Proximus SA — Annual Report 2010

Mar 29, 2011

Customer satisfaction Responsibility Innovation

Jérémy, a cinema buff, spends much of his free time watching movies and reading journals.

Friends, fi rst nights out, music – Bert knows better than anyone how to organize his life and activities with his mobile.

Christiane is self-confi dent and has a passion for culture. Besides visiting museums and exhibitions, she also likes to consult the works of her favorite artists on the Internet.

Marjorie's days are fi lled with different scents and colors. She likes to spend her free time with friends or going shopping.

He may be a professional from head to toe, but Daniel loves to spend time with his family and think about the next holiday destination – Italy, Greece or Egypt?

Klara and Alec

Work and taking care of the children take up a lot of energy. Even though their diaries are full, Cedric and Sandra love to spend some quality time with their family.

Xavier is always on the move. His work as a company director takes him all over France and Belgium. To unwind, he likes to read design books while sipping on a good glass of rum.

Active, fun and sporty, Nancy lives each moment to the max. Always connected, she easily mixes business with pleasure.

Highlights 2010

Belgacom boosts Internet in three phases: more volume, more speed and the rst unlimited o er in Belgium.

Now the fourth largest operator in the world thanks to its partnership with the South African MTN, signs an agreement with G-Xchange for international money transfer.

Belgacom becomes the o cial partner of cyclo-cross and mountain-bike champion Sven Nys.

15,249 recycled mobile phones CSR

Thanks to the "Big Spring Recycling" campaign, Belgacom collects 15,249 mobile phones. For each mobile phone returned to a Belgacom Center, a tree is planted. In total, 3 hectares of forest have been planted.

Belgacom integrates all its teams in a convergent organization. Important milestones are reached, such as the harmonization of employment conditions and the introduction of a uni ed salary policy. e objective: to work together for the success of the Group.

exclusif Samsung Galaxy S 16 GB à € 549,99. * Action unique «100 MB d'Internet On GSM pendant 30 jours», uniquement valable pour les clients Proximus existants et recevant une facture mensuelle. 1 activation par client. Action sans obligation surferez aux conditions habituelles en fonction de l'option activée sur votre abonnement. Proximus boosts mobile sur ng and – with Samsung – announces the exclusive launch of the Samsung Galaxy S, a gem of technological innovation. Just after that, the Samsung tablet was also available in our shops.

Scarlet takes over the mobile activities of Mobisud in Belgium. A few days later, Scarlet, Mobisud and

PingPing launch an application for SMS money transfer between Belgium and Morocco.

Belgacom strengthens its convergent ICT offering by creating a new ICT channel for the self-employed and SMEs. "Advice", "Service" and "Flexibility" are the key concepts within this specialized ICT network.

ICT Provider

Mobile network

In 2010, the contract with HUAWEI enabled us to upgrade 27% of Belgacom's mobile infrastructures, ensuring the

development of our 3G network and the expansion of a new generation of technologies.

Full convergence is becoming a reality within large enterprises. Belgacom launched a complete offer for all business interaction needs: fi x and mobile voice communication, videoconferencing, instant messaging, etc. It supports employees by integrating the collaboration and presence tools they use, both on-site and "as-a-service" in the cloud.

e new mobile application "m.skynet.be" is launched before the summer. ousands of applications are made available to customers, such as "Hello Proximus", which allows them to check their bill, and the complete Belgacom TV guide.

Belgacom TV constantly innovates and reinvents television with new possibilities: live 3D broadcasts, TV on PC, football on smartphones...

continuer à travailler quoi qu'il arrive.

L'accès à internet et à vos e-mails est primordial dans l'exercice quotidien de votre profession. Votre connexion internet doit donc être performante à tout instant. Voilà pourquoi Belgacom vous propose la première offre internet en Belgique comprenant 4 garanties de service qui vous permettent de continuer à travailler en toutes circonstances. Accès internet rétabli en maximum 8 heures ouvrables Priorité lors d'appels au helpdesk technique Sécurité maximale de vos PC ou de votre réseau Assistance téléphonique pour vos problèmes informatiques Il existe déjà une solution Belgacom Bizz Internet à partir de € 40 htva /mois. Nouveau Belgacom innovates by launching the All-in packs for the self-employed and SMEs: Bizz Internet. These packs offer professional customers a service guarantee of business continuity, no matter what happens.

PingPing, the mobile payment service, attracts more and more customers. PingPing and Coca-Cola sign an agreement: 5,000 drink dispensers in Belgium and Luxembourg will be equipped with Belgacom's payment service.

the future To mark ve years of Belgacom TV, Didier Bellens announces a new interactive platform, which o ers a more personalized o er with ever more content and available applications.

To develop interactivity, Belgacom will form strategic partnerships with innovative spin-o s like Jinni, Softkinetic, Blinkx, Mubi and OnLive, a leader in the eld of cloud gaming.

Contents

02 12 Our strategy delivers returns in line with market expectations

Interview with Theo Dilissen, Chairman of the Board of Directors

04 Belgacom widens its offer with innovative and exclusive services to all its customers

Interview with Didier Bellens, President and CEO

08 Our profile

Belgacom leads in convergence to ease and enrich people's lives

Operating context

• Moving fast, in a fastmoving market • Regulation

20 30 Our strengths

• Strong in strategy, rich in innovation

• An ever stronger Belgacom backbone

Our customers

• Simply best for consumers

• Serious about business
• Carrying the Belgacom message abroad

Our people

• Our people, the members of the Belgacom family

Responsible in our community

76 Corporate governance statement

• Financial key figures

• Consolidated management report
• Consolidated financial statements
• Non-consolidated financial statements of Belgacom SA

175 Glossary

Chairman of the Board of Directors

Our strategy delivers returns in line with market expectations

How would you describe 2010, in general, for the whole Group?

In 2010, our strategy of convergence has fully delivered on its promises. Although it has been a diffi cult market, we see that we have made it into a very good year. The key point is we came out of the year even stronger than we went into it. Partly this is due to a lot of good work done by ma nagement in controlling costs – which is inevitably one of the main levers for profi tability in a market like ours. Partly it was the consequence of the impressive overall performance of our products and services including the fact that our broadband gave us the capa city to deliver stunning services and win new business. What we have learnt from the year is that our strategy is without doubt the right one, but that to derive the full be nefi ts from it we need to constantly adapt our tactics. We did that well in 2010 – with the right adaptations in every one of our business units.

How did the convergence and innovation strategy evolve in 2010?

Through the year we continued our process of constant innovation and convergence. Our investment in Onlive has opened up a new approach as radical as our pioneering introduction of Belgacom TV, that allows us to provide new services in entertainment, gaming, and even e-learning. Our continual upgrade of our network maintains it as one of our principal assets and it assures of a platform on which we can make an unrivalled offer of products and services. Re cognition at international level that we have the fi fth best broadband network in the world demonstrates its importance. And our growing awareness of the merits of personalized service drives us to new ways of satisfying individual client demands, also by offering a range of distinct services to meet diverse desires within the same household. This innovation process continues all the time. We explore how we can best serve segments in TV, among football fans, within client groups that have particular interests or needs, and in bouquets not just for the consumer market, but also for the enterprise market. We bring cloud computing and Machine to Machine (M2M) to this market, and particularly to smaller fi rms, by combi ning valuable services with total simpli city in use.

How far did you achieve your key priority for 2010 of putting the customer at the center of your operations?

This was the year that we gathered critical mass behind this project. It has been on the agenda since 2009, and du ring 2010 we made everyone aware that it was our priority. So important is it that we followed progress closely at board level, with detailed assessments of customer satisfaction segment by segment, item by item. Wherever we found that it wasn't going in the right direction, we identifi ed the problems and set up methods to solve them – particularly focusing on clients with persistent problems. This not only helped the customer. It also helped Belgacom in understanding the mechanics of dissatisfaction and the design of successful solutions. So in 2010 we drew our baseline, we started to communicate our commitment to the outside world, and we started to feel a positive reaction to our commitment both within the company and beyond. There was real progress – but of course we still have some way to go.

What are the assets that the Group is relying on to succeed in this new approach?

Innovative thinking is one of the key assets. We set the tone for innovative service fi ve years ago when we launched IPTV. We did it again at the end of 2010 when we announced that we would switch our approach from a household perspective to a more individualized perspective.

But our innovative thinking can result in products and services only because we also have a strong infrastructure to build on, with our unrivalled networks. We have the capacity to offer unlimited interactivity. We can cut down latency times to improve customer service. And we are constantly upgrading for the future.

"What we have learnt from the year is that our strategy is without doubt the right one, but that to derive the full benefi ts from it we need to constantly adapt our tactics."

In our approach to the market, we deploy our extensive range of pro ducts and services through branding of separate content, so as to maintain and increase our customer base in our established segments, and at the same time to win customers in segments identifi ed through increasing refi nement of our tactics, whether in niche consumer markets or by offering very low-priced all-in-one packages in the enterprise market.

Of course we could not do any of this without our employees. They have engaged themselves in this process too, and our entire approach to our workforce now focuses on helping each and every one of them to participate fully in the Group's development, in ways that fulfi l their ambitions and aspirations as well as the Group's.

Being at the forefront of developments in technology is clearly an essential factor too. We are well-placed for designing the right course through entertainment, cloud computing, connected world, mobility and health. Our acquisition of Telindus gave us additional skills for network services, our data centers provide economy and effi ciency, we are making alliances that allow us to deliver new products and services across new platforms. And because we know that in this evolving market we constantly need to be ready for the day after tomorrow, we are increasingly partnering, outsourcing, cosourcing – on everything from entertainment to electronic toll-road payments.

And strategically, we ensure we have the feel of what is happening across the world in our sector, in the short term and in the longer term. Fed by our contacts with our major suppliers and with our customers in our international business, we constantly review our planning to take account of the important shifts in our business areas – ranging from the upcoming strength of Chinese operators to the mushrooming of new technology companies. In such a ra pidly shifting world, we know – and our shareholders increasingly understand – that it is no longer possible to merely rest on our laurels. This is why we have merged our legal entities – so that, through convergence, we can be successful into the future, too.

Highlight of 2010

Finalization and implementation of our convergence strategy for the Group itself

We completed our negotiations with the unions. All the aspects were examined, including the sensitive issues such as our collective labor agreements and the administrative changes resulting from the integration at Group level.

Interview with Didier Bellens, President and CEO

Belgacom widens its off er with innovative and exclusive services to all its customers

Didier Bellens, what are the key achievements for Belgacom in 2010?

In 2010 we broke our own records. We sold 311,000 packs, which is a progression of 55% compared to 2009, and Mobile internet won 68,000 new customers in a year. With IPTV, we have now attained the magic number of more than 1 million TV customers. This has been achieved from a base of zero when we started five years ago. Now we have 31% of the digital TV market. This is one of the most remarkable – and remarked – rates of growth in Europe. Our subsidiary Scarlet is positioned as an attacker in the Belgian market for the segments we have aimed it at, showing real creativity in its approach. We have added a much more human touch to our marketing communication campaigns.

Convergence is becoming a more concrete reality, and the key differentiator of Belgacom. What drives the success of this strategy?

We are continually bringing new building blocks to our strategy of driving convergence between networks and devices. Increasingly, convergence becomes much more than offering packs to our customers. It has diversified into new possibilities of offering them access to any content, on any device, anywhere. Concretely, this means our customers can use a tablet on a fixed connection indoors and continue on a mobile network outside, or can watch TV on a laptop. They have this ease of access because we put a broadband line and wifi into their house, and we provide them with the best 3G coverage outside. Thanks to our fix and mobile networks we are the only ones in Belgium able to offer such an experience and such a wide possibility of choices, via adapted bundles. And all our bundles have the same fundamental aim: we want every segment of our customer base to have the best possible access, and the right support to take advantage of it. To match customers' expectations, we offer them the right service, thanks to search and recommendation engines which are expert at predicting what customers want to find.

"We have now attained the magic number of more than 1 million TV customers, starting from zero five years ago. Now we have 31% of the digital TV market. This is one of the most remarkable – and remarked – rates of growth in Europe."

So your convergence strategy seems to be paying off. How would you define the potential still to be developed in terms of convergence?

Our growth potential is still huge. One rich field is in broadband penetration: today it stands at around 70% of Belgian houses, and our ambition is to raise it to 80%- 90%.

Convergence is not just delivering broadband to more customers. It is about developing new services that compel customers. The greatest potential for the future comes from the new realm of personalized solutions. As the frontiers fade away between networks, applications and content, we are developing innovative solutions that are customized to meet the needs of each of our clients.

We do not sell technologies. We sell solutions and applications. We deliver them through our own networks and platforms and thanks to our own people. This is done while maintaining our costs under control.

How will you achieve this ambition?

We cannot do everything on our own. That is why we are now open to partners, so our customers can get a wider variety of content and services to match their needs.

We need to be able to deal with the most innovative and leading players.

Our entire strategy is geared to creating a genuine openness to innovative actors such as TV producers, content owners and Silicon Valley companies. We have already reached agreements with some

Highlights of 2010

• 1. Our progress in convergence We have been able to adapt our organization, exploit our technologies, and win customers over to the advantages of our converging offers.
• 1. An additional human touch to the Group We launched new advertising campaigns, giving customers more reasons to choose and re-choose Belgacom, while at the same time reinforcing and consolidating the sense, within our own workforce, that Belgacom is increasingly people-oriented.

3. Our opening towards innovative and exclusive services

We are moving from a technology company to a service company, offering our clients customized solutions in an innovative, simple and friendly way.

1. Increased employee satisfaction Our workforce feels more engaged in what the Group is doing, and understands better where the Group is going, and what advantages that will bring to each member of our staff.

45% of our clients have at least two Belgacom products

of them: in 2010, we built partnerships with Jinni, OnLive, Blinkx, Mubi, Softkinetic and others.

These companies are aware of our strengths and see an ideal match in working with us in Belgium, as it is an attractive market to develop their technology and to provide a center for their wider operations.

Many of our potential partners are used to operating in the short timeframes of Silicon Valley. Here, our smaller size gives us an advantage against many of our peers in larger countries. We need to be agile, and be able to react quickly. We are determined to do so.

Focusing on the customers builds the basis of trust to open the future. How will you make sure that society in general – as well as customers – will follow you there?

We are building the basis of our customers' trust by satisfying their needs, simplifying their lives and communicating in a transparent way.

Not only for the future, but already today. Everything we have done in 2010 refl ects the priority we attach to customercentricity. Customers want new applications, faster speeds, new content, new products. They want things to be easy to use and they want their contacts with us to be effi cient. This is why we aim to constantly increase the level of service and, at the same time, to make things simpler. That is how we will differentiate ourselves from the competition.

The improvements we have made in our service and the ambitious commitments we have made to society are essential levers to win the confi dence of our clients. To consolidate our customers' trust, we have also set ourselves the target of becoming a leading company in terms of Corporate Social Responsibility. Our three main CSR commitments are strongly linked to our core business and to our stakeholders' expectations: enhancing access to communications, enabling a low-carbon/greener society, and communicating on electro-magnetic fi elds and health.

During 2010, we progressed with our strategy, and we are well on track to reach our target of becoming a leading socially responsible company by 2012. Our efforts gained external recognition, confi rming the relevance of the CSR strategy and governance that we set up four years ago. In this context, Belgacom was included in the Ethibel Excellence Investment Register. In addition, our last CSR report was awarded the third place in the Awards for "Best Belgian CSR report", and Belgacom once again features among the companies that have received the Belgian Top Employer Label.

I aim to further embed CSR and sustainability in our customer offering and marketing, in order to enable a more accessible and safe digital society on the one hand, and to help our customers reduce their environmental footprint on the other.

Is this vision of trust and customer-focus shared across the Group?

The involvement of all our employees at every level and in every department has been crucial in 2010 in our engagement to please our customers and it will be just as crucial in 2011.

It is clear that we are going in the right direction. Throughout the year, we have worked on building awareness and adoption of customer-centricity at all levels and in each department of our group. I could feel there was a huge involvement in the Satisfaction programe. Of course we can still improve, and we are changing the mentality so that the focus on the customer is more widely recognized every day in everything we do.

Does your current position on the market enable you to further develop your convergence and customerfocus strategy?

Compared to its European peers, Belgacom has stronger assets and we are deploying them more effectively. We were early in spotting the merits of convergence with IPTV: we made the right move, and got the right results from it. We are also gearing ourselves up to new waves of innovation to ride ahead of the competition as the market expands in size and evolves in nature.

Are the prospects for the business market as good as they are for the consumer market?

I am very optimistic about our Enterprise Business Unit. Customers' needs are evolving and expanding fast, and new "As the frontiers fade away between networks, applications and content, we develop innovative solutions that are customized to meet the needs of each of our customers."

development areas – such as cloud services and Machine to Machine (M2M) – will offer new possibilities and provide high value. Technology will cut the costs of devices and of handling data and software for companies. The services that we deliver ease the burden that companies currently have to carry in paying for hardware and software, and in carrying out maintenance and security operations. We allow them to concentrate on their core operations that generate revenues for them. With our subsidiary Telindus International, we will deliver those services, and we are organising ourselves to be able to do so, maximizing the expertise we possess across our European network.

Does the way you operate in other countries show how you can adapt and change ?

There is innovation and energy in the way our international operations are developing. Tango and Telindus are doing extremely well, with a very assertive and creative approach to the Luxembourg market. Tango is positioned as an attacker facing the dominant player. And on the international front, BICS is in very good shape. The deal with MTN propelled us into the world top 4 among international carriers and number 2 for mobile data services to mobile operators, here again demonstrating our ability to position ourselves as true challengers. This ability is key for us.

How does Belgacom tackle an ever fiercer competitive landscape?

We remain very attentive, as we have to face tough competition, from new operators in our consumer and business markets, and in our longstanding battle with cable operators. So far we have demonstrated that we are able to reinvent ourselves, listen to our customers and change the way we work: the services we provide, the content we offer, the innovations we introduce, the partnerships we build. We have made huge changes within the company, bringing it forward from its history as a telephone company to its current vanguard position as a service-providing company.

Does this competition make regulatory pressure increase?

The Belgian regulatory body decision has had a big impact on our financial results. Today there are two subjects of real significance.

The first challenge is mobile termination rates. The June 2010 decision of the IBPT on termination rates brings Belgium back into better conformity with what happens in the rest of Europe. Belgacom has fought for years to see the Belgian market evolve in this direction. Since the decision, we have twice lowered our tariffs for calls from fixed to mobile. In the long term, the fixed and mobile termination rates should in any case converge. This clearly benefits to our customers.

The second challenge consists of establishing a level playing field with cable operators. In Belgium, cable operators are not regulated, and only Belgacom is. That creates real inequity in terms of competition. Regulators have to ensure that companies are subject to the same rules and are treated fairly so that true competition can benefit consumers.

As a conclusion, what can Belgacom and its customers look forward to in 2011 and beyond?

With customer centricity, corporate responsibility, and innovation, we are taking convergence to its next stage: building a Belgacom that adapts to each customer in a more open and flexible way, by responding to each customer's wishes and needs.

This annual report reflects that our customers are at the center of our business. We want all our customers to trust that there is a Belgacom for everyone. And the same adaptability marks the development of our new partnerships, too. We will join efforts to provide wider choices in new services and products.

We trust in our future, and we are building a relationship of trust to get there.

Number of Belgacom TV clients from launch in June 2005 until February 2011

Belgacom leads in convergence to ease and enrich people's lives

Who we are

Belgacom is a sustainable, innovative and customer centric service company operating in telecom, IT, and media.

Our mission

As a responsible company, Belgacom wants to be the preferred provider of intuitive end-to-end solutions combining fixed and mobile telecom, IT and media, thereby empowering its customers to master and enrich their professional and private lives in a sustainable way.

Our organization

• Residential customers are taken care of by the Consumer Business Unit (CBU).
• Professional customers benefit from the services of the Enterprise Business Unit (EBU).
• Service Delivery Engine and Wholesale (SDE&W) groups together the network and IT services. Its wholesale activity offers telecommunications services to other operators and suppliers on the Belgian market.
• Staff and Support (S&S) brings together all the horizontal functions that support the Group's activities.
• BICS, a joint venture of Belgacom, MTN and Swisscom, is in charge of international carrier services.

Key fi gures

EUR 734 million invested

in 2010, i.e. 11.1% of Group revenues

5,332,000 mobile customers (Proximus and Tango)

1,558,000

(residential and business)

Internet customers

Personnel (FTE) 13% S&S 21% SDE&W 32% EBU 2% BICS 32% CBU 16,308 FTE

+55% of packs sold in 2010 Numbers of packs sold (in thousands) 2007 2008 2009 2010 870 560 302 153

975,000 Belgacom TV customers

Carol Lousberg, Internet/Belgacom TV installer: Technology is my eld. My aim is to make sure that our customers don't have any problems with installing and using our products. It's up to me to support them, and give them any explanations they may need to get the most out of their digital television and Internet access.

Silvio La Ferrara, Belgacom Center salesman: It's my job to listen to customers, to understand their needs, and to offer them personalized advice. For instance, for just a few euros a month you can personalize your TV with a package of channels and programes tailored to your own needs – I've recommended our "kids" package for Cédric and Sandra's children.

The Kids package offers the best in cartoons and series for children. Dora, SpongeBob SquarePants and Looney Tunes are all available in this package.

All xed Internet packages allow an unlimited download volume.

Cédric Dumont, Sandra Voet and their children Klara (5) and Alec (3)

Our lives are pretty busy what with work and the kids.

So we love taking the time to sit down and watch their cartoons with them at the weekend.

Moving fast, in a fast-moving market

For years now, customers have taken for granted the separation of their phones from wires. Increasingly they want their other devices such as tablets and computers to be independent of wires, too. And now customers want devices that allow them, wherever they are, to make calls, send messages, access data and emails, look at photos and fi lms, or play games and listen to music.

New applications, new linkages, new challenges

But smartphones and tablets are only part of the story. Driven in part by technology, and in part by customer expectation, a real revolution is underway, and is accelerating. It is continuing to transform the world of telecommunications in ways unimagined – and unimaginable – less than a decade ago. People now want total connectivity. They want their houses, their cars, their streets, their towns to be connected. They no longer accept barriers – between places, devices or services. And they expect operators to provide products that are ever more rapid, more effective, more creative, and at the same time, more simple to use.

The widening miracle of convergence has not only brought together voice, data and entertainment on a single device. It also opens up the prospect of customers enjoying seamless access across what used to be separate channels. The ever-closer links between phones, computers, and television permit customers to focus on the content, the applications, the facilities that they want in a multiplay environment.

Innovation /// New ecosystems – Our ambition extends beyond connectivity to the world of applications and services. By enabling communication between everyone and everything, we will spur advances and create possibilities beyond imagination in all domains. New ecosystems will emerge to build the platforms of the future, from the Smart Grid and connected home to e-health and Intelligent Traffi c Systems.

The result is a constant acceleration, and constant multiplication. Acceleration, in ever-shorter development cycles for products and services. And multiplication, in the ever-wider range of suppliers on the market, each seeking a bigger share of this expanding market.

New connections are coming

Convergence between fi xed and mobile and between telecom and IT is key for the future. Cloud computing has started to make an impact in 2010 and will soon become a signifi cant factor in market development. Now the world is on the brink of seizing signifi cant new opportunities in cloud computing and machine-tomachine business. It offers freedom, fl exibility, safety and choice, and for a level of interconnectivity that will soon see more machines connected to one another than

Th e ever-closer links between phones, computers, and television permit customers to focus on the content, the applications, the facilities that they want in a multiplay environment.

people. All those changes will lead to new connections, new collaborative models based on unique combinations of assets.

It is an exciting time to be a provider in this rapidly-evolving world. It is also demanding. A successful operator must be able to meet expectations amidst this complex multiplication of content and applications. A leading operator must be able to meet expectations faster and better than its rivals – and must be able to stay ahead of expectations, too. The potential is limited only by our creativity.

An ever smarter consumer

Customer needs are changing fast. Customers are better informed, they want more, and they want it simpler. They use more devices than before, and they want to be connected any time. The result is that they need not only quality products, but also fl exibility and high-quality support and services.

The customer wants simplicity of use in ever-more complex and integrated products and services. So offers must be designed for the customer to enjoy intuitively. And because the market is so competitive, with a wide variety of advantageous multiplay packs, successful offers must provide good value for money.

The customer also wants to benefi t from the multiple trends towards convergence – in media, telecoms, and entertainment, and in behaviors, devices, networks and content. The customer doesn't see it as convergence. What is of interest to the customer is the freedom to secure the services he or she wants, from any device, within the most adapted network. So convergence means much more than bundles – it is a genuine integrated service of "any content on any device" – a true Any3 revolution: anywhere, anything, anytime.

Th e market is evolving rapidly. Already, smartphones are making huge inroads into the Belgian market – approaching 20% of mobile phone units sold. And tablets, considered unusual only recently, are now increasingly common purchases. Th ese are just two further demonstrations of how rapidly the market for Belgacom is changing.

Customer centricity ///Belgacom Community – As applications multiply and the possibilities for staying connected increase, our role is to help our clients through the changes, to listen to them, and to be ready to dialoge with them. Th at is why in 2010 we created the Belgacom Community, an Internet forum that allows customers to fi nd technical information and details about our products, and to exchange ideas and create a place where they can give their opinions on our products and services.

Our competitive position (market share)

The growing number of smartphones and other devices, together with the convergence of mobile and fix termination rates, have boosted the take-up of our packs. We are the only supplier on the Belgian market that can offer these solutions.

97% 3G outdoor coverage. Belgacom offers the best mobile experience.

Belgacom in the competitive market

As the market shifts to embrace telecoms companies offering TV, and TV/ cable operators offering telecom services, competition gets tougher every day. Belgacom operates in a market that is not only constantly changing, but in which not all players are subject to the same rules. By virtue of its history and its current composition, Belgacom is subject to obligations of public service that other operators escape. But Belgacom's innate strengths and sharp instincts are allowing it to hold its own, even in a volatile context.

Tough competition in the residential market

For consumers, the competitive landscape is a battleground in fixed (voice, Internet and TV) between Belgacom, Telenet and Voo. Belgacom has about 46% of the Internet market, against 45% held by the cable operators (Telenet in Flanders and Brussels, and VOO principally in Wallonia). Other licensed operators, active on Belgacom infrastructure, serve 9% of the market. In digital TV, Belgacom has about 31%, against some 64% for the cable operators, the remaining 5% of the TV market, comprises satellites players. Competition is based largely on service.

In mobile voice and Internet, Proximus, Belgacom's mobile brand, is the leader among nation-wide networks, with about 41% market share, followed by Mobistar with 33% and KPN's Base with 26%. Competition is tough, but not value destructive.

The main competitors have network assets and strong international shareholders. Belgacom is the only operator currently with a nation-wide fixed and mobile network, but other players are also moving towards convergence.

Strong position in the enterprise market

In the enterprise segment, Belgacom holds a strong position in most of the very fragmented markets, ranging across mobile voice, fixed voice, fixed data, mobile data, datacenter services and hosted applications, unified communications and LAN integration.

Belgacom also offers a unique selling proposition of full and convergent solutions for fixed, mobile and IT services.

Top level networks

Belgacom is a leader in mobile coverage, with a GSM network that reaches 99.98% of the Belgian population, and 3G reaching 97%. It is a leader in mobile speed, too, with drive tests showing it offers the best data transfer performance of all three operators, and best in class in upload speeds. Upgrading of the radio access network is assuring retention of network superiority.

The nation-wide high-quality fixed network qualifies Belgacom for a place among the world's leaders for fiber coverage. EUR 550 million has been invested since the strategic decision in 2003 to install fiber to the curb, now covering over 76% of the population. Its VDSL provides up to 30Mbps, and its ADSL coverage of 99.85% is a world record. Its DSL network driving tv coverage provides Belgacom TV to 89% of the population, with HD coverage available to 73%.

Understanding the market

The success of Belgacom is based primarily on understanding the market, so as to meet customers' expectations rapidly and effectively. Belgacom has shown it can deliver easy-to-use packs of a quality that customers are willing to pay for.

Against this background, Belgacom has demonstrated that it is not only successful, but is a leader in this changing context. Our customers expect us to adapt ourselves, to embrace innovation, to build networks that promote the development of unparalleled products and services for homes and businesses, with convergence that our competitors can only follow.

And Belgacom is well positioned, with its major investments in 3G and fiber networks offering optimum coverage to devices combining mobile and fixed technology. This is part of the pay-off for the network investments that Belgacom has made as part of its long-term strategy.

In 2010, residential and SME customers were at the head of our list of priorities, allowing us to turn customer satisfaction into a value that will differentiate us further from the competition.

In the professional telecom market too, Belgacom is still well positioned as a leader for most product groups, despite the increasingly intense competition. Belgacom wants to be the leader in rethinking the way that it delivers into this constantly evolving market. The customer is at the center of this rethink. So that the customer can obtain maximum value and service from Belgacom.

Making customer satisfaction our priority

This is why the Belgacom strategy is transversal, eliminating any barriers between different parts that could impede effective customer service. Therefore the entire company has been mobilized around this priority, with customer satisfaction as the top priority. What matters to the customer is the service obtained through every point of contact with Belgacom – so our goal is entire end-toend customer satisfaction. The customer doesn't want to know – and doesn't have to know – which part of the group is supplying the service or providing the solution to his or her problem. The customer just needs to be confident that any service required will be supplied promptly and efficiently and courteously.

The customer gets service, because Belgacom operates as a team. Irrespective of the structure of the company, everyone who works for Belgacom now knows that success lies in team work. Belgacom's top class fixed and mobile networks give it a real advantage on the convergent market, with an offer not only of attractive mobile and fixed packs, but increasingly through innovative convergent services. But packs and services are not enough. Belgacom is focusing on customer satisfaction, via a continuous improvement of its service through every interaction. And there is evidence that customers are seeing progress. Improvements in customer satisfaction ratings later in the year demonstrated that we were putting in place the right structures and methods, giving us confidence that in 2011 we are well positioned to truly delight the customer and outperform the competition.

Customer satisfaction is just as important on the professional market. Here too, Belgacom's strengths enable it to offer innovative and value-added services on top of telephony. Here too, customer service for smaller firms and corporate customers have been at the center of our strategy.

Belgacom's top class fixed and mobile networks give it a real advantage on the convergent market, not only with an offer of attractive mobile and fixed packs, but increasingly through innovative convergent services.

Regulation

As the leading telecommunications operator in Belgium, Belgacom continues to experience a high degree of regulation but steps have been made in 2010 towards a level playing field.

Efficient and balanced regulation in the telecom sector is in the long term interest of Belgian consumers and companies. For Belgacom, there are three key issues in this respect: the imbalanced regulation between Belgacom and the cable operators, the asymmetries of the fees for traffic between mobile operators (mobile termination rates), and the universal service that only Belgacom provides.

MTR

The mobile termination rate is the fee that mobile network operators charge to connect calls made from other fixed or mobile networks. Competition in Belgium has been distorted for many years because Belgacom Mobile had to pay significantly higher charges for calls to the subscribers of the other mobile networks.

On 29 June 2010, the Belgian regulator (BIPT) adopted a decision on the 2010- 2013 MTRs. Gradual MTR decreases are now defined until 2013 for all mobile operators. The first decrease occurred on 1 August 2010 and the second one on 1 January 2011. At the same time, the BIPT reduced the existing MTR asymmetry, which is why the decrease for the other two mobile players was greater than for Proximus. This brings the Belgian regulation more in line with the European practice. Fully symmetric tariffs will be reached in 2013.

The decrease in MTRs is reflected by Belgacom in its fixed-to-mobile retail tariffs. Accordingly, Belgacom lowered its fixedto-mobile tariffs on 1 August 2010 and on 1 January 2011.

On 14 July 2010, Mobistar and KPN Group each filed an appeal against the BIPT decision of 29 June before the Brussels Appeal Court, both asking the Court to suspend and annul the decision (especially regarding their own MTR tariffs). On 15 February 2011, the Court took its decision in the suspension procedure, rejecting all the claims of Mobistar and KPN Group. The annulment procedure is still ongoing.

Regulatory equivalence with cable

Today, only the Belgacom fixed network is regulated, whereas cable operators are exempt from any obligation to share their network with other actors. In December 2010, the Belgian regional media regulators (BIPT, CSA, Medienrat and VRM) have finally proposed to regulate the dominant cable operators. This in their respective coverage areas and to require them to resell analogue TV, to open up their Digital TV platform, and to resell broadband.

Belgacom considers this as an important step forward towards a level playing field with cable but there is still an important imbalance in the proposed regulatory controls. Symmetric regulation of all infrastructures is the best approach for Belgian consumers and businesses and will ensure fair competition between all operators. Final decisions are expected in the course of 2011.

Universal service

Since 1998, Belgacom has been subject to a broad universal service obligation (USO) which is the most extensive regime in Europe. Belgacom has never been compensated for providing these services.

On 6 October 2010, the EU Court of Justice considered that the way the Belgian Law appreciates the unfair burden of the universal service is not in full accordance with the European law. Based on this, the Belgian Constitutional Court annulled the articles in the Belgian law regarding the funding of the universal service on 27 January 2011. The current system should be reviewed in light of these decisions. It is expected that this will be addressed in the new telecom law that will transpose the revised EU Directives in the course of 2011.

Lower roaming rates

The EU authorities first introduced caps on voice roaming prices in 2007. In July 2009, they adopted revised rules (Roaming II Regulation) that cut roaming charges further so that by July 2011 the maximum roaming charge would be EUR 35 cents per minute for outgoing calls and EUR 11 cents for incoming calls.

Voice roaming

A retail cap of EUR 11 cents (excl. VAT) combined with a wholesale cap of 4 cents has also been imposed for SMS roaming as from 1 July 2009 for outgoing SMS.

Final decision on MTR

EURcents	Before*	01-Aug-10*	01-Jan-11*	01-Jan-12	01-Jan-13
Proximus	7.2	4.62	3.94	2.46	1.08
Mobistar	9.02	5.05	4.29	2.62	1.08
Base	11.43	5.81	4.90	2.92	1.08
% change
Proximus		-36%	-15%	-38%	-56%
Mobistar		-44%	-15%	-39%	-59%
Base		-49%	-16%	-40%	-63%
Asymmetry
Mobistar-Prox	25%	9%	9%	7%	0%
Base-Prox	59%	26%	24%	19%	0%

* Rates with inflation

SMS Roaming (EURcent per sms)

Data roaming services are regulated at wholesale level based on a price cap, calculated on a kilobyte basis. On 1 July 2010, the data roaming prices went down from EUR 1 per Mb to EUR 80 cents per Mb.

Data roaming (EURcent per Mb)

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

The European Commission, which must review the roaming rules by 30 June 2011, considers that ultimately the difference between roaming and national tariffs should approach zero by 2015 and is seeking "permanent, structural solutions" to make the roaming market more competitive. The way to achieve this objective has not been defined yet.

Financial collecting model for Premium Rate Services

Since 1 April 2010, Belgacom adopted, where appropriate, a financial collecting model for part of its Premium Rate Services in which Belgacom collects from customers on behalf of a third-party content provider. This is a consequence of the circulars issued end 2009 by the Ministry of Finance concerning the application of VAT on Premium Rate Services and Tax on Chance Games. As a result, these revenues can no longer be considered as Belgacom revenues.

LLU (Local Loop Unbundling) and bitstream prices

In 2010 (decision of August 2010 rectified by a decision of November), the BIPT decreased by around 20% the monthly price for full unbundling while keeping the price for shared access stable. The BIPT also set new monthly prices for ATM Bitstream and took its final decisions on Ethernet Bitstream and on VDSL2 Bitstream. For VDSL2, the BIPT applies a 15% mark-up on the fiber investments to take into account the related business risks. The new price for full unbundling is at the low EU end. Belgacom disagrees with certain aspects of the BIPT pricing methodology and has decided to lodge an annulment procedure against the decision.

BIPT decisions of 2010

EUR	Before	2010
Full unbundling	9.29	7.78
Shared access	0.85	0.87
ATM bitstream	14.31	12.72
Ethernet bitstream	-	11.48
VDSL2 bitstream	-	13.94

Mobile licenses

The final conditions for the renewal of the 2G licenses were published in the Official Journal on 25 January 2011. The Royal Decrees align the end of the GSM and DCS 1800 licenses on the 3G/UMTS calendar in two steps : (i) the license is extended for a 1st period of 5 years, i.e. until 2015 for Proximus and Mobistar, followed by (ii) a second period of "tacit extension" until 2021.

A law amendment published on 25 March 2010 requires mobile operators to pay for the tacit extension of their 2G licenses. The amount of EUR 74 million for Belgacom for the first period of extension of its license (until 2015) corresponds to the original 2G license fees proportionate to the spectrum quantity and duration. Belgacom has opted for annual payments. The first one, for the amount of about EUR 12 million, was made in April and the second one of about EUR 16.7 million was made in December 2010 for the year 2011. An additional payment for further extension for the second period (2015-2021) will also be due except if the Constitutional Court decides otherwise.

Belgacom maintains its standpoint that the tacit extension of its 2G license until 2015 (as confirmed by a decision of the Court of Appeal of 20 July 2009) does not imply payment of the renewal fee. Therefore Belgacom filed on 18 August 2010 an annulment procedure before the Constitutional Court against the Law of 25 March 2010. The two other mobile operators have decided to lodge an annulment procedure too. Beside this annulment procedure, Belgacom initiated on 7 October 2010 an action against the Belgian State and the BIPT before the Civil Court to ensure the possibility to recover the undue license fees. In the meantime, Belgacom will comply with the payment obligations with all due reserves.

The BIPT intends to auction a fourth 3G (UMTS license) and 4G licenses (2.6 GHz) in the course of 2011. The final conditions were published on 25 January 2011. According to the indicative planning of the BIPT, the 3G license would be auctioned in June 2011 and the 4G licenses as of mid October 2011.

Consumer protection

In 2010, Belgacom was fined EUR 800,000 by the BIPT for allegedly infringing its obligation to inform its customers of a tariff increase. Consumer protection is an important priority for Belgacom and it considers that the act of the BIPT was not in proportion with the nature of the facts, and was too severe given the lack of prior guidance by the BIPT. Belgacom challenges this decision in Court but the appeal did not suspend the payment of the fine.

Jérôme Peeters, salesman at the Generation Store in Louvainla-Neuve: I work at the new Generation Store in Louvain-la-Neuve, which is far more than just a shop. It's been developed specially for young people, so that they can discover and check out all the latest mobile technologies.

The Generation MTV 25 subscription allows you to send SMS for free on all networks 24 hours a day, and includes 100 MB a month to browse the web from your mobile 'phone.

Bert Fieux, 15 and a music fan

Texting's the cheapest way.

It's the easiest way of keeping in touch with my friends – and the most fun.

Strong in strategy, rich in innovation

In 2010, we maintained our long term strategy of convergence of our products and services and of our fi xed and mobile networks. Not only has experience proved that we made a good choice. Today the entire industry is following us, confi rming that our strategy was the right one. But in a rapidly changing and complex market, we want to go further. We are going to leverage our strengths and combat our weaknesses.

Didier Bellens /// We are now open to partners, so our customers can get a wider variety of content and services to match their needs. Our entire strategy is geared to creating a genuine openness to innovative actors such as TV producers, content owners and Silicon Valley companies.

The strategy of convergence in which we have invested for many years proves its effi ciency day after day. Today, convergence means much more than offering bundles to our clients, as Didier Bellens explained in his foreword. It is fully embedded in all parts of the company. It is spreading to the way we function as an organization, to our product and services offer, to our branding, and to our web presence. And it is evident in the new experience we can offer, with innovative services on different screens, ranging from TV and VOD on PC to football on web and on mobile, and from our 3D demo channel to programming of the TV decoder from PC, telephone or Internet.

The sector in which we operate is characterized by the constant acceleration and multiplication of technologies, devices and applications. In this rapidly evolving context, Belgacom is selectively opening itself up to partners, to increase its agility and to reduce the time to market. We cannot do everything on our own. We want to grab existing opportunities so that we can regularly propose new offers to our residential hand professional clients.

Our vision: Let's open ourselves up!

Staying ahead in innovation and customer satisfaction in an ever more demanding market requires openness, agility to seize innovation opportunities quickly and readiness to work with partners. In order to evolve with the market we need to transform ourselves.

Partnerships with small and nimble companies help us to capture additional market potential. At the same time, partnership reduces costs of development and maintenance and mitigates risks. We will become the incubator of our partners' innovation, while accelerating our advance into new business areas. This will support our competitive differentiation.

Customers are increasingly using multiple devices, combining and using them in a very personal way. Belgacom provides the foundation of the global connectivity between all kinds of devices.

In 2010 we started to move in this direction with our partnerships with Jinni, OnLive, Mubi, Softkinetic and Clear-Media. In 2011, we will go further.

Our identity

Throughout 2011, Belgacom will further nurture its identity: being a customer centric, responsible and innovative company.

Customer centricity

End-to-end customer satisfaction was made the top priority to the whole Group for 2010. The ambition was to provide the customers with a seamless and totally satisfying experience while putting them at the center of every aspect of our operations. Cross-business unit initiatives were set up to implement this genera ting a global and transversal mobilization of all our teams. 2010 was the fi rst step of our customer centricity program.

In 2011 we will go further, by working not only on customer satisfaction but also on simplifi cation. Our ultimate goal is to offer the best satisfaction to our clients through simplifi ed processes and intuitive offerings. In short, we are aiming at a new degree of simplicity. We are a large organization surrounded by multiple stakeholders in a complex market that is constantly altered by advanced technology. Our success depends on mastering this complexity and ensuring that we are able to act decisively and rapidly to deliver quality products and services to the market to delight our customers. Our customer focus is refl ected not only in a friendly service but also through our investments in networks and our staff members. You will learn more about our customer focus related actions in every section of this report.

Grégoire Dallemagne Executive Vice President Strategy

"We will make our offer future-proof by enriching it thanks to partnerships, in order to provide our customers with an enlarged product offer that can respond to their specifi c needs."

Th e sector in which we operate is characterized by the constant acceleration and multiplication of technologies, devices and applications.

CSR /// ISO 27001 – In order to protect our customers' privacy, we off er technical solutions that provide high levels of security on all our products. Our management system for information security is certifi ed ISO27001.

A responsible company

We aim at creating value for all our stakeholders through sustainable growth, fully in line with our Corporate Social Responsibility commitments. We believe our future business success relies on making a positive impact on economic, technological and social progress through our activities and winning the trust of our stakeholders. CSR is therefore embedded in our corporate identity and strategy. Our three main CSR commitments are strongly linked to our core business – where we can have a real impact – and to our stakeholders' expectations: enhancing access to communications, enabling a low-carbon/greener society, and communicating on electromagnetic fi elds and health.

Our ambition is to be recognized as a leading responsible company in Belgium. In 2010, our CSR actions and communication have paid off and we gained external recognition for our CSR efforts: we have been included in the Ethibel Excellence Investment Register and we fi nished in third position at the Awards for Best Belgian CSR Report. CSR gives us the opportunity to show a more "human face" and delivers on our desire to contribute to a more sustainable society. See the dedicated CSR section on page 52 for details.

Innovation

Belgacom is evolving into a company that provides innovative services to benefi t consumer and enterprise customers. We detect, select and develop innovative

Customer centricity /// New bills – We have worked on simplifying and improving the layout of the bills we send to our customers. Our Bill Viewer application, which enables our customers to consult their bill online, has been made more user-friendly and accessible. Its structure and navigation are now simpler, the information relating to communications can be drilled down to the smallest detail, the PDF fi les of the bills are available right away without prior request, and the details of the communications can even be viewed in Excel format.

services and solutions that make best use of our key assets in order to delight and ease the life of our customers. We began building a new innovation culture within the organization to harness the creative spirit of all our employees. In 2010 we worked at integrating innovation into the daily missions of each of our departments helping to shape an even stronger image of Belgacom as innovative enterprise.

To maintain and enhance our leadership in our rapidly evolving market we will partner with leading-edge companies. Exclusive partnerships will give us access to specific expertise that complements our own, and reduce our time to market to launch new services. It is a fundamental shift towards an open innovation model.

Belgacom is evolving into a company that provides innovative services to its customers through identifying the areas that will bring most benefit to them. We want to be able to detect, select and develop innovative services through our key assets, in order to delight and ease the life of our customers.

Enriching people's lives through innovation New trend:

the era of personalization

The world of telecommunications is expanding dramatically – with exciting changes for both consumers and businesses. We are part of a globally connected world, where consumers look forward to a whole host of new communication and entertainment services – from TV, film, gaming and education to a range of more functional services around energy management and security – all accessible via easy-to-use and consistent interfaces across screens and devices. Businesses will benefit from tailored applications that are delivered on an on-demand basis.

Thanks to the development of individual devices and the multiplication of applications, the focus will no longer be just the household: it will shift to an individual perspective, opening up a new era for the customer – and the opportunity to improve the competitive positioning for the Belgacom Group in the short / medium term.

Customers are increasingly taking advantage of multiple devices, combining and using them in a very personal way. Belgacom provides the foundation of the global connectivity between all kinds of devices – computers, TVs, smartphones, tablets, game consoles – creating possibilities beyond imagination in nearly all domains: energy, healthcare, mobility, safety, connected car, connected home…

Our Intelligent Networks enable a wide variety of plug & play devices and applications to access any content on any device, independent of location – our resilient and selfhealing networks and datacenters are the foundations of more and more cloud services for consumers and businesses.

Belgacom places innovation at the center of corporate strategy. With increased momentum, we are driving innovation throughout the Group, across its new integrated structure. The innovation strategy in Belgacom is carried through by all its divisions.

We are driving innovation in the launch of new services. We are driving innovation in our approach to customer centricity. Open innovation and technology breakthroughs stimulate entirely new eco-systems and make the difference in some of society's toughest challenges. We focus our innovation effort on 5 key areas: entertainment, cloud computing, connected world, mobility and healthcare.

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PingPing /// School Money – PingPing School Money makes it possible to do away with cash for minor expenses such as photocopying, meals and drinks… Based on NFC technology, this solution can be integrated into student cards or can be made available through tags stuck onto mobile phones. It simplifies the live of parents, students and teachers, guaranteeing total transparency and security by limiting expenditure to within the school environment.

Entertainment More interactivity

Entertainment is becoming more and more accessible, whatever the network or device used. The very concept of entertainment is also evolving: it's no longer a matter of having information, but of being able to access it. And what the customer is looking for is personalized experiences obtained through interactive applications accessible via intuitive interfaces.

Belgacom's interactive platform aims to offer easy and intuitive access to a wide choice of entertainment options - games, music, films, television series or classic television. We are building the entertainment platform of tomorrow, in partnership with suppliers of innovative content and with technology companies ranging from the smallest niche player to the very biggest.

In 2010, to widen our entertainment offer, we concluded partnerships with:

• OnLive, so as to propose games hosted on remote servers and accessible via many different devices (such as mobile phones or computers);
• SoftKinetic, a company specialized in 3D gesture recognition technology for television, to explore new techniques allowing our clients to interact with our platform without having to use a console or a remote control;
• Jinni, a company offering a tool for discovering and recommending films.

Cloud computing Beyond the current horizons

"Cloud computing", stocking data on remote servers, allows companies and individuals to access an ever wider range of computing resources, applications and services. It offers unprecedented efficiency, since access is permanent wherever the user is located. Cloud computing also means customers no longer have to be responsible for the complex and costly tasks of managing softwares and computing equipment.

Belgacom is playing a central role in this evolution. It offers customers, smaller firms and big companies access to reliable and secure applications and services via its fixed and mobile networks and its and its secure data centers. Among the applications we offer, companies can choose

a complete suite of softwares on a service contract, and individuals can select from among different offers grouping television, video-on-demand, and, shortly, games, educational applications and other new services.

• Business market: e-learning, unified communications, videosurveillance, Hosted Virtual Desktop, tele-presence solutions.
• Residential market: on-line games, allowing everyone access to a wide choice of interactive communication tools (games, education, information, practical guides, medical assistance…), without having to purchase expensive consoles.

Th e connected world Devices talking to one another

Today, 2 billion people are connected to the Internet. Tomorrow, right across the world, an even greater number of

machines will also be connected. Individuals and devices will be able to communicate between themselves, creating new opportunities in many different fi elds. The connected world of tomorrow (called "the Internet of things") will make it possible to create new ecosystems. Belgacom is making its resources available via intelligent and fl exible interfaces so that suppliers of content and technology can propose attractive services to their clients.

• Home Monitoring: tthe entire house will be connected and it will be possible to manage it from a simple tactile screen. Th at will hugely improve our comfort and security.

• Intelligent meters will allow us to control all the devices in our house and will help optimize our energy consumption.

Mobility Th e "any3" revolution

The balance between work and private life, traffi c congestion and climate worries are all high on the agenda of policy makers and businessmen, and are leading to a proliferation of commercial models and innovative ecosystem based on mobile technologies and Internet.

