WE ARE...

We are a telecommunications company operating in the Belgian and international markets. The quality of our interconnected fixed and mobile networks makes us the leading provider of telephony, Internet and television services in Belgium. It also allows us to offer anywhere and anytime access to digital data and the best multimedia content. In addition, we develop solutions to reduce our CO2 emissions, support the most vulnerable communities and promote access to the digital world for all. This is how we contribute to the economic, social and environmental development of the society in which we are rooted.

Creating and sharing value

Simplification at the service of the customer 20

>> Discover the online version of this annual report at http://annualreport.belgacom.com

GLOSSARY

3G – Mobile network of the third generation (UMTS – Universal Mobile Telecommunications System), allowing both voice and data transmission with higher throughput

4G – Mobile network of the fourth generation, allowing data transmission with very higher throughput

Belgacom TV ARPU – Includes only customer-related revenue and takes into account promotional offers, divided by the number of households with Belgacom TV

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

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

CSR – Corporate Social Responsibility

CWS – Carrier and Wholesale Technologies

DSL – Digital Subscriber Line (DSL) is a family of technologies that provides digital data transmission over the wires of a local telephone network

Dual Carrier – a 3G feature that doubles the download speed of compatible devices to a maximum theoretical speed of 42 Mbps by combining data transmitted on 2 frequencies.

EBITDA – Earnings before Interest, Taxes, Depreciation, and Amortization

EBU – The Enterprise Business Unit provides services to our professional customers

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 standardsetting, 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

HD – High-Definition

HDTV – High Definition television

HR – Human Resources

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)

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 packet-switched network infrastructure

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

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 churn rate – The total number of SIM cards disconnected from the Proximus 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

Monthly net ARPU – Equal to total mobile voice and mobile data revenues, divided by the average number of active mobile customers for that period. The ARPU is calculated on the basis of the monthly averages for the period indicated.

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, nongovernmental organizations are created by natural or legal persons with no participation or representation of any government

PUE – Power Usage Effectiveness is a metric used to determine the energy efficiency of a data center. PUE is determined by dividing the amount of power entering a data center by the power used to run the computer infrastructure within it. PUE is therefore expressed as a ratio, with overall efficiency improving as the 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 & VDSL2 – Very High Rate Digital Subscriber Line is a high-speed broadband access technology which uses the existing copper wire infrastructure. VDSL2 is the successor of VDSL

VOD – Video On Demand

VoIP – Voice over Internet Protocol

WAN – Wide Area Network

WIFi – Local wireless network

CONTENT

A COLLECTIVE RESPONSIBILITY

Belgacom is not only a driving force of economic growth, but also of progress for Belgian society as a whole. The company's various stakeholders rightfully have high expectations, which must be translated into a sustainable vision for the future and a growth-driven corporate strategy. For Stefaan De Clerck, Chairman of the Board of Directors, the company's collective responsibility and the interests of its shareholders ultimately go hand in hand. We talked to him about recent changes and future challenges.

"ALL ELEMENTS ARE ON HAND FOR TEN NEW, SUCCESSFUL YEARS."

You have been Chairman of the Board of Directors since September 2013. A lot has changed over those few months...

Belgacom is indeed going through a period of major changes. The technological evolution in the telecoms sector is accelerating, both in the fi eld of mobile solutions and fi xed solutions. To be able to offer our customers the highest quality and the most innovative products, we must constantly put the bar higher as a company. Continuous development is an absolute necessity. This is, therefore, a priority of our new CEO, who was appointed at the beginning of 2014. In addition, the company has a new Board of Directors, with a strong female representation. This renewal immediately creates a dynamic which benefi ts the good management of our company. All elements are in place again to allow Belgacom to develop a new long-term vision and set the stage for a new successful decade. Exciting months and years lie ahead of us, also in a European and international context. Now it's a question of setting out a new course.

Why is this such a crucial period?

On a hyperdynamic and constantly innovating market, the challenge for Belgacom is to fi nd the right balance between investment and cost savings. On the one hand, Belgacom must not make any concessions to the investments required to prepare for the future, but on the other, the competitive environment forces us to work as effi ciently as possible. That requires a simplifi cation of processes, products and services, which in the end also benefi ts the customer experience and customer satisfaction.

How can the different stakeholders help achieve that successful transition?

I'm a fervent advocate of dialog. Belgacom has shown that, together with its most important stakeholder, its personnel, it is able to successfully marry consultation with effi ciency. For many years now, the company has experienced a remarkable climate of industrial peace, despite the diffi cult market conditions. We hope that in 2014 this culture of consensus will again prove its soundness.

MARKET CONTEXT INTERVIEW

HAS SHOWN ITS ABILITY TO SUCCESSFULLY MARRY CONCERTATION WITH EFFICIENCY."

"BELGACOM

The same reasoning also applies to the majority and the minority shareholders. In the coming months the main task will be to establish a positive climate of consultation with the new government. But we also want to listen to the minority shareholders. Investments in the long term must be shouldered by everyone. Our entire strategy must be established on a solid basis that is as broad as possible. The shareholders can certainly help to show the importance of Belgacom, not just as a lever for economic growth, but also as a company that helps society move forward, with new applications, including in fi elds, such as service to citizens, healthcare and education. This is only possible if the company remains competitive and manages to start growing sustainably again.

STEFAAN DE CLERCK

CHAIRMAN OF THE BOARD OF DIRECTORS

Is the public shareholding a guarantee for stability?

It is extremely important that the government makes sure that the telecom infrastructure and the related services are generally available to everyone, both citizens and companies. This is a collective responsibility. All companies, from start-ups to multinationals, must be able to rely on the best possible infrastructure to develop their activities. Investments in the telecom infrastructure are therefore essential for the economy as a whole. In that respect, the public shareholder must create a framework that makes such investments possible and ensure that they actually take place.

What is your view of the company today?

You must get to know the company inside out to really be able to see how intensively people are working and the quality that is being delivered, while the technological sector and the regulations are rapidly changing. It is a company that must constantly have a 360° view of its broad, quickly changing environment. Despite the crisis and various profound changes, Belgacom manages to remain remarkably healthy and dynamic. This is thanks to its highly competent employees, a strong focus on the consumer and major long-term investments. Those are our assets for the future.

BUILDING ON OUR STRENGTHS TO GENERATE SUSTAINABLE GROWTH

Belgacom has all the assets to restore growth in a constantly changing market. Our vision is based on a combination of highperformance connectivity, tailored solutions, and attractive content. We perform an essential service. By bringing life to their screens, we improve the lives of consumers and businesses. This may be self-evident today, but you still need 15,000 employees to realize this daily. What is Belgacom's main challenge?

We operate in an increasingly competitive market. Although we are seeing an increase in screens, with a real boom in sales of smartphones and tablets, the overall number of customers isn't growing anymore. The challenge is therefore to increase the revenue per customer by offering innovative services. We have strong assets to come out on top during this pivotal period.

What are these assets?

Our major investments in 3G, 4G, vectoring and the optical local loop ("Fiber to the Home") have given us a technological advantage in fixed and mobile networks. We are also at the cutting edge of technology in the field of digital television. We have developed a vast content offer and improve it continuously. We offer access to this content on all screens, anytime, anyplace.

BELGACOM ACTIVITY REPORT 2013

MARKET CONTEXT INTERVIEW

MARKET CONTEXT

INTERVIEW

BELGACOM ACTIVITY REPORT 2013

In addition, we are the only national operator that can provide integrated solutions to companies in all the different regions of the country. We make their work easier, thanks to numerous innovative services and smart interconnectivity adapted to their specific needs. We have a critical mass and a strong financial basis that other operators do not, or no longer have. But our main asset remains the skills and motivation of our 15,000 employees.

What will be the new drivers of growth?

Consumers and businesses want solutions that make life easier on a daily basis. They want to use their different screens for entertainment, to share emotions and work smarter. The convergence of our fixed and mobile networks brings life to all these screens. We are still far from having exploited all the possibilities in terms of content, applications and entertainment. Security is another area with great needs, both in the private sphere (personal data protection) and the professional sphere (IT security, protection against cyber-attacks, etc.). Cloud computing is also a tremendous driver of simplicity and convenience. It will become easier to share documents, videos and photos which are securely stored in a universal location and to view them on different screens, including a TV. 6,000 Belgacom customers have already tested this service.

What were the innovations in 2013 that responded to these new needs?

We further improved the quality and speed of our networks. In the mobile network in particular we upgraded 3G and extended 4G coverage. 4G is like a huge motorway that you can only appreciate if you have a high-performance car. Content and applications are the things that fully exploit ultra-fast mobile broadband. The prospects are promising. In the field of healthcare, for example, we have tested a 4G in-car communication system in an ambulance. We have also launched innovative applications in digital TV, with TV Replay, and in the field of mobile payment, with Sixdots, the future Belgian standard. Finally, the success of our all-in offers for both residential and business customers shows that our convergence strategy is working.

What are your priorities for the coming months?

We will further simplify our structures and reduce operational costs so that we can continue to invest in meeting customer needs. Our brand image and customer satisfaction are permanent focus areas. Through our combined efforts we can win back market share, especially in the North of the country.

Besides, the commercialization of all our products under the Proximus brand foreseen for the end of 2014, is an important step towards clarity in our offering and in our communication. It should be synonym for a better client service and of a brand close to and listening to its users.

How are these priorities implemented within the company?

We have set up programs to guide our employees towards a performance-based culture. The aim is to better collaborate to ensure efficiency is at the core of all our processes. This optimal collaboration will reflect on customer satisfaction and must become a source of pride for each of our employees.

The Chairman, in the previous pages, talks about the "collective responsibility" of Belgacom. What is your view of the company's social role?

Belgacom has indeed an important social role. This responsibility is part our culture. Ethical values are not dictated from above but are translated into actions in which you believe. In our case, it seems logical to contribute to social development in fields linked to our business, such as the fight against the digital divide, ecologically efficient solutions, and raising cyber security awareness. Furthermore, we remain a major sponsor of cultural and sporting events.

What does sustainable growth mean for Belgacom?

A company that doesn't grow has no future. Belgacom is a strong company that wants to revive growth. To be sustainable, this growth must strike the right balance between investment and shareholder remuneration, without forgetting its social role.

"PEOPLE WANT TO USE THEIR DIFFERENT SCREENS FOR ENTERTAINMENT, TO SHARE EMOTIONS OR TO WORK SMARTER. WE GIVE THEM THE CONNECTIVITY AND THE CONTENT THAT BRINGS LIFE TO ALL THESE SCREENS."

HIGHLIGHTS 2013

HIGHLIGHTS 2013

A NEW TELEVISION EXPERIENCE

The Belgacom teams in charge of entertainment services have developed a new way of experiencing television thanks to TV Replay. This new service allows viewers to replay in delayed time any TV-program broadcast in the past 36 hours.

FIRST 4G OPERATOR

The sustained deployment of 4G enabled us to reach a coverage of 50% by the end of 2013. This technology enables high-speed Internet access.

POINTS-OF-SALE USING GREEN ENERGY

In 2013, we awarded Eneco the power supply contract for our Belgacom Centers. Our points-ofsale now run entirely on renewable energy from wind power, produced in Belgium.

SIMPLIFICATION OF OUR NETWORKS

Our network simplification program has reached cruising speed. We migrated more than 600,000 analog lines to new technologies, with complete transparency for the customer.

THE MOBILE OFFENSIVE

On the residential market, we managed to win back and retain both mobile and convergent customers. On the SMEmarket, we consolidated our leadership by reducing customer churn to preprice war levels. We even regained market share!

AN INTERNATIONAL FIRST FOR BICS

BICS, our international "carrier" subsidiary, recorded strong voice traffi c growth in a declining market. For the fi rst time, we established a 4G (LTE) roaming connection between Europe, Asia, North America and Africa.

LUXEMBOURG STRONGER TIES WITH BNP PARIBAS FORTIS

We won back BNP Paribas Fortis for mobile telephony and strengthened our ties with the banking leader by landing various contracts. We also launched a joint venture together for SixDots, the future mobile payment standard in Belgium.

SCARLET, THE LOW-COST REFERENCE

Scarlet is increasingly positioning itself as a reference in low-cost telecommunications, with an attractive offer for price-sensitive consumers. After having completely revised its mobile offers, Scarlet launched a triple-play offer of Internet + TV + fixed telephony.

HISTORIC CONTRACT FOR TELINDUS

Telindus Luxembourg concluded 2013 by signing the largest contract in its history. In partnership with IBM and as a subcontractor storage infrastructures, Telindus Luxembourg became a strategic provider of Innovative Solutions for Finance (IS4F), formerly a subsidiary of Dexia Group.

TANGO IS ENTERING A NEW ERA

Tango is entering the entertainment era with great strides. It develops original offerings (sports, games and music) in which entertainment is at the heart of the matter.

FLEX, A NEW WAY OF WORKING

We implemented a more flexible work organization program called Flex, which allows us to work in a more agile way and more independently of our professional environment. Together we can make the difference, in a spirit of trust and accountability.

KEY FIGURES 2013

MARKET CONTEXT KEY FIGURES 2013

MARKET CONTEXT

KEY FIGURES 2013

5,496,000

3G and 2G coverage

4G coverage at end 2013

Hotspots in Belgium ± 800,000

CO2 emissions

trained in safely using internet and new media 12,456 children

FINDING A GOOD BALANCE IN A SATURATED MARKET

Everywhere in Europe telecom operators have had to face a market often nearing its saturation point. The decline of the fixed and mobile voice market, the Internet market and even the digital TV market, along with the brutal mobile telephony price erosion, have put margins under pressure. The challenge for operators will be to compensate for this downward pressure with new sources of revenue.

Penetration rate of mobile Source : Belgacom 111%

Navigating through an adverse economic climate

In 2013, operators had to come to terms with a series of constraints, especially regulatory ones (see focus on p.12). The general economic climate also played a major role. Even though the crisis is hitting Belgium less hard than other European countries, the stagnation of economic activity is weighing heavily on both households and businesses, which are tending to limit their expenditure in general, and in telecoms in particular.

Rationalization for business customers

Many business customers have initiated cost-reduction programs and have preferred to postpone investments in their IT and telecom infrastructure. In a context of rationalization, public service companies are in search of a single point of contact, able to provide all IT and telecom solutions they need.

Offering a low-cost alternative in the residential market

With the crisis emerged a low-cost offer. A new player, Snow (BASE), has entered this segment with an offer combining basic fixed telephony, Internet and digital television, at an aggressive price. It did not take long for Belgacom to respond, via its subsidiary Scarlet. These low-cost offers have boosted the digital TV segment, which is slowly reaching its limit in terms of number of subscribers.

Adapting to the explosive growth of data traffic

Telecom operators have invested significantly in their infrastructures these past years, whether in high-speed Internet, Wi-Fi or fourth-generation mobile networks (4G). 2013 has also seen a proliferation of connected devices and applications taking advantage of the ever-larger bandwidth. The intensive use of social networks, the cloud, gaming, videoconferencing, etc. have created new drivers for growth which are still far from running at full capacity. New investments are required to support this data traffic.

Monetizing the investments in the networks

European telecom operators must take on a double challenge: compensate for the declining revenue from voice and SMS by developing mobile data while avoiding that a slow-down in network investment adversely affects the customer experience.

In Europe today, an imbalance can be seen between those who have made it possible for broadband and mobile Internet to become widespread and those who are taking advantage of this growth. Reference is made here to what are known as "over-thetop" players which short-circuit the traditional telecom networks by offering communication or Internet content services often free of charge, but financed by advertising, and taking advantage of the bandwidth.

MARKET CONTEXT OPERATIONAL CONTEXT

THE BELGIAN MARKET AND ITS REGIONAL SPECIFICITIES

Following a purely regional logic and strategy, the penetration of the cable operators, which is particularly extensive in Belgium, has strongly influenced the competitive landscape. In Flanders, Belgacom's main competitor is the cable operator Telenet, dominating the fixed market, while in Wallonia, where Belgacom is the market leader, Voo is the main competitor. Numéricable operates in some Brussels municipalities and in a small part of Hainaut. As the only quadruple-play operator on a national scale, Belgacom has well understood these regional specificities. For several years now, it has been taking these different regional needs into account in its sales strategy. FOCUS

Taking advantage of the momentum in Belgium

The spectacular sales increase of smartphones (+15%) and tablets (+72%) in 2013 enables Belgium to gradually catch up with its neigbours after a backlog of mobile Internet. 38% of mobile telephones are now smartphones and mobile data use on smartphones more than doubled between 2012 and 2013, reaching on average 250 MB.

The mobile experience cannot be satisfactory without fast and powerful connections. In this regard, the 4G/LTE coverage expanded in 2013. With a 50% coverage at the end of 2013, Belgacom remains ahead of the 2 other mobile operators.

At the same time, 3G coverage has been constantly extended. End 2013, Belgacom was in the lead with a 3G coverage of 99.5% (source: CommSquare) and improved the 3G network capacity, enabling speeds of up to 21 Mbps.

>> Wi-Fi hotspots in Belgium ±800,000

FOCUSA REGULATORY FRAMEWORK THAT PUTS PRESSURE ON MARGINS

The telecom operators have had to incorporate into their strategies 3 major regulatory measures, on a Belgian and on a European level.

>> Prolonged effects of the "new telecom law"

The amendments to the telecom law, which entered into force in 2012, in particular the possibility offered to consumers and SMEs to switch operators more easily by enabling them to terminate their contract free of charge after 6 months, have continued to foster market volatility. Consumer protection remains a focus for Belgian and European political and regulatory authorities taking initiatives to increase the transparency of offerings and prices and enable customers to better manage their telecom costs.

>> Roaming

Roaming prices decreased again in July 2013 in compliance with the third European Regulation that entered into force mid-2012. In 2014, this service will continue to be under the scrutiny of the European authorities, which aim to establish a single European electronic communications market and intend to eliminate in the medium term the surcharges linked to roaming.

>> Opening-up of the cable network

In 2013, the Belgian regulators adopted decisions relating to the reference offers and wholesale prices that cable operators must apply, allowing the effective implementation of the obligations decided on in 2011, between now and the second quarter of 2014.

So far, only Mobistar has expressed an interest to use the cable platform to propose a fixed offering on the market.

More details on the regulatory and legislative framework can be found in the financial report.

MARKET CONTEXT

OPERATIONAL CONTEXT

Winning the mobile war

If just one figure for 2013 is to be remembered, one which is indicative of the fierce competition in the mobile telephony segment, it would undoubtedly be the drop in prices of unlimited bundles for mobile voice and SMS communication. These dropped from EUR 80–90 per month to EUR 32–65 per month, in just one year.

This "mobile war" is the main consequence of the "new telecom law", which entered into force in October 2012 and which makes it easy to switch operators (see also the focus on p.12), along with the simultaneous aggressive pricing by the cable operators. This price war hits a context where penetration of mobile telephony is reaching its saturation (111% in Q4 2013), meaning a very low growth potential.

This shake-up of the mobile market generated a decline in the prepaid card market, due to the greater attractiveness of the postpaid offers, and an increase in customer volatility. The latter, however, has slowed down since the third quarter of 2013.

Stabilizing the fixed telephony market

The triple-play (fixed line + Internet + digital TV) and quadrupleplay (triple-play + mobile telephony) pack offers, including attractive unlimited fixed-line calling bundles, enabled to stabilize the fixed telephony penetration rate. Belgians remain attached to their fixed line, valuing its convenience and quality. About 7/10 Belgian households still have a fixed line.

The pace of the digital TV penetration is slowing down as these services are adopted by a large majority of consumers. By placing the TV product at the heart of its multiple-play offers, Belgacom consolidated a 32% market share in digital television and a 27% share in the overall TV market by end 2013.

Taking advantage of opportunities

"Convergent" offers to retain customers

To retain a more volatile customer base, the operators use the technique of combined sales. As show by the growing percentage of "packs" in overall sales, the consumer has understood the advantage of centralizing his convergence needs - fixed and mobile, voice and data, communications and content - with just

BELGACOM COMPETITIVE POSITION (MARKET SHARE)

MARKET CONTEXT

OPERATIONAL CONTEXT

38% of mobile owners have a smartphone Source : Belgacom market research, second semester of 2013 38%

one provider. As early as in 2007, Belgacom has been a pioneer and leader in this convergence strategy, first by selling packs and then by launching convergent services, such as TV Everywhere.

Differentiating services in the cloud

Cloud computing, i.e. the remote access to IT applications and services by means of just a web browser and a broadband connection, offers enormous potential to the telecom operators. From mass-market storage of family photos to the provision of solutions combining connectivity and IT aimed at SMEs to the management of ultra-high performance data centers, every customer will find way to satisfy his or her needs. The cloud is a unique opportunity for the operators to differentiate themselves by offering new, flexible and secure services.

FIT FOR GROWTH

14MARKET CONTEXT

STRATEGY

In a hyper-connected world the customer should be able to interact via the terminal of his choice, wherever, whenever and however he wants, regardless the level of complexity of the underlying technology.

THE 29 EXPERIENCE STORES LET THE CUSTOMERS BETTER UNDERSTAND OUR PRODUCTS.

Our main challenge is to restore sustainable growth by winning back market share (as we did with our mobile subscriptions at the end of 2013) and by emphazing even more the convergent solutions for our customers. To achieve this, we must continue to invest in our networks and platforms to respond to the needs of the future. At the same time, we are speeding up our transformation to become a more agile, differentiated company.

CONVERGENCE AT BELGACOM

SERVICING ONE CONTACT - ONE DATABASE - ONE SYSTEM & PROCESS

BELGACOM HAS ALWAYS BEEN A CONVERGENCE PIONEER AND INTENDS TO REMAIN LEADER OF CONVERGENT SERVICES, NOT JUST BY DEVELOPING PACKS BUT BY ALLOWING USERS TO ACCESS THEIR CONTENT, APPLICATIONS AND SERVICES ANY TIME, ANY PLACE, IN A PERSONALIZED WAY.

Building on our assets

Belgacom has undeniable assets on which it can rely: its fixed and mobile networks, its lead in cloud computing and digital TV, its distribution network close to the customer, and above all its employees, whose expertise and capacity to adapt, enable the company to cope with difficult market conditions.

The best convergent networks

Belgacom is counting more than ever on its convergence strategy to ensure sustainable growth in a complex market. In 2013, this extensive convergence of networks, content and applications led to a range of services increasingly adapted to the needs of hyper-connected customers and available on many complementary screens.

Talented employees

Belgacom can rely on the motivation and contribution of its 15,000 employees. We are an employer of choice which promotes innovation and mobility and aims to develop talent in the fields of the future.

Our own cloud and cyber security expertise

Our cloud platform, managed from our own data centers, guarantees an optimal level of security for our customers. Moreover, Belgacom is developing its competence in cyber security in order to meet current needs. In this field, it has become a reference for many companies.

An advanced digital television platform

Belgacom is a pioneer in digital TV services. It is the only company in Belgium that allows customers to watch TV on any device, on the fixed or mobile network, thanks to the service TV Everywhere. It is also the first operator to offer TV Replay, which allows you to watch a program up to 36 hours after it has been broadcast.

A distribution network close to the customer

Residential and business customers have easy access to Belgacom's competent staff, who are at their disposal in an extensive sales network composed of Belgacom Centers, indirect sales partners, call centers, and customer advisers (for key accounts).

MARKET CONTEXT STRATEGY

AS WE HAVE DONE WITH DIGITAL TV AND THE 3G AND 4G NETWORKS, WE HAVE TO ANTICIPATE TECHNOLOGICAL MIGRATIONS.

Consolidating our leadership

Belgacom is the only operator in Belgium to offer all its telecom and IT services over its own networks. In the mobile sector, we increased our investment in the 3G experience and the 4G deployment. With regard to the broadband network, we continue to develop advanced technologies to better anticipate growing Internet traffi c needs and improve VDSL2.

We aim to invest more in our networks, systems and services by, fi rst and foremost, making our fi xed and mobile networks increasingly intelligent and fl exible. The networks, which are compatible thanks to IP technology, will be able to recognize the user and adapt his or her access to services based on his or her profi le. As such, our systems enable us to personalize our offer even more, and to develop new convergent services more quickly and easily. We then need to transform Belgacom in such a way that our customers can easily contact us via digital and interactive communication means.

A deep transformation to anticipate the future

The saturation of our traditional markets forces us to adapt and focus more on reducing our operating costs. To increase profitability, it is no longer enough to invest. We also need to work on our cost structure. These savings are essential, if we want to increase our investment in our networks and solutions, restore long-term growth, and provide our shareholders with a sustainable remuneration.

Belgacom focuses on 4 levers to become more agile and restore sustainable growth

Enhancing the customer experience

In a sector with ongoing technological changes, Belgacom invests in services which provide real added value to consumers and businesses through strong and differentiated brands (Proximus and Scarlet). Not only is it essential to invest in innovations generating growth, but also to deploy them at the right time, among the right customers, and to communicate as effectively as possible. That is how you win or win back "profi table" market share. In this respect, the cloud is a major growth driver among both residential and business customers. For the latter, we want to become the single privileged contact for all their telecom and IT needs, with increased focus on security.

Customer satisfaction is based on the customer's overall experience with our brands. Our rich convergent products and services must simplify their lives and give them the freedom to interact with the device of their choice, wherever, whenever and however they want, regardless of the level of complexity of the underlying technology.

Making our organization more efficient

Belgacom is a fl agship company of the BEL 20, employing more than 15,000 people directly and over 11,000 indirectly. In the following years, Belgacom has to prepare for the retirement of several thousand employees.

Belgacom hopes to simplify and optimize its work processes in order to limit the need to replace these resources. It will involve the redeployment of competencies and expertise in order to adapt to the future company needs. This transformation will allow us to keep our HR costs at a consistent level for at least the next 5 years.

BELGACOM FOCUSES ON 4 LEVERS TO BECOME MORE AGILE AND RESTORE SUSTAINABLE GROWTH

Simplifying at all levels

Simplification is a strategic priority at all levels. First of all, Belgacom intends to significantly streamline its portfolio of products and solutions. Furthermore, the migration of a number of ageing systems to new IP technologies allowed us, particularly in 2013, to prepare the network simplification. Our internal IT systems are also the object of rationalization and efficiency programs.

Simplification also helps us reduce costs and improve the customer experience. Indeed, a simpler offer and simpler systems are less expensive to manage and guarantee the customer a better quality experience.

Standing out from the competition with differentiated brands

With the convergence of fixed and mobile technologies, but also telecoms and IT, our customers are looking for a single partner, able to provide all these services. In this context, the merger of our 2 commercial brands, Belgacom and Proximus, into a single brand is a natural development, more in line with the reality of our offers and simpler for our customers. It also facilitates the management of our internal systems and our product offering.

Proximus, the banner of a single brand

At the end of 2014, the Proximus brand will group our mobile technologies and solutions with our long-standing expertise in fixed telephony, ICT, Internet and digital television. With Proximus, we opt for a brand that embodies proximity – of customers to their world, and of our company to its stakeholders.

Apart from Proximus, Scarlet continues to target more priceconscious customers.

One brand: Proximus. One company: Belgacom

Over the years, Belgacom has become a leading telecom player. Therefore, it should keep its name and status as a legal entity, as an employer, and as a listed company, not just for our employees but also for our partners, suppliers, shareholders and other stakeholders.

Building the future culture: "From Good to Gold"

In order to mobilize all its forces behind common objectives, Belgacom focuses on different levers for evolving towards a company culture that rhymes with better service quality and better results. For example, as of 2014, all management members, regardless of their department, will have the same objective at Group level. The stronger collaboration between departments will improve and speed up decision-making. The aim is to develop a "From Good to Gold" culture which stimulates performance, respect, feedback and transparent communication.

Always more simplicity

Simplification enables us to reduce costs and improve the customer experience

CONTENT TO VIEW, EXPERIENCE AND SHARE, EVERYWHERE AND ANYTIME

In 2013, Belgacom again reinforced its content strategy by being a distributor, producer and co-producer all at once. Its program offering was further enhanced by new features which provide more freedom and convenience. Consumers now have access to lots of entertainment, no matter what their tastes are, what time of the day it is, where they are or what type of terminal they are using.

More than 10,000 titles available in video on demand 10,000

Over 70 channels in our basic Belgacom TV offer 70

Content creates added value

For almost 10 years now, Belgacom has been investing not only in technology, but also in its content offer. Its goal is to permanently redefine the television consumer experience. As pioneer in Belgium and Europe, Belgacom has understood that digital TV is a natural extension of the telecom operator profession and a source of added value for its customers. In the beginning, added value was linked to digital television's intrinsic qualities: image quality, access to an ever-growing range of programs, "on-demand" consumption, ease of recording, etc. Over the years, hundreds of thousands of Belgians have integrated digital television and a Belgacom decoder into their living rooms. This new way of watching television has now become an established part of their lives.

Convergence with 4 dimensions

In pace with technological innovation, content consumption is becoming ever more intuitive and personalized. It has given material shape to the convergence strategy valued by Belgacom: subscribers can now watch what they want (for all tastes, from the most general to the most local), where they want (on a computer, TV, tablet or smartphone) and when they want (live or delayed broadcasting). A fourth dimension which is of particular importance should be added: "on the platform of their choice". Indeed, whereas some

Belgacom TV offers packs adapted to kids or fans of evergreen movies, and exclusive football and basketball content on Belgacom 11, 11+ and 5

MARKET CONTEXT

STRATEGY

content providers focus on closed systems, Belgacom offers the same quality of access on a maximum number of multi-brand terminals and pursues a multi-platform strategy open to all operating systems.

A customer retention argument

Our content offer is strategic. It makes our technical expertise directly tangible to the customer. It is also crucial: on a volatile market, anytime access to extensive and varied content has become an important customer retention tool. Customers who have a unique experience, by watching a football match on their smartphone or by taking advantage of the possibilities of "smart TV" with their family, will recognize our added value. As a result, they will not want to look elsewhere. On the contrary, they will be tempted to use more programs, which increases our average revenue per customer. This content strategy allows us to establish a strong emotional link with them.

At any time and on any type of screen

In 2013, Belgacom launched TV Replay in a test phase with 10,000 customers. This service makes it possible to watch any TV program up to 36 hours after broadcast, on any type of screen, from a television to a smartphone. This new service, exclusive to Belgium, and developed in close collaboration with the main Belgian broadcasters, meets the growing need of consumers to watch their favorite content whenever they want.

And further, the multi-screen use via the TV Everywhere offer has become more popular these past months. Belgacom offers a wider choice, with 40 or so channels available at one's fingertips, on a smartphone or tablet. It is striking to note that the audience peaks registered on TV Everywhere occurred most frequently during live broadcasts, in particular during football matches.

An expanded offer for all tastes

Our range of channels and channel packages has again been extended, with special attention being paid to local content. For example, we offer feature channel, Dobbit TV (devoted to DIY) and, on an exclusive basis, the Fashion One channel (dedicated to fashion and trends). In July, we launched the Multi-Channel Package, grouping the existing channel packages Kids, Entertainment, Nature & Discovery, Nostalgia, and Sport & Pleasure, together with more than 40 thematic channels in a single package. To ensure customers can easily find their bearings in our abundant range of channels and videos on demand, we further improved our personalized search and recommendation tools, to meet the most exacting requirements.

Football news

Our football channel Belgacom 11+ covers the British League Cup. The UEFA Champions League (with its famous multi-live feature) and the best of the Spanish and Portuguese championships continue to be our established values. Our differentiated football offer includes programs dedicated to behind-the-scenes coverage of Belgian clubs, such as RSCA TV, Club TV, and Charleroi TV and of big international clubs via our exclusive partnerships with Barça TV, Real Madrid TV, Manchester United TV and Manchester City TV. In 2013, we also broadcasted exclusive content linked to our Red Devils, partners for already 20 years: the documentary Everyday Football about the everyday life of our national team and of all Belgian football protagonists, including coverage of youth team matches.

TV Replay

Launched in 2013, this service makes it possible to watch a program up to 36 hours after broadcast, on any type of screen

Privileged partnerships

Being a content distributor and (co)producer all at once opens many doors and makes it possible to provide TV viewers and mobile Internet users a differentiated offer. Sponsoring enables us to be present at major national and local sports, music and cultural events, to share the highlights with the public and to obtain content which we subsequently distribute on different platforms. Talking sports, Belgacom highlights its privileged partnerships with Belgian basketball, football and cycling. We are also present at major music festivals of which we offer streaming broadcasts to our customers, the Ghent Film Festival, Bozar and the Queen Elisabeth musical competition. Finally, being the co-producer of more than 20 Belgian or Belgian-French films per year, enables us to be associated with several major movie pre-premières. We also organized, for the first time ever in Belgium, a pre-première video screening at the home of a Belgacom TV customer, in the presence of the film's actors (Brasserie Romantiek in Mechelen and Stars 80 in Huy).

Continuous investment

In the months and years to come, Belgacom will continue to invest in enhancing its content offering, both in local programs and international blockbusters. Most of these programs can be watched on demand, live or in delayed broadcasting and on a maximum number of platforms. This unique and convergent television experience is linked to our telecom operator profession. The added value of our increasingly intelligent networks becomes tangible for all our customers.

MARKET CONTEXT

STRATEGY

SIMPLIFICATION AT THE SERVICE OF THE CUSTOMER

SIMPLIFICATION

In 2013 Belgacom committed itself to an ambitious simplification project. This project is one of the pillars required for the transformation of the company. Simplification aims to improve the customer experience while generating increased agility and efficiency. These 3 objectives help to reduce operational costs and will result in structural changes that will increase Belgacom's profitability in the medium- and long-term. The simplification project covers 4 key areas.

>> Belgacom migrated more than 600,000 lines 600,000

based on analog technologies to new standards

A simplified, future-oriented products and services portfolio

Our customers expect ever simpler offers. That is why Belgacom pays special attention to simplifying its commercial offers by reducing the number of options for mobile subscribers and by offering convergent "all-in packs" which meet the needs of most of its customers.

For example, the number of customers subscribing to the comprehensive Internet Everywhere/Bizz Pack offer continues to grow. More previously scattered services are now grouped in one bundle, which facilitates billing and administrative follow-up, both for the customer and Belgacom.

In 2013, Belgacom carried out migrations from old to future-oriented solutions. Belgacom committed itself to further simplify the structure of its products and services portfolio in order to reduce maintenance costs and further improve the customer experience.

A simplified network

Simultaneously managing different generation networks is a challenge and a major cost. In 2013, Belgacom made substantial progress in simplifying its network infrastructure. This project, called Mantra, has made it possible to migrate more than 600,000 oldgeneration fi xed lines to new standards. As for the backbone network, ATM lines have been replaced by solutions and technologies of the future. Belgacom will continue to dispose of old technologies and further increase the value-added services for its customers.

A simplified architecture for the IT systems

We also launched a major project to optimize our IT systems. It aims, among other things, to speed up the process of bringing new products to market, while simplifying the management of the catalog of existing products and services. In 2013, new software solutions were implemented enabling different departments to work faster and more effi ciently in all stages of interaction with our customers, from the search for information about our solutions to the payment of bills or the management of customer needs.

A rationalized number of providers

Belgacom was able to reduce the number of its providers and partners for certain market segments. Reducing the number of providers has made it possible to simplify and streamline the procurement procedure, from tendering to bill management, logistics and delivery, which also results in signifi cant savings. Finally, fewer but more strategic partnerships allow us to maintain privileged relationships with our partners. This effort will be continued in 2014.

Simplification also means nurturing a state of mind and culture

By making simplifi cation a top priority, Belgacom has started a process of deep change in its corporate culture. This transformation process is supported and supervised at the highest level of the company. Having maximum number of employees adhering to this transformation is one of the key success factors of this project.

THE OPTIMIZATION OF OUR IT SYSTEMS PROVIDES A BETTER CUSTOMER EXPERIENCE.

AN IMPROVED CUSTOMER EXPERIENCE

Proactive replacement of 80,000 digital television decoders with more scalable models makes customers benefi t from a better customer experience: TV in HD (high defi nition), more recording options and an interface allowing faster and easier navigation through the menus. FOCUS

360,000

In 2013, Belgacom migrated 360,000 customers to Internet Everywhere and Bizz Pack convergent offers

OUR NETWORKS AS THE BACKBONE FOR NEW SERVICES

One of Belgacom's most important assets is its networks. In 2013, we continuously worked on the technological development of both our fixed and our mobile networks and made serious progress in simplifying them. We also paid special attention to delivering an even higher quality service and developing new services.

Customer satisfaction with installations 82%

MARKET CONTEXT NETWORKS

A fast high quality mobile network

In 2013 Belgacom again invested substantial amounts in the quality of its network.

For example, the average speed on the 3G network was increased by 60% and customers can now enjoy an average download speed of 6.2 Mbps, with peak speeds of up to 21 Mbps. In addition, we increased the capacity of the 3G network by 70% to support the particularly strong growth in mobile data use.

In an independent study of Test Achats conducted in the first half of 2013, we were acknowledged as having the best quality mobile network in Belgium.

First Belgian operator with 4G coverage of 50% End-2013, Belgacom's brand-new 4G network reached 50% of Belgium's population.

The new 4G technology enables ultra-fast Internet with an average download speed of 19 Mbps, with peak speeds reaching 56 Mbps.

Moreover, a solution was developed to roll out 4G in the 19 municipalities of the Brussels Capital Region. At the start of 2014, Belgacom was the first operator to launch 4G in Brussels on a first number of sites.

Commitment to further extend 4G coverage

In order to enable as many customers as possible to acces ultra-fast mobile Internet with 4G technology, Belgacom continues to invest in mobile coverage.

OUR COMMITMENT TOWARDS CYBER SECURITY

The security of our systems and data is an absolute priority for Belgacom. As market leader we have to set the example and play a pioneering role to guarantee data confidentiality and privacy protection at all times.

In 2013, Belgacom was the victim of a hacking attack on its internal systems. This incident inevitably received much press attention, but Belgacom completely openly communicated.

Cyber security requires constant vigilance and continuous investment to constantly optimize the security systems. A few months after this incident, Belgacom has learnt a great deal from the way in which this problem was detected and solved. This knowledge is now being shared with customers and authorities.

This incident reinforced Belgacom's commitment towards strong cyber security in all its aspects. The new cyber defense plan provides for a wide range of actions across different domains: setup of a series of structural measures and governance, increase of continuous awareness of our employees about the importance of cyber security, optimal protection of networks and IT platforms, and the establishment of a Cyber Defense Unit. This Unit focuses exclusively on detecting and solving cyber incidents. FOCUS

LOOK THROUGH THE EYES OF THE CUSTOMER >> ENHANCING THE CUSTOMER'S SATISFACTION IS OUR PRIORITY.

To that end, we purchased, for EUR 120 million, one of the 3 licenses auctioned by the BIPT, the telecom regulator, for use of the 800 MHz spectrum. The license is valid for 20-years and will provide better, homogenous coverage in more rural areas.

A powerful and ever-faster fixed network

In 2013, Belgacom continued to extend its VDSL2 network, which now reaches +/- 89% of the Belgian population.

Thanks to the VDSL2 technology, a large majority of our customers can enjoy a more powerful Internet connection with an average speed of 33 Mbps along with high-definition television.

In addition, the VDSL2 network is perfectly suited for new applications, such as the storage of documents, photos and videos in the cloud and personalized TV solutions such as TV Replay.

Speed boost with Dynamic Line Management

In 2013, Belgacom switched its VDSL2 network into a higher gear with the help of Dynamic Line Management, an in-house developed technology.

This technology continuously monitors a line's stability and adapts it in a dynamic way to the highest technically attainable speed for that specific line. In this way, the average speed of all VDSL2 lines was increased by 30%, while one-third of all VDSL2 lines now reaches speeds of up to 50 Mbps.

Vectoring for an even better performing network

Belgacom is a pioneer in vectoring, a crosstalk suppression technology which significantly improves the performance of a VDSL2 line. Belgacom closely collaborates with Alcatel-Lucent and other leading industrial partners on the development of this technology.

In 2013, Belgacom became the world's first operator to test vectoring in real-life conditions with around 1,000 users on its VDSL2 network. End December, Belgacom managed to successfully complete the development stage and activate the vectoring technology for customers who have our brand-new modem which supports these vectoring speeds.

Since the beginning of 2014, Belgacom has started the rollout of vectoring on its network to let a majority of customers benefit from guaranteed speeds of 70 Mbps.

Internet everywhere thanks to a powerful Wi-Fi network

Belgacom steadily continued the activation of Wi-Fi hotspots. By end 2013, our customers could make use of approximately 800,000 hotspots in Belgium and, through our cooperative venture with FON, even as many as 12 million hotspots worldwide.

A step forward in simplifying our networks

The simplification of our networks aims to reduce our operating costs in the long run and to allow us to become a more efficient, agile company.

In a first step, we started with the outphasing of old telephony and data equipment and freeing up 250,000 m² of technical space (i.e. one-fourth of our total technical space) by outphasing around 25 technical buildings.

End-2013 we managed to migrate all 410,000 telephone lines and 240,000 data lines to new, more modern platforms.

We also informed the BIPT, the telecom regulator, of our 19 technical buildings that we wish to vacate in the coming years.

A POWERFUL MOBILE NETWORK WHEN IT MATTERS

At big events such as Rock Werchter, Dour Festival, Tomorrowland, etc., Belgacom's mobile network once again demonstrated its quality. Even the familiar peak in calls, text messages and data traffic on New Year's Eve passed seamlessly. That day, the network processed 30 million text messages, while the mobile data traffic doubled compared with 2012. FOCUS

A better service and a series of new services for our customers

A positive trend in 2013 was the higher level of customer satisfaction we achieved thanks to a better service delivery and the added focus on simpler, easier-to-use new products.

Rising satisfaction indicators

Customer satisfaction with installations rose in 2013 to a record high of almost 82%. The reliability and stability of our networks and systems also increased by 10% compared with 2012, thereby also contributing to these good results.

By simplifying our IT systems we also could increase the efficiency of our customer service (see also page p.20).

Richer TV experience

In June 2013, Belgacom launched a faster, more responsive and more energy-efficient TV decoder, in order to offer customers enhanced and more personalized content. We also created Wi-Fi Bridge, allowing high-quality wireless reception of TV channels on one or more TV sets.

We also made our TV Everywhere app considerably more userfriendly. It now takes only a few seconds to start the app and enjoy Belgacom TV on a smartphone or tablet.

We further enhanced Belgacom TV with the TV Replay option, enabling to watch TV programs up to 36 hours after broadcast, obviating the need to record them. In an initial phase this new option will be tested with 10,000 interested customers.

Further evolution of cloud offering

Belgacom is constantly extending its cloud infrastructure to keep up with the growing demand from residential and business customers.

The business customers offering was extended with the Office 365 package, a solution for storage, back-up and a web shop.

In 2013, an important step was taken to installing optical fiber. For example, an optical fiber connection ("Fiber to the Home" or FTTH) was installed for the first time on the site of a test user based on a newly developed standard method. The advantage of optical fiber is that it allows a much higher network speed than copper cable. FOCUS

NETWORKS

Belgacom launched a personal cloud solution for residential customers, allowing them to save and manage contacts, photos, music and videos on a smartphone, tablet, laptop or PC. In an initial phase, this solution is being tested by 6,000 interested customers.

Strong foundations to build the future

We continuously want to improve the quality of our existing networks. We make every effort to simplify our networks and devote extra attention to simplify our products and services for our customers.

Moreover, Belgacom is always looking ahead to fulfill customers' needs over 5 to 10 years. This means that Belgacom is investing today in a future with faster and smarter fixed and mobile networks.

Finally, Belgacom continues to support sales and support services with new IT solutions, in order to provide our customers with even better and more efficient service in the coming years.

(56 Mbps peak speeds)

A "WHOLESALER" ACTIVITY WHICH IS PARTICULARLY IMPORTANT

Though less known, Belgacom's unique customer experience is also evident on the so-called wholesale market. Through its Carrier & Wholesale Solutions division, Belgacom provides a series of telecom solutions to many operators in Belgium: connectivity services, high-speed access (DSL), etc.

Belgacom's wholesaler activity has been developed following the liberalization of telecoms. To stimulate free competition, the regulator required the incumbent operator to open its networks to third parties. Over the years, Belgacom has been able to count on a growing number of customer operators, both on the corporate market and the residential market. An increasing proportion of agreements signed between operators is no longer linked to the regulatory context but is part of broader commercial partnerships.

>> Facilitating partnerships with third parties

One of Belgacom's priorities as a wholesaler is to create an open model facilitating the creation of partnerships with other operators, particularly mobile virtual network operators (MVNOs), but also "over-the-top" players which offer telecom services on the Internet without going through the traditional networks. These partnerships make it possible to speed up the return on the massive investments in networks and platforms.

>> Launch of SNOW

Snow, a triple-play offer (television, fixed telephony and Internet) of Base became operational. It is the result of a 5-year commercial agreement between the Dutch operator KPN and Belgacom's wholesale division.

3.4%

3.4% of Belgacom revenues are generated by the national wholesale activity

CREATING AND SHARING VALUE

Belgacom has been a well-known Belgian company for generations. Its importance for the economy and Belgian society as a whole continues to grow, with the increasing importance of new technologies in our lives and companies. As a leader and innovator, Belgacom takes its responsibility to society. We are convinced that our company's success depends on our capacity to make a positive contribution to economic, social and environmental progress. We want to create value, and above all, to share that value through our infrastructure, solutions, and our employees.

A MAJOR ECONOMIC PLAYER

Despite a complex market situation, we invested in 2013 EUR 972 million mainly in more performing networks. At the same time, prices of our solutions continue to drop, as such, providing access to communications to a vast majority. We are also one of the top employers in the country, with almost 15,000 employees. We believe our employees are our best asset. Every year, we invest in their development and training. In 2013, each employee followed an average of 23 hours of training!

Direct contribution

In 2013, we paid EUR 1.67 billion in taxes, social contributions and dividends.

RESPONSIBILITY AT THE HEART OF OUR ACTIVITIES

We acknowledge the need for responsible and transparent management of our activities towards all our stakeholders. Corporate Social Responsibility (CSR) is a strategic management tool and a key element of our corporate mission and strategy.

Our CSR strategy aims to contribute towards a safer, greener, more inclusive (digital) society, while ensuring we do business in an ethical and responsible way.

SMARTCAFÉS ARE ORGANIZED IN 14 POINTS-OF-SALE AND PROPOSE 13 TRAININGS ON OUR PRODUCTS AND SERVICES.

OUR CSR STRATEGY

CONTRIBUTION

NUMBER OF DISADVANTAGED PEOPLE TRAINED ON ICT SKILLS BY BELGACOM

23 BELGACOM ACTIVITY REPORT 2013 CONTRIBUTION

Enhancing access to communications

Our significant investments in Belgium's digital infrastructure improve access to technologies and essential services, enabling people and businesses to interact while generating economic benefits.

We make a special point of improving the digital literacy of citizens and helping more people connect to the Internet to enjoy the benefits of the digital society. In September 2013, we launched SmartCafé, a series of 13 training sessions on our products and services. These sessions, open to everyone, were given in 14 of our points-of-sale, and we count already more than 500 participants.

www.belgacom.be/formation

Web Experts for sharing across generations

We carried on the Web Experts initiative, which encourages young people to share their knowledge of the Internet with older people. We also continued to support various ICT training centers. In total, we helped more than 11,300 disadvantaged citizens improve their digital skills.

www.webexperts.be

Devices for people with a disability

We continued to expand our catalog of devices and applications for people with a disability. In our general catalog of mobile phones and tablets, we also created a filter which allows you to easily identify devices for people with special needs.

www.belgacom.be/handicap >> http://bit.ly/devicecatalog

Encouraging a responsible product use

Since telecoms play an increasingly important role in our lives, we promote the safe and responsible use of our solutions. We focus on providing information on electromagnetic fields, and health. We are also involved in the protection of children online. This policy favours our brand image and makes Belgacom a reference partner. It allows us to develop a relationship of trust with our stakeholders.

Cooperation with Child Focus

In 2013, our employees trained over 12,000 children in 185 primary schools on the safe use of Internet, in cooperation with Child Focus (the Belgian Safe Internet Center) and Microsoft.

Exposure to electromagnetic fields

As for the mobile network, we continuously extend it in a socially responsible way, in accordance with the strict regional standards on electromagnetic fields.

Enabling a low-carbon society

We are determined to speed up the evolution towards a low-carbon society. Our goal is to reduce our CO2 emissions by 70% by 2020 (compared with 2007). At the same time, we help our customers reduce their own environmental impact.

Energy consumption reduced by 3%

Belgacom's energy consumption fell by more than 3% for the third consecutive year. We also managed to reduce our ecological footprint by an additional 2%. Our transparency in this regard and our performance in the fight against climate change have earned us two CDP awards (CDP is an international, notfor-profit organization providing the only global system to measure, disclose, manage and share vital environmental information). We are now among the 5 European telecom operators with the best results in this area.

Waste recycling

As much as 83% of our waste is recycled, and most nonrecyclable materials is used to generate energy. In cooperation with the NGO GoodPlanet Belgium, we initiated a large-scale awareness campaign on mobile phone recycling in schools. Mobile phones contain precious metals and materials which can be given a second life.

ICT solutions good for the environment

Finally, our ICT solutions, for example videoconference or the cloud help our customers save energy and reduce their CO2 emissions.

EVOLUTION OF OUR CO2 EMISSIONS

Since 2007, we have reduced our CO2 emissions by 63%

Ethic in our way o working

We want to carry out our activities in a responsible and ethical way in relation to our employees, our suppliers, and the communities in which we operate. This helps us to build trust with our stakeholders, protect our image, improve employee engagement, contribute to social integration, and create stronger ties with our suppliers and communities.

Our Corporate Governance Charter, Code of Conduct, Compliance Office, and policies underpin our approach to responsible business.

The main pillars of our ethics charter:

Positive work culture

We believe in the professional development of our employees. We fight against all forms of discrimination and promote a worklife balance in the workplace. To this end, in 2013 we launched the first 2 phases of a project offering our employees the possibility to work from home 2 days a week. Our promotion of a pleasant work environment has earned us the "Top Employer" title for several years (read our chapter on "A more agile organisation").

Responsible supply chain

We apply increasingly strict ethical standards for our supply chain, in close collaboration with our suppliers. By incorporating CSR standards in our buying procedures, we not only improve our brand image but also produce beneficial changes in the communities where our suppliers operate.

Our suppliers must meet well-defined social, ethical, security and environmental standards. We regularly monitor compliance with these standards through surveys and dialog with our suppliers.

In 2013, 140 suppliers filled in our CSR self-assessment questionnaire, and the 59 suppliers belonging to the "medium to high risk" category have been invited to set up a corrective action plan. 38 on-site audits were carried out and shared by the "Joint Audit Cooperation" (JAC) members. Belgacom itself carried out 4 of these on-site audits.

CSR is an integral part of our supplier's performance reports, of the contracts and the tendering criteria. We also distributed a "Sustainability Award" to a local supplier. >> www.belgacom.com/suppliers

Supporting communities

Belgacom's contribution to society is also felt in a very concrete way in the field.

In 2013, we invested over EUR 1.8 million in social action, whether through financial donations, the provision of services or volunteer initiatives by our employees.

For example, we continued to provide free broadband connectivity to Bednet and Take Off to enable children with a long-term illness to stay in contact with their class at school.

12,456 children have been trained in safely using the Internet and new media 12,456

In the beginning of 2013, we offered 2,500 nights to homeless people in one of our buildings. We also raised over EUR 70,000 in funds through our SMS services.

Our sales divisions invite customers to convert the points earned through our loyalty plan, into donations for Unicef and the Foundation Against Cancer. We were able to donate more than EUR 80,000 to these associations in 2013.

Over the past few years, our efforts to more concretely shape our social responsibility have been recognized by independent parties, as our integration in CSR indices, such as the Ethibel Sustainability Index, ASPI, CDP and the Triodos Sustainable Investment Universe, clearly illustrates.

More information on

www.belgacom.com/responsibility

Please send your comments on our CSR commitment and your opinion of this report to [email protected]

A MORE AGILE ORGANIZATION

HUMAN RESOURCES

More than ever, Belgacom needs motivated, highly productive employees to take on the challenges of a hypercompetitive market. Our structures and working methods must become more agile to meet the growing demands of our customers. Being good is not enough anymore. We need to be excellent. In 2013, the company continued to invest in developing its talent pool in order to make collaboration, trust, transparency and agility part of its DNA.

For Belgacom, its employees are its most important capital. Products can be copied, but not unique know-how and expertise. In the past, we started with the premise we first should strengthen our employees engagement. It was generally accepted that more engaged employees, would also deliver better quality work. However, this assumption was not entirely correct. For example, the creation of a work environment promoting performance is crucial. We, therefore, also measure a number of other parameters in our annual employees survey and initiate improvement actions. These actions will enable us to evolve into an agile, highly productive company that can respond effectively to rapid market changes.

A COMPANY FAVOURING DIVERSITY

>> Age diversity

Belgacom considers diversity as an asset. In 2013, special emphasis was placed on age diversity. When developing HR projects, particular attention is now paid to the stage of life our employees are in rather than their age.

>> Gender diversity

Gender diversity is at the heart of our HR approach and has become focus of attention in the traditionally most "male dominated" departments. The SDE (networks) and EBU (business customers) divisions have, among other things, held information and awareness sessions on gender diversity and the importance of gender equality in managerial positions. FOCUS

THE FLEXIBILITY OF ALL IS A PRIORITY. THE FLEX-PROGRAM HELPS US TO CHANGE OUR WAY OF WORKING.

Team leaders as catalysts of change

Nobody has as much impact on the performance of an employee as his or her immediate superior. In this regard, one of Belgacom's priorities in 2013 was to reinforce the leadership skills of our managers and executive staff and their ability to adapt to change. This culture development track is being implemented top-down, from Management Committee members to field team leaders.

More accountability and mutual trust

Belgacom has defined 4 pillars for managers and executive staff for their daily interaction with their employees: team spirit (sharing success as well as failure); respect and recognition; open and constructive communication; and promotion of transparency. Such a change in culture takes a number of years. In 2013, this transformation was stimulated with 2 training and awareness programs for managers and executive staff.

Good to Gold

This track aims to encourage a new culture striving for excellence, as being good at what we do is no longer enough. One of Belgacom's challenges is to put the technical skills, of which the intrinsic qualities are widely recognized, into practice. It is not just about having the know-how, but applying it within the teams on a daily basis.

Since a top-down approach was chosen, Belgacom's Management Committee first followed this program, succeeded by just over 600 team leaders in 2013. About 1,100 others will follow in 2014. This training is given by about 20 high potential managers or employees, who received special coaching to act as a link in the change process.

Lead 21

The Lead 21 program, which was launched in 2012, has been extended to all team leaders. As many as 865 employees have followed this 5-day course. The aim is to ensure that every team leader has leadership skills as well as technical competencies. Improving these skills becomes a source of motivation and of professional and personal satisfaction for those following the program.

Initiatives such as Good to Gold and Lead 21 are long-term projects. Keen for these to have a lasting effect, Belgacom is making sure that the leadership principles learnt during the training courses are put into practice in each division, such as the creation of a network of "culture and leadership champions" in connection with the Good to Gold program. As such, each team leader makes a lasting contribution to creating a more stimulating and motivating work environment.

A department dedicated to supporting team leaders

The Human Resources department has also set up a "Team Leader Solution Center" to guide and support team leaders. The latter can turn to the Center with any questions related to the proper functioning of their teams. This department also organizes personalized or group coaching sessions, information sessions and workshops. As leaders guide and direct our staff every day, they are the force driving the change that Belgacom wants to implement.

A more flexible working environment

With regard to new working methods, Belgacom intends to implement in-house the solutions it sells to its customers. The flexibility of our company and employees is therefore a priority. In 2013, we speeded up a number of processes, grouped under the "Flex" program, to make our working methods more flexible by promoting and supporting teleworking and homeworking. But it also means providing the necessary tools to evolve towards a new, digital working environment that is no longer confined to a desk and chair. To ensure this transition as harmonious as possible, our team leaders can follow a "remote leadership" training. Its purpose is to train our managers and executive staff on using new tools for communication and guidance, coaching and remote leadership.

Specific and concrete training courses

Besides providing programs with a direct focus on leadership and adapting to change, Belgacom continued to invest in special training courses for a large number of targeted employees. For instance, the "Shop of the Future" courses, which help our sales staff serve customers better in our stores, and a whole series of high-level technical courses for our technicians and engineers. We also innovated with a course on the use of social media and one on managing absenteeism to increase overall efficiency of our teams. A culture of dialog

>> 1,257 vacancies were filled in 2013, 394 by external candidates and 863 through internal job moves 1,257

Belgacom invested EUR 30 million in training, i.e. 3% of its payroll 30 million

To stimulate employee engagement and an open dialog across hierarchical lines, Belgacom has been conducting an employee satisfaction survey every year for 10 years. For 2 years now, this survey has been measuring not only employee engagement, but also strategic alignment and agility. Every year it results in specific action plans to make the necessary improvements. In 2013, this approach resulted in, among other things, interactive chat sessions with members of the Board and the development of a more open and transparent way of communicating.

MARKET CONTEXT HUMAN RESOURCES

HEALTHY EMPLOYEES

The health of a company is a reflection of the health of its employees. Our Vitality program includes an intranet site with initiatives and tips on physical exercise and healthy eating, a team of employees responsible for promoting all "health" initiatives in the company, and a community for sharing ideas and suggestions. FOCUS

Essential cost-saving measures

The training and development of employees is and remains an absolute priority for Belgacom. However, the company must also monitor the hyper-competitive market environment. To avoid diminishing profit margins and loss of competitiveness, we must keep our personnel costs under control. In order to achieve these essential cost-saving measures, we have 2 levers:

Simplify to reduce work volume

We will continue with the simplification of our product lines and internal procedures, being 1 of our 4 strategic priorities. It will enable us to cut down on the work volume and the systematic replacement of employees leaving the company.

Reorganize our structures while keeping social peace

A drastic simplification of some of our structures is unavoidable. Many employees will be required to show flexibility, even though we will prefer soft transitions, without jeopardizing our objectives on the development of human capital.

We will continue to respect the essential principle of social dialog, as we did in the last few years, even though the market urges us to seek new balances. We will make every effort to maintain a constructive dialog with our social partners, as we did when signing the collective labor agreement for 2013-2014.

Results of the 2013 Speak Up survey

This year, 72% of our employees took part in the Speak Up employee survey, measuring not only the level of employee engagement, but also strategic alignment and agility, 3 pillars with significant impact on our company's success. The scores for these 3 pillars improved compared with 2012, especially with respect to engagement and strategic alignment, which are in line with or considerably above the telecom benchmark.

A positive corporate culture

Around 8 out of 10 employees would recommend Belgacom as a company that is good to work for and would also recommend our products and services to their family and friends. This is a good illustration of the fact that our employees are true ambassadors of our company. An increasing number of employees indicate that recognition is part of the corporate culture and that they are receive more feedback to help them improve their performance, 2 areas in which we have noted improvements of about 10% compared with 2012.

Agility as a factor of change

Finally, we observed progress in the perception of our capacity to respond to change. Our employees, like Belgacom's management, say that we must continue our efforts in this area to further increase the agility of our structures and working methods in order to prepare for the company's future and respond to the increasing demands of our customers. Agility will therefore be a central priority in the years to come.

OUR PRIORITIES IN 2014

Our human resources management strategy is a longterm endeavor. Therefore, instead of turning our priorities upside down, we will implement measures to become even more efficient. Our greatest challenge will be to keep personnel costs under control but also to complete the transformation of our company culture. Our ambition is to make Belgacom an agile, efficient organization which is able to restore lasting growth. ²⁰¹⁴

MARKET CONTEXT HUMAN RESOURCES

>> MARIO, PETER, NICOLAS-XAVIER, OLIVIER, LUC, BRUNO, MARC, WARD AND KOEN THANKS TO OUR NETWORKS AND SOLUTIONS, WE COULD WIN MANY COMPANIES BACK.

>> MICHAEL AND FREYA AN EVEN MORE EFFICIENT SERVICE WITH EVEN A BIGGER SMILE IN OUR CALL CENTERS.

>> MURIEL AND FRÉDÉRIC MOBILE OFFENSIVE TOWARDS SMEs.

>> LAURE-EMMANUELLE AND MAUREEN TODAY 29 STORES BRING A NEW CUSTOMER EXPERIENCE TO LIFE.

>> GILLES, NADIJE AND NATALINA THIS YEAR BICS HAS DELIVERED MORE THAN 1.9 BILLION SMS WORLDWIDE.

>> DIRK

CYCLOCROSS IN OOSTMALLE OR BIG FESTIVALS, OUR MOBILE INSTALLATIONS MUST ALWAYS REMAIN RELIABLE.

>> ALEXANDRE AND GRÉGORY THINKING OF NEW PARTNERSHIPS FOR "OVER-THE-TOP" ACTORS.

>> HILDE, PHILIPPE, WALTER AND NICOLAS SPORTS ON TOP ON BELGACOM 5, 11, 11+.

>> JOHAN, PHILIPPE AND LARS AN EVEN MORE PERFORMING TECHNICAL SERVICE FOR MORE SATISFIED CLIENTS.

>> RACHIDA, WESLEY, BART AND CARLY SCARLET, SIMPLE AND ACCESSIBLE TELECOM SOLUTIONS FOR PRICE-SENSITIVE CLIENTS.

>> ILSE, GEERT AND MURIEL BELGACOM, FAN OF THE WHOLE CLAN ;)

>> VÉRONIQUE, THIERRY AND KARL EVEN SIMPLER IT SYSTEMS FOR A BETTER CLIENT SERVICE.

>> MURIEL AND AMAURY SUPPORTERS OF THE RED DEVILS… ALREADY FOR 20 YEARS.

>> CHRISTOPHE AND JORAN ALWAYS MORE PERFORMING COPPER AND OPTICAL FIBER NETWORKS.

>> MARINA AT TANGO WE HAVE A REPORTING SYSTEM THAT ALLOWS US TO KNOW OUR CUSTOMERS BETTER AND TO ADAPT OUR OFFERING TO THEIR NEEDS.

>> DEBEN, EMMANUEL AND LUK LOOKING THROUGH THE EYES OF THE CLIENT MEANS IMPROVING HIS EXPERIENCE WITH OUR PRODUCTS.

>> SABINE, INGE, CORINNE, GEORGES AND RONALD TOWARDS A NEW "FLEX" WORKING ENVIRONMENT IN LINE WITH THE DIGITAL ERA.

>> FILIP, SYLVIANE AND JEAN-CHRISTOPHE TV REPLAY, A NEW WAY TO EXPERIENCE TELEVISION.

A UNIQUE EXPERIENCE FOR EACH RESIDENTIAL CUSTOMER

38MARKET CONTEXT

CUSTOMER

For Belgacom, technological advancement is not a goal in itself, but a way of responding to the needs of our diverse residential customer base, those needs being freedom, simplicity and user-friendliness. We continue to invest in ever more highly performing fixed and mobile networks and in more intuitive solutions for customers. In 2013 we continued to focus on optimizing a services offer in which every residential customer will find something to his or her taste.

Belgacom has managed to reap the fruits of its convergence strategy on the telecom market, which is highly competitive, especially in the mobile telephony segment. This strategy enables Belgacom to position itself more firmly as a single operator that offers access to a wide range of communication solutions and content via different fixed and mobile devices. Belgacom launched various initiatives to put into practice its strategy to bring life to screens anywhere, anytime and whenever it suits the customer. Always with the intention to make life easier for its customers.

The Mobile offensive

Belgacom has proved it can respond very fast to the fierce competition. The operator has simplified its offering and adapted its rates to the advantage of the consumer. By highlighting the quality of our Proximus network, we have managed to drastically reduce the number of customers leaving for other operators to the level of before the mobile market disruption. The repositioning of our low-cost brand Scarlet with a new, competitive postpaid and prepaid mobile offer also proved effective to retain and attract price-sensitive customers.

All these efforts have helped to achieve substantial growth in our mobile telephone subscriptions (postpaid).

ONE BILL FOR THE WHOLE CLAN >> SINCE APRIL, CUSTOMERS HAVE BEEN ABLE TO ADD UP TO 6 MOBILE SUBSCRIPTIONS TO THEIR PACK, GIVING THEM A DISCOUNT OF BETWEEN EUR 5 AND 10 PER MOBILE.

MARKET CONTEXT CUSTOMER

Packs with added value at an attractive price

Our convergence strategy has been well received by consumers, as shows the growing sales of our Internet Everywhere Packs. Our Packs today offer more value for an attractive all-in price. We have succeeded in raising our average revenue per family and are consolidating our position as a trusted partner for telecom among an increasing number of households. We also offer families extra advantages: customers can combine up to 6 mobile subscriptions in one Pack and receive a monthly discount of between 5 and 10 euro for each mobile.

TV Everywhere, our service which enables customers to watch digital TV on any device, is now included in all Packs.

With Scarlet Trio we have launched a convergent solution for price-conscious customers.

Brands to suit everyone's needs

In 2013 our marketing teams joined forces to reinforce the complementarity of our brands: Proximus for clients wanting the best mobile experience and Belgacom for those searching convergent solutions and a qualitative service. End 2014, our company will group all solutions – mobile, fixed and IT – under Proximus as the unique commercial brand (see p. 17). As such, we will keep on offering the service and reliability of Belgacom together with the quality and innovation of Proximus. As to Scarlet, this brand shall offer simple and accessible solutions for price conscious customers under its own brand.

Continue to strive for simplicity

The words "simple" and "freedom" are characteristic of how our customer service has evolved. Our support through the contact centers and Belgacom Centers is complemented by new possibilities for online support via our website www.belgacom. be. Thanks to our site's e-Services and the "Help and support section", customers can find the answers to their questions whenever they want. They don't even have to leave their home. In 2013, our website saw a significant increase in the number of satisfied customers.

Building services together with the customer

Belgacom wants to earn the trust of its customers. All our innovations are, therefore, tested thoroughly for maximum reliability and user-friendliness.

We value feedback from customers and, therefore, launched a number of services in test phase in 2013. For TV Replay (delayed viewing of a program without recording it) we started a test in November with the 3 largest Flemish media groups VMMa, VRT and SBS Belgium. It was later extended to the channels of the RTL Group and AB Group.

MARKET CONTEXT CUSTOMER

40 >> Number of downloads of the Hello application in 2013 870,000

TV REPLAY enables the customer to watch programs until 36 hours after broadcast and without recording them.

SCARLET IN THE "LOW-COST" SEGMENT >> IN 2013, BELGACOM REINFORCED THE COMPLEMENTARITY OF SCARLET ( FOR PRICE-CONSCIOUS CONSUMERS) WITH THE REST OF ITS PORTFOLIO. SCARLET ALSO REVISED ITS MOBILE SUBSCRIPTION OFFERING AND LAUNCHED THE CONVERGENT SCARLET TRIO OFFER.

We also started a test phase for Belgacom Cloud, a cloud solution for residential customers. Belgacom Cloud allows customers to back up their favorite photos, videos, documents and other content, such as music in a centralized way. They have access to these media anytime, anywhere and can also easily share them with family and friends via their smartphone, laptop, tablet or even Belgacom TV.

Trust also means permanently guarantee our solutions are secure. To that end, for Belgacom Cloud, we work with F-Secure, a leading international IT security provider.

Points-of-sale where the customer experience is the central focus

As soon as customers step into a Belgacom point-of-sale, they must get the attention they deserve and find the solution that best meets their needs. We have expanded our network of Experience Stores to 29 modern, attractive points-of-sale immersing customers in the world of Belgacom possibilities. Customers can easily try out products themselves and get advice from our sales teams.

Customers do not want to wait longer than necessary. Therefore, we launched a new ordering system in the Belgacom Centers reducing the time to process an order, while considerably lowering the risk of errors.

Ensuring the security of people and goods

Sometimes the security of goods and people is the reason of existence of our products: at the start of 2013, we launched Belgacom Home Control, a solution enabling customers to know what is happening at home anytime, anywhere via their smartphone, tablet or PC thanks to a comprehensive, simple and discrete installation, consisting of an exchange, an HD camera, a smoke detector, motion detectors, and remote controls. Since November 2013, Belgacom Home Control can even be connected to the telemonitoring system of Securitas.

Stronger Tango in Luxembourg

Tango, the Luxembourg subsidiary of Belgacom, expanded its content offer for digital TV with new channels, a German-language interface and an extensive offering for the Portuguese community. As such Tango has emerged as a major player on the entertainment market. Belgacom's convergence strategy is also evident in the Grand Duchy, where the TV offer is integrated in a Tango Pack.

PARTNER OF THE RED DEVILS >> BELGACOM IS THE INSEPARABLE SPONSOR OF THE RED DEVILS. AGAINST THE BACKDROP OF THE MEMORABLE QUALIFYING CAMPAIGN FOR THE WORLD CUP IN BRAZIL, WE LAUNCHED SPECIFIC INITIATIVES TO PROMOTE THE BRAND.

2014OUR PRIORITIES ON THE RESIDENTIAL MARKET

Our ambition is to further consolidate our leadership position on the Belgian market. To achieve that it is necessary to create growth by offering customers innovative solutions and keep our costs under control. In this way we will be able to safeguard the vital investments for the future and further strengthen our market share.

A SINGLE PARTNER FOR OUR BUSINESS CUSTOMERS

Companies today are looking for a partner they can trust. They search a partner that provides innovative and comprehensive solutions which give them the necessary peace of mind. In Belgacom they find a single partner that couples its expertise as a telecom provider with high-quality IT skills. Besides holding on to our leadership position in telecoms in 2013, we also achieved some fine results in Unified Collaboration, cloud computing and security.

MARKET CONTEXT CUSTOMER

MARKET CONTEXT

CUSTOMER

Belgacom, the reference in telecoms

For business customers, the difference between their telecom and IT needs is becoming blurred and loses relevance, as cloud computing and mobile applications are catching on. The self-employed, SMEs and large enterprises prefer solutions allowing them to take maximum advantage of new technologies. In this context, Belgacom's convergence strategy is bearing more and more fruit: in 2013, the service provider remained leader in its traditional telecoms market despite a vigorous mobile market shake-up. The actions for keeping business customers were effective.

Win-back of large customers

Belgacom also managed to win back quite a few customers. Large enterprises, such as BNP Paribas Fortis and bpost, put their trust in us again, returning to Belgacom for their mobile telephony. The quality of our network and service was the decisive factor for their decision.

Excellent growth on the IT markets

Besides telecommunication, Belgacom is also focusing on a second pillar of its strategy, the provision of IT solutions that are closely related to Telco. The company grew in a stagnating market thanks to a series of fine projects aimed at delivering solutions instead of just selling technologies.

Total solution for the Flemish Roads and Traffic Administration

A good example is the contract with the Flemish Roads and Traffic Administration for a project on automatic license plate recognition showing the combination of Belgacom's strengths. Together with our partners, we provide a comprehensive solution which seamlessly combines the connectivity and infrastructure (the cameras) with the license plate recognition software. It also helps the traffic police carry out its prevention and control

HISTORIC CONTRACT FOR TELINDUS LUXEMBOURG

Together with Belgacom, Telindus Luxembourg concluded this year by signing the most important project in its entire history.

By partnering with IBM as a subcontractor for telecommunications and storage infrastructures, Telindus Luxembourg will become a strategic service and technology provider for Innovative Solutions for Finance (IS4F), which was previously part of Dexia Group in the form of ADTS, and the vehicle for servicing organisations such as Belfius Assurances, Belfius Bank, Banque International à Luxembourg (BIL), Dexia Credit Local SA, Dexia SA/NV and International Wealth Insurers (IWI). Luxembourgish customers. FOCUS

Telindus Luxembourg has wide experience in outsourcing and was already a long-term partner of ADTS. The partnership with Belgacom offers IS4F good coverage of different Belgian and

TELINDUS LUXEMBOURG HAS CONCLUDED A PARTNERSHIP WITH IBM AS A SUBCONTRACTOR FOR TELECOMMUNICATION AND STORAGE INFRASTRUCTURES.

EUR 701 million from IT revenues in 2013 (+1.3% compared to 2012) 701million

duties, thereby facilitating road traffic analysis. The solution also promotes the exchange of information on a local, regional and national level. Thanks to the agreement between Belgacom and the Flemish Roads and Traffic Administration, the service can be extended to all Flemish cities and municipalities. Brecht and Brasschaat are already pioneering in this area.

Further growth of the cloud services

Two years ago, Belgacom launched the BeCloud offer. This forms the backbone of our Belgacom strategy to provide simple, intuitive IT solutions. "IT as a Service" offers many advantages, including predictability of costs. The customer pays only for the services or storage space he actually uses. Belgacom also extended its range of available infrastructure services (storage, hosting and back-up) and software applications (office automation, collaboration tools, etc.) on a "pay-as-you-use" basis. These services are progressing rapidly. The investments made in the cloud already resulted in excellent growth figures, both in terms of revenue and in terms of the number of customers hosted in the cloud. This proves that there is a real demand from companies.

Evolution of our revenues from cloud services in 2013 +12%

Appropriate answers for the work sector

Today, technology makes it possible to evolve towards new ways of working and collaborating. Companies want solutions that allow more flexibility and, at the same time, are secure and reliable. Inside its own walls, Belgacom is fully adopting this new way of working which offers more openness and flexibility. It can share this experience with its customers. Its always richer and diversified offer enables it to provide a wide range of connectivity, communication and collaboration tools. This new way of working is gradually less linked to a physical desk, and implies attractive growth opportunities for Belgacom.

Christel Vansimpsen Sint-Lucie Culture de cresson Fred Dumont Les Collines à Domicile Traiteur et livraison Eric Bluart Taxi Eric Compagnie de taxis

FOCUS CONVERGENT SOLUTIONS TAILORED TO SMES

The self-employed and SMEs are particularly sensitive to the attractiveness of our global solutions which combine fixed and mobile telecom, and IT solutions. In 2013, the percentage of SMEs that opted for such an offer rose by more than 10%. End August, Belgacom sold its 50,000th Bizz Pack, an all-in offer with fixed and mobile telecoms, mobile Internet, collaboration tools and back-up services in the cloud.

>> "Les Agisseurs"

With its advertising campaign "Les Agisseurs", Belgacom is presenting itself as a solutions provider helping SMEs to achieve their commercial objectives. Belgacom's technological solutions save them time, which they can then spend on their core activities. In the first phase of the campaign, 15 professional challenges of small businesses from different sectors were placed in the spotlight in an attractive way. In the second phase, from November 2013 to November 2014, these businesses explain how Belgacom helps them in practice to successfully overcome their challenges.

The feedback on this innovative campaign will help Belgacom to improve its specific approach to meeting the needs of the self-employed and SMEs. The aim is also to share a number of lessons and good practices with SMEs.

The example of Henri Essers

A good example of this new way of working can be found at the company Henri Essers. Founded in 1928, it has grown into one of the most important European players in transport and logistics for the chemical and pharmaceutical industry. In the past 10 years the company has grown quickly, partly thanks to strategic international acquisitions. Belgacom and Henri Essers looked for solutions to increase productivity and stimulate a smoother collaboration between employees in different locations. They chose a solution based on Microsoft Lync, in combination with the connectivity and functionality of integrated video and contact center solutions. "The central management and deep integration with other Microsoft applications – such as Office, SharePoint, Outlook, CRM and System Center – were the deciding factors", the customer concluded.

Growing demand for top-quality security products

The ever greater complexity of cyber-attacks and intrusions in IT systems, such as those Belgacom experienced first-hand and from which it learnt the necessary lessons and gained considerable experience (see page 27), requires ever stronger security competencies. As a telecom and IT player, Belgacom has the advantage it can offer global security services. Our Security Operations Center (SOC) monitors more than 400 million security incidents every day. It also monitors our customers' systems around the clock. In addition, an increasing number of companies are making use of our unique expertise and entrusting Belgacom with their security. They do not have to invest in own expensive equipment or in recruiting security experts wich are hard to find. They are guaranteed Belgacom watches over their data and applications, both within the company walls and in the cloud.

Innovations in mobile Internet

Sixdots as a benchmark for mobile payments For a number of years now, Belgacom has been investing in sector-specific solutions, such as healthcare and transport. The aim is to create new opportunities for business customers while making life easier for consumers. In 2013, Belgacom partnered with BNP Paribas Fortis to launch a mobile virtual wallet, which, among other things, should make payments easier. The Sixdots application, now also supported by other large banks, will enable consumers to pay for products and services via their smartphone, exchange virtual discount vouchers or centralize their customers' cards. Each payment is secured with a six-digit secret code (hence the name Sixdots). The commercial launch of Sixdots via the joint venture Belgian Mobile Wallet S.A. is scheduled for the spring 2014.

Problem-free parking with Mobile-for

Mobile-for, the Belgacom subsidiary specialized in solutions for mobile payments and parking tickets, recorded impressive growth in 2013. Mobile-for is reaping the fruits of an agreement for mobile parking with 22 Belgian cities, a collaboration with Flemish public transport company De Lijn for the electronic issuing of transport tickets, and innovative payment solutions for charging electric vehicles (there are already more than a 100 charging stations compatible with Mobile-for). In 2013, more than 6 million payments for mobile parking were processed via Mobile-for. The subsidiary's ambition is to become the preferred national and international partner of mobility players in the broadest sense.

Progression of revenues generated by our security solutions for businesses in 2013 +43%

MARKET CONTEXT CUSTOMER

FOCUS AN ENERGY-EFFICIENT DATA CENTER

In April 2013, Belgacom opened a new data center in Brussels that sets a new benchmark in energy efficiency. The new data center has a surface area of 2,250 m². Adding it, increased the total surface area of Belgacom's data centers (15,000 m²) by 19%.

The data center is managed in an environmentally-friendly and energy-efficient way. It is built according to the principles of separate cold and hot air flows, powerful cooling installations, and efficient energy use. This enables business customers to store servers/equipment with high energy consumption in the new data center.

Like other Belgacom data centers, the new data center has the ISO 27001 classification Tier-III+. This means that it offers an operational reliability of 99.99% thanks to a fully redundant power supply, supported by dynamic back-up generators and a cooling system with a capacity buffer.

EXPERTISE APPRECIATED INTER- NATIONALLY

Belgacom has leading-edge skills recognized internationally. Through the BICS joint venture, Belgacom, as a wholesaler (or "carrier") provides a series of telecom solutions to more than 700 operators worldwide. Indeed, BICS is a highly regarded leader, both for its voice and mobile data connectivity services and its innovative value-added solutions.

>> Minutes processed in 2013 (+3.4% compared with 2012) 28 billion

of the Belgacom Group's revenue 26%

A world's first

In 2013, BICS, a joint venture between Belgacom, Swisscom and MTN, was the protagonist of a world's first: the launch of LTE (4G) roaming between Europe, Asian, North America and Africa. Worldwide, close to 250 operators have already launched 4G and want to offer their customers high-speed high quality data access. To offer them this same experience around the world requires them to establish connections with all other 4G networks and that's where the expertise of BICS comes in. Its mission is to ensure that all types of communications are correctly routed across the different networks on an international scale. The BICS services (voice, messaging, roaming, etc.) are in a way the central interface between several hundred operators around the world.

MARKET CONTEXT CUSTOMER

BICS HAS BECOME THE "UNIQUE CONTACT" OF MANY TRANSNATIONAL OPERATORS.

RESULTS OF THE BICS SATISFACTION RESEARCH IN 2013

MARKET CONTEXT CUSTOMER

Growth of voice traffic on a declining market

In contrast to a worldwide declining voice market, BICS managed to carry more volume in voice communications. The global erosion of the voice market is both a challenge and an opportunity. The fact that some competitors in difficulty abandon their activities enables more solid operators to increase their market share. Combined with a persistent focus and constant investments in the diversification of its portfolio, this means that BICS has managed to establish itself as a "single contact" for numerous transnational operators. The company serves as a privileged "hub", especially in Europe, Africa, the Middle East and Asia. BICS can also count on a high level of satisfaction among its customers.

Strategic acquisitions and agreements

In October 2013, BICS acquired Aervox, a software development company based in Madrid and specialized in roaming and messaging. The acquisition of Aervox is part of a strategy aiming to develop new interoperability features and solutions in mobile data.

End December, BICS also announced the integration of activities for international money transfers via GSM in a joint venture with MasterCard, eServGlobal and BICS. This new company will enable users to send money to and from a mobile account, from payment cards, bank accounts and foreign exchange offices, no matter where they or the recipients are.

BICS also pays close attention to market developments engendered by the arrival of new "over-the-top" players from the Internet world. Through productive partnerships, the Belgacom's subsidiary continuously increases its penetration in the OTT market.

EUR 1.666 billion of revenues in 2013 (+ 1.3% compared with 2012) 1.666billion

8% of the Group's profitability (EBITDA)

New value-added services

Today, satisfying customers and dealing with the pressure on roaming revenues is a challenging reality for operators. In this regard, BICS distinguished itself in 2013 through the launch of SMART Webvision. This is a "big data" analysis and monitoring web application, which allows operators roaming in 2G, 3G and 4G to monitor communication flows in real-time. The operators can, if required, make the necessary adaptations to improve the experience of their own customers in roaming and offer them tailor-made solutions.

Our priorities for the future

BICS operates on an extremely competitive global market which requires a very high level of expertise. It is therefore constantly looking for highly sought-after technical talent possessing specific skills.

The quality of its teams and technologies should enable BICS to stay one step ahead of its competitors and speed up the deployment of new value-added services, which complement its proven carrier services offering.

MANAGING FINANCIAL MEANS MORE EFFICIENTLY

In 2013, the full impact of the mobile disruption increased pressure on revenues and overall profitability. Although Belgacom's successful commercial response did limit the impact of the value destruction in the mobile market, this illustrates that the simplification and management of our cost structure are essential for preserving our market leader position and the development of our growth strategy.

Belgacom has embarked on a vast cost-optimization program these past few years. This efficiency effort has already resulted in savings but these efforts will need to be intensified going forward. The priority now is to continue this transformation and increase efforts to simplify products and processes (see page 20). In this way, the company is moving towards a culture of change and efficiency.

The Wings program, launched in 2011, focuses on operational efficiency, or put simply, the optimization of each company expense. This vast plan is now deeply anchored in the organization, and, is based on 3 pillars:

FINANCE

>> More than 80 measures have been taken at +80

all levels to streamline our product portfolio, change our way of working, and increase our efficiency.

Increasing efficiency

More than 80 measures have been taken at all levels to streamline our product portfolio, change our way of working, and increase our efficiency. Most of these measures focus on creating synergies between departments. It is Belgacom's ambition to provide a flawless experience to the customer, from start to finish, in each of his contacts with the company. In this regard, the teams responsible for human resources and IT systems play a crucial role as facilitators. Indeed, a more collaborative business model implies a culture of performance and change shared by all employees, and well-oiled, interconnected IT systems.

Substantial gains in efficiency have been made by setting up shared services centers which bring together a number of administrative tasks, through the optimization of the sales channels, the grouping and renegotiation of outsourcing contracts for the call centers, the optimization of team work in certain technical services and the rationalization of the utility vehicle fleet to meet real needs.

Buying better

Belgacom has embarked on a global program to revise its purchasing and sourcing approach. Our principle: buy less, buy cheaper, buy better. It is not just about negotiating the best price for each individual contract; it is about developing a "procurement system" where the procurement function acts in partnership with the business and finance to create greater value. This partnership acts also on the demand side: buying less by eliminating waste, for instance by means of newly introduced sophisticated forecasting models. Managing the demand side in partnership with the business also stimulates the reflection on finding the right balance between value on the one hand, and requirement specifications on the other. It turns out that for certain deliverables, it is perfectly possible to adjust functional or technical requirements to achieve lower prices, without compromising the service level for the customer or end user. Moreover, in no way do we question the ethical and ecological standards and principles incorporated in our specifications. As we explain in our chapter on Belgacom's contribution, our social responsibility is also reflected in our purchasing policy. The contracts concluded with new providers in so-called lower-cost countries all meet the intrinsic quality criteria with regard to ethics.

Focusing on value

Improving our knowledge of customers and taking the right measures throughout the complete customer lifecycle are important ways to steer the company from a value perspective. A refined segmentation allowed us to provide our customers with the right offer, at the right time, depending on whether the customer is more sensitive to price or seeks the most complete and high-quality service possible. Implementing value management has helped us to optimize the financial means, ensuring this way that acquisition, development and retention costs are linked to value creation. It is all about changing the approach of recent years, where value was mainly driven by a growing customer base.

Our approach to sales channels has also been revised to make the latter more profitable and lead the customer to the most suitable channel. We encourage our customers to use our Internet services and self-service to order basic products or to find answers to their questions, while offering them a personalized service in the Belgacom points-of-sale for transactions with a higher value.

The move towards a management culture based on value requires the involvement of all team leaders. This is why we regularly organize awareness-raising sessions to explain what value creation and management consists of and what its objectives are.

Building confidence in the future

Belgacom's vast efficiency program has now been integrated within the different operational departments, which are now staging posts and fully assume their role of transformation engine. We are convinced that this strategy will bear fruit in the future. In fact, our gains in efficiency allow us to continue to invest in networks in order to offer the best possible service to our customers and generate sustainable growth.

WINGS AMBITION: FUEL THE GROWTH STRATEGY THROUGH EFFICIENCY

VALUE SOURCING

Buying cheaper, better, and less >> Joint efforts of sourcing and business units

bottom-line impact in the P&L

EFFICIENCY IMPROVEMENTS

Tools to manage value creation
Value Based Management principles

BELGACOM SHARE

Since March 2004, Belgacom's shares have been listed on Euronext Brussels under the ticker symbol BELG. The Belgacom share is a.o. included in the following leading indices: BEL20, STOXX Europe 600 Telecommunications index, STOXX Europe 600, Bloomberg Europe Telecommunications and FTSE Eurofirst 300 index.

Belgacom share performance

2013 was a good year for the telecom sector as a whole. Compared with the overall market (SXXP index up 17.4% year-overyear), the telecom sector (SXKP index up 32.1% year-over-year) outperformed it with 14.7 p.p. Furthermore, the BEL20 closed the year 2013 18.1 % higher versus end-2012. A strong trigger for this sector outperformance came from improved sentiment around regulation and Vodafone selling its stake in Verizon to the latter, which created increased consolidation hopes in the whole sector. In comparison with this sector outperformance, the Belgacom share had a tougher year. This was caused by the mobile price war that started at the end of 2012, but also impacted 2013. The Belgacom share closed 2013 3.15% lower versus end-2012 with a closing price of EUR 21.55 on 31 December 2013. Meanwhile the average trading volume increased by 34.0%. The share reached its year-high closing price of EUR 23.25 on 9 January 2013 and its lowest level on 22 July 2013 with a closing price of EUR 16.32.

2013 saw a fairly stable start pending the kick-off of the telecom sector's reporting season. With the announcement of the 2012 results, the market reacted disappointed to Belgacom's outlook for 2013. This downward trend continued in March with the lower visibility on the Belgian mobile market creating further uncertainty. The Belgacom share went ex-dividend on 23 April 2013. The first-quarter results were positively received, though the market still feared mobile back book repricing risks. In anticipation of the second-quarter results, June appeared to be a stable month. This calm continued in July, but was then disrupted by a profit warning and dividend suspension by one of Belgacom's Belgian peers, pulling down the Belgacom share to its lowest closing price of 2013. However, the Belgacom share showed outperforming second-quarter results and quickly regained ground. Besides signs of stabilisation on the Belgian mobile market, the main trigger for

SHARE QUOTATION

Name	Term
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 SHARE PERFORMANCE OVER 2013 AS COMPARED TO BEL20, STOXX EURO TELECOM 600 (SXKP) AND STOXX EURO 600 (SXXP)

(source: Thomson One)

BELGACOM SHARE PERFORMANCE OVER 2013 AS COMPARED TO ITS EUROPEAN INCUMBENT PEERS

the share recovery was the news in September that Vodafone would sell its 45% stake in Verizon Wireless to Verizon Communications Inc. This, in combination with signs of American interest in European telecom companies, further strengthened the belief that consolidation in the European telecom market would finally start to happen. This recovery was halted by disappointment with in-line third-quarter results and the renewed fear of a new mobile price war in October. In November, however, the upward movement of the share price continued and Belgacom acquired the 800 MHz spectrum at the minimum price. Finally, on 3 December, Belgacom went ex-interim dividend; this was made up for before the year end in combination with some well-received macroeconomic news flows. In this way, the Belgacom share ended 2013 3.15% lower than the year before.

BELGACOM SHARE PERFORMANCE

	2009	2010	2011	20124	2013
Share information
Share price high	28.65	29.11	27.64	24.60	23.25
Share price low	21.67	24.31	21.40	20.80	16.32
Share price at 31 December	25.32	25.13	24.24	22.21	21.55
Annual trading volume (number of shares)	181,364,309	138,569,376	148,786,324	142,139,111	189,753,834
Average trading volume per day (number of shares)	708,454	532,959	578,935	555,231	744,133
Number of outstanding shares	320,614,683	321,482,641	317,648,821	318,321,665	318,759,360
Weighted average number of outstanding shares	320,475,553	321,138,048	319,963,423	318,011,049	318,987,711
Key data per share as reported
EBITDA1	6.14	7.56	5.93	5.55	5.33
Net Income (Group Share)1	2.82	3.94	2.36	2.24	1.98
Ordinary dividend (gross)	1.68	1.68	1.68	1.68	1.68
Interim-dividend (gross)	0.40	0.50	0.50	0.81	0.50
Gross dividend yield2	8.2%	8.7%	9.0%	11.2%	10.1%
Price/earnings at 31 December2	8.98	6.37	10.26	9.94	10.90
Key data per share before non-recurring
EBITDA1	6.10	6.18	5.97	5.61	5.37
Net Income (Group Share)1	2.79	2.57	2.41	2.29	2.02
Price/earnings at 31 December2	9.09	9.79	10.06	9.68	10.65
Market capitalisation at 31 December (billion EUR)3	8.12	8.08	7.70	7.07	6.87

1 Based on weighted average number of outstanding shares 2

Based on the last closing price of the respective year 3 Calculation based on number of outstanding shares & last closing price of the respective year

4 Key data per share based on the restated 2012 figures MARKET CONTEXT BELGACOM SHARE

Our shareholders

Ownership on 31 December 2013

Belgacom's main shareholder is the Belgian government, owning 53.5% of the Belgacom shares. Belgacom itself held 5.6% of its own shares at end-2013. The free-float represents 40.9%.

Of this free-float, close to a fourth is held by retail investors and the remainder essentially by institutional shareholders. Belgacom's main institutional shareholders are located in the United States and the United Kingdom followed by Belgium and Germany.

End-2013, Belgacom held 18,820,954 treasury shares, representing 5.6% of the total number of shares. In the course of 2013, 219,935 treasury shares were used in a Discount Share Purchase Plan for Belgacom management and 662,581 options were exercised.

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 20 March 2013, BlackRock Inc. notified that its shareholding in Belgacom SA went above the 3% threshold. With 10,321,814 Belgacom shares in its possession on 15 March 2013, BlackRock Inc. has a participation of 3.05% of the shares with voting rights emitted by Belgacom SA.

On 9 April 2013, BlackRock Inc. notified Belgacom SA that since 4 April 2013 its participation in the total amount of 338,025,135 shares with voting rights emitted by Belgacom SA went below the 3% threshold.

On 13 May 2013, BlackRock Inc. notified Belgacom SA that:

a purchase of voting rights as at trade date 6 May 2013 caused its participation in the total amount of 338,025,135 shares with voting rights emitted by Belgacom SA to reach 3.00%, with 10,152,158 shares in its possession: accordingly, BlackRock's holding reached the 3% threshold;
a sale of voting rights on 7 May 2013 caused BlackRock's holding to cross back below the 3% threshold.
On 5 November 2013, BlackRock Inc. notified Belgacom SA that:
a purchase of voting rights as at trade date 31 October 2013 caused its participation in the total amount of 338,025,135 shares with voting rights emitted by Belgacom SA to reach the 3% threshold.
On 31 October 2013, BlackRock Inc. held 10,151,240 shares or 3.00% of Belgacom's total shares.
On 2 December 2013, BlackRock Inc. notified Belgacom SA that:
a sale of voting rights on 7 November 2013 caused BlackRock's holding to cross below the 3% threshold.

MARKET CONTEXT BELGACOM SHARE

INSTITUTIONAL SHARES BY GEOGRAPHY

(source: Shareholder analysis September 2013)

SITUATION 31 DECEMBER 2013

Belgacom ownership	Shares	% Total shares	% Voting rights	% Dividend rights
Belgian State	180,887,569	53.5%	56.7%	55.9%
Belgacom own shares	18,820,954	5.6%	0.0%	1.3%
Free-Float	138,316,612	40.9%	43.3%	42.8%
TOTAL	338,025,135	100.0%	100.0%	100.0%

TREASURY SHARES EVOLUTION

Status 31 December 2012	19,703,470
Options exercised during 2013	-662,581
Discount Purchase Plan employees	-219,935
Status 31 December 2013	18,820,954

BELGACOM SHARE

a purchase of voting rights as at trade date 8 November 2013 caused its participation in the total amount of 338,025,135 shares with voting rights emitted by Belgacom SA to reach 3.01%, with 10,166,775 shares in its possession: accordingly, BlackRock's holding moved back above the 3% threshold;
a sale of voting rights on 26 November 2013 caused Blackrock's holding to cross back below the 3% threshold.
On 11 December 2013, BlackRock Inc. notified Belgacom SA that:
a purchase of voting rights at trade date 6 December 2013 caused its participation in the total amount of 338,025,135 shares with voting rights emitted by Belgacom SA to reach 3.00%, with 10,143,633 shares in its possession: accordingly, BlackRock's holding reached the 3% threshold.

Belgacom SA holds 18,820,954 treasury shares, representing 5.6% of the total number of outstanding shares. The Belgian state holds 180,887,569 shares, representing 53.5% of the total number of outstanding shares.

To Belgacom's knowledge, no other shareholder owned 3% or more of Belgacom's outstanding shares as at 31 December 2013.

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

FSMA (former CBFA) on [email protected]
Belgacom on [email protected]

Investor Relations

Belgacom Investor Relations (IR) aims at ensuring open communication with the Belgian and international investment world on a regular basis. Through transparent, consistent dialog with investors and financial analysts, the Group strives for a fair share value based on high-quality financial information.

To keep Belgacom's current and potential shareholders informed, Belgacom's management speaks to the financial community on a regular basis. Each quarterly results announcement is followed by a conference call or investor/analyst presentation during which maximum time is reserved for a "questions & answers" session. Twice a year, following the full-year and half-year results, Belgacom organizes a roadshow with top management covering the most important money centres of Europe and the United States. Furthermore, Belgacom participated in several major international investment conferences. In between these events, meetings and conference calls with senior management are organized. In all these activities, management is supported by the Investor Relations team (IR).

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

A strict quiet period is observed 4 weeks before the issuing of a quarterly report and 6 weeks before the communication of the annual results.

Shareholder remuneration

Shareholder return policy

Belgacom commits to an attractive shareholder remuneration policy by returning, in principle, most of its annual free cash flow (2) 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 2013 Following the above-mentioned commitment, the Board of Directors approved in October 2013 the payment of an interim dividend of EUR 0.50 gross per share.

On 27 February 2014, the Board of Directors decided to propose an ordinary dividend of EUR 1.68 per share to the Annual Shareholder Meeting of 16 April 2014. As a result, Belgacom expects a dividend of EUR 2.18 gross per share for the 2013 full-year results. After approval by the Annual Shareholder Meeting, the normal dividend will be paid on 25 April 2014, with record date on 24 April 2014 and ex-dividend date on 22 April 2014.

This brings the 2013 total shareholder return to EUR 702 million, including the interim dividend.

Furthermore, Belgacom's Board of Directors intends to continue to award Belgacom's shareholders with an attractive and sustainable dividend. Therefore the Board of Directors intends to pay out a stable yearly dividend of EUR 1.50 per share (interim dividend of EUR 0.50 and ordinary dividend of EUR 1.00) for the next 3 years to come, provided Belgacom's financial performance is in line with its expectations.

DIVIDEND PER SHARE (IN EUR)

Extra-ordinary dividend

(1) Subject to approval by General Shareholder Meeting

FINANCIAL CALENDAR

16 April 2014	Annual General Shareholder Meeting
22 April 2014	Ex-dividend listing of shares
25 April 2014	Payment of ordinary dividend
9 May 2014	Announcement of first-quarter results 2014
1 August 2014	Announcement of half-year results 2014
24 October 2014	Announcement of third-quarter results 2014

Note that these dates may be subject to change.

(2) 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

CORPORATE GOVERNANCE STATEMENT

Corporate governance aims to define a set of rules and behaviours according to which companies are properly managed and controlled, with the objective of increasing transparency. It is a system of checks and balances between the shareholders, the Board of Directors and the management. Belgacom is committed to comply with the legal and regulatory obligations 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-to-day 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 Company Code 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.

Changes in the composition of the Board of Directors The mandates of Ms. Mimi Lamote, Ms. Michèle Sioen and Mr. Michel Moll came to an end on 23 December 2012. According to the by-laws of the company, it is up to the Belgian State to renew these mandates or to replace the members. In the meantime, based on the principle of continuity, the mandates were tacitly extended. On 20 September 2013, the mandate of Mr. Michel Moll as Chairman a.i. came to an end and on 27 September 2013, the mandates of Ms. Michèle Sioen, Ms. Mimi Lamote and Mr. Michel Moll as directors came to an end.

Mr. Stefaan De Clerck was appointed as director and Chairman of the Board on 20 September 2013.

On 27 September 2013, Ms. Isabelle Santens and Mr. Laurent Levaux were appointed as directors.

On 15 November 2013 the Belgian State put an end to the mandate of Mr. Didier Bellens as President & Chief Executive Officer.

On 13 January 2014, Ms. Dominique Leroy was appointed President & Chief Executive Officer for a renewable term of 6 years.

MARKET CONTEXT CORPORATE GOVERNANCE

Functioning of the Board of Directors

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 5 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 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 dialog 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.

The Corporate Governance Charter and the Charter of the Board of Directors have been updated in February 2014 whereby the notion "conflict of interest" received a broader interpretation.

MEMBERS OF THE BOARD OF DIRECTORS APPOINTED BY THE BELGIAN STATE

Name	Age	Position	Term
Stefaan De Clerck (1)	62	Chairman	2013 - 2019
Didier Bellens (2)	58	President & CEO	2003 – 2013
Dominique Leroy (6)	49	President & CEO	2014 - 2020
Theo Dilissen	59	Director	2004 - 2015
Martine Durez	62	Director	1994 – 2019
Laurent Levaux (4)	58	Director	2013 - 2019
Isabelle Santens (4)	54	Director	2013 – 2019
Paul Van de Perre	60	Director	1994 – 2019
Mimi Lamote (5)	48	Director	2006 – 2012
Michèle Sioen (5)	47	Director	2006 – 2012
Michel Moll (3/5)	65	Director	1994 – 2012

(1) Mandate as of 20 September 2013

(2) Mandate till 15 November 2013

(3) Mandate as Chairman a.i. till 20 September 2013 (4) Mandate as of 27 September 2013

(5) Mandate till 27 September 2013

(6) Appointed on 13 Januari 2014

MEMBERS OF THE BOARD OF DIRECTORS APPOINTED BY THE GENERAL SHAREHOLDERS' MEETING

Name	Age	Position	Term
Jozef Cornu	69	Independent director	2009 - 2015
Pierre Demuelenaere	55	Independent director	2011 - 2017
Guido J.M. Demuynck	63	Independent director	2007 - 2019
Pierre-Alain De Smedt	70	Independent director	2004 - 2016
Carine Doutrelepont	53	Independent director	2004 - 2016
Oren G. Shaffer	71	Independent director	2004 - 2014
Lutgart Van den Berghe	62	Independent director	2004 - 2016

Committees of the Board of Directors

In accordance with the by-laws, 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 5 non-executive Directors, the majority of whom must be independent. In line with its charter, it is chaired by an independent Director.

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

the financial reporting process;
efficiency of the systems for internal control and risk management of the company;
the Company's internal audit function and its efficiency;
the quality, integrity and legal control of the statutory and the consolidated annual accounts and the financial statements of the Company, including the follow-up of 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. Messrs. Pierre-Alain De Smedt (Chairman), Michel Moll (till 27 September 2013), Guido J.M. Demuynck, Oren G. Shaffer and Paul Van de Perre are the members of the Audit and Compliance Committee.

Nomination and Remuneration Committee

The Nomination and Remuneration Committee (NRC) consists of 5 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 President & Chief Executive Officer and of the members of the Management Committee on proposal of the President & CEO;
the appointment of the Secretary General;
the remuneration of the members of the Board of Directors and the Board Committees;
the remuneration of the President & Chief Executive Officer and members of the 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 4 times a year.

MARKET CONTEXT CORPORATE GOVERNANCE

MEMBERS OF THE BOARD OF DIRECTORS

1. DOMINIQUE LEROY

President & Chief Executive Offi cer and Director of Belgacom since 13 January 2014, more info see p.60 Management Committee.

2. STEFAAN DE CLERCK

Mr. Stefaan De Clerck is the Chairman of the Belgacom Board of Directors since 20 September, 2013. He has been Member of Parliament from October 1990 till October 2013. From June 1995 till April 1998 and from December 2008 till December 2011 he was the Belgian Minister of Justice. He has been the Mayor of the city of Kortrijk (Belgium) from January 2001 till end of December 2012. Mr. De Clerck holds a Master's Degree in Law from the Catholic University of Leuven.

3. JOZEF CORNU

Mr. Jozef Cornu embarked on his career at the Brown Boveri Research center (now ABB) in Switzerland in 1970. From 1973 until 1982 he held various positions in Bell Telephone Mfg Co, the Belgian subsidiary of the ITT Group. From 1982 to 1984 he was CEO of Mietec, a start-up semiconductor company.

From 1984 to 1987 he was General Manager of Bell Telephone Mfg Co. From 1988 to 1995 he was a member of the Management Board of Alcatel NV, before assuming the post of General Manager of Alcatel Telecom from 1995 to 1999. From 2000 to 2008 he was a member of the board of Alcatel (and later Alcatel-Lucent) and advisor to the chairman until 2004. From 2006 to 2007 he was chairman of Istag (Information Society Technologies Advisory Group) of the European Union. From 2007 to 2008 he was chairman of Medea+, the European Eureka programme for research in Microelectronics.

Mr. Cornu was CEO of Agfa-Gevaert from December 2007 till end of April 2010 and remains a member of its Board of Directors. He is also a non-executive director at KBC. Since November 13, 2013 Mr. Cornu is the Chief Executive Offi cer of the NMBS (Belgian railway). He 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.

4. THEO DILISSEN

Since January 2014, Mr. Dilissen is Chairman of the Board of Directors of Swissport Belgium (Swissport is an international ground handler at airports). Since January 2011, Mr. Dilissen is member of the Board of Directors of Eurostar.

Mr. Dilissen was Chairman of the Board of Directors of Belgacom from October 2004 till March 2012. From June 2010 until March 2012, he was CEO of Arcadis Belgium. From September 2005 until the end of March 2009 he was CEO and afterwards Chairman of Aviapartner. Previously Mr. Dilissen was CEO, Managing Director and Vice-Chairman of Real Software and from 1989 to 2000 he was COO and member of the Board of ISS (a Danish publicly listed company). He studied Sociology (Antwerp) and holds a Master in Business Administration from the Flanders Business School.

5. PIERRE DEMUELENAERE

Mr. Pierre Demuelenaere is the co-founder, President & CEO of I.R.I.S. (Image Recognition Integrated Systems), a company created in 1987 to commercialise the results of his Ph.D.

Mr. Demuelenaere has more than 30 years of experience in Imaging and Artifi cial Intelligence. He has accumulated a solid experience in technology company management, R&D management and setting up of international partnerships with US and Asian companies (HP, Kodak, Adobe, Fujitsu, Samsung, Canon…).

Throughout the years, he has remained very involved in defi ning the R&D vision of I.R.I.S and has contributed to the development of new technologies, new products and the fi ling of a number of patents.

Pierre Demuelenaere received the "2001 Manager of the Year" award and I.R.I.S., the "2002 Company of the year" award. In 2008 he was designated by Data News as ICT personality of the year. He is also member of the Board of Directors of Pairi Daiza, BSB and Guberna.

In 2013, Pierre Demuelenaere has successfully negotiated the acquisition of I.R.I.S. Group by Canon. The company is now member of Canon Group.

Mr. Demuelenaere is a civil engineer in Microelectronics from the Université Catholique de Louvain (UCL) and received his Ph.D. in applied sciences in 1987.

MARKET CONTEXT CORPORATE GOVERNANCE

6. GUIDO J.M. DEMUYNCK

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, E-Plus Germany).

Until July 2008, he was the CEO of Kroymans Corporation BV in the Netherlands. Mr. Demuynck is also member of the Supervisory Board of Tom Tom since June 2005. As from January 2011 he joined the Supervisory Board of Apollo Vredestein BV and the Supervisory Board of Xsens BV. As from May 2011, he is also a Board member of Teleplan International NV As from January 2012 he is also Board member of Divitel BV and Aito BV.

He holds a degree in applied economics from the University of Antwerp (UFSIA) and a degree in marketing from the University of Ghent (RUG).

7. PIERRE-ALAIN DE SMEDT

Mr. De Smedt is since March 2011 the Chairman of the Fédération des Entreprises de Belgique (FEB/VBO). Before and since June 2006, he was the Chairman of Febiac (Fédération belge de l'Automobile et du Cycle).

From 1999 till end of 2004 he was Executive Vice President of Renault. He was chairman of Autolatina, VAG and Ford's joint venture subsidiary in Latin America. He served as Chairman of Volkswagen Brazil and Argentina before being appointed as Chairman of Seat. Mr. De Smedt is the Chairman of the Board of Deceuninck Plastics Group and a member of the Board of Alcopa (Group Moorkens) and Recticel SA.

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

8. CARINE DOUTRELEPONT

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 firm Doutrelepont & Partners, which specialises in Information and Communication Technologies, Intellectual property, Media law, Competition matters and European law.

She holds a State Ph.D in European 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. For years, she worked as an Expert for the European Commission, at the Belgian Senate and at the Belgian Competition Council.

Since 2008, she is a Member of the Royal Academy of Belgium (Technology and Society Section). She is the author of several books and publications. Ms. Doutrelepont is also member of the Board of King Baudouin Foundation and of Belfius Bank.

9. MARTINE DUREZ

Ms. Durez was the Chief Financial and Accounting Officer 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 Mons-Hainaut 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 served as a regent of the National Bank of Belgium. Ms. Durez graduated as a Commercial Engineer and holds a Ph.D. in Applied Economics from the University of Brussels (ULB).

10. LAURENT LEVAUX

A 'magna cum laude' graduate in economics at UCL (Brussels, Belgium), Mr. Laurent Levaux began his career at the age of 22 at the head of a small struggling company in Liège, at the time employing some 100 people. 4 years later the company was turned round, developed, and was merged with a large international group. He next obtained an MBA from the University of Chicago (1985) before going to work for McKinsey & Co, where he spent some 10 years, the last 4 as a partner, undertaking strategic and restructuring assignments throughout Europe.

In 1995 he joined the Executive Committee of Belgian steel group Cockerill-Sambre as head of its non-steel subsidiaries, in particular CMI, a loss-making company, where he was CEO. When he left CMI in February 2003, it was a debt-free, growing and profitable engineering and maintenance Group.

In March 2003, Laurent Levaux became CEO of ABX Logistics, a multinational logistics group, headquartered in Belgium, a company which suffered heavy losses since its creation in 1998.

From 2003, the results have been constantly improved to reach a level amongst the best of the industry.

In October 2008, ABX Logistics merged with the Danish Group DSV, quoted in Copenhagen.

Since October 2008, Laurent Levaux is Chairman and CEO of Aviapartner.

Aviapartner, which is headquartered in Brussels, is a leading player in ground-handling services to passengers on the European continent.

11. ISABELLE SANTENS

Ms. Isabelle Santens is President and CEO of Andres NV, a Belgian fashion company that designs, produces and distributes the ladies clothing brands Xandres, Xandresxline and Hampton Bays.

After studies of geography and economy at the Catholic University of Leuven, she joined Andres in 1985, became Director of Design and turned CEO in 2000. She turned the company from a mere production orientated facility to a sales & marketing driven company with focus on building strong brands and opening pilotstores. She is also a board member in several cultural institutions.

12. OREN G. SHAFFER

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

He was already a member of the Board of Directors at Belgacom from 1996 to 2000. He currently holds directorships at Demag Cranes AG (Germany), Intermec Inc. (USA), Terex Corp. (USA) and XPO Logistics (USA).

He received 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.

13. LUTGART VAN DEN BERGHE

Ms. Lutgart Van den Berghe is Executive Director of Guberna (Belgian Governance Institute) and Extra-Ordinary Professor at the University of Ghent (B). She is a Partner of the Vlerick Business School where she served for many years as Chairman of the Competence Center "Entrepreneurship, Governance and Strategy".

She is a Member of the Belgian Commission for Corporate Governance and Non-Executive Director in several companies, such as Electrabel (B) and Belfius (B). At EcoDA (European Confederation of Directors' Association), she is a member of the Board and chairwoman of its policy committee. Ms. Lutgart Van den Berghe is doctor in Business Economics of the University of Ghent (RUG).

14. PAUL VAN DE PERRE

Mr. Van de Perre is the co-founder of GIMV (Venture Capital Firm and listed on Euronext) and was formerly a director of Sidmar (Arcelor-Mittal), Thomassen Drijver Verblifa Belgium, Sunparks (division of Sunair) and other companies. He is currently director of Greenbridge Incubator (University of Ghent), Scientific Investment Board (Universitry of Brussels), president of the Board of Directors of Thenergo (listed on Euronext), member of the Investment Committee of Participatiefonds Vlaanderen (PMV). Mr. Van de Perre is CEO of Five Financial Solutions (corporate finance) and CEO of Caesar Real Estate Fund (real estate finance). Mr. Van de Perre holds an MBA in Economics of the University of Brussels (VUB) and is a certified accountant (IAB).

MARKET CONTEXT CORPORATE GOVERNANCE

The first meeting each year reviews the performance, budgets for pay-out of bonuses and merits, and long-term and short-term incentive plans. At that meeting an annual review of the philosophy and strategy of the remuneration is also discussed. At the second meeting the Nomination and Remuneration Committee fixes the performance measurement targets of the President & Chief Executive Officer and the members of the Management Committee through Key Performance Indicators. In addition to these meetings, the Committee organizes a meeting on Human Resources and a meeting on Corporate Governance.

In 2013, Messrs. Stefaan De Clerck (member and Chairman as of 20 September 2013), Michel Moll (member and Chairman a.i. till 20 September 2013), Jozef Cornu, Pierre-Alain De Smedt, Ms. Martine Durez and Ms. Lutgart Van den Berghe were the members of the Nomination and Remuneration Committee.

Strategic and Business Development Committee

The Strategic and Business Development Committee (SBDC) consists of 6 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. 3 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 2013, Messrs. Stefaan De Clerck (Chairman as of 20 September 2013), Michel Moll (Chairman a.i. till 20 September 2013), Didier Bellens (till 15 November 2013), Ms. Dominique Leroy (as of 13 January 2014), Messrs. Jozef Cornu, Theo Dilissen, Guido J.M. Demuynck and Ms. Carine Doutrelepont were the members of the Strategic and Business Development Committee.

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 and 4.7. Although provision 4.6 stipulates that mandates of Directors should not exceed 4 years, the mandates of Belgacom Directors are for 6 years as prescribed by article 18 of the 1991 Law. Where provision 4.7 states that the Board appoints its Chairman, article 18 § 5 of the 1991 Law foresees that the Chairman is appointed by the King.

Transactions between the company and its Board Members and executive 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 Company Code, Mr. Didier Bellens declared, during the Board of Directors of 28 February 2013, to have a conflict of interest in connection with the "Employee incentive plans", item of the agenda of this Board meeting.

In accordance with article 523 of the Belgian Company Code, Ms. Lutgart Van den Berghe and Ms. Carine Doutrelepont declared, during the Board of Directors of 2 May 2013, to have a conflict of interest in connection with the "Project Idar", item of the agenda of this Board meeting.

In accordance with article 523 of the Belgian Company Code, Mr. Didier Bellens declared, during the Board of Directors of 25 July 2013, to have a conflict of interest in connection with the "Employee incentive plans", item of the agenda of this Board meeting.

In accordance with article 523 of the Belgian Company Code, Ms. Martine Durez, Ms. Mimi Lamote, Ms. Michèle Sioen, Mr. Michel Moll and Mr. Paul Van de Perre declared during the extraordinary Board of Directors of 25 September 2013, to have a conflict of interest in connection with the "Appointment new directors of the Board of Directors", item of the agenda of this Board meeting.

On 24 February 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 has contractual relationships and is also a vendor for telephony, Internet and/or ICT services for many of the companies in which Board members have an executive or non executive mandate. These transactions take place in the ordinary course of business and at arms length. Belgacom is also a Partner of Guberna, the Belgian Institute for Directors (affiliated with Ms. Lutgart Van den Berghe who is Executive Director of Guberna), for which it has paid a fee of EUR 30,250 in 2013.

Activities Report of the Board and Committee meetingss

In 2013, 8 meetings took place for the Board of Directors, 8 meetings for the Audit and Compliance Committee, 6 for the Nomination and Remuneration Committee and 3 for the Strategic and Business Development Committee.

A list with the attendance of the members is included in the Remuneration Report.

MARKET CONTEXT CORPORATE GOVERNANCE

In order to comply with legislation on insider dealing 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. 61).

Evaluation of the Board

The Board performed a self-evaluation in December 2012 in order to assess its size, composition, performance as well as the interaction with management. This exercise was conducted with the help of Spencer Stuart 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 28 February 2013 to implement the following short term actions:

having each year a yearly draft agenda for the committees;
organise a tutorial on the role of the committees and on risk management;
have a yearly presentation on succession planning to the Board;
develop a reporting system, allowing the Board to follow the key business drivers of the company;
add one meeting a year for the strategic committee.

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 6-year term, and can be terminated only by Royal Decree deliberated after discussion in the Council of Ministers. In line with the 1991 Law and the Company's Articles of Association, the President & Chief Executive Officer is a 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 Ms. Dominique Leroy. Her renewable 6-year fixed-term contract started on 13 January 2014.

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.

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

Name	Age	Position
Michel GEORGIS	61	Executive Vice President Group Human Resources
Dirk LYBAERT	53	Executive Vice President Corporate Affairs
Geert STANDAERT	44	Executive Vice President Service Delivery Engine & Wholesale
Ray STEWART	65	Executive Vice President Finance
Bart VAN DEN MEERSCHE	56	Executive Vice President Enterprise Business Unit
Phillip VANDERVOORT	52	Executive Vice President Consumer Business Unit

Mr. Bruno Chauvat, who was the Executive Vice President Strategy & Content left the company on 24 January 2014.

Mr. Dirk Lybaert was appointed as Executive Vice President Corporate Affairs on 24 January 2014.

Mr. Phillip Vandervoort was appointed as Executive Vice President Consumer Business Unit as from 1 April 2014.

MARKET CONTEXT CORPORATE GOVERNANCE

MEMBERS OF THE BELGACOM MANAGEMENT COMMITTEE

1. DOMINIQUE LEROY

Since 13 January 2014, Dominique Leroy is the CEO of Belgacom. She joined Belgacom as Vice President Sales for the Consumer Business Unit in October 2011 and was nominated Executive Vice President of the Consumer Business Unit of Belgacom in June 2012.

Prior to Belgacom, Ms. Leroy worked for 24 years at Unilever. She was Managing Director of Unilever Belux and member of Unilever's Benelux Management Committee. She previously held various positions in marketing, fi nance and customer development.

Ms. Leroy is member of the Boards of Tango, Scarlet and BICS and is an independent Board Member at Lotus Bakeries. Ms. Leroy holds a master in Advanced Management (Business Engineering) from the Solvay Business School.

2. MICHEL GEORGIS

From June 2007 until December 2011, Michel Georgis was the Executive Vice President of the Consumer Business Unit Belgacom. Since 1 January 2012 he is the Executive Vice President Group Human Resources. He is the Chairman of the Boards of Tango Luxembourg, Scarlet NV Holland and Wireless Technologies (The Phone House) and member of the BICS and Pension Fund Boards. As of May 2005 and until the integration in January 2010, he was the CEO of Proximus (Belgacom Mobile). Prior to this position he 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 Coca-Cola 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 Catholic University of Leuven.

3. RAY STEWART

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 International Business Development unit for Ameritech headquartered in Chicago. He has a Business Undergraduate degree in Accounting and a Masters of Business Administration in Finance. He is also a Certifi ed Public Accountant. Ray Stewart is also a member of the Board of Directors of Nyrstar since September 2007.

4. BART VAN DEN MEERSCHE

Bart Van Den Meersche is the Executive Vice President of Belgacom's Enterprise Business Unit. Mr. Van Den Meersche joined Belgacom after 28 years of experience in the ICT sector through a professional career with IBM, of which 16 years in different Management positions, including 8 years as Country General Manager of IBM Belgium/Luxembourg. In his last year at IBM, he was Vice President Industries & Business Development IBM South-West Europe and a member of the IBM South-West Europe Executive Management Team. Bart Van Den Meersche holds a degree in Mathematics from the Catholic University of Leuven. Mr. Van Den Meersche was during 6 years President of Agoria ICT and also a member of the Board of Agoria, VOKA and VBO/FEB.

5. DIRK LYBAERT

Dirk Lybaert is Executive Vice President Corporate Affairs, regrouping the following areas of responsibilities: Group Communications, Legal, Public Affairs, Regulatory, Security Governance & Investigations.

He is also the Secretary of the Board of Directors of Tango Luxembourg and of the Belgacom Pension Fund, as well as member of the Board of Belgacom International Carrier Services (BICS) and of Belgacom Opal.

Mr. Lybaert was since 2005 Secretary-General of Belgacom. From 1995 until 2007 he was an assistant at the Law Faculty at the University of Brussels for the course "Name Contracts". From 2000 to 2005 he held different positions within the Legal department of Belgacom. Prior to Belgacom, he was an offi cer at the Federal Police, where he reached the position of Lieutenant-Colonel, director of the Anti-Terrorism Program.

Mr Lybaert has Master's degrees in Criminology, Law and Business Law, as well as degrees in Advanced Management and Social and Military Sciences.

6. GEERT STANDAERT

Geert Standaert joined the Belgacom Management Committee as Executive Vice President Service Delivery Engine & Wholesale in March 2012. In this function, he oversees all IT development, service engineering, technical infrastructure and operations for the Group as well as the wholesale activities.

Mr. Standaert joined the Group in 1994 and held Director positions in various disciplines, including IT, Infrastructure Operations and Data operations before becoming Vice President Customer Operations in 2007.

Mr. Standaert holds a Master's degree in Civil Engineering from the University of Ghent (RUG).

7. PHILIP VANDERVOORT

Phillip Vandervoort has joined the Belgacom Group on 1/4/2014 as Executive Vice President of the Consumer Business Unit. Before he has worked with several important companies, such as Dupont de Nemours International, Union Minière, Interbrew/Inbev and, since 2007, Microsoft Corporation. Mr. Vandervoort is industrial engineer and is a bachelor in business administration.

MARKET CONTEXT CORPORATE GOVERNANCE

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;
Romain LESAGE, Member of the Court of Auditors;
Pierre RION, Member of the Court of Auditors;
Luc Callaert SC sfd SPRLU, represented by Luc CALLAERT.

Deloitte Auditors SC sfd SCRL, represented by Mr. G. Verstraeten and Mr. N. Houthaeve, 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 Company Code, Belgacom declares the supplementary fees that it granted during the 2013 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 2013 an amount of 251,595 EUR for non-mandate fees for Deloitte Auditors SC sfd SCRL, the Group's auditors. This amount is detailed as follows:

(in EUR)	Auditor	Network of auditor
Other mandatory audit missions	10,690	25,250
Tax advice	13,420	1,270
Other missions	173,815	27,150
Total	197,925	53,670

The Group also spent during the year 2013 an amount of EUR 1,627 for non-mandate fees paid to Luc Callaert SC sfd SPRLU. This amount is detailed as follows:

(in EUR)	Auditor
Other mandatory audit missions	1,627
Tax advice
Other missions
Total	1,627

Government Commissioner

On 17 April 2012, Mr. Michel Vanden Abeele was appointed Government Commissioner in order to supervise, in conformity with the 1991 Law, the management of Belgacom from an administrative point of view. Mr. Amaury Caprasse was appointed Deputy Government Commissioner.

Compliance

Role of Compliance at Belgacom

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 with 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 (see p. 22).

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 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. 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.

In line with the former years actions, the following efforts have been done in 2013, in order to improve the visibility of the Code of conduct and its policies:

particular emphasis was placed on information security. An important awareness campaign has been launched towards our staff through the intranet and by posters put up in all meeting rooms. This campaign has also been supported by educational films;
in May 2013, Belgacom opened up social media access to all of its staff. As to support this opening and to raise users'awareness about a responsible use of these new tools, several initiatives have been put in place: a policy, training, a film, questions and answers, …;
Belgacom published a new anti-bribery policy, which is entirely in line with its Code of Conduct and which establishes a zero tolerance principle towards any form of corruption. This policy sets out, in a single document, all principles that have been developed in several other policies.

The compliance domains which were the compliance focus areas for 2013 were :

1. Information security;
1. Responsible use of social media;
1. The Dealing Code;
1. Regulatory compliance;
1. Competition law;
1. Chinese walls;
1. Environment;
1. Privacy.

REMUNERATION REPORT 2013

Belgacom considers transparency on executive remuneration very important. Therefore, in conformity with the corporate governance law of April 6, 2010 and Principle 7 of the corporate governance Code 2009, the company provides the following information towards its shareholders and all other stakeholders: the description of the Directors' remuneration and a high level explanation of the Group remuneration policy. Furthermore, it includes an analysis of our executive remuneration and provides an overview of the main provisions of the contractual relationships.

ACTIVITIES REPORT AND ATTENDANCE AT BOARD AND COMMITTEE MEETINGS

Name	Board (total 8)	A&CC (total 8)	NRC (total 6)	SBDC (total 3)	Total remuneration (in EUR)
Stefaan DE CLERCK (1)	4/4		3/3	1/1	75,750
Didier BELLENS (2)	6/6			3/3	0
Jozef CORNU	8/8		6/6	3/3	89,500
Pierre DE MUELENAERE	8/8				67,000
Guido DEMUYNCK	8/8	8/8		3/3	94,500
Pierre-Alain DE SMEDT	7/8	7/8	6/6		112,000
Theo DILISSEN	6/8			3/3	64,500
Carine DOUTRELEPONT	8/8			2/3	72,000
Martine DUREZ	8/8		6/6		82,000
Laurent LEVAUX (4)	2/4				16,750
Isabelle SANTENS (4)	3/4				21,750
Oren G. SHAFFER	7/8	8/8			82,000
Lutgart VAN DEN BERGHE	8/8		6/6		82,000
Paul VAN DE PERRE	8/8	8/8			87,000
Mimi LAMOTE (5)	4/4				40,250
Michel MOLL (3/5)	4/4	3/3	3/3	2/2	113,000
Michèle SIOEN (5)	4/4				40,250

Total remuneration: telecom advantage included

A&CC: Audit and Compliance Committee; NRC: Nomination and Remuneration Committee; SBDC: Strategic and Business Development Committee

(1) Mandate as of 20 September 2013

(2) Mandate till 15 November 2013

(3) Mandate as Chairman a.i. till 20 September 2013 (4) Mandate as of 27 September 2013

(5) Mandate till 27 September 2013

Didier Bellens was the President & CEO of Belgacom until November 2013. In January 2014, a new CEO, Dominique Leroy, has been appointed. With this nomination, a new ceiling has been defined in the executive remuneration policy of Belgacom. Belgacom's executive remuneration policy will further take into account this new ceiling for every new member in the Management Committee. In line with the demand at the Annual Shareholders Meeting of 2013, the Board of Directors has also reviewed the remuneration of Board members and has compared this with different benchmarks. These benchmarks show that the remuneration at Belgacom is in line with the market. The Board has, however, assessed that in this period, where efforts are asked from management and from the employees, it is important to give a clear signal that Board members want to share these efforts. For that reason the Board has decided that on the remuneration of 2014 it will apply a reduction of 10 % which is in line with the proposal of the Management Committee to voluntarily reduce, for the 2013 performances of the top 170 of the company, the envelope for the individual part of their shortterm variable remuneration (bonus) by 10%.

Directors' Remuneration

Policy of Directors' Remuneration

The remuneration and compensation of the Directors was decided by the General Shareholders' Meeting of 2004. The principles of this compensation did not change in 2013: 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. This fee is doubled for the Chairman.

Attendance fees of EUR 2,500 are foreseen for each member of an advisory committee of the Board of Directors, with the exception of the President & CEO. For the Chairman of the respective advisory committee, these 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 Chairman of the Board of Directors is also Chairman of the Joint Committee and of the Pension Fund. Ms. Martine Durez and Mr. Theo Dilissen are members of the Board of the Pension Fund. They do not receive any fees for these participations.

For the execution of their Board mandates, the Directors do not receive performance-based remuneration such as bonuses or long-term incentive programs, nor do they receive benefits linked to pension plans.

Overview of Directors' Remuneration

The individual Directors' remuneration for the fiscal year 2013, based on their activities and attendance at Board and Committee meetings, is presented in the table on the left.

MARKET CONTEXT CORPORATE GOVERNANCE

Remuneration Policy

Belgacom has an innovative remuneration policy which is regularly assessed and updated through close cooperation with external Human Resources fora and universities. The remuneration policies of Belgacom's employees are defined in a process of dialog with the Board of Directors and the social partners.

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 considerable 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.

Belgacom's global reward principles

To accomplish our company goals within a highly and fast changing competitive global telecom market, we need qualified, talented and engaged employees working in a high performance culture. To foster this culture, it is critical to have a competitive Global Rewards Program.

The objectives of the Belgacom Global Rewards Program are:

to drive performance that generates long-term profitable growth;
to stimulate empowerment that reinforces the business strategy and desired culture;
to offer fair and equitable remuneration both to civil servants and to the group's contractual employees, according to market practices;
to recognize and reward high performance;
to link pay to both individual and the overall success of Belgacom;
to enable Belgacom to attract and retain market's talents at all levels;
to combine the needs and responsibilities of employees and their families with those of the company and society as a whole.

Belgacom also maintains -and modernizes- powerful public sector instruments, such as work-life benefits (e.g. sick child care, hospitalisation, …) 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, Belgacom has won several awards for the continuous efforts of the company to create a balanced working environment for its staff.

The Global Rewards Program keeps up and supports this goal and mission.

Executive Remuneration

Objectives and the principles of Belgacom's executive pay 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. The company wants to attract and retain high performing top executives for its Management Committee and for its senior management. It wants to reward clear role models, who have a commitment to high performance and the company values.

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

Remuneration element	Description	Strategic role
Base Salary	Involves fixed cash compensation.	Attraction. Rewards for performance of
	Aims for the median of the labor market peer group.	day to day activities.
Short–term variable pay	Is based on achie vements of annual	Drives and rewards annual Belgacom's performance.
	measures of which 30% is driven by Belgacom Group Performance; 40% by Business Unit	Drives and rewards sound strategic and business decisions for the long-term of Belgacom.
	Performance and 30% to individual leadership measures.	Aligns interests of manage ment and shareholders.
Long-term Performance Value Plan is based on Incentives Belgacom's Total Shareholder Return		Aligns & drives senior mana- gement's long-term perfor mance with shareholders' expectations.
	versus a predefined basket of European telecom operators.	Ensures right decisions for the success of Belgacom.
		Attracts and retains talents.

Definition of the level of compensation

The Nomination & Remuneration Committee sets the remuneration policy for top executives and decides on 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 (Financial sector excluded) and a set of peer companies in the European Telecommunications and ICT sector.

The current remuneration policy does not provide for a specific contractual claw back stipulation in favour of the company for the variable remuneration of executive managers accorded on the basis of incorrect financial information, this without deterioration of the various legal provisions applicable between the concerned individuals and the company (e.g. Acts of 7 July 1978, 12 April 1965 and 10 February 2003, concerning the claw back possibilities from employees in case of fraud, serious fault and usual minor fault, civil liability, etc.).

MARKET CONTEXT CORPORATE GOVERNANCE

Policy of executive remuneration

The relationship between the distinct remuneration components of the Belgacom Management Committee members and the former President & CEO is illustrated in the figures below. The figures show the effective and relative importance of the various components of remuneration paid in 2013.

FIGURE 1 : RELATIVE IMPORTANCE OF THE VARIOUS COMPONENTS OF REMUNERATION (KPI'S 100% AT TARGET)

FORMER PRESIDENT & CEO *

BELGACOM MANAGEMENT COMMITTEE

* Former President & CEO Long-term Variable remuneration forfeit due to termination of employment contract in 2013

Overview of executive remuneration

The executive remuneration policy is built upon fixed components, being the basic remuneration, the retirement and post-employment benefits and other benefits, and variable performance based components, being the short-term variable remuneration and the long-term variable remuneration.

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 2013, 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 specialized in market and customer intelligence, of which the processes are audited on a regular basis.

Key performance indicators at Group level:

The key financial indicator used is the operational cash flow.
Important non-financial indicators included are Simplicity and Customer Experience measuring the progress made in the simplification and optimization of processes and the customer's user experience and Cost transformation measuring efficiency improvement in cost management.
Another operational indicator is the "employee engagement index", which each year measures employees' organizational commitment, job engagement, strategic alignment and agility amongst Belgacom's employees.

Key performance indicators at Business Unit level

The key performance indicators concern amongst others convergence, value management, solution centricity, the transformation of the fix and mobile network and the number of new customers in voice, fix, internet and TV business.

Basic remuneration

The basic remuneration of the Management Committee is annually reviewed by the Nomination & Remuneration Committee, based on an extensive review of performance and assessment of potential provided by the President & CEO, as well as on external benchmarking data. The company wants to position top executive pay towards the median of the market.

The basic remuneration comprises the base salary earned in the position of the President & CEO and the members of the Management Committee for the reported year. The former President & CEO, Didier Bellens, was also a non-remunerated member of the Board of Directors. During 2013, the members of the Management Committee haven't received any merit increase. Changes in the figures are mainly the result of legal indexation in January 2013 and changes within the Management Committee composition.

Short-term variable remuneration

BASIC REMUNERATION (IN THOUSANDS EUR) BEFORE EMPLOYER'S SOCIAL CONTRIBUTION

FORMER PRESIDENT & CEO * MANAGEMENT COMMITTEE **

* The variance 2012/13 is explained by the index and the pay-out on 11 months i.o. 12 but vacation pay for 2014 had to be paid upon departure

** The variance 2012/13 is explained by changes within Belgacom Management Committee

MARKET CONTEXT CORPORATE GOVERNANCE

The company wants to position top executive short-term variable remuneration for the achievement of targets at 100%. In case of sustained excellent performance at company, business unit and individual level, the short-term variable remuneration can go above the 100% with a cap at 200%.

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

FIGURE 2: THE BELGACOM MANAGEMENT COMMITTEE POLICY TAKES INTO ACCOUNT GROUP, BUSINESS UNIT AND INDIVIDUAL PERFORMANCE

The short-term variable remuneration includes the actual bonus paid in the reported year 2013, for performance year 2012. A linear pay-out curve with an upper and lower limit is adopted for each component of the short-term variable remuneration.

This curve determines the short-term variable remuneration that is granted to the members of the Management Committee, based on the effective result of each KPI. For the former President & CEO in 2013 this is capped at 150 %.

The result is indeed calculated based on a predefined formula which takes into account the different KPI's at predefined weights. For the short-term variable remuneration 2013, related to performance year 2012, the following Group KPI's were defined:

free cash flow;
cost transformation;
simplicity & customer experience;
employee engagement index.

On top of the business and company results, the individual performance weights for 30% of the overall short-term pay-out level. Individual performance is evaluated versus pre-defined measurable objectives.

As from performance year 2013, although the parameters taken into consideration in the formula defining the short-term variable remuneration granted to the President & CEO and to the members of the Management Committee remain unchanged, their weight has been reviewed so that the impact of the Group KPI prevails the individual and Business Unit KPI's. FORMER PRESIDENT & CEO

The short-term variable remuneration is paid through one of the options of the "Short-Term Incentive Plan". The President & CEO and the members of the Management Committee can choose to receive their short-term variable remuneration in cash bonus or under the "Discounted Share Purchase Plan".

The Discounted Share Purchase Plan provides the right to buy allocated shares at a 16.66% discount. The value of this 16.66% discount is equal to the gross value of the short-term incentives result. The executive himself finances 83.34% of the full share purchase price, requiring a significant personal investment. The shares are treasury shares and are blocked for a period of two years.

The former President & CEO chose to receive his short-term variable remuneration through the Discounted Share Purchase Plan. The majority of the Management Committee has opted for a cash bonus.

The short-term variable remuneration of the former President & CEO increased in line with his performance in 2012 while for the members of the Management Committee it decreased in comparison with last year. The decrease for the members of the Management Committee is mainly due to changes in the composition of the Management Committee.

SHORT-TERM VARIABLE REMUNERATION (IN THOUSANDS EUR) BEFORE EMPLOYER'S SOCIAL CONTRIBUTION

MARKET CONTEXT CORPORATE GOVERNANCE

Long-term variable remuneration

In 2013, Belgacom launched a new long-term incentive plan for its Executives, the "Long-Term Performance Value Plan" replacing the "Stock Options Plan". This new plan has been developed to keep our executive remuneration policy balanced and attractive, as well as compliant with the shareholders' expectations.

Belgacom's Performance Value Plan aims to be fully performance driven and transparent, aligned on market best practices and is inspired from Long-Term Incentive Plans used by other European Telecommunications companies.

Therefore, Total Shareholder Return has been selected as performance criteria to drive expected Long-Term Performance of our executives and to align it with the interests of the shareholders.

Belgacom's Total Shareholder Return will be measured against the respective Total Shareholder Return of a basket of 12 other European telecom operators for the first time at the end of a 3 years performance cycle.

Under this Long-Term Performance Value Plan, the granted awards are blocked for a period of 3 years, after which the Performance Values vest. After this period, the possible exercising rights depend on the performance of Belgacom's Total Shareholder Return compared to a group of peer companies.

COMPANIES INCLUDED IN THE BASKET ARE

Deutsche Telekom	Vodafone
Telekom Austria Group	BT
Telefonica	Telecom Italia
KPN	TDC
Portugal Telecom	Swisscom
TeliaSonera	France Telecom

* Rights are forfeited due to ending of CEO's employment contract

Pay-out Level

The pay-out level has been designed in line with the "pay for performance" principle and depends on the short-term variable remuneration and Belgacom's performance. The design of the Long-Term Performance Value Plan ensures that executives are rewarded for "above median" returns while there will be limited or no reward for "below median" returns.

Pay-out Options

The members of the Management Committee can choose between 3 different pay-out options being cash, Discounted Shares Purchase Plan, and Belgacom's shares. These options cannot be combined and the preferred pay-out option has to be made at the date of grant and is irreversible. In 2013, all members of the Management Committee have chosen for cash as pay-out option. This implies employer social contributions to be taken into account.

A year-over-year overview of the evolution on Long-Term Performance Value Plan cannot be provided due to the change in Long-Term Incentive Plan design.

From 2004 until 2012, stock options have been granted to the former President & CEO, and the members of the Management Committee. Hereafter, an overview of the remaining stock option plan for the former President & CEO and other members of the Management Committee is available.

OVERVIEW OF THE FORMER LONG-TERM VARIABLE REMUNERATION

		Didier Bellens	Bruno Chauvat	Michel Georgis	Dominique Leroy	Geert Standaert	Ray Stewart	Bart Van Den Meersche
on January 1st, 2013, Stock options remaining from previous years:		585,774	0	258,503	12,665	33,443	297,278	70,000
Stock options exercised during reported year	Number	107,686	-	47,486	0	4,148	51,453	0
	Year of grant of options exercised	2009	-	2006 & 2009	-	2009	2009	-
	Number
Stock options lapsed during reported year	Year of grant of options lapsed
Stock options forfeited during reported year	Number	478,088
	Year of grant of options forfeited	2007-8, 2010-11-12
TOTAL		0	0	211,017	12,665	29,295	245,825	70,000

OVERVIEW BASIC AND VARIABLE REMUNERATION OF THE FORMER PRESIDENT & CEO AND OTHER MEMBERS OF THE MANAGEMENT COMMITTEE

Remuneration	Former President & CEO		Other members of the Management Committee
	2012	2013	2012	2013
Basic remuneration	963,096	1,026,727	2,760,207	2,751,044
Short-term variable remuneration	513,715	581,115	1,393,093	1,190,971
Long-term share-based variable remuneration	534,614	0	692,913	0
Long-Term Performance Value based variable remuneration	0	0	0	1,188,272
Retirement and post-employment benefits	113,032	97,804	538,377	755,028
Other benefits	14,773	11,607	154,819	120,204
TOTAL (excl. employer's social contribution)	2,139,230	1,717,253	5,539,409	6,005,519
Employer's social contribution	344,906	365,967	1,349,802	1,673,311
TOTAL (incl. employer's social contribution)	2,484,136	2,083,220	6,889,211	7,678,830

Retirement and post-employment benefits

The former President & CEO was participating in a complementary pension scheme which foresaw an annual contribution of EUR 73,495.42, yearly indexed. 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.

Overview

The table below reflects the remuneration and other benefits paid directly or indirectly to the members of the Belgacom Management Committee in 2013 by Belgacom or any other undertaking belonging to the Belgacom Group (benefit based on gross or net remuneration, depending on the type of benefit).

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

the changes in the composition of the management team;
the legal indexation of salaries (January 2013);
the limited acceptance rate of the stock option plan 2012;
the new Long-Term Performance Value Plan design.

Main provisions of the contractual relationships

Contractual arrangement of former President & CEO In March 2009, Didier Bellens started the first year of his new six-year mandate as President & CEO. He had a contract as a self-employed executive. Nevertheless, he was subject to employee's 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". The former President & CEO's employment contract ended in November 2013. There was no pay-out of any severance pay.

Clauses

The former President & CEO was bound by a non-competition clause, prohibiting him for 12 months after leaving the group from working for a competitor of Belgacom Group in Belgium and in those countries where Belgacom Group generates at least 5% of its consolidated revenues. If activated by Belgacom, he would have received an amount equal to one year's salary as compensation. This clause has not been activated upon departure of the former President & CEO.

The members of the Management Committee, who are bound by a non-competition clause prohibiting them for 12 months after leaving the group from working for any other mobile or fixed licensed operator active on the Belgian market, will receive an amount equal to 6 months' salary as compensation.

Dominique Leroy, Bruno Chauvat, Geert Standaert, Ray Stewart and Bart Van Den Meersche have a contractual termination clause with an indemnity of 1 year's remuneration.

Michel Georgis has a contractual termination clause with an indemnity of 1 year's remuneration plus 1 month pay per year of seniority acquired, with a maximum of two years' remuneration after 12 years of service.

MARKET CONTEXT CORPORATE GOVERNANCE

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 forward-looking statements, including statements about the Company's beliefs and expectations. These statements are based on the Company's current plans, estimates and projections, as well as its expectations of external conditions and events. Forward-looking statements involve inherent risks and uncertainties and speak only as of the date they are made. The Company undertakes no duty to and will not necessarily update any of them in light of new information or future events, except to the extent required by Belgian law. The Company cautions investors that a number of important factors could cause actual results or outcomes to differ materially from those expressed in any forward-looking statements.

For further information

Dirk Lybaert

Executive Vice President Corporate Affairs Bd. du Roi Albert II/Koning Albert II-laan, 27 B - 1030 Brussels Tel: +32 2 202 16 48 E-Mail: [email protected]

For CSR information

Xavier Dekeuleneer Head of Corporate Social Responsibility Bd. du Roi Albert II/Koning Albert II-laan 27 B - 1030 Brussels Tel: +32 2 202 93 67 E-Mail: [email protected]

For financial information

Nancy Goossens Vice President Investor Relations Bd. du Roi Albert II/Koning Albert II-laan 27 B - 1030 Brussels Tel: +32 2 202 82 41 Fax: +32 2 201 54 94 E-Mail: [email protected]

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Editor-in-chief: Dirk Lybaert Executive Vice President Corporate Affairs Bd. du Roi Albert II/Koning Albert II-laan 27 B - 1030 Bruxelles Conception and coordination: Anne-Françoise Streel Corporate Communication Project Manager Design and prepress: Chris Communications www.chriscom.be Printing: Snel Pictures: Jean-Michel Byl, Getty images, Istock and Belgacom Visit Belgacom's website:

www.belgacom.com Belgacom's annual report is also published in Dutch and in French.

belgacom FINANCIAL REPORT 2013

FINANCIAL KEY FIGURES

Income Statement (EUR million)	2004	2005	2006	2007	2008	2009	2010	2011	2012 Restated (4)	2013
Total income before non-recurring items	5,540	5,458	6,100	6,065	5,978	5,990	6,603	6,406	6,462	6,318
Non-recurring income	0	238	0	0	8	74	436	11	0	0
Total income	5,540	5,696	6,100	6,065	5,986	6,065	7,040	6,417	6,462	6,318
Non-recurring expenses	-41	-355	0	-46	-93	-62	8	-26	-15	-14
EBITDA (1) before non-recurring items	2,394	2,214	2,149	2,077	1,990	1,955	1,984	1,912	1,801	1,713
EBITDA (1)	2,353	2,098	2,149	2,031	1,905	1,967	2,428	1,897	1,786	1,699
Depreciation and amortization	-742	-726	-802	-774	-743	-706	-809	-756	-748	-782
Operating income (EBIT)	1,611	1,372	1,347	1,256	1,161	1,261	1,619	1,141	1,038	917
Net finance income / (costs)	-27	64	104	1	-109	-117	-102	-106	-131	-96
Income before taxes	1,584	1,436	1,451	1,258	1,053	1,144	1,517	1,035	907	822
Tax expense	-508	-339	-358	-300	-254	-241	-233	-262	-177	-170
Non-controlling interests	152	139	121	0	-1	-1	17	17	19	22
Net income (Group share)	922	959	973	958	800	904	1,266	756	712	630
Cash flows and Capital Expenditures (EUR million)	2004	2005	2006	2007	2008	2009	2010	2011	2012 Restated (4)	2013
Cash flows from operating activities	1,899	1,883	1,643	1,581	1,552	1,406	1,666	1,551	1,480	1,319
Cash paid for acquisitions of intangible assets and property, plant and equipment	-556	-696	-676	-625	-764	-597	-734	-757	-773	-852
Cash flows from / (used in) other investing activities	78	389	-2,279	255	-380	-12	48	-7	-16	38
Free cash flow (2)	1,421	1,575	-1,313	1,210	409	797	980	788	691	505
Cash flows from / (used in) financing activities	-1,658	-1,102	751	-720	-570	-1,030	-728	-1,051	-809	-353
Net increase / (decrease) of cash and cash equivalents	-237	473	-562	490	-161	-233	252	-264	-118	152
Balance sheet (EUR million) As of 31 December	2004	2005	2006	2007	2008	2009	2010	2011	2012 Restated (4)	2013
Balance sheet total	5,368	5,831	7,300	7,325	7,782	7,450	8,511	8,312	8,243	8,417
Non-current assets	3,963	3,808	5,504	5,072	5,564	5,505	6,185	6,217	6,192	6,254
Investments, cash and cash equivalents	406	884	327	785	618	408	627	356	285	415
Shareholders' equity	2,223	2,221	2,391	2,520	2,271	2,521	3,108	3,078	2,881	2,846
Non-controlling interests	407	370	8	6	5	7	235	225	211	196
Liabilities for pensions, other post-employment benefits and termination benefits	760	1,010	886	831	777	677	565	479	570	473
Net financial position	110	534	-1,636	-1,167	-1,835	-1,716	-1,451	-1,479	-1,601	-1,815
Belgacom share - key figures	2004	2005	2006	2007	2008	2009	2010	2011	2012 Restated (4)	2013
Basic earnings per share before non-recurring items (EUR)	2.65	2.76	2.87	2.96	2.71	2.79	2.57	2.40	2.27	2.02
Basic earnings per share (EUR)	2.57	2.78	2.87	2.87	2.45	2.82	3.94	2.36	2.24	1.98
Diluted earnings per share (EUR)	2.57	2.77	2.87	2.87	2.45	2.82	3.94	2.36	2.23	1.98
Dividend per share, gross (in EUR)	1.38	1.52	1.60	1.68	1.68	1.68	1.68	1.68	1.68	1.68
Interim/special dividend per share, gross (in EUR)	0.55	0.00	0.29	0.50	0.50	0.40	0.50	0.50	0.81	0.50
Weighted average number of ordinary shares (3)	358,612,854	345,406,186	338,621,113	334,017,553	326,179,820	320,475,553	321,138,048	319,963,423	318,011,049	318,759,360
Share buyback (EUR million)	0	300	200	78	352	0	0	100	0	0
Data on employees	2004	2005	2006	2007	2008	2009	2010	2011	2012 Restated (4)	2013
Number of employees (full-time equivalents)	16,933	16,335	18,180	17,942	17,371	16,804	16,308	15,788	15,859	15,699
Average number of employees over the period	17,108	16,388	18,163	17,995	17,465	16,878	16,270	15,699	15,952	15,753
Total income before non-recurring items per employee (EUR)	323,847	333,034	335,869	337,031	342,291	354,917	405,859	408,046	405,084	401,080
Total income per employee (EUR)	323,847	347,577	335,869	337,031	342,746	359,322	432,685	408,760	405,084	401,080
EBITDA (1) before non-recurring items per employee (EUR)	139,945	135,103	118,294	115,400	113,934	115,849	121,953	121,764	112,924	108,735
EBITDA (1) per employee (EUR)	137,549	128,010	118,294	112,847	109,058	116,551	149,247	120,834	111,973	107,851
Ratios	2004	2005	2006	2007	2008	2009	2010	2011	2012 Restated (4)	2013
Return on Equity	42,2%	43,1%	40,7%	38,8%	37,5%	35,6%	30,9%	24,9%	25,0%	22,5%
Gross margin	73,6%	71,5%	67,1%	66,8%	67,0%	65,2%	60,0%	60,7%	59,6%	59,5%
Net debt / EBITDA before non-recurring items	0,0	-0,2	0,8	0,6	0,9	0,9	0,7	0,8	0,9	1,1

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

(2) Cash flow before financing activities

(3) i.e. excluding Treasury shares

(4) As a consequence of the adoption in 2013 of IAS 19R with retrospective application, the new accounting principles have been applied to 2012 figures

CONSOLIDATED MANAGEMENT REPORT

MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL RESULTS

Belgacom Group

Group revenue of EUR 6,318 million; 2.2% lower than for 2012
Group EBITDA¹ of EUR 1,713 million, i.e. -4.9% lower than for 2012
Full-year EBITDA margin of 27.1%
Belgacom generated EUR 505 million Free Cash Flow in 2013

Revenues

The Belgacom Group ended the year 2013 with total revenue of EUR 6,318million, or –2.2% lower than for 2012. Capital gains² and other one-off³ impacts excluded, the Belgacom Group revenue was 2.9% or EUR 186 million lower than the previous year. Like its peers in the European Telecoms industry, Belgacom saw its revenue pressured by regulatory measures ⁴ , including both local and European imposed price reductions. This caused a EUR 85 million revenue loss for the Belgacom Group, or –1.3%. Furthermore, as a result of the sale of some its The Phone House stores⁵ , Belgacom generated less revenue from this sales channel.

Belgacom's revenue was significantly impacted by a tough mobile market, resulting from the new Belgian Telecom law, in force since October 2012, and more aggressive price competition on the Belgian Mobile market.

In particular, Belgacom saw its mobile revenue going down due to the loss of mobile postpaid and prepaid customers, and because of lower revenue per user due to the introduction of new attractive mobile prices. Even though Belgacom's ramping down of mobile prices and its successful retention actions could fairly quickly restore the customer churn levels and turn the mobile postpaid customer base back to growth, the financial effect was substantial for both the Consumer and Enterprise segment.

1 EBITDA before non-recurring items

² In 2013, the Belgacom Group realized EUR 31 million capital gains on the sale of technical buildings in the framework of its network simplification program.

³ One-off amounts impacting the year-over-year variance, including accounting adjustments and provision reversals.

⁴ Regulatory price reductions on Roaming rates and Mobile Termination Rates.

⁵ As part of the agreement with the Competition Council, Belgacom sold some of The Phone House stores in November 2012.

The revenue pressure on Mobile was to some extent offset by a firm financial performance of the Fixed business, with growing revenue for Fixed Internet and TV services. For both services, Belgacom grew its customer base over the year 2013 and saw its revenue per customer slightly increase as a result of price indexation.

Belgacom's International Carrier Segment, BICS, also showed a positive revenue contribution compared to the previous year driven by a firm uptake in Mobile revenue.

Operating expenses

The Belgacom Group's total operating expenses for 2013 amounted to EUR 4,605 million before non-recurring items, which is 1.2% lower compared to the year before.

The Belgacom Group ended the year 2013 with EUR 2,561 million Cost of Sales, i.e. 1.9% lower than the previous year. Oneoffs⁶ excluded, Belgacom's Cost of Sales was 0.9% lower. In addition to the positive effect from Belgacom's efforts to reduce costs through value management, the favorable evolution was driven by lower costs related to The Phone House as some of the stores were sold, and a positive impact from the lowered Mobile Termination Rates. The lower costs from the customer segments were partly offset by higher costs for BICS.

The 2013 HR-expenses of EUR 1,142 million were up +1.4% versus 2012. This increase was mainly driven by the inflationbased wage indexation in January 2013, for a large part offset by the year-on-year reduction in headcount to 15,699 fulltime equivalents (-160 FTEs) and more capitalized manpower resulting from Belgacom's network and IT simplification projects in 2013. Early 2013, the last wave of employees which signed up for the "Tutorship" restructuring program, left Belgacom. This was partly offset by some business-critical hiring.

The 2013 non-HR expenses for the Belgacom Group were down by 2.3% to a total of EUR 903 million, benefitting from continued company-wide cost containment efforts, and the lower costs related to The Phone House. This largely offset the impact in 2013 from resources required for Belgacom's simplification projects within the Service Delivery Engine segment.

EBITDA

The Belgacom Group reported EUR 1,713 million EBITDA⁷ for 2013, or 4.9% less than for 2012. Capital gains⁸ and other one-off⁹ impacts excluded, the Belgacom Group EBITDA was 8.7% or EUR 160 million lower than the previous year.

Regulatory measures had a negative impact for a total amount of EUR 48 million, or -2.7%. The remaining decrease in EBITDA is mainly driven by a lower direct margin within the two customer segments.

⁶ Accounting adjustments recorded in the second quarter 2012 following the adoption of the New Telecom law and an accounting reallocation in the third quarter 2013

⁷ Before non-recurring items

⁸ In 2013, the Belgacom Group realized EUR 31 million capital gains on the sale of technical buildings in the framework of its network simplification program.

⁹ One-off amounts impacting the year-over-year variance, including accounting adjustments, impairment and provision reversals.

Tax Expense

The effective tax rate was 20.7% for the year 2013. This is slightly above the effective rate of 19.5% for the year 2012 which included an accelerated use of tax losses. The 2013 tax rate results from the application of the general principles of Belgian tax and international law.

CAPEX

The Belgacom Group's invested amount for the full-year 2013 totaled EUR 852 million, or 13.5% of Group revenue. This is EUR 972 including the 800 MHz spectrum license which Belgacom obtained for the minimum price of EUR 120 million. With network quality being an important differentiator in a more intense Belgian competitive market, investments in the Fixed and Mobile networks represent the majority of invested amounts . Apart from ongoing basic network investments for renewal and expanding capacity, Belgacom invested in increasing its download speeds on the broadband network through the implementation of Dynamic Line Management, an in-house developed technology, and started to prepare the network for the Vectoring roll-out in 2014. Furthermore, on the mobile side, Belgacom increased its mobile data speeds to 6 Mbps on average on 3G, rolled out Dual Carrier and continued to deploy the 4G technology, reaching over 50% outdoor coverage end-2013, with 4G availability in over 260 Belgian cities. The SDE&W division is also implementing a Network Simplification program and a company-wide IT change plan.

Free Cash Flow*

Belgacom ended the year 2013 with EUR 505 million of Free Cash Flow or EUR 186 million less than for the same period of 2012, mainly due to higher income tax payments, higher cash paid for Capex, and lower EBITDA partially offset by a positive evolution in the working capital.

The FCF does not include the Capex acquisition of the 800 Mhz spectrum license paid over a 20-year period (EUR 120 million). Acquisition and financing are treated as a non-cash transaction. The 2013 reimbursement of EUR 6 million is included in the financing activities of the cash flow statement.

Net financial position

Compared to end-2012, the net financial debt increased by EUR 214 million to EUR 1,815 million per end of 2013 as the cash returned to shareholders in the form of dividends exceeded the 2013 Free Cash Flow.

The outstanding long-term gross financial debt (re-measured at fair value) amounted to EUR 1.9 billion at the same date. The outstanding amount of EUR 114 million from the deferred payment arrangement for the 800 MHz license is not included in the net financial debt.

Consumer Business Unit - CBU

Consumer segment generated EUR 2,226 million revenue in 2013, down 4.1% from 2012
The disruption in the mobile market significantly reduced Mobile revenue
Revenue growth from solid Fixed business provided some relief
Good customer growth in 2013 for TV, Internet and Mobile postpaid
Full-year segment result of EUR 971 million, i.e. a 2% decline compared to 2012

CBU revenues

For the full-year 2013, CBU reported revenues of EUR 2,226 million or 4.1% less than for 2012 or -4.4% on a comparable basis¹⁰. The year-over-year decrease is driven by the impact from the mobile disruption in the Belgian market. The increased price competition in combination with a new Telecom law, in force since October 2012, triggered an unprecedented volatility in the mobile market. Even though Belgacom succeeded in lowering churn levels early 2013, the prior Postpaid customer loss, a continued declining prepaid customer base, and the re-pricing of existing customers resulted in a significant loss of Mobile revenue. This was partly compensated for by a solid performance of fixed products, with both TV and Internet showing a sound revenue growth.

Furthermore, regulatory measures reduced the 2013 revenue by EUR 27 million (-1.2%). This entails the effect from a further decline of Voice roaming tariffs, lower Mobile Termination Rates and the resulting decline in fixed-to-mobile tariffs, as well as the regulated capping of Mobile Data Roaming pricing.

¹⁰ Excluding one-off accounting adjustments in 2012 and 2013

Belgacom generated EUR 410 million from Fixed Voice, or 3.4% less compared to 2012. The revenue pressure is mainly driven by a stable, though continued Fixed line erosion. In 2013, the consumer Fixed Voice customer base decreased by 84,000 lines. As a result, the Consumer segment ended 2013 with a total of 1,634,000 lines, 4.9% lower than the prior year. The ARPU, however, slightly increased to EUR 20.2 (+1.5%), positively impacted by price changes in 2013 .

Revenue from Fixed Internet grew 4.5% to EUR 354 million in 2013. This results from a combination of a growing customer base and some price changes in 2013. Driven by its successful Pack offers, the Consumer segment added 42,000 new Internet customers in the course of 2013, growing its customer base by 3.6% to 1,235,000. In 2013, the ARPU went up by 0.4% to EUR 26.6 as customer pricing was adjusted in exchange for more volume and speed.

Belgacom continued to grow its TV revenue, reaching EUR 267 million for 2013. This 13% revenue growth compared to 2012 resulted from Belgacom's successful convergent Pack sales, attracting 62,000 new households to Belgacom TV. By end 2013, Belgacom's TV customer base counted 1,218,000 TV households, or 1,479,000 when including multiple set-top boxes.

Another revenue growth driver was the ARPU, supported by a price increase for rented settop boxes since February 2013. The 2013 ARPU increased to EUR 18.7, up 4.4% over the prior year.

The revenue generated by Belgacom's Consumer segment from Mobile services (i.e. combined revenue from Mobile Voice, Mobile Data and SMS) was significantly reduced in 2013 as a result of regulatory measures ¹¹ and the mobile market disruption. This started mid-2012 and reached its zenith when the new Telecom law was adopted on 1 October 2012. In 2013, the consumer segment saw its revenue from Mobile services being reduced by EUR 119 million or 13% versus the prior year. This was due to a combination of postpaid customers lost in 2012, a decreasing prepaid customer base, and the effect of customers signing up for Belgacom's new, more attractive mobile price offers. Backed by its superior mobile network, attractive mobile offers and convergent Pack offers, Belgacom was able to restore the port-in/port-out balance fairly quickly, resulting in a net growth of 208,000 mobile postpaid Voice and Data cards. This brought the total postpaid base to 1,928,000 mobile cards by end-2013. Prepaid cards, however, continued to show a declining trend. The Consumer segment lost 283,000 prepaid cards, resulting in a total of 1,640,000 cards by end-2013. With mobile prices becoming more attractive, the blended mobile ARPU eroded to EUR 18.5, 8.9% lower compared to 2012.

¹¹ Lower regulated rates for Mobile Termination, Voice and Data Roaming

CBU operating expenses

723 678 624 666 611 ³⁴⁵ ³²⁵ ³⁴⁰ ³⁵⁴ ³⁴⁹ ²⁹⁷ ²⁹¹ ²⁹⁹ ³⁰⁹ ²⁹⁴ 1,365 1,295 1,263 1,330 1,255 2009 2010 2011 2012 2013 Non-HR costs HR costs Cost of Sales

Total expenses (in mio €)

Segment result (in mio €) & margin

The total expenses from the Consumer segment were EUR 1,255 million or 5.6% lower than previous year.

The 2013 Cost of Sales ended 8.3% lower to reach EUR 611 million. This is the combined result of positive regulation effects, the divestment of part of The Phone House stores, as well as the benefits from a value management approach.

The Consumer segment recorded EUR 349 million HR costs, 1.3% lower than for the prior year. The impact from the January 2013 inflation-based wage indexation was more than offset by the positive impact from the divestment of part of The Phone House stores.

This divestment also positively impacted the non-HR costs, totalling EUR 294 million or 4.9% lower compared to 2012. Furthermore, costs were reduced through continued cost optimization efforts.

The CBU full-year segment result amounted to EUR 971 million which is EUR 20 million or 2% below that of 2012. The yearon-year variance was impacted by a one-off accounting adjustment¹² and litigation provisions and a loss on disposal. Adjusted for these, the segment result was down by 5.4% from 2012. Apart from a negative impact from regulation for EUR 8 million, the segment decline was mainly driven by the pressure on the Direct Margin, partly compensated for by a lower cost base. The 2013 full-year contribution margin¹³ was 43.6%.

2009 2010 2011 2012 2013

Subsidiaries: Tango & Scarlet

2009 2010 2011 2012 2013

For the full-year 2013, Tango, Belgacom's Luxembourgish mobile operator, continued to do well with reported revenues of EUR 127 million or an increase of 11.2% compared to 2012. This growth is driven by the good trend of smartphone sales with Tango's leading 4G subscriptions in Luxembourg and a growing customer base for quadruple play, including TV. Furthermore, over the year 2013, Tango added 9,000 customers.

2009 2010 2011 2012 2013

With Scarlet, Belgacom's multi-brand strategy in its home market started to pay off with the full-year revenue loss substantially declining versus previous years. In the last quarter of 2013, Scarlet's year-over-year evolution came to a turnaround point and progressed to a slight growth.

¹² A EUR 26 million accounting adjustment was recorded in the second quarter 2012 following the passing of the new Telecom law

¹³ Belgacom does not apply a full cost allocation. Network and IT costs are therefore mainly centralized within SDE&W

Enterprise Business Unit - EBU

Mobile disruption spill-over to business market impacting revenue and direct margin
Solid growth in Mobile customer base
Slow economy hampers ICT growth
Regulatory price cuts significantly impacted revenue and segment result
2013 segment result totals EUR 1,023 million

EBU revenues

Over the year 2013 Belgacom's professional customer segment generated EUR 2,198 million in revenue, i.e. 4.2% lower than for 2012. This decline was partly caused by regulatory¹⁴ measures, lowering EBU's 2013 revenue by EUR 54 million or -2.3%. The remaining decline was primarily due to the disruption in the Belgian mobile market, with a substantial spill-over effect on the business market. The introduction of more abundant offers, including higher volumes of free minutes and SMSes, as well as higher data volumes, caused a significant pressure on the mobile revenue. This could not be fully compensated for by higher revenue from ICT, whose growth was hampered by a weak economy.

¹⁴ Lower Mobile Termination Rates and the flow-through to Fixed-to-Mobile rates, lower Voice and Data Roaming rates

With enterprises rationalizing on their Fixed Voice lines, EBU's Fixed Voice business continued its declining trend in 2013. Over the full-year 2013, EUR 463 million was generated in Fixed Voice, or 3.8% less than for 2012. This is in part due to the lowered Fixed-to-Mobile rates, and in part to the continued erosion of Fixed Voice lines. In 2013 EBU's Fixed Voice line base eroded by 64,000 lines to a total of 1,292,000. The price changes in 2013 gave some support to the 2013 Fixed Voice ARPU¹⁵ which slightly increased to EUR 28.6.

For the full-year 2013, EBU reported EUR 380 million Fixed Data revenues, 2.1% less than for 2012. This includes revenue from Fixed Internet and data connectivity. The decline is in part due to a continued migration from older technologies to the Belgacom Explore platform, for which pricing is more favorable for customers. Furthermore, EBU ended the year 2013 with a slightly smaller customer base of 441,000 Internet customers (-0.5% year-on-year), partly offset by a 0.5% increase in ARPU to EUR 39.3, mainly driven by price adjustments. This offset the impact on ARPU from SOHO and SME customers increasingly opting for advantageous converged Packs.

ICT revenue (in mio €)

EBU reported EUR 701 million ICT revenue for 2013. This is EUR 9 million or 1.3% more than in 2012, in spite of an unfavorable economic climate, with customers delaying IT projects or opting for private Cloud-based solutions, triggering a shift from one-time revenue to monthly service fees.

¹⁵Average revenue per user on a monthly basis

The Mobile service revenue, i.e. the combined revenue from Mobile Voice, Mobile Data and SMS, within the Enterprise Segment declined from EUR 626 million in 2012 to EUR 555 million in 2013 or -11.4%. Regulatory¹⁶ price cuts significantly reduced the mobile revenue, with Mobile Data in particular being impacted by the capping of retail Data Roaming prices since July 2012, further reduced on 1 July 2013. In addition, EBU's Mobile Service revenue was impacted by a spill-over effect on business customers from the mobile re-pricing triggered by the new Telecom law. EBU's new Mobile pricing, supported by a recognized high-quality Mobile network, resulted in a rapid restoration of the port-in/port-out balance as of mid-2013. With an annualized Mobile churn rate of 11.9% for 2013, the churn fell even below the 12.7% mark of 2012. Mobile cards sold in a multi-play Pack did very well in 2013, and pushed the Mobile sales to a strong growth of 147,000 mobile cards, including Mobile Voice, Mobile Data and Machine-to-Machine cards. This brought the EBU Mobile customer base by end-2013 to 1,633,000 cards, up by 10% year-on-year.

With mobile pricing under severe pressure, and an increasing number of Machine-to-Machine cards at low ARPU, the blended mobile ARPU amounted to EUR 29.9, down by 17.6% from the prior year. Most of the ARPU pressure, however, is caused by regulatory price cuts and the uptake of more abundant price plans, including more free Voice usage.

EBU operating expenses

The total operating expenses for the Enterprise Business Unit for 2013 totaled EUR 1,175 million, 0.5% lower compared with the previous year. This results from lower Cost of Sales and Other operating expenses, partly offset by higher HR costs.

For 2013, EBU reported EUR 603 million in Cost of Sales, i.e. 2.6% less than for 2012. This results from the positive effect from lower Mobile Termination Rates, more than offsetting volume-driven commissions and SMS interconnection costs.

Year-over-year the HR expenses increased by 3.9% to EUR 418 million in 2013, mainly due to a higher personnel base versus the previous year to support the increased servicing to Business customers and the migration from 'old' to 'new' technologies, along with the inflation-based salary indexation of January 2013.

EBU segment result and contribution margin

EBU's segment result over the full-year 2013 totaled EUR 1,023 million, 8.1% lower compared to 2012 or 8.8% lower on a comparable¹⁷ basis. This includes a EUR 37 million (-3.3%) negative impact from regulation. The remaining decrease was mainly driven by a lower Direct margin resulting from the pressure on Mobile Service and Fixed Voice revenue.

The contribution margin¹⁸ decreased to 46.5% in 2013.

¹⁶ The final cut in Mobile Termination Rates (1 January 2013) and the reduced Voice and Data Roaming rates

¹⁷ Corrected for the EUR 8.1 million accounting adjustment in the second quarter 2012 following adoption of new Telecom law

¹⁸ Belgacom does not apply a full cost allocation. Network and IT costs are therefore mainly centralized within SDE&W

Service Delivery Engine & Wholesale – SDE&W

SDE&W revenues

Revenue within the SDE&W segment relates mainly to wholesale activities from Belgacom. Over the full-year 2013 the SDE&W revenues amounted to EUR 294 million, or 3.4% below those of 2012. This includes the negative effect from some regulatory¹⁹ measures, lowering the SDE&W revenue by EUR 4 million (-1.2%) in 2013. The remaining decline is due to lower broadband volumes, partially compensated for by the commercial wholesale offer to Base and the growth in Roaming volumes which compensated for both regulated and commercial price reductions.

SDE&W operating expenses

Over the full-year 2013, the HR expenses totaled EUR 172 million, slightly down from the prior year. The salary indexation of January 2013 was more than compensated for by the effect from a lower headcount and more capitalized manpower resulting from increased network investments and IT development in 2013.

The total non-HR expenses for the full-year 2013 totaled EUR 204 million. Besides the one-off provision reversal in the third quarter 2012, costs were up year-on-year because of the resources required for Belgacom's simplification projects.

Staff & Support – S&S

S&S revenues

The revenue from Staff & Support over the full-year 2013 totaled EUR 60 million, of which EUR 31 million was driven by capital gains recorded in the first and last quarter of 2013. These capital gains came from the sale of technical buildings as part of the network simplification project.

S&S operating expenses

The full-year 2013 non-HR expenses were down 7.7% from a high comparable base, driven by some unfavorable incidentals recorded in 2012 (impairment, provision for environmentally driven soil works) as well as the funding of the cost-efficiency project initiated in 2012. The HR expenses were up by 3% as a result of the inflation-based wage indexation in January 2013, partially offset by the lower headcount compared to end-2012.

¹⁹ Regulatory impacts from Mobile Termination Rates and lowered Local Loop Unbundling and Bitstream prices

International Carrier Services – BICS

Revenue increase of 1.3% over 2012
Favorable destination mix to large extent offset by EU-wide MTR cuts & dollar effect
Continued strong uptake of Mobile data
2013 gross margin up by 3.9% from 2012

ICS revenues

ICS gross margin

Over the full-year 2013 BICS reported EUR 1,666 million revenue, up by EUR 22 million or 1.3% compared to 2012, driven by BICS' non-Voice business. Revenue from the Voice business was fairly stable in relation to the previous year, as the benefit from a better destination mix was neutralized by the negative effect from European-wide MTR reductions and a disadvantageous dollar evolution.

The Gross margin over the full-year 2013 totaled EUR 254 million, a 3.9% year-on-year increase. While Voice revenues remained stable, the Voice gross margin improved by 8.2% driven by the high-margin traffic to Asia, while the MTR and dollar impacts are limited on gross margin. On the other hand, non-Voice revenues were up by 12.9% whereas the Gross margin was down by 0.9% because of fierce price competition.

ICS EBITDA and margin

Segment result (in mio €) & margin

Driven by a higher Direct Margin and somewhat lower expenses, BICS reported over the full-year 2013 a segment result of EUR 140 million, up 8.6% from 2012, and a segment margin of 8.4%.

ICS Volumes

Volumes (in mio €)

Voice volumes were slightly down versus 2012 whereas nonvoice volumes continued to grow strongly in 2013, up by 26% from the prior year.

QUARTERLY RESULTS AS REPORTED

Group – Financials

(EUR million)	Q112	Q212	Q312 Restated	Q412	2012	Q113	Q213	Q313	Q413	2013
Revenues (1)	1,588	1,611	1,620	1,644	6,462	1,586	1,583	1,568	1,582	6,318
Consumer Business Unit Enterprise business unit Service Delivery Engine & Wholesale Staff&Support International Carrier Services Intersegment eliminations	577 579 78 9 382 -37	575 576 76 7 409 -34	587 560 75 7 424 -33	581 579 76 11 430 -33	2,321 2,294 304 34 1,645 -137	553 554 75 18 417 -31	567 554 74 7 413 -32	549 533 73 10 437 -34	556 557 72 25 401 -30	2,226 2,198 294 60 1,666 -127
Costs of materials and charges to revenues	-614	-667	-649	-680	-2,611	-637	-645	-636	-643	-2,561
Personnel expenses and pensions	-278	-281	-290	-278	-1,126	-290	-283	-288	-282	-1,142
Other operating expenses	-226	-224	-217	-256	-924	-218	-225	-216	-244	-903
EBITDA (1)	470	438	464	429	1,801	441	430	428	413	1,713
Segment EBITDA margin (1)	29.6%	27.2%	28.6%	26.1%	27.9%	27.8%	27.2%	27.3%	26.1%	27.1%
Non recurring items	0	-10	- 1	- 4	-15	0	0	1	-15	-14
Ebitda after non-recurring items	470	428	463	425	1,786	441	430	430	398	1,699
(1) before non-recurring items

Group reported to underlying

	Q112		Q113 Var in %	Q212		Q213 Var in %	Q312		Q313 Var in %	Q412		Q413 Var in %	2012		2013 Var in %
	Restated			Restated			Restated			Restated			Restated
GROUP - REVENUE
Reported	1,588		1,586 -0.1%	1,611		1,583 -1.7%	1,620		1,568 -3.2%	1,644		1,582 -3.8%	6,462		6,318 -2.2%
One-offs	0	-11		12	0		0	1		0	-20		12	-30
Like-for-like	1,588		1,575 -0.8%	1,623		1,583 -2.5%	1,620		1,569 -3.1%	1,644		1,561 -5.0%	6,474		6,288 -2.9%
Regulation		24			30			16			15			85
Underlying	1,588	1,599	0.7%	1,623		1,612 -0.6%	1,620		1,585 -2.1%	1,644		1,576 -4.1%	6,474		6,373 -1.6%
GROUP - EBITDA
Reported	470	441	-6.1%	438	430	-1.9%	464	428	-7.7%	429	413	-3.7%	1,801		1,713 -4.9%
One-offs	0	-11		34	0		- 2	- 8		4	-16		36	-35
Like-for-like	470	430	-8.4%	472	430	-9.0%	462	421	-9.0%	433	397	-8.3%	1,838		1,678 -8.7%
Regulation		15			20			7			5			48
Underlying	470	446	-5.2%	472	450	-4.7%	462	428	-7.4%	433	402	-7.1%	1,838		1,726 -6.1%


One-offs: net impact provisions, the new disposal	Telco Law		accounting adjustments in Q2'12, capital gains realised on the sale of a technical buildings, the Q3'13 (EBITDA-neutral) accounting reclassification and the loss on a

Regulation: includes impact from lower Mobile Termination and Roaming rates, and other regulatory impacts

Revenue evolution in percentages

	Q112	Q212	Q312	Q412	2012	Q113	Q213	Q313	Q413	2013
GROUP
Reported YoY variance	0.3%	-0.1%	1.5%	1.7%	0.9%	-0.1%	-1.7%	-3.2%	-3.8%	-2.2%
Like-for-like YoY variance	0.1%	0.8%	0.4%	0.7%	0.5%	-0.8%	-2.5%	-3.1%	-5.0%	-2.9%
Underlying YoY variance	1.0%	1.8%	2.7%	2.1%	1.9%	0.7%	-0.6%	-2.1%	-4.1%	-1.6%
CBU
Reported YoY variance	2.1%	-0.7%	2.8%	1.5%	1.4%	-4.2%	-1.5%	-6.5%	-4.2%	-4.1%
Like-for-like YoY variance	0.5%	-0.8%	0.3%	-1.0%	-0.3%	-4.2%	-3.1%	-5.9%	-4.2%	-4.4%
Underlying YoY variance	1.7%	0.7%	2.8%	0.7%	1.5%	-3.1%	-1.8%	-4.7%	-3.2%	-3.2%
EBU
Reported YoY variance	-2.2%	-2.9%	-2.2%	-2.1%	-2.3%	-4.4%	-3.8%	-4.7%	-3.8%	-4.2%
Like-for-like YoY variance	-1.0%	-0.3%	-2.5%	-2.4%	-1.5%	-4.4%	-4.2%	-4.7%	-3.8%	-4.3%
Underlying YoY variance	0.1%	0.8%	1.3%	-0.3%	0.4%	-1.5%	-0.7%	-3.1%	-2.4%	-1.9%
SDE&W
Reported YoY variance	-4.3%	-4.9%	-3.2%	-5.0%	-4.4%	-3.0%	-3.4%	-2.4%	-4.7%	-3.4%
Like-for-like YoY variance	-5.1%	-6.1%	-4.5%	-6.3%	-5.5%	-3.0%	-3.4%	-2.4%	-4.7%	-3.4%
Underlying YoY variance	-4.3%	-4.9%	-3.3%	-5.0%	-4.4%	-1.8%	-1.7%	-1.9%	-3.2%	-2.1%
BICS
Reported YoY variance	2.6%	5.5%	5.7%	7.3%	5.3%	9.1%	0.9%	3.0%	-6.8%	1.3%
Like-for-like: i.e. excluding impact from M&A, the re-segmentation, the new and litigation settlement		Telco Law							accounting adjustments, capital gains realised on the sale of a technical buildings, the Q3'13 accounting reclassification

Underlying: i.e. like-for-like excluding impact from regulatory measures

Group – Capex

(EUR million)	Q112	Q212	Q312	Q412	2012	Q113	Q213	Q313	Q413	2013
Group Capex	186	174	160	234	753	193	177	176	426	972
Consumer Business Unit Enterprise business unit Service Delivery Engine & Wholesale Staff&Support International Carrier Services	61 4 116 5 1	33 4 126 8 3	30 3 114 8 5	40 5 158 19 12	164 15 514 40 20	48 3 134 2 6	30 3 137 5 2	26 2 139 7 3	61 5 315 18 26	164 13 725 33 37

CBU – Financials

(EUR million)	Q112	Q212	Q312	Q412	2012	Q113	Q213	Q313	Q413	2013
			Restated
Revenues	577	575	587	581	2,321	553	567	549	556	2,226
From Fixed	274	270	274	277	1,096	279	281	282	283	1,124
Voice	110	105	105	105	425	104	103	102	101	410
Data	85	84	85	85	339	87	89	90	89	354
T V	55	57	61	62	235	64	66	67	69	267
Terminals (excl. TV)	6	6	7	7	25	6	6	6	5	23
Scarlet	19	18	17	18	71	17	17	17	18	69
From Mobile	281	282	292	278	1,133	255	262	250	252	1,019
Voice	130	123	133	120	505	100	107	99	94	399
Data	97	102	98	100	398	97	98	95	96	386
Terminals (excl. TV)	27	29	32	28	116	29	25	25	29	109
Tango	27	28	28	30	114	29	32	32	33	127
Other	22	23	22	25	92	19	24	17	22	82
Costs of materials and charges to revenues	-162	-182	-157	-166	-666	-149	-165	-139	-159	-611
Personnel expenses and pensions	-89	-87	-91	-87	-354	-88	-86	-88	-87	-349
Other operating expenses	-74	-73	-77	-86	-309	-68	-74	-65	-88	-294
Segment result	252	234	263	243	991	248	243	258	223	971
Segment Contribution margin	43.7%	40.6%	44.7%	41.8%	42.7%	44.9%	42.8%	46.9%	40.0%	43.6%

CBU – Operationals

	Q112	Q212	Q312	Q412	2012	Q113	Q213	Q313	Q413	2013
FROM FIXED
Number of access channels (thousands)	2,938	2,926	2,918	2,912	2,912	2,895	2,883	2,872	2,870	2,870
Voice	1,780	1,758	1,737	1,718	1,718	1,693	1,673	1,653	1,634	1,634
Broadband	1,159	1,169	1,181	1,193	1,193	1,203	1,210	1,219	1,235	1,235
Traffic (millions of minutes)	1,086	1,027	965	1,060	4,138	1,086	988	901	971	3,945
National	828	754	703	768	3,053	787	696	639	689	2,810
Fixed to Mobile	164	179	170	187	701	190	184	164	174	712
International	94	93	92	104	383	110	108	98	108	423
TV (thousands)	1,254	1,301	1,340	1,386	1,386	1,412	1,428	1,447	1,479	1,479
TV - households	1,057	1,093	1,125	1,156	1,156	1,170	1,184	1,198	1,218	1,218
of which multiple settop boxes	196	209	216	230	230	242	245	249	260	260
ARPU (EUR)
ARPU Voice	20.2	19.7	19.7	20.0	19.9	20.1	20.2	20.3	20.3	20.2
ARPU broadband	26.9	26.4	26.5	26.1	26.5	26.3	26.7	26.9	26.4	26.6
ARPU Belgacom TV	17.6	17.6	18.1	18.2	17.9	18.3	18.6	18.7	19.0	18.7
FROM MOBILE
Number of active customers (thousands)	3,805	3,811	3,748	3,643	3,643	3,561	3,572	3,560	3,568	3,568
Prepaid	2,116	2,071	1,992	1,923	1,923	1,815	1,733	1,684	1,640	1,640
Postpaid	1,690	1,739	1,756	1,720	1,720	1,746	1,838	1,876	1,928	1,928
Annualized churn rate (blended - variance in p.p.)	20.4%	19.9%	25.8%	36.0%	25.9%	33.3%	26.5%	26.1%	26.5%	28.0%
Net ARPU (EUR)
Prepaid	14.0	14.2	13.6	14.4	14.0	13.3	14.0	12.6	12.5	13.1
Postpaid	27.9	27.3	28.9	26.6	27.7	24.1	24.4	23.5	22.8	23.7
Blended	20.1	20.1	20.8	20.1	20.3	18.5	19.2	18.3	18.0	18.5
Blended voice	11.6	11.1	12.0	11.1	11.5	9.5	10.2	9.5	9.0	9.5
Blended data	8.5	9.0	8.7	9.0	8.8	9.0	9.1	8.8	9.0	9.0
UoU (units)	377.9	391.7	357.5	389.9	379.1	375.3	384.4	348.6	373.3	370.7
MoU (min)	101.5	104.7	100.5	101.7	102.1	102.2	109.4	108.1	110.4	107.6
SMS (units)	279.8	291.3	262.1	294.2	281.7	279.8	283.0	249.2	272.3	271.4

EBU – Financials

(EUR million)	Q112	Q212	Q312 Restated	Q412	2012	Q113	Q213	Q313	Q413	2013
Revenue	579	576	560	579	2,294	554	554	533	557	2,198
From Fixed	408	409	398	418	1,633	406	406	391	412	1,615
Voice	124	120	118	119	481	118	117	114	114	463
Data	99	99	96	95	388	96	96	94	95	380
Terminals	18	18	18	18	72	18	18	17	17	71
ICT	167	172	167	186	692	174	175	166	186	701
From Mobile	166	162	158	155	640	143	144	137	141	565
Voice	106	102	100	96	403	88	88	83	83	343
Data	56	58	55	54	223	53	53	52	54	212
Terminals	3	3	3	5	14	2	2	2	4	10
Other	5	5	4	6	21	5	5	5	5	19
Costs of materials and charges to revenues	-149	-157	-150	-163	-619	-148	-149	-146	-159	-603
Personnel expenses and pensions	-99	-102	-102	-100	-402	-107	-105	-104	-102	-418
Other operating expenses	-40	-39	-39	-41	-160	-38	-37	-38	-41	-155
Segment result	291	278	268	276	1,113	260	263	245	255	1,023
Segment Contribution margin	50.2%	48.3%	48.0%	47.6%	48.5%	47.0%	47.5%	45.9%	45.7%	46.5%
Mobile Data - detail	56	58	55	54	223	53	53	52	54	212
			Adjusted*
SMS	26	26	25	26	103	25	24	23	24	96
Advanced data	31	32	30	28	120	28	29	29	30	117

*The split between SMS and advanced Mobile Data has been adjusted due to a refinement in the allocation of data bundles. The 2012 results have been adjusted accordingly to keep a correct comparable basis.

EBU- Operationals

	Q112	Q212	Q312	Q412	2012	Q113	Q213	Q313	Q413	2013
FROM FIXED
Number of access channels (thousands) Voice Broadband	1,841 1,394 446	1,824 1,379 445	1,815 1,370 444	1,799 1,356 443	1,799 1,356 443	1,781 1,338 444	1,760 1,318 442	1,746 1,305 441	1,732 1,292 441	1,732 1,292 441
Traffic (millions of minutes) National Fixed to Mobile International	754 502 167 84	699 459 161 79	636 416 147 73	686 451 160 75	2,775 1,828 635 311	695 457 161 77	654 422 156 76	592 382 140 69	630 410 151 70	2,571 1,672 607 292
ARPU (EUR) ARPU Voice ARPU Broadband	28.9 39.5	28.4 39.0	27.9 39.1	28.6 38.8	28.5 39.1	28.7 39.0	28.8 39.3	28.3 39.5	28.7 39.2	28.6 39.3
FROM MOBILE
Number of active customers (thousands) Postpaid	1,413 1,413	1,449 1,449	1,470 1,470	1,486 1,486	1,486 1,486	1,516 1,516	1,549 1,549	1,589 1,589	1,633 1,633	1,633 1,633
Annualized churn rate (blended - variance in p.p.)	11.7%	11.0%	10.8%	16.8%	12.7%	14.2%	13.6%	10.0%	10.4%	11.9%
Net ARPU (EUR) Postpaid Postpaid voice Postpaid data	38.7 25.3 13.5	37.2 23.7 13.5	35.5 22.9 12.6	33.9 21.6 12.2	36.3 23.3 12.9	31.5 19.7 11.8	30.8 19.2 11.6	28.8 17.8 11.1	28.4 17.2 11.2	29.9 18.4 11.4
UoU (units) MoU (min) SMS (units)	375.8 327.8 106.6	377.0 326.6 111.7	339.9 293.3 104.7	366.8 314.3 118.1	364.7 315.4 110.3	360.2 310.2 117.7	363.9 315.8 118.9	337.4 290.9 113.1	361.4 311.1 125.3	355.7 306.8 119.0

SDE&W – Financials

(EUR million)	Q112	Q212	Q312 Restated	Q412	2012	Q113	Q213	Q313	Q413	2013
Revenues	78	76	75	76	304	75	74	73	72	294
Costs of materials and charges to revenues	- 9	- 9	- 9	-10	-37	-11	-10	-10	-10	-40
Personnel expenses and pensions	-43	-43	-46	-43	-174	-45	-42	-44	-41	-172
Other operating expenses	-48	-50	-41	-48	-187	-50	-52	-51	-50	-204
Segment result	-23	-26	-21	-25	-94	-30	-31	-32	-30	-122

SDE&W – Operationals

	Q112	Q212	Q312	Q412	2012	Q113	Q213	Q313	Q413	2013
FROM FIXED
Number of access channels (thousands) Voice (1) Broadband (1)	12 1	11 1	11 1	11 1	11 1	10 1	10 1	10 1	10 1	10 1
FROM MOBILE
Number of active Mobile customers (thousands) Retail (1) MVNO	8 5	9 7	8 8	8 8	8 8	8 5	7 7	9 7	9 6	9 6

(1) i.e. Belgacom retail products sold via SDE&W (OLO's own usage and reselling)

S&S – Financials

(EUR million)	Q112	Q212	Q312 Restated	Q412	2012	Q113	Q213	Q313	Q413	2013
Revenues	9	7	7	11	34	18	7	10	25	60
Costs of materials and charges to revenues	1	- 1	0	- 2	- 2	0	0	0	0	0
Personnel expenses and pensions	-37	-38	-40	-38	-153	-40	-38	-40	-40	-157
Other operating expenses	-50	-50	-49	-67	-217	-50	-50	-50	-50	-201
Segment result	-78	-82	-81	-96	-338	-71	-82	-80	-65	-298

ICS – Financials

(EUR million)	Q112	Q212	Q312	Q412	2012	Q113	Q213	Q313	Q413	2013
Revenues	382	409	424	430	1,645	417	413	437	401	1,666
Costs of materials and charges to revenues	-326	-347	-361	-367	-1,400	-355	-347	-370	-340	-1,412
Personnel expenses and pensions	-10	-10	-11	-11	-43	-11	-11	-12	-12	-45
Other operating expenses	-18	-17	-17	-20	-73	-16	-18	-17	-18	-69
Segment result	28	34	35	32	129	35	37	38	31	140
Segment EBITDA margin	7.3%	8.4%	8.3%	7.3%	7.8%	8.3%	8.9%	8.6%	7.7%	8.4%

ICS – Operationals

Volumes (in million)	Q112	Q212	Q312	Q412	2012	Q113	Q213	Q313	Q413	2013
Voice	6,907	6,984	6,934	7,556	28,382	7,267	6,701	7,287	6,872	28,127
Non-Voice (SMS/MMS)	323	361	428	445	1,557	451	461	540	512	1,964

RISK MANAGEMENT

This section presents an overview of the Group's Risk Management including a description of its major risks and uncertainties and its main mitigation efforts.

Taking risks is inherent in doing business and successfully managing risks delivers return to Belgacom's stakeholders. 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. Financial risk management objectives and policies are reported in note 33 of the consolidated financial statements, published on the Belgacom website. Risks related to important ongoing claims and judicial procedures are reported in note 35 of these statements. The Enterprise and financial reporting risks are detailed below, together with the related mitigating factors and control measures. Note that this is not intended to be an exhaustive analysis of all potential risks Belgacom might be facing.

1. