30

Disposal of subsidiary -19

Reclassifi cations -11

As of 31 December 2005 net of accumulated amortization and impairment 0

Acquisition of Telindus Group 231

Acquisition of Infrasystems 4

Acquisition of Extenseo 1

Acquisition of minority stake in Belgacom Mobile 1,519

Acquisition of Euremis 5

As of 31 December 2006 net of accumulated amortization and impairment 1,760

(in EUR million) Goodwill

As of 31 December 2004

Cost 109

Accumulated amortization and impairment -78

Net carrying amount 30


Cost 10


Net carrying amount 0


Cost 1,770


Net carrying amount 1,760

Goodwill decreased in 2005 due to the disposal of 100% of the shares of Belgacom Directory Services SA to Promedia Comm.V. (see note 6.3), and due to reclassifi cations to intangible assets with fi nite useful life.

The purchase of the 25% minority stake of Vodafone BV in Belgacom Mobile SA led to a signifi cant increase of goodwill in 2006 resulting from the difference between the acquisition cost (EUR 2,001 million) and the minority interests in the balance sheet at acquisition date (EUR 482 million).

The acquisition of Telindus Group and some other entities in 2006 also resulted in an increase of goodwill of respectively EUR 231 million and EUR 10 million (see note 6.3).

Goodwill has been tested for impairment at the segment level because the performance, fi nancial position (including goodwill) and capital expenditures within the Group are only monitored at segment level.

The carrying amount of goodwill is allocated to the segments as follows:

(in EUR million - as of 31 December) 2004 2005 2006

Fixed Line Services 30 0 236

Mobile Communication Services 0 0 1,524

International Carrier Services 0 0 0

Total 30 0 1,760

The recoverable amount at segment level (including goodwill) is based on the value in use estimated through a discounted cash fl ow model. For the years 2007 till 2011, the free cash fl ows are based on the Five Year Plan as approved by the management and Board of Directors. For subsequent years, the data of the Five Year Plan are extrapolated based on the esti-mated consumer price indices evolution of 2% per year. Free cash fl ows of each segment are discounted at a specifi c post-tax weighted average cost of capital comprised between 7.50% and 9.00%. Pre-tax weighted average cost of capital was between 7.60% and 9.30%. The results of this analysis led to the conclusion that none of the goodwill is impaired at 31 December 2006.

Sensitivity analysis demonstrates that the value in use exceeds the net carrying value of the cash generating units (segments) if key assumptions (discount rate, long term growth rate and fi ve year business plan assump-tions) would change signifi cantly.


Note 4. Intangible assets with fi nite useful life GSM Internally Customer bases Other and UMTS generated and trade intangible (in EUR million) licenses assets names acquired assets Total

As of 1 January 2004 net of accumulated amortization and impairment 243 115 0 138 496

Additions 0 53 0 56 109

Reclassifi cations 0 -51 0 60 10

Impairment charge 0 0 0 -5 -5

Amortization charge for the year -20 -21 0 -98 -139

As of 31 December 2004 net of accumulated amortization and impairment 223 96 0 151 471

Additions 0 44 0 211 255

Acquisition of subsidiary 0 0 0 20 20

Disposals 0 0 0 -2 -3

Disposal of subsidiary 0 0 0 -4 -4

Reclassifi cations 0 0 0 20 20


Amortization charge for the year -24 -27 0 -102 -153


Additions 0 41 0 90 130

Acquisition of subsidiary 0 6 73 9 88

Disposals 0 0 0 -1 -1

Reclassifi cations 0 0 0 3 3


Amortization charge for the year -24 -55 -28 -113 -220


GSM Internally Customer bases Other and UMTS generated and trade intangible (in EUR million) licenses assets names acquired assets Total


Cost 377 240 0 538 1,155

Accumulated amortization and impairment -154 -144 0 -387 -684

Net carrying amount 223 96 0 151 471


Cost 377 283 0 810 1,470

Accumulated amortization and impairment -177 -170 0 -520 -867



Cost 377 320 73 921 1,690

Accumulated amortization and impairment -201 -215 -28 -656 -1,100


The license fees relate to the Global System for Mobile communication (“GSM”) and Universal Mobile Telecommunication System (“UMTS”). In 1994, the Group acquired a GSM license in Belgium for an amount of EUR 226 million. Amortization started in 1995 over the useful life of the license (15 years). In March 2001, the Group acquired an UMTS license in Belgium for an amount of EUR 150 million. Amortization started in June 2004 over the useful life of the license, that is scheduled to end in 2020.

Customer bases and trade names acquired include intangible assets recognized as part of business combinations that occurred in 2006 (see note 6.3).Other intangible assets mainly include football rights and broadcasting rights acquired, purchased software and rights of use for cables.Most of the acquisitions and additions of the three years presented have been realized in Western Europe.


Note 5. Property, plant and equipment Land Technical Furniture Other Assets and and network and tangible under (in EUR million) buildings equipment vehicles assets construction Total

As of 1 January 2004 net of accumulateddepreciation and impairment 640 1,988 41 137 50 2,854

Additions 16 241 12 13 164 447

Disposals -19 -1 0 -4 0 -24

Reclassifi cations 0 95 0 7 -111 -10

Impairment 0 -15 0 0 0 -15

Depreciation charge for the year -40 -511 -19 -26 0 -595

As of 31 December 2004 net of accumulateddepreciation and impairment 596 1,797 35 128 102 2,658

Additions 14 292 8 10 117 441

Acquisition of subsidiary 0 6 0 0 0 6

Disposals -11 0 0 0 0 -11

Disposal of subsidiary 0 -13 0 0 0 -13

Reclassifi cations 0 78 0 10 -97 -9

Impairment 0 -1 0 0 0 -1



Additions 12 355 13 6 160 546

Acquisition of subsidiary 56 26 3 3 2 89

Disposals -7 -5 0 -4 -1 -18

Reclassifi cations 0 148 0 -64 -87 -3

Impairment 0 -1 0 -1 0 -2



Land Technical Furniture Other Assets and and network and tangible under (in EUR million) buildings equipment vehicles assets construction Total


Cost 775 8,722 152 259 102 10,011

Accumulated depreciation and impairment -179 -6,925 -117 -132 0 -7,353

Net carrying amount 596 1,797 35 128 102 2,658


Cost 756 8,963 140 272 122 10,253




Cost 812 9,516 162 99 195 10,783



An impairment loss was recorded in 2004 on the intangible assets and technical and network equipment of the International Carrier Services segment for an amount of EUR 5 million (see note 4) and EUR 15 million respectively.

The increase in 2006 resulting from acquisition of subsidiary relates primarily to the acquisition of Telindus Group, Infrasystems Group and Euremis SA (see note 6.3).

During the period from 1996 through 2001, the Group entered into several cross-border lease arrangements of technical and network equip-ment (see note 36). Such arrangements are still operational.

Most of the acquisitions and additions of the three years presented have been realized in Western Europe.


Note 6. Investments in subsidiaries and joint venturesNote 6.1. Investments in subsidiariesThe consolidated fi nancial statements include the fi nancial statements of Belgacom SA and the subsidiaries listed in the following table.

Country of Group’s participating interests

Name Registered offi ce incorporation 2004 2005 2006

Belgacom SA under Public Law Bld du Roi Albert II 27 Belgium Mother 1030 Bruxelles company VAT BE 0202.239.951

Belgacom Mobile SA Rue du Progrès 55 Belgium 75% 75% 100% 1210 Bruxelles VAT BE 0453.918.428

Belgacom Finance SA Rue de Merl 74 Luxemburg 100% 100% 100% 2146 Luxembourg

Belgacom Group International Services SA Geldenaaksebaan 335 Belgium 100% 100% 100% 3001 Heverlee VAT BE 0466.917.220

Finbel Re SA Rue de Merl 74 Luxemburg 100% 100% 100% 2146 Luxembourg

Connectimmo SA Bld du Roi Albert II 27 Belgium 100% 100% 100% 1030 Bruxelles VAT BE 0477.931.965

Citius Belgium SA Bld du Roi Albert II 27 Belgium 100% 100% 100% 1030 Bruxelles VAT BE 0458.333.512

Belgacom Skynet SA Rue Carli 2 Belgium 100% 100% 100% 1140 Evere VAT BE 0460.102.672

Skynet iMotion Activities SA Rue Carli 2 Belgium - 100% 100% 1140 Evere VAT BE 0875.092.626

WIN SA Rue Marie-Henriette 60 Belgium 100% 100% 100% 5000 Namur VAT BE 0464.163.014

Belgacom Invest SARL Rue de Merl 74 Luxemburg 100% 100% 100% 2146 Luxembourg

Extenseo SPRL Rue Louis Marcx 23 Belgium - - 100% 1160 Bruxelles VAT BE 0464.699.779

Telindus Group NV Geldenaaksebaan 335 Belgium - - 100% 3001 Heverlee VAT BE 0422.674.035

Telindus NV (4) Geldenaaksebaan 335 Belgium - - 100% 3001 Heverlee VAT BE 0442.257.642

Telindus Sourcing SA (4) Parc Scientifi que - Bld Initialis 1 Belgium - - 100% 7000 Mons VAT BE 0457.839.802

Telindus BV (4) Savannahweg 19 The Netherlands - - 100% 3542 AW Utrecht

Telindus International BV (4) Savannahweg 19 The Netherlands - - 100% 3542 AW Utrecht

Telindus Networks SA (4) Chemin des Primevères 45 Switzerland - - 100% 1701 Fribourg

Telindus SA (4) Chemin des Primevères 45 Switzerland - - 100% 1701 Fribourg

Telindus SPA (4) Via della Maglianella 65/D Italy - - 100% 00166 Roma

Telindus G.m.b.H. (4) Sylvesterallee 2 Germany - - 100% 22525 Hamburg

Netconcept G.m.b.H (4) Wilhelm-Theodor-Römheld-Strasse 14 Germany - - 100% 55130 Mainz

Telindus SA (4) Plaza Ciudad de Viena 6 Spain - - 100% 28040 Madrid

Telindus SA (4) Route d’Arlon 81– 83 Luxemburg - - 65% 8009 Strassen

Telectronics SA (4) Rue de l’Industrie 1 Luxemburg - - 65% 4823 Rodange




Beim Weissenkreuz SA (4) Alleé Marconi 16 Luxemburg - - 65% 2120 Luxemburg

Telindus PSF SA (4) 2 Rue des Mines Luxemburg - - 65% 4244 Esch sur Alzette

Telindus Ltd (4) Hatchwood Place - Farnham Road United Kingdom - - 100%

Odiham, Hants RG29 1AB

Telindus Surveillance Solutions Ltd (4) Brookmount Court, Unit D - Kirkwood Road United Kingdom - - 100% CB4 2QH Cambridge

Telindus France SA (4) ZA de Courtaboeuf- 10, Avenue de Norvège France - - 100% 91962 Les Ulis

Groupe Telindus France SA (4) ZA de Courtaboeuf- 10, Avenue de Norvège France - - 100% 91962 Les Ulis

Telindus Ltd (Thailand) (4) Bond Street 473 - Muang Thong Thani 3 Thailand - - 100%

Pakkred, Nonthaburi 11120 Bangkok

Telindus Comunicacoes e Servicos SA (4) Torre de Monsanto - Rua Alfonso Praça 30 Portugal - - 100% 1495-061 Algés

Telindus Ltd (4) Three Exchange Square 9th fl oor China - - 100% Central Hong Kong

Yunnan Telindus Technology Co Ltd (4) Room C22-23 Innovation Park - Jinkai Road 3 China - - 100% Kunming Nation-class Economic & Technological Development Zone Kunming, Yunnan

Telindus Hungary Ltd (4) Záhony U. 7 - Graphisoft Park Hungary - - 75% 1031 Budapest

Infrasystems Sverige AB Svetsarvägen 8 Sweden - - 100% 171 41 Solna

Infrasystems Solutions Stockholm AB Svetsarvägen 8 Sweden - - 100% 171 41 Solna

Infrasystems Solutions Väst AB Ringögatan 12 Sweden - - 100%

417 07 Göteborg

Euremis SA Chaussée de Nivelles 81 Belgium - - 56% 1420 Braine-l’Alleud VAT BE 0477.133.397

Belgacom Directory Services SA - Belgium 100% - -

Expercom SA - Belgium 100% - -

Digital Age Design SA - Belgium 85% - -

Streamcase SA - Belgium 100% - -

Infosources SA and subsidiaries (1) - (2) 100% - -

Belgacom International Carrier Services SA (3) - Belgium 100% - -

Belgacom Deutschland G.m.b.H. (3) - Germany 100% - -

Belgacom UK Ltd (3) - United Kingdom 100% - -

Belgacom International Carrier Services Nederland BV (3) - The Netherlands 100% - -

Belgacom Incorporated (3) - United States 100% - -

Belgacom International Carrier Services Asia Pte Ltd (3) - Singapore 100% - -

Belgacom International Carrier Services (Portugal) SA (3) - Portugal 100% - -

Belgacom International Carrier Services Italia Srl (3) - Italy 100% - -

Belgacom International Carrier Services Spain SL (3) - Spain 100% - -

Belgacom International Carrier Services Switzerland AG (3) - Switzerland 100% - -

Belgacom International Carrier Services Austria G.m.b.H (3) - Austria 100% - -

Belgacom International Carrier Services Sweden AB (3) - Sweden 100% - -

Belgacom International Carrier Services Japan KK (3) - Japan 100% - -

Belgacom International Carrier Services China Ltd (3) - China 100% - -

Belgacom Présence SA (3) - France 100% - -

(1) Hereafter “Group Infosources”.(2) Belgium, France, Germany and Switzerland.(3) These subsidiaries qualify as joint-venture interests starting mid 2005 (see note 6.2 and 6.3).(4) Subsidiaries of the Group Telindus that has been acquired early January 2006.


Note 6.2. Investments in joint venturesThe Group has a joint-venture interest in the following companies.



Certipost SA Centre Monnaie Belgium 50% 50% 50% 1000 Brussels VAT BE 0475.396.406

Certipost BV Siriusdreef 10 The Netherlands 50% 50% 50% 2132 WT Hoofddorp

Allo Bottin SA 101/109, rue Jean-Jurès France - 50% 50% 92300 Levalloi-Perret

Belgacom International Rue Lebeau 4 Belgium - 72% 72%Carrier Services SA (1) 1000 Brussels VAT BE 0866.977.981

Belgacom International Albert Einsteinstrasse 34 Germany - 72% 72%Carrier Services Deutschland G.m.b.H 63322 Rödermark

Belgacom Deutschland G.m.b.H. (1) Albert Einsteinstrasse 34 Germany - 72% 72% 63322 Rödermark

Belgacom International Carrier Services UK Ltd Great Bridgewaterstreet 70 United Kingdom - 72% 72% M15ES Manchester

Belgacom UK Ltd (1) 1,City Square United Kingdom - 72% 72% Leeds - LS1 2 DP

Belgacom International Stationsplein 8 C The Netherlands - 72% 72%Carrier Services Nederland BV (1) NL-6221 BT Maastricht

Belgacom International 2001 l street suite 750 United States - 72% 72%Carrier Services North America Inc 20036 Washington

Belgacom Incorporated (1) Corporation trust center - 1209 Orange street United States - 72% 72% USA - 19801 Willington Delaware

Belgacom International 8 Cross Street - # 11-00 PWC Building Singapore - 72% 72%Carrier Services Asia Pte Ltd (1) Singapore 048624

Belgacom International Edifi cio Monumental Portugal - 72% 72%Carrier Services (Portugal) SA (1) Avenida Praia da Vitoria n° 71 A - 11° P-1069-006 Lisboa

Belgacom International Via San Vito 7 Italy - 72% 72%Carrier Services Italia Srl (1) 20123 Milano

Belgacom International Plaza Pablo Ruiz Picasso Spain - 72% 72%Carrier Services Spain SL (1) Torre Picasso s/n - Planta 4a 28020 Madrid

Belgacom International Papiermülhestrasse 69 Switzerland - 72% 72%Carrier Services Switzerland AG (1) 3014 Bern

Belgacom International Wagramer Strasse 19 Austria - 72% 72%Carrier Services Austria G.m.b.H (1) 1010 Wien

Belgacom International Drottninggaton 30 Sweden - 72% 72%Carrier Services Sweden AB (1) 41114 Goteborg

Belgacom International 9th Floor, Prudential Tower Japan - 72% 72%Carrier Services Japan KK (1) 13-10 Nagata-cho 2-chrome Chiyoda-ku - Tokyo 100-0014

Belgacom International Three Pacifi c Place - Level 28 China - 72% 72%Carrier Services China Ltd (1) 1, Queen’s road East Kowloon - Hong Kong

Belgacom International Rue du Colonel Moll 3 France - 72% 72%Carrier Services France SAS 75817 Paris

E-Port Communications Systems SA (4) Slijkensesteenweg 2 Belgium - - 50% 8400 Oostende VAT BE 0864.818.940

Belgacom Présence SA (1)(2) France - 72% -

Belgacom International Carrier Services Italia Srl (3) Italy - 72% -

(1) These joint venture interests qualifi ed as subsidiaries in 2004 (see notes 6.1 and 6.3).(2) Merged in 2006 with Belgacom International Carrier Services France SAS.(3) Merged in 2006 with Belgacom International Carrier Services Italia Srl.(4) Joint ventures of the Group Telindus that has been acquired early January 2006.


The share of the assets, liabilities, income and expenses of the jointly controlled entities which are included in the consolidated fi nancial state-ments, are detailed as follows:


Non-current assets - 70 62

Current assets - 277 229

Total assets - 348 292

Non-current liabilities - 4 4

Current liabilities - 278 272

Total liabilities - 282 276

(in EUR million - year ended 31 December) 2004 2005 2006

Total revenue - 713 686

Total operating expenses before depreciation and amortization - -686 -669

Depreciation and amortization - -20 -20

Net fi nance revenue - 1 0

Income/(loss) before taxes - 8 -3

Tax expense - -2 -3

Net income/(loss) - 6 -6

Note 6.3. Acquisitions and disposal of subsidiaries and joint ventures and increases and decrease in participating interestsIn the fi rst half of 2005, Belgacom and Swisscom Fixnet AG (“Swisscom”) agreed to combine their respective international carrier businesses effec-tive 1 July 2005 into Belgacom International Carrier Services (“BICS”) SA that would carry on the combined business.

To this purpose, Belgacom transferred on 1 January 2005 its international carrier branch of activity at historical book value to its 100% subsidiary BICS. Effective 1 July 2005, Swisscom contributed its international carrier assets to BICS in exchange for a 28% ownership in BICS and subsidiaries. These assets were contributed by Swisscom at fair value and comprised mainly non-current assets notably its international carrier customer base and indefeasible rights of use and technical network equipment in Swit-zerland and other countries. No cash was contributed and no goodwill was recognized as a result of this transaction. The dilution of the Group’s interest in BICS from 100% to 72% resulted in the disposal of net assets

for an amount of EUR 18 million and the recognition of a dilution gain of EUR 4 million (disclosed as other operating revenue).

Prior to 1 July 2005, BICS was a 100% subsidiary of Belgacom and hence fully consolidated. Effective 1 July 2005, BICS is proportionally consoli-dated because Belgacom and Swisscom established joint control.

In January 2005, the Group sold 100% of its shares of Belgacom Directory Services SA to Promedia Comm.V. which resulted in the recognition of a gain of EUR 238 million classifi ed as non-recurring revenue in the income statement.

The disposal of net assets in respect of these transactions of the year 2005 amounted to approximately EUR 34 million summarised as follows:

(in EUR million) 2005

Non-current assets disposed of 38

Current assets disposed of, excluding cash and cash equivalents 72

Cash and cash equivalents disposed of 28

Non-current liabilities disposed of -1

Current liabilities disposed of -103

Net assets disposed of 34

Consideration received 282

Gain on disposal (including non-recurring revenue) 249

The net cash infl ow on disposal is as follows:

(in EUR million) 2005

Cash received 264

Cash and cash equivalents disposed of with the subsidiaries -28

Net cash infl ow 237

In early January 2006, the Group acquired all outstanding shares and warrants of the Telindus Group, a leading provider of network-based ICT solutions and services, with its headquarters in Belgium and quoted on Euronext Brussels. On 14 March 2006, Belgacom asked the Brussels Euronext stock-market authority to delist the Telindus Group share.

The total acquisition costs amounted to EUR 605 million. No equity instruments were or can be issued as part of the cost. The net amount of cash paid for the acquisition is EUR 584 million (after the deduction of cash acquired).


The fair value of the identifi able assets and liabilities of the Telindus Group at the date of acquisition and the corresponding carrying amounts immediately prior to the acquisition were:

Fair value recognised Carrying (in EUR million) on acquisition value

Goodwill acquired (see note 3) 0 83

Intangible assets with fi nite useful life (see note 4) 84 20

Property, plant and equipment (see note 5) 89 85

Other participating interests (see note 8) 196 196

Deferred income tax assets (see note 9) 22 22

Other non-current assets 1 1

Inventories 35 35

Trade receivables (see note 12) 236 236

Current income tax assets 4 4

Other current assets (see note 13) 22 22

Investments and cash and cash equivalents (see note 14) 21 21

710 726

Minority interests (see note 16) -8 -6

Non-current interest-bearing liabilities (see note 17) -29 -29

Liability for pensions and termination benefi ts (see note 10) -5 -3

Provisions and contingent liabilities -2 -2

Deferred income tax liabilities (see note 9) -31 -2

Current interest-bearing liabilities -26 -26

Trade payables -118 -118

Income tax payables -3 -3

Other current payables (see note 20) -117 -115

-337 -302

Net assets acquired 373 424

Goodwill arising on acquisition (see note 3) 231

Consideration 605

The consideration is detailed as follows:

(in EUR million)

Cash paid to shareholders 601

Costs associated with the acquisition 4

Consideration 605

The cash outfl ow on acquisition is as follows:

(in EUR million)

Consideration paid 605

Net cash acquired of the subisidary -21

Net cash outfl ow 584

The goodwill mainly represents the future synergies with the Belgacom Group, the know-how of Telindus Group employees, and revenue protection.

The acquisition took place early in January 2006. Therefore, the revenue and expenses of the Telindus Group have been incorporated into the Belgacom Group fi nancial statements from 1 January 2006, contributing EUR 708 million to the total revenue and EUR 31 million to the operating income before depreciation and amortization.

On 5 July 2006, Telindus acquired InfraSystems Group, a network and systems specialist established in Sweden, enabling Telindus to gain unique skills in the unifi ed communication sector and a geographical presence in this country.

On 29 September 2006, Belgacom Mobile acquired the control of Euremis SA, the leading Belgian provider of mobile sales force solutions to the mid-market segment. This acquisition enables Belgacom Mobile to answer to the evolution of its customers’ needs and expand its product offering towards end-to-end mobile solutions.

The fair value of the identifi able assets and liabilities of Infrasystems Group and Euremis at the date of acquisition and the corresponding carrying amounts immediately prior to the acquisition were:

Fair value recognised Carrying (in EUR million) on acquisition value

Total assets 7 4

Total minority interests and liabilities -6 -4

Net assets acquired 1 0

Goodwill arising on acquisition (see note 3) 10

Consideration 11

The consideration is detailed as follows:

(in EUR million)

Cash paid to shareholders 7

Cash to be paid to shareholders 4

Costs associated with the acquisition 0

Consideration 11

The cash outfl ow on acquisition is as follows:

(in EUR million)

Consideration paid 11

Net cash acquired of the subisidary 0

Net cash outfl ow 11

No other signifi cant acquisitions, disposals or changes in participating interests of subsidiaries or joint ventures occurred in the three years presented.

Note 7. Enterprises accounted for under the equity methodThe investments in enterprises accounted for under the equity method are summarized as follows:


Alert Services Holding and subsidiaries 26 - -

Total 26 0 0

Loss from these enterprises accounted for using the equity method is summarized as follows:


Alert Services Holding and subsidiaries -1 - -

Total -1 0 0

In January 2005, Belgacom divested its minority interest in Alert Services Holding through the exercise of its put option towards Securitas Direct International in exchange of EUR 50 million cash. The divestment resulted in a gain of EUR 11 million recognized as fi nance revenue in the income statement (see notes 11 and 31).


Note 8. Other participating interests(in EUR million - as of 31 December) 2004 2005 2006

Neuf Cégétel 120 138 -

Other unlisted shares 91 1 1

Unlisted shares 211 138 1

Eutelsat Communication SA - 57 68

Mobistar SA - - 165

Other listed shares - 2 -

Listed shares 0 59 233

Total 211 198 234

In 2003 and 2004, the Group recorded impairment losses on its partici-pating interest in neuf telecom SA, a French telecommunications provider, for EUR 47 million and EUR 20 million respectively in order to reduce the carrying amount to its recoverable amount, estimated to EUR 140 million and EUR 120 million respectively. The recoverable amount was deter-mined based on EBITDA and sales multiples, business metrics (including cash fl ow valuation using a discount rate of 11%) and publicly available information on neuf telecom SA. These impairment losses are recorded as fi nancial expenses (see note 31).

In May 2005, neuf telecom SA and Cégétel SA merged into Neuf Cégétel SA, which became the primary alternative operator in the fi xed line business in France. This merger diluted the participating interests of the Group to 5.8% of the combined entity Neuf Cégétel. This merger increased the recoverable value of the participating interest taking into account “EBITDA”, sales multi-ples, business metrics (including cash fl ow valuation using a 10.5% discount rate), and publicly available information of the combined entity. Based on these elements, the fair value of this participating interest was determined to be in the range between EUR 130 million and EUR 165 million at 31 December 2005, compared to a range between EUR 110 million and EUR 130 million at 31 December 2004. As a result, impairment losses for EUR 18 million have been reversed directly through equity in 2005, as re-measurement to fair value.

In the second half of 2006, the Group disposed its interest in Neuf Cégétel for EUR 237 million resulting in a fi nance revenue of EUR 118 million (see note 31) after reversal of the remaining cumulative re-measurement to fair value.

Through the acquisition of Telindus Group in 2006, the Group holds shares in its mobile competitor Mobistar SA for EUR 165 million (see note 6.3).

In 2005, the Group divested several participating interests resulting in a gain of EUR 52 million recorded in fi nance revenue (see note 31). The re-measurements to fair value of the divested participating interests that had been recorded directly through equity in previous years are also included in the gain of EUR 52 million. The primary divested interest included therein was Eutelsat, which was sold in exchange for EUR 69 million cash and a 3% minority interest in the acquirer, Eutelsat Communications SA. This company was listed for the fi rst time on the Paris stock exchange on the 2d December 2005, leading to a re-measurement to fair value recorded directly through equity of EUR 47 million as of 31 December 2005 that increased to EUR 61 million as of 31 December 2006.

Total re-measurements to fair value of participating interests resulted in increases of the carrying values for EUR 25 million in 2004, EUR 66 million in 2005 and in a decrease of EUR 1 million in 2006. These amounts are recorded directly through equity.

Note 9. Income taxesGross deferred income tax assets/(liabilities) relate to the following:


Deferred income tax liabilities

Accelerated depreciation for tax purposes -30 -25 -30

Remeasurement of fi nancial instruments to fair value -1 -1 -1

Deferred taxation on sales of property, plant and equipment -6 -6 -6

Other -25 -30 -20

Gross deferred income tax liabilities -63 -62 -57

Deferred income tax assets

Accelerated depreciation for tax purposes 0 0 4

Remeasurement of fi nancial instruments to fair value 9 10 5

Post-employment and termination benefi ts 23 28 22

Tax losses carried forward 380 404 315

Capital losses on investments in subsidiaries 69 2 2

Other 20 16 21

Gross deferred income tax assets 501 460 370

Net deferred income tax assets/(liabilities), when grouped per taxable entity, are as follows:


Net deferred income tax liability -38 -42 -38

Net deferred income tax asset 476 440 351

The Group has tax losses carried forward arising in Belgium that are avail-able indefi nitely to offset future taxable profi ts of the companies in which these losses arose.

At 31 December 2006, Belgacom SA’s accumulated tax losses amount to EUR 982 million amongst others as a result of the non-recurring expenses related to the BeST restructuring program in 2002, the non-recurring expenses related to the transfer of the pension obligations for statutory employees in 2003 and the non-recurring expenses related to the collec-tive labour agreement of 2005 (see note 10.1). Based on the current busi-ness plan of Belgacom SA, future taxable profi t will be available against which the tax losses can be further utilized.

Deferred tax assets have not been recognized in respect of the losses of subsidiaries that have been loss-making for several years. Cumulative tax losses carried forward and tax credits available for such companies amounted to EUR 43 million at 31 December 2004, EUR 42 million at 31 December 2005 and EUR 160 million at 31 December 2006.

Belgacom’s share in the undistributed retained profi t of subsidiaries amounts to EUR 2,753 million at 31 December 2006 and is taxable at an effective tax rate of 1.7% upon remittance to the parent company. No deferred tax liability is recorded for such undistributed earnings since they are not intended to be distributed to the parent company in the foreseeable future.


In the income statement, deferred tax income/(expense) relate to the following:


Relating to deferred income tax liabilities

Accelerated depreciation for tax purposes 8 6 27

Deferred taxation on sales of property, plant and equipment -6 0 0

Other -1 -4 12

Relating to deferred income tax assets

Accelerated depreciation for tax purposes 0 0 -1

Remeasurement of fi nancial instruments to fair value 2 1 -5

Post-employment and termination benefi ts 10 5 -6

Tax losses carried forward -173 24 -107

Capital losses on investments in subsidiaries 0 -67 0

Other -3 -4 5

Deferred tax expense of the year -162 -39 -75

The consolidated income statement includes the following tax expense:


Current income tax

Current income tax expense -346 -301 -284

Adjustments in respect of current income tax of previous periods 1 2 2

Deferred income tax

Expense resulting from changes in temporary differences -162 -39 -76

Income resulting from a reductionin income tax rates - - 1

Income tax expense reported in consolidated income statement -508 -339 -358

The reconciliation of income tax expense applicable to income before taxes at the statutory income tax rate to income tax expense at the group’s effective income tax rate for the years ended 31 December is as follows:



At Belgian statutory income tax rateof 33.99% 538 488 493

Effect of reduction in income tax rates on closing balance of deferred income tax 0 0 -1

Income tax consequences of disposal of subsidiaries and other participating interests 0 -105 -42

Non-taxable income from subsidiaries -51 -58 -95

Non-deductible expenditures for income tax purposes 26 17 18

Other -6 -3 -16

Income tax expense 508 339 358

Effective income tax rate (in %) 32.09 23.57 24.65

In 2005, the income tax consequences of the disposal of subsidiaries and other participating interests mainly relate to the gain on the sale of Belgacom Directory Services’ shares and of the Group’s interests in satel-lite companies. In 2006, the income tax consequences of the disposal of other participating interests mainly relate to the gain on the sale of Neuf Cégétel shares.

The non-taxable income from subsidiaries primarily relates to the income of Belgacom Group International Services, which is subject to a tax regime that is not based on taxable income, and to the notional interest deduc-tion applicable in Belgium as from 2006.

Non-deductible expenditures for income tax purposes primarily relate to various expenses that are disallowed for tax purposes and unrecognized tax losses carried forward.


The calculation of the net liability is based on the assumptions estab-lished at the balance sheet date. The assumptions for the various plans have been determined based on both macro-economic factors and the specifi c terms of each plan relating to the duration and the benefi ciary population, in order to apply the most relevant measure of estimated outfl ow of resources.

Note 10.1. Termination benefi ts and additional compensations in respect of restructuring programsTermination benefi ts and additional compensations included in this chapter relate to the BeST and PTS restructuring programs, the external mobility offer and other restructuring programs. No plan assets are accumulated for these benefi ts.

Belgacom implemented the People, Teams and Skills (“PTS”) restructuring program in the years 1997 and 1998. This program consisted of a volun-tary early retirement program accepted by 6,290 employees. Under the terms of the plan, the Group will pay bridge pension amounts until the year 2007.

During the fi rst quarter of 2002, Belgacom SA implemented the Belgacom E-Strategic Transformation (“BeST”) restructuring program. The program offered all statutory employees aged 50 years and older, and having 20 or more service years in the company, the option to voluntarily early leave the company in return for a guaranteed monthly payment of a percentage of their base salary. The program allows the employees to receive full pension benefi ts and provides them with additional years of service towards their pension benefi ts. Under the terms of the plan, the Group will pay guaranteed salary allowances until the year 2012. The number of employees that accepted the offer was 4,157.

In 2004, the Group implemented an external mobility offer whereby stat-utory employees can voluntarily apply for permanent or temporary outplacement to the e-ID cards and emergency call centre projects of the Ministry of Internal Affairs. At 31 December 2004, 507 people that applied for the outplacement jobs, have been assigned to both projects.

As a result, the Group incurred in 2004 termination benefi ts and addi-tional compensation costs for temporary leave for an amount of EUR 41 million. These restructuring expenses are disclosed as non- recurring expenses in the income statement (see note 29).

In 2005, a new collective agreement was approved by Belgacom.

Through this agreement, 362 employees who could not be redeployed, left the company in accordance with agreed upon provisions as of 31 December 2005. Under the terms of this agreement, statutory employees became immediately inactive, until they offi cially retire (at 60 years), in return for a guaranteed minimum monthly payment and continued entitlement on all post-employment benefi ts. Contractual employees were dismissed prior to 31 December 2005 in return for a leave package.

The agreement also included an innovative career outphasing program (tutorship), allowing the oldest and most experienced employees to grad-ually build of their career, whilst transferring their experience and knowl-edge to the younger employees. 2,792 employees, or 84% of the target population, signed up irrevocably for the program prior to 31 December

2005. Statutory employees gradually reduce their work time to zero from the age of 55 until 58 and stop working at the age of 58 until they offi -cially retire at 60 years. During the tutorship period between 55 and 60, the statutory employees are entitled to the pro-rata portion of their salary and a complementary payment for inactivity if the pro-rata salary becomes lower than a guaranteed minimum. Contractual employees also gradually reduce their working time and leave defi nitively the company at 58 years.

In order to cover the fi nancial obligations of the Group under the terms of this collective agreement, the Group recognised in 2005 a liability for termination benefi ts, additional compensation and other post-employ-ment benefi ts for an amount of EUR 350 million. This amount, together with the related impacts on other employee benefi t accruals (EUR 5 million) is disclosed as non-recurring expenses in the income statement (see note 29).

Any subsequent re-measurement of the liability for termination benefi ts and additional compensations is recognized immediately in the income statement.

The funded status of the plans for termination benefi ts and additional compensations is as follows:


Defi ned Benefi t Obligation 580 810 687

Plan assets at fair value 0 0 0

Benefi t obligation in excess of plan assets 580 810 687

The components of the expense recognized in the income statement are as follows:


Interest cost 22 18 28

Actuarial loss recognized 4 8 -2

Expense recognized in the income statement, before curtailment, settlement and special termination benefi ts 26 25 26

Special termination benefi ts 41 346 0

Expense recognizedin the income statement 67 372 26

The movement in the net liability recognized in the balance sheet is as follows:


At the beginning of the year 665 580 810

Expense for the period 67 372 26

Actual employer contribution -153 -141 -149

At the end of the year 580 810 687

Note 10. Assets and liabilities for pensions, other post-employment benefi ts and termination benefi tsThe Group has several plans that are summarized below:


Termination benefi ts and additional compensations in respect of restructuring programs 580 810 687

Defi ned benefi t plans for complementary pension plans (net liability) 8 13 5

Post-employment benefi ts other than pensions 155 165 172

Other liabilities 17 21 22

Net liability recognized in the balance sheet 760 1,010 886

Defi ned benefi t plans for complementary pension plans (net asset) -5 -5 -5

Net asset recognized in the balance sheet -5 -5 -5


Change in plan assets:



Actual employer contribution 153 141 149

Distributions to benefi ciaries -158 -141 -149


Change in the defi ned benefi t obligation:




Actuarial loss recognized 4 8 -2




The liability for termination benefi ts and additional compensations was determined using the following assumptions:

(in % - as of 31 December) 2004 2005 2006

Discount rate 2.69 - 3.70 3.8 - 4.50 3.8 - 4.50

Future price infl ation 1.33 - 1.40 1.8 - 2.00 1.8 - 2.00

Sensitivity analysisAn increase or decrease of 0.5% in the effective discount rate involves a fl uctuation of the liability by approximately EUR 11 million.

The Group expects to pay an amount of EUR 120 million for termination benefi ts and additional compensations in 2007.

Note 10.2. Defi ned benefi t plans for complementary pensionsBelgacom SA and some subsidiaries have a joint complementary defi ned benefi t pension plan for their employees. This plan provides pension bene-fi ts for services as of 1 January 1997. The related separately administrated pension fund was created in 1998.

Belgacom Mobile, a subsidiary of Belgacom, has a complementary defi ned benefi t pension plan for its employees. The related separately adminis-tered fund was created in 2001.

Telindus BV, a subsidiary of Telindus Group established in the Nether-lands, has also a complementary defi ned benefi t pension plan for its employees fi nanced through an insurance company.

The funded status of the pension plans is as follows:



Plan assets at fair value -67 -92 -132

Defi cit/(surplus) 15 9 -4

Unrecognized actuarial gain/(loss) -12 -2 4

Defi cit/(surplus) after unrecognized actuarial gain/(loss) composed of: 3 7 0

Net liability recognized in the balance sheet 8 13 5

Net assets recognized in the balance sheet -5 -5 -5

The history of the experience adjustments is as follows:



Plan assets at fair value -67 -92 -132

Defi cit/(surplus) 15 9 -4

Experience adjustment on plan liabilities: gain/(loss) -1 2 5

Experience adjustments on plan assets: gain 0 7 1



Current service cost - employer 17 17 22

Interest cost 4 5 6

Expected return on plan assets -5 -6 -8

Past service cost recognized 1 0 0

Expense recognized in the income statement 17 16 19

The movement in the net liability/(assets) recognized in the balance sheet is as follows:


At the beginning of the year -4 3 7


Acquisition of subsidiary 0 0 2


Defi cit/(surplus) after unrecognizedactuarial gain/(loss) composed of: 3 7 0

Net liability at the end of the year 8 13 5

Net assets at the end of the year -5 -5 -5




Expected return on plan assets 5 6 8

Actuarial gains on plan assets 0 7 1

Actual employer contribution 11 12 29


Benefi ts payments and expenses -1 -1 -2





Service cost 17 17 22

Interest cost 4 5 6

Plan amendments 1 0 0


Benefi ts payments and expenses -1 -1 -2

Actuarial loss/(gain) 1 -2 -5



The pension liability was determined using the following assumptions:

(in % - as of 31 December) 2004 2005 2006

Discount rate 6.10 5.50 4.25 - 5.50

Expected rate of returnon plan assets 8.00 7.70 4.25 - 7.70

Future price infl ation 2.30 2.00 2.00

Nominal future salary increase 4.80 - 5.30 4.50 - 4.75 4.00 - 4.75

Nominal future baremicsalary increase 4.25 3.95 3.95

The expected return on plan assets is an assumption based on market data, historical returns of other Belgian pension plans and future long term expectations. It takes into account the asset allocation of the respective pension plans that may evolve over the time depending on achieved and future expected returns.

The assets of the pension plans are detailed as follows:

(in % - as of 31 December) 2004 2005 2006

Equities 61 60 55

Bonds 39 40 43

Insurance deposits (for the plan of Telindus BV) - - 3

The actual return on plan assets is as follows:

(in % - as of 31 December) 2004 2005 2006

Actual return on plan assets 5 13 9

The Group expects to contribute an amount of EUR 20 million to these pension plans in 2007.

Note 10.3. Post-employment benefi ts other than pensionsHistorically, the Group grants to its retirees post-employment benefi ts other than pensions in the form of train ticket discounts, hospitalization insurance, reimbursement of medical expenses and a socio-cultural aid premium. All post-employment benefi ts other than pensions are directly paid by the Group to the retirees and therefore no plan assets are accu-mulated for such benefi ts. In 2005, the employer cost assumptions in respect of hospitalization insurance premiums have signifi cantly increased, which resulted in additional unrecognized actuarial losses for an amount of EUR 45 million.

The funded status of the plans is as follows:





Unrecognized actuarial loss -3 -54 -52

Unrecognized past service cost -3 -3 -3


The history of the experience adjustments is as follows:





Experience adjustment on plan liabilities: gain/(loss) 1 -50 -1



Current service cost - employer 2 2 2


Actuarial gain recognized 0 0 2

Expense recognized in the income statement, before curtailment, settlement and special termination benefi ts 11 11 17


Expense recognized in the income statement 11 19 17

The movement in the net liability recognized in the balance sheet is as follows:










Distributions to benefi ciaries 9 8 10





Service cost 2 2 2




Actuarial (gain)/loss -1 50 1


The liability for post-employment benefi ts other than pensions was determined using the following assumptions:

(in % - as of 31 December) 2004 2005 2006

Discount rate 6.10 5.50 5.50

Future cost trend 3.10 3.04 3.04

Future price infl ation 2.30 2.00 2.00

The liability for post-employment benefi ts other than pensions is deter-mined using the Belgian offi cial mortality tables, adjusted for mortality experience of the statutory retirees.

Sensitivity analysisAn increase or decrease of 1% in the medical cost trend would result in an increase of EUR 17 million respectively a decrease of EUR 14 million of the defi ned benefi t obligation, and in an increase or decrease of the expense (service and interest cost) of the year of EUR 1 million.

The Group expects to contribute an amount of EUR 10 million to these plans in 2007.


Note 10.4. Other liabilitiesThe Group has a legal obligation to pay child allowance benefi ts to a limited number of statutory retirees and to the BeST, PTS and benefi ci-aries of the restructuring program of 2005.

Telindus Group has a legal obligation to pay a one-time post-employment benefi t in accordance with local law in France and in Italy.

Those amounts are directly paid by the Group and therefore no plan assets are accumulated for such benefi ts. Any subsequent re-measure-ment of the liability is recognized immediately in the income statement.

The funded status is as follows:





The liability was determined using the following assumptions:

(in % - as of 31 December) 2004 2005 2006

Discount rate 5.00 5.00 4.00 - 5.00

Future price infl ation 1.80 1.80 1.80 - 2.00

Note 11. Other non-current assets(in EUR million - as of 31 December) Note 2004 2005 2006

Derivatives held-for-hedging 21 59 49 16

Other derivatives 21 1 1 1

Put option related to Alert Services Holding 7 13 0 0

Non-current investments 6 7 7

Other fi nancial assets 7 8 12

Total 86 65 36

Note 12. Trade receivables(in EUR million - as of 31 December) 2004 2005 2006

Gross receivables 984 1,066 1,340

Allowance for doubtful debtors -140 -119 -133

Total 844 947 1,207

Note 13. Other current assets(in EUR million - as of 31 December) 2004 2005 2006

VAT receivables 21 14 15

Prepaid expenses and accrued income 25 32 53

Other receivables 6 17 13

Total 52 64 81

Note 14. Investments(in EUR million - as of 31 December) 2004 2005 2006

Shares 81 86 91

Total 81 86 91

Shares include sicavs and funds invested mainly in money markets instru-ments, euro-bonds and equity instruments. The shares are classifi ed as available-for-sale and are measured at fair value, being their quoted price.

Note 15. Cash and cash equivalents(in EUR million - as of 31 December) 2004 2005 2006

Fixed income securities 245 137 154

Short-term deposits 61 18 26

Cash at bank and in hand 18 643 56

Total 325 798 236

The Group invests part of its liquidities in commercial paper or treasury certifi cates held-to-maturity and carried at amortized cost. Short-term deposits are made for periods varying between one month and three months, depending on the immediate cash requirements of the Group, and earn interest at the respective short-term deposit rates. Cash at bank earns interest at fl oating rates based on daily bank deposit rates.

Note 16. EquityNote 16.1. Shareholders’ equityAt 31 December 2006, the share capital of Belgacom SA amounted to EUR 1 billion (fully paid up), represented by 361,775,135 shares, with no par value and all having the same rights, provided such rights are not suspended or cancelled in the case of treasury shares. The Board of Direc-tors of Belgacom SA is entitled to increase the capital for a maximum amount of EUR 200 million.

Distribution of retained earnings of Belgacom SA, the parent company, is limited by a restricted reserve built up in prior years in accordance with Belgian Company Law up to 10% of Belgacom’s issued capital.

Belgacom SA has a statutory obligation to distribute 5% of the parent company income before taxes to its employees. In the accompanying consolidated fi nancial statements, this profi t distribution is accounted for as personnel expenses.

On 30 December 2003, Belgacom SA purchased 12,380,950 treasury shares from its shareholder at that time, ADSB Telecommunications BV, for an amount of EUR 325 million or EUR 26.25 per share. In accordance with the Protocol Agreement concluded on 2 October 2003 between Belgacom and its shareholders at that time, the purchase price of that transaction would subsequently be adjusted to the share price in case of the initial public offering. This price adjustment has resulted in March 2004 in the reimbursement to Belgacom of EUR 22 million by ADSB Telecommunications. On 20 March 2004, the own shares acquired in December 2003 (EUR 303 million) were cancelled.

Under the Protocol Agreement concluded on 2 October 2003, a second purchase of treasury shares from the shareholder at that time, ADSB Telecommunications BV, was carried out on 20 March 2004 for a total number of shares of 38,761,905 and for a total amount of EUR 950 million.

In March 2004, Belgacom sold treasury shares for an amount of EUR 45 million to its employees, under a discounted share purchase plan (see note 39).

On 19 March 2004, Belgacom launched an Employee Stock Option plan whereby 1,128,500 share options were granted to the key management and senior management of the Group (see note 39).

On 14 September 2004, Belgacom cancelled 25,843,915 treasury shares acquired in March 2004 (EUR 633 million) in execution of a decision of the Board of Directors taken on 26 August 2004.

On 24 February 2005, the Board of Directors decided to conduct a share buy-back for a maximum amount of EUR 300 million and for a share purchase price that must not be more than 5% above the highest and 10% below the lowest closing price in the thirty-day trading period preceding the transaction. The program was launched in May 2005 and completed on 17 August 2005. In total Belgacom bought 10,613,234 shares on the stock exchange at an average price per share of EUR 28.27.

On 25 August 2006, the Board of Directors decided to conduct a share buy-back for a maximum amount of EUR 200 million that started on 28 August 2006 and was completed on 11 October 2006. In total


6,782,656 shares were bought back for a total amount of EUR 200 million at an average price per share of EUR 29.49.

The voting and dividend rights in respect of treasury shares acquired in 2003 and 2004 are suspended while the voting and dividend rights in respect of treasury shares acquired in 2005 and 2006 are cancelled. Dividends allocated to treasury shares for which the dividend rights are suspended are accounted for under the caption “Reserves not available for distribution” in the statutory fi nancial statements of Belgacom SA.

In 2005 and 2006, Belgacom sold 139,198 respectively 138,549 treasury shares to its senior management for EUR 3 million respectively EUR 4 million under discounted share purchase plans at a discount of 16.67% (see note 39).

During the years 2005 and 2006, Belgacom employees exercised 169,435 respectively 211,015 share options. In order to honour its obligation in respect of this exercise, Belgacom used treasury shares (see note 39).

In 2005, Belgacom granted 538,541 share options to its key management and senior management with an exercise price of EUR 29.92. In 2006, Belgacom granted 608,928 share options to its key management and senior management with an exercise price of EUR 25.94 (see note 39).

Number of shares:

2004(1) 2005 2006

As of 1 January 400,000,000 361,775,135 361,775,135

Cancellation -38,224,865 0 0

As of 31 December 361,775,135 361,775,135 361,775,135

(1) Number restated to take into account the share split, from one to ten shares, that occurred on 19 February 2004.

Number of treasury shares:

2004 2005 2006

As of 1 January 12,380,950 11,075,964 21,380,565

Acquisition 38,761,905 10,613,234 6,782,656

Sale under a discounted share purchase plan -1,842,026 -139,198 -138,549

Exercice of stock option 0 -169,435 -211,015

Cancellation -38,224,865 0 0

As of 31 December 11,075,964 21,380,565 27,813,657

Note 16.2. Minority interestsUntil October 2006, minority interests included primarily the 25% stake of the minority shareholder Vodafone BV in the equity, net income and dividend payments of Belgacom Mobile SA. As agreed on 24 August 2006 between Belgacom and Vodafone, Belgacom acquired the remaining 25% shares of Belgacom Mobile in early November 2006 following the approval by the Belgian competition authorities end October 2006 (see note 3).

Note 17. Interest-bearing liabilitiesNote 17.1. Non-current interest-bearing liabilities

(in EUR million - as of 31 December) Note 2004 2005 2006

Unsubordinated debentures 273 263 1,871

Credit institutions 0 0 24


Total 303 296 1,917

In November 2006, the Group issued three non-current unsubordinated debentures for a total nominal amount of EUR 1,650 million, to fi nance the acquisition of Vodafone’s minority stake in Belgacom Mobile SA. These debentures are measured at amortized costs and have a carrying amount of EUR 1,639 million at 31 December 2006.


All long term debt is unsecured.

The state of long-term borrowings at 31 December 2006 before any derivatives is as follows:

3.73% unsubordinated debentures in EUR:These are bonds issued by Belgacom SA at fl oating rate (Euribor 3m+13bps) for which interests are payable quarterly, and the capital is repayable in full on the maturity date.

4.63% to 4.74 % unsubordinated debentures in JPY:These are bonds issued by Belgacom SA for which interests are payable annually, and the capital is repayable in full on the maturity date.

4.125% to 4.375% unsubordinated debentures in EUR:These are bonds issued by Belgacom SA for which interests are payable annually, and the capital is repayable in full on the maturity date.

3.78% credit institutions in EUR:This is a long term bank loan issued by Telindus NV for which interests are payable semi-annually and the capital is amortized semi-annually.

The interest rates on the long term debts after effect of derivatives on long term debts hedged, and after effect of measurement at amortized costs on long term debts not hedged, are presented in note 22.

Note 17.2. Current interest-bearing liabilities


Unsubordinated debentures -current portion 56 0 0

Credit institutions -current portion 0 0 5

Derivatives held-for-hedging -current portion 20 3 0 0


Other current fi nancial debt 1 111 66

Total 62 111 71

Fair value remeasurement -loans hedged -3 0 0

Total 58 111 71

Bank credit facilities at 31 December 2006In addition to the interest-bearing liabilities disclosed in notes 17.1 and 17.2, the Group is backed by long term credit facilities of EUR 586 million and short term credit facilities of EUR 518 million. These facilities are provided by a diversifi ed group of banks. At 31 December 2006, there is no outstanding balance under the long term facilities and there is an outstanding balance of EUR 43 million under the short term facilities, with an average remaining maturity of less than one month.

The Group has also established a USD 2.5 billion Euro Medium Term Note (“EMTN”) Program and a EUR 1 billion Commercial Paper (“CP”) Program. At 31 December 2006, there is an outstanding balance under the EMTN Program of EUR 1,650 million, corresponding to the unsubordinated debentures newly issued in 2006 to fi nance the acquisition of the Voda-fone’s stake in Belgacom Mobile SA, with an average remaining maturity of 7 years. At 31 December 2006, there is no outstanding balance under the CP Program.

Non-current interest-bearing liabilities, by year of maturity, are summarized as follows (state of borrowings at 31 December 2006):

Nominal interest As of 31 December Maturity date(2)

(in EUR million) rate (1) 2004 2005 2006 2008 2009 2010-26

Unsubordinated debentures

• Floating rate borrowings

EUR 3.73% 0 0 300 0 300 0

• Fixed rate borrowings

JPY 4.63% to 4.74%(3) 217 217 217 - - 217

EUR 4.125% to 4.375% 0 0 1,350 - - 1,350

Credit institutions

• Fixed rate borrowings

EUR 3.78% 0 0 24 - - 24

Total 217 217 1,891 0 300 1,591

Fair value remeasurement - loans hedged 56 46 14

Fair value remeasurement - derivatives 30 33 21

Unsubordinated debentures - measurement at amortized cost 0 0 -10

Total 303 296 1,917

(1) Interest rate for the year 2006 (for fl oating rate borrowings, average interest rate).(2) State of non-current interest-bearing liabilities per maturity date at 31 December 2006.(3) Has been converted by means of an interest rate and currency swap into a EUR loan with fl oating rate.


Note 18. Provisions Worker’s Illness Other (in EUR million) accidents Litigation days risks Total

As of 1 January 2004 49 71 38 51 210

Additions 3 33 11 6 53

Utilisations -3 -9 -11 -6 -28

Withdrawals -1 -35 0 -8 -44

As of 31 December 2004 49 59 39 43 191

Additions 2 16 11 12 42


Withdrawals 0 -3 -6 -6 -16

As of 31 December 2005 48 68 32 45 193

Additions 2 27 11 9 49


Withdrawals 0 -8 0 -2 -11

As of 31 December 2006 47 82 32 46 208

The provision for workers’ accidents relates to compensation that Belgacom SA could pay to members of personnel injured (including professional illness) when performing their job and on their way to work. Until 31 December 2002, according to the law of 1967 (public sector) on labor accidents, compensation was funded and paid directly by Belgacom. This provision (annuities part) is based on actuarial data including mortality tables, compensation ratios, interest rates and other factors defi ned by the law of 1967 and calculated with the support of a profes-sional insurer. Taking into account the mortality table, it is expected that most of these costs will be paid out until 31 December 2053.

As from 1 January 2003, contractual employees are subject to the law of 1971 (private sector) and statutory employees remain subject to the law of 1967 (public sector). For both the contractual and statutory employees, Belgacom is covered as from 1 January 2003 by insurance policies for workers’ accidents and therefore will not pay directly members of personnel.

The provision for litigation represents management’s best estimate for probable losses due to pending litigation where the Group has been sued by a third party or is subject to a judicial or tax dispute. The expected timing of the related cash outfl ows depends on the progress and duration of the underlying judicial procedures.

The provision for illness days represents management’s best estimate of probable charges related to the granting by Belgacom of accumulating non-vesting illness days to its statutory employees. The provision has been determined based on statistical data.

The provision for other risks primarily includes the provision for the incurred risks from the re-insurance company, the expected costs for dismantling and restoration of mobile antenna sites and buildings, envi-ronmental risks and sundry risks. It is expected that most of these costs will be paid during the period 2006-2018. The provision for restoration costs is estimated at current prices and discounted using a discount rate that varies between 2.62% and 5.52%, depending when the expenditures are expected to be required to settle the obligation.

Note 19. Other non-current payables(in EUR million - as of 31 December) 2004 2005 2006

Other amounts payable 2 1 4

Total 2 1 4

Note 20. Other current payables(in EUR million - as of 31 December) 2004 2005 2006

VAT payables 7 8 40

Payables to employees 87 77 93

Accrual for holiday pay 60 63 78

Accrual for social security contributions 33 35 48

Taxes withheld on remuneration 20 19 18

Deferred income 144 128 169

Accrued expenses 24 11 22

Other amounts payable 6 5 34

Total 381 347 502

Note 21. Derivatives(in EUR million - as of 31 December) Note 2004 2005 2006

Non-current assets

Derivatives held-for-hedging 11 59 49 16


Total 59 50 17

Non-current liabilities

Other derivatives - interest-bearing liabilities 17 30 33 21

Current liabilities

Derivatives held-for-hedging - interest-bearing liabilities 17 3 0 0

Other derivatives - interest-bearing liabilities 17 1 0 0

Total 35 33 21

The Group makes use of derivatives such as interest rate swaps (IRS), interest rate and currency swaps (IRCS), forward foreign exchange contracts and currency options.

Belgacom owns mainly derivatives for hedge purposes. Hedges are fair value hedges, with re-measurement to fair value of both hedged items and hedging derivatives recorded in the income statement. Belgacom does not hold or issue derivatives for trading purposes but, when the relationship between hedging instrument and hedged item does not meet criteria for hedge accounting set by IAS 39, derivatives are accounted for as held-for-trading with re-measurement to fair value recorded into the income statement.


Note 22. Financial risk management objectives and policiesThe Group is exposed to market risks, including interest rates and foreign currency exchange rates risks, associated with underlying assets, liabilities and anticipated transactions. Based on the analysis of these exposures, Belgacom selectively enters into derivatives to manage the related risk exposures.

Belgacom has established internal guidelines such that it will not reach a level of gearing that would cause its ratings to fall below certain levels.

Interest rate riskThe Group manages its exposure to changes in interest rates and its overall cost of fi nancing by using mainly interest rate swaps (IRS), interest rate and currency swaps (IRCS) and forward rate agreements. The main interest rate instruments used are IRS and IRCS. They are used to trans-form the interest rate exposure on the underlying assets or liabilities from a fi xed interest rate to a fl oating interest rate or vice versa.

Foreign currency riskThe Group’s currency exposure relates to foreign currencies in which debts have to be paid and to operational activities in foreign currencies that are not “naturally” hedged. In order to hedge the currency exposure, the Group uses derivatives such as interest rate and currency swaps (IRCS), currency options and forward foreign exchange contracts.

Credit risk and signifi cant concentrations of credit riskConcentration of credit risk relating to local accounts receivable is limited due to the large number of customers. For accounts receivables from foreign telecommunication companies, the concentration of credit risk is also limited due to the netting agreements with accounts payable to these companies, prepayment obligations, bank guarantees and credit limits of credit insurers.

Credit risk arising from the inability of a counterpart to meet the terms of the Group’s fi nancial instruments is generally limited to the amount, if any, by which the counterpart’s obligations exceed the obligations of the Group.

The table below shows the positive and negative fair value of derivatives, included in the balance sheet respectively as current/non-current assets or liabili-ties, together with the notional amounts presented by the term of maturity.

Fair value Notional amount

Within 3-12 1-5 Over (in EUR million - as of 31 December 2004) Positive Negative 2 months months years 5 years Total

Interest rate and currency swaps 59 -3 25 217 242

Derivatives held as fair value hedges 59 -3 0 25 0 217 242

Interest rate swaps 0 -31 - 86 - 144 230

Equity options 1 - - - - 1 1

Derivatives not qualifying as hedges 1 -31 0 86 0 145 231

Total 59 -35 0 112 0 362 473



Interest rate and currency swaps 49 - - - - 217 217

Derivatives held as fair value hedges 49 0 0 0 0 217 217

Interest rate swaps - -33 - - - 144 144

Forward foreign exchange contracts 0 - 12 - - - 12



Total 50 -33 12 0 0 362 374



Interest rate and currency swaps 16 - - - - 217 217

Derivatives held as fair value hedges 16 0 0 0 0 217 217

Interest rate swaps - -21 - - - 144 144

Forward foreign exchange contracts 0 0 36 - - - 36



Total 17 -21 36 0 0 362 398


The Group’s maximum exposure to credit risk (not taking into account the value of any collateral or other security held) in the event the counterpart fail to perform their obligations in relation to each class of recognized fi nancial assets, including derivatives, is the carrying amount of those assets in the balance sheet.

The Group is exposed to credit loss in the event of non-performance by a counterpart on derivatives, but does not anticipate non-performance by any of these counterparts, given their very good credit rating. The amount

Direct borrowing IRCS agreements IRS agreements Net currency obligations

Notional Weighted Average Amount Weighted Average Amount Weighted Average Amount Weighted Average amount average time to payable average time to payable average time to payable average time to interest maturity (receivable) interest maturity (receivable) interest maturity (receivable) interest maturity rate(1) rate rate rate (in EUR (in EUR (in EUR (in EUR(as of 31 December 2004) million) (in %) (in years) million) (in %) (in years) million) (in %) (in years) million) (in %) (in years)

EUR

• Fixed - - - - - - 200 5.34 8.0 200 5.34 8.0

• Variable 31 2.65 0.9 242 2.13 13.1 (200) 2.26 7.1 73 2.22 21.8

JPY

• Fixed 242 4.58 13.1 (242) 4.58 13.1 - - - 0 - -

• Variable - - - - - - - - - - - -

Total 273 4.37 11.7 0 - - 0 - - 273 4.81 11.7



EUR

• Fixed - - - - - - 144 6.20 9.9 144 6.20 9.9

• Variable - - - 217 2.08 13.6 (144) 2.22 9.9 73 2.14 20.9

JPY

• Fixed 217 4.62 13.6 (217) 4.62 13.6 - - - 0 - -

• Variable - - - - - - - - - - - -

Total 217 4.62 13.6 0 - - 0 - - 217 4.72 13.6



EUR

• Fixed 1,379 4.37 7.7 - - - 144 6.20 8.9 1,523 4.54 7.8

• Variable 300 3.76 2.9 217 2.83 12.6 (144) 2.96 8.9 373 3.53 6.2

JPY

• Fixed 217 4.26 12.6 (217) 4.26 12.6 - - - 0 - -

• Variable - - - - - - - - - - - -

Total 1,896 4.26 7.5 0 - - 0 - - 1,896 4.34 7.5

(1) Weighted average interest rate taking into account amortization of transactions costs and issue premiums (if any) for borrowings measured at amortized costs and taking into account last recent exchange rates for borrowings where interests can be paid in various foreign currencies.

of such exposure equals the market value of such contracts. The Group generally does not require collateral or other security from the counter-part as these are highly rated fi nancial institutions.

The tables below summarize the borrowings’ portfolio, the interest rate and currency swap agreements (IRCS), the interest rate swap agreements (IRS) and the net currency obligations of the Group at 31 December 2004, 2005 and 2006.


Note 23. Net revenue(in EUR million - year ended 31 December) 2004 2005 2006

Sales of goods 230 218 597

Rendering of services 5,185 5,166 5,425

Total 5,415 5,384 6,022

Note 24. Other operating revenue(in EUR million - year ended 31 December) 2004 2005 2006

Income from directory business 28 0 0

Gain on disposal of intangible assetsand property, plant and equipment 37 13 17

Gain on disposal of consolidatedcompanies 0 10 0

Other income 61 50 61

Total 125 74 78

Note 25. Non-recurring revenue(in EUR million - year ended 31 December) 2004 2005 2006

Gain on sale of Belgacom Directory Services - 238 -

Total 0 238 0

Gains on the disposal of subsidiaries and joint-ventures are reported as non-recurring revenue when they individually exceed EUR 5 million.

In January 2005, the Group sold 100% of the shares of Belgacom Direc-tory Services SA to Promedia Comm.V. resulting in the recognition of a gain of EUR 238 million (see note 6.3).

Note 26. Costs of materials and charges to revenue(in EUR million - year ended 31 December) 2004 2005 2006

Purchases of materials 151 147 459

Purchases of services 1,310 1,408 1,546

Total 1,461 1,555 2,005

Purchases of materials are shown net of work performed by the enterprise that is capitalized for an amount of EUR 12 million in 2004, EUR 12 million in 2005 and EUR 48 million in 2006.

Note 27. Personnel expenses and pensions(in EUR million - year ended 31 December) 2004 2005 2006

Salaries and wages 746 717 832

Social security expenses 163 163 194

Pension costs 17 16 19

Post-employment benefi ts other than pensions and termination benefi ts 39 40 31

Other personnel expenses 27 21 29

Total 993 957 1,106

Salaries and wages and social security expenses are shown net of work performed by the enterprise that is capitalized for an amount of EUR 36 million in 2004, EUR 37 million in 2005 and EUR 45 million in 2006.

Note 28. Other operating expenses(in EUR million - year ended 31 December) 2004 2005 2006

Rent expense 87 85 107

Maintenance and utilities 167 164 171

Advertising and public relations 110 127 135

Consultancy 118 150 172

Administration and training 66 61 55

Telecommunications, postage costs and offi ce equipment 30 34 37

Outsourcing 36 38 55

Allowances on trade debtors 19 6 16

Impairment on intangible assets and property, 20 5 16plant and equipment

Taxes other than income taxes 49 38 56

Other operating charges(1) -9 24 21

Total 693 731 841

(1) Including unrealized and realized net exchange losses amounting to EUR 2 million in 2004; and unrealized and realized net exchange gains amounting to EUR 1 million in 2005 and to EUR 4 million in 2006. This line item also includes a net decrease of provisions of EUR 30 million in 2004.

Other operating expenses are shown net of work performed by the enter-prise that is capitalized for an amount of EUR 96 million in 2004, EUR 106 million in 2005 and EUR 112 million in 2006.

The table below summarizes the interest rate swap agreements (IRS) of the Group at 31 December 2004, 2005 and 2006.

2004 2005 2006 2006

Notional amount Weighted average payable Average time(as of 31 December) (in EUR million) interest rate (in %) to maturity (in years)

Fixed rate to fi xed rate 0 0 0 - -

Fixed rate to variable rate 0 0 0 - -

Variable rate to variable rate 31 0 0 - -

Variable rate to fi xed rate 200 144 144 6.20 8.9

Total 230 144 144 - -


Note 29. Non-recurring expenses(in EUR million - year ended 31 December) 2004 2005 2006

Termination benefi ts and additional compensation 41 355 -

Total 41 355 -

Losses on the disposal of subsidiaries and joint-ventures that individually exceed EUR 5 million and costs of restructuring programs are recorded as non-recurring expenses.

The Group recorded in 2004 termination benefi ts and additional compen-sation benefi ts for temporary leaves for an amount of EUR 41 million in respect of the external mobility offer for the e-ID cards and emergency call centre projects of the Ministry of Internal Affairs (see note 10.1).

The Group recorded in 2005 termination benefi ts, additional compensa-tion benefi ts and other post-employment benefi ts in respect of the collective labor agreement concluded between Belgacom and the Unions in November 2005 for an amount of EUR 355 million (see note 10.1).

Note 30. Depreciation and amortization(in EUR million - year ended 31 December) 2004 2005 2006

Amortization of goodwill 8 - -

Amortization of licenses and other intangible assets 139 153 220

Depreciation of property, plant and equipment 595 573 582

Total 742 726 802

Note 31. Net fi nance income/(costs)(in EUR million - year ended 31 December) Note 2004 2005 2006

Finance income

Dividends received from other participating interests 15 0 0

Gain on disposal of other participating interestsand enterprises accountedfor using the equity method 7-8 1 63 122

Interest income 21 27 21

Fair value measurement of put option on Alert Services Holding 1 0 0

Fair value adjustments - - 10

Finance costs

Interests and charges on debts -34 -22 -35

Discounting charges on provisions -1 -1 -1

Discounting charges on termination benefi ts - - -13

Impairment losses on other participating interests 8 -20 0 0

Fair value adjustments of fi nancial instruments -9 -2 -

Total -27 64 104

In 2004, the Group obtained a dividend of EUR 15 million from its invest-ments in satellites.

In 2005, Belgacom disposed of its interests in certain satellite companies resulting in a gain of EUR 52 million (see note 8) and its minority interests in Alert Services Holding resulting in a gain of EUR 11 million (see note 7).

In 2006, Belgacom disposed of its interest in Neuf Cégétel resulting in a gain of EUR 118 million (see note 8).

Note 32. Earnings per shareBasic earnings per share are calculated by dividing the net income for the year attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the year.

Diluted earnings per share is calculated by dividing the net income for the year attributable to ordinary shareholders, by the weighted average number of ordinary shares outstanding during the year, both adjusted for the effects of dilutive potential ordinary shares.

The following table refl ects the income and share data used in the computation of basic and diluted earnings per share.

(year ended 31 December) 2004 2005 2006

Net income attributable to ordinaryshareholders (in EUR million) 922 959 973

Adjustments for dilutivepotential ordinary shares(in EUR million) 0 0 0

Adjusted net income for calculatingdiluted earnings per share(in EUR million) 922 959 973

Weighted average numberof ordinary shares 358,612,854 345,406,186 338,621,113

Adjustment for share options 86,076 166,072 153,096

Weighted average number of ordinary shares for dilutedearnings per share 358,698,931 345,572,258 338,774,209

Basic earnings per share (in EUR) 2.57 2.78 2.87

Diluted earnings per share (in EUR) 2.57 2.77 2.87

On 19 February 2004, the shareholders have decided to split each existing ordinary share into ten new shares.

The 538,541 stock options granted in 2005 are anti-dilutive for the periods presented and hence not included in the calculation of diluted earnings per shares, while the options granted in 2004 and 2006 are dilutive.

Note 33. Dividends paid and proposed(year ended 31 December) 2004 2005 2006

Dividends on ordinary shares:Dividends proposed to theshareholders’ meeting(in EUR million) 500 534 552

Number of shareswith dividend rights 361,775,135 351,161,901 344,713,982

Dividend per share (in EUR) 1.38 1.52 1.60

Special dividend proposed to the shareholders’ meeting (in EUR million) 200 - -

Special dividend per share (in EUR) 0.55 - -

Interim dividend paid to the shareholders (in EUR) - - 100

Interim dividend per share (in EUR) - - 0.29

The proposed dividends for 2004 and 2005 have been effectively paid in April 2005 and April 2006 respectively. The interim dividend of 2006 has been paid in December 2006.


Note 34. Related party disclosuresNote 34.1. Consolidated companiesSubsidiaries and joint-ventures are listed in note 6.

Enterprises accounted for under the equity method are listed in note 7.

Commercial terms and market prices apply for the supply of goods and services between Group companies.

Joint-venturesBelgacom International Carrier Services SA and subsidiariesEffective 1 July 2005, the Group holds a joint venture interest of 72% in Belgacom International Carrier Services SA and subsidiaries (hereafter “BICS”); the remaining 28% shares being held by Swisscom Fixnet AG (see note 6.3). BICS is involved in international carrier activities towards Belgacom SA and subsidiaries, Swisscom Fixnet AG and subsidiaries and other telecom operators.

For the period from 1 July 2005 until 31 December 2005, sales and purchases from BICS to the Group amounted to EUR 27 million and EUR 22 million respectively. At 31 December 2005, BICS had trade receiv-ables of EUR 4 million, trade payables of EUR 5 million and short-term loans of EUR 11 million towards the Group.

For the year 2006, sales and purchases from BICS to the Group amounted to EUR 21 million and EUR 16 million respectively. At 31 December 2006, BICS had trade receivables of EUR 4 million, trade payables of EUR 3 million and short-term deposits of EUR 21 million towards the Group.

Enterprises accounted for under the equity methodAlert Services Holding and subsidiariesUntil January 2005, the Group held a 28% stake in Alert Services Holding and subsidiaries but the Group had no signifi cant transactions with this minority participation during 2003 and 2004. In January 2005, the Group sold its 28% stake to Securitas Direct International (see note 7).

TritoneThe Group holds a majority stake in Tritone Telecom BV whose operating activities ceased in July 2002. Belgacom granted loans until end 2002 to fi nance the unwinding of the operations of Tritone. Loans receivable from Tritone, net of the related allowance, are nil at 31 December 2006.

The Group sells no goods or services anymore to Tritone since July 2002. Trade receivables from Tritone, net of the related allowance for doubtful debtors, are nil at 31 December 2006.

Note 34.2. Relationship with shareholdersThe Belgian State is the majority shareholder of the Group, with a stake of 50% plus 1 share. The Group holds treasury shares for 7.7%. The remaining 42.3% are traded on the First Market of Euronext Brussels since the March 2004 public offering initiated by the consortium ADSB Tele-communications BV (hereafter “ADSB”).

Relationship with the Belgian StateThe Group supplies telecommunication services to the Belgian State and various administrations of the Belgian State. All such transactions are made within normal customer/supplier relationships on terms and condi-tions that are not more favourable than those available to other customers and suppliers. The services provided to those administrations do not represent a signifi cant component of the Group’s net revenue..

Commercial relationship with the former shareholder ADSB and the shareholders of ADSB until the Initial Public OfferingThe few transactions of the Group with ADSB and ADSB’s shareholders (SBC Communications Inc, Singapore Telecommunications Limited and TDC A/S) until March 2004 related to international traffi c termination and international network renting, and were carried out at arm’s length.

In 2004, until the date of the IPO, the Group sold services to ADSB and ADSB’s shareholders companies for EUR 3 million. In the same period, purchases of the Group to ADSB and ADSB’s shareholders companies amounted to EUR 1 million.

Other relationship with the former shareholder ADSBAs decided in the Protocol Agreement dated 2 October 2003 between Belgacom and its shareholders at that time, the Group purchased 12,380,950 of its own shares from ADSB on 30 December 2003, for a total price of EUR 325 million. The purchase value has been adjusted downwards by EUR 22 million, at the time of the pricing of the initial public offering, based on the initial offer price per share (see note 16).

In accordance with the same Protocol Agreement, the Group purchased on 20 March 2004 38,761,905 ordinary shares from ADSB at the initial offer price per share for an amount of EUR 950 million.

Relationship with the minority shareholders of Belgacom MobileUntil early November 2006, Vodafone BV and subsidiaries (hereafter “Vodafone”) held a 25% stake in Belgacom Mobile (see note 16.2).

The Group enters into transactions with Vodafone in the framework of its mobile telephony activity (roaming-in revenues and roaming-out costs). Vodafone also charges consultancy fees to Belgacom Mobile. These trans-actions are done at normal customer/supplier relationships on terms and conditions that are not more favourable than those available to other customers/suppliers.

The Group sold services to Vodafone for EUR 76 million in 2004, EUR 72 million in 2005 and EUR 84 million until end of October 2006, when Vodafone ceased to be a related party to the Group. Vodafone sold services to the Group for EUR 89 million in 2004, EUR 91 million in 2005 and EUR 86 million until end of October 2006.

Accounts receivable from Vodafone, net of the related allowance for doubtful debtors, amounted to EUR 10 million at 31 December 2004 and EUR 35 million at 31 December 2005. Trade payables to Vodafone amounted to EUR 6 million at 31 December 2004 and EUR 27 million at 31 December 2005.

Relationship with the minority shareholders of Belgacom International Carrier Services SA and subsidiariesSwisscom Fixnet AG (hereafter “Swisscom”) holds a 28% stake in BICS since 1 July 2005.

The Group enters into transactions with Swisscom and its subsidiaries in the framework of its international carrier activities. Swisscom is using BICS’s network to handle their outgoing international voice and data traffi c while BICS is using Swisscom’s national network to terminate inter-national voice and data traffi c to Switzerland. These transactions are done at normal customer/supplier relationships on terms and conditions that are not more favourable than those available to other customers/suppliers.

During the second half of 2005, the Group sold services to Swisscom for EUR 44 million and Swisscom sold services to the Group for EUR 43 million. In 2006, the Group sold services to Swisscom for EUR(78 million and Swisscom sold services to the Group for EUR 75 million.

Accounts receivable from Swisscom, net of the related allowance for doubtful debtors, amounted to EUR 11 million at 31 December 2005 and EUR 14 million at 31 December 2006. Trade payables to Swisscom amounted to EUR 14 million at 31 December 2005 and EUR 25 million at 31 December 2006.

Note 34.3. Relationship with other State-controlled enterprisesThe Group supplies telecommunication services to various State-controlled enterprises. All such transactions are made within normal customer/supplier relationships on terms and conditions that are not more favourable than those available to other customers and suppliers. The services provided to State-controlled enterprises do not represent a signifi cant component of the Group’s net revenue.

Note 34.4. Relationship with key management personnelPrior to the Initial Public Offering of 22 March 2004, by virtue of a deci-sion by the General Meeting of 12 April 1995, the members of the Board of Directors who represented the Belgian State, with the exception of the Chief Executive Offi cer (CEO), had the right to a directors’ fee that amounted to 619.73 EUR per meeting with a maximum of 9,915.74 EUR per year. They also had the right to directors’ emoluments for an amount


equivalent to that of the directors’ fee. The Chairman of the Board of Directors had, in pursuance of that same decision, also the right to a directors’ fee and directors’ emoluments for an amount that corre-sponded to the double of the amounts granted to the above mentioned members of the Board of Directors.

Compensation of the directors was revised subsequent to the Initial Public Offering. Since then the calculation of this compensation is as follows: an annual fi xed compensation of 50,000 EUR for the Chairman of the Board of Directors and of 25,000 EUR for the other members of the Board of Directors, with the exception of the President and Chief Executive Offi cer. All members of the Board of Directors, with the exception of the President and Chief Executive Offi cer, have the right to an attendance fee of 5,000 EUR per attended meeting of the Board of Directors. Attendance fees of 2,500 EUR per meeting are granted to each member of an advising committee to the Board of Directors, with the exception of the President and Chief Executive Offi cer. For the Chairman these attendance fees are doubled. The total remuneration for the directors amounts to EUR 1,011,000 for 2004, EUR 1,404,375 for 2005 and EUR 1,104,000 for 2006. The directors have not received any loan or advance from the Group.

The number of meetings of the Board of Directors and advising commit-tees are detailed as follows:

2004 2005 2006

Number of meetings

Board of Directors 6 9 6

Audit and Compliance Committee 4 4 5

Nomination and Remuneration Committee 13 8 6

Strategic and Business DevelopmentCommittee 3 6 4

For the year ended 31 December 2004, a total amount of EUR 9,039,714 was paid in aggregate to the members of the “Belgacom Management Committee” (BMC), Chief Executive Offi cer included. In 2004, the members of the Belgacom Management Committee were B. Cosgrave, A. De Lathauwer, D. Bellens, R. Stewart, Ph. Vander Putten, W. Mosseray, S. Alcott, J.-C. Vandenbosch (1 month) and M. Vermaerke (3 months).

For the year ended 31 December 2005, a total amount of EUR 6,961,434 was paid in aggregate to the members of the “Belgacom Management Committee” (BMC), Chief Executive Offi cer included. In 2005, the members of the Belgacom Management Committee were B. Cosgrave, A. De Lathauwer, D. Bellens, R. Stewart, W. Mosseray, S. Alcott, Ph. Vander Putten (4 months), and M. Georgis (8 months).

For the year ended 31 December 2006, a total amount of EUR 8,316,554 was paid in aggregate to the members of the “Belgacom Management Committee” (BMC), Chief Executive Offi cer included. In 2006, the members of the Belgacom Management Committee are B. Cosgrave, A. De Lathauwer, D. Bellens, R. Stewart, W. Mosseray, S. Alcott, M. Georgis and R. Everaert.

These total amounts of key management compensation include the following components:• short-term employee benefi ts: annual salary (base and variable) as well

as other short-term employee benefi ts such as medical insurance, private use of management cars, luncheon vouchers, and including social security contributions paid on these benefi ts.

• post-employment benefi ts: insurance premiums paid by the Group in the name of members of the BMC. The premiums cover mainly a post-retirement complementary pension plan.

• termination benefi ts paid out.

(in EUR) 2004 2005 2006

Short-term employee benefi ts 7,388,615 5,927,742 7,009,718

Post-employment benefi ts 491,892 1,033,692 1,306,836

Termination benefi ts 1,159,207 0 0

Total 9,039,714 6,961,434 8,316,554

In addition to these pecuniary advantages, equity compensation benefi ts have been granted to the BMC members through a discounted share purchase plan in 2004 and employee stock option plans in 2004, 2005 and 2006. In 2004, the BMC members had the opportunity to participate in a discounted share purchase plan whereby they purchased 510,410 shares at a 16.67% discount compared to the issuance price of the initial public offering (24.50 EUR per share). The same year, the BMC members also had the opportunity to participate to an Employee Stock Option Plan whereby they were granted 356,581 share options. In 2005, the BMC members had the opportunity to participate to an Employee Stock Option Plan whereby they were granted 340,389 share options. In 2006, the BMC members had the opportunity to participate to an Employee Stock Option Plan whereby they were granted 138,786 share options.

Note 34.5. RegulationsThe telecommunications sector is regulated through the legislation adopted in the Belgian parliament, through a series of Royal and Ministe-rial Decrees, and also through decisions of the Belgian Institute for Postal services and Telecommunications, commonly referred to as the “BIPT/IBPT”. The Belgian licensing regime provides for individual licenses for the provision of public fi xed voice telephony services, public network infra-structure services and mobile telecommunications services.

The company is also governed by certain provisions and principles of Belgian public and administrative law whereby Belgacom has obligations such as the delivery of regulated services and public services.

Note 35. Rights, commitments and contingent liabilitiesOperating lease commitmentsThe Group rents sites for its telecom infrastructure and leases buildings, technical and network equipment, as well as furniture and vehicles under operating leases with terms of one year or more. Rental expenses in respect of these operating leases amounted to EUR 124 million in 2004, EUR 124 million in 2005 and EUR 146 million in 2006.

Future minimum rentals payable under the non-cancellable operating leases are as follows at 31 December 2006:

From From More Within 1 to 3 3 to 5 than (in EUR million) one year years years 5 years Total

Buildings 26 38 8 3 76

Sites 11 31 10 0 51

Technical and networkequipment 38 33 10 17 98

Furniture 2 2 1 0 4

Vehicles 33 36 1 0 70

Total 109 140 30 20 299

Claims and legal proceedingsFrom time to time Belgacom has been, and expects to continue to be, subject to legal, regulatory and tax proceedings and claims arising in the ordinary course of its business. The Group is currently involved in various judicial and regulatory proceedings, including those for which a provision has been made (see note 18) and those described below, in the jurisdic-tions in which it operates concerning matters arising in connection with the conduct of its business. These include also proceedings before the Belgian Institute for Postal services and Telecommunications (“BIPT”), appeals against decisions taken by the BIPT on the one hand, and proceed-ings with the Belgian tax administrations with respect to real estate with-holding taxes on the other hand.

In September 2002, Codenet, Versatel, Colt and Worldcom fi led a complaint with the Belgian Competition Council alleging that Belgacom’s “Benefi t Excellence Program” constitutes an abuse of an alleged dominant position in the market through pricing and loyalty rebates. The complain-ants also fi led a request for interim relief measures with the President of


the Competition Council requesting, among other things, the suspension of the program. Belgacom’s “Benefi t Excellence Program”, which was launched in March 2002, is a voice telephony tariff plan aimed at large corporate users offering specifi c base rates for national telephony and for fi xed-to-mobile calls as well as an additional discount scheme. On 22 December 2004, the President of the Competition Council rejected the complainant’s request for interim relief measures because Belgacom had clarifi ed the way the volume discounts are applied, and stated that there was, in his opinion, no serious risk that other licensed operators would disappear because of the ‘Benefi t Excellence’ tariffs (and especially the volume discount). The issue of interim relief measures having been closed successfully for Belgacom, the case on the merits with respect to the alleged infringement is still pending and no calendar for the proceedings has been set. On 7 March 2006, Belgacom received a “statement of objec-tions” from the Corps des Rapporteurs (College of Examiners), which is conducting the ongoing investigation for the “Benefi t Excellence” complaint. The statement of objections, to which Belgacom responded on 23 May 2006, considers that various Belgacom pricing plans for business customers involve infringements of the competition rules. These infringe-ments allegedly date back to October 2000, and some of them, in partic-ular the loyalty rebates and the so-called discriminatory pricing conditions, are considered to be still in place to date. The Corps des Rapporteurs heard Belgacom on this matter on 6 June 2006. Once the investigation is completed, the Corps des Rapporteurs will submit a reasoned report to the Belgian Competition Council, which will then have to rule on the objections raised against the Belgacom pricing schemes in question. Belgacom may be subject to an obligation to increase the retail tariffs that are the subject of the claim and if it would ultimately be found to have committed an abuse of dominant position, it may be subject to a maximum fi ne of up to 10% of the Group’s annual turnover. Based on this, Belgacom has provided for a portion of the claim.

In June 2003, BASE fi led an action against Belgacom Mobile before the Commercial Court of Brussels. BASE alleges that Belgacom Mobile’s termination rates since 1 October 2000 are not in accordance with the offi cial telecommunications regulations requiring cost oriented pricing and that Belgacom Mobile’s Proximus-to-Proximus tariffs constitute an abuse of Belgacom Mobile’s alleged dominant position in the Belgian market. BASE’s provisional estimate of the claim for compensation, based upon BASE’s briefs in August 2004, amounts to approximately EUR 700 million in reimbursement and damages, representing the amount of lost revenue that BASE allegedly suffered as a result of these practices, and is subject to increase. On 1 March 2004, Mobistar fi led a request to intervene voluntarily in the action brought by BASE against Belgacom Mobile. Mobistar alleges that if the Commercial Court of Brussels were to fi nd that Belgacom Mobile’s termination rates were not in accordance with the obligation of cost-oriented pricing, Mobistar should be awarded damages provisionally estimated by Mobistar to range between EUR 967,000 and EUR 56,000,000 depending on the termination rates upheld by the Court. Furthermore, Mobistar alleges that in addition to the Proximus-to-Proximus tariffs, certain tariff schemes offered by Belgacom Mobile to business and corporate customers constitute an abuse of Belgacom Mobile’s allegedly dominant position. Mobistar requests the Court to appoint a court expert to calculate the amount of alleged damages and seeks compensation for such damages, provisionally esti-mated at a minimum of EUR 50,000,000. As with the action fi led by BASE, Belgacom Mobile is contesting the claim made by Mobistar. The pleadings in this case are ongoing. Belgacom believes that its mobile termination rates are in line with the rulings of the BIPT. Accordingly, no provision was recorded in the fi nancial statements.

In February 2005, BASE fi led an additional action against Belgacom Mobile before the President of the Commercial Court of Brussels. This action is intimately linked with the existing fi le which opposes Belgacom Mobile against BASE and Mobistar: BASE alleges that Belgacom Mobile’s Proximus-to-Proximus tariffs in certain tariff plans constitute an abuse of Belgacom Mobile’s alleged dominant position in the Belgian market, these tariffs being lower than for calls to the other mobile networks and the tariff difference not being justifi ed by a difference in underlying termina-tion costs. On the basis of these allegations, BASE this time requested a cease-and-desist order of certain tariff plans. On 12 December 2005, the

President of the Brussels Commercial Court ruled that there is no possible abuse of dominant position by Belgacom Mobile as the latter is consid-ered not dominant on the mobile market. Consequently the request for a cease-and-desist order of certain Proximus–to-Proximus tariff schemes is rejected.

On 19 January 2006, the Belgian Competition Authority performed a dawn raid at Belgacom Mobile’s premises based upon a complaint of Base dated 7 October 2005, alleging abusive pricing on the professional market. Several documents have been seized during this offi ce search. Since then, the Competition Authority requested Belgacom Mobile to submit information and documentation as to its activities on the profes-sional market. If the Competition Authority would ultimately fi nd that Belgacom Mobile committed an abuse of dominant position, it may be subject to a maximum fi ne of up to 10% its annual turnover.

Capital expenditure commitmentsAt 31 December 2006, the Group has contracted commitments of EUR 59 million, mainly for the acquisition of intangible assets and technical and network equipment.

Other rights and commitmentsAt 31 December 2006, the Group has the following other rights and commitments:• The Group received bank guarantees from its suppliers and other third

parties to guarantee the completion of contracts or works ordered by the Group for an amount of EUR 19 million;

• The Group granted bank guarantees for an amount of EUR 37 million to its customers and other third parties to guarantee, among others, the completion of contracts, works ordered by its clients and the payment of rental expenses for renting of sites for antennas installation;

• Belgacom has a right, established by Belgian legislation with respect to Universal Services, to receive a compensation from the Universal Serv-ices Obligation fund for offering Social Tariffs for the years 2005 and 2006. Since this right is contested by some operators and is under investigation by the European Commission, the Group qualifi es the compensation receivable as a contingent asset;

• The Group grante uarantees for EUR 4 million to the Walloon Region of Belgium to guarantee execution by Wallonie Intranet SA (hereafter “WIN SA”) of all obligations provided for in WIN SA’s contractual agree-ment with the Walloon Region. The commitment, which is renewable, amounts to EUR 7 million.

Note 36. Cross-border lease arrangementsDuring the period 1996 through 2001, the Group entered into several cross-border lease arrangements with foreign investors relating to part of its fi xed and mobile switches equipment. Under the terms of these agree-ments, which range in duration from 13 to 16 years, the Group received at the inception date of the arrangements a total amount of USD 681 million and placed a total amount of USD 652 million on deposit. The Group entered, in respect of the deposits, into non-refundable payment under-taking agreements with highly rated banks.

In respect of these arrangements, the Group received fees from the foreign investors or realized gains for a total amount of EUR 23 million. These fees or gains are recognized in the income statement under the caption “other operating revenue” over the lifetime of the respective agreements. The fees effectively recognized in income amount to EUR 1.6 million in 2004 and 2005 and EUR 1.4 million in 2006.

On 25 September 2002, the Group sold its investment in Ben Nederland Group but agreed it will continue to guarantee the payment of leasing debts amounting at 31 December 2006 to USD 47 million (EUR 36 million), in case the payment undertakers on the related cross-border lease arrangement would become insolvent. The risk that this guarantee will result in a payment by the Group is mitigated by the fact that the deposit institutions involved are rated AAA or AA by Standard & Poors. The term of the related leasing debt expires in 2012.


Early buy-out have been exercised by the Group with effect in January 2005 (for an arrangement of 1996 amounting to USD 71 million at incep-tion), in January 2006 (for the second arrangement of 1996 amounting to USD 87 million at inception) and in January 2007 (for part of an arrange-ment of 1997 amounting to USD 67 million at inception).

Note 37. Net fi nancial positionof the GroupThe Group defi nes net fi nancial position as the net amount of invest-ments, cash and cash equivalents, interest-bearing liabilities and related derivatives (including re-measurement to fair value).


Assets

Non-current investments (1) 11 6 7 7

Current investments (1) 14 81 86 91

Cash and cash equivalents (1) 15 325 798 236

Non-current derivatives 11 59 50 17

Liabilities

Non-current interest-bearing liabilities (1) 17 -303 -296 -1,917

Current interest-bearing liabilities (1) 17 -58 -111 -71


(1) After remeasurement to fair value, if applicable.

Non-current interest-bearing liabilities include non-current derivatives at fair value amounting to EUR 30 million in 2004, EUR 33 million in 2005 and EUR 21 million in 2006 (see note 17).

Note 38. Fair value of fi nancial instrumentsThe estimated fair values of fi nancial assets and liabilities which are not carried at fair value in the balance sheet are presented in the following tables:

(in EUR million - Carrying Estimated Diffe-as of 31 December 2004) Note amount fair value rence

Financial assets


Trade receivables 12 844 844 0

Current income tax asset 50 50 0



Financial liabilities

Interest-bearing liabilities,non-current and current 17 -32 -33 0

Other non-current payables 19 -2 -2 0

Trade payables -782 -782 0

Income tax payable -224 -224 0

Other current payables 20 -237 -237 0

Net difference between recordedamount and estimated fair value 0


Financial assets


Trade receivables 12 947 947 0





Interest-bearing liabilities,non-current and current 17 -111 -111 0


Trade payables -1,038 -1,038 0





Financial assets


Trade receivables 12 1,207 1,207 0





Interest-bearing liabilities,non-current and current 17 -1,735 -1,725 9


Trade payables -1,086 -1,086 0





Note 39. Share-based PaymentDiscounted Share Purchase PlansIn 2004, 2005 and 2006, the Group launched Discounted Share Purchase Plans (hereafter “DSPP”).

Under the 2004 plan, Belgacom sold 1,842,026 shares to all employees with a discount of 16.67% compared to the issuance price of the initial public offering (24.50 EUR per share). Under the 2005 and 2006 plans, Belgacom sold respectively 139,198 shares and 138,549 shares to the senior management of the Group at a discount of 16.67% compared to the market price (respectively 29.92 EUR and 25.94 EUR per share). The cost of the discount amounted to EUR 8 million in 2004, EUR 0.7 million in 2005 and EUR 0.6 million in 2006 and was recorded in the income statement as personnel expenses (see note 27).

Employee Stock Option PlansIn 2004, 2005 and 2006, Belgacom launched Employee Stock Option Plans (hereafter “ESOP”) whereby respectively 1,128,500, 538,541 and 608,928 share options were granted to the key management and senior management of the Group.

The Group has early adopted IFRS 2 (“Share-based Payments”) in 2004, as issued on 19 February 2004 by recognizing the fair value of the share options at inception date over their vesting period (three years) in accord-ance with the graded vesting method. Such fair value amounts to EUR 5 million for the plan of 2004, EUR 2 million for the 2005 plan and EUR 2 million for the 2006 plan. The annual charge of the graded vesting is recognized in the income statement as personnel expenses and amounts to EUR 2 million in 2004, EUR 3 million in 2005 and EUR 2 million in 2006.

At the moment of exercise, the employee will pay the exercise price of 24.50 EUR per share for the 2004 plan, 29.92 EUR per share for the 2005 plan and 25.94 EUR per share for the 2006 plan, with physical delivery of the share. The share options are exercisable until 22 March 2011 for the 2004 plan, 21 April 2012 for the 2005 plan and 24 April 2013 for the 2006 plan at the latest, except for the 2004 plan where the share options of the President and Chief Executive Offi cer are exercisable until 2012 at the latest.

Only the 2005 and 2006 plans provide the benefi ciaries with a right to the dividends declared after granting the options.

The three plans have slightly different specifi c vesting conditions and exercise periods for the share options in case of voluntary or involuntary leave of a plan participant. For the 2004 plan, in case of voluntary leave of the employee, all unvested options forfeit except during the fi rst year, for which the fi rst third of the options vests immediately and must be exer-cised within two years as from the date of leave. In case of involuntary leave of the employee, all unvested options vest immediately and must be exercised within two years as from the date of leave. For the 2005 and 2006 plans, in case of voluntary leave of the employee, all unvested options forfeit except during the fi rst year, for which the fi rst third of the options vests immediately and must be exercised within two years as from the date of leave. In case of involuntary leave of the employee, all unvested options vest immediately and must be exercised within two years as from the date of leave or as a minimum 3 years as from 1 January of the year following the grant date.

The evolution of the stock option plans is as follows:

Number of stock options

Plan 2004 Plan 2005 Plan 2006

Outstanding at 1 January 2004 0 - -

Movements during the period: 0 - -

• Granted 1,128,500 - -

• Forfeited 0 - -

• Exercised 0 - -

• Expired 0 - -

Outstanding at 31 December 2004 1,128,500 - -

Exercisable at 31 December 2004 0 - -

Movements during the year

• Granted - 538,541 -

• Forfeited -21,114 - -

• Exercised -169,435 - -

• Expired - - -

Total -190,549 538,541 -

Outstanding at 31 December 2005 937,951 538,541 -

Exercisable at 31 December 2005 210,255 0 -

Movements during the year

• Granted - - 608,928

• Forfeited -5,583 -1,600 -

• Exercised -196,188 -5,562 -9,265

• Expired - - -

Total -201,771 -7,162 599,663

Outstanding at 31 December 2006 736,180 531,379 599,663

Exercisable at 31 December 2006 386,879 177,562 31,722

The following assumptions were applied for determining the weighted average fair value of the stock options at grant date:

Plan 2004 Plan 2005 Plan 2006

Option pricing model Binomial Black Black Scholes Scholes

Contractual life of the options 7 years 7 years 7 years

Expected life 5 (to 6) years 6 years 6 years

Exercise price EUR 24.50 EUR 29.92 EUR 25.94

Expected volatility(compared to peer group volatility) 27.50% 18.00% 21.00%

Expected dividend pay-out ratio 50% - 60% 50% - 60% 50% - 60%

Risk free interest rate Euro swap Euro swap Zero annual annual coupon rate rate derived from IRS yield cruve

Fair value of options granted EUR 4.29 EUR 4.15 EUR 4.02

Weighted average share price at exercise during the year 2005 EUR 32.96 - -

Weighted average share price at exercise during the year 2006 EUR 31.87 EUR 32.67 EUR 31.98

Weighted averageremaining contractual life (years) 4 5 6

The volatility has been estimated based on the actual trading statistics of the share and taking into account alignment to certain peers, comparable in terms of risk profi le.


Note 40. Relationship with the auditorsThe Group expensed during the year 2006 an amount of EUR 298,169 for non-mandate fees for the Group’s auditors. This amount is detailed as follows:

(in EUR) Auditor Network of auditor

Other mandatory audit missions 91,341 54,044

Tax advice 4,375 26,661

Other missions 119,464 2,284

Total 215,180 82,989

Note 41. Segment reportingThe Board of Directors and the Chief Executive Offi cer manage the opera-tions of Belgacom Group by business segments. These business segments are the primary segments and are described as follows:• Fixed Line Services. This segment provides retail voice, data, Internet

and network integration services, to residential and business customers in Belgium, as well as regulated and commercial wholesale services to other carriers and service providers in Belgium.

• Mobile Communications Services. This segment provides retail mobile telephony services to residential and business customers in Belgium and provides wholesale data services to third parties.

• International Carrier Services. This segment provides voice, data and capacity and infrastructure services to telecommunications operators worldwide.

The Group’s head offi ce and central functions are included for fi nancial reporting purposes within the Fixed Line Services segment.

When a legal entity includes more than one segment, adjustments for intersegment pricing are determined on an arm’s length basis. Segment results, assets and liabilities include items attributable to a segment as well as those that can be allocated on a reasonable basis.

Mobile Fixed Communi- International Inter- Line cations Carrier segment (in EUR million - year ended 31 December 2004) Services Services Services eliminations Total

Net revenue 2,837 2,022 556 0 5,415

Other operating revenue 101 24 0 0 125

Intersegment revenue 154 193 88 -435 0

Total segment revenue 3,092 2,239 645 -435 5,540

Total segment result(1) 1,257 1,135 2 0 2,394

Non-recurring expense -41 0 0 0 -41

Operating income before depreciation and amortization 1,216 1,135 2 0 2,353

Depreciation and amortization -500 -227 -15 0 -742

Operating income/(loss) 717 907 -13 0 1,611

Finance costs (net) - - - - -27

Loss from enterprises accounted for using the equity method -1 - - - -1

Income before taxes - - - - 1,583

Tax expense - - - - -508

Net income - - - - 1,075

Minority interests - - - - 152

Net income (group share) - - - - 922

(1) Operating income before depreciation and amortization and before non-recurring expenses.

Mobile Fixed Communi- International Line cation Carrier (in EUR million - as of 31 December 2004) Services Services Services Unallocated Total

Enterprises accounted for under the equity method 26 - - - 26

Segment assets 2,807 1,130 242 1,189 5,368

Segment liabilities -794 -406 -226 -1,721 -3,145

Capital expenditure 338 205 13 - 556

Impairment losses recorded in the income statement

• on intangible assets, property, plant & equipment (into segment result) 0 0 -20 - -20

• on consolidated companies (into segment result) -1 - - - -1

• on other participating interests (into fi nance costs) -20 - - - -20


Mobile Fixed Communi- International Inter- Line cations Carrier Segment (in EUR million - year ended 31 December 2005) Services Services Services Eliminations Total

Net revenue 2,745 2,001 637 0 5,384




Total segment result (1) 1,147 1,041 27 -1 2,214

Non-recurring revenue 238 0 0 0 238

Non-recurring expense -355 0 0 0 -355

Operating income before depreciation and amortization 1,031 1,041 27 -1 2,098


Operating income 538 827 7 0 1,372

Finance revenue (net) - - - - 64



Net income - - - - 1,098





Segment assets 2,874 1,155 335 1,467 5,831

Segment liabilities 952 655 279 1,354 3,240

Capital expenditure 488 195 19 -6 696


• on intangible assets, property, plant & equipment (into segment result) -2 -2 -1 - -5


Mobile Fixed Communi- International Inter- Line cations Carrier Segment (in EUR million - year ended 31 December 2006) Services Services Services Eliminations Total

Net revenue 3,367 1,975 680 0 6,022




Total segment result (1) 1,116 1,000 33 0 2,149

Operating income before depreciation and amortization 1,116 1,000 33 0 2,149


Operating income 547 786 13 0 1,347

Finance revenue (net) - - - - 104



Net income - - - - 1,093





Segment assets 3,450 2,694 292 863 7,300

Segment liabilities 1,144 653 274 2,828 4,900

Capital expenditure 448 214 15 - 676


• on intangible assets, property, plant & equipment (into segment result) -6 -10 - - -16

For secondary segment reporting purposes, the Group has defi ned groups of countries characterized by similar economic environment and risks and returns.

The group of countries “Western Europe” represents more than 90% of total revenue and total assets of the Group. As a consequence, the company concluded that it must not present secondary segment information.

Note 42. Recent IFRS pronouncementsThe Group does not early apply any standards or interpretations that are adopted for use in the European Union but not yet effective at 31 December 2006. The Group will investigate the possible impact of the application of such new standards or interpretations on the Group’s fi nancial statements in the course of 2007.

Note 43. Post balance sheet eventsShareholder returnThe Belgacom Board of Directors decided on 1 March 2007 to propose to the Annual General Meeting of 11 April 2007 an ordinary dividend of EUR 552 million (EUR 1.6 dividend per share), on top of the interim dividend paid in December 2006.

Furthermore, the Board of Directors feels that the current level of net fi nancial debt is acceptable and at this time sees no need to further reduce this position.

Cancellation of sharesThe Board of Directors decided on 1 March 2007 to propose to the Extraordinary General Meeting of 11 April 2007 a cancellation of 23,750,000 treasury shares.

Mobistar stakeIn January and February 2007, Belgacom sold its remaining stake in Mobistar for a total amount of EUR 166 million. The last tranche of 2,274,043 shares was sold on 22 February 2007 for a price of EUR 65 per share or a total amount of EUR 148 million.

Restructuring following acquisition of the Vodafone stake in Belgacom MobileFollowing the acquisition of the Vodafone 25% stake in Belgacom Mobile, Belgacom continues to pursue a full convergence strategy offering inte-grated solutions to its customers. To continue the transformation process, the Belgacom Management Committee has redefi ned the senior manage-ment structure and has appointed the people who will be in charge of the new key positions within the Group. This is only a fi rst step in the redefi ni-tion of the organization. In the coming weeks and months, Belgacom will continue to fi ne-tune and implement its new structure.

For Staff and Support services, Belgacom is working towards an integration of all functions at Group level. The other Business Units will operate in a matrix structure whereby most senior managers will get a hierarchical and a matrix (Fixed/Mobile convergence) responsibility.

For the above mentioned restructuring, the Belgacom Management Committee will work closely together with the social partners.

Belgacom is convinced that its workforce can be optimized through natural attrition, further external mobility projects and voluntary leaves . Expecta-tion is that the Group’s headcount will be reduced by about 1,500 people between now and 2011, on top of the “Collective Agreement” of 2005.


Ernst & Young Tel: +32 (0)2 774 91 11Reviseurs d’Entreprises Fax: +32 (0)2 774 90 90BedrijfsrevisorenAvenue Marcel Thiry 204Marcel Thirylaan 204B-1200 Bruxelles - Brussel

REPORT OF THE AUDITOR TO THE GENERAL MEETING OF SHAREHOLDERS OF BELGACOM SA DE DROIT PUBLIC/NV VAN PUBLIEK RECHT ON THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2006

In accordance with legal requirements, we report to you on the performance of the audit mandate that has been entrusted to us. This report contains our opinion on the consolidated fi nancial statements as well as the required additional comments and information.

Unqualifi ed opinion on the consolidated fi nancial statementsWe have audited the consolidated fi nancial statements of Belgacom SA de droit public/NV van publiek recht and its subsidiaries (collectively referred to as “the Group”) for the year ended 31 December 2006, prepared in accordance with International Financial Reporting Standards (“IFRS”) as adopted by the Euro-pean Union, and with the legal and regulatory requirements applicable in Belgium. These consolidated fi nancial statements comprise the consolidated balance sheet as at 31 December 2006, and the consolidated statement of income, changes in equity and cash fl ow for the year then ended, as well as the summary of signifi cant accounting policies and other explanatory notes. The consolidated balance sheet shows total assets of EUR 7,300 millions and the consolidated income statement shows a profi t for the year, share of the Group, of EUR 973 millions.

Responsibility of the Board of Directors for the preparation and fair presentation of the consolidated fi nancial statementsThe Board of Directors is responsible for the preparation and fair presentation of the consolidated fi nancial statements. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of consolidated fi nancial statements that are free from mate-rial misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

Responsibility of the auditorOur responsibility is to express an opinion on these consolidated fi nancial statements based on our audit. We conducted our audit in accordance with legal requirements, and the auditing standards applicable in Belgium, as issued by the Institute of Registered Auditors (“Institut des Réviseurs d’Entreprises/Instituut der Bedrijfsrevisoren”) and International Standards on Auditing. Those standards require that we plan and perform the audit to obtain reasonable assurance whether the consolidated fi nancial statements are free from material misstatement.

In accordance with these standards, we have performed procedures to obtain audit evidence about the amounts and disclosures in the consolidated fi nancial statements. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the consolidated fi nancial statements, whether due to fraud or error. In making those risk assessments, we have considered internal control relevant to the Group’s preparation and fair presentation of the consolidated fi nancial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control. We have evaluated the appropriateness of accounting policies used, the reasonable-ness of signifi cant accounting estimates made by the Group and the presentation of the consolidated fi nancial statements, taken as a whole. Finally, we have obtained from the Board of Directors and the Group’s offi cials the explanations and information necessary for executing our audit procedures. We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our opinion.

OpinionIn our opinion, the consolidated fi nancial statements for the year ended 31 December 2006 give a true and fair view of the Group’s fi nancial position as at 31 December 2006 and of the results of its operations and its cash fl ows in accordance with IFRS as adopted for use by the European Union, and with the legal and regulatory requirements applicable in Belgium.

Additional comments and informationThe preparation and the assessment of the information that should be included in the annual report on the consolidated fi nancial statements are the responsibility of the Board of Directors.Our responsibility is to include in our report the following additional comments and information, which do not modify the scope of our opinion on the consolidated fi nancial statements:• The annual report on the consolidated fi nancial statements deals with the information required by law and is consistent with the consolidated fi nancial state-

ments. We are, however, unable to comment on the description of the principal risks and uncertainties which the entities included in the consolidation are facing, and on their situation, their foreseeable evolution or the signifi cant infl uence of certain facts on their future development. We can nevertheless confi rm that the matters disclosed do not present any obvious inconsistencies with the information that we became aware of during the performance of our mandate.

Brussels, 12 March 2007 Ernst & Young Reviseurs d’Entreprises SCCRL/ Bedrijfsrevisoren BCVBA represented by

Marnix Van DoorenPartner


> report of the auditor

114 > Income statement

116 > Balance sheet after appropriation

118 > Appropriation statement

The fi nancial information presented in this caption is an extract of the non-consolidated fi nancial statements of Belgacom SA under public law as approved by the General Assembly on 11 April 2007 and as communicated to the National Bank of Belgium (in Dutch and French) in the month following the General Assembly. These fi nancial statements were prepared in conformity with the accounting and reporting laws and regulations applicable in Belgium (“Belgian GAAP”). The Joint Auditors of Belgacom SA de droit public/ Belgacom NV van publiek recht have issued an unqualifi ed opinion with respect to such non-consolidated fi nancial statements.

A full set of the fi nancial statements of Belgacom SA under Public Law is available on the Belgacom web site (www.belgacom.be/investor/en) as soon as they will be fi led at the National Bank of Belgium.

contents

Extract from the Belgian GAAP non-consolidated fi nancial statements · 113

> extract from the Belgian GAAP non-consolidated fi nancial statements of Belgacom SA under public law


> income statement


I. Operating income 3,713 3,041 3,045

A. Turnover 3,525 2,856 2,828

B. Increase (+); Decrease (-) in stocks of fi nished goods, work and contracts in progress 0 0 2

C. Own construction capitalised 124 134 169

D. Other operating income 65 51 46

II. Operating charges -2,971 -2,337 -2,410

A. Raw materials, consumables and goods for resale 165 173 203

1. Purchases 170 179 207

2. Increase (-); Decrease (+) in stocks -5 -6 -4

B. Services and other goods 1,522 994 1,070

C. Remuneration, social security costs and pensions 784 730 710

D. Depreciation of and other amounts written off formation expenses, intangible and tangible fi xed assets 495 425 399

E. Increase (+); Decrease (-) in amounts written off stocks, contracts in progress and trade debtor -2 -4 -7

F. Increase (+); Decrease (-) in provisions for liabilities and charge -21 2 12

G. Other operating charges 28 17 21

H. Operating charges capitalised as reorganization costs 0 0 0

III. Operating profi t 743 703 635

IV. Financial income 88 11 14

A. Income from fi nancial fi xed assets 61 0 0

B. Income from current assets 3 4 8

C. Other fi nancial income 24 7 6

V. Financial Charges -219 -208 -280

A. Interest and other debt charges 185 192 266

B. Increase (+); Decrease (-) in amounts written off current assets other than mentioned under II.E. 0 0 0

C. Other fi nancial charges 35 15 14

VI. Profi t on ordinary activities before taxes 612 507 369



VI. Profi t on ordinary activities before taxes 612 507 369

VII. Extraordinary income 32 351 68

A. Adjustments to depreciation of and to other amounts written off intangible and tangible fi xed assets 0 0 0

B. Adjustments to amounts written off fi nancial fi xed assets 0 18 66

C. Adjustments to provisions for extraordinary liabilities and charges 5 0 0

D. Gain on disposal of fi xed assets 26 333 1

E. Other extraordinary income 0 0 0

VIII. Extraordinary charges -95 -466 -45

A. Extraordinary depreciation of and extraordinary amounts written off formation expenses, intangible and tangible fi xed assets 0 0 1

B. Amounts written off fi nancial fi xed assets 22 4 5

C. Provisions for extraordinary liabilities and charges (increase+, decrease -) -84 306 -130

D. Loss on disposal of fi xed assets 0 0 0

E. Other extraordinary charges 157 155 168

F. Extraordinary charges capitalised as reorganization costs 0 0 0

IX. Profi t for the period before taxes 549 392 392

IXbis. A. Transfer from deferred taxation 0 0 0

B. Transfer to deferred taxation -6 0 0

X. Income taxes 2 0 0

A. Income taxes 0 0 0

B. Adjustment of income taxes and write-back of tax provisions 2 0 0

XI. Profi t for the period 544 392 392

XII. Transfer from untaxed reserve 0 0 1

Transfer to untaxed reserve -12 0 0

XIII. Profi t for the period available for appropriation 532 392 393


> balance sheet after appropriation


ASSETS

FIXED ASSETS 11,809 11,853 14,889

I. Formation expenses 0 0 0

II. Intangible assets 137 105 83

III. Tangible assets 1,680 1,566 1,567

A. Land and buildings 234 225 215

B. Plant, machinery and equipment 1,254 1,175 1,152

C. Furniture and vehicles 29 25 24

D. Leasing and other similar rights 74 52 41

E. Other tangible assets 34 28 21

F. Assets under construction and advance payments 55 63 113

IV. Financial assets 9,991 10,182 13,239

A. Affi liated enterprises 9,911 10,170 13,232

1. Participating interests 9,911 10,170 13,232

2. Amounts receivable 0 0 0

B. Other enterprises linked by participating interests 45 0 0

1. Participating interests 45 0 0

2. Amounts receivable 0 0 0

C. Other fi nancial assets 35 12 7

1. Shares 34 11 7

2. Amounts receivable and cash guarantees 1 1 0

CURRENT ASSETS 1,005 1,787 1,401

V. Amounts receivable after more than one year 3 3 2

A. Trade debtors 0 0 0

B. Other amounts receivable 3 3 2

VI. Inventories and contracts in progress 40 45 49

A. Inventories 40 44 49

1. Raw materials and consumables 25 24 22

2. Work in progress 0 0 0

4. Goods purchased for resale 15 20 27

B. Contracts in progress 0 1 0

VII. Amounts receivable within one year 661 539 553

A. Trade debtors 643 514 534

B. Other amounts receivable 18 25 19

VIII. Investments 279 570 762

A. Own shares 271 564 754

B. Other investments and deposits 8 6 8

IX. Cash at bank and in hand 10 618 17

X. Deferred charges and accrued income 12 13 17

Total assets 12,813 13,640 16,290



LIABILITIES AND SHAREHOLDERS’ EQUITY

SHAREHOLDERS’ EQUITY 4,964 4,819 4,560

I. Capital 1,000 1,000 1,000

II. Share premium account 0 0 0

III. Revaluation surplus 0 0 0

IV. Reserves 3,964 3,818 3,560

A. Legal reserve 100 100 100

B. Reserve not available for distribution 293 601 812

C. Untaxed Reserves 17 17 17

D. Reserves available for distribution 3,554 3,100 2,631

V. Profi t (loss) carried forward 0 0 0

VI. Investment grants 0 0 0

PROVISION AND DEFERRED TAXATION 859 1,170 1,052

VII. A. Provisions for liabilities and charges 852 1,164 1,046

1. Pensions and similar obligations 0 0 0

2. Taxation 0 0 0

3. Major repairs and maintenance 0 0 0

4. Other liabilities and charges 852 1,164 1,046

B. Deferred taxation 7 6 6

LIABILITIES 6,991 7,652 10,678

VIII. Amounts payable after more than one year 3,612 3,997 5,817

A. Financial debts 3,611 3,997 5,817

1. Subordinated debentures 0 0 0

2. Unsubordinated debentures 217 217 1,867

3. Leasing and similar obligations 0 0 0

4. Credit institutions 3,036 3,421 3,591

5. Other loans 359 359 359

D. Other amounts payable 1 0 0

IX. Amounts payable within one year 3,214 3,514 4,712

A. Current portion of amounts payable after more than 1 year 870 815 826

B. Financial debts 849 1,572 2,764

1. Credit institutions 849 1,572 2,764

2. Other loans 0 0 0

C. Trade creditors 619 427 374

1. Suppliers 619 427 374

2. Suppliers bills 0 0 0

D. Advances received on contracts in progress 24 17 14

E. Taxes, remuneration and social security 140 140 167

1. Taxes 19 18 47

2. Remuneration and social security 122 122 119

F. Other amounts payable 712 544 567

X. Accrued charges and deferred income 164 140 149

Total libabilities and shareholders’ equity 12,813 13,640 16,290


> appropriation statement


A. Profi t to be appropriated 532 392 393

B. Transfers from capital and reserves 196 162 278

C. Transfers to capital and reserves -21 -16 -20

F. Distribution of profi t -706 -537 -651

3G Third-generation mobile telephony, better known as UMTS (Universal Mobile Telecommunications System).

ADSL (Asymmetric Digital Subscriber Line): Technology which allows a high-speed, point-to-point digital connection over a copper pair.

ADSL2+ Advanced version of ADSL, which allows a bandwidth of up to 15 Mbps.

ARPU (Average Revenue Per Unit): An indicator for determining a customer’s profi tability.

ATM (Asynchronous Transfer Mode): A technique enabling high-speed transfer of digital data. It consists in dividing information fl ow (voice, data and image) into fi xed-size packets, known as “cells”.

BACKBONE A high bandwidth line which acts as the mainstay linking access providers to the world network.

BILAN (Belgacom Interconnection of LAN): A total telecom solu-tion based on the Internet Protocol (IP), Frame Relay and ATM networks.

BLOG A website on which one or several persons express their views on a regular basis.

BROADBAND A high bandwidth network capable of transmitting large data fl ows.

BROBA (Belgacom Reference Offer for Bitstream Access): Belga-com’s reference offer for binary rate access.

BRUO (Belgacom Reference Unbundling Offer): Belgacom’s reference offer for local loop unbundling.

CDMA (Code Division Multiple Access): A digital technique in which different conversations can be transmitted simul-taneously and are differentiated by being tagged with a code.

DVB-H (Digital Video Broadcasting - Handheld): Digital, micro-wave radio broadcasting system intended for reception on handheld devices.

DVB-T (Digital Video Broadcast - Terrestrial): Broadcasting standard (signal transmission) of digital television via radio waves.

EPG (Electronic Program Guide): Standard enabling the broad-casting, in teletext mode, of scheduled television programs in the form of an on-screen interactive guide.

FRAME RELAY Data transmission protocol that divides a physical communications line into several virtual channels.

GPRS (General Packet Radio Service): A second-generation mobile telephony standard. It enables direct Internet access and data exchange at speeds 18 times faster than those of the GSM protocol and allows volume-based pricing.

GSM (Global System for Mobile Communications): An abbrevi-ation which is often synonymous, in common parlance, with the mobile telephone or terminal. It is actually a European standard for a common digital cellular telephony system.

HDTV (High Defi nition Television): High-resolution television, a sound and image quality standard which is still in devel-opment.

HSDPA (High Speed Downlink Packet Access): A protocol for mobile telephony, sometimes called 3.5 G or even 3 G+.

IP (Internet Protocol): A protocol for transmitting data packets, used for routing and transporting messages via the Internet.

IP VPN (IP Virtual Private Network): A VPN offers the advantages of a private network (security, etc.) while using public infrastructures. The user thereby saves on network management and infrastructure costs.

ISDN (Integrated Services Digital Network): A fully digitized fi ber-optic network enabling simultaneous, high-speed transmission of voice, text, data and images (still or animated).

ISP (Internet Service Provider): An organization that offers a connection to the Internet computer network.

MMS (Multimedia Messaging Service): A technology for illus-trating text messages (displayed on a mobile telephone) with photos, video and/or audio clips.

MOBLOG Content posted to the Internet from a mobile device, such as a cellular telephone or personal assistant (PDA).

MPEG-2/MPEG-4 (Moving Picture Experts Group): Standard for video compression. MPEG-4, which is more powerful (delivers the same quality as MPEG-2 with smaller packets of data), is the standard of the future for digital television applications.

PABX (Private Automatic Branch eXchange): A company exchange around which the company’s internal telephone network is organized. It also enables data transmission.

QUADRUPLE-PLAY A combined offer consisting of fi xed and mobile telephony, Internet and television services from a high-speed access.

SDSL (Symmetric Digital Subscriber Line): Technology that trans-ports data at speeds of up to 2.3 Mbps, upstream and downstream.

STREAMING A technique for downloading multimedia fi les enabling surfers to read the fi le in real-time, without waiting for full download. This is the case, for example, with sound or video on the Internet.

TCP-IP (Transmission Control Protocol - Internet Protocol): A protocol used in conjunction with Internet Protocol (IP) to transmit data in billing units (datagrams or packets) between computers via the Internet. IP processes the actual delivery of data, whereas TCP ensures the follow-up of individual units of data to ensure they are routed effi ciently over the Internet.

TRIPLE-PLAY A combined offer consisting of fi xed telephony, Internet and television from a high-speed access.

UMTS (Universal Mobile Telecommunication System): A third-generation mobile telecommunications system capable of providing multimedia services at a very high speed.

VDSL (Very High Rate Digital Subscriber Line): An advanced version of ADSL, which allows a bandwidth of up to 20 Mbps.

VOD (Video On Demand): An interactive video system, with the same functionalities as a VCR, which allows users to order fi lms or television programs remotely and against payment.

VOIP (Voice over Internet Protocol): A technique for transmit-ting voice conversations over the Internet or any other network supporting the TCP/IP protocol.

VPN (Virtual Private Network): A private network whose architecture is based on the use of the TCP-IP protocol.

WDM ([Dense] Wavelength Division Multiplexing): A technique enabling several independent fl ows of digital information to coexist on the same optical fi ber.

WIFI Stands for “Wireless fi delity”. WiFi technology enables short-range, wireless, high-speed surfi ng via a hotspot.

Glossary · 119

> glossary

Disclaimer

This communication contains forward-looking statements, including statements about the Company’s beliefs and expectations. These statements are based on the Company’ s current plans, estimates and projections, as well as its expectations of external conditions and events. Forward-looking statements involve inherent risks and uncertainties and speak only as of the date they are made. The Company undertakes no duty to and will not necessarily update any of them in light of new information or future events, except to the extent required by Belgian law. The Company cautions investors that a number of important factors could cause actual results or outcomes to differ materially from those expressed in any forward-looking statements.

For fi nancial information, please contactIngvild Van LysebettenHead of Investor RelationsBd du Roi Albert II/Koning Albert II-laan, 27B - 1030 BrusselsTel: + 32 2 202 40 23Fax: + 32 2 201 54 94E-Mail: [email protected]

For further information, please contactThierry BouckaertPress and External Communication DirectorBd du Roi Albert II/Koning Albert II-laan, 27B - 1030 BrusselsTel: + 32 2 202 82 50Fax: + 32 2 203 65 93E-Mail: [email protected]

Visit Belgacom’s website: www.belgacom.beBelgacom’s Annual Report is also published in Dutch andin French.

Additional InformationCorporate name and legal formThe autonomous public-sector company Belgacom is a Société anonyme de droit public/Naamloze vennootschap van publiek recht (limited liability company under public law) as defi ned by the Law of 21 March 1991 on the reform of certain public-sector commercial undertakings 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 specifi c legislation of any kind.

Registered Offi ceBoulevard du Roi Albert II/Koning Albert II-laan, 271030 Brussels BelgiumVAT BE 0202.239.951Brussels Register of Legal EntitiesBrussels Trade Registry 587.163

Consultation of the issuer’s documentsThe public documents concerning the issuer can be consulted at the registered offi ce.

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 Tele-graph Company, the RTT (Régie des Téléphones et Télégraphes/Regie van telegraaf en telefoon).

The transformation of Belgacom into a SA of public law was implemented by the Royal Decree of 16 December 1994, which was published in the Belgian Offi cial Gazette on 22 December 1994, and went into effect on the same day.

Objects of the CompanyAs described in the Article 3 of the Articles of Association, the Company’s objects are:1. to develop services within the fi eld of telecommunications in Belgium or

elsewhere;2. to take all actions aimed at promoting, directly or indirectly, its activities or

ensuring optimal use of its infrastructure;3. to acquire participating interests in bodies, companies or associations – whether

existing or to be created, Belgian, foreign or international, and public or private sector – that may contribute, directly or indirectly, to the achievement of its corporate objects;

4. to provide radio and television broadcasting services.

Editor-in-chief:Thierry BouckaertBd du Roi Albert II/Koning Albert II-laan, 27 – B - 1030 BrusselsConception and coordination:Frédéric Herzeele - Corporate Communication ManagerNancy Goossens - Investor Relations Offi cerFranck Vanbelle - Corporate Content & Publication ManagerGraphics: Chris Communications - www.chriscom.bePrepress: Snel Grafi csPrinting: MassozPictures: Belgacom, Jean-Michel Byl, Getty Images and Corbis


> general information

Boekjaar afgesloten op 31 december 2004 2005 2006

Resultatenrekening (in miljoen EUR)

Totale opbrengsten voor niet-terugkerende elementen 5.540 5.458 6.100

Niet-terugkerende opbrengsten 0 238 0

Totale opbrengsten 5.540 5.696 6.100

EBITDA(1) voor niet-terugkerende elementen 2.394 2.214 2.149

EBITDA(2) 2.353 2.098 2.149

Afschrijvingen -742 -726 -802

Bedrijfswinst (EBIT) 1.611 1.372 1.347

Netto fi nanciële opbrengsten (kosten) -27 64 104

Winst voor belastingen 1.584 1.436 1.451

Belastingen -508 -339 -358

Minderheidsbelangen 152 139 121

Nettowinst (aandeel van de Groep) 922 959 973


Kasstroom en Investeringen (in miljoen EUR)

Kasstroom uit operationele activiteiten 1.899 1.883 1.643

Investeringen -556 -696 -676

Netto kasstroom gegenereerd uit/(besteed in) andere investeringsactiviteiten 78 389 -2.279

Vrije kasstroom(2) 1.421 1.575 -1.313

Netto kasstroom besteed in fi nancieringsactiviteiten -1.658 -1.102 751

Netto toename/(afname) van kas en kasequivalenten -237 473 -562

Op 31 december 2004 2005 2006

Balans (in miljoen EUR)

Totaal balans 5.368 5.831 7.300

Vaste activa 3.963 3.808 5.504

Beleggingen, kas en kasequivalenten 406 884 327

Eigen vermogen (aandeel van de groep) 2.223 2.221 2.391

Minderheidsbelangen 407 370 8

Schulden voor pensioenen, andere vergoedingen na uitdiensttreding en beëindigingsvoordelen 760 1.010 886

Netto fi nanciële positie 110 534 -1.636


Gegevens per aandeel

Gewone winst per aandeel (in EUR) 2,57 2,78 2,87

Verwaterde winst per aandeel (in EUR) 2,57 2,77 2,87

Dividend per aandeel, bruto (in EUR)(3) 1,38 1,52 1,60

Interim/bijzonder dividend per aandeel, bruto (in EUR) 0,55 0,00 0,29

Gewogen gemiddeld aantal gewone aandelen 358.612.854 345.406.186 338.621.113

Per 31 december 2004 2005 2006

Operationele gegevens

Totaal van de toegangskanalen (in duizenden)(4) 5.252 5.251 5.238

Totaal van de ADSL-toegangskanalen (retail en wholesale) (in duizenden) 1.024 1.268 1.493

Actieve mobiele klanten (in duizenden)(5) 4.198 4.253 4.311

Door International Carrier Services vervoerde minuten (in miljarden) 6,9 9,6 12,2

Personeel 16.933 16.335 18.180

OpbrengstenDe totale opbrengstenvan de Groep verhogenmet 7,1%.

EBITDADe EBITDA van de Groepna niet-terugkerende elementen kendeeen toename van 2,4%.

Winst per aandeelDe winst per aandeel ismet 3,2% toegenomentot 2,87 EUR.

NettowinstDe nettowinst (aandeel van de Groep) bedroeg 973 miljoen EUR.

kerncijfers financiële resultaten van de Groep

139.665Belgacom TV klanten

58.077nieuwe actieve klantenbij Proximus

Opbrengsten 2006 per segment (vóór eliminaties)

33% MCS

11% ICS

56% FLS

EBITDA 2006 per segment (vóór eliminaties)

Opbrengsten (in miljoen EUR)

EBITDA (in miljoen EUR)

(1) Voorbereid onder de IFRS-normen zoals goedgekeurd voor toepassing in de Europese Unie.(2) Earnings Before Interests, Taxes, Depreciation and Amortization.(3) Kasstroom voor fi nancieringsactiviteiten.

(4) PSTN + ISDN BA + ISDN PRA + retail ADSL.(5) Klant die in de voorbije drie maanden een oproep of een sms heeft gekregen of

verstuurd.

Nettowinst (in miljoen EUR)

Winst per aandeel (in EUR)

47% MCS

2% ICS

52% FLS

4.000

4.500

5.000

5.500

6.000

0

200

400

600

800

1.000

1.000

1.200

1.400

1.600

1.800

2.000

2.200

2.400

0

1

2

3

04 05 06

04 05 06

04 05 06

04 05 06

5.540

922

2,57

959

2,78

5.696

973

2,87

6.100

2.353

2.0982.149

annual report 2006

simplicityThis title captures in a nutshell the Belgacom Group’s objectives for 2007. The telecommunications sector is particularly complex, and the number of service offerings has risen steadily in the past few years. This is why the Belgacom Group has opted for convergence and simplicity, through clear offers and transparent interactions. Our main objective is to make high-performance products with unlimited communication possibilities available for everyone.

Belg

acom

an

nual

rep

ort

2006

“beyond complexity lies simplicity!” Albert Einstein

“beyond complexity lies simplicity!” albert einstein

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