Thanks to its platforms and its convergent network, Belgacom is very well positioned to bring answers to many of these questions facing society. The adoption of fl exible technologies that are varied and convergent allows companies to conceive and exploit their products and services in the "any3" economy - anywhere, anytime and any-

how. Belgacom has played a leading proactive role as a participant in these new ecosystems in many sectors, such as in micro-payments. Our portable purse PingPing, combined with NFC technology already present in smartphones, gives access to a whole range of applications, such as paying for public transport, parking, refueling electric cars, hiring public cycles, cultural activities...

• PingPing: mobile platform for micro-payment allowing users to pay for products and services with their mobile phones. Purchases can be made via an NFC tag (a sticker equipped with a microchip that allows proximity payments), by sending an SMS to a short number, or via an Android application.
• Paying for parking by SMS in fi ve more towns in 2010. 14 towns now use the service, representing 30% of all the paying parking spaces in Belgium - and totaling 7 million transactions since the service was launched in 2006.
• Launch of an SMS ticketing solution for the De Lijn transport service in Flanders in February 2010 - more than 800,000 transactions in 2010.

Healthcare

All our healthcare systems face a major challenge: keeping citizens in good health as long as possible. In many countries, it is increasingly recognized that ICT solutions (mobile data, machine-to-machine communication technologies and cloud computing) contribute to improving the existing systems. Technologies that make it possible to improve the quality of care while still making savings. Belgacom is playing a central role in several e-health initiatives, such as Belgium-HF (a solution providing remote monitoring of patients suffering from cardiac insuffi ciency) and more recently in projects such as AMACS (a solution for detecting falls at home). Belgacom is contributing to the conception and deployment of innovative solutions so as to help improve healthcare systems.

Our networks and IT systems are the backbone of all our activities. Our copper network, fiber network and 3G networks are unequalled across Belgium. With our comprehensive IT systems alongside, Belgacom is able to offer a range of access and services that keeps us ahead of our competitors, and clearly differenti-

ates us.

An ever stronger Belgacom backbone

Constant enhancements are undertaken to support the innovation and solutions that our customers demand and expect (ranging from increased bandwidth for their fixed-line data connections to faster mobile services). Thanks to our engineering efforts, the customers get higher speeds, greater stability, faster restoration from outages, and overall better service. Our networks allow us to offer new applications all the time, because they can evolve to carry the increased traffic from new services used more intensively by more customers.

Within SDE&W (Service Delivery Engine & Wholesale) – our department in charge of networks and support – major initiatives were taken to promote customer centricity. We had to introduce changes while maintaining the operations that our entire group depends on. We incorporated the transformation into our daily work, with a team dedicated fulltime to the process.

Boosting fixed network capacities

What customers saw was the benefit of greater access to our triple-play of telephone, television and high-speed Internet access over a single broadband connection, wider access to HD TV and higher data transfer speeds. What provided the benefits was our investment of EUR 32 million in 2010 in extending the deployment on our fixed network of the Broadway project so that our clients can, for instance, watch two televisions simultaneously and independently. We reached over 76% coverage of the population. By end 2010, Belgacom had increased its TV coverage to 89%, with 73% having access to High Definition TV. Belgacom continues to update its fixed access network by implementing evolutions of VDSL technology. These evolutions will entitle our customers to benefit from additional bandwidth.

Sustaining best-in-class mobile experience

Customers obtained better 3G networks, as we accelerated the switch to optical fiber or microwave, through a project that will see a complete migration from the earlier 2G and 3G network equipment of Nokia Siemens Networks to Huawei software-defined radio equipment by the end of 2011. The benefits will keep coming, because this technology will enable a further rollout of the 3G network at lower cost, allowing Belgacom to sustain a best-in-class mobile data experience. It also makes it possible to add the forthcoming generation of mobile technology on the radio access equipment (LTE – Long Term Evolution) and improve the energy efficiency of our networks by 20%.

Moving to all IP

Our long-term business transformation project "Move to all IP" has three main objectives:

• A network transformation where legacy technologies will gradually be replaced by IP based alternatives. The legacy technologies are end-of-life or are not economical anymore to cope with the growing demand of bandwidth.
• An IT transformation that will bring more effi ciency through further automation and the reduction of handling time of manual work. Some of the IT tools will be renewed and others will be modifi ed and enhanced.
• The customer interaction model will shift towards more customer self management. The customer wants to have more control during interactions such as sales, installation, repair. We will invest in product simplifi cation and intuitive e-tools to support more customer self management.

In 2010 Belgacom progressed with its "Move to All IP" (MaIP), re-engineering its network, IT systems and processes. Achievements in 2010 were the improved monitoring and diagnostic services, the launch of a new sales support tool, a new "From quote to cash" application implemented for the ICT business in Belgium, and connection of professional and residential customers to the new Voice over IP platform. So far, EUR 101 million were invested in the MaIP project, of which EUR 50 million in 2010.

Improving customers' experience

Because of its central position in the Belgacom architecture, actions in SDE&W make a huge contribution to meeting the Group's overall customer satisfaction objectives. Customer centricity has been given tangible form through initiatives that have made customers' lives easier, such as:

• Easier and better access to call cent-

ers, because our operators have been closely coached to be able to give rapid and highly professional replies to clients, and to spot "high risk" clients so that they can be referred to high risk teams for urgent intervention. The coaching is a continuous process with constant feedback loops to improve responses, through the use of "quality circles" involving our employees in direct contact with customers, which constantly monitor customers' feedbacks and drive appropriate improvements. So as to provide our customers with a satisfying end-toend experience, we need transparency and objectivity in understanding their needs and wishes, and their reasons if they are dissatisfi ed or disappointed.

• Greater convenience for clients needing on-site technical assistance: customers can choose the time of day (among fi ve options, including lunchtime and evenings) for installations and other service interventions, and they receive confi rmation calls before the visit and follow-up calls afterwards.
• High risks teams: urgent intervention and assiduous follow-up of problems for clients with serious or persistent problems, from identifi cation through to solution design, implementation and verifi cation. Each week, the high risk teams analyze about 2,000 cases and defi nitively resolve specifi c and repetitive technical diffi culties for hundreds of clients.
• Technical coordination: our new Provisioning Coordination Desks ensure that when our technicians are on-site, they get instant back-up and information coordination – allowing them to save an average of 30 minutes on each client visit.
• Integrated service: we introduced a comprehensive approach to each client contact, with smart and systematic links between our different departments to speed and simplify all technical stages of service supply – so that our internal teamwork ensures that the client has a satisfactory end-to-end experience

Wholesale operations

Our Wholesale operation (CWS) brought to life a number of initiatives aimed at improving customer experience. These include the launch of 24/7 support for IT issues encountered by the customers, a process allowing operators to diagnose technical network issues themselves and a system enabling regulated broadband customers to book installation technicians on line.

CWS also continued developing its product portfolio with upgrades and new profi les for the wholesale broadband offer and new Ethernet solutions, which will allow a smooth migration to all IP. Commercial successes included winning some prestigious customers through partnering with international operators.

Scott Alcott Executive Vice President Service Delivery Engine & Wholesale

"The smart networks and platforms that we have been building for years allow new connections and enable us to deliver the services and applications of tomorrow, at the same time spurring innovation and creating possibilities beyond imagination. It's not easy to make big changes and to keep the lights on all the time, but we managed it."

-12% complaints in 2010

Bram Leunis, Product & Services Specialist behind the avatar Eva: The Belgacom Community gives our customers an online platform where they can get quick answers to their questions, discuss our products, and even help one another out, and they can also use it to suggest ideas of their own. This gives us closer links with our customers too, and helps us to improve our services.

Sofi e De Moerloose, Segment Marketing Specialist: People's needs are changing – customers want to be able to go online anywhere, at any time and using all their devices. With our Internet on GSM offers, we're putting mobile web browsing within everyone's reach.

Using the Internet On GSM Intense package, our customers get 1 GB to browse intensively on their mobile phones.

With the "Séries Pass" subscription available on Belgacom TV, fans of TV series can watch dozens of them, some of which have never been shown before, whenever and as often as they like.

Nancy Beaupain, hooked on social networks

What's vital for me is not missing anything that's going on, so I check out news sites all day long and I'm online with my friends on the social networks.

I want to stay connected without sending my budget rocketing!

Because the products and services that we provide are more and more a part of their daily lives, our customers are increasingly demanding. So we realize that we have to be more accessible and fl exible if we are to maintain a level of service that customers are willing to pay for. In 2010 we put in place the new framework that will allow us to offer improved customer centricity. We are realistic in our approach, and although we know what the customers want and deserve in terms of service, we know we are still only on the way to providing it. We know that technology is far from enough. We have to focus on servicing and full accessibility: service to the clients, guiding our clients through the new digital era, enabling each individual, each household, to fully enjoy the digital experience.

Simply best for consumers

Scott Alcott, Mister Satisfaction /// Scott Alcott was appointed Mister Satisfaction by Didier Bellens in 2010. Scott got everyone working in a transversal manner to make sure that every interaction with the client provided better service. His work led to a wide mobilization of the staff and the implementation of concrete and coordinated actions to give the client better service.

Weet het meteen, met Internet On gsm

Anticipating clients' needs

Gaat het

regenen?

We have signifi cantly invested in our network. At the same time, we have integrated our activities into a single group. Our clients can take advantage of the most convincing offer for high speed access on any platform, at any time, and seamlessly on fi xed or mobile, without having to fi gure out how to put it all together themselves. To maximize customer satisfaction we have constantly developed our offers. We have successfully spotted trends before they arrive, and positioned ourselves to be able to bring new products and services to our customers – just as we did when we moved to fi xed and mobile convergence years before anyone else, just as we did with providing both 3G and wifi , just as we did with the introduction of Belgacom TV.

Always innovating

Customers have shown us we were right to launch our TV service, since they have enthusiastically signed up to it. What has given it additional impact are the new features we developed – such as the fi rst football match broadcast in 3D, or the possibility to watch football on PC. The innovations also extend to attractive new formulas, as the take-up of our mobile Internet service demonstrate. Continued success with free TV and the increasing number of packs sold proves that our formulas match what customers want.

One for all

The unique asset of being able to offer quadruple-play across the whole country provides Belgacom with a unique opportunity for serving the clients better. Customers satisfi ed with one of our services are likely to take a favorable view of other services we may offer them. Cross-selling and up-selling of products and services is good for the customer and also for us. And in a rapidly changing consumer marketplace, one of the big challenges is not only to sell more, but to sell more per household. In particular, the bundles we can supply are a major incentive for customers to choose Belgacom. More than 45% of our customers already have two or more of our products, through the success of our packs. And as devices and services proliferate and become more complex, the trend is increasingly towards customers choosing one operator for all their services. Belgacom is ideally placed to capitalize on this opportunity.

Ambitious but humble

Similarly, we are upfront and honest when we have slipped up – as sometimes happens still, for instance in outages or in late delivery. We offer frank apologies where appropriate – and we fi nd that a small gesture often goes a long way to restoring our reputation. And we are working assiduously to remedy defi ciencies, and to intervene to improve the customer experience: we focus on attention points such as cutting queues in shops, improving accessibility of call centers, providing precise and reliable appointments for onsite visits by technicians, supplying emergency alternatives when a network fails... It is all a matter of maximizing the customers' disruption-free access to their services, and of reducing unnecessary interactions for them, through end-toend process improvements, shorter implementation loops and reduction of waiting times.

"We place individual customers at the center of our operations by examining every point of contact with us. This can be via billing, the call center, our shops, on the web or when technicians visit them. We want to be accessible, and while keeping it simple, we must deliver more and more sophisticated but intuitive products, wider choice, and ever-higher levels of service. We must offer solutions, not problems. That way we turn our many assets into real advantages – for our customers, and for our business."

Customer centricity /// New services – Our technical service is open from 8 a.m. to 10 p.m., 7 days a week. Our technical support staff send the customer an SMS message confi rming the appointment for an installation or repair, and our technicians call 30 minutes before arriving at the customer's premises.

New success for our packs /// 2010 was again a successful year for our bundled off ers. 311,000 customers opted for our multi-play packs, leading to a total of 870,000 packs.

Offering more to bring more satisfaction

During the year we have kept up a steady stream of constant improvements so that the customer remains not just satisfi ed but also intrigued – with new products, new levels of service, new packs, new convergence, new formulas, enhanced communications, clearer profi le. Among the most striking:

New products

• We offered exclusivity on the Galaxy S device.
• Belgacom boosted the Internet in 3 waves: On March 1, we boosted both volume and speed. On June 1, we launched the fi rst unlimited Internet offer in Belgium, which means e.g. unlimited Internet as from EUR 32.50 per month. On September 1, we decided to increase Internet navigation speed again, allowing our customers

to send information faster than cable operators customers.

• We offered new convergence of fi xed and mobile products based on our excellent network, providing access via TV, tablet, gsm, laptop, PC, etc, and streaming live football, with the European scoop of 3D TV football.
• Our Generation MTV was voted Coolest Mobile Phone Operator in MTV Networks' survey of some 300 brands.

New pricing actions

• We introduced new pricing plans for mobile data with more value for the same price: we doubled the number of customers for Internet on GSM: we now have more than 117,000 customers (excluding "Pay as you use") thanks to our successful marketing actions, so that we remained leader in the postpaid market.

• We launched Internet on GSM Start (EUR 4.99/month) and Internet on GSM Prepaid, with a teaser free trial action.
• We confi rmed the success of our multiple packs.

Our range of products and services is so complete that we can make the best offer for many distinct needs. This means that, unlike many rival suppliers, we can afford to compare our offers. We favor transparency about what we provide, what we charge for it, and the value that customers derive. In other words, we are ready to behave towards our customers with total candor. And at a time when the client is less and less tolerant of mistakes, and less and less credulous over misleadingly simple offers, we have responded with more information about what we can do. When we dared to publicly compare our prices with our main competitors, we were able to show that in packs we outperform on price, on volume and upload

CSR /// Recycling of mobile phones – Belgacom collected 15,249 mobile phones thanks to its "Big Spring Recycling" campaign. For each mobile phone returned to a Belgacom Center, a tree was planted. In total, 3 hectares of forest have been planted.

Didier Bellens /// An additional human touch to the Group – We launched new advertising campaigns while at the same time reinforcing and consolidating the sense, within our own workforce, that Belgacom is increasingly people-oriented.

speed most of our competitors. Belgacom does not aim to be the cheapest – but to give more value for money.

Keeping it simple

Simplicity is the first demand of our clients, as technology becomes ever more complex, as the range of applications widens, and as personalized offers increase the possibilities of choices. To help the customer, Belgacom made special efforts to ensure maximum simplicity.

• Invoices that are predictable and easy to read make life easier for our busy retail customers. We have made major improvements in the readability of our invoices, so clients can see at a glance what they are being charged for.
• And if bills become overdue, we have simplified our procedures too. Instead of sending a reminder with a fixedcharge administrative penalty, the first reminder is issued without a penalty.

We want to offer our clients faster Internet speed and the best TV experience.

• We have made the installation kits for our products clearer. Now step-bystep instructions guide the customer through carefully-designed procedures that enable them to enjoy our products and services as soon as they have purchased them.
• We have standardized our activation fees, too, removing unnecessary complexity and confusion from our previous different rates. Now, a connection costs EUR 50, and a change of address EUR 30.

Simplicity means customers need to call in for help less often, and reducing the number of calls to call centers also allows us to reduce the number of staff there, to use their skills elsewhere, so we provide the same service with fewer people.

More accessible

Accessibility represents half of customer satisfaction. So we decided to put the emphazis on making everything about our products and services accessible.

Shorter call center response times

Rapid responses from our call centers have become the norm, thus increasing our capacity to meet customers' wishes, questions and requests. We integrated our call centers for Fixed and Mobile – answering 6.4 million calls, offering wider choice to customers.

And we focused the traffic from customers through fewer phone numbers – not a reduction in service, but a better channelling of customers' contacts, so they get a faster and better response with less waiting time.

6.4 million calls answered by our call centers

Pay&Go Generation is a prepaid card aimed at young people, offering them up to 5,000 free SMS and reduced calling rates after 4 p.m.

Communicate differently /// In October 2010, for the first time in our history, we launched a radio campaign with the voices of our technical support operators. This generated a sense of pride among our employees, and provided an authentically modest tone of voice that was appreciated by our customers.

www.mesfilmsbelgacomtv.be /// Our search engine puts innovation and technology at the service of the customer. Thanks to this tool, each customer can receive free personalized movie recommendations and discover the movies that best match his or her taste and profile.

First Generation Store in Louvain-la-Neuve

Launch of a new store concept aimed at a young public (12 – 35 years old) and mainly off ering mobile products and services. It is not just a shop but a meeting place where customers can experience a new mobile world with their friends.

Eva, our on-line support assistant, answered more than 4,000 messages during 2010, reaching almost 4,000,000 people.

Belgacom branding of shops

Belgacom Controlled Channels Footprint was expanded, and more than 100 shops now appear under the new Belgacom Center branding (in 2010, 15 new shops and 30 renovated shops), and the fi rst Generation Store was opened – the new shop concept to target the youth market, linked to a dedicated Skynet channel offering a weekly selection of movies, music releases, concerts, parties, festivals, …

An attractive website

We created a new website homepage, so all our customers can fi nd us easily. The links on it make it very straightforward to contact us, whatever the problem or request. This is a key element in the strategic approach to service the customer better via the web. The main benefi ts are a contextual navigation and contact recommendation, to solve customer issues more effi ciently; simplifi cation of the homepage, focusing on customer needs, and designed to make it easy to fi nd information; direct access to key links and customer tools; a support area and personal information with a "my account" facility; and an improved e-shop and search engine.

EVA, the new helper

The website is reinforced with the new Belgacom Community site and with Eva, our on-line support assistant. The Belgacom Community site (http:// community.belgacom.be) is the new Belgacom forum, through which customers have the possibility to post issues or problems. Eva, our on-line support assistant, is there to help. It also includes a suggestion box section, ("Votre avis/U mening"), in which customers can propose new products/ideas to Belgacom, and take part in polls which enhance our customer insights.

Loyalty programs

We developed more loyalty programs for customers: we launched "Play and Gold", where prepaid customers can receive a prize after every reload of EUR 15 or more (865,000 customers have participated, and we have distributed more than 3,000 gifts); loyalty programs, including Proxi-Club and the Group Loyalty Platform, reward mobile and fi xed customers; exclusive programs with service differentiation have been created for our most valuable customers; and a second "customer day" was held in Walibi, for all CBU customers and their families (a whole day for 26,000 customers!)

Tango and Scarlet

Our range also allows us to make pa rallel offers to suit different market segments. In our Group, Scarlet is positioned as an attacker in the Belgian market, showing real creativity in its approach. We can deploy Scarlet for price-sensitive customers, and have given it a younger image – so it provides fuller complementarity to Belgacom. We have completed a deal that brought Mobisud back to us, increasing our foothold in the market for communications with the countries of the Maghreb. Tango is also doing extremely well, with a very assertive and creative approach to the Luxembourg market, positioning it as an attacker facing the dominant player. Tango kept its leading position in the pre-paid market, while in the post-paid market we launched Tango Smart and deployed a new point of sales concept. Our launch of the iPhone in Luxembourg also provided additional successes for Tango.

Scarlet /// Under the broadband multi-brand strategy, Scarlet continues to target price-sensitive customers but is progressively developing a younger image to appeal to young adults "on the go".

iPhone success /// Tango enjoyed real success in Luxembourg, particularly because of the launch of the iPhone4 and the growth in sales of smartphones.

For self-employed people and small companies, the tools and services are often similar to those that are successful with our private and residential customers, although the needs are frequently greater, since dependability of service is essential for businesses. Our customers among larger companies have different

needs, frequently making use of Belgacom's broader range of IT and network expertise and facilities. Many of them benefi t from a designated account manager to ensure constant contact and seamless service.

Serious about business

Didier Bellens /// I am very optimistic about our Enterprise Business Unit. Customers' needs are changing and expanding fast, and new development areas – such as cloud services and M2M (Machine to Machine) – will off er new possibilities and provide high value.

Belgacom is in a good position in the SME and corporate markets, but a deliberate choice was made to put a special focus on the SME market in 2010, and to ensure that the demands of these customers for greater security, reliability and service level assurance could be met.

Getting closer to SMEs' needs

For smaller and medium-sized companies in 2010 we focused on three areas. We aimed to maximize growth through fi xed and mobile ICT and data. We emphazised our ability to deliver on servicing: we simplifi ed our offer and improved the customer experience, generating a value-based differentiation from the competition, and aligning ourselves more closely with our customers' needs. And we maximized our talent for proximity, including through building new partnerships that brought us closer to SME customers. Despite the negative impact on this segment from the economic downturn, our ambitions were converted in many cases into real achievements.

Opening new channels

We opened up new channels to professionals and companies in the ICT sector, through Belgacom ICT Agent and Belgacom ICT Experts. The Belgacom ICT Agent channel, launched in February, is a non-exclusive indirect sales channel intended to bring our ICT products & services into the SME market; most of our chosen partners were already servicing the hardware & software needs and/ or IT consultancy needs of smaller fi rms. A special portal was also developed to simplify ordering by these new partners and to provide them with all the product information they need. We also created Belgacom Bridging ICT, a new subsidiary of Belgacom, in which the partners are ICT experts, mainly focused on mediumsized fi rms. So far four Belgian IT integrators are involved: ElectroComputer, Interconnect, Jockordy and SoftComputer. In 2010, Belgacom Bridging ICT also took a 40% share in the hosting company Clear-Media to widen its offer for medium-sized companies and to reinforce its position in the market. We also started a comprehensive reorganization of our own sales force.

Maintaining market share

We kept our market shares stable. In mobile voice, we fi ne-tuned the offer within our convergence strategy, bringing together packs, fi x-mobile and mobile voice-data offers. We brought additional value and stimulated the uptake of Internet on GSM by including 15 MB of data volume by month in all SME commercialized voice plans, so that customers without a mobile data tariff plan can sample it without any additional investment. New offers include "unlimited offers" (Bizz Mobile No Limit, Bizz Smart 95, Bizz Fusion Smart Team), and, at the lower end, an entry product, Bizz Flex+ 15.

Mobile data

In mobile data, we activated twice as many Internet-on-GSM customers as in 2009. Innovative launches included:

• Bizz Smart, which combines mobile voice and mobile data in one subscription;
• Bizz Mobile Internet Duo, providing a Belgian exclusive of Internet on GSM and Internet on laptop on one subscription;
• a Mobile Internet Value Pack for the medium-sized company, allowing sharing of mobile data volume amongst employees;
• a Belgacom partnership with Apple on iPad, with special mobile Internet tariff plans;
• and a new partnership strategy leading to M2M take-up.

"We have a great position, since we are the only operator in the nation which has a network capable of handling all demands across all current and emerging devices and platforms. So we can credibly tell businesses that as the next revolution in telecommunications takes place: 'We will provide you with seamless solutions, with our high speed access anytime anywhere on any device'".

Vous êtes indépendant ou dirigez une PME?

BIZZ Internet/// Belgacom continued to reinforce its presence among SMEs, particularly because of the range of Bizz Internet solutions, off ering four service guarantees, including restoring Internet access within eight working hours.

Bent u zelfstandige of hebt u een kmo ? Meer dan 100 experten beantwoorden al uw vragen op het exclusieve nummer 0800 22 500.

Fixed Internet

In fi xed Internet, we increased volume and speed of most connections through the "boost your Internet" initiatives on both residential and professional markets, and we developed a new SME Internet offer integrating service guarantees for our customers. This offering – called Bizz Internet – implies priority at the technical call center, repair within 8 hours, a monthly free call for technical IT support, and secured connection. We also revised our highend Internet portfolio as a new Bizz Pro offering.

The Explore platform

Explore demonstrated its merits to customers and to Belgacom. SME connectivity rose +17% through migrations, winback & network extensions, with our commitments to customer centricity including guarantees of continuity, superior network quality, bandwidth and 24/7 support. This helped to retain customers and to boost ICT up-sell, and through our managed services it brought additional revenues. In addition, within Explore Publi Link, the private and secured network for public administrations, a new range of ICT applications was developed. In December 2010 we had 13,749 SME Explore customers, an increase of 25% year-on-year.

Convergence in offers and programs

In ICT, we launched our fi rst combined offerings, notably a service linking hardware with ICT service, and 3G embedded hardware with a mobile Internet offer.

Convergence was refl ected in our loyalty programs too, where we launched a Group loyalty platform, enabling customers to collect points through both fi xed and mobile solutions. The Proximus Club and Business Rewards Program for SMEs were merged into a single program: Bizz Club, with a Bizz Club Platinum version. More than 100,000 customers are active in Bizz Club. The loyalty programs have a clear impact in reducing churn rate.

We also took our fi rst steps in a joint offering by bundling hardware and mobile Internet, providing a netbook at EUR 1. Other innovations included providing a unique customer service phone number, and engagement in the Start Your Business advisory service. For the third year we also continued our involvement in the Ultimate Makeover program, which aims at revitalizing SMEs by advising on advanced hardware, software, telecom and other ICT needs.

Smart actions for corporate customers

Growing interest in sourcing and managed services

In the corporate sector, a slight improvement in the economic climate stimulated a renewal of IT investments – but in tough market conditions, with increased scrutiny of IT investments and tighter margins. We responded with smart action, taking advantage of customers' growing interest in sourcing and managed services, so they could better focus on their core business. This resulted in a new sourcing contract with FOD Finance for instance. On top, the satisfaction of existing sourcing customers increased signifi cantly, which has led to contract renewals with Eandis and Astrid (via consortium).

Organizations want to optimize their infrastructure (networks, systems, services, telecom expenditures), and at the same time to innovate. Governance, security, privacy are increasingly important to our customers, especially for our datacenter services, and we started to sell new products for data-loss prevention and forensics, allowing better protection of user and enterprise data. We seized these new opportunities, and explored the possibilities that are emerging from new applications with machineto-machine communications, mobile devices and mobile Internet.

New projects

The results are evident in the delivery of signifi cant new projects ranging from datacenter services to managed networks and IP telephony. Belgacom was able to secure telecom contracts for mobile voice and mobile data (with returning customers such as Delhaize and the European Union Institutions), fi xed voice and WAN connectivity.

Many of our ICT customers have renewed or bought new connectivity via our Explore offering. Many new services, such as SIP trunking (which allows our customers to call anybody anywhere in the world independently of the network of the called party) are being added on top of the Explore managed connectivity. Mobile back-up of connections has been implemented. Customers can access their infrastructure in our datacenters ICT revenue grew by 3.3% compared to 2009, boosted by strong results from Telindus International.

Discover online www.onemagazine.be

Growth of Telindus International

UK /// Achievements included Telindus UK becoming the supporting partner for the Virgin Media core network – a transformational deal. Telindus UK also won an "Investors in people" silver award for its HR management.

THE NETHERLANDS /// The General Electric GCOM-voice utility service deal by Telindus NL became reality with a sizeable base of active users. Telindus NL also won a great deal with WIBRA, connecting through International Explore all their shops in Belgium and linking them redundantly with the Dutch head office.

SPAIN /// Telindus Spain grew by over 10% in 2010, performing well in the economic climate, thanks to some important project wins for Euskastel and Ono.

FRANCE /// Telindus France realized growth of 12% in 2010, due to excellent CISCO product sales and also to a significant growth of services revenues.

LUXEMBOURG /// Telindus Luxembourg reaped the reward of the Group's strategic approach, developing into a full range service provider with capabilities such as datacenter and WAN adding to an already extensive offer. It was also elected as "ICT Company of the year".

Telindus France and Luxembourg also address all International ICT products and services needs of AT&T customers through a dedicated Account Management handling all opportunities for all countries. This Global Account Management approach with AT&T also began to pay off with new telepresence sites implemented and a groundbreaking Managed Services deal with Ipanema for a new AT&T outsourcing client.

via a managed or unmanaged network. Our full national footprint, as well as our mobile and fixed back-up possibilities, allow our customers to support their employees.

Boosting convergence

Our commitment to convergence meant that special attention was given to our offering around Unified Communication and collaboration tools. A project team was set up to streamline the offering, shorten our supplier list and tune our managed services. A special offer involving SIP trunking offered customers a full Voice over IP network. This approach led to a great success in the banking sector particularly and will now be expanded to others.

The challenges of the cloud and M2M

Our corporate customers are also facing the challenges of cloud computing. The foundations are in place, in terms of ubiquitous broadband, more powerful client devices, and datacenter infrastructure, but our customers have questions about security, privacy, continuity, redundancy, back-up, governance, legal aspects and integration of cloud applications with business applications running in their own infrastructure. Our response has been to start formulating answers to these questions, and to provide a solid future-proof infrastructure. At the same time, we are working on enhancements to our existing cloud offering including "Infrastructure as a Service" and "UC as a Service", with more solutions to follow.

The continued evolution of M2M also drives enterprises to reengineer their processes for interaction with customers and suppliers, or to create new business processes integrating devices that used to be excluded from any IT intelligence. Here too, we are constantly offering new insights and opportunities to customers to take fullest advantage of these emerging technologies.

Performing abroad

Against a background of slow recovery from crisis, uncertain market and fluctuating customer demands, we performed well in the upper half of the market, where our response made 2010 a good year. This was the result of good progress in transforming ourselves towards a more "Managed Services" oriented company and in focusing on cost containment. New opportunities arose in the banking environment due to new regulations and to the need for new dedicated security solutions. Through hard work, dedication, education and commitment we were able to consolidate the business in our local domestic markets, and in many cases to go further, as with the start of Data Center/cloud and connectivity offers in Luxembourg, or the gradual change to virtualization and managed services in the Netherlands. And for our international cross border customers, we created a new focused centralized pre-sales team within International Sales & Marketing.

Improving customer satisfaction SME

For small and medium-sized enterprises (SMEs) we have launched customer satisfaction programs that relate to the different touch points of a customer life-cycle, and particularly focus on key moments such as change of location, port-in, billing, or complaints. We want to make it easy for SMEs to do business with Belgacom, and ensure that they can continue their business in every circumstance.

Making it easy for these demanding customers to do business with us means providing them with end-to-end satisfaction and offering them an all-round professional approach, whatever their

Cloud computing /// Cloud services make possible new business models by lowering the entry barrier for new entrepreneurs. They are instrumental in the development of large-scale, multiple stakeholder projects such as road charging, smart grids and e-health. Belgacom will play a critical role in this evolution, both as the network backbone on which to deliver these services, and as a trusted partner that aggregates, integrates and secures tailored suites of services for consumers, SMEs and larger companies.

particular needs are. We provide a comprehensive product experience, we offer a unique 0800 number and dedicated sales and repair teams, and our SME websites have been fully revised so that SMEs can fi nd product information, and enjoy new functionalities such as chat, call-back, and integrated shop locator.

To provide business continuity, our fi rst step was to integrate it within the Bizz internet product range, since we know that the internet connection is by far the most important working tool for SMEs. And this fi rst step will be followed by a full range of new business continuity services we plan.

Corporate

With a strong emphazis on customer need, we also devoted additional attention to dedicated accounts. Contacts with each of our corporate accounts is managed by a single executive, who acts as the customer's interface with Belgacom, simplifying each customer's dealings, and often, through familiarity with the customer's business, anticipating or recommending new possibilities available from Belgacom.

To increase customer satisfaction still further, we improved our dialoge with customers through debates, networking events, policy meetings with individual customers, and presentations of our products and services.

International

Among international customers we increased customer satisfaction by streamlining our cross-border offerings and service delivery. We also enhanced our visibility at international level, so that we are now considered as an international partner, and we map our approach in line with the customer's international footprint. Initiatives in local markets included the Telindus NL customer services improvement program specifi cally for storage customers.

And because a personalized customer approach is already part of the Businessto-Business market with its multi-level relationship models, we have worked on the "Integrator", a people business where a personalized approach is our key differentiating factor. We are also integrating the customer perspective more fully into our international operations through new processes such as providing a quote to customers in terms of real times and costs. Not only do we learn from our international operations, where the IT services we provide through them have always involved close contact with the customer and a readiness to solve customer problems, but our international operations benefi t from our tools and processes to become better.

Customer centricity /// In 2010, as a top priority for the professional market, we worked at improving our approach to give reality to the concept that "Belgacom is easy to do business with". For example, our closer focus on Explore international signifi cantly speeded up the entire installation process from purchasing to billing, cutting it from 120 to 95 days on average.

CSR /// Green data centers – Our investments in optimizing our use of energy have qualifi ed us to be the fi rst Belgian company to sign up to the EU's "green" code of conduct for data centers.

Carrying the Belgacom message abroad

BICS has become a tier 1 global carrier. The transaction with the MTN Group coupled with organic growth boosted BICS into the world's top four for international voice traffic. It enabled us to consolidate our leadership in EMEA and reinforced our prominent position in mobile data carrier services.

Increasing voice traffi c

On the voice side, BICS managed to increase traffi c by 30 %, hence outgrowing the market and reaching a total vo lume of 25 billion minutes, which brings us to the 4th position in the worldwide ranking of international voice carriers. The massive volume increase has compensated the severe unit margin decrease observed since end-2009 and driven by fi erce competition amongst numerous carriers striving to increase their share of a shrinking market. BICS' performance is the result of our mobile focus, our ever increasing exposure to emerging markets and our strict quality commitments. BICS also took advantage of the technology shift with an exponential growth of its VoIP traffi c. We tapped into a new market segment with the launch of BICS' EasyConnect VoIP, a plug & play solution which enables smaller operators and ISPs to get access to BICS' qualitative and competitive voice offering through a fully automated pricing, billing and reporting application.

Reinforcing messaging and data roaming

At the same time, BICS reinforced its leading position in the messaging and data roaming business, with a growth of more than 15%. Diversifi cation was further pursued with the launch of new services such as Steering of Roaming and the BICS Roaming Hub (BICS has been chosen as the roaming hub provider for the MTN Group), while new developments of BICS' international remittance solution HomeSend© have been achieved through strategic partnerships with companies such as MFIC, Eastnets, and Provident Capital Networks.

One of the key challenges of 2010 was the takeover and integration of the MTN ICS activities, which is on schedule and almost completed. Our experience with Swisscom helped us to make this a smooth process.

Following the technology shift occurring in the telecommunications market, BICS continued to increase the IP dimension of its activities, by implementing the fi nal steps of the migration of its traditional switching platforms to a full Next Generation Network solution. At the same time, BICS deployed IP based services like IPX, the future model of data exchange between (mobile) operators.

Looking ahead

In 2011, our main objectives are to further drive value from the organic growth of our activities, through the optimization of our voice business, to further enhance our messaging and data product portfolio, and to extend our coverage of specifi c geographies and customer segments. After 2 successful M&As (Swisscom and MTN), we remain interested in value creative opportunities to further participate in the consolidation of the international wholesale market.

"In 2011, while maximizing the benefi ts of our transaction with MTN, we will pursue our strategy of optimizing our voice business, further diversifying our product portfolio and getting ready for new IP-based business models. At the same time, we will remain attentive to any consolidation opportunity."

+46% Growth of non-voice products year-over-year

+30% Increase of voice traffi c

A worldwide reach /// BICS has direct connections with over 550 operators, of which 250+ mobile operators.

Tanguy Dekeyser, cinema specialist: Belgacom TV has the largest range of video on demand. To help you to choose a lm to match your mood, I'd suggest that you create your own cinema pro le at www.mes lmsbelgacomtv.be. That will give you customized suggestions.

In our video on demand range, we offer more than 1,300 lms including a catalogue of more than 500 Mubi lms aimed at lovers of classic, foreign and independent cinema. For a xed monthly price, cinema lovers can watch as many Mubi lms as they like.

What I'm after is the widest range!

Movies are my passion – blockbusters, series, art-house fi lms – I love them all.

What we embarked on in 2010 was a comprehensive reorganization and reinforcement of the group. We decided to improve our processes internally, to fi nd a way to make a better mix of all our assets to better serve the customers. It was a matter of realizing convergence in every sense: among our services, our products, and – above all – our people. Now everyone in the group realizes that this was the right approach. The next step is for everyone in the group to feel engaged in providing customer satisfaction.

Our people, the members of the Belgacom family

Florence Coppenolle, Vice President Group Communication /// Let's share a smile – Belgacom improved its visibility in the press by 10% thanks to more transparent and proactive communication. Almost 500 employees took part in the internal end-of-year campaign "Let's share a smile". Th is allowed us to instill pride and a positive dynamic throughout the Group.

We worked hard on harmonization in the areas of compensation and benefi ts, performance management, and creation of clear job descriptions, building strong foundations for the future of the company and its people.

Astrid De Lathauwer Executive Vice President Human Resources

Convergence across the Group

Indeed, after the convergence of products & services, 2010 was a crucial year in which we integrated the people coming from our different entities into the converged company. We aimed at convergence through the Fix-Mobile Study – the fi nal step towards a genuinely unifi ed convergent organization in which "One Group" becomes able to answer better and quicker to the customers' needs.

We worked hard on harmonization in the areas of compensation and benefi ts, performance management, and creation of clear job descriptions, building strong foundations for the future of the company and its people.

"Job families" to simplify job descriptions

Putting convergence into effect was helped by the creation of "job families". Job families are clusters of jobs having more or less the same generic responsibilities and competences, replacing the legacy in which each entity had its own job classifi cation and job descriptions. These job families absorbed and simplifi ed the job rating system of the four constituent group entities. They are linked to standardized salary bands, and they evolve in the same way too, providing the same opportunities, allowing all employees to see clearly their place in the structure, how their career can develop, and how they can transfer or move upwards.

Training and development

For convergence to work, our people have to understand their roles within the reorganised group, so that they embrace the fl exibility it depends on, and benefi t from the mobility it offers. Consequently, 2010 saw a major focus on training and development, as key drivers of engagement and performance. We tested individual employees' sales skills with our products and services, and their customer service skills, to identify their particular capacities and competence level. This way we could identify gaps in their knowledge – so that, for instance, people who before the convergence only sold mobile phones learned how to sell fi xed too. These individual competence measurements were then fed into further training in groups. This very individual focus brought their skills up to the level that allowed customer experience to be upgraded, with priority to departments that are critical to customer centricity: call centers, shops, technicians. We also created a sales academy to develop the skills of our sales forces in ICT and convergence.

Bringing management and staff closer

Direct managers play a very important role in increasing engagement. That is why we put in place a real management cascade to communicate the 2010 changes directly from manager to employee. This management cascade brought the immediate superiors closer to their employees, as they played a much more active role in passing on the information than by just forwarding mails. They actively explained changes and the philosophy and reasoning behind.

Closer links between managers and employees are also important for the creation of a coaching culture. This is a more human approach with a strong personal touch, going further than training, and with managers assessing and advising each employee. It also involves boosting the related change-management skills of our team leaders.

14,091 employees followed at least one training during 2010

403,087 training hours

Customer centricity ///Extended opening hours

Highlights of 2010

• Setting up a new HR structure in order to better answer our employees' needs
• Creation of a team of career consultants who focus on helping our people with their career management
• Implementation of specifi c actions to improve career development: leadership program, coaching program and career management
• New conventions on HR rules and on mapping rules for the integration, and a new two-year social convention for 2011-2012
• The Belgacom Fun Day 2010: a family event for all Belgacom Group members at Bobbejaanland: 13,342 participants

To improve customer satisfaction, we have developed some e-learning sessions to communicate the "golden rules to our operators". Th ese rules allow us to make sure that we don't forget to tell or ask our customers anything crucial which could help us understand their situation better and thus strengthen customer proximity.

Making change work

Our biggest challenge was the short time frame: negotiating and implementing the integration for Belgacom was not easy but thanks to the good collaboration of our unions, our management and our people, we did it! The changes have been agreed with the unions through extensive negotiations. Thanks to their constructive collaboration we managed to reach agreement on all issues in a relatively short period.

Getting the balance right

In terms of diversity we renewed our focus on gender balance, with the WINC platform for support to women in management positions. A team of 12 well placed Business Unit Champions, supported by 12 corporate project members, have taken up the challenge of driving gender balanced leadership. This has created an environment where male and female talents can uplift each other. Besides we continued our partnership with Wheel-it to facilitate employability of disabled candidates. It was confi rmed in 2010 that we obtained the diversity label for the second time.

In order to foster a responsible management culture, we deployed our new Code of Conduct, called "the way we do responsible business", throughout the organization. A review of the governance and goals of our diversity program led to a focus on gender balance, responding to the needs of a mature workforce, disability, and culture. Project teams have been allocated to each topic and concrete action plans have been developed. For instance, we developed a handbook to facilitate recruitment and integration of people with disabilities, that will be distributed in 2011.

Age-conscious HR management

A set of burning platforms makes age a hot topic, not only within companies, but also within our current society. Within Belgacom, expectations from employees are still set on early retirement, which is not realistic in the context of European demography and the widening encouragement for employees to work longer in order to maintain a stable social security system. Besides this, the so-called "mature workforce" can hardly be considered a minority population, as more than half of our employees are aged

Th e 20km through Brussels /// We had the biggest company team participating: 602 employees took part.

Didier Bellens /// Th e involvement of all our employees at every level and in every department has been crucial in 2010 in our engagement to please our customers. Th ere is a shared sense that we are going in the right direction. We have changed the spirit in the company. I could sense this real mobilization throughout the year.

45+. Our fi nal objective is to keep our employees vital, employable and motivated throughout the whole career. We are therefore conducting a study and working with a project group to develop sustainable measures in the framework of an age conscious HR policy embracing all generations, whilst, in the short term, focussing on employees aged 50+ and employees with "heavy" (physical or mental) functions.

Being responsible

In line with our CSR commitment, we launched a major ecodriving program for our company car drivers. We also continued to offer our "cafeteria" plan to promote ecological mobility, helping to change people's minds by encouraging public transport.

Culture and disability

We want to be an inclusive company in everything we do. Working together with different cultures and different people makes us rich – personally and as a company. We support our teamleaders to work with disabled employees by providing them with a single point of contact (our social unit) and with suffi cient information. We continue to post our jobs on Wheel-it, directly addressing the disabled population and we continue partnerships with other organizations, fostering integration of people from other cultures to enter the labor market.

We will...

• launch a Strategic Workforce Plan to take the initiative in building the right skills for the future
• support our employees in managing their careers
• help our leaders develop so that they bring their people effectively into the strategy
• go further in creating a stimulating working environment for our employees

External recognition /// Two new awards – We do not only get internal recognition for our eff orts. In 2010, we featured on the "Most Wanted Companies" list of Vlerick-References & Vacature, and won the "Top Employer" award granted by the CRF Institute. Th is confi rms that Belgacom's HR policies and practices are maintaining the Group as a leader among attractive fi rms, and that we are well-known for our investments in our staff , as well as our extensive training program.

Vincent Lepoint, Belgacom Center salesman: Every customer has a different level of knowledge about technology. My role is to help them, and to give them advice about the right product. For senior citizens, Belgacom even offers specifi c training sessions – an easy way of entering the era of new communications no matter what age.

Belgacom offers all its fi xed Internet customers the chance to go on a free one-day training course on using the Internet, so that anyone can get to grips with the new technologies.

Christiane Niels, retired and an art lover

Th e Internet means I can stay in touch with my grandchildren.

Travel websites, cultural news, the weather, the newspapers… A whole world opens up in front of me – and nowadays I even do my shopping online!

Our CSR Strategy

At Belgacom, we recognize the need for a responsible and transparent way of managing our business, in relation with all our stakeholders. Our future success will rely on making a positive impact on economic, technological and social progress through our activities and on winning the trust of our interest groups. CSR is therefore considered as a strategic management tool and as a key component of our corporate mission and strategy.

"I am convinced that our future business success relies on creating value for all our stakeholders, in a transparent and responsible way. Corporate Social Responsibility is a key enabler in this respect. As a matter of fact, CSR was one of our main focus areas in 2010, next to Customer Centricity and Innovation. During 2010, Belgacom progressed with its CSR strategy, and we are well on track to reach our target of becoming a leading socially responsible company in Belgium by 2012. Our efforts gained external recognition, confi rming the relevance of the CSR strategy and governance set up four years ago.

I aim to further embed CSR and sustainability in our customer offering and marketing in order to enable a more accessible and safe digital society on the one hand, and to help our customers reduce their environmental footprint on the other hand."

See our CEO's interview in our activities report (p.04)

Becoming a leading CSR company

Our ambition is to be recognized as a leading responsible company in Belgium by 2012 and we believe we are on the right track. Our CSR actions and communication have paid off and we gained external recognition for our CSR efforts. We have been included in the Ethibel Excellence Investment Register and we ranked in the Top 3 at the Awards for Best Belgian CSR Report. Recognition outside has been matched by recognition inside Belgacom. CSR is now fully absorbed into the culture of Belgacom and business units spontaneously take it into account because it has paybacks for us as a commercial enterprise.

We are already recognized as sectorleader in Belgium in defi ning a global CSR strategy and integrating it rapidly in our operations. But we know it is not enough and we still need to improve on a number of our commitments, such as customer service and the integration of CSR in our supply chain. The commitment of our senior management and board is crucial to this, along with the feedback of our stakeholders.

Making a positive impact

Our CSR strategy aims to promote a more accessible and safe digital society and to enable sustainable growth, based on six commitments.

From the very beginning, we have decided to focus on three main commitments rooted in our core business and primarily dedicated to our customers: Enhancing Access to Communications, Enabling a Low-Carbon/Greener Society, Communicating on electromagnetic fi elds and health.

Those key priorities towards our customers are supported by our commitments towards three other major stakeholders: our employees, our suppliers and the communities in which we operate.

About our CSR report

This is Belgacom's fifth CSR report, which aims to provide a summary of our CSR strategy, management and performance.

Our complete CSR report is available online www.belgacom.com.

We base our approach to CSR management and reporting on the principles of the Global Reporting Initiative third Generation (GRI:G3). We have included a GRI cross-reference table in our online report to help readers find GRI-related content and data.

For the first time, we have included our international subsidiaries in our key quantitative figures. Ernst & Young Bedrijfsrevisoren's assurance statement (see p. 33 in our online long-form CSR report) not only provides assurance on the qualitative information in the CSR report, but also on a selection of key quantitative data for the year 2010, identified by a √ in our "Key Figures" table (p. 66).

CSR Europe also provided an independent review of our CSR report on p. 67.

We welcome your feedback on our CSR engagement and your views on this report csr@belgacom.be

CSR delivers shared value for society and for Belgacom

	Value for society	Value for Belgacom
Enhancing access to communications	• More people able to enrich their personal and professional lives via modern technology • Protection of children online	• Increase of our market share • Reduction of commercial and reputational risks related to online privacy and security
Enabling a low-carbon society	• Enhanced resource conservation and energy/CO2 efficiency	• Cost savings • Mitigation of business risks (introduction of a CO2 tax for example) • Enhanced business opportunities via green IT solutions
Communicating on electromagnetic fields and health	• Well-informed customers with responsible behaviours.	• Mitigation of health risks on our business and reputation • Enhanced stakeholder trust and reputation
Promoting a positive working culture	• Improved work-life balance for our employees • Economic contribution: EUR 1,107 million	• Improved attraction and retention of our workforce • Reduced absence and illness costs
Developing a responsible supply chain	• Improved social, environmental and ethical standards of our suppliers • Economic contribution: EUR 1,430 million	• Mitigation of risks on our business and reputation • Enhanced relationships with our suppliers
Supporting our communities	• Improved standards of living in the communities we operate in • Economic contribution: EUR 1.7 million	• Enhanced stakeholder trust and reputation

Concetta Fagard, Vice President Group CSR, Sponsoring, PR, Events & Reputation /// "I am proud to look back at the CSR progress made in 2010. Thanks to the involvement of all our business units, we were able to realize our CSR commitments and gained external recognition. I look forward to continuing our progress in 2011."

Our performance in 2010

We invested EUR 1.7 million to help the communities we operate in, supporting over 100 local social initiatives

We maintained our Top Employer Label, improved our employee satisfaction rate, and reduced our occupational accident rate.

We conducted a detailed assessment of the CSR performance of our suppliers, representing 36% of our procurement spend.

Responsible supply chain

We continued to help reduce the digital divide by improving our customer service. We provided tailored offers for elderly and disadvantaged people, donated 766 PCs to schools and NGOs and gave ICT

training to 7,424 people.

External recognition

We started gaining external recognition for our CSR efforts: inclusion in the Ethibel Excellence Investment Register and Top-3 ranking at the Award for Best Belgian CSR Report.

We organized three multi-stakeholder panels to gather feedback on each of our key CSR commitments.

We reduced our CO2 emissions by 3% vs 2009, reaching 56% vs our 2007 baseline (we aim to reduce by 70% over the period 2007- 2020). We enhanced communication on our green IT solutions and recycled 48% more mobile phones compared to 2009.

Communicating on electromagnetic fields and health

We further encouraged responsible use of our products, by distributing a brochure on electromagnetic fields in our shops and publishing advice on our websites.

International integration

We increased the integration of our international subsidiaries in our Group CSR strategy and included them in our key CSR quantitative indicators.

The level of maturity for each of our CSR priorities has been assessed internally, based on our objectives, benchmarking of our peers, and our stakeholders' feedback. A complete version of our commitments and achievements ("we said-we have-we will" table) is available in our online CSR report.

	Our priorities	Level of maturity	Key achievement in 2010
CSR	Stakeholder engagement		• Mapping of stakeholders and dialog via three multi-stakeholder panels
management	Embedding CSR		• Enhanced integration of international subsidiaries in CSR strategy and reporting
			• New Group-wide Code of Conduct "the way we do responsible business"
	Transparent reporting and external recognition		• Inclusion in Ethibel Excellence investment register
Access	Customer satisfaction and service		• Top-3 at Best Belgian CSR report Award • Customer service was our key strategic priority in 2010 (12% less complaints than in 2009)
	Simple offers, clear pricing		• Simplified our product range and launched new low-cost offers
	Customer privacy, online		• Pedagogic file on online safety distributed in all Belgian secondary schools
	safety, and responsible product use		• Published advice for responsible use on our websites
	Products for elderly and		• Defined a strategy to improve our offering for elderly in consultation with our stakeholders
	disadvantaged		• Nearly doubled our sales of devices for elderly people
	Enhancing ICT skills		• Enabled 263 ill children to remain in contact with their schools via videoconference (43% increase vs last year) • 174,256 hours of ICT training given (+ 12% increase vs last year)
			• 766 PC's donated to schools and associations
Environment	Lowering our CO2 emissions		• Reduced our CO2 by 3% vs 2009 (and by 56% vs 2007 baseline)
	Energy efficiency		• Saved 11.7 GWh via energy efficiency initiatives (EUR 1.2 million)
	Greener transport		• Bronze Green Fleet Award
			• 631 drivers trained on ecodriving
	Waste management		• Reduced waste by 6% vs 2009 and improved recycling rate to 70%
	Green IT solutions		• Increased communication on our Green IT solutions
	Green products		• Signed EU Codes of Conduct for energy efficient datacenters, broadband, and digital TV decoders
	Mobile phone recycling		• Stopped repacking 30% of our mobile devices with Belgacom packaging • Collected and recycled 48% more old mobile phones than last year
EMF & Health	Transparent communication on electromagnetic fields		• Communicated the exposure level of all our wireless devices • Distributed the brochures published by the Federal Health Authorities in our shops
	(EMF)		and published tips and tricks to reduce exposure to EMF on our websites
			• Postponed our elearning tool to 2011 due to delays in the definition of a full EMF legal framework for networks
	Network compliance		• Initiated the network retrofit process in order to comply with the new legal framework
	Monitor scientific research		• Updated our review of scientific research (see online CSR report)
Employees	Social dialog		• Finalized the integration of affiliates (organizational structure, harmonized remuneration policies, standardized job families)
	Diversity		• Reviewed our HR diversity strategy and decided to increase focus on ageing, next to gender and disability
			• 30% of women in total workforce (constant vs previous year)
	Safety and health		• Reduced rate of occupational accidents
	Training and development		• Increased learning penetration
	Employee engagement		• Improved employee satisfaction
			• 87% of employees satisfied or very satisfied with our CSR policy
Suppliers	Raise CSR standards of our suppliers		• Assessed the CSR performance of our strategic suppliers, representing 36% of our procurement spend (above target)
			• Followed up 2 suppliers with insufficient CSR performance
	Integrate CSR in sourcing criteria		• Defined a process to include a 5% weighting of CSR criteria in our projects and sourcing
Communities	Donate money and time to		• Donated EUR 1.7 million as well as time and equipment to 101 social projects
	good causes
	Responsible sponsoring		• Launched Dreambox, which sponsored the equipment and web site of over 300 local sport clubs
			• Weekly initiations to street basket for 1,000 youngsters

How we manage CSR

CSR is now firmly embedded in our group activities, and our business units automatically and spontaneously take account of CSR in their decision-making. We have constructed a framework that ensures the world beyond Belgacom has its legitimate opportunity to influence our CSR approach and priorities.

Engaging with stakeholders to understand their expectations Stakeholder feedback helps us to finetune our CSR strategy and build trustbased relationships.

We have a wide and diverse range of stakeholders: employees, unions, investors, suppliers, customers, NGO's, governments, regulators, local communities, opinion leaders, etc.

Our interaction with these stakeholders is in part through this CSR report. But that is not enough. We also conduct assiduous questionnaire exercises with financial and management analysts, with investors, suppliers, and customers, and with CSR organizations. We frequently organize meetings with our stakeholders, and of course we have a constant open channel through csr@belgacom.be.

This year, we mapped our stakeholders and organized three multi-stakeholder panels, for each of our three key CSR commitments. The outcome of these panels is highlighted in the respective chapters and served as input for our 2011 strategy.

See below our stakeholder engagement framework.

Focusing on relevant CSR stakes

We regularly challenge our CSR strategy as a way of ensuring that we address the CSR issues that are the most significant (or "material") for our stakeholders and for our business.

The choices arise from the results of a wide range of inquiries, including our dialog with internal and external stakeholders, the requirements of international bodies and national legislation, monitoring of societal trends, and benchmarking of our peers. This year, we also mapped our CSR stakes according to the new ISO26000 (guidance on social responsibility) in order to ensure that our approach was consistent with this new framework.

This year, we mapped our stakeholders and organized three multi-stakeholder panels, for each of our three key CSR commitments. We built our stakeholder management framework in collaboration with the CSR research team of the Louvain School of Management and we established a process based on three steps. This way we are confident that our CSR strategy focuses on the most relevant issues, and that our reporting mirrors those choices.

See below our materiality matrix

Embedding CSR throughout the organization

Our mission, our corporate values (Respect, Can Do, Passion), our Corporate Governance Charter, our Code of Conduct "The way de do responsible business" and our compliance office and policies, underpin our approach to business and to corporate social responsibility. These are the foundations to create and sustain a culture of responsible business management.

More information on corporate governance and our compliance office is available in the Governance chapter (p. 76) and on our website.

Because we know CSR needs constant nurturing, even when it is established, we have created a framework to guarantee that it receives the attention it deserves and needs. We have developed an internal governance and reporting structure that embeds CSR in everything we do. The framework is centred around two entities: the Group CSR department and the CSR Steering Committee, including Vice-Presidents from each business unit. These entities, headed by the Vice-President Group CSR, report directly to the CEO and the Belgacom Management Committee.

A CSR representative has been appointed in each business unit, to work closely with the Group CSR team in implementing CSR actions. Our key priorities are managed as a "corporate strategic program", with monthly progress reports to our Belgacom Management Committee.

As a result, we were not only able to deliver on the CSR commitments we took on for 2010, but also to ensure that they were correctly overseen and monitored.

Working with others

In recognition of the need for a collective approach to our CSR challenges, we are active members of industry organizations and specific CSR associations including:

Because telecommunications bring a wide range of benefi ts in daily lives, we want to make our products and services accessible to as many people as possible and offer maximum safety and ease of use. To achieve this, we focus on simplifying our offers and improving our customer experience and servicing. We contribute to reducing the digital divide by improving access for disadvantaged people and by providing ICT training. We care for our customers' online safety and privacy by providing appropriate control mechanisms and advice.

Enhancing access to communications

Key priorities

• Customer satisfaction and service
• Simple off ers, clear pricing
• Customer privacy, online safety, and responsible product use
• Products for elderly and disadvantaged
• Enhancing ICT skills

What our stakeholders expect from us /// We organized a panel with relevant stakeholders (politics, customers, supplier) and listened to their opinions on the accessibility of our products for seniors and disabled people. Th e main messages that will infl uence our future actions are: • Telecoms can play a key role in helping seniors and disabled continuing to live autonomously.

• We already off er solutions that fi t their needs, but our communication should be improved seeing the lack of awareness.
• Many opportunities remain to enhance the accessibility of our products and services

A cross-functional team has been set up and implemented numerous actions to improve the accessibility of our servi cing channels and improve our overall customer service.

Improving our customer service and satisfaction

We recognize the need to improve our overall customer service and experience and have made "Customer centricity" our key strategic priority. A cross-functional team has been set up and implemented numerous actions to improve the accessibility of our servi cing channels and enhance our overall customer service: shorter waiting time, simplifi ed access numbers, and longer opening hours for our call centers; increased fl exibility of our technical intervention teams; improved clarity of our invoices, and new web-based customer service channels. As a result, the number of complaints decreased by 12% compared to the previous year.

But we still have a long way to go, and "customer centricity" will remain our key priority in 2011.

More information can be found in our activities report

Preserving customer privacy and child safety online

In order to promote a responsible use of our technologies and protect our customers' privacy, we offer technical solutions that provide high levels of security on all our products. Our management system for information security is certifi ed ISO27001. We have received no fi nes for privacy violations in the last three years.

Ensuring the safety of children is particularly important for Belgacom and we partner with NGO Child Focus to raise awareness of children on a secure use of our technologies.

Reducing the digital divide in Belgium

73% of Belgian households now have access to the Internet, a 20% increase vs 2006 (fi gures from Eurostat). We wish to enable as many people as possible to benefi t from modern technologies.

We provided 174,256 hours of ICT training to 7,424 persons, granted 766 free PCs to 203 schools and associations, and sold 10,000 Start2Surf packages with their low-cost Internet offer.

We nearly doubled our sales of devices for the elderly. These devices are simple and user-friendly, provide basic services, with a bright and easy-to-read screen, large keys, and a powerful loudspeaker.

Helping ill children who are off school

For children with chronic disease or a long illness, Bednet (www.bednet.be) and Take Off (www.asbl-takeoff-vzw.be) create a virtual network allowing them to stay in contact with their teacher and classmates. Belgacom donates the Internet connectivity between classrooms and homes or hospitals, in addition to fi nancial support. In 2010, some 263 children benefi ted from these solutions (43% increase vs last year).

Fair competition

We are in favour of fair competition, on quality of service and price, in the interest of our customers.

More information is available in the "CEO interview" and "Regulatory" sections of our activities report

Promoting a responsible use of our technologies

We published advice for a responsible use of our products on our websites.

Customer satisfaction

-12% complaints compared to 2009

+12% hours of ICT training

We will ...

• Increase our customer satisfaction, via improved service and simplicity
• Launch at least two new initiatives to bridge the digital divide in 2011
• Provide a minimum of 170,000 hours of ICT training per year
• Improve the accessibility of our web sites for people with disabilities
• Develop responsible marketing and communication guidelines
• Take at least two new initiatives to encourage a responsible use of our products in 2011

Th ink before you post /// We supported Child Focus in distributing a teaching pack on "safe Internet use" in Belgian secondary schools.

Connecting the elderly /// Tango promoted the Maxcom mobile, a device designed for seniors, with a large screen, easy keyboard and an SOS function with 5 pre-registered numbers.

Enabling a low-carbon society

Key priorities

• Reduce our CO² emissions by 70% (2007-2020)
• Help our customers lower their environmental impact
• Involve and raise awareness of stakeholders on climate change

Our key targets for energy/CO2 reduction

	Target	Deadline	Status
Reduce our CO2 emissions (vs 2007)	70%	2020	On track (56%)
Certifi ed renewable electricity	100%	2009	Done (100%)
Mobile network	+ 20% energy effi ciency + 25% energy effi ciency	2012 2020	On track (5%) On track
Datacenters	Average PUE of 1.75 + 25% energy effi ciency	2012 2020	On track (PUE=1.88) On track
Fixed network	+ 25% energy effi ciency	2020	On track
Transport	Reach an average of 120 gr/ km for CO2 emissions in new company-car orders	2012	On track (132g CO2/km)
	Launch a major eco-driving training program	2010	Done
	Encourage the use of low carbon transport	2020	On track
Offi ce buildings	Monitor and improve the energy effi ciency of our buildings	2020	On track

What our stakeholders expect from us /// We invited our stakeholders and listened to their opinions about our climate change strategy and progress. Th e main messages that have been included in our plans for 2011 were:

• Th ey recognize and value our climate strategy and our related reduction targets on CO² and energy
• Th ey expect us to promote our green ICT solutions and to inform and help our customers to lower their costs and energy/CO² • Th ey expect us to further involve our employees

We reduced our CO2 emissions by 3% vs. 2009, reaching 56% compared to our 2007 baseline. This is driven by our shift to renewable electricity since 2008 and our continuous efforts to optimize our energy consumption.

Reducing our energy consumption

In 2010 we cut electricity consumption by 11.7GWh – equivalent to EUR 1.17 million in annual savings – in our data centers, fixed and mobile network. We managed to reduce our electricity consumption by 3%, despite increased traffic on our networks.

We started to replace our mobile network infrastructure with more energy-efficient technology. This already resulted in more than 5GWh annual savings. Once replacement will cover all the remaining sites next year, we will reach a total of 20% energy efficiency savings by 2012 and 25% by 2020.

We improved the energy efficiency of our data centers, by implementing closed cold corridors, free chilling, and heat exchangers in order to heat the building with the heat produced by the IT equipment in the data rooms. These investments allowed us to sign up to the EU code of conduct for energy efficiency in data centers (the first company in Belgium to sign). In 2010 we reduced our average PUE (1.88) by 4% vs 2009 (1.96).

Compared to last year, we raised our heating needs especially in technical buildings by 7% due to the colder winter. We also reduced the energy consumed in our offices by 4% and our total transport consumption by 6%.

For the first time we also measured the CO2 emissions of our international operations resulting in an extra 8KTon CO2 (includes electricity, heating and fleet fuel).

Greening our Fleet

We introduced a limit of 170g of CO2 emissions per km on new company cars and promoted greener vehicles, resulting in a strong decrease of the average CO2 emissions of our new company cars (132g CO2/km). 631 employees received an eco driving training. Under the umbrella of the new "mobility budget" concept (with voluntary personal limits on fuel or parking) about 500 employees started to combine their company car and public transport for commuting. The total energy consumption of our fleet fell by 3% compared to 2009. As a result, we won the "Fleet owner of the year" award, the Bronze "Green Fleet" award and signed the Gold Fleet label.

Helping customers manage their own environmental footprint

Our products and services contribute to ways of living and working that are more efficient in terms of CO2 emissions and energy consumption. In 2010 we took some important steps in this direction but we realize that more can – and has to – be done the coming years.

We are seeing growing interest and demand from our business customers and therefore improved the communication on our energy efficient IT solutions, such as flexible working, smart metering, or data center services.

Discover our green IT solutions on www.belgacom.be/greenict

By signing the EU Code of Conduct on energy efficiency for digital TV services and broadband equipment, we commit to continuously reduce the energy consumption of our customer equipment. And because the environment is also impacted by waste, we worked on recycling and packaging, including a GSM recycling campaign which managed to collect 48% more mobile phones than last year. We also stopped repacking 30% of our mobile devices with Belgacom packaging.

-56% CO2 vs. 2007

CO2 emissions (thousand tons)

-2.5% energy vs. 2009

Energy consumption (terajoules)

-6% waste vs. 2009

We will ...

• Lower our CO² emissions by 70% and improve the energy efficiency of our networks and datacenters by 25% over the period 2007-2020
• Launch at least two new initiatives to help our customers become more energy-efficient
• Increase collection and recycling of old mobile devices

Telindus Luxembourg /// Received Cisco's Green Partner of the Year Award for the BeLux market.

Telindus Netherlands /// Launched a voluntary homework policy for approximately 40% of their workforce.

Grand recyclage de printemps Rapportez tous vos anciens GSM ! Cumulez

un arbre vos réductions !

GSM recycling /// We planted a tree in Niger for each old mobile phone we collected during our Spring recycling campaign, resulting in a forest of 15,000 trees.

Communicating on electromagnetic fi elds and health

Key priorities

• Transparent communication on exposure levels
• Network and devices compliance
• Monitoring scientifi c Research

67%

of the Belgian respondents are satisfi ed with the quality of the information on EMF according to a recent public opinion survey (EU Eurobarometer). Th e EU average is 58%. Th is puts Belgium in fourth place in the EU.

We distribute the brochure published by the Federal Health Authorities in our shops.

We will ...

• Launch the EMF e-learning tool and take at least another initiative to inform our customers
• Launch the retrofi t of the mobile network in the Brussels and Flemish regions as legally required

While the rapid growth of wireless technologies has brought personal, social and commercial advantages, some anxieties still remain about the potential effect on health of electromagnetic fi elds (EMF). We have taken on board these concerns by closely following scientifi c research in this domain, applying a responsible network deployment, and by informing our stakeholders in a transparent way.

Informing our customers on electromagnetic fi elds

We increased communication towards our customers, including by distributing in our points of sale the brochure "Téléphones mobiles et santé"/ "Mobiele telefoon en gezondheid" published by the Belgian Federal Health Authorities.

On our corporate and commercial websites, we published tips and tricks on how to reduce exposure to electromagnetic fi elds:

• Keep the phone away from your body by using a handsfree device or by texting or by accessing the Internet.
• Use the phone in areas with good reception
• Limit the call duration
• Choose a mobile device with a weak SAR (Specifi c Absorption Rate) value.

Based on this advice, Belgacom is committed to communicating on SAR levels of all its devices and to providing a handsfree kit with each mobile phone sold.

What our stakeholders expect from us /// We invited our stakeholders and listened to their opinions on our actions in network deployment and in communication on exposure levels to electromagnetic sources. Th e panel confi rmed that: • It is not the role of Belgacom to take a position on science

• Belgacom was taking the appropriate actions by relaying the information coming from the health authorities.

Key priorities

• Social Dialog
• Diversity and non discrimination
• Safety and health
• Career management and training

Promoting a positive working culture

We aim to promote a fair, diverse and safe work environment and culture. The success of the Belgacom Group is founded on competencies, involvement, and on the adaptability of the staff to all changes we are confronted with. We believe in the professional development of our employees, we work towards equal opportunities and we promote work life balance through many initiatives. Through all our policies and initiatives, we respect the Belgian law on human rights and we define all priorities through a continuous social dialog.

Preserved the safety and health of our employees

Work-related stress is an issue of growing concern in developing countries as a consequence of the strains of the modern world. At Belgacom we want to raise awareness at an early stage, and we have developed a global policy to prevent psychosocial problems at work. We also launched a stress self-assessment tool for all Group employees, and we offer social assistance to employees via the Social Unit (SUN). The Social Consultants give personalized guidance in a changing environment, counsel, mediate or refer the employee to a specialist in case of stress, conflicts, alcohol abuse or aggression. Our work related accident rate decreased from 9.6 in 2009 to 8.8 this year for all

Belgian affiliates. A positive result, due to high awareness in health and safety matters.

Improved employee satisfaction

The results of the employee survey (ELIx) show some good progress. While employee satisfaction is at 88%, both commitment to the job as commitment to the company increased with respectively 1 and 3 points. 87% of employees are satisfied or very satisfied with our CSR policy.

Employee volunteering

In collaboration with asbl Toolbox, we offered some employees the opportunity to coach non-profit organizations on specific issues related to their competencies. It enables our employees to develop their skills in a new environment, while non-profit organizations benefit from free consulting.

87%

of employees are satisfied or very satisfied with our CSR policy

85% of our employees followed at least one training

We will ...

• Ensure each business unit has its own skills plan by 2012
• Stimulate career management also for mid- and late-career employees (2011-2014)
• Improve employee satisfaction each year and by 5 percent in 2015 vs 2010

Telindus UK /// Obtained Investors in People Silver Award, a recognition for its leading social practices.

Telindus France /// Launched "Mission Handicap", an ambitious program aiming to integrate and encourage the employability of disabled professionals.

More information is available in the chapter "Our People" of our activities report on p. 46

Developing a responsible supply chain

Key priorities

• Raise CSR standards of our suppliers
• Include CSR as sourcing and selection criteria

Our approach is to raise social and environmental standards throughout our supply chain by working with our direct suppliers to improve their CSR performance and their own supply chain management, while improving our own efficiency. Embedding our CSR standards in our procurement practices helps us to protect our reputation and makes a real difference to the communities where our suppliers operate.

Assessed the CSR performance of our strategic suppliers, representing

36% of our procurement spend

We will ...

• Extend CSR risk assessment for all suppliers with a spend above EUR 125,000
• Evaluate the CSR performance of detected medium and high-risk suppliers and follow up with 10 more high-risk suppliers
• Integrate additional sustainability criteria in the sourcing plans and in our request for proposals for at least 5 categories (of a total of 199 categories)
• Continue to include CSR topics in strategic review meetings with key suppliers

Our Group procurement policy includes our Corporate Social Responsibility approach and our Code of Ethical Purchasing, which sets out our expectations towards suppliers and is a mandatory component of our procurement contracts.

More info: www.belgacom-suppliers.be

However transforming a supply chain into a full CSR compliant end-to-end organization is a challenging journey. There is still some work to do to make all our contracts CSR compliant.

Evaluating and improving the CSR performance of our suppliers

We evaluated the CSR performance by inviting all our strategic suppliers to participate in a survey. The suppliers who answered represented 36% of the total spend of Belgacom over 2010, above our target of 30%. Our evaluation process is based on the GeSI industry standard and tools (E-Tasc) helping to avoid redundancy for our suppliers and other buyer companies.

Two suppliers had an insufficient CSR performance in 2009. Within a period of 6 months, we followed up these suppliers in order to raise their standards. A third supplier has been voluntarily selected for follow up.

CSR as selection criteria

In 2010, we defined a process to include a 5% weighting of CSR criteria in our projects and sourcing. Our decision to embed CSR criteria has been materialized into instructions, tools and trainings towards our buyers.

Greening our logistics

In our logistics department, we confirmed our CSR engagement by signing a long term agreement for a new green warehouse also hosting sheltered workplaces for the execution of some key logistics activities. A CSR training was given to our logistics managers.

Raising CSR standards throughout our supply chain /// In our specific business sector – business gifts and gadgets – it is challenging to find the right balance between social, environmental and economic interests. In collaboration with Belgacom, we have deliberately chosen to integrate sustainability in our operations. This exercise requires efforts across our whole supply chain, impacting also our own suppliers. Stephane Smidt, Managing Director Smidt-Imex

A 100 m wheelers race dedicated to young Belgian athletes was organized during the Belgacom Youth Memorial Van Damme in collaboration with To Walk Again.

Key priorities

• Donate money and time to good causes
• Responsible sponsoring

© Guy STEEN / ASBL MEMORIAL VAN DAMME

Supporting our communities

We contribute to improving the quality of life of the communities we are part of – through our CSR responsibilities such as widening access to telecommunications to disadvantaged people, respecting children's rights, promoting social links between communities and people, and by involving our own staff in their local communities.

Helping the homeless

We supported the "plan froid" helping homeless people during winter. We made available a 0800 free number for homeless people to call the Samu Social, the Brussels social emergency service. We supported their fundraising by offering them media space for their TV spot. We also mobilized our employees by organizing a blanket collection and by proposing that they can offer the amount of their end year gift for meals for homeless people. More than 4,800 employees have participated in this action, resulting in 24,000 meals and 250 blankets for homeless people!

Supporting fundraising actions dedicated to victims of major natural disasters

In cooperation with the other Belgian operators, we made available a short number for SMS donations in favour of victims of the earthquake in Haiti and of the flood in Pakistan. More than EUR 450,000 were collected.

Supporting youngsters and sports via Belgacom Dreambox

Embedding CSR in our sponsoring approach is key for us. This year, we developed the Dreambox initiative aiming at supporting youngsters involved in tennis, football and basketball teams. Dreambox sponsors their shirts and gives them the possibility to develop a website for free. This concept has been extended to the G-football competition, which focuses on boys and girls with a mild intellectual or motor disability. So far, over 300 teams received a shirt sponsoring.

Donated EUR 1.7 million

as well as time and equipment to 101 social projects

We will ...

• Launch the new Belgacom Foundation
• Support at least 100 social projects
• Offer access to sport or cultural events to disadvantaged youngsters in collaboration with our sponsoring department

Telindus Spain's action for Caritas /// Telindus Spain supported Caritas International by organizing a fund raising among employees. For each euro collected, Telindus donated 5 EUR more in order to fund community kitchens.

Helping the homeless /// 24,000 meals donated to homeless people by our employees.

Key Figures

		2008	2009	2010	2010
		Belgian operations	Belgian operations	Belgian operations	Global operations
General Information	Total revenue (Mio EUR)	5,9781	5,9901	6,6031	6,603
	Net income (Mio EUR)	8001	9041	1,2661	1,266
	Total number of employees (Full Time Equivalent) √	17,3711	16,8041	16,3081	16,308
Enhancing access to	Mobile network coverage – 2G	99.98%	99.98%	99.98%	99.94%
communications	Mobile network coverage – 3G	90.20%	96.70%	97.11%	97.02%
	Number of Base stations Mobile network	4,097	4,243	4,313	4,580
	Mobile network: Landlord relationships index2	90.14	84.20	/	/
	Mobile network: Landlord satisfaction rate2	/	/	93.50%	/
	Fast Internet coverage	99.70%	99.70%	99.70%	/
	Digital TV coverage	86.60%	87.20%	89.00%	/
	Hours of ICT training provided via our partners	/	158,181	174,256	/
	% increase in sales of devices for elderly/disabled (vs previous year)	/	17%	92%	95%
	Evolution number of customer complaints vs previous year	/	/	-12%	/
Enabling a low-carbon	Electricity (Terajoules)	1,667	1,670	1,620	1,662
society	% renewable electricity	76%	100%	100%	97%
	Heating gas (Terajoules)	170	151	156	157
	Heating fuel (Terajoules)	101	97	110	110
	Vehicle (fleet) fuel (Terajoules)	517	502	490	554
	Yearly electricity savings (Terajoules)	n/a	52	41	/
	CO2 emissions (KTons)5 √	108	81	79	87
	CO2 emissions scope 1 – heating and fleet fuel (KTons) √	56	53	53	58
	CO2 emissions scope 2 – electricity (KTons) √	23	0	0	4
	CO2 emissions scope 3 (KTons)3 √	29	28	25	25
	Waste (Tons)	13,709	10,251	9,635	/
	% waste reused/recycled	71%	66%	70%	/
	Mobile phones collected in our shops for reuse and recycling √	26,742	25,877	38,233	/
	Water ('000L)	/	223,874	167,875	/
		/	100%	100%	100%
	Communicating on health & EMF % of wireless devices with labeling of exposure levels
Promoting a positive working	Employee satisfaction with Belgacom as employer6	84%1	86%1	88%1	88%
culture	% of employees having followed at least 1 training4	81%	83%	85%	/
	Average number of training hours per employee4	23	22	21	22
	% of woman in total workforce √	30%	30%	30%	29%
	% of woman in middle management √	31%	30%	29%	28%
	% of woman in senior management √	19%	21%	21%	19.5%
	% of woman in top management √	16%	17%	18%	16.4%
	Occupational accidents rate (index) √	9.7	9.6	8.8	/
	Illness rate (including long-term illness)	6.5%	6.6%	6.7%	6.2%
	Average age of employees (years)	44	44	45	44
	Average career length (years)	17.6	18.5	19.3	/
	Number of employees working part-time	3,463	4,124	4,662	4,789
	Voluntary attrition rate √	2.4%	2.0%	1.9%	2.2%
	% of workforce represented in health and safety committees	100%	100%	100%	100%
Developing a responsible	% of suppliers based in Belgium	/	87%	90%	/
supply chain	CSR supplier assessments, in % of total procurement spend	/	12.5%	36%	/
	% of buyers trained in CSR	43%	100%	100%	/
	% of e-orders	83%	88%	87%	/
Supporting our communities	Funding amount in % of pretax profit	0.3%	0.2%	0.1%	/
	# of local non-profit organizations supported	99	105	101	/

√ Ernst&Young provided a limited external assurance on these indicators (for our Belgian operations in 2010)

1. Revenues, FTE, net income and employee satisfaction are related to our global operations

2. New calculation method as from 2010, due to changes in the questionnaire submitted to our landlords

3. Scope 3 includes employee commuting, outsourced transport and business travel for our Belgian operations

4. Restatement due to change of calculation method (based on headcount, and no longer FTE. Figures exclude some small operations in Belgium)

5. Sum of CO2 emissions scope 1, 2 and 3 equals total CO2 emissions, but difference is caused by rounding

6. Restatement due to change of calculation method

Independent review of our CSR report by CSR Europe

Belgacom has invited CSR Europe's Executive Director, Stefan Crets, to conduct an independent review of the Company's 2010 CSR Report.

Significant Strengths and achievements include:

• 1. Alignment with Annual Report The preparation and publication of the CSR report in parallel with the annual report is an important step towards providing all stakeholders with a consolidated view of Belgacom's performance.
• 1. Clear priorities and reporting on progress the report presents a coherent and clear set of priorities that are material to Belgacom's operations. The focus on improved performance demonstrates the year-on-year approach that builds on previous achievements in line with the company's forward-looking performance goals.
• 1. Robust comparability of Performance Data The table of KPIs integrated throughout the report are enhanced through their use of multi-year data, which enables readers to make easy and direct comparisons in a number of important areas. It is also encouraging to see the introduction of data regarding Belgacom's global operations as a stand-alone set of metrics even if in the first year the data is somewhat incomplete.
• 1. Enhancing the work environment The report demonstrates that Belgacom has made a number of significant and interconnected steps to improve the quality of the working experience for their employees alongside a renewed focus on skills, training and volunteering.

In future reports, we encourage Belgacom to:

• 1. Further clarify the link between the business and the CSR strategy of Belgacom The evidence base and the narrative could be strengthened to show Belgacom's CSR performance as a dimension of corporate strategy and overall business development. How the different CSR objectives are in line with and serve the business strategy will demonstrate the added value of the current CSR approach more clearly. The further integration of the CSR governance within the overall management approach will be instrumental to this direction.
• 1. Clarify the mid- and long term targets This would help to understand the real contribution of the different CSR efforts, both towards the company itself as to the society in which it operates; e.g. it is not clear what the real overall impact is of the strong effort on reducing emissions through the company car policy and eco-driving.
• 1. Deepen the analysis of CSR impact Belgacom could seek to develop robust measurement tools to understand the real impact of its business activities (internally & externally) and thereby create quantitative indicators on what value is created and for whom. Combining this with the business case is what truly enables a company to achieve integrated reporting.
• 1. Comparative Performance within the industry The Report may gain extra legitimacy by showing readers how Belgacom is performing relative to national and/or regional competitors within the same sector, and/or of a similar size.

Jamal Sabraoui, High Risk Team Operator: I'm a bit like the guardian of our network. I analyse our customers' lines, check their stability, and anticipate any problems. The most important thing for our customers is that their connections work faultlessly 24 hours a day and 7 days a week.

Vincent Leroy, Belgacom ICT Agent: The boss of every SME has particular requirements, but what they all need from our product range is exibility and guaranteed service. As a Belgacom ICT Agent, my role is to understand those needs from the very rst contact, and to offer a genuinely personalised solution.

With Bizz Mobile Internet Duo Favourite, freelancers and SMEs can browse and send e-mails using their laptops and mobile 'phones using a single subscription.

Xavier Pottiez, managing director of "Xavie'Z", a specialist in top-of-the-range kitchens

I'm constantly on the road or out at meetings with my customers.

So what I need is a partner I can trust an^d someone who really understands how my business works.

Shareholder information

It is of great importance to us to ensure a consistent and transparent communication fl ow towards the Belgian and international investment world. Through a regular and open dialogue with investors and fi nancial analysts, we keep the market informed of important news fl ows and events as well as on the progress of our long-term strategy. Furthermore, we strive to provide high-quality fi nancial information. In this context, the Belgian Financial Analysts' Association awarded Belgacom, in October 2010, the special nomination for the best fi nancial press releases.

Stock market:	First Market of Euronext Brussels
Ticker:	BELG
ISIN:	BE0003810273
National SVM code:	3810.27
Bloomberg code:	BELG BB
Thomson code:	BELG-BT
Reuters code:	BCOM

"Belgacom has had a fairly consistent and attractive shareholder return policy. Last year we decided to make the policy more clear for our shareholders. Our stated commitment is to return most of the annual free cash fl ow to shareholders. This will be accomplished by dividends and share buybacks. For the results of 2010 we paid a total dividend of EUR 2.18 per share. And the company announced a share buyback program for a maximum amount of EUR 200 million which will be completed during 2011 – 2012."

Belgacom wants to maintain an active contact with the investor and analyst community. Four times a year, on the day of the quarterly results announcement, we hold an analyst conference call accessible to the fi nancial community. Twice a year, following the full-year and half-year results, we organize a road show with top management covering the main money centers of Europe and the United States. In addition, Belgacom participates in several major international investment conferences. In between these events, meetings and conference calls with senior management are organized. In all these activities, the management is supported by the Investor Relations team (IR).

Potential new investors who are less familiar with the Belgacom story can meet the Investor Relations team on one of the IR-only road shows that are organized throughout the year and that focus on introducing the company and its strategy.

Moreover, retail and institutional shareholders as well as the analysts can count on the Investor Relations team on a daily basis. The IR team answers questions and explains the short- and long-term strategy of the Group, with the appropriate approach for equal treatment of all shareholders and analysts. Belgacom Investor Relations adopts a quiet period four weeks before the quarterly results announcements and six weeks before the annual results.

Share ownership Ownership on 31 December 2010

The Belgian government remains the main shareholder, owning 53.5% of the shares. The free-fl oat represents 41.6% with main shareholders located in the United States, the United Kingdom, Bene lux, France and Germany.

Belgacom ownership	Shares	% Total shares	% Voting rights	% Dividend rights
Belgian State	180,887,569	53.5%	56.3%	55.8%
Belgacom own shares	16,542,494	4.9%	0.0%	0.9%
Free-fl oat	140,595,072	41.6%	43.7%	43.3%
TOTAL	338,025,135	100.0%	100.0%	100.0%

End 2010, Belgacom held 16,542,494 treasury shares, representing 4.9% of the total number of shares. In the course of 2010, 294,304 treasury shares were used in a Discount Share Purchase Plan for Belgacom management and 573,654 options were exercised.

Treasury shares evolution
Status 31 December 2009	17,410,452
Options exercised during 2010	-573,654
Discount Purchase Plan employees	-294,304
Acquisition of treasury shares	0
Cancellation	0
Status 31 December 2010	16,542,494

The voting rights of the treasury shares are suspended by law. The dividend rights of the treasury shares acquired in 2004 are also suspended, whereas the dividend rights for shares acquired as from 2005 are cancelled. Under Belgian law, companies are prohibited from owning more than 20% of their outstanding share capital.

Transparency declarations

According to Belgacom's bylaws, the thresholds as from which a shareholding needs to be disclosed have been set at 3% and 7.5%, in addition to the legal thresholds of 5% and each multiple of 5%.

On 6 April 2010, Capital Research and Management Company notified that its shareholding in Belgacom S.A. went above the 3% threshold. With 11,062,800 Belgacom shares in its possession on 1 April 2010, Capital Research and Management Company had a participation of 3.27% of the shares with voting rights emitted by Belgacom S.A.

Notifications of important shareholdings to be made according to the Law of 2 May 2007 or Belgacom's bylaws should be sent to:

• CBFA (e-mail trp.fin@cbfa.be, to be confirmed by fax on number +32 2 220 59 12)
• Belgacom (e-mail investor.relations@ belgacom.be, to be confirmed by fax on number +32 2 201 54 94)

The Belgacom share in 2010

Belgacom closed the year 2010 with a share price of EUR 25.13 and a market capitalization of about EUR 8 billion. Our share reached its year-high closing price of EUR 29.11 on 20 September 2010 and its lowest level on 7 May 2010 with a closing price of EUR 24.31.

Belgacom shareholding

Nancy Goossens, Vice President Investor Relations /// "The investor relations team strives for the best possible communication towards the financial community, with focus on clarity, reliability and transparency. We view our website as a primary source of information on which we publish our quarterly detailed reports, our company presentation, analyst consensus, the financial calendar and much more."

Gross dividend yield, based on the 2010 annual gross dividend of EUR 2.18 per share and the last 2010 closing price of the Belgacom share.

	2006	2007	2008	2009	2010
Share information
Share price high	33.80	35.82	33.31	28.65	29.11
Share price low	24.60	27.82	24.58	21.67	24.31
Share price at 31 December	33.37	33.74	27.33	25.32	25.13
Annual trading volume (number of shares)			241,516,832 291,898,716 281,419,643 181,364,309 138,569,376
Average trading volume per day (number of shares)	947,125	1,144,701	1,099,295	708,454	532,959
Number of outstanding shares			333,961,478 332,071,776 320,334,261 320,614,683 321,482,641
Weighted average number of outstanding shares			338,621,113 334,017,553 326,179,820 320,475,553 321,138,048

Market	11.14	11.20	8.75	8.12	8.08
Price/earnings at 31 December2	11.62	11.76	11.15	8.98	6.37
Gross dividend yield2	5.7%	6.5%	8.0%	8.2%	8.7%
Interim-dividend (gross)	0.29	0.50	0.50	0.40	0.50
Ordinary dividend (gross)	1.60	1.68	1.68	1.68	1.68
Net income (Group Share)1	2.87	2.87	2.45	2.82	3.94
EBITDA before non-recurring1	6.35	6.22	6.10	6.10	6.18
Key data per share

capitalization at 31 December

(billion EUR)3

1. Based on weighted average number of outstanding shares

2. Based on share price 31 December 2010

3. Calculation based on number of outstanding shares & share price 31 December 2010

Belgacom share compared to BEL20 and Euro STOXX

The BEL20 and the DJ stoxx Telecommunication index have been rebased to the Belgacom share price on 4 January 2010 (in EUR).

Belgacom share price evolution (in 2010)

Shareholder remuneration Shareholder return policy

Belgacom commits to an attractive shareholder remuneration policy by returning, in principle, most of its annual free cash flow1 to its shareholders.

The return of free cash flow either through dividends or share buybacks will be reviewed on an annual basis, in order to keep strategic financial flexibility for future growth, organically or via selective M&A, with a clear focus on value creation. This also includes confirming appropriate levels of distributable reserves.

The shareholder remuneration policy is based on a number of assumptions regarding future business and market evolutions, and may be subject to change in case of unforeseen risks or events outside the company's control.

Shareholder return from the financial year 2010

Following the above-mentioned commitment, the Board of Directors approved in October 2010 the payment of an interim dividend of EUR 0.50 gross per share (net amount of EUR 0.375 per share), corresponding to a total amount of EUR 161 million. The dividend was paid on 10 December 2010.

On 24 February 2010, the Board of Directors decided to propose in addition an ordinary dividend of EUR 1.68 per share

to the Annual Shareholder Meeting of 13 April 2011. After approval, the normal dividend will be paid on 29 April 2011, with record date on 28 April 2011 and ex-dividend date on 26 April 2011.

This brings the 2010 total dividend to EUR 701 million, including the interim dividend. In addition, the Board of Directors approved a share buyback for a maximum amount of EUR 200 million, to be carried out during 2011 - 2012, and this within the limits as approved by the General Assembly of 8 April 2009. Therefore, the share price cannot be more than 5% above the highest and 10% below the lowest closing price in the thirty-day trading period preceding the transaction.

EUR 2.18 gross dividend 2010

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

Financial calendar 13 April 2011	Annual General Shareholder Meeting
26 April 2011	Ex-dividend listing of shares
29 April 2011	Payment of ordinary dividend
6 May 2011	Announcement of first quarter results 2011
29 July 2011	Announcement of half year results 2011
28 October 2011	Announcement of third quarter results 2011

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Corporate governance statement

Corporate governance aims to define a set of rules and behaviors according to which companies are properly managed and controlled, with the objective of increasing transparency. It is a system of checks and balances between the shareholders, the Board of Directors and management. Belgacom is committed to complying with the legal, regulatory, and best practices.

Belgacom governance model

At Belgacom, the Articles of Association are strongly influenced by the specific legal status of the company. As a limited liability company under public law, Belgacom is in the first instance governed by the Law of 21 March 1991 on autonomous public sector enterprises ("the 1991 Law"). For matters not explicitly regulated otherwise by the 1991 Law, Belgacom is governed by Belgian corporate law. The key features of Belgacom's governance model are:

• A Board of Directors, which defines Belgacom's general policy and strategy 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 President & Chief Executive Officer, who takes primary responsibility and ownership for operational management (including, but not limited to, day-today management);
• A Management Committee, which assists the President & Chief Executive Officer in the exercise of his duties.

Designation applicable Code on Corporate Governance

Belgacom designates the 2009 Belgian Code on Corporate Governance as the applicable Code.

Board of Directors

As provided for in the 1991 Law, the Board of Directors is composed of:

• Directors appointed by the Belgian State in proportion to its shareholding
• Directors appointed by a separate vote among the other shareholders, for the remaining seats. At least 3 of these Directors must be independent according to the criteria of article 526ter of the Belgian Code of Companies and the criteria of the Belgian Corporate Governance Code. The Board of Directors is composed of maximum 16 members, including the person appointed as President & Chief Executive Officer. Today the Board is composed of 14 members.

Members of the Board of Directors appointed by the Belgian State

Name	Age	Position	Term
Theo Dilissen	57	Chairman	2004 - 2015 (*)
Didier Bellens	55	President & CEO	2003 - 2015
Martine Durez	60	Director	1994 - 2012
Mimi Lamote	46	Director	2006 - 2012
Michèle Sioen	45	Director	2006 - 2012
Michel Moll	63	Director	1994 - 2012
Paul Van de Perre	58	Director	1994 - 2012

* As Chairman until 2012

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

Name	Age	Position	Term
Jozef Cornu	66	Independent Director	2009 - 2015
Guido J.M. Demuynck	60	Independent Director	2007 - 2013
Pierre-Alain De Smedt	66	Independent Director	2004 - 2016
Carine Doutrelepont	50	Independent Director	2004 - 2013
Georges Jacobs	70	Independent Director	2004 - 2011
Oren G. Shaffer	68	Independent Director	2004 - 2013
Lutgart Van den Berghe	58	Independent Director	2004 - 2016

The Board of Directors meets whenever the interests of the company so require or at the request of at least two Directors. In principle, the Board of Directors meets every year in five regularly scheduled meetings. The Board of Directors must also evaluate the strategic long-term plan in an extra meeting each year.

In general, the Board's decisions are made by simple majority of the Directors present or represented, although for certain issues a qualified majority is required.

The Board of Directors has adopted a Board Charter which, together with the charters of the Board Committees, reflects the principles by which the Board of Directors and its Committees operate.

The Board Charter provides, among other things, that important decisions should have broad support, understood as a qualitative concept indicating effective decision-making within the Board of Directors following a constructive dialoge between Directors. They should be prepared by standing or ad hoc Board Committees with significant representation of non-executive, independent Directors within the meaning of Article 526ter of the Belgian Company Code. All charters were updated on 24 February 2011.

Committees of the Board of Directors

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

The Audit and Compliance Committee's role is to assist and advise the Board of Directors in its oversight of:

• The financial reporting process;
• The efficiency of the systems for internal control and risk management of the company;
• The Company's internal audit function and its efficiency;

• The quality, integrity and legal control of the statutory and the consolidated annual accounts and the financial statements of the Company, including the follow-up of questions and recommendations made by the auditors;

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

• The Company's compliance with legal and regulatory requirements;
• Compliance within the Company with the Company's Code of Conduct and the Dealing Code.

The Audit and Compliance Committee meets at least once every quarter. Mr. Pierre-Alain De Smedt (Chairman), Messrs. Michel Moll, Oren G. Shaffer and Paul Van de Perre are the members of the Audit and Compliance Committee. Mr. Guido J.M. Demuynck replaces as from 1 March 2011 Mr. Philip Hampton whose mandate ended at the last General Shareholders meeting.

Nomination and Remuneration Committee

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

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 members of the Management Committee on proposal of the President & CEO;
• The appointment of the Secretary General;
• The remuneration of the members of the Board of Directors and the Board Committees;
• The remuneration of the President & Chief Executive Officer and members of the Management Committee;
• The review on an annual basis of the remuneration philosophy and strategy for all personnel, and specifically the compensation packages of top senior management;
• The oversight of the decisions of the President & Chief Executive Officer with respect to the appointment, the dismissal and the compensation of management;
• The preparation of the remuneration report and the presentation of that report at the Annual General Shareholders meeting;
• Corporate governance issues.

The Nomination and Remuneration Committee meets at least four times a year. The first meeting each year reviews the 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 and strategy of the remuneration is also discussed. At the second meeting the Nomination and Remuneration Committee fixes the performance measurement targets of the President & Chief Executive Officer and the members of the Management Committee through Key Performance Indicators. In addition to these meetings, the Committee organizes a meeting on Human Resources and a meeting on Corporate Governance.

In 2010, Mr. Theo Dilissen (Chairman), Ms. Martine Durez, Mr. Georges Jacobs and Ms. Lutgart Van den Berghe were the members of the Nomination and Remuneration Committee. As from 1 March 2011, Mr. Georges Jacobs is replaced by Mr. Pierre-Alain De Smedt and Mr. Jozef Cornu has been added in order to have a majority of independent members on this committee.

Strategic and Business Development Committee

The Strategic and Business Development Committee (SBDC) consists of six Directors. In line with its charter, the President & Chief Executive Officer and the Chairman of the Board of Directors are ex-officio members, and the Committee is chaired by the Chairman of the Board of Directors. One additional member is chosen among the Directors appointed by the Belgian State. Three members must be appointed among the Directors appointed by the General Shareholders meeting.

The Strategic and Business Development Committee's role is to review envisaged acquisitions, mergers and divestments over EUR 100 million and to review large corporate restructuring programs. If appropriate, the Board of Directors can decide on establishing a special ad hoc Committee, dealing with a specific subject, and composed of members with the appropriate experience.

In 2010, Mr. Theo Dilissen (Chairman), Mr. Didier Bellens, and Messrs. Guido J.M. Demuynck and Oren G. Shaffer were the members of the Strategic and Business Development Committee. As from 1 March 2011, Mr. Oren G. Shaffer is replaced by Mr. Jozef Cornu and Ms. Carine Doutrelepont and Mr. Michel Moll came to reinforce the committee.

Members of the Board of Directors

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

President & Chief Executive Offi cer and Director of Belgacom since March 2003,

More info see p. 82 Members of the Management Committee.

Ms. Durez was the Chief Financial and Accounting Offi cer at bpost until January 2006, when she became Chairman of the Board of bpost. Ms. Durez was also Professor of Financial Management and Analysis at the University of MonsHainaut until 2000. She has also served as a member of the High Council of Corporate Auditors and the Committee of Accounting Standards 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 PhD in Applied Economics from the University of Brussels (ULB).

Michèle Sioen is CEO of the Sioen Industries group since 2005. She held various positions in the group from 1990 until 2005. Sioen Industries produces and processes technical textiles, is stock quoted and world market leader. Michèle Sioen was president of Fedustria until 2010. She is vice president of the VBO, has various directorships and is member of the Corporate Governance Commission. Michèle Sioen holds a degree in Economics and several postgraduate degrees.

Mr. Van de Perre is the cofounder of GIMV (Venture Capital Firm) and was formerly a director of Sidmar (Arcelor). He is currently director of Grontmij NV, Greenbridge Incubator (University of Ghent) and member of the Investment Committee of PMV. Mr. Van de Perre is CEO of Five Financial Solutions (corporate fi nance) and CEO of Caesar Real Estate Fund (real estate fi nance). Mr. Van de Perre holds an MBA in Economics and is a certifi ed accountant (IAB).

Formerly, Mr. Shaffer was Vice Chairman and Chief Financial Offi cer of Qwest Communications from 2002 to 2007 and President and Chief Operating Offi cer of Sorrento Networks. 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 Terex Corporation. 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.

Michèle Sioen Paul Van de Perre Oren G. Shaff er PierreAlain De Smedt

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 the Chairman of the Board of Deceuninck Plastics Group and a member of the Board of Avis Group and Alcopa (Group Moorkens). He is Vice President of FEB/VBO (Fédération des Entreprises de Belgique). He is a graduate in engineering and economics of the University

of Brussels (ULB).

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

Count Jacobs is Chairman of the Board of Directors of Delhaize Group. 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. He holds a law degree and a degree in economics from UCL, as well as a Master of Arts in Economics from the University of California, Berkeley.

Ms. Doutrelepont is a lawyer at the Brussels' Bar and member of the Bar of Paris. She is the founding partner of the Belgian law fi rm Doutrelepont & Partners, which specialises 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). 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), at the Belgian Senate and at the Belgian Competition Authority. Since 2008, she is a Member of the Royal Academy of Belgium (Technology and Society Section). She is the author of several books and publications.

Until December 2010, Mr. Demuynck was CEO of Liquavista. Before that he held various positions within Royal Philips Electronics NV from 1976 till 2002. Amongst others, he was Vice President Marketing Audio in the USA, CEO of Philips in South Korea, General Manager Line of Business Portable Audio in Hong Kong, CEO Group Audio in Hong Kong. In 2000, he became CEO Product Division Consumer Electronics in Amsterdam and member of the Group Management Committee of Philips. In 2003, Mr. Demuynck joined Royal KPN where he became member of the Board of Management and CEO of the Mobile Division (KPN Mobiel Netherlands; Base Belgium, EPlus Germany). Until July 2008, he was the CEO of Kroymans Corporation BV in the Netherlands. Mr. Demuynck is also member of the Supervisory Board of Tom Tom since June 2005. As from January 2011 he joined the Supervisory Board of Apollo Vredestein BV and the Supervisory Board of Xsens BV. He holds a degree in applied economics from the university of Antwerp (UFSIA) and a degree in marketing from the University of Ghent (R.U.G).

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

Mimi Lamote Lutgart Van den Berghe Jozef Cornu

Ms. Van den Berghe holds a PhD in economics from Gent University where she is an extraordinary professor. She is a Partner at the Vlerick Leuven Gent Management School and executive director of GUBERNA, the Belgian Directors' Institute. She lectures on Corporate Governance and serves as a nonexecutive director in a number of listed and nonlisted multinational companies such as Electrabel, CSM (The Netherlands), SHV Holding (The Netherlands).

Mr. Jozef Cornu embarked on his career at the Brown Boveri Research center (now ABB) in Switzerland in 1970. From 1973 until 1982 he held various positions in Bell Telephone Mfg Co, the Belgian subsidiary of the ITT Group. From 1982 to 1984 he was CEO of Mietec, a startup semiconductor company. From 1984 to 1987 he was General Manager of Bell Telephone Mfg Co. From 1988 to 1995 he was a member of the Management Board of Alcatel NV, before assuming the post of General Manager of Alcatel Telecom from 1995 to 1999. From 2000 to 2008 he was a member of the board of Alcatel (and later Alcatel-Lucent) and advisor to the chairman until 2004. From 2006 to 2007 he was chairman of ISTAG (Information Society Technologies Advisory Group) of the European Union. From 2007 to 2008 he was chairman of Medea+, the European Eureka program for research in Microelectronics. Mr Cornu was CEO of AgfaGevaert from December 2007 till end of April 2010 and remains a member of its board of directors. He is also a nonexecutive director at KBC. Mr Cornu holds a degree of civil engineer in electrical and mechanical engineering from the Catholic University of Leuven, as well as a Ph.D. in electronics from Carleton

University in Ottawa, Canada.

Changes in the composition of the Board of Directors

The mandate of Mr. Philip Hampton came to an end on 14 April 2010. The General Shareholders Meeting of 2010 has renewed the mandates of Ms. Lutgart Van den Berghe and of Mr. Pierre-Alain De Smedt for a period of 6 years which will end at the General Shareholders Meeting of 2016. Mr. Georges Jacobs will resign as member of the Board at the General Shareholders Meeting of 13 April 2011 for having reached the age limit of 70 years.

Directors' remuneration

The remuneration and compensation of the Directors was decided by the General Shareholders Meeting of 2004. The calculation of this compensation did not change in 2010: it foresees an annual fixed 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. All members of the Board of Directors, with the exception of the President & CEO, have the right to an attendance fee of EUR 5,000 per attended meeting of the Board of Directors.

Attendance fees of EUR 2,500 have been foreseen for each member of an advisory committee to the Board of Directors, with the exception of the President & CEO. For the Chairman these attendance fees are doubled. The members also receive EUR 2,000 per year for communication costs. For the Chairman of the Board of Directors the communication costs are also doubled.

The Directors do not receive performance-based remuneration such as bonuses or long-term share-related incentive programs, nor do they receive benefits linked to pension plans.

Evaluation of the Board

The Board performed a self-evaluation in 2010 in order to assess its size, composition, performance as well as the interaction with management. A special focus was given to the assessment of the committees. This exercise was conducted with the help of SpencerStuart as external expert. Members were invited to answer an extensive questionnaire, followed by an interview between the external expert and every individual member. Starting from the conclusions and the action plan that was agreed upon after the previous evaluation, members were asked their opinion on corporate governance at Belgacom, the functioning of the Board, the Board relationships and the functioning of the committees.

As an outcome, the Board decided at its meeting of 29 July 2010 to implement the following short term actions:

• Adding one Board meeting per year;
• Introducing a concept for regular reporting by the President & CEO in between meetings;
• Organizing a strategic off-site meeting;
• Organizing a discussion on a yearly agenda for the committees;
• Making "risk analysis" a priority for the Audit and Compliance Committee;
• Making "succession planning of management" a priority for the Nomination and Remuneration Committee;
• Making the "long term implementation of the strategy" a focus of the Strategic and Business Development Committee.

The Board also decided to have a partial renewal of the Committees and to investigate a longer term plan of recruiting new competences at the Board.

Departure from the 2009 Belgian Corporate Governance Code

Belgacom complies with the principles and provisions of the 2009 Belgian Corporate Governance Code, except provisions 4.6, 4.7 and 8.8. Although provision 4.6 stipulates that mandates of Directors should not exceed four years, the mandates of Belgacom Directors are for six years as prescribed by article 18 of the 1991 Law. Where provision 4.7 states that the Board appoints its Chairman, article 18 § 5 of the 1991 Law foresees that the Chairman is appointed by the King. Given its current shareholder structure, contrary to provision 8.8, the Articles of Association do not provide for shareholders representing 5% of the capital to submit proposals to the Annual General Meeting. Under the current Articles of Association, shareholders must represent at least one-fifth of the company's share capital to be entitled to do so. The General Shareholders Meeting of 13 April 2011 is invited to accept a modification of article 33 of the Articles of Association, allowing shareholders, that alone or together represent at least 3% of the capital, to submit proposals to the Annual General Meeting so that Belgacom will also be compliant with provision 8.8.

Transactions between the company and its Board Members and executive managers

A general policy on conflicts of interest applies within the company. It prohibits the possession of financial interests that may affect personal judgment or professional tasks to the detriment of the Belgacom Group. In accordance with article 523 of the Belgian Companies Code, the President & CEO, Mr. Didier Bellens, declared to have a conflict of interest in connection with the Employee Incentive Plans of the agenda of the Board of Directors' meeting of 25 February 2010. He is in fact a beneficiary of the Senior Management Short- & Long-term Incentive Plan 2009. He informed Belgacom's auditor of this conflict of interest and decided not to participate in the deliberation or voting on this item.

In its meeting of February 24, 2011, the Board adopted a "related party transactions policy" which governs all transactions or other contractual relationships between the company and its board members. Belgacom is a vendor for telephony, Internet and/or ICT services for many of the companies in which Board members have an executive or non-executive mandate. On the other hand Belgacom is a Partner of Guberna, the Belgian Institute for Directors (affiliated with Lutgart Van den Berghe who is Executive Director of Guberna), for which it has paid a fee of EUR 30,250 in 2010. The law firm Doutrelepont & Associates-Afschrift GEIE (affiliated with Carine Doutrelepont, who is partner in this law firm) has performed in 2010 for Belgacom SA attorneys' services, for which it has paid a fee of EUR 44,137.82 + 8% costs in 2010.

Name	Board (total 5)	ACC (total 5)	NRC (total 8)	SBDC (total 2)	Total Remuneration
Theo DILISSEN	5/5		8/8	2/2	EUR 154,000
Didier BELLENS	5/5			1/2	EUR 0
Jozef CORNU	5/5				EUR 52,000
Guido J.M. DEMUYNCK	4/5			2/2	EUR 52,000
Pierre-Alain DE SMEDT	5/5	5/5			EUR 77,000
Carine DOUTRELEPONT	5/5				EUR 52,000
Martine DUREZ	5/5		8/8		EUR 74,500
Philip HAMPTON (*)	0/1	0/1			EUR 11,375
Georges JACOBS	5/5		8/8		EUR 72,000
Mimi LAMOTE	5/5				EUR 52,000
Michel MOLL	5/5	5/5			EUR 64,500
Oren G. SHAFFER	5/5	5/5		2/2	EUR 69,500
Michèle SIOEN	4/5				EUR 47,000
Lutgart VAN den BERGHE	5/5		8/8		EUR 72,000
Paul VAN de PERRE	5/5	5/5			EUR 64,500

(*) End of mandate 14/04/2010

The Board of Directors in its meeting of December 23, 2010 decided to create an ad hoc Committee, consisting of Mr. Jozef Cornu, Ms. Carine Doutrelepont and Mr. Paul Van de Perre in order to examine together with management the company's response in the legal proceeding initiated in June 2003 by KPN Group Belgium against Belgacom (former Belgacom Mobile S.A.).

Application of the measures taken by the company in order to comply with legislation on insider trading and market manipulation (market abuse)

In order to comply with legislation on insider trading and market manipulation, Belgacom adopted a dealing code prior to the Initial Public Offering. This code aims to create awareness about possible improper conduct by employees, officers and Directors and the possible sanctions. This dealing code has been widely communicated and is available to all employees. A list of key persons is kept, and all Directors and key employees were requested to sign an affidavit that they had read, understood and agreed to comply with the dealing code. Closed periods (including prohibited periods) are defined, and any deal must be communicated to and cleared by the Head of Compliance Services before transaction (see "Compliance" section on p. 89).

Management

President & Chief Executive Officer

The President & Chief Executive Officer is appointed by the Belgian State by Royal Decree deliberated in the Council. Appointments are for a renewable sixyear term, and can be terminated only by Royal Decree deliberated after discussion in the Council of Ministers. In line with the 1991 Law and the Company's Articles of Association, the President & Chief Executive Officer is a member of the Board of Directors. The President & Chief Executive Officer and the Chairman of the Board of Directors must come from different language groups.

The President & Chief Executive Officer is entrusted with day-to-day management, and reports to the Board of Directors. In addition, in line with the 1991 Law and the company's Articles of Association, the Board of Directors may, deciding by a majority of two thirds of its members present or represented, delegate all or part of its powers to the President & Chief Executive Officer, with the exception of:

• The approval of the Management Contract with the Belgian State and changes to it;
• The establishment of the business plan and general policy of the company;
• The supervision of the President & Chief Executive Officer;

• And other powers explicitly reserved by law to the Board of Directors which include, for example, the establishment of the annual accounts for submission to the General Shareholders Meeting and the preparation of merger proposals.

The Board of Directors has delegated broad powers to the President & Chief Executive Officer.

The current President & Chief Executive Officer is Mr. Didier Bellens. Mr. Bellens' six-year fixed-term contract started as from 1 March 2003 and was renewed in March 2009 for a new six-year term that will end on 28 February 2015.

Management Committee

The members of the Management Committee are appointed and dismissed by the Board of Directors on proposal of the President & Chief Executive Officer, after consultation of the Nomination and Remuneration Committee. The powers of the Management Committee are determined by the President & Chief Executive Officer. The Management Committee's role is to assist the President & Chief Executive Officer in the exercise of his duties.

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

Members of the Belgacom Management Committee

Didier Bellens started his career at Deloitte Haskin & Sells. He held the post of fi nancial Director of the Brussels Lambert Group until 1985, before taking on the position of Deputy Manager of the Pargesa Holding, where he was responsible for the management of holdings, mergers and acquisitions. Between 1992 and 2000 he was back at the Brussels Lambert Group, as Managing Director, taking charge of the group's strategic participations in companies such as Royale Belge, the BBL and the CLT. He played an instrumental role in the merger between AXA and Royale Belge, the change in ownership of the BBL, and the merger between the CLT and the UFA. Between 2000 and 2003, he served as CEO of the RTL Group, where he focused on the group's international expansion. He concluded the merger with Pearson Television and launched the RTL Group on the stock market.

Scott Alcott is the Executive Vice President of Belgacom's Service Delivery Engine division. In that capacity, he oversees all technical infrastructure and operations for the group as well as wholesale activity. Previously Mr. Alcott has served as Belgacom's Chief Operating Offi cer Fixed Line Services, Chief Strategy Offi cer, Chief Information and Technology Offi cer, General Manager of Marketing and Product Management, EVP (a.i.) Enterprise Business Unit and CEO (a.i.) of the Telindus Group.

Executive Vice President Human Resources. Ms. De Lathauwer joined Belgacom in 2000 and previously held the positions of Top Group Resources & Talent Director and HR Director of Belgacom.

Astrid De Lathauwer is the

Didier Bellens Scott Alcott Astrid De Lathauwer

Mr. Bellens was appointed Belgacom's President and Chief Executive Offi cer for the fi rst time in March 2003. His mandate was then renewed in March 2009 for a sixyear term. Mr. Bellens is a member of the Board of Directors of BICS, Scarlet and Tango. He is also a member of the Board of Directors of AXA Belgium, VOKA (the Flemish Chamber of Commerce and Industry) and is on the steering committee of the FEB (Federation of Enterprises in Belgium). In addition, Mr. Bellens serves as independent Chairman of the Nomination and Remuneration Committee, and as independent Director of the Board of Directors of the Compagnie Immobilière de Belgique. He is also advisor to CV Capital Partners and member of the International Advisory Council of the New York Stock Exchange. He is also a member of the Board of Directors of the Erasmus Foundation, of Business & Society and of the ULB Foundation, and serves as Vice Chairman of the Solvay Business School's Consultative Council. Mr. Bellens holds a degree in management engineering from the Solvay Business School (ULB).

Mr. Alcott held various positions in marketing, product management and new business development for AT&T, AT&T Wireless, Ameritech and SBC. Mr. Alcott is a member of the Board of Directors of BICS, Scarlet, Calient Networks, AmCham

Belgium, and the International School of Brussels. Mr. Alcott holds a B.S. in Economics from the Wharton School at the University of Pennsylvania.

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.

Grégoire Dallemagne joined Belgacom in 2008 as Executive Vice President Strategy. Mr. Dallemagne started his career at Arthur Andersen in the audit division and then as consultant in the telecommunications team. Later, after a traineeship with Microsoft (USA) while completing his MBA, he embarked on his career in the Tele2 group in 2000. From assistant to the CEO of Tele2 AB, he became group fi nancial controller and rapidly fi nance manager of Tele2 Luxembourg, before launching the Tele2 activities in Belgium from scratch in 2003. In 2005, he led

Michel Georgis is since June 2007 the Executive Vice President of the Consumer Business Unit Belgacom. He is also the Chairman of Skynet and Tango Luxembourg Boards and member of the Committee for Development of Belgian Sports (Belgian Olympic Committee). As of May 2005 and until the integration in January 2010, Michel Georgis was the CEO of Proximus (Belgacom Mobile). Prior to this position he

Ray Stewart is Executive Vice President Finance & CFO. Prior to Belgacom, from 1994 until 1997 he was the Chief Financial Offi cer for Matav, the incumbent Telephone Company in Hungary. From 1991 to 1994 he was the Chief Financial Offi cer for Ameritech International which was the Inter-

Bart Van Den Meersche is the Executive Vice President of Belgacom's Enterprise Business Unit. Mr. Van Den Meersche recently joined Belgacom, after 28 years of experience in the ICT Sector through a professional career with IBM, of which 16 years in different Management positions, including 8 years as Country General Manager of IBM Belgium/ Luxembourg. In his last year at IBM, he was Vice President Indus

Grégoire Dallemagne Michel Georgis Ray Stewart Bart Van Den Meersche

the acquisition of Versatel Belgium and took the position of Managing Director of Tele2 and Versatel Belgium. In 2007, KPN acquired Tele2 and Versatel Belgium and Mr. Dallemagne became member of the Executive Committee of KPN International. Mr. Dallemagne holds a commercial engineer degree from the Louvain School of Management, a CEMS Master from the Community of European Management Schools and an MBA from the University of Chicago Graduate School of Business. He is also member of the Board of UWE (the Walloon Chamber of Commerce and Industry) and Tango Luxembourg.

was as of January 2004 the Chief Operations Offi cer at Proximus. He

joined Proximus in January 2000 as Executive Vice President Sales, Marketing & Customer Operations. Michel Georgis started his career in 1977 at CocaCola Belgium. In 1991 he joined Interbrew, where he fi lled different positions before becoming Sales & Marketing Director Central & Eastern Europe. Michel Georgis holds a Master's degree in Applied Economics from the University of Leuven.

national 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. Ray Stewart is also member of the Board of Directors of Nyrstar since September 2007.

tries & Business Development IBM SouthWest Europe and a member of the IBM SouthWest Europe Executive Management Team. Bart Van Den Meersche holds a degree in Mathematics from the University of Leuven. Mr. Van Den Meersche was during 6 years President of Agoria ICT and also member of the Board of Agoria, VOKA and VBO/FEB.

In 2010, the Belgacom Management Committee was composed of the following members, in addition to the President & Chief Executive Officer (see table below).

Age	Position
45	Executive Vice President Service Delivery Engine and Wholesale
38	Executive Vice President Strategy
47	Executive Vice President Human Resources
58	Executive Vice President Consumer Business Unit
62	Executive Vice President Finance
53	Executive Vice President Enterprise Business Unit & Chief Executive Officer of Telindus Group N.V.

Remuneration report

The new corporate governance law of April 6, 2010 imposes listed companies to publish a remuneration report and describes the elements that should be included in the annual report. The Corporate Governance Committee has drawn up an update of the implementation guidelines replacing the 2009 guideline based on the Principle 7 of the Corporate Governance Code 2009. In advance of the legal obligation, Belgacom group has decided to substantially comply with the new guidelines – which entail greater transparency over executive remuneration – in its 2010 annual report.

Remuneration Policy

Belgacom has an advanced and innovative remuneration policy which is regularly assessed and updated through close cooperation with external Human Resources fora and universities.

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

Because of Belgacom's history as a public-service company, there are some differences in its dynamics and structure, compared to the private sector. This has a major influence on how its remuneration policy has evolved. Belgacom Human Resources developed creative and adaptable programs to deal with its obligations related to the statutory employment status of some of its workforce, and introduced new elements that harmonised policies between civil servants and contractual employees. Some powerful private sector instruments were introduced, such as performance differentiation, job classification, employee engagement and variable pay. These were superimposed on the traditional payment rules linked to statutory employment.

Belgacom also maintains – and modernises – powerful public sector instruments, such as work-life benefits and social assistance. It is the responsibility of the Belgacom work-life department to combine the needs and responsibilities of employees and their families with those of the company and society as a whole. Over the years it has won several awards, including the "Family Friendly Firms" prize, awarded by the "Ligue des Familles", in 2007. This recognized the efforts of Belgacom to create a balanced working environment for its staff. The public-sector component is also an important tool in branding in employment terms. The objective of Belgacom is to treat all employees equally and to create a working environment in which any differences are acceptable to employees.

The remuneration policies of Belgacom employees are determined in a process of full dialoge with the board of directors and the social partners.

Executive Remuneration Policy

Belgacom has developed an executive remuneration policy which rewards executives competitively and at rates which are attractive in the market, aligning the interests of management and of shareholders. The company wants to attract, retain and provide incentives for top executives, for its Management Committee and for its senior management. Belgacom wants its top executives to be clear role models, with a commitment to high performance and the company values.

The top executives are covered by dedicated reward programs which focus on the principles of Belgacom strategy to consistently reward high performance by individuals and by the company. To distinguish itself from other employers, Belgacom seeks to excel in the total package it offers, by providing not only cash but also numerous benefits. A fundamental principle of its remuneration policy is a degree of freedom for executives in choosing how they are to be rewarded.

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

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

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

The remuneration policy does not contain claw back stipulations concerning the variable remuneration of executive managers in favour of the company except for the various legal clauses applicable (law of July 7, 1978, April 12, 1965 and February 10, 2003 concerning the claw back possibilities for employees in case of fraud, serious fault and usual minor fault, civil liability, etc.).

The relationship between the distinct remuneration components of the Belgacom Management Committee members and the President & CEO is illustrated in figure 1.

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

Figure 2: Information about the "Care and Ease indicator"

4%

45%

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

Overview of executive remuneration

Remuneration earned by the CEO and the members of the Management Committee for the reported year

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

Annual variable pay is calculated in relation to performance against Key Performance Indicators set by the Board of Directors upon advice of the Nomination & Remuneration Committee.

For 2010, these performance indicators included financial indicators as well as non-financial indicators, at both Group and Business Unit level. The achievement of these KPI's are followed-up and communicated regularly. The results are based on audited financial figures and non-financial indicators measured by internal and external agencies specialised in market and customer intelligence of which the processes are audited on a regular basis.

The most important key financial indicator used is the operational cash flow. Important non-financial indicators included are the "care and ease" indicator and the "employee loyalty index". The "care and ease" indicator supports the ambition of Belgacom to offer superior service to each customer (care) and to re-introduce a culture of superior process quality (ease). The "care indicator" measures the end-to-end satisfaction of our customers. The "ease indicator" measures operational excellence in our customer interactions: the "First Time Right" principle. Measurements are made regularly of all interactions and channels with customers.

Another operational indicator is the "employee loyalty index", which each year measures employees' organizational commitment and job engagement, through a survey they filled in themselves. This is used as a starting point for further action.

The "Short-Term Incentives Plan" offers the executive on a regular basis a choice between several pay formulas. The current options are cash, a complementary pension fund, and a "Share Purchase Plan" – or a combination.

The Belgacom Group variable pay system reflects the group values, emphasizes the strengths of the Business Units, and creates incentive for individual performance.

The year-on-year evolution of the figures is the consequence of mainly:

• The full year impact of the new contract granting a new six-year mandate to the President & CEO as from March 2009;
• The full year impact of BMC members Grégoire Dallemagne and Michel De Coster and the departure in September 2010 of Michel De Coster.
• The strongly improved performances against the Key Performance Indicators driving variable remuneration related to 2009 paid in 2010 compared to the amount of 2008 paid in 2009.

For convenience, we restated the figures of 2009 following the new disclosure guidelines.

/// 85

Table 1: Overview basic and variable remuneration CEO and other members of the Management Committee.

		President & CEO		Other members of the
				Management Committee
Remuneration	2009	2010	2009	2010
Basic Remuneration	985,721	914,708	2,647,391	2,608,943
Short term variable remuneration	481,428	736,046	1,006,460	2,226,448
Long term Share-based variable remuneration	475,972	465,006	906,246	1,116,018
Group insurance premiums	106,860	108,301	551,881	510,295
Other benefits	10,177	9,732	206,056	185,555
TOTAL (excl. employer's social contribution)	2,060,158	2,233,793	5,318,034	6,647,259
TOTAL (incl. employer's social contribution)	2,403,386	2,561,455	5,858,722	7,718,257

Contractual arrangement

of the President & CEO In March 2009 Didier Bellens started the first year of his new six-year mandate as President & CEO. He has a contract as a self-employed executive. Nevertheless he is subject to employee social security charges, in line with Article 11 § 1 of the Royal Decree of November 28, 1969.

This article states that "the application of the law on the social security system for employees is expanded/extended to those institutions of public utility and autonomous public enterprises as well as such individuals who, in their capacity of agent and against remuneration, devote their principal activity to the dayto-day management or direction of these institutions and enterprises, to the extent no statutory pension regime is applicable to these individuals".

Basic remuneration

The basic remuneration comprises the base salary earned in the position of the CEO and the members of the Management Committee for the reported year. The President & CEO, Didier Bellens, is also a non-remunerated member of the Board of Directors. During 2010, the members of the Management Committee, with the exception of the President & CEO, were granted on average an increase in line with the overall merit granted to employees within the Belgacom Group.

Short term variable remuneration The short term variable remuneration includes the actual bonus paid in the reported year 2010, for performance year 2009, through one of the options of the "Short Term Incentive Plan". The CEO and the members of the Management Committee can choose to receive the bonus in cash, or under the "Share Purchase Plan" or complementary pension plan.

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

The President & CEO chose to receive his bonus through a "Share Purchase Plan". The other members of the Management Committee have chosen different options.

Long term Share-based variable remuneration

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

On an individual basis, the Management Committee received the options mentioned in the table below. Grants for the reported year vest in equal annual instalments of one third over a three-year period following the grant date, and can be exercised within a period of seven years. To comply with the new law on corporate governance the regulation of the Long Term Incentive plan is modified as of stock options grant in 2011 (for more details, see "Future remuneration policy").

Early 2009, the Belgian government approved a law permitting the extension, under certain conditions, of certain stock options. Since Belgacom Group's "Long-Term Incentive Plan" falls within the scope of this extension, the Board of Directors of Belgacom decided to offer the opportunity of an extension of life of five years for the stock options granted between 2004 and 2008 included to all Group employees holding such stock options within the conditions of this law. As a consequence, the life of stock options held by the President & CEO and the members of the Management Committee has been extended within the limitations of the law.

Table 2: Overview of stock option plan: President & CEO and other members of the Management Committee.

		Didier BELLENS	Scott ALCOTT	Grégoire DALLEMAGNE	Michel DE COSTER	Astrid DE LATHAUWER	Michel GEORGIS	Ray STEWART
Stock options remaining from previous years:		479,389	142,890	83,873	82,838	117,493	109,560	202,980
Stock options	Number	108,621	37,375	37,375	35,039	34,105	46,719	70,078
granted during reported year	Exercise price (in EUR)	26,445	26,445	26,445	26,445	26,445	26,445	26,445
Stock options	Number	162,744	34,264	9,625	6,470	12,193	12,240 7,718	30,606
exercised during reported year	Year of grant of options exercised	2004	2004	2009	2009	2004	2005 2006	2004
Stock options	Number
lapsed during reported year	Year of grant of options lapsed
	TOTAL	425,266	146,001	111,623	111,407	139,405	136,321	242,452

Extra-legal pension

The President & CEO participates in a complementary pension scheme which foresees an annual indexed contribution of EUR 75,624.83. The current members of the Management Committee have a "Defined Benefit Plan".

Other benefits

Belgacom Group wants to stimulate its executives by offering a portfolio of benefits and advantages that are competitive in the market place. The President & CEO and the other members of the Management Committee receive benefits on top of their remuneration, including medical insurance, car and other benefits in kind.

Main provisions of the contractual relationship

The President & CEO is bound by a noncompetition clause, prohibiting him for 12 months from working for a competitor of Belgacom Group in Belgium and in those countries where Belgacom Group generates at least 5% of its consolidated revenues. He will receive an amount equal to one year's salary as compensation.

The members of the Management Committee, who are bound by a non-competition clause prohibiting them for 12 months from working for any other mobile or fixed licensed operator active on the Belgian market, will receive an amount equal to six months' salary as compensation.

Didier Bellens and Ray Stewart have a contractual termination clause with an indemnity of one year's remuneration.

Scott Alcott, Grégoire Dallemagne and Michel Georgis have a contractual termination clause with an indemnity of one year's remuneration plus one month pay per year of seniority acquired, with a maximum of two years' remuneration after 12 years of service.

Astrid De Lathauwer has a contractual termination clause with an indemnity of one year's remuneration plus one month pay per year of seniority acquired.

Michel De Coster was paid an indemnity in execution of his contractual termination clause. The indemnity amounted to one year's remuneration plus one month pay per year of seniority acquired, resulting in a 14 months indemnity pay.

Bart Van Den Meersche has a contractual termination clause with an indemnity of one year's remuneration, compliant with the new corporate governance law.

Figure 4: Relative importance of the various components of remuneration 2011 (KPI's 100% at target)

Future remuneration policy

Belgacom has a balanced executive remuneration policy which rewards executives competitively and at rates which are attractive in the market, aligning the interests of management and shareholders. It is built upon fixed components (base salary + benefits & perks) and variable performance based components, being the short term incentive plan (STIP) and the long term incentive plan (LTIP).

In the frame of the application of the new corporate governance law the Board of Directors has approved the proposal of the Nomination & Remuneration Committee to manage the impact on the CEO and BMC members' remuneration policy as follows:

The Short Term Incentive plan and the Long Term Incentive plan will be rebalanced in order to obtain an equal weight between payment after 1 year and deferred payment.

The Long Term Incentive plan regulation for the CEO and the other members of the Belgacom Management Committee will be changed as from the grant received in 2011 on the following main elements:

• The vesting schedule will be updated to a vesting of 50% after at least 2 years and 50% after at least 3 years following the grant.
• As explicit vesting criterium is installed : for long term performance, the closing price of the share must be higher than the exercise price minus the total amount of gross dividends attached to the shares which can be acquired through the exercising of the options.
• A 3 year cliff exercising period will be installed.

As a result the relative importance of the various components of remuneration (KPI's 100% at target) will change as follows: (see figure 4).

Board of Auditors

The Board of Auditors of the company is composed as follows:

• Deloitte Auditors SC sfd SCRL, represented by Mr. Geert VERSTRAETEN also Chairman of the Board of Auditors
• Luc Callaert SC sfd SPRLU, represented by Luc CALLAERT;
• Romain LESAGE, Member of the Court of Auditors;
• Pierre RION, Member of the Court of Auditors.

Deloitte Auditors SC sfd SCRL, represented by Mr. G. Verstraeten and Mr. L. Van Coppenolle, are responsible for the audit of the consolidated financial statements of Belgacom and its subsidiaries.

The other members of the Board of Auditors are, together with Deloitte, entrusted with the audit of the non-consolidated financial statements of the parent company.

Mr. Lesage's mandate will expire on 30 June 2014, the mandates of Mr. Rion, Deloitte and Callaert will expire at the annual General Shareholders Meeting in 2016.

Additional fees paid to the auditors

In accordance with the provisions of Article 134 § 2 of the Belgian Companies Code, Belgacom declares the supplementary fees that it granted during the 2010 financial year to two auditors, members of the Joint Auditors: Deloitte Auditors SC sfd SCRL and Luc Callaert SC sfd SPRLU.

The Group spent during the year 2010 an amount of EUR 315,640 for nonmandate fees for Deloitte Auditors SC sfd SCRL, the Group's auditors. This amount is detailed as follows:

(in EUR)	Auditor	Network of auditor
Other mandatory audit missions	66,837	0
Tax advice	0	13,519
Other missions	145,211	90,073
Total	212,048	103,592

The Group also spent during the year 2010 an amount of EUR 1,500 for non-mandate fees paid to Luc Callaert SC sfd SPRLU. This amount is detailed as follows:

(in EUR)	Auditor
Other mandatory audit missions	1,500
Tax advice	0
Other missions	0
Total	1,500

Government Commissioner

The State has appointed Mr. Paul Vanwambeke as Government Commissioner in order to supervise, in conformity with the 1991 Law, the management of Belgacom from an administrative point of view.

Compliance

In an increasingly complex legal and regulatory context and a changing business environment as well as a difficult economic situation, compliance plays an important role in the business world. The Belgacom Group Compliance Office is responsible for coordinating compliance activities within the Belgacom Group, explaining the applicable rules, providing the required tools to encourage compliance, and ensuring a consistent approach to compliance within the Group.

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

All employees must perform their daily activities and their business objectives according to the strictest ethical standards and principles using the company values (Respect, Can do and Passion) as guiding principle.

The Code "The way we do responsible business" sets out the above-mentioned principles, and aims to inspire each employee in his or her daily behavior and attitudes. The ethical behavior is not limited to the text of the Code. The Code is a summary of the main principles and is thus not exhaustive. The principles and the rules in the Code are more developed in the different internal policies and procedures. The Code is available on www.belgacom.com.

Organization of compliance activities

The Compliance Office is managed by the Vice President Group Legal, who reports directly to the Chairman of the Audit and Compliance Committee (ACC). The ACC Charter 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 "The way we do responsible business".

The Compliance Program

Ethical behavior and respect for the values are part of the compliance approach within the Belgacom Group.

The revision of the compliance program launched in 2009 was continued in 2010. A particular effort was made on the drafting of a general format for the policies, the aim being that all the Belgacom Group policies apply this new format in the future. The Dealing Code was the first policy to be re-examined on the basis of this new format.

The compliance domains which were the focus areas for 2010 were :

• The Dealing Code
• Regulatory compliance
• Competition law
• Chinese walls
• Environment
• Privacy Accounting practices

As focus areas, particular attention was given by the Compliance Office to these compliance domains: several awarenessraising campaigns have been organized, in particular through the Compliance Business Partners, but also by the updating and the creation of new tools for training.

Finally, in addition to the existing helpdesk, a new version of the procedure allowing employees to report any breaches of the law, of the Code of Conduct or of other regulations, was published.

Report on internal control and risk management systems

The Belgacom Board of Directors is responsible for the assessment of the effectiveness of the systems for internal control and risk management.

Belgacom has set up an internal control system based on the COSO model, i.e. the internal control integrated framework and enterprise risk management published by the Committee of Sponsoring Organization of the Treadway Commission ("COSO"). This COSO methodology is based on five areas: the control environment, risk analysis, control activities, information & communication and monitoring.

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

The integration of Belgian subsidiaries or activities of the Group in Belgacom S.A. under public law realized on 4 January 2010 required significant resources to adapt the administrative organization and internal control to the new activities, but at the same time, it also offered opportunities to further improve it.

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

For more information, please see page 107

Sandro Manzo, Account Team Manager GSK Bio: My role is to get to know my customers and to take on board the particular needs of their business. For instance, in terms of communication, we're continuing to work with GSK Bio to develop specifi c types of coverage via GSM and WLAN that guarantee security and access for their staff.

Bernard Opdecam, Presales Network GSK Bio: I'm here to help customers decide what their technical needs are and how Belgacom can meet them. Getting these solutions up and running is often a complex business because they have to be integrated into the customer's own ICT infrastructure. So there's no room for error, because many of the applications are critical.

Using the Belgacom Wireless Offi ce Extended solution, our corporate customers can increase staff mobility. This service combines fi xed and mobile telephony and allows businesses to cut their costs at the same time gaining access to the PABX functions which are most commonly used on mobile phones.

Daniel Lebeau, Vice Chairman, Information and Management Systems, at GSK Biologicals

Our company operates all over the world.

So we need global, unifi ed solutions for everything – the data center, mobile communication solutions, applications… an^d they all have to supply a high level of security.

Financial Key Figures

			Year ended 31 December
Income Statement (EUR million)	2006	2007	2008	2009	2010
Total income before non-recurring items	6,100	6,065	5,978	5,990	6,603
Non-recurring income	0	0	8	74	436
Total income	6,100	6,065	5,986	6,065	7,040
EBITDA(1) before non-recurring items	2,149	2,077	1,990	1,955	1,984
EBITDA(1)	2,149	2,031	1,905	1,967	2,428
Depreciation and amortization	-802	-774	-743	-706	-809
Operating income (EBIT)	1,347	1,256	1,161	1,261	1,619
Net finance income / (costs)	104	1	-109	-117	-102
Income before taxes	1,451	1,258	1,053	1,144	1,517
Tax expense	-358	-300	-254	-241	-233
Non-controlling interests	121	0	-1	-1	17
Net income (Group share)	973	958	800	904	1,266
			Year ended 31 December
Cash flows and Capital Expenditures (EUR million)	2006	2007	2008	2009	2010
Cash flows from operating activities	1,643	1,581	1,552	1,406	1,666
Capital expenditures	-676	-625	-764	-597	-734
Cash flows from / (used in) other investing activities	-2,279	255	-380	-12	48
Free cash flow(2)	-1,313	1,210	409	797	980
Cash flows from / (used in) financing activities	751	-720	-570	-1,030	-728
Net increase / (decrease) of cash and cash equivalents	-562	490	-161	-233	252
			As of 31 December
Balance sheet (EUR million)	2006	2007	2008	2009	2010
Balance sheet total	7,300	7,325	7,782	7,450	8,511
Non-current assets	5,504	5,072	5,564	5,505	6,185
Investments, cash and cash equivalents	327	785	618	408	627
Shareholders' equity	2,391	2,520	2,271	2,521	3,108
Non-controlling interests	8	6	5	7	235
Liabilities for pensions, other post-employment benefits and termination benefits	886	831	777	677	565
Net financial position	-1,636	-1,167	-1,835	-1,716	-1,451
Data per share	2006	2007	Year ended 31 December 2008	2009	2010
Basic earnings per share (EUR)	2.87	2.87	2.45	2.82	3.94
Diluted earnings per share (EUR)	2.87	2.87	2.45	2.82	3.94
Weighted average number of ordinary shares	338,621,113	334,017,553	326,179,820	320,475,553	321,138,048
			Year ended 31 December
Data on employees	2006	2007	2008	2009	2010
Number of employees (full-time equivalents)	18,180	17,942	17,371	16,804	16,308
Average number of employees over the period	18,163	17,995	17,465	16,878	16,270
Total income per employee (EUR) EBITDA(1) per employee (EUR)	335,869 118,294	337,031 112,847	342,746 109,058	359,322 116,551	432,685 149,247
			Year ended 31 December
Ratio's	2006	2007	2008	2009	2010
Return on Equity(3)	45.7%	38.8%	37.5%	35.5%	31.6%
Gross margin(4)	67.1%	66.8%	67.0%	65.2%	60.0%
Net debt / EBITDA before non-recurring items	0.8	0.6	0.9	0.9	0.7

(1) Earnings Before Interests, Taxes, Depreciation and Amortization.

(2) Cash flow before financing activities.

(3) The net income and the Shareholders' equity are adjusted to exclude the non-recurring income /expenses and the related tax impacts.

(4) The gross margin is adjusted to exclude the non-recurring income.

Consolidated management report1 Belgacom Group

• Solid full-year revenue2 : up by 10.2% to EUR 6,603 million
• Full-year EBITDA 2010 of EUR 1,984 million, or +1.5% YoY
• Group EBITDA margin of 30%
• Strong FCF of EUR 980 million

Revenues

The Belgacom Group ended the year 2010 with a solid revenue of EUR 6,603 million, excluding non-recurring income, or an increase of 10.2% compared to 2009. The growth trend over 2010 is largely the result of the full consolidation of Belgacom's International Carrier Business Unit (BICS), including the contribution from MTN ICS3 .

On a like-for-like basis, i.e. when consolidating the 2010 revenue from BICS proportionally at 57.6%, the Belgacom Group revenue is 0.6% or EUR 37 million below the revenue of last year. This includes the loss of revenue due to regulation, lowering the Belgacom 2010 revenue by EUR 121 million or -2%.

Belgacom's underlying business, i.e. excluding the negative impact resulting from regulation, grew by 1.4% over the full year. This is driven by the sound underlying business growth of the Consumer Business Unit and by the organic revenue growth from BICS.

Revenue (in EUR million) before non-recurring items

Share in 2010 Group revenue per BU

Operating expenses

For 2010, the Belgacom Group reported total operating expenses of EUR 4,619 million before non-recurring items, or a year-over-year increase of 14.5%, impacted by the full consolidation of BICS and additional business of MTN ICS.

The additional revenue from BICS since the start of the year, at typically lower margins, has significantly increased the Cost of Sales for the Belgacom Group, going up 26.6% to EUR 2,642 million. However, like-for-like4 , the Cost of Sales was flat compared to last year. This is mainly the result of the positive effect that some regulatory measures had on the Cost of Sales.

For the full-year 2010, Belgacom reports total HR expenses6 of EUR 1,107 million, including some additional HR costs following the full consolidation of BICS and the contribution of MTN. Adjusted for this, the Group HR expenses were 1.6% lower than the previous year, mainly driven by the headcount decrease of -496 FTE's to 16,308 FTE's end of 2010.

Belgacom reports for 2010 a total of Non-HR expenses7 of EUR 870 million. This includes some additional costs following the full consolidation of BICS and the contribution of MTN. On a like-for-like basis, the non-HR expenses were up by 1.1%, partly due to the upgrade of the Mobile Radio Access network.

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

Headcount evolution (in FTE)

1. Detailed financial results as from page 102

2. Revenue is defined as the sum of net revenue and other operating income

3. On 30 November 2009, MTN transferred its international carrier services to BICS in exchange for a 20% stake in BICS. As a result, Belgacom's interest in BICS was diluted from 72% to 57.6%. On 1 January 2010, Belgacom acquired control of BICS and BICS became fully consolidated.

4. Consolidating BICS at 57.6%

5. Less costs following the lower Mobile Termination Rates and the implementation of a collecting model for Premium Rate Services

6. 1. HR expenses: i.e. personnel expenses and pensions
7. 1. Other operating expenses

EBITDA

The Group EBITDA for the full-year 2010, before non-recurring items, came in at EUR 1,984 million, i.e. 1.5% higher than for 2009. On a like-for-like basis, the EBITDA decreased by 1.3%, i.e. equal to the regulation impact which lowered the 2010 EBITDA by EUR 26 million. Excluding the regulation impact, Belgacom maintained its full-year EBITDA flat to last year.

The solid EBITDA level led to a full-year EBITDA margin of 30%.

BICS lowered the 2010 Group EBITDA margin in two ways: (1) through the full consolidation and (2) through strong organic growth. As BICS' revenue typically comes at a lower margin, the revenue growth mathematically lowered the Group EBITDA margin.

Excluding the effect of the full consolidation of BICS, the 2010 EBITDA margin is 32.4%, compared to an EBITDA margin of 32.6% in 2009.

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

2010 EBITDA contribution per BU (in EUR million)

Tax Expense

The 2010 full-year tax expense amounts to EUR 233 million, whereas this was EUR 241 million in 2009. This brings the 2010 effective tax rate for the Belgacom Group to 15.4%, compared to 21.0% in 2009. The 2010 effective tax rate results from the application of the general principles of Belgian tax law, and includes a positive effect from the nontaxable capital gain9 of EUR 436 million.

Excluding this non-recurring income, the 2010 effective tax rate is 21.6%.

Within the fleet-domain, Belgacom decided to switch from leasing to buying some of the utility cars, leading to an increase in the 2010 capex of S&S.

Capex (in EUR million) & capex as % or revenue

2010 Capex per BU (in EUR million)

CAPEX

Over the full-year 2010, Belgacom Group invested a total of EUR 734 million, or 11.1% of its Group revenue. The increase of EUR 137 million versus last year is partly explained by capex required for the renewal of the 2G license for the period 2010-2015, for a total of EUR 74 million.

Furthermore, Belgacom continued the roll-out of its "Move-to-all-IP" project (MaIP), requiring a total investment of EUR 50 million over 2010. The Broadway project, i.e. the further roll-out of fiber-tothe-curb and the installation of VDSL2, required EUR 32 million over 2010, bringing the population coverage to 76%. In addition, some of the content rights contracts for Belgacom TV were up for renewal in 2010.

8. Adjusted for the full consolidation of BICS and the contribution of MTN

1. The 2010 Group revenue includes a non-recurring income of EUR 436 million. This results from the acquisition of control of BICS on 1 January 2010, which led to the remeasurement of the Group's previously held interest in BICS.

Free Cash Flow*

Belgacom ended the year 2010 with a strong Free Cash Flow of EUR 980 million, i.e. EUR 183 million higher than for 2009. The positive variance is partly due to the EUR 51 million one-off cash increase resulting from the full consolidation of BICS, whereas the 2009 Free Cash Flow included the payment of a EUR 66 million fine imposed by the Belgian Competition Authority.

Moreover, the 2010 Free Cash Flow was positively impacted by lower income tax payments as the legal entity merger resulted in the anticipated use of the Belgacom SA tax losses carried forward, and because of the lower tax pre-payment ratio, creating positive timing differences. Furthermore, Belgacom ended the year 2010 with a higher EBITDA (before nonrecurring items). These positive impacts were, however, partly offset by the increase in capex.

797

On 31 January 2011, Belgacom issued a seven year senior unsubordinated bond of EUR 500 million maturing on 7 February 2018 under its Euro Medium Term Note program. The purpose of this transaction is to pre-finance the maturing bonds of November 2011 with a fixed rate coupon at 3.875%.

Net financial position (in EUR million)

December 2010

2008 2009 2010

409

*Cash flow before financing activities

Net financial position

Belgacom continues to have a sound financial position. The net financial debt decreased by EUR 265 million in 2010 to EUR 1,451 million, corresponding to 0.7x EBITDA (before non-recurring items).

The outstanding gross financial debt amounted to EUR 2.1 billion (nominal value), most of it maturing in 2011 and 2016.

Consumer Business Unit – CBU

• 2010 revenues stable on like-for-like10 basis, in spite of EUR 60 million regulation impact
• Full-year EBITDA +1.1% like-for-like10; solid contribution margin of 45.3%
• Growing revenue for TV, Data and Tango
• Continued success of convergent offers: 870,000 multi-play Packs sold end 2010

CBU revenues

For the full-year 2010, CBU reported revenues of EUR 2,368 million or a decrease of 1.9% compared to 2009, fully driven by the intercompany flows that disappeared in 2010 following the legal entity merger. When adjusting the 2009 figures for these eliminated flows, revenues remained flat yearover-year while absorbing a regulatory impact of EUR 60 million (or -2.6%).

In 2010, CBU revenues were pressured by the implementation of a financial collecting model for Premium Rate Services, the further decline of the roaming tariffs as from July 2010, the cut in Mobile Termination Rates as from August 2010 and the consequent decline in fixed-tomobile tariffs. These regulatory measures impacted fixed voice, mobile voice and mobile data revenues.

When excluding regulation impacts, the underlying business showed a sound financial performance, with 2010 revenues growing 2.6% compared to 2009. Underlying growth is coming from data, TV and the mobile business in Luxembourg (Tango).

Revenue (in EUR million)

In 2010, the more traditional product lines such as fixed voice and mobile voice were pressured by regulation. In 2009, voice revenues represented 52% of CBU revenues whereas in 2010 this decreased to 49%.

Fixed voice revenue of EUR 506 million declined 9.8% year-over-year, driven

by the loss in access lines, the recurring discounts on Packs and some regulatory measures11. The CBU line loss of 2010 was contained to -129,000 lines versus -138,000 a year earlier. This resulted in a total fixed line base of 1,933,000 by end 2010, including Scarlet VoIP customers.

Fixed & mobile voice revenue (in EUR million)

Mobile voice revenue of EUR 653 million declined 3.3% on a like-for-like basis10 fully due to regulatory measures12. The underlying revenue trend in 2010 was positive. Over the year, CBU added 74,000 postpaid customers, leading to an increase in its postpaid ratio from 40% end of 2009 to 42.6% end of 2010. The total customer base amounted to 3,769,000 or 54,000 customers fewer than one year ago due to a loss in prepaid (-75,000) and MVNO (-53,000) customers.

Fixed line & mobile customers (in '000)

Both fixed and mobile data continued to grow in 2010 and now represent 28% of CBU revenues versus 26% in 2009.

Full-year mobile data revenues increased 6.5% to EUR 322 million in spite of the implementation of the collecting model. Mobile data includes revenue from both SMS and non-SMS data, i.e. "Advanced Data".

SMS revenues grew 11% like-for-like, driven by the success of offerings including free SMS that boosted SMS volumes (+25%). Advanced data was up 11.6% like-for-like and excluding the impact of the financial collection model, driven by the growing demand for mobile data solutions.

Fixed & mobile data revenue (in EUR million)

Fixed Internet showed a revenue growth of 4.4% to EUR 337 million, driven by the growing customer base (+38,000 new customers) and the revamped Internet portfolio that offers higher speeds and volumes to the customer for a slightly higher price. End 2010, CBU had 1,113,000 Internet customers.

1. 2009 results adjusted for intercompany items and changes in revenue and cost allocation

2. Implementation of a financial collecting model and lower fixed-to-mobile tariffs following the cut in mobile termination rates

3. Lower roaming tariffs, the cut in mobile termination rates and the implementation of a collecting model for Premium Rate Services

Belgacom TV continued its growth path with revenues increasing almost 36% to EUR 182 million and the TV customer base growing by 30% or +223,000 customers. Customer growth was mainly supported by Belgacom's unique market position with Packs including "Free TV". End of 2010, CBU counted 975,000 TV customers, including 135,000 second stream users. In 2010, TV revenues represented 8% of total CBU revenues.

TV revenue (in EUR million)

TV customers (in '000)

CBU operating expenses

Full-year Cost of Sales were, on a likefor-like basis13, 1.4% lower than the previous year, mainly driven by a positive effect from regulatory measures14 and initiatives to improve product profitability.

On a full-year basis, CBU counted 510 FTE's less, bringing the year-end total to 5,209 FTE's, as a result of the ongoing tutorship program, the Scarlet restructuring and natural attrition. Consequently, the full-year HR costs of EUR 325 million were 5.8% lower than a year earlier.

Non-HR costs continued to decline as a result of the ongoing cost focus. For the full-year 2010, non-HR costs of EUR 291 million were 2.3% down compared to 2009.

Total expenses (in EUR million)

CBU segment result and contribution margin

The CBU full-year segment result amounted to EUR 1,073 million or an increase of 1.1% year-over-year on a like-for-like basis13. This includes a negative regulation impact of EUR 19 million. The 2010 full-year contribution margin was 45.3% versus a like-for-like13 2009 margin of 44.8% or a slight increase of 0.5ppt on a comparable basis.

1. 2009 results adjusted for intercompany items and changes in revenue and cost allocation

2. Implementation of a collecting model and the cut in mobile termination rates

Enterprise Business Unit – EBU

• Crisis impact stabilized in 2010
• 2010 revenue decline limited to 2.1%, on like-for-like basis
• Regulation impact of EUR -39 million on revenue, but only EUR -3 million on EBITDA
• Solid contribution margin of 50%

EBU revenues

EBU ended the year 2010 with EUR 2,421 million of revenue, or a year-overyear decline of 3.2%. The lower revenue is partly explained by the absence of intercompany revenue since the start of 2010 due to the legal entity merger. Likefor-like, i.e. when adjusting 2009 numbers for the intercompany revenue, the full-year revenue decline was limited to 2.1%, an improvement over the previous year in which EBU lost 4.2% organic revenue due to the economic crisis.

The 2010 revenue was negatively impacted by regulation for an amount of EUR 39 million, or -1.6%. This includes the impact from lower Mobile Termination Rates since 1 August 2010, the flowthrough to Fixed-to-Mobile rates and lower Roaming rates for Voice and Data. When excluding regulation impacts, the underlying business of EBU was slightly down by 0.5% compared to 2009.

Revenue (in EUR million)

Fixed and mobile voice revenues were impacted by regulatory measures. End 2010, fixed and mobile voice revenues represented 43% of EBU revenues.

Over 2010, EBU generated EUR 539 million of Fixed Voice revenue, or a decrease of 6.1% compared to 2009. This is partly due to some regulatory measures15. The remaining decline in revenue results from the line erosion, which was contained to a line loss of 51,000, whereas this was 53,000 for the previous year. This line loss, and the lower usage per line, affected the traffic volumes, decreasing over 2010 by 5.7%.

For the full-year 2010, EBU reports EUR 502 million of Mobile Voice revenue. This is EUR 27 million, or 5% less than for 2009, on a like-for-like basis16. Most of the decline is the result of regulatory17 measures. Furthermore, EBU customers increasingly opt for advantageous Mobile Rate plans, allowing for free calling. In 2010, EBU gained 75,000 new mobile customers18, leading to a total mobile customer base of 1,303,000. The growth level in 2010 was somewhat lower than the previous year as a result of the customer acquisition strategy adopted in the SME segment to focus more on highvalue customers.

Fixed line & mobile customers (in '000)

EBU generated a total of EUR 692 million of ICT revenue, i.e. a 3.3% increase compared to the previous year, with especially strong results from Telindus International. In 2009, EBU saw its ICT revenue hit by the economic crisis, with larger IT projects being delayed or spread in time. As of the fourth quarter 2009, the trend turned with a significant step-up in revenue.

ICT revenue (in EUR million)

Revenue from Mobile data grew, on a like-for-like19 basis by 2.8% to EUR 185 million. This includes revenue from both SMS and non-SMS data, i.e. 'Advanced Data'.

SMS revenue increased by 4% to EUR 76 million, including a negative impact in the first half of lowered SMS roaming tariffs on 1 July 2009. Advanced Data20 revenue grew by 2% to EUR 109 million, including a limited impact from the financial collecting model for Premium Rate Services as of 1 April 2010. Advanced data saw its revenue growth trend being impacted by the EU regulation on data roaming to prevent 'bill shocks'21.

1. Lower fixed-to-mobile rates consequently to the lower MTR as of 1 August 2010 and the impact of the financial collecting model for Premium Rate Services. 16. The turnover from Mobile Voice used to include intercompany revenue, which was mainly linked to inbound revenue (Fixed-to-Mobile).

2. The intercompany flows, however, disappeared with the merger of the legal entities at the start of 2010.

3. 1. Lower MTR and Roaming rates, and the collecting model for premium rate services since 1 April 2010
4. 1. This number does not include the 8,000 internal mobile cards that have been cancelled in the first quarter of 2010 following the legal entity merger

With a total of EUR 392 million, the total revenue from Fixed Data was 2.3% lower than for 2009. Besides revenue from Fixed Internet, this includes Connectivity revenue for which the migration from older technologies (Leased Lines, Frame Relay, ATM) to the new and more advantageous "Explore" platform (connectivity and managed services) continues.

In a saturated and highly competitive Fixed Internet market, EBU kept its broadband customer base fairly stable at 445,000.

EBU operating expenses

EBU reports a cost of sales for the fullyear 2010 of EUR 685 million, which is 1.6% lower than the previous year, on a like-for-like basis22. The year-over-year decrease results from the positive effect on Cost of Sales from some regulatory measures, i.e. from the lower MTR's since 1 August 2010 and the application of the financial collecting model for Premium Rate Services.

Lower headcount positively impacted EBU's 2010 HR expenses, going down by 1.1% to EUR 375 million.

In 2010, the total EBU headcount decreased by 65 FTEs, leading to a total of 5,263 FTEs by year-end. This also includes the additional headcount following the creation of the new company "Bridging ICT".

In spite of the continued focus on reducing expenses in 2010, EBU's full-year non-HR expenses of EUR 149 million were 5% up compared to 2009. This is partly explained by a positive one-time effect in 2009.

EBU segment result and contribution margin

Over the full year, EBU reports a segment result of EUR 1,212 million, or 1.6% below the previous year. On a like-for-like basis23, the 2010 segment result was 3.6% lower year-over-year. The full-year negative impact from regulation on the segment result was limited to EUR 3 million.

The 2010 contribution margin of EBU stands at 50.0%, compared to 50.8% for 2009, on a like-for-like basis23.

Segment result (in EUR million) & margin

1. Compared to 2009, excluding intercompany revenue

2. Non-SMS mobile data

3. As of 1 July 2010, all customers are by default on a maximum financial limit of EUR 49.85 (excl. VAT) per month for Data roaming, unless they have opted out.

4. Compared to 2009, adjusted for intercompany Cost of Sales which are no longer included as of 2010

5. When excluding intercompany items from the 2009 result

Service Delivery Engine & Wholesale – SDE&W

SDE&W revenues

SDE&W ended the year with EUR 342 million of revenues, or a decline of 11.4% year-over-year on a reported basis. This decline mainly results from the intercompany flows that have been eliminated as from 2010 due to the legal entity merger.

On a like-for-like basis, SDE&W revenues were down 1.7% year-over-year while absorbing a negative regulation24 impact of EUR 22 million (-6.4%).

Excluding the effect from regulation, full-year revenues were up 4.7%, driven by the migration of Scarlet customers moving from a bitstream to a Carrier DSL solution.

Revenue (in EUR million)

SDE&W operating expenses

Cost of Sales for the year 2010 were positively impacted by the eliminated intercompany costs. On a like-for-like basis25, the full-year Cost of Sales decreased by 26.2% to EUR 46 million, driven by the positive effect of the financial collecting model for Premium Rate Services.

Full-year HR expenses amounted to EUR 203 million, or an increase of 5.2% year-over-year, driven by more headcount and the 2% wage indexation of October 2010.

Non-HR expenses for the year 2010 were impacted by the swap of the Radio Access Work to Huawei equipment and by additional costs following the migration of Scarlet customers. As a result, the non-HR costs increased 9.3% year-overyear to EUR 202 million.

Total expenses (in EUR million)

Staff & Support – S&S

S&S revenues

Staff and Support generated EUR 35 million of revenues during the year 2010, or a slight increase of 4.6%. This results, amongst other things, from slightly higher capital gains realized on the sale of buildings.

S&S operating expenses

Total operating expenses were down 4.1% to EUR 355 million, mainly driven by the company-wide focus to reduce costs.

1. Revenues were mainly pressured by the financial collecting model for Premium Rate services and, to a lesser extent, by the regulation on Roaming tariffs, Mobile Termination Rates and new LLU and bitstream prices as from August 2010.

2. Compared to 2009, excluding intercompany costs

International Carrier Services – BICS

• Positive effect from full consolidation and MTN ICS contribution
• Like-for-like full-year revenues up 3.9%
• Full-year EBITDA margin of 8%
• Solid volume growth

BICS revenues

BICS ended the year with revenues amounting to EUR 1,610 million. 2010 revenues have been positively impacted by the full consolidation and the additional business of MTN ICS. On an adjusted basis, i.e. when proportionally consolidating BICS' 2010 revenue at 57.6%, BICS revenues were up 3.9%.

Revenue before non-recurring items (in EUR million)

BICS gross margin

The reported full-year gross margin grew 58.4% year-over-year to EUR 226 million including the positive impact of the full consolidation.

Voice unit margins were pressured by the intense competition in the International Carrier market, as well as by the high fluctuations in the EUR/USD exchange rate. Non-voice margins, however, grew as a result of BICS' increased leadership in mobile data.

Gross margin (in EUR million)

BICS EBITDA and margin

BICS' end-of-year reported EBITDA of EUR 129 million was positively impacted by the full consolidation and the additional contribution of MTN ICS. Organically, the EBITDA of BICS was slightly down due to the pressure on gross margins, which was partly offset by the lower operational expenses.

The 2010 EBITDA margin was slightly down to last year, but showed improvement over the quarters driven by the solid performance of the non-voice business. The 2010 full-year EBITDA margin was 8%.

EBITDA (in EUR million) & margin

BICS Volumes

The 2010 volumes were positively impacted by the additional MTN-business. Full-year 2010 voice volumes were up 31% and non-voice grew almost 46% year-over-year.

Quarterly results as reported

Results have not been restated for reporting changes

• Group results impacted by 100% consolidation of BICS and MTN contribution as from 2010
• Segment results impacted by legal entity merger resulting in disappearance of intercompany flows

Group – Financials
(EUR million)	Q109	Q209	Q309	Q409	2009	Q110	Q210	Q310	Q410	2010
Revenues	1,492	1,504	1,476	1,518	5,990	1,641	1,664	1,640	1,658	6,603
Consumer Business Unit	591	604	602	617	2,414	590	592	585	600	2,368
Enterprise business unit	640	626	602	632	2,501	615	610	590	606	2,421
Service Delivery Engine & Wholesale	98	94	94	100	386	94	85	79	83	342
Staff&Support	7	12	6	8	33	10	7	10	7	35
International Carrier Services	217	227	228	221	892	378	414	415	402	1,610
Intersegment eliminations	-61	-60	-55	-60	-236	-47	-45	-40	-39	-172
Costs of materials and charges to revenues	-511	-511	-515	-550	-2,087	-662	-674	-651	-655	-2,642
Personnel expenses and pensions	-281	-280	-271	-277	-1,108	-274	-275	-281	-278	-1,107
Other operating expenses	-207	-211	-196	-225	-840	-210	-212	-218	-230	-870
Segment result	492	502	494	467	1,955	495	503	490	495	1,984
Segment EBITDA margin*	33.0%	33.4%	33.5%	30.8%	32.6%	30.2%	30.2%	29.9%	29.9%	30.0%
Non recurring items	0	-62	0	74	12	436	1	0	8	444
Ebitda	492	440	494	541	1,967	931	504	490	503	2,428

(*) before non-recurring items

Group – Capex

(EUR million)	Q109	Q209	Q309	Q409	2009	Q110	Q210	Q310	Q410	2010
Group Capex	135	134	136	192	597	154	222	139	219	734
Consumer Business Unit	26	16	19	29	89	49	19	11	54	132
Enterprise business unit	6	4	4	6	20	2	3	7	7	20
Service Delivery Engine & Wholesale	98	106	100	118	422	96	180	96	121	492
Staff&Support	3	6	8	27	44	5	13	19	26	62
International Carrier Services	2	3	6	12	22	2	8	6	11	27

CBU – Financials

(EUR million)	Q109	Q209	Q309	Q409	2009	Q110	Q210	Q310	Q410	2010
Revenues	591	604	602	617	2,414	590	592	585	600	2,368
From Fixed	290	285	290	298	1,163	291	280	281	288	1,139
Voice	144	141	138	138	561	133	125	124	124	506
Data	79	78	82	84	323	85	85	84	83	337
TV	29	30	34	40	134	44	43	46	49	182
Terminals (excl. TV)	13	12	13	14	51	8	7	8	7	31
Scarlet	25	24	22	23	95	21	20	19	23	84
From Mobile	278	297	291	296	1,161	279	288	285	290	1,142
Voice	170	178	179	176	704	161	168	165	160	653
Data	71	77	75	80	303	80	79	79	84	322
Terminals (excl. TV)	14	18	14	16	62	15	16	17	21	68
Tango	23	23	23	24	93	24	25	25	25	99
Other	24	22	21	23	90	21	24	19	23	87
Costs of materials and charges to revenues	-166	-174	-178	-205	-723	-180	-171	-158	-169	-678
Personnel expenses and pensions	-89	-88	-81	-87	-345	-81	-81	-82	-82	-325
Other operating expenses	-68	-75	-73	-81	-297	-65	-73	-70	-83	-291
Segment result	268	266	269	244	1,048	264	267	276	266	1,073
Segment Contribution margin	45.4%	44.1%	44.8%	39.6%	43.4%	44.7%	45.1%	47.1%	44.3%	45.3%

CBU – Operationals

	Q109	Q209	Q309	Q409	2009	Q110	Q210	Q310	Q410	2010
FROM FIXED
Number of access channels (thousands)	3,164	3,130	3,114	3,102	3,102	3,120	3,098	3,076	3,046	3,046
PSTN	2,013	1,979	1,956	1,934	1,934	1,904	1,877	1,850	1,817	1,817
ISDN	38	37	36	34	34	32	31	30	28	28
IP*	71	70	65	60	60	93	92	90	88	88
ADSL, VDSL	1,042	1,044	1,057	1,075	1,075	1,091	1,099	1,107	1,113	1,113
Traffic (millions of minutes)	1,230	1,124	1,060	1,181	4,594	1,178	1,052	1,004	1,140	4,374
National	1,022	918	869	973	3,781	976	857	824	942	3,599
Fixed to Mobile	105	109	101	108	423	104	103	94	102	404
International	102	97	90	100	390	98	91	86	96	371
TV (thousands)	555	589	663	752	752	814	868	920	975	975
TV - households	486	513	575	652	652	713	753	795	839	839
of which second stream users	70	75	88	100	100	100	115	125	135	135
ARPU (EUR)
ARPU Voice	21.7	21.6	21.5	21.7	21.7	21.2	20.3	20.3	20.9	20.7
ARPU broadband	28.6	28.1	29.1	29.0	28.7	28.7	28.5	28.1	27.6	28.2
ARPU Belgacom TV	20.4	19.2	20.6	21.3	20.4	20.7	19.1	19.3	19.7	19.7
FROM MOBILE
Number of active customers (thousands)	3,787	3,809	3,829	3,824	3,824	3,739	3,745	3,773	3,769	3,769
Prepaid	2,229	2,224	2,235	2,199	2,199	2,169	2,160	2,153	2,123	2,123
Postpaid	1,451	1,488	1,510	1,530	1,530	1,538	1,557	1,573	1,604	1,604
MVNO	107	97	84	95	95	31	29	47	42	42
Annualized churn rate (blended – variance in p.p.)	19.6%	20.8%	21.5%	20.5%	20.7%	20.9%	20.1%	21.8%	22.8%	21.4%
Net ARPU (EUR)
Prepaid	13.3	14.4	13.8	14.6	14.2	14.3	15.0	14.7	15.3	14.8
Postpaid	35.3	36.4	36.5	35.8	35.7	32.5	32.9	32.1	31.4	32.2
Blended	21.6	22.7	22.6	22.8	22.5	21.5	22.3	21.8	22.0	21.9
Blended voice	15.3	15.9	15.9	15.7	15.7	14.5	15.2	14.9	14.5	14.8
Blended data	6.3	6.8	6.7	7.1	6.7	7.0	7.1	7.0	7.5	7.1
UoU (units)	262.9	290.5	275.7	312.4	286.0	318.0	335.1	307.1	345.3	326.5
MoU (min)	107.9	112.9	108.9	111.8	110.5	104.0	109.8	104.8	106.0	106.1
Normalized MoU (min)	93.6	96.5	95.6	96.9	95.6	86.1	88.9	87.6	90.5	88.7
SMS (units)	156.0	178.7	167.8	201.8	176.5	215.2	226.5	203.5	240.5	221.6
Normalized SMS (units)	68.3	72.2	69.0	80.3	73.4	85.3	87.1	85.7	101.2	90.6

(*) As from Q1 2010 Scarlet VoIP customers are included

EBU – Financials

(EUR million)	Q109	Q209	Q309	Q409	2009	Q110	Q210	Q310	Q410	2010
Revenues	640	626	602	632	2,501	615	610	590	606	2,421
From Fixed	438	429	411	442	1,719	432	425	413	427	1,697
Voice	148	144	139	142	574	141	136	130	132	539
Data	101	100	100	100	401	99	98	98	98	392
Terminals	19	18	18	19	74	18	18	19	18	74
ICT	171	166	153	181	670	174	172	167	179	692
From Mobile	193	194	186	186	759	177	180	174	170	702
Voice	146	144	135	135	560	129	130	124	120	502
Data	43	46	48	47	184	45	47	47	46	185
Terminals	4	4	3	4	15	3	3	3	5	15
Other	9	4	5	4	22	6	5	3	8	22
Costs of materials and charges to revenues	-198	-184	-174	-192	-748	-183	-175	-163	-164	-685
Personnel expenses and pensions	-95	-94	-94	-96	-379	-91	-93	-96	-95	-375
Other operating expenses	-41	-39	-33	-29	-142	-36	-35	-39	-40	-149
Segment result	306	310	301	315	1,231	306	308	292	306	1,212
Segment Contribution margin	47.7%	49.4%	50.0%	49.7%	49.2%	49.7%	50.4%	49.5%	50.6%	50.0%

EBU – Operationals

	Q109	Q209	Q309	Q409	2009	Q110	Q210	Q310	Q410	2010
FROM FIXED
Number of access channels (thousands)	1,974	1,958	1,946	1,937	1,937	1,922	1,912	1,901	1,886	1,886
PSTN	664	657	652	649	649	647	644	641	636	636
ISDN	854	847	840	830	830	818	810	801	791	791
IP	11	11	12	12	12	11	12	12	13	13
ADSL, VDSL	445	443	442	446	446	445	446	446	445	445
Traffic (millions of minutes)	901	837	770	828	3,336	848	790	727	781	3,145
National	620	569	522	567	2,278	579	529	487	529	2,123
Fixed to Mobile	176	171	157	169	672	173	168	153	165	660
International	105	97	91	92	386	96	93	86	87	362
ARPU (EUR)
ARPU Voice	31.3	30.9	30.1	30.9	30.8	30.9	30.2	29.0	29.7	30.0
ARPU broadband	40.1	39.8	40.1	39.7	39.9	39.4	39.1	39.0	38.7	39.1
FROM MOBILE
Number of active customers (thousands)	1,170	1,190	1,211	1,235	1,235	1,252	1,271	1,286	1,303	1,303
Postpaid	1,170	1,190	1,211	1,235	1,235	1,252	1,271	1,286	1,303	1,303
Annualized churn rate (blended – variance in p.p.)	10.7%	11.0%	9.0%	9.9%	10.2%	10.6%	10.9%	10.0%	10.8%	10.6%
Net ARPU (EUR)
Postpaid	54.5	53.6	51.1	50.1	52.4	46.9	47.0	44.7	42.8	45.3
Postpaid voice	42.1	40.7	37.6	37.2	39.5	34.8	34.5	32.4	30.9	33.1
Postpaid data	12.4	12.9	13.4	12.9	12.9	12.1	12.5	12.3	11.9	12.2
UoU (units)	388.5	389.2	365.4	387.8	382.4	360.7	363.6	345.3	372.8	361.3
MoU (min)	355.4	354.5	329.3	346.6	346.0	319.7	321.8	305.6	327.3	319.2
Normalized MoU (min)	337.9	338.9	313.5	327.7	327.7	287.4	282.7	265.8	281.7	279.8
SMS (units)	64.7	68.4	68.6	76.5	69.6	74.6	77.0	74.7	85.5	78.1
Normalized SMS (units)	53.3	54.3	53.8	57.6	54.5	59.1	60.0	59.2	66.9	61.4

SDE&W – Financials

(EUR million)	Q109	Q209	Q309	Q409	2009	Q110	Q210	Q310	Q410	2010
Revenues	98	94	94	100	386	94	85	79	83	342
Costs of materials and charges to revenues	-16	-18	-18	-20	-72	-15	-10	-10	-10	-46
Personnel expenses and pensions	-50	-50	-47	-45	-193	-51	-48	-53	-50	-203
Other operating expenses	-48	-43	-42	-51	-185	-50	-50	-52	-50	-202
Segment result	-16	-18	-13	-18	-64	-23	-23	-36	-27	-109
Segment Contribution margin	-16.5%	-18.7%	-13.6%	-17.6%	-16.6%	-24.0%	-26.6%	-45.5%	-33.1%	-31.8%

S&S – Financials

(EUR million)	Q109	Q209	Q309	Q409	2009	Q110	Q210	Q310	Q410	2010
Revenues	7	12	6	8	33	10	7	10	7	35
Costs of materials and charges to revenues	0	-1	-1	1	0	1	0	0	0	1
Personnel expenses and pensions	-41	-41	-42	-42	-166	-41	-43	-41	-40	-165
Other operating expenses	-50	-49	-43	-61	-204	-50	-45	-45	-52	-192
Segment result	-84	-79	-80	-94	-337	-80	-80	-75	-85	-320

BICS – Financials

(EUR million)	Q109	Q209	Q309	Q409	2009	Q110	Q210	Q310	Q410	2010
Revenues	217	227	228	221	892	378	414	415	402	1,610
Costs of materials and charges to revenues	-184	-186	-193	-186	-749	-325	-359	-356	-344	-1,383
Personnel expenses and pensions	-6	-6	-6	-6	-24	-10	-9	-9	-10	-39
Other operating expenses	-8	-11	-11	-10	-40	-15	-15	-16	-12	-58
Segment result	19	23	17	20	78	28	32	34	36	129
Segment EBITDA margin	8.7%	10.0%	7.4%	8.8%	8.7%	7.4%	7.7%	8.1%	8.9%	8.0%

BICS – Operationals

Volumes (in million)	Q109	Q209	Q309	Q409	2009	Q110	Q210	Q310	Q410	2010
Voice	4,498	4,707	4,805	5,306	19,316	5,923	6,254	6,433	6,680	25,290
Non-Voice (SMS/MMS)	117	119	149	164	549	168	188	209	235	800

Other information

Rights, commitments and contingencies as of 31 December 2010

Disclosures related to rights, commitments and contingencies are reported in note 33 of the consolidated financial statements.

Use of financial instruments

Disclosures related to the use of financial instruments are reported in note 31 of the consolidated financial statements.

Circumstances which may considerably impact the development of the Group

Circumstances which may considerably impact the development of the Group are reported under the section on major risks and uncertainties.

Research and development activities

In 2010, the research and development activities covered the following:

• Study of the potential of new technologies:
• Opportunities raised by IP technology that have become ubiquitous in all types of networks and services such as Synchronous Ethernet for backhauling in the mobile network, evolution to IPv6, Access Gateway to replace the old technologies supporting voice services (PSTN, ISDN);
• Fibre to the Home study (FTTH): technical and economical studies have been conducted to determine the most appropriate evolution path, taking into account the evolution of the users' bandwidth needs;
• Environment (Green): this is a continuous focus for Belgacom. Innovations to help increase awareness, and offer future solutions to decrease the CO2 footprint in Belgium are being demonstrated in a newly created Innovation Lounge;
• Smart Metering: new technologies were tested concerning the putting in service of smart meters in the consumer environment.

• Introduction of new technologies:

• IMS (IP Multimedia Subsystems): further developments were executed on this platform to support all the future voice services (Voice over P…);
• Important IT projects have been launched aiming at improving the customer experience by offering more

interactivity and more flexibility. They also contribute at improving the internal operational efficiency, reducing the troubleshooting time and facilitating the fixed-mobile convergence;

• Continuing research in the context of the Belgium HF project to develop ICT means allowing to better foresee heart attacks.

• Evolution of the technology in terms of improvement and existing services extension such as:

• The IPTV platform (TV over IP): after the introduction of High-Definition television, the TV platform continues to be enriched with new functionalities to improve the customer experience. 3D TV has been investigated and demonstrated;
• VDSL2: this technology continues to be deployed and additional functionalities are being analyzed and developed to improve its potential.

• The preparation of the introduction of new services:

• Technical pilot projects were deployed in the framework of mobile payment. Different pilot projects in several sectors were set up in order to prepare a commercial launch.

Belgacom collaborates with universities, industrial partners and several other bodies, such as I.B.B.T. (Interdisciplinair Instituut voor Breedband Technologie), IWT (Agentschap voor Innovatie door Wetenschap en Technologie) and the H.G.I. (Home Gateway Initiative Forum). Belgacom takes part in several User Committees for Strategic Research projects. Together with other players in the ICT industry, Belgacom has prepared the deployment of a Living Lab in Kortrijk. This will create an ecosystem for testusers and application developers to test new and innovative applications.

Treasury shares

Disclosures related to treasury shares are reported in note 15 of the consolidated financial statements.

Major risks and uncertainties

Belgacom's operating income and net income may decline if growth in the Belgian telecommunications market continues to slow down or if pressure on margins should continue without being compensated by increased volumes in the international carrier services business. Also, the continuing strong competition in the Belgian market from both cable companies and mobile operators could result in loss of market share. However, Belgacom is taking the necessary measures to stay competitive. These measures could lead to reduced rates, through additional promotions or other means. Furthermore, pursuing a strict cost control policy continues to be one of Belgacom's priorities.

To safeguard its competitive position, Belgacom attaches great importance to maintaining and further developing a highquality network; the broadband network, among others, continues to be renewed with fiber to the street cabinet. This is producing a strong increase in capacity, which allows new products and services, including Internet and TV services, to be developed. This in turn will enable Belgacom to retain current customers and attract new ones. The need for the development and implementation of new technologies may oblige Belgacom to make significant additional investments.

Certain products and services are subject to national or European regulation, such as broadband services, fixed telephony and mobile termination and roaming tariffs. This regulation can have an impact on the pricing of these products and services and, as a consequence, on turnover and operating profits.

Risks related to important ongoing claims and judicial procedures are reported in note 33 of the consolidated financial statements.

Capital management

The purpose of the Group's capital management is to maintain net financial debt and equity ratios that allow for security of liquidity at all times via flexible access to capital markets, in order to be able to finance strategic projects and to offer an attractive remuneration to shareholders. The latter was updated by the Belgacom Board of Directors of 25 February 2010 and Belgacom now commits to return, in principle, most of its annual consolidated cash flow before financing activities (or "Free Cash Flow"), to its shareholders. The return of free cash flow either through dividends or share buybacks, will be reviewed on an annual basis, in order to keep strategic financial flexibility for future growth, organically or via selective merger and acquisition projects, with a clear focus on value creation. This also includes confirming appropriate levels of distributable reserves.

Over the two periods presented, the Group didn't issue new shares or any other dilutive instrument.

Post-balance sheet events

Disclosures related to post-balance sheet events are reported in notes 33 and 39 of the consolidated financial statements.

Internal control and risk management systems

The Belgacom Board of Directors is responsible for the assessment of the effectiveness of the systems for internal control and risk management.

Belgacom has set up an internal control system based on the COSO model, i.e. the internal control integrated framework and enterprise risk management published by the Committee of Sponsoring Organisation of the Treadway Commission ("COSO"). This COSO methodology is based on five areas: the control environment, risk analysis, control activities, information & communication and monitoring.

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

The integration of Belgian subsidiaries or activities of the Group in Belgacom S.A. under public law realized on 4 January 2010 required significant resources to adapt the administrative organization and internal control to the new activities, but at the same time, it also offered opportunities to further improve it.

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

1. Control environment

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

The members of the A&CC have sufficient expertise in financial matters to discharge their functions. Its Chairman, Mr. Pierre-Alain De Smedt, is competent in accounting and auditing. He is a "licenciate" in commercial and financial sciences. He occupied during his career several functions as CFO, CEO and COO. Amongst his non-executive functions he is also member of the Audit Committee of Avis Europe.

The A&CC's role is to assist and advise the Board of Directors in its oversight on (i) the financial reporting process, (ii) the efficiency of the systems for internal control and risk management of Belgacom, (iii) the Belgacom's internal audit function and its efficiency, (iv) the quality, integrity and legal control of the statutory and the consolidated financial statements of Belgacom, including the follow up of questions and recommendations made by the auditors, (v) the relationship with the Company's auditors and the assessment and monitoring of the independence of the auditors, (vi) Belgacom's compliance with legal and regulatory requirements, (vii) the compliance within the organization with the Belgacom's Code of Conduct and the Dealing Code. The A&CC meets at least once every quarter.

1.2. Ethics

The Board of Directors has approved a Corporate Governance Charter and a Code of Conduct "The way we do responsible business". All employees must perform their daily activities and their business objectives according the strictest ethical standards and principles, using the company values (Respect, Can do and Passion) as guiding principle.

The Code "The way we do responsible business", which is available on www.

belgacom.com, sets out the abovementioned principles, and aims to inspire each employee in his or her daily behaviour and attitudes. The ethical behavior is not limited to the text of the Code. The Code is a summary of the main principles and is thus not exhaustive.

In addition, Belgacom in general and the Finance department in particular have a tradition of a high importance to compliance and a strict adherence to a timely and qualitatively reporting.

1.3. Policies and procedures

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

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

1.4. Roles & Responsibilities

Belgacom's internal control system benefits from the fact that throughout the whole organization, roles and responsibilities are clearly defined. Every business unit, division and department has its vision, mission and responsibilities, while on individual level, everybody has a clear job description and objectives.

The main role of the Finance Division is to support the divisions and affiliates by providing accurate, reliable and timely financial information for decision making, to monitor the business profitability and to manage effectively corporate financial services. The establishment of the external financial reporting falls under the responsibility of the Corporate Accounting department that is structured on the principles of local accounting units combined with centralized support and consolidation.

Through the local accounting units, the accounting responsibility for the different affiliates of the same "subgroup" are centralized into one accounting team, taking into account the geographical location and the integration into these affiliates, which positively contributes to the accuracy and reliability of reported figures.

The accounting teams of the mother company Belgacom assume this accounting responsibility for the major Belgian companies, but also provide the central support to the other accounting teams. For this centralized support, the organization is structured according to the major (financial) processes. These major processes include capital expenditures and assets, inventories, contracts in progress & revenue recognition, financial accounting, operational expenditures, provisions & litigations, payroll, post employment benefits and taxes. This centralized support organized around specific processes and IFRS standards allows for in depth accounting expertise and ensures compliance with group guidelines.

The consolidation of all different legal entities into the Consolidated Financial Statements of the Belgacom Group is realized centrally. The consolidation department defines and distributes information relating to the implementation of accounting standards, procedures, principles and rules. It also monitors changes in regulations to ensure that the financial statements continue to be prepared in accordance with IFRS, as adopted by the European Union. The monthly instructions for consolidation set forth not only the schedules for preparing accounting information for reporting purposes, but also includes detailed deadlines and items requiring particular attention, such as complex issues or new internal guidelines.

1.5. Skills & Expertise

Adequate staffing is a matter to which Belgacom pays careful attention. This requires not only sufficient headcount, but also the adequate skills and expertise. These requirements are taken into account in the hiring process, and subsequently in the coaching and formation activities, facilitated and organized by the Belgacom Corporate University.

For financial reporting purposes, a specific formation cycle was put in place, whereby junior as well as senior staff have to participate mandatory. These internally and externally organized accounting seminars cover not only IFRS but local accounting rules & regulations, Tax and Company law & regulations as well. In addition, the knowledge and expertise is also kept up to date and extended for more specific domains for which staff is responsible (revenue assurance, pension administration, financial products, etc.) through attendance to seminars and self-study. Furthermore, employees also attend general formations session on Belgacom new business product & services.

2. Risk analysis

Belgacom believes that Risk Management is fundamental to corporate governance and the development of sustainable business. The group has adopted a risk philosophy that is aimed at maximizing business success and shareholder value by effectively balancing risk and reward.

The objective of Risk Management is not only to safeguard the Group's assets and financial strength but also to protect Belgacom's reputation.

The Group's Enterprise Risk Management (ERM) covers the full spectrum of risks ("potential adverse events") and uncertainties that Belgacom could encounter. Belgacom ERM is a structured and consistent framework for assessing, responding to and reporting on risks that could affect the achievement of company strategic development objectives. It seeks to maximize value for shareholders by aligning risk management with the corporate strategy, assessing the emerging risk from regulation, new technologies or the market, and developing risk tolerance and mitigating strategies. Belgacom ERM is reviewed and updated every year since 2006. This risk assessment and evaluation takes place as an integral part of Belgacom annual strategic planning cycle. The resulting report on major risks and uncertainties is then reviewed by the management committee, the CEO and the A&CC.

Financial Reporting -

new transactions and new upcoming standards

It is the responsibility of the Corporate Accounting department to follow-up on the evolution in area of new upcoming standard (both local GAAP and IFRS). Changes are identified, and the impact on the Belgacom financial reporting is proactively analyzed.

For every new type of transaction (e.g. new product, new employee benefit), an in depth analysis from a financial reporting and tax point of view is mandatory performed. In addition, the development requirements for the financial systems are timely defined and compliance with internal and external standards is guaranteed. Emphasis is on the development of preventive controls and setting up reporting tools that enable a posteriori controls.

On a regular base, the A&CC is informed about new upcoming financial reporting standards and their potential impact on the Belgacom Group financials.

3. Risk mitigation factors and control measures

3.1. General risk mitigation factors and control measures

Belgacom mitigation response strategies depend on the nature of the risk and may often combine various actions, including insurance, increased vendors SLA'S/ liabilities, credit scoring, risk avoidance or active risk management through people, processes and systems.

The cost of risk mitigation is considered in determining response strategies. Certain risks are consciously accepted based on their potential limited impact on the Belgacom organization and/or their low level of materiality. Risk such as political, economic, regulatory are beyond Belgacom control and mitigation is limited to responsive actions to limit their impact.

For every important transaction which is submitted to the Belgacom Management Committee or Board of Directors, the risk & uncertainties triggers and the necessary mitigation actions to be taken are reported, as well as the potential accounting impact on the Belgacom Financial Statements.

3.2. Detailed and structured

Financial Statement Closing Process Clear roles and responsibilities in the Closing Process of the Group Financial Statement have been defined. During the monthly, quarterly, half-yearly and annual financial statement closing processes, there is a continuous monitoring on the different steps. In addition, different controls are performed to ensure quality and compliance with internal and external requirements and guidelines.

For Belgacom and its major affiliates, a very detailed closing calendar is established, which includes in detail cross-divisional preparatory meetings, deadlines for ending of specific processes, exact date and hours when IT sub-systems are locked, validation meetings and reporting deliverables.

For every process and sub-process, different controls are performed, including preventive controls, where information is tested before being processed, as well as detective controls, where the outcome of the processing is being analyzed and confirmed. Specific attention is given to reasonableness tests, where financial information is being analyzed by more underlying operational drivers, and coherence tests, where financial information from different areas is brought together to confirm results or trends, etc. Tests on individual accounting entries are performed for material or non-recurrent transactions and on a sample basis for others. The combination of all these tests provides sufficient assurance on the reliability of the financials.

4. Information and Communication

4.1. Financial reporting IT systems The accounting records of the Company and most of its affiliates are kept on large integrated IT systems. Operational processes are often integrated in the same system (e.g. supply chain management, payroll). For the billing systems, which are not integrated, adequate interfaces and a monitoring system have been developed. For the consolidation purposes, a specific consolidation tool is used.

The organizational set-up and access management are designed to support an adequate segregation of duties, prevent unauthorized access to the sensitive information and prevent unauthorized changes. The set-up of the system is regularly subject to the review by the internal audit department or external auditors.

4.2. Effective Internal

communication

Most of the accounting records today are kept under IFRS as well as local GAAP. In general, financial Information delivered to management and used for budgeting, forecasting and controlling activities is established under IFRS. A common financial language used throughout the organization positively contributes to an effective and efficient communication.

4.3. Reporting and validation of the financial results

The financial results are internally reported and validated on different levels. On the level of processes, there are validation meetings with the business process owners. On the level of the affiliates, a validation meeting is organized with the accounting and controlling responsible. On Belgacom group level, the consolidated results are split per segments. For every segment, the analysis and validation usually includes comparison with historical figures, as well as budget-actual and forecast-actual analysis. Validation requires (absences of) variances to be analyzed and satisfactorily explained.

Afterwards, the financial information is reported and explained to the Belgacom Management Committee (monthly) and presented to the A&CC (quarterly).

5. Supervision and assessment of internal control

The effectiveness and efficiency of the internal control are regularly assessed in different ways and by different parties:

• Each owner is responsible for reviewing and improving its business activities on a regular basis: this includes a.o. the process documentation, reporting on indicators and monitoring of those.
• In order to have an objective review and evaluation of the activities of each organization department, Belgacom's Internal Audit department conducts regular audits across the company' operations. The independence of Internal Audit is ensured via its direct reporting line to the Chairman of the A&CC. Audit assignments performed may have a specific financial processes scope but will also assess the effective-

ness and efficiency of the operations and the compliance towards the applicable laws or rules.

• The A&CC reviews the quarterly interim reporting and the specific accounting methods. The main disputes and risks facing the Group are considered; the recommendations of internal audit are followed-up; the compliance within the company with the Code of Conduct and Dealing Code is regularly discussed.
• Except for some very small foreign affiliates, all legal entities of the Belgacom Group are subject to an external audit. In general, this audit includes an assessment of the internal control, and leads to an opinion on the statutory financials and on the (half-yearly and annual) financials reported to Belgacom for consolidation. In case the external audit reveals a weakness or identifies opportunities to further improve the internal control, recommendations are made to management. These recommendations, the related action plan and implementation status are at least annually reported to the A&CC.

/// 111

Consolidated Financial Statements

Prepared under International Financial Reporting Standards for each of the two years ended 31 December 2010 and 2009

Consolidated income statement	112
Consolidated statement of other comprehensive income	112
Consolidated balance sheet	113
Consolidated cash flow statement	114
Consolidated statement of changes in equity	115
Notes to the consolidated financial statements	116
Note 1. Corporate information	116
Note 2. Significant accounting policies	116
Note 3. Goodwill	125
Note 4. Intangible assets with finite useful life	126
Note 5. Property, plant and equipment	127
Note 6. Investments in subsidiaries, joint ventures and associates	128
Note 7. Other participating interests	134
Note 8. Income taxes	134
Note 9. Assets and liabilities for pensions, other post-employment benefits and termination benefits	136
Note 10. Other non-current assets	142
Note 11. Trade receivables	142
Note 12. Other current assets	142
Note 13. Investments	143
Note 14. Cash and cash equivalents	143
Note 15. Equity Note 16. Interest-bearing liabilities	144 144
Note 17. Provisions	146
Note 18. Other non-current payables	146
Note 19. Other current payables	146
Note 20. Net revenue	147
Note 21. Other operating income	147
Note 22. Non-recurring income	147
Note 23. Costs of materials and services related to revenue	147
Note 24. Personnel expenses and pensions	148
Note 25. Other operating expenses	148
Note 26. Non-recurring expenses	148
Note 27. Depreciation and amortization	149
Note 28. Net finance income / (costs)	149
Note 29. Earnings per share	150
Note 30. Dividends paid and proposed	150
Note 31. Additional disclosures on financial instruments	151
Note 32. Related party discolsures	158
Note 33. Rights, commitments and contingent liabilities	159
Note 34. Cross-border lease arrangements	162
Note 35. Share-based Payment	162
Note 36. Relationship with the auditors	164
Note 37. Segment reporting	164
Note 38. Recent IFRS pronouncements	166
Note 39. Post balance sheet events	166
Auditor's report	167

Consolidated income statement

		Year ended 31 December
(EUR million)	Note	2009	2010
Net revenue	20	5,922	6,552
Other operating income	21	68	51
Non-recurring income	22	74	436
Total income		6,065	7,040
Costs of materials and services related to revenue	23	-2,087	-2,642
Personnel expenses and pensions	24	-1,108	-1,107
Other operating expenses	25	-840	-870
Non-recurring expenses	26	-62	8
Total operating expenses before depreciation and amortization		-4,097	-4,612
Operating income before depreciation and amortization		1,967	2,428
Depreciation and amortization	27	-706	-809
Operating income		1,261	1,619
Finance income		26	21
Finance costs		-143	-123
Net finance costs	28	-117	-102
Income before taxes		1,144	1,517
Tax expense	8	-241	-233
Net income		904	1,283
Non-controlling interests	15	-1	17
Net income (group share)		904	1,266
Basic earnings per share (in EUR)	29	2.82 EUR	3.94 EUR
Diluted earnings per share (in EUR)	29	2.82 EUR	3.94 EUR
Weighted average number of ordinary shares	29	320,475,553	321,138,048
Weighted average number of ordinary shares for diluted earnings per share	29	320,686,600	321,712,030

Consolidated statement of other comprehensive income

	Year ended 31 December
(EUR million)	2009	2010
Net income	904	1,283
Other comprehensive income:
Available-for-sale investments:
Valuation gain/(loss) taken to equity	1	0
Transfer to profit or loss on sale	0	-5
Exchange differences on translation of foreign operations	1	0
Other comprehensive income net of tax	1	-5
Total comprehensive income	905	1,278
Attributable to:
Equity holders of the parent	906	1,262
Non-controlling interests	-1	17

		As of 31 December
(EUR million)	Note	2009	2010
ASSETS
NON-CURRENT ASSETS		5,505	6,185
Goodwill	3	2,088	2,337
Intangible assets with finite useful life	4	623	1,190
Property, plant and equipment	5	2,420	2,348
Investments in associates	6	2	2
Other participating interests	7	1	26
Deferred income tax assets	8	295	158
Pension assets	9	2	2
Other non-current assets	10	75	122
CURRENT ASSETS		1,945	2,326
Inventories		86	114
Trade receivables	11	1,089	1,246
Current income tax assets	8	169	198
Other current assets	12	194	142
Investments	13	76	43
Cash and cash equivalents	14	332	584
TOTAL ASSETS		7,450	8,511
LIABILITIES AND EQUITY
EQUITY	15	2,528	3,342
Shareholders' equity	15	2,521	3,108
Issued capital		1,000	1,000
Treasury shares		-509	-484
Restricted reserve		100	100
Available for sale and hedge reserve		5	0
Stock compensation		10	11
Retained earnings		1,911	2,476
Foreign currency translation		4	4
Non-Controlling interests	15	7	235
NON-CURRENT LIABILITIES		3,093	2,364
Interest-bearing liabilities	16	2,128	1,406
Liability for pensions, other post-employment benefits and termination benefits	9	677	565
Provisions	17	199	203
Deferred income tax liabilities	8	86	187
Other non-current payables	18	3	3
CURRENT LIABILITIES		1,830	2,804
Interest-bearing liabilities	16	59	783
Trade payables		1,123	1,304
Income tax payables	8	137	188
Other current payables	19	511	529
TOTAL LIABILITIES AND EQUITY		7,450	8,511

Consolidated cash flow statement

			Year ended 31 December
(EUR million)	Note	2009	2010
Cash flow from operating activities
Net income (group share) Adjustments for:		904	1,266
Non-controlling interests	15	-1	17
Depreciation and amortization on intangible assets and property, plant and equipment	4.5	706	809
Increase of impairment on intangible assets and property, plant and equipment Increase of provisions	4.5	3 8	1 26
Deferred tax expense	8	46	75
Fair value adjustments on financial instruments		2	1
Gain on disposal of consolidated companies and remeasurement of previously held interest	6	-72	-437
Gain on disposal of property, plant and equipment		-3	-3
Other non-cash movements Operating cash flow before working capital changes		5 1,598	10 1,766
Decrease / (increase) in inventories		14	-27
Decrease in trade receivables		66	1
Increase in current income tax assets		-25	-28
Decrease / (increase) in other current assets Decrease in trade payables		-38 -55	58 -2
Increase / (decrease) in income tax payables		-27	48
Increase / (decrease) in other current payables		11	-13
Decrease in net liability for pensions, other post-employment benefits and termination
benefits Decrease in other non-current payables and provisions	9	-97 -40	-113 -23
Increase in working capital, net of acquisitions and disposals of subsidiaries		-192	-99
Net cash flow provided by operating activities (1)		1,406	1,666
Cash flow from investing activities
Purchase of intangible assets and property, plant and equipment	3, 4, 5	-597	-734
Cash paid for acquisitions of other participating interests		0	-26
Cash (paid) / received for consolidated companies, net of cash acquired Cash (paid) / received from sales of consolidated companies, net of cash disposed of	6	1 -22	56 0
Cash received from sales of intangible assets and property, plant and equipment		2	16
Net cash received from other non-current assets		6	1
Net cash used in investing activities		-609	-686
Cash flow before financing activities		797	980
Cash flow from financing activities
Dividends paid to shareholders	30	-684	-702
Dividends / capital paid to non-controlling interests Net sale of treasury shares	15	0 8	-30 25
Net (purchase) / sale of investments		-23	26
Decrease of shareholders' equity		-1	-1
Issuance of long term debt Repayment of long term debt		6 -304	6 -4
Repayment of short term debt		-33	-49
Net cash used in financing activities		-1,030	-728
Net increase / (decrease) of cash and cash equivalents		-233	252
Cash and cash equivalents at 1 January		565	332
Cash and cash equivalents at 31 December	14	332	584
(1) Net cash flow from operating activities includes the following cash movements :
Interest paid		-103	-93
Interest received Income taxes paid		10 -221	5 -139

Consolidated statement of changes in equity

(EUR million)	Issued capital	Treasury shares	Restricted reserve	Available for sale and hedge reserve	Foreign currency trans lation	Stock Compen sation	Retained Earnings	Sharehol ders' Equity	Non controlling interests	Total Equity
Balance at 1 January 2009	1,000	-517	100	4	3	6	1,675	2,271	5	2,276
Fair value changes in available-for-sale investments Currency translation differences Equity changes not recognised in the income statement Net income	0 0 0 0	0 0 0 0	0 0 0 0	1 0 1 0	0 1 1 0	0 0 0 0	0 0 0 904	1 1 1 904	0 0 0 -1	1 1 1 904
Total comprehensive income	0	0	0	1	1	0	904	906	-1	905
Dividends to shareholders (relating to 2008) Interim dividends to shareholders (relating to 2009) Non-controlling interests arising in a business combination Treasury shares Exercise of stock options	0 0 0 0 0	0 0 0 2	0 0 0 0	0 0 0 0	0 0 0 0	0 0 0 0	-538 -128 0 0	-538 -128 0 2	0 0 3 0	-538 -128 3 2
Sale of treasury shares under a discounted share purchase plan Stock options	0	6	0	0	0	0	-1	5	0	5
Stock options granted and accepted	0	0	0	0	0	4	0	4	0	4
Deferred stock compensation	0	0	0	0	0	-4	0	-4	0	-4
Amortization deferred stock compensation Total transactions with equity holders	0 0	0 8	0 0	0 0	0 0	4 3	0 -668	4 -656	0 3	4 -653
Balance at 31 December 2009	1,000	-509	100	5	4	10	1,911	2,521	7	2,528
Fair value changes in available-for-sale investments Equity changes not recognised in the income statement Net income	0 0 0	0 0 0	0 0 0	-5 -5 0	0 0 0	0 0 0	0 0 1,266	-5 -5 1,266	0 0 17	-5 -5 1,283
Total comprehensive income	0	0	0	-5	0	0	1,266	1,262	17	1,278
Dividends to shareholders (relating to 2009) Interim dividends to shareholders (relating to 2010) Dividends of subsidiaries to non-controlling interests Non-controlling interests arising in a business combination Treasury shares	0 0 0 0 0	0 0 0 0	0 0 0 0	0 0 0 0	0 0 0 0	0 0 0 0	-539 -161 0 0	-539 -161 0 0	0 0 -9 220	-539 -161 -9 220
Exercise of stock options	0	17	0	0	0	0	-2	15	0	15
Sale of treasury shares under a discounted share purchase plan Stock options	0	9	0	0	0	0	-1	7	0	7
Stock options granted and accepted	0	0	0	0	0	3	0	3	0	3
Deferred stock compensation	0	0	0	0	0	-3	0	-3	0	-3
Amortization deferred stock compensation	0	0	0	0	0	3	0	3	0	3
Exercise of stock options Total transactions with equity holders	0 0	0 25	0 0	0 0	0 0	-2 1	2 -701	0 -675	0 211	0 -464
Balance at 31 December 2010	1,000	-484	100	0	4	11	2,476	3,108	235	3,342

Notes to the consolidated financial statements

Note 1. Corporate information

The consolidated financial statements at 31 December 2010 were authorized for issue by the Board of Directors on 24 February 2011. They comprise the financial statements of Belgacom SA, its subsidiaries and joint ventures (hereafter "the Group") as well as the Group's share of results in associates.

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 implemented by the Royal Decree of 16 December, 1994. Belgacom SA headquarters are located at Boulevard du Roi Albert II, 27 1030 Brussels, Belgium.

As from 1 January 2008 onwards, the Board of Directors, the Chief Executive Officer and the Belgacom Management Committee manage the operations of the Belgacom Group based on the new customer-oriented organization structured around the five following reportable operating segments:

• The Consumer Business Unit (CBU) sells voice products and services, internet and television, both on fixed and mobile networks, to residential customers, mainly on the Belgian market;
• The Enterprise Business Unit (EBU) sells ICT services and products to professional customers, whether they are self-employed persons, small companies or major corporations. These ICT solutions, including telephone services, are marketed mainly under the Belgacom, Proximus and Telindus brands, on both the Belgian and international markets;
• The Service Delivery Engine & Wholesale (SDE&W) centralizes all the network and IT services and costs (excluding costs related to customer operations and to the service delivery of ICT solutions), provides services to CBU and EBU and sells these services to other telecom and cable operators;
• International Carrier Services (ICS) is responsible for international carrier activities;
• Staff and Support (S&S) brings together all the horizontal functions (human resources, finance, legal, strategy and corporate communication), internal services and real estate that support the Group's activities.

Further information concerning the operating segments is included under note 37.

The number of employees of the Group (in full time equivalents) amounted to 16,308 at 31 December 2010, and 16,804, at 31 December 2009. For the year 2010, the average number of headcount of the Group was 151 management personnel, 14,702 employees and 2,113 workers. For the year 2009, the average number of headcount of the Group was 139 management personnel, 15,221 employees and 2,297 workers.

Note 2. Significant accounting policies

Basis of preparation

The accompanying consolidated financial statements as of 31 December 2010 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. The Group did not early adopt any IASB standards or interpretations.

The consolidated financial statements have been prepared on a historical cost basis, except for the measurement at fair value of derivatives and available-for-sale financial assets. The carrying values of assets and liabilities 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 policies

The accounting policies applied are consistent with those of the previous financial years except that the Group applied the new or revised IFRS standards and interpretations as adopted by the European Union that became mandatory on 1 January 2010 and that are detailed as follows:

• Revised IFRS 3 ("Business Combinations");
• Amendments to IAS 27 ("Consolidated and Separate Financial Statements"), to IFRS 2 ("Share based Payments") and to IAS 39 ("Financial instruments: Recognition and Measurement – Eligible Hedged Items");
• IFRIC 17 ("Distribution of Non Cash Assets to Owners"), IFRIC 12 ("Service Concession Arrangements"), IFRIC 15 ("Agreements for the construction of real estate"), IFRIC 16 ("Hedges of a net investment in a foreign operation"), IFRIC 18 ("Transfers of Assets from Customers"); and
• Improvements to IFRS's issued in 2008 and 2009.

The adoption of these new standards and interpretations did not affect the financial statements of the Group, except for the application of the Revised IFRS 3 "Business Combinations" which required the re-measurement to fair value of the previously held interest in Belgacom International Carrier Services SA (BICS) at the date of acquisition of control and additional disclosures (see note 6.4). The Group doesn't anticipate the application of standards and interpretations.

Basis of consolidation

Note 6 lists 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 financial and operating policies of an entity so as to obtain benefits from its activities. The investments 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. Intercompany balances and transactions, and resulting unrealized profits or losses between Group companies are eliminated in consolidation. When necessary, accounting policies of subsidiaries are adjusted to ensure that the consolidated financial statements are prepared using uniform accounting policies.

Companies that are jointly controlled (defined 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-flow of joint ventures are combined on a line-by-line basis with similar items in the consolidated financial statements. The Group's proportionate share of the intercompany balance and transactions and resulting unrealized profits or losses between Group companies and jointly controlled entities are eliminated in consolidation.

Associated companies in which the Group has a significant influence, defined as an investee in which Belgacom has the power to participate in its financial 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 profit 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 associates and share in the result of the associates, 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.

Judgments and estimates

In preparing the consolidated financial statements, management is required to make judgments and estimates that affect amounts included in the financial statements.

Judgments and estimates that are made at each reporting date reflect 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 undertake, actual results may differ from those estimates.

Major judgments and estimates are principally made in the following areas:

Cross-border lease arrangements

The Group holds a commitment in a cross-border lease arrangement with foreign investors. The Group determined that these arrangements in substance do not involve a lease and that the related debts and deposits must not be recognized in the financial statements because they do not meet the definition of an asset and a liability under IFRS. More details are given in note 34.

Claims and contingent liabilities

Related to claims and contingencies, judgment is necessary in assessing the existence of an obligation resulting from a past event, in assessing the probability of an economic outflow, and in quantifying the probable outflow of economic resources. This judgment is reviewed when new information becomes available and with support of outside experts advises.

Recoverable amount of cash generating units including goodwill

In the context of the impairment test, the key assumptions that are used for estimating the recoverable amounts of cash generating units including goodwill are discussed in note 3 (Goodwill).

Actuarial assumptions related to the measurement of employee benefit obligations and plan assets

The Group holds several employee benefit plans such as pension plans, other post-employment plans and termination plans. In the context of the determination of the obligation, the plan asset and the net periodic cost, the key assumptions that are used are discussed in note 9 (Assets and liabilities for pensions, other post-employment benefits and termination benefits).

Acquisition of control in BICS on 1 January 2010

The shareholders' agreement of BICS foresees new decision-making rules and a deadlock procedure in force as from 1 January 2010 leading to the Group to conclude that it controls BICS as from that date. As a result of this and in application of the revised IFRS 3, BICS is fully consolidated as from 1 January 2010 and the previously held interest is re-measured to fair value. The Group estimated the fair value of this interest to EUR 564 million using valuation methodologies, such as discounted cash flows with a terminal value.

Foreign currency translation

Foreign currency transactions

The 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 liabilities 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 classified in "other operating expenses" in the income statement in the period in which they arise.

Foreign operations

Some foreign subsidiaries and joint-ventures operating in non-EURO countries 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 classified 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.

Goodwill

Goodwill represents the excess of the sum of the consideration transferred, the amount of non-controlling interests, if any, and the fair value of the previously held interest, if any, over the net fair value of identifiable assets, liabilities and contingent liabilities acquired in business combination. When the Group obtains control, the previously held interest in the acquiree, if any, is remeasured to fair value through the income statement.

When the net fair value, after reassessment, of identifiable assets, liabilities and contingent liabilities acquired in a business combination exceeds the sum of the consideration transferred, the amount of non-controlling interests, if any, and the fair value of the previously held interest, if any, this excess is immediately recognized in income statement as a bargain purchase gain.

Changes in a contingent consideration included in the consideration transferred are adjusted against goodwill when they arise during the provisional purchase price allocation period and when they relate to facts and circumstances existing at acquisition date. In other cases, depending if the contingent consideration is classified as equity or not, changes are taken into equity or in the income statement.

Acquisition costs are expensed and non-controlling interests are measured at acquisition date either at their value or at their proportionate interest in the identifiable assets and liabilities of the acquiree, on a transaction-by-transaction basis.

Goodwill is stated at cost and not amortized but subject to an annual impairment test at the level of the cash generating unit to which it relates and whenever there is an indicator that the cash generating unit to which the goodwill has been allocated, may be impaired.

Intangible assets with finite useful life

Intangible assets consist primarily of the Global System for Mobile communication ("GSM") license, the Universal Mobile Telecommunication System ("UMTS") license, customer bases and trade names acquired in business combinations, internally developed software 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 are identifiable, when the group controls the asset and when future economic benefits from the asset are probable. Capitalized software costs are included in internally generated and other intangible assets and are amortized over three to five years.

Intangible assets with finite life acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a business combination is their fair value at the date of acquisition.

Intangible assets with finite 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 straight-line amortized over their estimated useful life. GSM and UMTS licenses, other intangible assets and internally generated assets with finite 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 lives are assigned as follows:

• GSM, UMTS and other network licenses Over the license period
• Customer bases and trade names acquired 3 to 20
• Software
• Rights to use, football and broadcasting rights

The amortization period and the amortization method for an intangible asset with finite useful life are reviewed at least at each financial year-end. Changes in the expected useful life or the expected pattern of consumption of future economic benefits 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 equipment

Property, plant and equipment are stated at cost less accumulated depreciation 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 it does not extend the life of the asset or does not significantly 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 derecognized upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on de-recognition of the asset (calculated 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 derecognized.

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:

Land and buildings	Useful life (years)
• Land	Indefinite
• Buildings and building equipment	22 to 33
• Facilities in buildings	3 to 10
• Leasehold improvements and advertising equipments	3 to 10
Technical and network equipment
• Cables and ducts	15 to 20
• Switches	8 to 10
• Transmission	6 to 8
• Radio Access Network	6 to 7
• Mobile sites and site facility equipment	5 to 10
• Equipment installed at client premises	2 to 8
• Data and other network equipment	2 to 15
Furniture and vehicles
• Furniture and office equipment	3 to 10
• Vehicles	5 to 10

The asset's residual values, useful life and depreciation methods are reviewed, and adjusted if appropriate, at each financial 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 the construction of property, plant and equipment.

Borrowing costs are capitalized if they are directly attributable to the acquisition, construction or production of a qualifying asset.

Useful life (years)

Over the contract period

5

Impairment of non-financial assets

The Group reviews the carrying value of its non-financial assets at each balance sheet date for any indication of impairment.

The Group compares at least once a year the carrying value with the estimated 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 flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific 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 previously 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 taxation

Deferred 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 tax assets associated to deductible temporary differences and unused tax losses carried forward are recognized to the extent that it is probable that taxable profit 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 sufficient taxable profit 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 profit 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.

Changes in deferred tax assets and liabilities are recognized in the income statement except to the extent that they relate to items recognized directly in equity, in which case the tax effect is also recognized directly in equity.

Provision for taxation that could arise if undistributed retained profit of certain subsidiaries is remitted to the parent company, is only recognized where a decision has been taken to remit such retained profit, i.e., where the subsidiary intends to distribute a dividend.

Pensions, other post-employment benefits and termination benefits

The Group operates several defined benefit pension plans to which the contributions are made through separately managed funds. The Group also agreed to provide additional post-employment benefits to certain employees. The cost of providing benefits 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 defined benefit 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 individual plan.

The Group also operates several defined contribution plans. Contributions are expensed as incurred.

The Group operates several restructuring programs that involve termination benefits or other forms of additional compensation. The actuarial gains and losses on these liabilities are recognized in the income statement when incurred.

The total expense recognized in the income statement is classified in personnel expenses and pensions, except non-recurring expenses and the interest cost that is classified as finance cost in respect of the liability for termination benefits and additional compensations resulting from external mobility programs and from the collective labor agreement of 2005.

Short term and long term employee benefits

The cost of all short-term and long-term employee benefits, such as salaries, 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 instruments

Fair value of financial instruments

The following methods and assumptions were used to estimate the fair value of financial 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 flow 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 floating interest rate, the amortized cost is assumed to approximate fair value;
• for long term debts carrying a fixed interest rate, the fair value is determined based on the market value when available or otherwise based on the discounted future cash flows;
• For trade receivables, trade payables, other current assets and current liabilities, the carrying amounts reported in the balance sheet approximate 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 valuation techniques, in particular the discounting of future cash flows.

Criteria for initial recognition and for de-recognition of financial assets and liabilities

Financial instruments are initially recognized when the Group becomes party to the contractual terms of the instruments. Normal purchases and sales of financial 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 benefits specified in the contract, the rights expire or the Group surrenders or otherwise loses control of the contractual rights that comprise the financial asset. Financial liabilities (or a portion thereof) are de-recognized when the obligation specified in the contract is discharged, cancelled or expires.

Criteria for offsetting financial assets and liabilities

Where a legally enforceable right of offset exists for recognized financial 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 financial effects are offset.

Criteria for classifying financial instruments as held to maturity

Some financial instruments are classified 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 financial instruments classified as held to maturity are medium to short term.

Criteria for classifying financial instruments as available-for-sale

Non-derivative financial assets that the Group has no intention nor ability to keep until maturity, that the Group does not classify as loans and receivables and that the Group does not designate as at fair value through profit and loss at inception, are classified as available-for-sale.

Shares in equity of non-consolidated entities are usually classified as available-for-sale financial assets. Shares in mutual funds or similar funds are classified as available-for-sale, if not designated at fair value through profit and loss at inception.

Other participating interests

Other 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 classified as available-for-sale financial 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 financial asset is sold, collected or otherwise disposed of, at which time the cumulative gain or loss previously reported in equity is included in income statement.

Other non-current financial assets

Other non-current financial assets include derivatives (see below), long-term interest-bearing receivables such as loans to jointventures, 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 classified as held-to-maturity and are carried at amortized cost.

Trade receivables and other current assets

Trade 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.

Investments

Investments include shares in funds and mutual funds, fixed 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 consideration given and including acquisition costs associated with the investment. 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, at which time the cumulative gain or loss previously reported in equity is included in income statement.

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, fixed income securities that are classified 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, at which time the cumulative gain or loss reported in equity is included in income statement. 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 equivalents

Cash and cash equivalents include cash, current bank accounts and investments with an original maturity of less than three months, and that are highly liquid.

Cash and cash equivalents are carried at amortized cost.

Impairment of financial assets

The Group assesses at each balance sheet date whether there is any objective evidence that a financial asset or group of financial assets is impaired. When the carrying amount of the financial asset is greater than its recoverable amount, an impairment loss is recorded.

An allowance account is always used to account for impairment losses, whether impairment is caused by credit losses or not.

Allowances and impairment losses on financial assets are accounted for as finance costs when the asset relates to financing activities. When the asset relates to operating or investing activities, allowances and impairment losses are accounted for as other operating expenses.

Impairment losses on receivables are determined when it is probable that the Group will not be able to collect any amount due, on basis of individualized criteria or based on portfolio statistics and analysis of ageing balances.

In case of impairment due to credit losses, the impairment allowance is reversed when it becomes probable that the Group will collect the financial asset, as a result of various indicators such as the receipt of collaterals, a successful capital increase at the customer etc.

The impairment allowance will also be reversed when the asset is definitively sold, collected or at the opposite, uncollectible, at what time, the definitive gain (loss) on disposal of the asset is recorded in income statement.

Impairment losses on available for sale equity investments are recognized in net income in case of significant or prolonged decline in the fair value below cost. These impairment losses are not reversed in income statement. If it appears that an existing impairment loss has to be reversed, reversal will be recorded in equity, as a re-measurement to fair value.

Interest-bearing liabilities

All 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 are measured at amortized cost using the effective interest rate method, with amortization of discounts or premiums through the income statement.

Derivatives

The 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 fluctuations 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).

The Group uses IRS and IRCS to reduce its exposure to interest rate and foreign currency fluctuations on long-term debts. These economical hedges are not accounted for as hedges.

The Group does not hold or issue derivative financial 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 sufficiently effective, or the effectiveness 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 neutralized by those on other derivatives.

Net gains and losses on financial instruments

The Group excludes dividends, interest income and interest charges from the net gains and losses on financial instruments. Dividends, interest income and interest charges arising from financial instruments are posted to the finance income/(costs).

Net gains/(losses) from disposals or settlements of financial instruments are accounted for as finance income/(costs) when the instruments relate to financing activities. When the financial instruments relate to operating or investing activities, net gains/(losses) from disposals or settlements are accounted for as other operating income/(expenses).

Net gains and losses resulting from fair value measurement of derivatives used to manage foreign currency exposure on operating activities that do not qualify for hedge accounting under IAS 39 are recorded as operating expenses.

Net gains and losses resulting from fair value measurement of derivatives used to manage interest rate exposure on interest-bearing liabilities that do not qualify for hedge accounting under IAS 39 are recorded in finance income/(costs).

Inventories

Inventories 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 specific 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 specific contract and an allocation of fixed and variable overheads incurred in connection with contract activities based on normal operating capacity.

Leases

Leases of assets through which all the risks and the benefits of ownership of the asset are substantially transferred to the Group are classified as finance lease. Finance leases are recognized as assets and liabilities (interest-bearing liabilities) at amounts equal to the lower of the fair value of the leased asset and the present value of the minimum lease payments at inception of the lease. Amortization and impairment testing for depreciable leased assets, is the same as for depreciable assets that are owned. Lease payments are apportioned between the outstanding liability and finance charges so as to achieve a constant periodic rate of interest on the remaining balance of the liability.

Leases of assets through which all the risks and the benefits of ownership of the asset are substantially retained by the leasing company are classified as operating lease. Payments under operating leases are recognized as an expense in the income statement on a straight-line basis over the lease term.

Provisions

Provisions are recognized when the Group has a present legal or constructive obligation resulting from past events, for which it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate of the amount of the obligation can be made. A past event is deemed to give rise to a present obligation 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 estimated 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 financial expense in the income statement.

Assets and associated liabilities classified as held for sale

Assets and associated liabilities held for sale are recorded at the lower of their carrying value or fair value less costs to sell, and are classified as current assets.

Share based payment

The 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 methodologies for pricing financial 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 recognized 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 expenses

Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. Specific revenue streams and related recognition criteria are as follows:

• Revenue from wireline, carrier and mobile traffic 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 applicable 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 fixed and mobile phone cards is deferred and recognized based on usage of the cards;
• Maintenance fees are recognized as revenue over the maintenance period on a pro-rata basis;
• Commissions received are recognized when the Group acts as an agent, i.e. when the Group does not bear inventory risk and credit risk, does not set the prices nor change or perform part of the services and has no latitude in the supplier's selection;
• The revenue from sales arrangements with multiple deliverables are allocated to the different components of the arrangements based on their relative fair values.

Net revenue is defined as the gross inflow of economic benefits during the period arising in the course of the ordinary activities and taking into account the amount of any trade discounts and volume rebates allowed by the Group. The award credits (loyalty programs) are recorded as a separate component of the sales transaction and recorded as deduction form the initial sale in net revenue. Revenue from award credits is recognized at redemption.

Expenditure on research activities is recognized in the income statement as an expense as incurred.

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 services related to revenues include the costs for purchases of materials and services directly related to revenue.

Costs for advertising and other marketing charges are expensed as incurred.

In order to reflect the gradual evolution as from 2007 towards more and longer fixed term contracts in excess of one year with mobile post-paid customers, the upfront dealer commissions relating to these contracts are expensed as from 2008 over the estimated contract period. Commissions to dealers for other contracts are expensed as incurred.

Non-recurring income and non-recurring expenses include gains or losses on the disposal of consolidated companies exceeding individually EUR 5 million, fines and penalties imposed by competition authorities or by the regulator exceeding EUR 5 million and costs of employee restructuring programs including actuarial gains and losses.

Note 3. Goodwill

(EUR million)	Goodwill
As of 1 January 2009	2,111
Acquisition of Tango Group Acquisition of Scarlet Group Other acquisitions Subsidiary held for sale Other	-19 1 -4 -1 0
As of 31 December 2009	2,088
Acquisition of control in BICS Acquisition of MBS TELECOM NV Acquisition of Sahara Net LLC Price adjustments of Scarlet Other	252 1 5 -7 -1
As of 31 December 2010	2,337

In 2008, the acquisition of both Tango Group and Scarlet Group resulted in a combined increase of goodwill of EUR 334 million. The amount of goodwill relating to these two acquisitions was not final as the purchase price allocation was still provisional (Tango Group) or had not yet started (Scarlet Group) as of 31 December 2008 and has been finalized in 2009.

In 2010, as a result of the acquisition of control on BICS on 1 January 2010 requiring to re-measure the previously held interest at fair value (see notes 6.4 and 22), goodwill increased with EUR 252 million in 2010. The Group elected not to apply the full goodwill option for this acquisition, meaning that the non-controlling interests are measured at acquisition date at their share in the net assets of BICS measured at fair value.

Goodwill has been tested for impairment at the operating segment level because the performance, financial position (including goodwill) and capital expenditures within the Group are monitored at operating segment level.

The carrying amount of goodwill is allocated to the operating segments as follows:

		As of 31 December
(EUR million)	2009	2010
Consumer Business Unit	1,003	1,001
Enterprise Business Unit	1,085	1,084
International Carrier Services	0	252
Total	2,088	2,337

The recoverable amount at segment level (including goodwill) is based on the value in use estimated through a discounted cash flow model. For the years 2011 to 2015, the free cash flows 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 a growth rate varying between 0% and 1.6% per year, reflecting management vision about the long term evolution of the market and based on historical data. Free cash flows of each segment are discounted at a specific post-tax weighted average cost of capital comprised between 6.9% and 9.0%. Pretax weighted average cost of capital, derived from the post-tax weighted average cost of capital via an iterative method, is comprised between 9.3% and 12.5%. A weighted average cost of capital is calculated for each segment, based on the relative weight of its capital structure components and includes a risk premium specific to its inherent risk. The results of this analysis led to the conclusion that none of the goodwill is impaired at 31 December 2010.

Sensitivity analysis demonstrates that the value in use still exceeds the net carrying value of the cash generating units (segments) if key assumptions (discount rate and long term growth rate) would deteriorate significantly.

Note 4. Intangible assets with finite useful life

(EUR million)	GSM and UMTS licenses	Internally generated assets	Customer bases and trade names acquired	TV rights	Other intangible assets	Total
As of 1 January 2009 net of accumulated amortization and impairment	128	86	50	125	162	552
Additions Acquisition of subsidiary Disposal of subsidiary Reclassifications Amortization charge for the year	0 0 0 -1 -17	53 2 0 0 -42	0 128 0 0 -30	17 0 0 0 -60	81 0 -2 -3 -57	151 130 -2 -3 -205
As of 31 December 2009 net of accumulated amortization and impairment	111	100	148	83	181	623
Additions Acquisition of subsidiary Disposals Reclassifications Amortization charge for the year	74 0 0 -7 -24	67 0 0 0 -36	0 541 0 0 -67	69 0 0 0 -68	67 9 -1 8 -65	277 550 -1 1 -260
As of 31 December 2010 net of accumulated amortization and impairment	154	132	621	83	199	1,190

(EUR million)	GSM and UMTS licenses	Internally generated assets	Customer bases and trade names acquired	TV rights	Other intangible assets	Total
As of 31 December 2009 Cost Accumulated amortization and impairment Net carrying amount	379 -268 111	384 -283 100	249 -101 148	205 -122 83	845 -664 181	2,061 -1,438 623
As of 31 December 2010 Cost Accumulated amortization and impairment Net carrying amount	450 -295 154	450 -318 132	790 -169 621	219 -136 83	877 -678 199	2,786 -1,596 1,190

The increase in 2010 results primarily from the full consolidation of BICS and the acquisition of control of BICS leading to a purchase price allocation of BICS (see note 6.4).

The GSM and UMTS licenses relate to the Global System for Mobile communication ("GSM") and Universal Mobile Telecommunication System ("UMTS"). In 1994, the Group acquired a GSM license (covering the use of 900 MHz spectrum) in Belgium for an amount of EUR 226 million. Amortization started in 1995 over the initial life of the license (15 years). Since 6 April 2008, the GSM license has been prolonged until 8 April 2015 free of charge. On 15 March 2010, the Belgian State adopted a Law imposing an additional fee for the extension of the 2G licenses until 2015 for EUR 74 million (for 12 MHz duplex), amortized over 5 years. Belgacom has chosen to pay by installments. On 18 August 2010, Belgacom lodged an annulment procedure before the Constitutional Court against the 15 March 2010 law. Beside this annulment procedure, Belgacom has initiated an action against the Belgian State and the BIPT to ensure the possibility to recover the amounts paid. 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 initial life of the license that is scheduled to end in 2021.

Customer bases and trade names acquired include intangible assets recognized as part of business combinations (see note 6.4).

TV rights include football rights and broadcasting rights acquired.

Other intangible assets mainly include purchased software and rights of use for cables.

Note 5. Property, plant and equipment

(EUR million)	Land and buildings	Technical and network equipment	Other tangible assets	Assets under construction	Total
As of 1 january 2009 net of accumulated depreciation and impairment	534	1,839	55	74	2,501
Additions Acquisition of subsidiary Disposals Disposal of subsidiary Reclassifications Impairment Depreciation charge for the year	17 0 -1 0 3 0 -41	372 -18 -1 -6 44 -2 -438	20 0 0 0 56 0 -22	37 0 1 -1 -100 0 0	446 -18 -2 -7 3 -3 -501
As of 31 December 2009 net of accumulated depreciation and impairment	512	1,788	109	11	2,420
Additions Acquisition of subsidiary Disposals Reclassifications Impairment Depreciation charge for the year	16 0 -4 0 0 -38	397 28 -7 12 0 -480	30 2 0 1 0 -31	14 3 0 -14 0 0	457 34 -11 -1 -1 -549
As of 31 December 2010 net of accumulated depreciation and impairment	486	1,738	110	13	2,348

(EUR million)	Land and buildings	Technical and network equipment	Other tangible assets	Assets under construction	Total
As of 31 December 2009 Cost Accumulated depreciation and impairment Net carrying amount	837 -325 512	10,479 -8,691 1,788	363 -255 109	11 0 11	11,690 -9,270 2,420
As of 31 December 2010 Cost Accumulated depreciation and impairment Net carrying amount	839 -353 486	10531 -8,792 1,738	378 -268 110	13 0 13	11,761 -9,413 2,348

The increase in 2010 results primarily from the full consolidation of BICS (see note 6.4).

Note 6. Investments in subsidiaries, joint ventures and associates

Note 6.1. Investments in subsidiaries

The consolidated financial statements include the financial statements of Belgacom SA and the subsidiaries listed in the following table.

Name	Registered office	Country of incorporation			Group's participating interests
				2009	2010
Belgacom SA under Public Law	Bld du Roi Albert II 27	Belgium			Mother company
Belgacom Mobile SA	1030 Bruxelles VAT BE 0202.239.951 Bld du Roi Albert II 27 1030 Bruxelles	Belgium	(7)	100%	-
Belgacom Finance SA	VAT BE 0453.918.428 Rue de Merl 74	Luxemburg		100%	100%
Belgacom Group International Services SA	2146 Luxembourg Bld du Roi Albert II 27 1030 Bruxelles	Belgium		100%	100%
Finbel Re SA	VAT BE 0466.917.220 Rue de Merl 74	Luxemburg		100%	100%
Connectimmo SA	2146 Luxembourg Bld du Roi Albert II 27 1030 Bruxelles	Belgium		100%	100%
Belgacom Skynet SA	VAT BE 0477.931.965 Bld du Roi Albert II 27 1030 Bruxelles	Belgium		100%	100%
Skynet iMotion Activities SA	VAT BE 0460.102.672 Rue Carli 2 1140 Evere	Belgium		100%	100%
Belgacom W SA	VAT BE 0875.092.626 Rue Marie-Henriette 60 5000 Namur	Belgium	(2)	100%	-
Belgacom Invest SARL	VAT BE 0464.163.014 Rue de Luxembourg 177 8077 Bertange	Luxemburg		100%	100%
Telindus Group NV	Geldenaaksebaan 335 3001 Heverlee	Belgium		100%	100%
Telindus NV	VAT BE 0422.674.035 Geldenaaksebaan 335 3001 Heverlee	Belgium	(7)	100%	-
Telindus Sourcing SA	VAT BE 0442.257.642 Avenue Thomas Edison 1 7000 Mons	Belgium	(7)	100%	-
Telindus BV	Krommewetering 7 3543 AP UTRECHT	The Netherlands	(1)	100%	100%
Telindus International BV	Krommewetering 7	The Netherlands	(1)	100%	100%
Telindus Networks SA	3543 AP UTRECHT Chemin des Primevères 45	Switzerland	(1) (3)	100%	100%
Telindus SA	1701 Fribourg Chemin des Primevères 45	Switzerland	(1) (3)	100%	100%
Telindus SA	1701 Fribourg Plaza Ciudad de Viena 6	Spain	(1)	100%	100%
Telindus SA	28040 Madrid Route d'Arlon 81– 83	Luxemburg	(1)	65%	65%
Telectronics SA	8009 Strassen 2 Rue des Mines	Luxemburg	(1)	65%	65%
Beim Weissenkreuz SA	4244 Esch sur Alzette Route d'Arlon 81– 83	Luxemburg	(1)	64%	64%
Telindus PSF SA	8009 Strassen 2 Rue des Mines	Luxemburg	(1) (8)	65%	-
	4244 Esch sur Alzette
Telindus LTD	Centurion - Riverside Way - Watchmoor Park Camberley - Surrey -GU15 3 YL	United Kingdom	(1)	100%	100%
Telindus Surveillance Solutions Ltd	Centurion - Riverside Way - Watchmoor Park Camberley - Surrey -GU15 3 YL	United Kingdom	(1)	100%	100%
Telindus France SA	ZA de Courtaboeuf- 10, Avenue de Norvège 91962 Les Ulis	France	(1)	100%	100%
Groupe Telindus France SA	ZA de Courtaboeuf- 10, Avenue de Norvège 91962 Les Ulis	France	(1)	100%	100%
Telindus Sweden AB	p/a Advokatfirman VINGE Smarlandsgatan 20 - Box 1107 111 87 Stockholm	Sweden	(1) (3)	100%	100%
Telindus Morocco SAS	Casablanca Nearshore Park, 1100 Bd. Al Qods, Shore III, Casanearshore, Sidi Maârouf Casablanca	Morocco	(1)	100%	100%
ISit BV	Krommewetering 7	The Netherlands	(1)	100%	100%
ISit ICT Services BV	3543 AP UTRECHT Krommewetering 7	The Netherlands	(1) (9)	100%	100%
ISit Education & Support BV	3543 AP UTRECHT Krommewetering 7	The Netherlands	(2)	100%	-
ISit NV	3543 AP UTRECHT Culliganlaan 1B	Belgium	(1) (3)	100%	100%
Euremis SA	1831 DIEGEM Chaussée de Nivelles 81	Belgium	(12)	100%	100%
	1420 Braine-l'Alleud 2146 Luxembourg
Belgacom Bridging ICT NV	Koning Albert II laan 27 1030 Brussels	Belgium		-	100%
Belgacom Opal SA	VAT BE 0826.942.915 Bld du Roi Albert II 27 1030 Bruxelles	Belgium		100%	100%
Belgacom Development SA	VAT BE 0861.583.672 Rue de Merl 74	Luxemburg		100%	100%
Beldiscom SA	2146 Luxembourg Bld d'Avroy 242 4000 Liege	Belgium		100%	100%
Mobile-For SA	VAT BE 0440.935.769 Bld du Roi Albert II 27 1030 Bruxelles VAT BE 0881.959.533	Belgium		100%	100%

Name	Registered office	Country of incorporation		2009	Group's participating interests 2010
Tango Mobile SA	Rue de Luxembourg 177	Luxemburg	(4)	100%	100%
Tango Fixed SA	8077 Bertange Rue de Luxembourg 177	Luxemburg	(4)	100%	100%
Tango Services SA	8077 Bertange Rue de Luxembourg 177	Luxemburg	(4)	100%	100%
Scarlet NV	8077 Bertange Ketelmeerstraat 198	The Netherlands	(5)	100%	100%
Scarlet Telecom BV	8226JX Lelystad Ketelmeerstraat 198	The Netherlands	(5)	100%	100%
Scarlet Belgie Holding BV	8226JX Lelystad Ketelmeerstraat 198	The Netherlands	(5)	100%	100%
Scarlet Extended NV	8226JX Lelystad Belgicastraat 5	Belgium	(5) (10)	100%	-
	1930 Zaventem VAT BE 0463.815.792
ST Integration NV	Belgicastraat 5 1930 Zaventem	Belgium	(5) (3)	100%	100%
Scarlet Business NV	VAT BE 0472.046.243 Belgicastraat 5 1930 Zaventem	Belgium	(5)	100%	100%
Scarlet Luxembourg SARL	VAT BE 0463.079.780 Rue Jean Piret 3	Belgium	(5)	100%	100%
Scarlet Telecom BVBA	2350 Luxembourg Belgicastraat 5	Belgium	(5) (3)	100%	100%
	1930 Zaventem VAT BE 0466.942.657
NetNet BVBA	Belgicastraat 5 1930 Zaventem	Belgium	(5) (10)	100%	100%
Scarlet Belgium NV	VAT BE 0461.549.853 Belgicastraat 5	Belgium	(5)	100%	100%
	1930 Zaventem VAT BE 0447.976.484
Full Telecom NV	Belcrownlaan 13i 2100 Deurne	Belgium	(5) (10)	100%	100%
MBS TELECOM NV	VAT BE 0864.940.684 Belgicastraat 5 1930 Zaventem	Belgium	(5)	-	100%
Sahara International Ventures NV	BE 0882.760.574 Franse Kampweg 6	The Netherlands		51%	51%
Sahara LAC BV	1406 NW Bussum Amstel 108	The Netherlands		51%	51%
Sahara Net LLC	1017 AD Amsterdam Box 5480	Saudi-Arabia		-	36%
Scarlet BV (Curaçao)	Damman, 31422 Fokkerweg 26	Netherlands Antilles	(6)	42%	42%
Caribbean Satellite Communications Inc	Willemstad Curacao 50 Soldado Serrano, Ocean park	Puerto Rico	(6)	42%	42%
Scarlet NV (BTS)	San Juan 00911 Kaya J.A. Abraham Boulevard 73	Netherlands Antilles	(6)	42%	42%
Scarlet NV (SNM)	Bonaire Three Palm Plaza 60, Unit 1, Welfare Road, Colebay	Netherlands Antilles	(6)	42%	42%
Carib - online NV	Sint Maarten Fokkerweg 26	Netherlands Antilles	(6)	42%	42%
Scarlet Inc	Willemstad Curacao 1334 Redwood Avenue	United States	(6)	42%	42%
Scarlet AARC NV	Brighton Iowa 52540 Santa Rosaweg 17	Netherlands Antilles	(6)	42%	42%
All America Cables and Radio (Sint Maarten) NV	Willemstad Curacao 36G Airport Road, Simpson Bay	Netherlands Antilles	(6)	42%	42%
Scarlet Telecom NV	Sint Maarten Watapanastraat 7	Aruba	(6)	42%	42%
Rainbow Internet Services NV	Oranjestad Watapanastraat 7	Aruba	(6)	42%	42%
Scarlet (BVI) Ltd	Oranjestad Arias Fabrega & Fabrega Trust Co BVI Ltd Wickhams Cay, Road Tow Britisch Virgin Islands		(6)	42%	42%
Belgacom International Carrier Services SA	Tortola Rue Lebeau 4 1000 Brussels	Belgium	(11)	-	58%
Belgacom International Carrier Services Deutschland GMBH	VAT BE 0866.977.981 Mendelssohnstrasse 87	Germany	(11)	-	58%
Belgacom International Carrier Services UK Ltd	60325 Frankfurt Great Bridgewaterstreet 70	United Kingdom	(11)	-	58%
Belgacom International Carrier Services Nederland BV	M15ES Manchester Wilhelminakade 91	The Netherlands	(11)	-	58%
Belgacom International Carrier Services North America Inc	3072 AP Rotterdam Corporation trust center - 1209 Orange street	United States	(11)	-	58%
Belgacom International Carrier Services Asia Pte Ltd	USA - 19801 Willington Delaware 8 Cross Street - # 11-00 PWC Building	Singapore	(11)	-	58%
Belgacom International Carrier Services (Portugal) SA	Singapore 048624 Avenida da Republica, 50, 10th floor	Portugal	(11)	-	58%
Belgacom International Carrier Services Italia Srl	1069-211 Lisbon Via San Vito 7	Italy	(11)	-	58%
Belgacom International Carrier Services Spain SL	20123 Milano Avenida de Aragon, 330	Spain	(11)	-	58%
	Parque Empresarial Las Mercedes 28022 Madrid
Belgacom International Carrier Services Switzerland AG	Papiermülhestrasse 69 3014 Bern	Switzerland	(11)	-	58%
Belgacom International Carrier Services Austria GMBH	Teinfaltstrasse, 4 1010 Wien	Austria	(11)	-	58%
Belgacom International Carrier Services Sweden AB	Drottninggaton 30 41114 Goteborg	Sweden	(11)	-	58%
Belgacom International Carrier Services JAPAN KK	#409 Raffine Higaski Ginza, 4-14 Tsukiy 4 - Chome - Chuo-ku Tokyo 104-0045	Japan	(11)	-	58%
Belgacom International Carrier Services China Ltd	Three Pacific Place - Level 28 1, Queen's road East Hong Kong	China	(11)	-	58% 58%
Belgacom International Carrier Services France SAS	Rue du Colonel Moll 3 75017 Paris	France	(11)	-	58%

(1) Subsidiaries of the Group Telindus (2) Liquidated in 2010

(3) In liquidation

(4) Subsidiaries of the Group Tango

(5) Subsidiaries of the Group Scarlet (6) Entity indirectly controlled by the Group

(7) Entity merged in 2010 in Belgacom SA under Public Law

(8) Entity merged in 2010 in Telindus SA (Luxembourg)

(9) Entity merged in 2010 in Isit BV (the Netherlands)

(10) Entity merged in 2010 in Scarlet Belgium NV (11) BICS Group, fully consolidated in 2010

(12) In liquidation after transfer of activity into Belgacom SA under Public Law in 2010

Note 6.2. Investments in joint ventures

The Group has a joint-venture interest in the following companies.

Name	Registered office	Country of incorporation		2009	Group's participating interests 2010
Allo Bottin SA	101/109, rue Jean-Jurès 92300 Levalloi-Perret	France	(1)	50%	50%
Belgacom International Carrier Services SA	Rue Lebeau 4 1000 Brussels VAT BE 0866.977.981	Belgium	(2)	58%	-
Belgacom International Carrier Services Deutschland GMBH	Mendelssohnstrasse 87 60325 Frankfurt	Germany	(2)	58%	-
Belgacom International Carrier Services UK Ltd	Great Bridgewaterstreet 70 M15ES Manchester	United Kingdom	(2)	58%	-
Belgacom International Carrier Services Nederland BV	Wilhelminakade 91 3072 AP Rotterdam	The Netherlands	(2)	58%	-
Belgacom International Carrier Services North America Inc	Corporation trust center - 1209 Orange street USA - 19801 Willington Delaware	United States	(2)	58%	-
Belgacom International Carrier Services Asia Pte Ltd	8 Cross Street - # 11-00 PWC Building Singapore 048624	Singapore	(2)	58%	-
Belgacom International Carrier Services (Portugal) SA	Avenida da Republica, 50, 10th floor 1069-211 Lisbon	Portugal	(2)	58%	-
Belgacom International Carrier Services Italia Srl	Via San Vito 7 20123 Milano	Italy	(2)	58%	-
Belgacom International Carrier Services Spain SL	Avenida de Aragon, 330 Parque Empresarial Las Mercedes 28022 Madrid	Spain	(2)	58%	-
Belgacom International Carrier Services Switzerland AG	Papiermülhestrasse 69 3014 Bern	Switzerland	(2)	58%	-
Belgacom International Carrier Services Austria GMBH	Teinfaltstrasse, 4 1010 Wien	Austria	(2)	58%	-
Belgacom International Carrier Services Sweden AB	Drottninggaton 30 41114 Goteborg	Sweden	(2)	58%	-
Belgacom International Carrier Services JAPAN KK	#409 Raffine Higaski Ginza, 4-14 Tsukiy 4 - Chome - Chuo-ku Tokyo 104-0045	Japan	(2)	58%	-
Belgacom International Carrier Services China Ltd	Three Pacific Place - Level 28 1, Queen's road East Hong Kong	China	(2)	58%	-
Belgacom International Carrier Services France SAS	Rue du Colonel Moll 3 75017 Paris	France	(2)	58%	-
E-Port Communications Systems SA	Slijkensesteenweg 2 8400 Oostende VAT BE 0864.818.940	Belgium	(3)	50%	50%

(1) In liquidation

(2) BICS Group, fully consolidated in 2010

(3) Joint ventures of the Group Telindus

The contribution of the assets, liabilities, income and expenses of the jointly controlled entities which are included in the consolidated financial statements, is detailed as follows:

		As of 31 December
(EUR million)	2009	2010
Non-current assets	133	0
Current assets	226	0
Total assets	359	0
Non-current liabilities	5	0
Current liabilities	255	0
Total liabilities	260	0

		Year ended 31 December
(EUR million)	2009	2010
Net revenue	841	0
Total operating expenses before depreciation and amortization	-763	0
Depreciation and amortization	-21	0
Income before taxes	131	0
Tax expense	-16	0
Net income	114	0

As a result of the acquisition of control into BICS as from 1 January 2010, BICS is fully consolidated from that date (see note 6.4).

Note 6.3. Investments in associates

The Group has a significant influence in the following companies.

Name	Registered office	Country of incorporation	Group's participating interests
			2009	2010
Tunz.com SA	Chaussée de La Hulpe 185 1170 Watermael-Boitsfort VAT BE 0886.476.763	Belgium	40%	40%
ClearMedia NV	Zagerijstraat 11 2960 Brecht VAT BE 0831.425.897	Belgium	-	40%

Note 6.4. Acquisitions and disposal of subsidiaries, joint ventures and associates

Contribution in kind of MTN Dubai into BICS in 2009

On 30 November 2009, MTN Dubai contributed its international carrier assets to BICS in exchange for a 20% ownership in BICS and BICS subsidiaries. These assets were contributed by MTN Dubai at fair value and comprised mainly its international carrier customer base. The dilution of the Group's interest in BICS and BICS subsidiaries from 72% to 57.6% resulted in the disposal of net assets for an amount of EUR 4 million and the recognition of a dilution gain of EUR 74 million disclosed as non-recurring income (see note 22).

Until year-end 2009, BICS was proportionally consolidated because Belgacom, Swisscom and MTN Dubai established joint control on BICS as decisions on operating and financing activities are taken with unanimous consent until 31 December 2009.

Acquisition of control into BICS on 1 January 2010

Effective 1 January 2010, the BICS shareholders' agreement foresaw new decision-making rules and a deadlock procedure in force as from 1 January 2010 leading to the Group to conclude that it controls BICS as from that date. As a result of this and in application of the revised IFRS 3, BICS is fully consolidated as from 1 January 2010 and the previously held interest is re-measured to fair value. The Group estimated the fair value of this interest to EUR 564 million using valuation methodologies, such as discounted cash flows with a terminal value. The Group has not identified intangible assets that can't be individually separated and reliably measured due to their nature. The resulting non-recurring gain amounts to EUR 436 million. The Group has chosen not to apply the full goodwill option for this acquisition. This means that the non-controlling interests aren't measured at fair value. No equity instruments were issued as part of the cost and the Group did not incur any cost in this transaction of acquisition of control.

The fair value of the identifiable assets and liabilities of BICS Group at the date of acquisition and the corresponding carrying amounts immediately prior to the acquisition were:

(EUR million)	Fair value recognised on acquisition	Carrying value
Intangible assets with finite useful life	639	156
Property, plant and equipment	77	77
Trade receivables Current income tax assets	366 2	366 2
Other current assets	24	24
Investments and cash and cash equivalents	121	121
Total assets	1,229	746
Liability for pensions and termination benefits	-2	0
Provisions and contingent liabilities	-5	-5
Deferred income tax liabilities	-166	-2
Trade payables	-419	-419
Income tax payables	-8	-8
Other current payables	-101	-101
Total non-controlling interests and liabilities	-700	-536
Net assets	529	210
Non-controlling interests	-217	-82
Net assets acquired	312	128
Goodwill arising on acquisition	252
Previously held interest measured at fair value	564
The cash outflow on acquisition is as follows:
Consideration paid	0
Net cash acquired of the subsidiary	121
Unpaid amounts	0
Net cash outflow	121

Due to the fact that BICS was jointly controlled in 2009, the cash increased with EUR 51 million when changing from a proportional consolidation on 31th December 2009 to the full consolidation on 1 January 2010. At the date of acquisition, trade receivable amounted to EUR 410 million nominal value and EUR 43 million allowance for doubtful debtors. The purchase price allocation did not lead to the recognition of contingent liabilities.

Other acquisitions in 2010

In 2010, the Group acquired MBS TELECOM NV for an amount of EUR 2 million and Sahara Net LLC (Saudi-Arabia) for an amount of EUR 5 million.

The fair value of the identifiable assets and liabilities of these acquisitions at the date of acquisition and the corresponding carrying amounts immediately prior to the acquisition were:

(EUR million)	Fair value recognised on acquisition	Carrying value
Intangible assets with finite useful life Property, plant and equipment Trade receivables Other current assets Investments and cash and cash equivalents	2 1 3 2 3	0 1 3 2 3
Total assets Trade payables Other current payables Total non-controlling interests and liabilities	11 -6 -3 -9	9 -6 -3 -9
Net assets acquired	2	0
Goodwill arising on acquisition	5
Consideration	7
The consideration is detailed as follows: Cash paid to shareholders Consideration	7 7
The cash outflow on acquisition is as follows: Consideration paid Net cash acquired of the subsidiary Net cash outflow	7 -3 4

Disposals of 2009

In 2009, the Group sold its interest in Telindus Thailand Ltd and in All Communications AG and the WIN activity of Belgacom W SA. These disposals resulted in the recognition of a loss of EUR 2 million.

The net assets disposed in respect of the abovementioned subsidiaries during the year 2009 are summarised as follows:

(EUR million)	Disposals of 2009
Current assets disposed of, excluding cash and cash equivalents Cash and cash equivalents disposed of Current liabilities disposed of Net assets disposed of	3 4 -1 6
Consideration received, net of transaction costs	3
Gain/(loss) on disposal	-2
The net cash inflow on disposal is as follows:
Cash received	3
Cash and cash equivalents disposed of with the subsidiaries	-4
Net cash inflow / (outflow)	-1

No other significant acquisitions, disposals or changes in participating interests of subsidiaries, joint ventures or associates occurred in each of the two years presented.

Note 7. Other participating interests

Other participating interests only include participating interests for which the Group does not exercise control, joint control or significant influence.

Other participating interests comprise the following interests:

		As of 31 December
(EUR million)	2009	2010
Unlisted shares	1	26
Total	1	26

The net carrying amount of other participating interests evolved on the following way:		As of 31 December
(EUR million) Note	2009	2010
Net carrying amount as of 1 January	1	1
Additions	0	25
Total	1	26

As of 31 December
2009	2010
9	33
-9	-7
1	26

In 2010, the Group acquired minority interests in Onlive Inc, In3Depth Systems NV and Jinny Media LTD for an aggregate amount of EUR 25 million.

Note 8. Income taxes

Gross deferred income tax assets / (liabilities) relate to the following:

		As of 31 December
(EUR million)	2009	2010
Deferred income tax liabilities
Accelerated depreciation for tax purposes	-41	-16
Fair value adjustments on acquisition	-25	-172
Statutory provisons not retained under IFRS	-14	-15
Remeasurement of financial instruments to fair value	-1	0
Deferred taxation on sales of property, plant and equipment	-5	-5
Other	-25	-16
Gross deferred income tax liabilities	-111	-223
Deferred income tax assets
Accelerated depreciation for tax purposes	43	43
Remeasurement of financial instruments to fair value	7	7
Liability for post-employment and termination benefits	158	119
Tax losses carried forward	55	10
Capital losses on investments in subsidiaries	41	1
Other	18	14
Gross deferred income tax assets	321	195
Net deferred income tax assets / (liabilities), when grouped per taxable entity, are as follows :
Net deferred income tax liability	-86	-187
Net deferred income tax asset	295	158

The Group has tax losses carried forward arising in Belgium that are available indefinitely to offset future taxable profits of the companies in which these losses arose.

Belgacom SA has fully used its accumulated tax losses carried forward in 2010 that Belgacom had amongst others as a result of the non-recurring expenses related to employee restructuring programs and the transfer of the pension obligations for statutory employees in 2003.

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 226 million at 31 December 2010 (EUR 306 million in 2009) of which EUR 168 million has no expiration date, EUR 17 million and EUR 20 million expire respectively in 2014 and 2015 and EUR 21 million has a longer expiration date.

The share of Belgacom in the undistributed retained profit of subsidiaries amounts to EUR 5,940 million at 31 December 2010 (EUR 4,930 million in 2009) 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 except when a decision has been taken to remit such retained profit i.e. when the subsidiary intends to distribute a dividend.

In the income statement, deferred tax income/ (expense) relate to the following:

		Year ended 31 December
(EUR million)	2009	2010
Relating to deferred income tax liabilities
Accelerated depreciation for tax purposes	-23	26
Fair value adjustments on acquisition	9	18
Excess liabilities	0	-1
Remeasurement of financial instruments to fair value	1	1
Other	-6	9
Relating to deferred income tax assets
Accelerated depreciation for tax purposes	3	0
Remeasurement of financial instruments to fair value	1	-1
Liability for post-employment and termination benefits	-33	-39
Tax losses carried forward	-31	-45
Capital losses on investments in subsidiaries	40	-40
Other	-6	-3
Deferred tax expense of the year	-46	-75

The deferred income tax liabilities increased by EUR 4 million in 2009 and EUR 166 million in 2010 through business combinations, as a result of the purchase price allocation of Tango and Scarlet in 2009 and BICS in 2010.

The consolidated income statement includes the following tax expense:

	As of 31 December
(EUR million)	2009	2010
Current income tax
Current income tax expense	-200	-160
Adjustments in respect of current income tax of previous periods	5	1
Deferred income tax
Expense resulting from changes in temporary differences	-14	-30
Expense resulting from use of tax losses carried forward and tax credits	-31	-45
Income tax expense reported in consolidated income statement	-241	-233

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 each of the two years ended is as follows:

	As of 31 December
(EUR million)	2009 2010
Income before taxes	1,144	1,517
At Belgian statutory income tax rate of 33.99%	389	516
Lower income tax rates of other countries	-4	-2
Income tax consequences of disposal of subsidiaries and other participating interests	-25	-148
Income tax consequences of capital losses on investments in subsidiaries	-40	-7
Non-taxable income from subsidiaries and notional interest deduction	-96	-128
Non-deductible expenditures for income tax purposes	54	9
Other	-37	-6
Income tax expense	241	233
Effective income tax rate	21.03%	15.39%

The non-taxable income from subsidiaries mainly relates to the application of general principles of tax law such as the notional interest deduction applicable in Belgium.

Income tax consequences of disposal of subsidiaries and other participating interests relate to the tax exemption of the capital gain the Group recognized as a result of the contribution in kind by MTN into BICS in 2009 and of the remeasurement of the previously held interest in BICS in 2010 (see notes 6.4 and 22).

Income tax consequences of capital losses on investments in subsidiaries relate primarily to the recognition of tax assets for subsidiaries in liquidation.

Non-deductible expenditures for income tax purposes primarily relate to various expenses that are disallowed for tax purposes and unrecognized tax losses carried forward.

Other adjustments for the year 2009 relate primarily to the recognition of tax losses as a result of a decision of the European Court of Justice in the respect of the taxation regime for dividends received from subsidiaries.

The tax effects relating to each component of other comprehensive income are as follows:

	As of 31 December
(EUR million)	2009	2010
Equity increase from remeasurement to fair value of available-for-sale investments	0	2
Total	0	2

Note 9. Assets and liabilities for pensions, other post-employment benefits and termination benefits

The Group has several plans that are summarized below:

	As of 31 December
(EUR million)	2009	2010
Termination benefits and additional compensations in respect of restructuring programs	469	353
Defined benefit plans for complementary pension plans (net liability)	1	1
Post-employment benefits other than pensions	191	196
Other liabilities	16	15
Net liability recognized in the balance sheet	677	565
Defined benefit plans for complementary pension plans (net asset)	-2	-2
Net asset recognized in the balance sheet	-2	-2

The calculation of the net liability is based on the assumptions established at the balance sheet date. The assumptions for the various plans have been determined based on both macro-economic factors and the specific terms of each plan relating to the duration and the beneficiary population, in order to apply the most relevant measure of estimated outflow of resources.

Note 9.1. Termination benefits and additional compensations in respect of restructuring programs

Termination benefits and additional compensations included in this chapter relate to employee restructuring programs. No plan assets are accumulated for these benefits.

In 2002, Belgacom SA implemented the Belgacom E-Strategic Transformation ("BeST") employee restructuring program. Under the terms of the plan, the Group will pay guaranteed salary allowances until the year 2012.

In 2005, the Group implemented a leave program and a career outphasing program (tutorship). Under the terms of the plan, the Group will pay benefits until the year 2015.

In 2007, the Group implemented a voluntary external mobility program to the Belgian State for its statutory employees.

In 2008, the Group increased its liability for restructuring programs by an amount of EUR 53 million, disclosed as non-recurring expenses . This increase reflects the impact of the evolution of the index during 2008 on all the salary components of all restructuring programs (EUR 19 million), and the success of the external mobility program started in 2007 (EUR 34 million).

In 2009, the Group implemented restructuring programs for employees in subsidiaries that resulted in a non-recurring expense of EUR 7.5 million (see note 26).

In 2010, the Group introduced additional conditions for participants to benefit from a leave premium in the voluntary external mobility program launched in 2007, leading to a reduced number of volunteers. The combined effects from this change and the revision of the discount rate of all termination programs led to a net decrease of the provision with EUR 8 million recognized in non-recurring expenses (see note 26).

Any subsequent re-measurement of the liability for termination benefits and additional compensations is recognized immediately in the income statement.

The funded status of the plans for termination benefits and additional compensations is as follow s :

	As of 31 December
(EUR million)	2009	2010
Defined Benefit Obligation	469	353
Benefit obligation in excess of plan assets	469	353

The components of the expense recognized in the income statement are as follows :

	Year ended 31 December
(EUR million)	2009	2010
Interest cost	20	11
Actuarial loss recognized	0	-8
Expense recognized in the income statement, before curtailment, settlement and special termination	20	4
benefits
Special termination benefits	7	0
Expense recognized in the income statement	27	4

The movement in the net liability recognized in the balance sheet is as follows :

		Year ended 31 December
(EUR million)	2009	2010
At the beginning of the year	569	469
Expense for the period	27	4
Business combination		1
Actual employer contribution	-126	-121
At the end of the year	469	353

Change in plan assets :
	As of 31 December
(EUR million)	2009	2010
At the beginning of the year	0	0
Actual employer contribution	126	121
Distributions to beneficiaries	-126	-121
At the end of the year	0	0

Change in the defined benefit obligation :

	As of 31 December
(EUR million)	2009	2010
At the beginning of the year	569	469
Interest cost	20	11
Actuarial (gain) / loss recognized	0	-7
Special termination benefits	7	0
Business combination	0	1
Distributions to beneficiaries	-126	-121
At the end of the year	469	353
The liability for termination benefits and additional compensations was determined using the following
		As of 31 December
	2009	2010
Discount rate	2.6 %- 4.5%	2.6 %- 4.5%
Future price inflation	2.00%	2.00%

Sensitivity analysis

An increase or decrease of 0.5% in the effective discount rate involves a fluctuation of the liability by approximately EUR 3 million. The Group expects to pay an amount of EUR 108 million for termination benefits and additional compensations in 2011.

Note 9.2. Defined benefit plans for complementary pensions

Belgacom SA and some subsidiaries have a joint complementary defined benefit pension plan for their employees. This plan provides pension benefits for services as of 1 January 1997. The related separately administrated pension fund was created in 1998. The pension fund of Belgacom Mobile created in 2001 merged into the Belgacom SA pension plan in 2009.

Telindus BV, a subsidiary established in the Netherlands, has a complementary defined benefit pension plan for its employees financed through an insurance company.

The funded status of the pension plans is as follows :

	As of 31 December
(EUR million)	2009	2010
Defined Benefit Obligation	196	239
Plan assets at fair value	-172	-211
Deficit / (surplus)	23	28
Unrecognized actuarial gain / (loss)	-24	-29
Deficit / (surplus) after unrecognized actuarial gain / (loss) composed of :	-1	-1
Net liability recognized in the balance sheet	1	1
Net assets recognized in the balance sheet	-2	-2

Historical data:

	As of 31 December
(EUR million)	2006	2007	2008	2009	2010
Defined Benefit Obligation	4	5	168	196	239
Plan assets at fair value	-3	-4	-131	-172	-211
Deficit / (surplus)	1	0	37	23	28
Experience adjustment on plan liabilities : gain / (loss)	3	0	10	2	-10
Experience adjustments on plan assets : gain / (loss)	-1	0	-45	10	5

The components of the expense recognized in the income statement are as follow s :

Year ended 31 December
(EUR million)	2009	2010
Current service cost - employer	24	25
Interest cost	9	11
Expected return on plan assets	-10	-11
Actuarial loss / (gain) recognized	1	0
Expense recognized in the income statement	24	25
The movement in the net liability/(assets) recognized in the balance sheet is as follows :

	As of 31 December
(EUR million)	2009	2010
At the beginning of the year	0	-1
Expense for the period	24	25
Actual employer contribution	-25	-25
Deficit / (surplus) after unrecognized actuarial gain / (loss) composed of :	-1	-1
Net liability at the end of the year	1	1
Net assets at the end of the year	-2	-2

Change in plan assets :

	As of 31 December
(EUR million)	2009	2010
At the beginning of the year	131	172
Expected return on plan assets	10	11
Actuarial gains / (losses) on plan assets	10	5
Actual employer contribution	25	25
Benefits payments and expenses	-3	-3
At the end of the year	172	211

Change in the defined benefit obligation :

		As of 31 December
(EUR million)	2009	2010
At the beginning of the year	168	196
Service cost	24	25
Interest cost	9	11
Benefits payments and expenses	-3	-3
Actuarial loss / (gain)	-2	10
At the end of the year	196	239

The pension liability was determined using the following assumptions :

		As of 31 December
	2009	2010
Discount rate	5.50%	5.00%
Expected rate of return on plan assets		3.25% - 6.20% 2.25 % -6.2%
Future price inflation	2.00%	2.00%
Nominal future salary increase		2.00% - 4.50%2.00% - 4.50%
Nominal future baremic salary increase		2.00% - 3.95%2.00% - 3.95%

The expected return on plan assets is an assumption based on market data and future long term expectations. It takes into account the asset allocation of the respective pension plans that may evolve over time depending on achieved and future expected returns. The assets of the pension plans are detailed as follows:

		As of 31 December
	2009	2010
Equities	45%	49%
Fixed income : bonds and cash	52%	44%
Insurance deposits (for the plan of Telindus BV)	3%	7%

The actual return on plan assets is as follows:

	As of 31 December
(EUR million)	2009	2010
Actual return on plan assets	20	16

The Group expects to contribute an amount of EUR 29 million to these pension plans in 2011.

Note 9.3. Post-employment benefits other than pensions

Historically, the Group grants to its retirees post-employment benefits other than pensions in the form of train ticket discounts, hospitalization insurance and a socio-cultural aid premium. All post-employment benefits other than pensions are directly paid by the Group to the retirees and therefore no plan assets are accumulated for such benefits.

The funded status of the plans is as follows :

	As of 31 December
(EUR million)	2009	2010
Defined Benefit Obligation	238	253
Plan assets at fair value	0	0
Benefit obligation in excess of plan assets	238	253
Unrecognized actuarial loss	-45	-55
Unrecognized past service cost	-2	-2
Net liability recognized in the balance sheet	191	196

Historical data:

	As of 31 December
(EUR million)	2006		2007	2008	2009	2010
Defined Benefit Obligation Benefit obligation in excess of plan assets		4 1	69 69	235 235	238 238	253 253
Experience adjustment on plan liabilities : gain / (loss)		3	0	2	0	-12

The components of the expense recognized in the income statement are as follow s :

	Year ended 31 December
(EUR million)	2009	2010
Current service cost - employer	2	2
Interest cost	13	13
Actuarial loss recognized	2	1
Expense recognized in the income statement	17	17

The movement in the net liability recognized in the balance sheet is as follows :

		As of 31 December
(EUR million)	2009	2010
At the beginning of the year	185	191
Expense for the period	17	17
Actual employer contribution	-11	-12
At the end of the year	191	196

Change in plan assets :

	As of 31 December
(EUR million)	2009	2010
At the beginning of the year	0	0
Actual employer contribution	-11	-12
Distributions to beneficiaries	11	12
At the end of the year	0	0

Change in the defined benefit obligation :

	As of 31 December
(EUR million)	2009	2010
At the beginning of the year	235	238
Service cost	2	2
Interest cost	13	13
Distributions to beneficiaries	-11	-12
Actuarial (gain)/loss	0	12
At the end of the year	238	253
The liability for post-employment benefits other than pensions was determined using the following assumptions :
	As of 31 December
	2009	2010
Discount rate	5.50%	5.00%
Future cost trend	2.00% - 4.00%2.00% - 4.00%
Future price inflation	2.00%	2.00%

The liability for post-employment benefits other than pensions is determined using the Belgian official mortality tables, adjusted for mortality experience of the statutory retirees.

Sensitivity analysis

An increase or decrease of 1% in the medical cost trend would result in an increase of EUR 20 million respectively a decrease of EUR 16 million of the defined benefit 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 13 million to these plans in 2011.

Note 9.4. Other liabilities

The Group has a legal obligation to pay child allowance benefits to a limited number of statutory retirees and to the beneficiaries of the employee restructuring programs.

Telindus France has a legal obligation to pay a one-time post-employment benefit in accordance with local law in France.

Those amounts are directly paid by the Group and therefore no plan assets are accumulated for such benefits. Any subsequent remeasurement of the liability is recognized immediately in the income statement.

The funded status is as follow s :

	As of 31 December
(EUR million) 2009		2010
Defined Benefit Obligation	16	15
Net liability recognized in the balance sheet	16	15

The liability was determined using the following assumptions :

	2009	2010
Discount rate	4.00% - 5.00%	3.75%
Future price inflation	2.00%	2.00%

Note 10. Other non-current assets

			As of 31 December
(EUR million)	Note	2009	2010
Other derivatives	31	58	106
Non-current investments		5	5
Other financial assets		12	11
Total		75	122

Note 11. Trade receivables

Most trade receivables are non-interest bearing and are usually on 30-90 days terms. Terms are somehow longer for the receivables of the International Carrier Services segment, since major part of its trade receivables on other Telco operators are paid via netting agreements.

The analysis of trade receivables that were past due but not impaired is as follows:

As of 31 December	Gross receivables	Allowance for doubtful debtors	Net carrying amount	Neither past due nor impaired	Past due but not impaired
(EUR million)					< 30 days	30-60 days			60-90 days 90-180 days 180-360 days > 360 days
2009 2010	1,209 1,389	-120 -143	1,089 1,246	858 923	102 84	34 44	15 29	28 45	14 47	37 73

As of 31 December 2009 and 2010, 79% and 74% respectively of the total of trade receivables were neither past due nor impaired. For the two years presented, no trade receivables were pledged as collaterals. In 2010, Belgacom Group received collaterals of EUR 20 million (in 2009 EUR 19 million) as securities for the payment of outstanding invoices. Collaterals typically are in the form of bank or parent guarantees. At balance sheet date, these cash collaterals have neither been sold nor transferred as collaterals.

The evolution of the allowance for doubtful debtors is as follows:

(EUR million)	Note	2009	2010
As of 1 January		-145	-120
(Increase) / decrease posted in operating expenses Disposal of subsidiary Other movements	25	2 6 16	-8 0 -15
As of 31 December		-120	-143

Note 12. Other current assets

	As of 31 December
(EUR million) Note	2009	2010
VAT receivables	22	7
Other derivatives	2	1
Prepaid expenses	108	100
Accrued income	18	19
Other receivables	45	14
Total	194	142

Note 13. Investments

	As of 31 December
(EUR million)	Note	2009	2010
Shares	31	76	43
Total		76	43

Shares include sicavs and funds invested mainly in money markets instruments, euro-bonds and equity instruments.

On the two years presented, the net carrying amount of investments evolved on the following way:

(EUR million)	Note	2009	2010
Net carrying amount as of 1 January		53	76
Additions Disposals		34 -12	38 -64
Re-measurements to fair value To equity Transfer to profit or loss on sale	28	1 0	0 -7
Net carrying amount as of 31 December		76	43

	As of 31 December
(EUR million)	2009	2010
Cost	71	43
Accumulated re-measurements to fair value	7	0
Accumulated impairment losses	-1	0
Net carrying amount	76	43

Note 14. Cash and cash equivalents

	As of 31 December
(EUR million)	2009 2010
Fixed income securities	208	332
Short-term deposits	66	195
Cash at bank and in hand	58	57
Total	332	584

The Group invests part of its liquidities in treasury certificates held-to-maturity. 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 floating rates based on daily bank deposit rates.

Note 15. Equity

Note 15.1. Shareholders' equity

At 31 December 2010, the share capital of Belgacom SA amounted to EUR 1 billion (fully paid up), represented by 338,025,135 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 Directors 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 financial statements, this profit distribution is accounted for as personnel expenses.

On 31 December 2010, the number of treasury shares amounts to 16,542,494 of which 2,824,690 with suspended dividend rights and 13,717,804 without dividend rights. 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 financial statements of Belgacom SA.

In 2009 and 2010, the Group sold respectively 221,238 and 294,304 treasury shares to its senior management for respectively EUR 4 million and EUR 6 million under discounted share purchase plans at a discount of 16.67% (see note 35).

During the years 2009 and 2010, employees exercised respectively 59,184 and 573,654 share options. In order to honor its obligation in respect of these exercises, Belgacom used treasury shares (see note 35).

In 2009, the Group granted 1,008,021 share options to its key management and senior management with an exercise price of EUR 22.71. In 2010, the Group granted 1,023,210 share options to its key management and senior management with an exercise price of EUR 26.445 (see note 35).

Number of shares (including treasury shares):	2009	2010
As of 1 January	338,025,135	338,025,135
Cancellation	0	0
As of 31 December	338,025,135	338,025,135
Number of treasury shares:	2009	2010
As of 1 January	17,690,874	17,410,452
Sale under a discounted share purchase plan	-221,238	-294,304
Exercice of stock option	-59,184	-573,654
As of 31 December	17,410,452	16,542,494

Note 15.2 Non-controlling interests

Non-controlling interests include primarily the 42.4% of the minority shareholders into BICS, Swisscom and MTN Dubai as from 1 January 2010, the 49% stake of the minority shareholder Pantheres in the equity and net income of Sahara International Venture NV and subsidiaries (see note 6) and the 35% stake of the minority shareholder Arcelor Mittal in the equity and net income of Telindus SA (established in Luxembourg) and subsidiaries (see note 6).

Note 16. Interest-bearing liabilities

Note 16.1. Non-current interest-bearing liabilities

	As of 31 December
(EUR million)	Note	2009	2010
Unsubordinated debentures		2,077	1,306
Leasing and similar obligations		4	3
Credit institutions		13	8
Other derivatives	31	33	89
Total		2,128	1,406

All long term debt is unsecured. During 2009 and 2010 there have been no defaults or breaches on loans payables.

Over the two years presented, interest rate swaps (IRS) and interest rate and currency swaps (IRCS) were used to manage the currency and interest rate exposure on the JPY unsubordinated debentures. The swaps enabled the Group to transform the interest rate on these debentures from a fixed interest rate to a floating interest rate or vice versa.

Non-current interest-bearing liabilities as of 31 December 2010 are summarised as follows:
	Carrying amount	Nominal amount	Measurement under IAS 39		Maturity date	Interest payment / repriceable	Interest rate payable	Effective interest rate
	(EUR million)	(EUR million)					(b)
Non-current interest-bearing liabilities
Unsubordinated debentures Floating rate borrowings JPY (a)	85	73	Amortized cost	Dec-96	Dec-26	Semi-annually	1.21%	1.21%
Fixed rate borrowings EUR EUR EUR	745 174 125 1,044	750 200 125 1,075	Amortized cost Amortized cost Amortized cost	Nov-06	Nov-16 Nov-16 Dec-13	Semi-annually Semi-annually Semi-annually	4.38% 4.38% 6.00%	4.50% 7.16% 6.11%
JPY (a) JPY (a)	85 92 177	73 72 145	Amortized cost Amortized cost	Nov-95 Dec-95	Nov-15 Dec-15	Semi-annually Semi-annually	6.18% 6.21%	6.18% 6.21%
Total unsubordinated debentures	1,306	1,292
Credit institutions Fixed rate borrowings EUR	8	8	Amortized cost	Nov-05	Nov-13	Semi-annually	3.78%	3.78%
Leasing and similar obligations	3	3	Amortized cost		2012	Quarterly	6.14%	6.14%
Other loans	0	0	Amortized cost
Total non-current financial liabilities (derivatives excluded)	1,317	1,304
Derivatives Derivatives held-for-trading	89	0	Fair value
Total	1,406	1,304

(a) converted into a loan in EUR via currency interest rate swap

(b) for floating rate borrowings, interest rate is the one prevailing at the last repricing date before 31 December 2010

Unsubordinated debentures in EUR and in JPY are issued by Belgacom SA. The capital is repayable in full on the maturity date. The foreign currency exposure on liabilities in JPY is fully hedged economically by interest rate and currency swaps converting these liabilities in JPY into liabilities in EUR (see note 31).

The credit institution in EUR is primarily a loan granted to Telindus NV by a bank for which interests are payable semi-annually and the capital is amortized semi-annually. An amount of EUR 4 million of the total nominal amount is reimbursed annually.

Note 16.2. Current interest-bearing liabilities

	As of 31 December
(EUR million)	2009	2010
Unsubordinated debentures - current portion	0	773
Leasing and similar obligations - current portion	3	3
Credit institutions - current portion	4	4
Credit institutions	2	0
Other loans	49	3
Total	59	783

As of 31 December 2009, the current interest-bearing liabilities mainly consisted of debts towards third parties in EUR with an average remaining maturity of less than 1 month.

As of 31 December 2010, the current interest-bearing liabilities mainly consisted of the EUR 773 million unsubordinated debenture issued in 2006 and maturing in November 2011.

Note 17. Provisions

(EUR million)	Workers' accidents	Litigation	Illness days	Other risks	Total
As of 1 January 2009	44	93	36	52	225
Additions	0	16	0	3	19
Utilisations	-3	-17	-7	-12	-38
Withdrawals	-2	-4	-1	-3	-10
Unwinding	2	0	0	1	3
As of 31 December 2009	41	89	29	41	199
Additions	2	13	9	7	31
Utilisations	-3	-4	-13	-4	-24
Withdrawals	0	-1	0	-5	-6
Unwinding	0	0	0	2	2
As of 31 December 2010	41	96	25	41	203

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 defined by the law of 1967 and calculated with the support of a professional 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 outflows 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 sites where payphones are installed, environmental risks and sundry risks. It is expected that most of these costs will be paid during the period 2009-2024. The provision for restoration costs is estimated at current prices and discounted using a discount rate that varies between 2% and 5%, depending the expected timing to settle the obligation.

Note 18. Other non-current payables

(EUR million) Note	2009	2010
Other amounts payable	3	3
Total	3	3

Note 19. Other current payables

		As of 31 December
(EUR million)	Note	2009	2010
VAT payables		22	18
Payables to employees		93	107
Accrual for holiday pay		79	78
Accrual for social security contributions		55	65
Taxes withheld on remunerations		16	17
Deferred income		189	191
Other derivatives	31	1	0
Accrued expenses		26	24
Other amounts payable		30	29
Total		511	529

Deferred income mainly includes prepaid telecommunication and ICT services.

Other amounts payable mainly relate to advances received on ICT contracts and amounts collected on behalf of third parties.

Note 20. Net revenue

		Year ended 31 December
(EUR million)	2009	2010
Sales of goods	545	565
Rendering of services	5,378	5,987
Total	5,922	6,552

Note 21. Other operating income

	Year ended 31 December
(EUR million)	2009	2010
Gain on disposal of intangible assets and property, plant and equipment	4	4
Gain on disposal of consolidated companies	1	0
Gains on realization of trade debtors	1	1
Other income	62	45
Total	68	51

Other income mainly includes compensation for network damages as well as employee and third party contributions for sundry services.

Note 22. Non-recurring income

	Year ended 31 December
(EUR million)	2009	2010
Gain on dilution of shareholding in BICS	74	0
Remeasurement to fair value of previously held interest in BICS	0	436
Total	74	436

Gains on the disposal of subsidiaries and joint-ventures are reported as non-recurring income when they individually exceed EUR 5 million.

In 2009, the contribution by MTN Dubai of international carrier assets (mainly its customer base) in exchange of an interest of 20% in BICS resulted in the recognition of a non-recurring income of EUR 74 million (see note 6.4).

In 2010, as a result of the acquisition of control into BICS and in application of the revised IFRS 3, the previously held interest into BICS has been re-measured to fair value, leading to the recognition of a non-recurring income of EUR 436 million (see note 6.4).

Note 23. Costs of materials and services related to revenue

		Year ended 31 December
(EUR million)	2009	2010
Purchases of materials	413	438
Purchases of services	1,674	2,204
Total	2,087	2,642

Purchases of materials are shown net of work performed by the enterprise that is capitalized for an amount of EUR 65 million in 2009 and EUR 63 million in 2010.

Note 24. Personnel expenses and pensions

	Year ended 31 December
(EUR million)	2009	2010
Salaries and wages	827	818
Social security expenses	203	202
Pension costs	24	25
Post-employment benefits other than pensions and termination benefits	23	20
Other personnel expenses	31	43
Total	1,108	1,107

Salaries and wages and social security expenses are shown net of work performed by the enterprise that is capitalized for an amount of EUR 57 million in 2009 and EUR 60 million in 2010.

Note 25. Other operating expenses

	Year ended 31 December
(EUR million)	2009	2010
Rent expense	113	116
Maintenance and utilities	192	205
Advertising and public relations	113	99
Consultancy	149	136
Administration and training	66	62
Telecommunications, postage costs and office equipment	43	38
Outsourcing	89	113
Allowances for trade debtors	-2	8
Loss on realization of trade debtors	29	25
Impairment on intangible assets and property,	3	1
plant and equipment
Taxes other than income taxes	57	30
Other operating charges (1)	-11	37
Total	840	870

(1) Including unrealized and realized net exchange gains amounting to EUR 1 million in 2009 and EUR 5 million in 2010.

Other operating expenses are shown net of work performed by the enterprise that is capitalized for an amount of EUR 108 million in 2009 and EUR 132 million in 2010.

Note 26. Non-recurring expenses

	Year ended 31 December
(EUR million)	2009	2010
Termination benefits and additional compensation	7	-8
Fines and penalties imposed by competition authorities or by the regulator	56	0
Total	62	-8

Losses on the disposal of subsidiaries and joint-ventures that individually exceed EUR 5 million, fines and penalties imposed by the regulator or completion authorities exceeding EUR 5 million and costs of restructuring programs (including actuarial gains and losses) are recorded as non-recurring expenses.

In 2009, the Belgian Competition Authority imposed a penalty of EUR 66.3 million on Belgacom Mobile for abuse of a dominant market position during the years 2004 and 2005 in the case initiated by KPN Group Belgium (former Base) in October 2005 (see note 33). The Group recognized this charge (net of existing provisions) as a non-recurring expense in the income statement of the second quarter 2009.

In 2009, the Group implemented restructuring programs for employees of subsidiaries that resulted in an expense of EUR 7 million (see note 9.1).

In 2010, the Group reviewed the assumptions used in the estimation of the liability for termination benefits that resulted in a decrease of the liability with EUR 8 million (see note 9.1)

Note 27. Depreciation and amortization

		Year ended 31 December
(EUR million)	2009	2010
Amortization of licenses and other intangible assets	205	260
Depreciation of property, plant and equipment	501	549
Total	706	809

Note 28. Net finance income / (costs)

	Year ended 31 December
(EUR million)	2009	2010
Finance income
Interest income on financial instruments At amortized cost At fair value through income statement Gain on disposal of	14 4	4 1
Investments	0	7
Discounting income On long term receivables	1	0
Fair value adjustments of financial instruments Not in a hedge relationship Other finance income	7 1	6 2
Finance costs
Interests and debt charges on financial instruments At amortized cost At fair value through income statement	-102 -14	-92 -11
Discounting charges On provisions On termination benefits On long term payables	-1 -14 -3	-1 -9 0
Impairment losses On cash and cash equivalents	-1	0
Fair value adjustments of financial instruments Not in a hedge relationship Other finance costs	-8 0	-7 -4
Total	-117	-102

Note 29. Earnings per share

Basic 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 reflects the income and share data used in the computation of basic and diluted earnings per share.
		Year ended 31 December
(in millions, except per share amounts)	2009	2010
Net income attributable to ordinary shareholders (EUR million)	904	1,266
Adjusted net income for calculating diluted earnings per share (EUR million)	904	1,266
Weighted average number of ordinary shares	320,475,553	321,138,048
Adjustment for share options	211,047	573,981
Weighted average number of ordinary shares for diluted earnings per share	320,686,600	321,712,030
Basic earnings per share (EUR)	2.82	3.94
Diluted earnings per share (EUR)	2.82	3.94

Earnings per share are influenced by non-recurring items included in the net income (see notes 22 and 26). The stock options granted in 2007 are anti-dilutive and hence not included in the calculation of diluted earnings per shares, while the other options granted are dilutive.

Note 30. Dividends paid and proposed

	Year ended December 31
(in millions, except per share amounts)	2009	2010
Dividends on ordinary shares:
Proposed dividends (EUR million)	539	540
Number of shares with dividend rights	320,614,683	321,482,641
Dividend per share (EUR)	1.68	1.68
Interim dividend paid to the shareholders (EUR million)	128	161
Interim dividend per share (EUR)	0.40	0.50

The proposed dividends for 2009 have been effectively paid in April 2010. The interim dividend of 2009 has been paid in December 2009. The interim dividend of 2010 has been paid in December 2010.

Note 31. Additional disclosures on financial instruments

Note 31.1. Derivatives

		As of 31 December
(EUR million)	Note	2009	2010
Non-current assets Other derivatives - interest related	10	58	106
Current assets Other derivatives Total assets	12	2 60	1 107
Non-current liabilities Other derivatives - interest related	16	33	89
Current liabilities Other derivatives Total liabilities	19	1 33	0 89

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.

The tables below show the positive and negative fair value of derivatives, included in the balance sheet respectively as current/noncurrent assets or liabilities, together with the notional amounts presented by the term of maturity.

As of 31 December 2009		Fair value	Notional amount
(EUR million)	Positive	Negative	Within 2 months	3 - 12 months	1 - 5 years	over 5 years	Total
Forward foreign exchange contracts	0	0	2	2	0	0	3
Derivatives held as cash flow hedges	0	0	2	2	0	0	3
Interest rate swaps	0	-25	0	0	0	144	144
Interest rate and currency swaps	52	0	0	0	0	217	217
Interests and currency related - other derivates	6	-8	0	0	0	0	0
Forward foreign exchange contracts	2	-1	43	24	1	0	68
Derivatives not qualifying as hedges (1)	60	-33	43	24	1	361	429
Total	60	-33	45	25	1	361	433

(1) Includes discontinued fair value hedge derivatives

As of 31 December 2010		Fair value			Notional amount
(EUR million)	Positive	Negative	Within 2 months	3 - 12 months	1 - 5 years	over 5 years	Total
Forward foreign exchange contracts	0	0	0	0	0	0	0
Derivatives held as cash flow hedges	0	0	0	0	0	0	0
Interest rate swaps	0	-25	0	0	144	0	144
Interest rate and currency swaps	106	0	0	0	72	73	145
Interests and currency related - other derivates	0	-64	0	0	0	0	0
Forward foreign exchange contracts	1	0	0	14	97	0	111
Derivatives not qualifying as hedges	(1) 107	-89	0	14	314	73	400
Total	107	-89	0	14	314	73	400

(1) Includes discontinued fair value hedge derivatives

Note 31.2. Financial risk management objectives and policies

The Group's main financial instruments comprise unsubordinated debentures, trade receivables and trade payables. The main risks arising from the Group's use of financial instruments are interest rate risk, foreign currency risk, liquidity risk and credit risk. The Group is also exposed to financial risks associated with forecasted transactions.

All financial activities are subject to the principle of risk minimization. To achieve this, all matters related to funding, foreign exchange, interest rate and counterparty risk management are handled by a centralized Group Treasury department. Simulations are performed using different market (including worst case) scenarios with a view to estimating the effects of varying market conditions. All financial transactions and financial risk positions are managed and monitored in a centralized treasury management system.

Group Treasury operations are conducted within a framework of policies and guidelines approved by the Board of Directors. Group Treasury is responsible for implementing these policies. According to the policies, derivatives are used to hedge interest rate and currency exposures. Derivatives are used exclusively as hedging instruments, i.e., not for trading or other speculative purposes. Derivatives used by the Group mainly include forward exchange contracts, interest rate swaps, interest rate and currency swaps and future rate agreements (FRA's).

The Group's internal auditors regularly review the internal control environment at Group Treasury.

No material changes occurred during the period 2009 - 2010 in the nature of the exposure of the Group to financial risks nor in the Group's policies and processes for managing financial risk.

Interest rate risk

The Group's exposure to changing market interest rates primarily relates to its long-term financial obligations. Group Treasury manages exposure of the Group to changes in interest rates and the overall cost of financing by using a mix of fixed and variable rate debts, in accordance with the Group's financial risk management policies. The aim of such policies is to achieve an optimal balance between total cost of funding, risk minimization and avoidance of volatility in financial results, whilst taking into account market conditions and opportunities as well as overall business strategy.

Accordingly, the company entered into several interest rate swaps (IRS) and interest rate and currency swaps (IRCS) to transform the interest rate exposure on certain financial liabilities from a fixed interest rate to a floating interest rate mechanism or vice versa.

These IRS and IRCS derivatives are economic hedges and do not qualify for hedge accounting.

The tables below summarize the non-current interest-bearing liabilities (excluding leasing and similar obligations), 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 2009 and 2010.

							As of 31 December 2009
		Direct borrowing			IRCS agreements			IRS agreements			Net currency obligations
	Notional amount	Weighted average interest rate (1)	Average time to maturity	Amount payable (receivable)	Weighted average interest rate (1)	Average time to maturity	Amount payable (receivable)	Weighted average interest rate (1)	Average time to maturity	Amount payable (receivable)	Weighted average interest rate (1)	Average time to maturity
	(EUR million)		(in years)	(EUR million)			(in years) (EUR million)		(in years)	(EUR million)		(in years)
EUR Fixed Variable	1,864	4.41%	5	217	0.89%	10	144 -144	6.20% 1.00%	6 6	2,008 73	4.54% 0.66%	5 17
JPY Fixed	217	4.99%	10	-217	-4.99%	10				0
Total	2,081	4.47%	5	0			0			2,081	4.41%	5

(1) Weighted average interest rate taking into account last repriced interest rates for floating borrowings.

							As of 31 December 2010
		Direct borrowing			IRCS agreements			IRS agreements			Net currency obligations
	Notional amount	Weighted average interest rate (1)	Average time to maturity	Amount payable (receivable)	Weighted average interest rate (1)	Average time to maturity	Amount payable (receivable)	Weighted average interest rate (1)	Average time to maturity	Amount payable (receivable)	Weighted average interest rate (1)	Average time to maturity
	(EUR million)		(in years)	(EUR million)			(in years) (EUR million)		(in years)	(EUR million)		(in years)
EUR Fixed Variable	1,858	4.43%	4	217	1.15%	9	144 -144	6.20% 1.27%	5 5	2,002 73	4.55% 0.93%	4 16
JPY Fixed	217	4.99%	9	-217	-4.99%	9				0
Total	2,076	4.48%	4	0			0			2,076	4.43%	4

(1) Weighted average interest rate taking into account last repriced interest rates for floating borrowings.

The Group expects immaterial impacts for 2011 on the income statement resulting from interest payable on floating rate borrowings on the one hand and from measurement at fair value in income statement of some IRS derivatives that do not qualify as hedging instruments on the other hand¹ .

Foreign currency risk

The Group's main currency exposures result from its operating activities. Such exposure arises from sales or purchases by operating units in currencies other than their respective functional currency. Transactions in currencies other than the functional currency mainly occur in the International Carrier Services ("ICS") segment whose international carrier activities generate payments to and receipts from other telecommunications operators in various foreign currencies, as well as in some affiliates of the Telindus subgroup running USD denominated operating activities and finally also, albeit to a limited extent, in relationship with international activities (roaming, capital and operating expenditure) of the Group.

Risks from foreign currencies are hedged to the extent that they are liable to influence the Group's cash flows. Foreign currency risks that do not influence the Group's cash flows (i.e., the risks resulting from the translation of assets and liabilities of foreign operations

¹ The volatility on the financial income/(costs) depends on the fluctuations of the EURIBOR at three months (EURIBOR 3M) for the interest payable on the floating rate borrowings and of the IRS-EURIBOR at seven years (IRS-EURIBOR 7 years) for the measurement at fair value of the IRS derivatives.

into the Group's reporting currency) as a rule are not hedged. However, the Group could envisage hedging such so-called translation differences should their potential impact become material to the Group's consolidated financial statements.

The typical financial instruments used to hedge foreign currency risk are forward foreign exchange contracts.

In 2009 and 2010, the Group only incurred currency exposures relative to its operating activities. Any re-measurement to fair value of underlying open trade positions in foreign currencies is recorded via the income statement and reduced or offset by the accompanying re-measurement to fair value of derivatives used to hedge such underlying exposures.

The Group performed a sensitivity analysis on the exchange rates EUR/USD, EUR/SDR2 EUR/GBP, and EUR/CHF, four currency pairs to which it is typically exposed in its operating activities, for the years 2009, 2010 and 2011. For 2009 and 2010, there was no material impact on the Group's income statement. For 2011, the Group does not expect any material impact of currency fluctuations on its overall financial performance either. This results on the one hand from the fact that overall the Group continues to have relatively limited ( albeit increasing in light of the growing ICS activities) foreign currency exposures and on the other hand from timely and adequately hedging such exposures as they surface in the course of business.

Credit risk and significant concentrations of credit risk

Belgacom is exposed to credit risk from its operating activities and from its financing activities (financial investments done to manage cash of the Group). Credit risk encompasses all forms of counterparty exposure, i.e. where counterparties may default on their obligations to Belgacom in relation to lending, hedging, settlement and other financial activities.

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 counterparties fail to perform their obligations in relation to each class of recognized financial assets, including derivatives with positive market value, is the carrying amount of those assets in the balance sheet.

To reduce the credit risk in respect of financing activities and cash management of the Group, transactions as a rule are only entered into with leading financial institutions whose credit rating equals at least A (S&P) and/or A2 (Moody's).

Credit risk on operating activities with significant clients is managed and controlled on an individualized basis. When needed, the Group requests additional collaterals. These significant customers are however not material to the Group, since the client portfolio of the Group is mainly composed of a large number of small customers. Hence, credit risk and concentration of credit risk on trade receivables is limited. For amounts receivable from other telecommunication companies, the concentration of credit risk is also limited due to netting agreements with accounts payable to these companies, prepayment obligations, bank guarantees, parent guarantees and the use of credit limits obtained via credit insurance.

The Group is exposed to credit loss in the event of non-performance by a counterparty on financial derivatives (see note 31.1) and a cross-border lease arrangement (see note 34). However, the Group does not anticipate non-performance by any of these counterparties, nor does it require collateral or other security from them, seeing it only deals with prime financial institutions.

In addition, the Group is exposed to credit risk by occasionally granting financial guarantees. At 31 December 2010, it had granted bank guarantees for an amount of EUR 31 million.

Liquidity risk

In accordance with the treasury policy, Group Treasury manages its overall cost of financing by using a mix of fixed and variable rate debts.

A liquidity reserve in the form of credit lines and cash is maintained to guarantee the solvency and financial flexibility of the Group at all times. For this purpose, Belgacom SA entered into bilateral credit agreements with different maturities and into two separate Syndicated Revolving Facilities. For medium to long-term funding, the Group uses bonds and medium term notes. The maturity profile of the debt portfolio is spread over several years. Group Treasury frequently assesses its funding resources taking into account its own credit rating and general market conditions.

The table below summarizes the maturity profile of the Group's interest bearing financial liabilities at each reporting date. This maturity profile is based on contractual undiscounted interests payments and capital reimbursements and takes into account the impact on cash flows of interest rate derivatives used to convert fixed interest rate liabilities into floating interest rate liabilities and vice versa. For floating rate liabilities, interest rates used to determine cash outflows are the ones prevailing at their last price fixing date before reporting date (as of 31 December 2009 and 2010, respectively).

(EUR million)	2010	2011	2012	2013	2014	2015-2028
As of 31 December 2009
Non-current interest-bearing liabilities	91	869	64	188	53	1,261
Current interest-bearing liabilities	60	0	0	0	0	0
Total	151	869	64	188	53	1,261
As of 31 December 2010
Non-current interest-bearing liabilities		59	66	189	52	1,275
Current interest-bearing liabilities		818	0	0	0	0
Total		877	66	189	52	1,275

2 SDR: Special Drawing Rights: basket of currencies, transactional money used in netting agreements between telecom operators

Bank credit facilities at 31 December 2010

In addition to the interest-bearing liabilities disclosed in notes 16.1 and 16.2, the Group is backed by long term credit facilities of EUR 755 million and short term credit facilities of EUR 116 million. These facilities are provided by a diversified group of banks. As at 31 December 2010, there were no outstanding balances under any of these facilities. A total of some EUR 871 million of credit lines was therefore available3 for drawdown as at 31 December 2010.

The Group has also established a EUR 2.5 billion Euro Medium Term Note ("EMTN") Program and a EUR 1 billion Commercial Paper ("CP") Program. As at 31 December 2010, there was an outstanding balance under the EMTN Program of EUR 1,850 million and no outstanding balance under the CP Program.

Note 31.3. Net financial position of the Group and capital management

The Group defines the net financial position as the net amount of investments, cash and cash equivalents minus any interest-bearing liabilities and related derivatives (including re-measurement to fair value).

		As of 31 December
(EUR million)	Note	2009	2010
Assets
Non-current investments (1)	10	5	5
Current investments (1)	13	76	43
Cash and cash equivalents (1)	14	332	584
Non-current derivatives	10	58	106
Liabilities
Non-current interest-bearing liabilities (1)	16	-2,128	-1,406
Current interest-bearing liabilities (1)	16	-59	-783
Net financial position		-1,716	-1,451

(1) after remeasurement to fair value, if applicable.

Non-current interest-bearing liabilities include non-current derivatives at fair value amounting to EUR 33 million in 2009 and EUR 89 million in 2010 (see note 16.1).

The purpose of the Group's capital management is to maintain net financial debt and equity ratio's that allow for security of liquidity at all times via flexible access to capital markets, in order to be able to finance strategic projects and to offer an attractive remuneration to shareholders. The latter was updated by the Belgacom Board of Directors of 25 February 2010 and Belgacom now commits to return, in principle, most of its annual cash flow before financing activities (or "Free Cash Flow"), to its shareholders. The return of free cash flow either through dividends or share buybacks will be reviewed on an annual basis, in order to keep strategic financial flexibility for future growth, organically or via selective merger and acquisition projects, with a clear focus on value creation. This also includes confirming appropriate levels of distributable reserves.

Over the two years presented, the Group did not issue new shares or any other dilutive instruments.

³ Some credit facilities are conditional to the compliance with certain debt ratios at group level.

Note 31.4. Categories of financial instruments

The Group has interest rate and currency swaps (IRCS) to manage the exposure to interest rate risk and to foreign currency risk on its non-current interest bearing liabilities (see note 31.2).

The following tables present the Group's financial instruments per category defined under IAS 39, as well as gains and losses resulting from re-measurement to fair value. The fair value of these financial instruments is properly reflected by their carrying amounts.

As of 31 December 2009
(EUR million)	Note	Category	Carrying		Amounts recognized in balance sheet according to IAS 39
		according to IAS 39 (1)	amount	Amortized cost	Acquisition cost net of impairment losses, if any	Fair value adjustment recognized in equity	Fair value adjustment recognized in income statement
ASSETS
Non-current assets
Other participating interests Other non-current assets	7	AFS	1		1	0
Other derivatives	10	FAHfT	58				58
Non-current investments	10	AHTM	5	5
Other financial assets	10	LaR	12	12
Current assets
Trade receivables	11	LaR	1,089	1,089
Other current assets
VAT and other receivables	12	LaR	67	67
Prepaid expenses	12	LaR	108	108
Accrued income	12	LaR	18	18
Other derivatives	12	FAHfT	2				2
Investments	13	AFS	76		71	7	-1
Cash and cash equivalents
Fixed income securities	14	HTM	208	208
Short-term deposits	14	LaR	124	124
LIABILITIES
Non-current liabilities
Interest-bearing liabilities
Unsubordinated debentures not in a hedge relationship	16	FLAC	2,077	2,077
Leasing and similar obligations	16	FLAC	4	4
Credit institutions	16	FLAC	13	13
Other derivatives Other non-current payables	16 18	FLHfT FLAC	33 3	3			33
Current liabilities Interest-bearing liabilities, current portion
Leasing and similar obligations	16	FLAC	3	3
Credit institutions	16	FLAC	4	4
Interest-bearing liabilities
Credit institutions	16	FLAC	2	2
Other loans	16	FLAC	49	49
Trade payables		FLAC	1,123	1,123
Other current payables
Other derivatives	19	FLHfT	1				1
Accrued expenses	19	FLAC	26	26
V.A.T. and other amounts payable	19	FLAC	296	296

(1) The categories according to IAS 39 are the following :

AFS: Available-for-sale financial assets

AHTM: Financial assets held-to-maturity

FAHfT: Financial assets held-for-trading

LaR: Loans and Receivables financial assets

FLAC: Financial liabilities at amortized costs

FLHfT: Financial liabilities held-for-trading

As of 31 December 2010
(EUR million)	Note	Category	Carrying		Amounts recognized in balance sheet according to IAS 39
		according to IAS 39 (1)	amount	Amortized cost	Acquisition cost net of impairment losses, if any	Fair value adjustment recognized in equity	Fair value adjustment recognized in income statement
ASSETS
Non-current assets
Other participating interests Other non-current assets	7	AFS	26		26	0
Other derivatives	10	FAHfT	106				106
Non-current investments	10	AHTM	5	5
Other financial assets	10	LaR	11	11
Current assets
Trade receivables	11	LaR	1,246	1,246
Other current assets
VAT and other receivables	12	LaR	21	21
Prepaid expenses	12	LaR	100	100
Accrued income	12	LaR	19	19
Other derivatives	12	FAHfT	1				1
Investments	13	AFS	43		43	0
Cash and cash equivalents
Fixed income securities	14	HTM	332	332
Short-term deposits	14	LaR	252	252
LIABILITIES
Non-current liabilities
Interest-bearing liabilities
Unsubordinated debentures not in a hedge relationship	16	FLAC	1,306	1,306
Leasing and similar obligations	16	FLAC	3	3
Credit institutions	16	FLAC	8	8
Other derivatives	16	FLHfT	89				89
Other non-current payables	18	FLAC	3	3
Current liabilities
Interest-bearing liabilities, current portion
Unsubordinated debentures not in a hedge relationship	16	FLAC	773	773
Leasing and similar obligations	16	FLAC	3	3
Credit institutions	16	FLAC	4	4
Interest-bearing liabilities
Other loans	16	FLAC	3	3
Trade payables		FLAC	1,304	1,304
Other current payables
Accrued expenses	19	FLAC	24	24
V.A.T. and other amounts payable	19	FLAC	314	314

(1) The categories according to IAS 39 are the following :

AFS: Available-for-sale financial assets

AHTM: Financial assets held-to-maturity FAHfT: Financial assets held-for-trading

LaR: Loans and Receivables financial assets

FLAC: Financial liabilities at amortized costs

FLHfT: Financial liabilities held-for-trading

Note 31.5. Assets and liabilities measured at fair value

The Group held as at 31 December 2010 financial instruments measured at fair value.

Those instruments are disclosed in the table below according to the valuation technique used. The hierarchy between the techniques reflects the significance of the inputs used in making the measurements:

• Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities;
• Level 2: valuation techniques for which all inputs which have a significant effect on the recorded fair value are observable for the asset or liability, either directly or indirectly;
• Level 3: valuation techniques for which all inputs which have a significant effect on the recorded fair value are not based on observable market data.

(EUR million)		Category			Fair values measurement at end of the reporting period using :
	Note	according to IAS 39 (1)	Balance at 31 December 2009	Level 1	Level 2	Level 3
ASSETS
Non-current assets Other participating interests Other non-current assets	7	AFS	1			1
Other derivatives	10	FAHfT	58		58
Current assets Other current assets Other derivatives Investments	10 13	FAHfT AFS	2 76	76	2
LIABILITIES
Non-current liabilities Interest-bearing liabilities Other derivatives	16	FLHfT	33		33
Current liabilities Other derivatives	19	FLHfT	1		1

(1) The categories according to IAS 39 are the following :

AFS: Available-for-sale financial assets

AHTM: Financial assets held-to-maturity

FAHfT: Financial assets held-for-trading

LaR: Loans and Receivables financial assets

FLAC: Financial liabilities at amortized costs

FLHfT: Financial liabilities held-for-trading

(EUR million)		Category	Balance at 31		Fair values measurement at end of the reporting period using :
	Note	according to IAS 39 (1)	December 2010	Level 1	Level 2	Level 3
ASSETS
Non-current assets
Other participating interests Other non-current assets	7	AFS	26			26
Other derivatives	10	FAHfT	106		106
Current assets Other current assets Other derivatives	10	FAHfT	1		1
Investments	13	AFS	43	43
LIABILITIES
Non-current liabilities Interest-bearing liabilities
Other derivatives	16	FLHfT	89		89

(1) The categories according to IAS 39 are the following :

AFS: Available-for-sale financial assets

AHTM: Financial assets held-to-maturity

FAHfT: Financial assets held-for-trading LaR: Loans and Receivables financial assets

FLAC: Financial liabilities at amortized costs FLHfT: Financial liabilities held-for-trading

Note 32. Related party disclosures

Note 32.1. Consolidated companies

Subsidiaries, joint-ventures and associates are listed in note 6.

Commercial terms and market prices apply for the supply of goods and services between Group companies.

Joint-ventures

Belgacom International Carrier Services SA and subsidiaries

BICS was a joint venture for the Group in 2009 until 1 January 2010. At that date, BICS became a subsidiary of Belgacom as a result of the acquisition of control by Belgacom into BICS.

For the year 2009, sales and purchases from BICS to the Group amounted to EUR 21 million and EUR 15 million respectively. At 31 December 2009, BICS had trade receivables of EUR 6 million, trade payables of EUR 4 million and short-term deposits of EUR 49 million towards the Group.

Associates

Tunz.com SA

In 2009, the Group acquired 40% of Tunz.com SA but the Group had no significant transactions with this minority participation in 2009 and 2010.

ClearMedia SA

In 2010, the Group acquired 40% of ClearMedia SA but the Group had no significant transactions with this minority participation in 2010.

Note 32.2. Relationship with shareholders

The Belgian State is the majority shareholder of the Group, with a stake of 53.5%. The Group holds treasury shares for 4.9%. The remaining 41.6% are traded on the First Market of Euronext Brussels.

Relationship with the Belgian State

The 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 conditions that are not more favorable than those available to other customers and suppliers. The services provided to those administrations do not represent a significant component of the Group's net revenue.

Note 32.3. Relationship with other State-controlled enterprises

The 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 significant component of the Group's net revenue.

Note 32.4. Relationship with key management personnel

Compensation of the directors is as follows: an annual fixed 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 Officer. All members of the Board of Directors, with the exception of the President and Chief Executive Officer, 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 Officer. For the Chairman these attendance fees are doubled. The total remuneration for the directors amounts to EUR 942,000 for 2009 and EUR 914,375 for 2010. The directors have not received any loan or advance from the Group.

The number of meetings of the Board of Directors and advising committees are detailed as follows:

	2009	2010
Board of Directors	5	5
Audit and Compliance Committee	5	5
Nomination and Remuneration Committee	5	8
Ad hoc Committee	1 (1)	0
Strategic and Business Development Committee	1	2

(1) The Board of Directors in its meeting of July 30, 2009 decided to create an ad hoc Committee, consisting of the members of the Nomination and Remuneration Committee extended with the Chairman of the Audit & Compliance Committee in order to confirm its position and not to conduct an investigation or take position with respect to the misuse of privileged information before the outcome of the investigation of the CBFA.

For the year ended 31 December 2009, a total amount of EUR 8,311,442 (social security costs and share-based payments included) was paid in aggregate to the members of the "Belgacom Management Committee" (BMC), Chief Executive Officer included. In 2009, the members of the Belgacom Management Committee were A. De Lathauwer, D. Bellens, R. Stewart, S. Alcott, M. Georgis, M. De Coster and G. Dallemagne.

For the year ended 31 December 2010, a total amount of EUR 11,264,598 (social security costs and share-based payments included) was paid in aggregate to the members of the "Belgacom Management Committee" (BMC), Chief Executive Officer included. In 2010, the members of the Belgacom Management Committee were A. De Lathauwer, D. Bellens, R. Stewart, S. Alcott, M. Georgis, M. De Coster (8 months) and G. Dallemagne.

These total amounts of key management compensation include the following components:

• Short-term employee benefits : annual salary (base and variable) as well as other short-term employee benefits such as medical insurance, private use of management cars, luncheon vouchers, and including social security contributions paid on these benefits;
• Post-employment benefits: insurance premiums paid by the Group in the name of members of the BMC. The premiums cover mainly a post-retirement complementary pension plan;
• Share-based payments: cost of the discount of 16.67% compared to the market price in Discounted Share Purchase Plan and the fair value of stock options (that is expensed over the vesting period in accordance with the graded vesting method); and

• Termination benefits.

		Year ended 31 December
EUR	2009	2010
Short-term employee benefits	5,079,039	5,876,229
Post-employment benefits	1,308,847	1,958,144
Termination benefits	0	984,886
Share-based payments	1,923,556	2,445,339
Total	8,311,442	11,264,598

No other long-term benefits were granted to the BMC members in 2009 nor in 2010.

Note 32.5. Regulations

The telecommunications sector is regulated through the legislation adopted in the Belgian parliament, through a series of Royal and Ministerial 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 fixed voice telephony services, public network infrastructure 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 33. Rights, commitments and contingent liabilities

Operating lease commitments

The 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 EUR 132 million in 2009 and EUR 125 million in 2010.

(EUR million)	Within one year	From 1 to 3 years	From 3 to 5 years	More than 5 years	Total
Buildings	19	25	10	3	57
Sites	20	38	37	68	163
Technical and network equipment	18	4	1	1	24
Furniture	0	0	0	0	0
Vehicles	29	42	10	1	82
Other material	1	2	1	0	3
Total	87	111	58	72	329

Future minimum rentals payable under the non-cancellable operating leases are as follows at 31 December 2010:

Claims and legal proceedings

From time to time, the Group 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 17) and those described below for which no or limited provisions have been accrued, in the jurisdictions 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, and proceedings with the Belgian tax administrations with respect to real estate withholding taxes and corporate income taxes.

1. After the launch on 1 June 2005 of the Happy Time tariff scheme by Belgacom, Tele2 filed a complaint with the Belgian Competition Authority i) alleging that said tariffs constitute an abuse of dominant position (27 June 2005) and ii) requesting interim measures, i.e. suspension of the Happy Time offer, pending the procedure (5 July 2005).

On 1 September 2006, Tele2's request for interim measures was initially rejected by the President of the Competition Council. Following an appeal by Tele2, the Court of Appeal, on 18 December 2007, nullified the aforementioned decision, arguing a.o. a lack of reasoning.

However, Tele2 did not ask the President to adopt a new decision on its request for interim measures but initiated on 18 April 2008 a damage claim before the commercial court based on an alleged abuse of dominance (the Happy Time plan) (claim for EUR 1 provisional and request for appointment of an expert to compute the precise damage). This case on the merits is still pending before the Court and the timing for a decision on the merits is unknown.

In the case on the merits with the Competition Authority, the Prosecutor issued on 29 September 2009 his reasoned report proposing to the Competition Council that Belgacom abused and still abuses its dominant position, retaining the allegation of price squeeze. The hearings before the Competition Council have taken place. The further timing for a decision on the merits is currently unknown.

Following the report of the Prosecutor, management reassessed the contingent liabilities of the Group, taking into account the current legal status of both litigation files. Belgacom will continue to monitor any further development in both cases and in the meantime vigorously continues to defend its interests.

It is to be noted that given different reorganizations within the KPN Group the claimant in the aforementioned case is now KPN Belgium.

• 1. Between 12 and 14 October 2010, the Belgian Directorate General of Competition started a dawn raid in Belgacom's offices in Brussels. This investigation concerns allegations by Mobistar and KPN regarding the wholesale DSL services of which Belgacom would have engaged in obstruction practices.This measure is without prejudice to the final outcome of the full investigation which has just started. Following the inspection, the Directorate General of Competition is to examine all the relevant elements of the case. Eventually the College of Competition Prosecutors may propose a decision to be adopted by the Competition Council. During this procedure, Belgacom will be in a position to make its views heard. (This procedure may last several years.)
• 1. In June 2003, KPN Group Belgium (former BASE) filed a damage action against Belgacom (former Belgacom Mobile) before the Commercial Court of Brussels alleging that:
• Since 1 October 2000 Belgacom's, mobile termination rates are not in accordance with the official telecommunications regulations requiring cost oriented pricing;
• Belgacom's Proximus-to-Proximus tariffs, also referred to as on-net tariffs, as of 1999 constitute an abuse of Belgacom's alleged dominant position in the Belgian market.

In respect of both allegations, KPN Group Belgium's provisional estimate of its claims for compensation varied in the course of the procedure based upon different methodologies presented to the Court. Based upon the last documents in the file (prior to the 2007 interim ruling, detailed below), said claims amounted to approximately EUR 1 billion.

In March 2004, Mobistar filed a request to intervene voluntarily in the action brought by KPN Group Belgium against Belgacom, alleging the same in respect of Belgacom's on-net tariffs, although Mobistar's allegation targets primarily tariff schemes offered by Belgacom to business and corporate customers. Besides a claim for compensation, Mobistar requested the court to appoint a court expert to calculate the amount of the alleged damages.

On 29 May 2007 following an extensive exchange of factual and legal arguments, the Commercial Court of Brussels ruled the following:

• In respect of the first allegation, Belgacom did not infringe the obligation requiring cost oriented pricing for its termination rates; the damages claim in this respect was consequently dismissed; and
• In respect of the second allegation, the alleged abuse of dominant position as to the Proximus-to-Proximus tariffs:
• o The Court did not find any proof for the existence of a dominant position during 2005; for the former years (1999 2004) the Court considered Belgacom as being in a dominant position;
• o The Court rejected two types of alleged abuses; and
• o In respect of two possible other types of abuses, the Court requested a panel of experts, composed of Mr. Robert Wtterwulghe and Mr. Cyril Nourissant to further examine the case with the following mission:
  • Network effects:
  • Determine whether the Proximus pricing plans, which contain an off-net/on-net differential and as such are criticised by KPN Group Belgium and Mobistar, have anti-competitive effects related to a network effect; and
  • If possible, determine the damage caused.

Price squeeze:

• Determine whether there was an anti-competitive price squeeze in respect of the aforementioned tariff plans; and
• If possible, determine the damage caused.

On 2 October 2009, the panel of experts filed their preliminary report and concluded:

• To the existence of the alleged competition law infringements;

• That it could be considered that the alleged impact of the Proximus on-net tariffs during the years 1999-2004 amounted to EUR 1,18 billion.

According to Belgacom, this first preliminary report does not provide a demonstration of the alleged infringements of the competition rules nor the existence of any damages.

Belgacom observed that an unprecedented and prospective method was put forward by this panel of experts, and assessed the use and implementation of this method as inappropriate. The panel considered that due to the alleged competition law infringements KPN Group Belgium and Mobistar underperformed as compared to the results and market shares that they would have achieved in an efficient market, to which reasoning and conclusions Belgacom strongly disagrees. Furthermore, the panel referred for its benchmark of an efficient market to the UK during the period 1999- 2004, which is according to Belgacom in this case highly disputable. Finally, review of the report raised a series of questions with respect to data used and mathematical accuracy of calculations at all levels of the assessment of the case. Taking these observations into account, Belgacom can only be of the opinion that the conclusions of this first preliminary report cannot be considered as a reliable outcome of the mission entrusted to the panel of experts.

On 10 December 2010, the panel of experts filed a second preliminary report, which a.o. takes into account the exchange of additional information that had been requested by the experts. Still pursuing the principles reflected in the first preliminary report, and thus, in particular, based on the same unprecedented and prospective method, this second report states that it could be considered that the alleged impact on Mobistar and KPN Group Belgium amounts to EUR 1,84 billion.

According to Belgacom, this second report, which remains preliminary of nature, does neither provide any demonstration of the alleged infringements of the competition rules. Following a thorough analysis, Belgacom noted that in the second preliminary report the vast majority of the observations and criticisms that it expressed on the first preliminary report remain unanswered and that moreover Belgacom's own expert reports related to the different elements to be assessed by the panel of experts, being the questions of network effect of the on-net tariffs, of the existence of price squeeze, of their respective anti-competitive effects and of the respective damages that these practices would allegedly have caused, were largely disregarded. Moreover this second report introduces certain new elements that Belgacom finds to be highly contestable (in particular, those new elements leading to an increase of the alleged amount of damages as compared to the first preliminary report, a.o. the introduction of a constant profitability benchmark for the whole period based on the UK market for the period 1999-2004, during which the UK operators were in a different phase of development as compared to those on the Belgian market).

For this and a number of other reasons, Belgacom decided to introduce a motion with the court in respect of the expert panel, requesting their recusal/replacement. This motion is to be dealt with by the court in the near future.

In any event and as foreseen in the proceedings, Belgacom will continue to submit at the required stages of the proceedings, its detailed observations and criticisms that will cover all aspects of the pending matter.

It is to be understood that it will always be upon the court (i) to decide whether anti-competitive practices have been committed that infringe the competition rules, (ii) to determine whether Belgacom is liable for such practices and (iii) to decide upon the amount of the possible damages to be paid, after having assessed the advice of the Expert panel and the parties' defense arguments.

Indeed, this matter does not only involve a debate on the possible damages that would have been caused, but first the existence of the alleged anti-competitive practices is to be demonstrated. If a final report should still be required, Belgacom considers that the experts will need to take the observations and criticisms of Belgacom into account.

Belgacom continues to contest the claims of both KPN Group Belgium and Mobistar and hence also the content of the second preliminary report of the panel of experts in respect of the existence of the infringements itself as well as in respect of the calculation of the damages.

Following the second preliminary report of the expert panel, management reassessed the contingent liabilities of the Group, taking into account the current legal status of this litigation file. Belgacom will continue to monitor any further development and in the meantime vigorously continues to defend its interests.

In October 2009, seven parties (Telenet, KPN Group Belgium (former Base), KPN Belgium Business (Tele 2 Belgium), KPN BV (Sympac), BT, Verizon filed an action against Belgacom Mobile (currently Belgacom and hereinafter indicated as Belgacom) before the Commercial Court of Brussels formulating allegations that are similar to those in the case mentioned above (including Proximus-to-Proximus tariffs constitute an abuse of Belgacom's alleged dominant position in the Belgian market), but for different periods depending on the claimant, in particular, in the 1999 up to now timeframe (claim for EUR 1 provisional and request for appointment of an expert to compute the precise damage). In November 2009 Mobistar filed another similar claim for the period 2004 and beyond. This case has been postponed for an undefined period.

1. In the proceedings following a complaint by KPN Group Belgium in 2005 with the Belgian Competition Authority the latter confirmed on 26 May 2009 one of the five charges of abuse of dominant position put forward by the Prosecutor on 22 April 2008, i.e. engaging in 2004-2005 in a "price-squeeze" on the professional market. The Belgian Competition Authority considered that the rates for calls between Proximus customers ("on-net rates") were lower than the rates it charged competitors for routing a call from their own networks to that of Proximus (=termination rates), increased with a number of other costs deemed relevant. All other charges of the Prosecutor were rejected. The Competition Authority also imposed a fine of EUR 66.3 million on Belgacom (former Belgacom Mobile) for abuse of a dominant position during the years 2004 and 2005. Belgacom was obliged to pay the fine prior to 30 June 2009 and recognized this charge (net of existing provisions) as a non-recurring expense in the income statement of the second quarter 2009.

Belgacom filed an appeal against the ruling of the Competition Authority with the Court of Appeal of Brussels, contesting a large number of elements of the ruling: a.o. the fact that the market impact was not examined. Also KPN Group Belgium and Mobistar filed an appeal against said ruling.

• 1. The Belgian tax authorities notified a foreign subsidiary of the Group in 2007 to be considered as a tax resident of Belgium rather than of Luxembourg and therefore to be subject to Belgian corporate income tax for the year 2004. In 2008, the Belgian tax authorities maintained their 2004 assessment and assessed the Belgian corporate income tax for the subsequent years 2005 and 2006. Belgacom has strong arguments to ward off the cumulative proposed tax assessment of EUR 69 million excluding interests (years 2004, 2005 and 2006 together) and contests the assessment.
• 1. Since 2003, Belgacom considers the enrolments of real estate tax on telecom equipment as undue and therefore recognizes an asset against the tax authorities in the 'current income tax asset' caption of the balance sheet for an amount of EUR 146 million at 31 December 2009 and EUR 170 million at 31 December 2010.

Capital expenditure commitments

At 31 December 2010, the Group has contracted commitments of EUR 66 million, mainly for the acquisition of intangible assets and technical and network equipment.

Other rights and commitments

At 31 December 2010, the Group has the following other rights and commitments:

• The Group received guarantees for EUR 6 million from its customers to guarantee the payment of its trade receivables and guarantees for EUR 8 million from its suppliers to ensure the completion of contracts or works ordered by the Group;
• The Group granted guarantees for an amount of EUR 38 million (including the bank guarantees mentioned in note 31.2) to its customers and other third parties to guarantee, among others, the completion of contracts and works ordered by its clients and the payment of rental expenses related to buildings and sites for antennas installation;
• Belgacom has a right, established by Belgian legislation with respect to Universal Services, to receive compensation from the Universal Services Obligation fund for offering Social Tariffs as from 1 of July 2005. This right is contested by some operators, and the European Commission attacked Belgium before the European Court. In October 2010, the European Court found the Belgian legislation non-compliant, requiring new legislative initiatives from the Belgian State. For these reasons, the Group qualifies the compensation receivable as a contingent asset.

Note 34. Cross-border lease arrangements

During the period 1996 through 2001, the Group entered into several cross-border lease arrangements with foreign investors relating to part of its fixed and mobile switches equipment. Under the terms of these agreements, 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 undertaking 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 income" over the lifetime of the respective agreements. The fees effectively recognized in income amount to EUR 0.3 million in 2009 and a net of EUR 1.0 million in 2010.

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 2010 to USD 31 million (EUR 24 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 A+ by Standard & Poor's. The term of the related leasing debt expires in 2012.

Only this arrangement remains open at 31 December 2010 after the early termination in 2010 of an arrangement amounting to USD 45 millions end 2009 and dating from 1999.

Note 35. Share-based Payment

Discounted Share Purchase Plans

In 2009 and 2010, the Group launched Discounted Share Purchase Plans.

Under the 2009 and 2010 plans, Belgacom sold respectively 221,238 shares and 294,304 to the senior management of the Group at a discount of 16.67% compared to the market price (discounted price of respectively EUR 22.71 and EUR 22.04 per share). The cost of the discount amounted to EUR 0.8 million in 2009 and EUR 0.9 million in 2010 and was recorded in the income statement as personnel expenses (see note 24).

Employee Stock Option Plans

In 2009 and 2010, Belgacom launched Employee Stock Option Plans whereby respectively 1,008,021 and 1,023,210 share options were granted to the key management and senior management of the Group.

As prescribed by IFRS 2 ("Share-based Payments"), the Group recognizes the fair value of the equity portion of the share options at inception date over their vesting period (three years) in accordance with the graded vesting method and periodic re-measurement of the liability component. Such fair value amounts to EUR 4 million for the 2009 plan and EUR 3 million for the 2010 plan. The annual charge of the graded vesting including the liability component re-measurement is recognized as personnel expenses and amounts to EUR 5 million in 2009 and 10 million in 2010.

At the moment of exercise, the employee will pay the exercise price of 22.71 EUR per share for the 2009 plan and 26.445 EUR per share for the 2010 plan, with physical delivery of the share. The share options are exercisable until 19 April 2016 for the 2009 plan and 02 May 2017 for the 2010 plan at the latest.

The plans granted in 2004, 2005, 2006, 2007 and 2008 are still open. All the plans except the 2004 plan provide the beneficiaries with a right to the dividends declared after granting the options. The dividend liability amounted to EUR 7 million on 31 December 2009 and EUR 11 million on 31 December 2010 and is included under the caption "Other current payables'.

In 2009, the Group gave the opportunity to its option holders to voluntary extend the exercise period of all the plans (except the plan 2009) with 5 years, within the guidelines as established by the law.

For all the plans except the 2004 plan, in case of voluntary leave of the employee, all unvested options forfeit except during the first year, for which the first 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 follow s:

			Number of stock options
	Plan 2004	Plan 2005	Plan 2006	Plan 2007	Plan 2008	Plan 2009	Plan 2010
Outstanding at 1 January 2004	0
Movements during the year 2004	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 2005
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 2006
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	-
Movements during the year 2007
Granted	-	-		475,516
Forfeited	-5,255	-5,491	-5,341	-1,236
Exercised	-140,292	-29,373	-81,096	-
Expired	-	-	-	-
Total	-145,547	-34,864	-86,437	474,280
Outstanding at 31 December 2007	590,633	496,515	513,226	474,280
Exercisable at 31 December 2007	590,633	341,739	211,182	30,742
Movements during the year 2008
Granted	-	-	-	-	796,197
Forfeited	-2,310	-3,800	-4,096	-5,070	-
Exercised	-269,776	-1,786	-9,358	-	-
Expired	-				-
Total	-272,086	-5,586	-13,454	-5,070	-
Outstanding at 31 December 2008	318,547	490,929	499,772	469,210	796,197
Exercisable at 31 December 2008	318,547	490,929	354,825	183,044	21,584
Movements during the year 2009
Granted						1,008,021
Forfeited	-6,750	-18,735	-180	-617	-	-
Exercised	-15,911	-31,496	-11,777	-	-	-
Expired	-	-	-	-	-	-
Total	-22,661	-50,231	-11,957	-617	-	1,008,021
Outstanding at 31 December 2009	295,886	440,698	487,815	468,593	796,197	1,008,021
Exercisable at 31 December 2009	295,886	440,698	487,815	334,171	297,619	3,621
Movements during the year 2010
Granted						-	1,023,210
Forfeited	-2,406	1,500	-16,580	156	-308	-
Exercised	-260,726	-37,960	-206,602	-7,237	-4,096	-57,033
Expired	-	-	-	-	-	-
Total Outstanding at 31 December 2010	-263,132 32,754	-36,460 404,238	-223,182 264,633	-7,081 461,512	-4,404 791,793	-57,033 950,988	1,023,210 1,023,210
Exercisable at 31 December 2010	32,754	404,238	264,633	461,512	579,250	341,745	40,435

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	Plan 2007	Plan 2008	Plan 2009	Plan 2010
Option pricing model	Binomial	Black Scholes	Black Scholes	Black Scholes	Black Scholes	Black Scholes	Black Scholes
Grant Date	22/03/2004	25/04/2005	24/04/2006	23/04/2007	21/04/2008	20/04/2009	3/05/2010
Dividend rights as from grant date	no	yes	yes	yes	yes	yes	yes
Contractual life of the options	7 years	7 years	7 years	7 years	7 years	7 years	7 years
Extension of the contractual period during 2009	5 years	5 years	5 years	5 years	5 years	-	-
Expected life	5 (to 6) years	6 years	6 years	6 years	6 years	6 years	6 years
Expected life for the extended options	11 years	11 years	10 years	10 years	10 years	-	-
Exercise price (EUR)	24.50	29.92	25.94	32.71	29.14	22.71	26.445
Expected volatility (compared to peer group volatility)	27.50%	18.00%	21.00%	19.83%	27.00%	38.50%	31.00%
Expected dividend pay-out ratio	50% - 60%/ FCF(*)	50% - 60%/ FCF(*)	50% - 60%/ FCF(*)	50% - 60%/ FCF(*)	50% - 60%/ FCF(*)	50% - 60%/ FCF(*)	FCF(*)
Risk free interest rate	Euro swap annual rate	Euro swap annual rate	Euro swap annual rate		Euro swap annual rate Euro swap annual rate Euro swap annual rate		Euro swap annual rate
Fair value of options granted (EUR)	4.29	4.15	4.02	6.25	6.68	6.90	3.47
Weighted average share price at exercise during the year (EUR):
- 2005	32.96	-	-	-	-	-	-
- 2006	31.87	32.67	31.98	-	-	-	-
- 2007	33.86	33.87	34.13	-	-	-	-
- 2008	27.11	26.80	28.63	-	-	-	-
- 2009	26.07	25.64	26.81	-	-	-	-
- 2010	28.60	28.11	27.54	28.33	29.21	27.83	-
Weighted average remaining contractual life (years)	4	3	6	5	6	5	6

(*) FCF: Belgacom commits, as from 2010, to return, in principle, most of the free cash flow to its shareholders.

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 profile.

Note 36. Relationship with the auditors

The Group expensed for the Group's auditors during the year 2010 an amount of EUR 1,070,173 for the annual audit mandate fees and EUR 315,640 for non-mandate fees.

This last amount is detailed as follows:

EUR	Auditor	Network of auditor
Attestation missions	66,837	0
Tax advice	0	13,519
Other missions	145,211	90,073
Total	212,048	103,592

Note 37. Segment reporting

As from 1 January 2008 onwards, the Board of Directors, the Chief Executive Officer and the Belgacom Management Committee managed the operations of Belgacom Group based on the new client-oriented organization structured around the five following reportable operating segments:

• The Consumer Business Unit (CBU) sells voice products and services, internet and television, both on fixed and mobile networks, to residential clients, mainly on the Belgian market;
• The Enterprise Business Unit (EBU) sells ICT services and products to professional clients, whether they are independent workers, smaller firms or major companies. These ICT solutions, including telephone services, are marketed mainly under the Belgacom, Proximus and Telindus brands, on both the Belgian and international markets;
• The Service Delivery Engine & Wholesale (SDE&W) centralizes all the network and IT services and costs (excluding costs related to customer operations and to the service delivery of ICT solutions), provides services to CBU and EBU and sells these services to other telecom and cable operators;
• International Carrier Services (ICS) is responsible for international carrier activities;
• Staff and Support (S&S) brings together all the horizontal functions (human resources, finance, legal, strategy and corporate communication), internal services and real estate supporting the Group's activities.

The merger of entities and activities of the Group into Belgacom SA of Public Law on 4th January 2010 resulted in some shifts between segments, especially impacting segment revenue from mobile voice and mobile data. The reason for this is the disappearance of the intersegment intercompany flows between the merged legal entities and activities. The most impacted intercompany flow is the Fixed-to-Mobile interconnection traffic (Belgacom SA to Proximus). Before the merger Belgacom SA of Public Law paid mobile termination costs to Belgacom Mobile SA (Proximus) to terminate fixed calls on the Proximus network. The same applies to Mobile-to-Fixed interconnection traffic, although the impact is much less significant.

Before the merger, these flows existed and were eliminated via "inter-segment eliminations" and don't exist anymore with the merger.

The Group elected not to restate the segment reporting of the year ended 31 December 2009.

No operating segments have been aggregated to form the above reportable operating segments.

The Group monitored the operating results of its reportable operating segments separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance was evaluated on the following basis:

• The operating income before depreciation and amortization and before non-recurring income and expenses; and
• The capital expenditures.

Group financing (including finance expenses and finance income) and income taxes were managed on a group basis and are not allocated to operating segments.

For the purpose of allocating resources to reportable operating segments, the Group monitored segment assets at the level of property, plant and equipment, intangible assets and goodwill. Other non-current assets and current assets are not allocated to operating segments.

The accounting policies of the operating segments are the same as the significant accounting policies of the Group. Segment results are therefore measured on a similar basis as the operating result in the consolidated financial statements.

Intercompany transactions between legal entities of the Group are invoiced on an arm's length basis.

				Year ended 31 December 2009
(EUR million)	Consumer Business Unit	Enterprise Business Unit	Service Delivery Engine & Wholesale	Staff & Support	International Carrier Services	Inter segment eliminations	Total
Net revenue Other operating income Intersegment income TOTAL SEGMENT INCOME	2,344 15 55 2,414	2,451 14 36 2,501	287 17 82 386	2 20 11 33	838 3 52 892	-236 -236	5,922 68 0 5,990
Costs of materials and services related to revenue Personnel expenses and pensions Other operating expenses	-723 -345 -297	-748 -379 -142	-72 -193 -185	-0 -166 -204	-749 -24 -40	206 0 29	-2,087 -1,108 -840
TOTAL OPERATING EXPENSES before depreciation & amortization	-1,366	-1,270	-450	-370	-814	236	-4,035
TOTAL SEGMENT RESULT (1)	1,048	1,231	-64	-337	78	-0	1,955
Non-recurring income Non-recurring expenses	-7	-56		0	74 -1		74 -62
OPERATING INCOME / (LOSS) before depreciation & amortization	1,041	1,176	-64	-337	151	-0	1,967
Depreciation and amortization	-144	-27	-437	-77	-21	0	-706
OPERATING INCOME / (LOSS)	897	1,149	-502	-413	130	-0	1,261
Net finance costs							-117
INCOME BEFORE TAXES							1,144
Tax expense							-241
NET INCOME							904
Non-controlling interests Net income (Group share)							-1 904

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

	Year ended 31 December 2009
(EUR million)	Consumer Business Unit	Enterprise Business Unit	Service Delivery Engine & Wholesale	Staff & Support	International Carrier Services	Inter segment eliminations	Total
Capital expenditure	89	20	422	44	22	-	597

	Year ended 31 December 2010
(EUR million)	Consumer Business Unit	Enterprise Business Unit	Service Delivery Engine & Wholesale	Staff & Support	International Carrier Services	Inter segment eliminations	Total
Net revenue Other operating income Intersegment income TOTAL SEGMENT INCOME	2,337 20 11 2,368	2,401 6 14 2,421	267 3 71 342	6 19 10 35	1,541 2 66 1,610	- - -172 -172	6,552 51 0 6,603
Costs of materials and services related to revenue Personnel expenses and pensions Other operating expenses	-678 -325 -291	-685 -375 -149	-46 -203 -202	1 -165 -192	-1,383 -39 -58	150 0 22	-2,642 -1,107 -870
TOTAL OPERATING EXPENSES before depreciation & amortization	-1,295	-1,210	-451	-355	-1,480	171	-4,619
TOTAL SEGMENT RESULT (1)	1,073	1,212	-109	-320	129	-1	1,984
Non-recurring income Non-recurring expenses	- 1	- -	- -	- 7	436 -	- -	436 8
OPERATING INCOME / (LOSS) before depreciation & amortization	1,074	1,212	-109	-314	566	-1	2,428
Depreciation and amortization	-153	-19	-480	-76	-82	1	-809
OPERATING INCOME / (LOSS)	920	1,192	-588	-389	484	0	1,619
Net finance costs							-102
INCOME BEFORE TAXES							1,517
Tax expense							-233
NET INCOME							1,283
Non-controlling interests Net income (Group share)							17 1,266

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

				Year ended 31 December 2010
(EUR million)	Consumer Business Unit	Enterprise Business Unit	Service Delivery Engine & Wholesale	Staff & Support	International Carrier Services	Inter segment eliminations	Total
Capital expenditure	132	20	492	62	27	-	734

In respect of geographical areas, the Group realized EUR 4,495 million net revenue in Belgium in 2009 and EUR 4,405 million in 2010 based on the country of the customer. The net revenue realized in other countries amounted to EUR 1,427 million in 2009 and EUR 2,147 million in 2010. More than 90% of the segment assets are located in Belgium.

Note 38. Recent IFRS pronouncements

The Group does not early adopt the standards or interpretations that are not yet effective at 31 December 2010.

This means that the Group did not apply the following standards or interpretations that are applicable for the Group as from 1 January 2011 or later:

• Improvements to IFRS's issued in 2009 and 2010;
• IFRS 9 ("Financial Instruments");
• IFRIC 19 ("Extinguishing Financial Liabilities"); and
• Amendments to IFRIC 14 ("Prepayment of a Minimum Funding Requirement"), IFRS 7 ("Financial Instruments: Disclosures Derecognition"), IAS 24 ("Related Party Disclosures"), IAS 32 ("Financial Instruments: Presentation - Classification of Rights Issue") and IAS 12("Income Taxes – Deferred Tax: recovery of Underlying Assets").

The Group will investigate the possible impacts of the application of these new standards and interpretations on the Group's financial statements in the course of 2011.

Note 39. Post balance sheet events

On 31 January 2011, Belgacom issued a seven year senior unsubordinated bond of EUR 500 million with a fixed rate coupon at 3.875% maturing on 7th February 2018 under its Euro Medium Term Note program. The purpose of this transaction is to pre-finance the maturing bonds of November 2011.

Auditor's report

Belgacom Annual Report 2010 /// Financial Report /// 168

Extract from the Belgian GAAP non-consolidated financial statements of Belgacom SA under public law

Income Statement	170
Balance Sheet after Appropriation	172
Appropriation Statement	174

The financial information presented in this caption is an extract of the non-consolidated financial statements of Belgacom SA under public law as approved by the General Assembly on 13 April 2011 and as communicated to the National Bank of Belgium (in Dutch and French) in the month following the General Assembly. These financial 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 unqualified opinion with respect to such non-consolidated financial statements.

A full set of the financial statements and statutory management report of Belgacom SA under Public Law is available in the "investor corner" section of the Belgacom Group website (www.belgacom.com) as soon as they will be filed at the National Bank of Belgium.

Income statement

(in EUR million - year ended 31 December)	2009	2010
I. Operating income	2,881	4,763
A. Turnover	2,596	4,450
C. Own construction capitalised	178	253
D. Other operating income	108	60
II. Operating charges	2,300	3,881
A. Raw materials, consumables and goods for resale	237	451
1. Purchases	231	456
2. Increase (-); Decrease (+) in stocks	7	-5
B. Services and other goods	919	1,545
C. Remuneration, social security costs and pensions	753	926
D. Depreciation of and other amounts written off formation expenses, intangible and tangible fixed assets	369	902
E. Increase (+); Decrease (-) in amounts written off	-5	8
stocks, contracts in progress and trade debtor
F. Increase (+); Decrease(-) in provisions for liabilities	-2	9
and charge
G. Other operating charges	28	38
III. Operating profit	582	881
IV. Financial income	83	34
A. Income from financial fixed assets	77	22
B. Income from current assets C. Other financial income	1 5	1 12
V. Financial Charges	354	446
A. Interest and other debt charges	306	419
B. Increase (+); Decrease(-) in amounts written off	34	0
current assets other than mentioned under II.E.
C. Other financial charges	14	27
VI. Profit on ordinary activities before taxes	311	470

(in EUR million - year ended 31 December)	2009	2010
VI. Profit on ordinary activities before taxes	311	470
VII. Exceptionnel income	13	136
B. Adjustments to amounts written off financial fixed assets D. Gain on disposal of fixed assets E. Other exceptionnel income	12 0 1	125 6 5
VIII. Extraordinary charges	79	152
B. Amounts written off financial fixed assets C. Provisions for extraordinary liabilities and charges (increase+, decrease -)	47 -109	2 -106
D. Loss on disposal of fixed assets E. Other extraordinary charges	0 140	120 135
IX. Profit for the period before taxes	244	454
X. Income taxes	0	130
A. Income taxes B. Adjustment of income taxes and write-back of tax provisions	0 0	137 7
XI. Profit for the period	244	324
XII. Transfer from untaxed reserve	1	1
XIII. Profit for the period available for appropriation	246	324

Balance sheet after appropriation

(in EUR million - as of 31 December) ASSETS	2009	2010
FIXED ASSETS	11,129	14,868
II. Intangible assets	131	4,984
III. Tangible assets	1,592	1,897
A. Land and buildings	191	226
B. Plant, machinery and equipment	1,363	1,575
C. Furniture and vehicles E. Other tangible assets	23 15	36 60
IV. Financial assets	9,406	7,986
A. Affiliated enterprises	9,404	7,958
1. Participating interests	9,404	7,958
B. Other enterprises linked by participating interests 1. Participating interests	2 2	3 3
C. Other financial assets	$\Omega$	25
1. Shares	0	24
2. Amounts receivable and cash guarantees	0	2
CURRENT ASSETS	5,061	1,431
V. Amounts receivable after more than one year	1	1
B. Other amounts receivable	$\mathbf{1}$	1
VI. Inventories and contracts in progress	38	89
A. Inventories	38	72
1. Raw materials and consumables	21	26
3. Goods purchased for resale	17	46
B. Contracts in progress	0	17
VII. Amounts receivable within one year	4,516	871
A. Trade debtors	498	834
B. Other amounts receivable	4,018	37
VIII. Investments	452	426
A. Own shares	441	416
B. Other investments and deposits	11	10
IX. Cash at bank and in hand	3	5
X. Deferred charges and accrued income	52	38
Total assets	16,191	16,298

(in EUR million - as of 31 December)	2009	2010
LIABILITIES AND SHAREHOLDERS' EQUITY
SHAREHOLDERS' EQUITY	2,405	2,003
I. Capital	1,000	1,000
IV. Reserves	1,405	1,002
A. Legal reseve	100	100
B. Reserve not available for distribution	478	455
1. In respect of own shares held	478	455
C. Untaxed Reserves D. Reserves available for distribution	14 813	14 433
VI. Investment grants	0	1
PROVISION AND DEFERRED TAXATION	814	725
VII.A. Provisions for liabilities and charges	809	720
4. Other liabilities and charges	809	720
B. Deferred taxation	5	5
LIABILITIES	12,972	13,571
VIII. Amounts payable after more than one year	4,822	9,700
A. Financial debts	4,822	9,630
2. Unsubordinated debentures	2,067	1,267
4. Credit institutions	2,396	7,904
5. Other loans B. Trade creditors	359 0	459 70
1. Suppliers	$\Omega$	70
IX. Amounts payable within one year	8,046	3,677
A. Current portion of amounts payable after more than 1 year	46	852
B. Financial debts	6,906	1,329
1. Credit institutions	6,906	1,327
2. Other loans C. Trade creditors	0 348	2 565
1. Suppliers	348	565
D. Advances received on contracts in progress	21	10
E. Taxes, remuneration and social security	169	347
1. Taxes	32	162
2. Remuneration and social security	137	185
F. Other amounts payable	556	574
X. Accrued charges and deferred income	105	194
Total liabilities and shareholders' equity	16,191	16,298

Appropriation Statement

(in EUR million - year ended 31 December)	2009	2010
A. PROFIT (LOSS) TO BE APPROPRIATED	246	324
B. TRANSFERS FROM CAPITAL AND RESERVES	440	409
C. TRANSFERS TO CAPITAL AND RESERVES	7	7
F. DISTRIBUTION OF PROFIT	679	726

Glossary

2G – Mobile network of the second generation (GSM), allowing both voice and data transmission with low throughput

3G – Mobile network of the third generation (UMTS – Universal Mobile Telecommunications System), allowing both voice and data transmission with higher throughput

ADSL – Asymmetric Digital Subscriber Line (high-speed connection)

Annualized mobile churn rate – 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

Belgacom TV ARPU – Includes only customer-related revenue and takes into account promotional offers, divided by the number of households with Belgacom TV

BICS – Belgacom International Carrier Services is a joint venture between Belgacom, Swisscom Fixnet, and MTN, and is responsible for international carrier activities

BIPT – Belgian Institute for Postal services and Telecommunications

Broadband ARPU – Total ADSL revenue, divided by the average number of ADSL lines for the period considered, divided by the number of months in that same period

Broadband lines CBU – Includes the Belgian residential lines of Scarlet as from Q1 2009

Broadway project – Project launched end 2003, deploying a fiber network (fiber-to-the-street cabinet) and VDSL, which today allows for speeds up to 30 Mbps. As such this project is an important enabler for fast Internet and Belgacom TV

CBU – The Consumer Business Unit takes care of our residential customers

CEP – Code of Ethical Purchasing

Cloud computing – The word "computing" refers to the technology which helps to manage information better and the term "cloud" refers to the storage of the data on the Internet. The computer systems which once used to be installed within the company itself now operate from outside it at external data centers. This means that companies only use the services available on these computer systems, without having to worry about maintaining the equipment themselves

CRF – Corporate Research Foundation

CSR – Corporate Social Responsibility

CWS – Carrier and Wholesale Technologies

DECT – Digital Enhanced Cordless Telephone – home cordless phone

DSL – Digital Subscriber Line (DSL) is a family of technologies that provides digital data transmission over the wires of a local telephone network

EBITDA – Earnings before Interest, Taxes, Depreciation, and Amortization

EBU – The Enterprise Business Unit provides services to our professional customers

ELIx – Employee Loyalty Index

EMF – Electromagnetic Fields. Propagation of electric and magnetic energy through the air

ETNO – European Telecommunications Network Operators' Association is the principal policy group for European electronic communications network operators. ETNO's primary purpose is to establish a constructive dialogue between its member companies and decision-makers and other actors involved in the development of the European Information Society to the benefit of users

Fixed Voice ARPU – Total voice revenue, excluding activation and payphone-related revenue, divided by the average voice access channels for the period considered, divided by the number of months in that same period

FSC – Forest Stewardship Council is an international NGO and a certification system that provides internationally recognized standard-setting, trademark assurance and accreditation services to companies, organizations, and communities interested in responsible forestry. The FSC label provides a credible link between responsible production and consumption of forest products, enabling consumers and businesses to make purchasing decisions that benefit people and the environment as well as providing ongoing business value

GeSI – Global e-Sustainability Initiative brings together leading ICT companies – including telecommunications service providers and manufacturers as well as industry associations – and non-governmental organizations committed to achieving sustainability objectives through innovative technology. GeSI fosters global and open cooperation, informs the public of its members' voluntary actions to improve their sustainability performance, and promotes technologies that foster sustainable development

GHG Protocol – The Greenhouse Gas Protocol is the most widely used international accounting tool for government and business leaders to understand, quantify, and manage greenhouse gas emissions

GRI – Global Reporting Initiative. This framework sets out the principles and indicators that organizations can use to measure and report their economic, environmental, and social performance. In addition to the criteria described in the chapter "About our CSR Reporting", GRI relies on the following criteria:

Balance – The report reflects positive and negative aspects of the organization's performance to enable a reasoned assessment of overall performance. The report discloses both favorable and unfavorable results and topics

Comparability – The reported information is presented in a manner that enables stakeholders to analyze changes in the organization's performance over time, and could support analysis relative to other organizations. The report and the information contained within it can be compared on a year-to-year basis

Timeliness – Reporting occurs on a regular schedule and information is available in time for stakeholders to make informed decisions

Clarity – Information is made available in a manner that is understandable and accessible to stakeholders using the report

Accuracy – The reported information should be sufficiently accurate and detailed for stakeholders to assess the reporting organization's performance

Reliability – Information and processes used in the preparation of a report should be gathered, recorded, compiled, analyzed, and disclosed in a way that could be subject to examination and that establishes the quality and materiality of the information

G-Xchange – G-Xchange, Inc. (GXI) is a wholly-owned subsidiary and the mobile commerce arm of Globe Telecoms, a leading telecom service provider in the Philippines

HD – High-Definition

HDTV – High Definition television

HR – Human Resources

ICNIRP – International Committee on Non Ionising Radiation Protection

ICT – Information and Communication Technologies

IDTV – Interactive Digital Television

IP network – An IP network is a computer network made of devices that support the Internet Protocol (IP)

IPP – Investors in People: standard making it possible to build up a complete picture of how a business is managing its people and where it can make improvements

IPTV – Internet Protocol Television is a system through which digital television service is delivered using the architecture and networking methods of the Internet Protocol Suite over a packetswitched network infrastructure

IPX – Internetwork Packet Exchange

ISAT – The Interactive online Self Assessment Tool is a tool that enables employees to measure their stress level, determine the factors that cause and maintain stress, and thus help them, with their managers, to solve the issue

ISO 14001 – Standard that provides the requirements for an environmental management system

ISO 27001 – Security Management Standard: the basic objective of the standard is to help establish and maintain an effective information management system, using a continual improvement approach

ISO 9001 – Standard that provides a set of standardized requirements for a quality management system

ISP – Internet Service Provider

IT – Information Technology

LAN – Local Area Network

LTE – Long Term Evolution

M2M – Machine-to-Machine

MaIP – Move to All IP

Mobile active customers – Includes voice and data cards. Active customers are customers who have made or received at least one call or sent or received at least one SMS message in the last three months. Prepaid customers and MVNO customers are fully segmented as CBU customers

Mobile net ARPU – Calculated on the basis of monthly averages for the period indicated

Monthly net ARPU – Equal to total mobile voice and mobile data revenues, divided by the average number of active mobile customers for that period

MoU (Minutes of Use) – Duration of all calls from or to Proximus, per active voice customer, per month

MTN – The MTN Group Limited is a multinational telecommunications group, operating in 21 countries across Africa and the Middle East

MTR – Mobile Termination Rate

NFC – Near Field Communication

NGO – Non-governmental organization. Legally constituted, non-governmental organizations are created by natural or legal persons with no participation or representation of any government

Normalized MoU – Duration of all calls from or to Proximus, per active voice customer, per month – excluding free minutes

Normalized SMS – Number of paying SMS per active customer per month (i.e. excluding SMS included in price plans)

PUE – Power Usage Effectiveness is a metric used to determine the energy efficiency of a data center. PUE is determined by dividing the amount of power entering a data center by the power used to run the computer infrastructure within it. PUE is therefore expressed as a ratio, with overall efficiency improving as the quotient decreases toward 1

S&S – The Staff & Support Unit brings together all the horizontal functions that support the Group's activities

SAR – Specific Absorption Rate: unit for measuring the quantity of electromagnetic energy that is absorbed by the human body when a mobile phone is used. The maximum allowed SAR in Europe is 2 W/kg in accordance with the ICNIRP guidelines

SDE&W – Service Delivery Engine & Wholesale groups together the network and IT services and offers services to other operators and suppliers

SIP – Session Initiation Protocol

SME – Small and Medium Enterprises

UoU (Units of Use) – Voice minutes of use + SMS (where one SMS equals one minute) per active customer per month

USO – Universal Service Obligation

VDSL – Very High Rate Digital Subscriber Line (advanced version of ADSL)

VDSL2 – Very High Speed Digital Subscriber Line 2 is an access technology that exploits the existing infrastructure of copper wires

VOD – Video On Demand

VoIP – Voice over Internet Protocol

WAN – Wide Area Network

WEEE – The Waste Electrical and Electronic Equipment Directive (WEEE Directive – EU) aims to reduce the amount of electrical and electronic equipment being produced and to encourage everyone to reuse, recycle and recover it

WIFi – Local wireless network

General information

Corporate name and legal form

The autonomous public-sector company Belgacom is a Société anonyme de droit public/Naamloze vennootschap van publiek recht (limited liability company under public law) as defined by the Law of 21 March 1991 on the reform of certain public-sector commercial 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 specific legislation of any kind.

Registered Office

Belgacom SA under public law Bd. du Roi Albert II 27 B-1030 Brussels VAT BE 0202.239.951 Brussels Register of Legal Entities

Consultation of the issuer's documents

The public documents concerning the issuer can be consulted at the registered office.

Date of constitution

The company was established as an autonomous public sector company, governed by the Law of 19 July 1930 setting up the Belgian National Telephone and Telegraph Company, the RTT (Régie des Téléphones et 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 Official Gazette on 22 December 1994, and went into effect on the same day.

Objectives of the Company

As described in Article 3 of the Articles of Association, the Company's objects are:

• 1. to develop services within the field of telecommunications in Belgium or elsewhere;
• 1. to take all actions aimed at promoting, directly or indirectly, its activities or ensuring optimal use of its infrastructure;
• 1. 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;
• 1. to provide radio and television broadcasting services.

Disclaimer

This communication contains forwardlooking 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.

The CO2 emissions related to the printing and distribution of this report have been totally offset with CO2Logic, by supporting a renewable energy project in India

Our report is printed on Satimat Green coated paper, made out of 60% recycled fibers, 40% FSC virgin fibers and on Cocoon Offset extra-white, FSC-

certified 100% recycled paper. Vegetablebased ink and non-solvent adhesives are used. The printing plates and ink recipients are recycled. The waste paper is collected and then compressed and recycled by authorized bodies. The printer is FSC and PEFC certified.

Editor-in-chief: Florence Coppenolle Vice President Group Communication Bd du Roi Albert II/ Koning Albert II-laan, 27 B - 1030 Brussels

Conception and coordination: Franck Vanbelle - Corporate Communication Project Manager

Design and prepress: Chris Communications www.chriscom.be

Printing: Snel

Pictures: Jean-Michel Byl, Pascal Broze, Reporters and Belgacom

For further information:

Florence Coppenolle Vice President Group Communication Bd du Roi Albert II/Koning Albert II-laan, 27 B - 1030 Brussels Tel: + 32 2 202 40 23 E-Mail: about@belgacom.be

For CSR information:

Concetta Fagard Vice President Group Reputation Vice President Group CSR, Sponsoring, PR & Events Bd du Roi Albert II/Koning Albert II-laan, 27 B - 1030 Brussels Tel: + 32 2 202 81 53 E-Mail: csr@belgacom.be

For fi nancial information:

Nancy Goossens Vice President Investor Relations Bd du Roi Albert II/Koning Albert II-laan, 27 B - 1030 Brussels Tel: + 32 2 202 82 41 Fax: + 32 2 201 54 94 E-Mail: investor.relations@belgacom.be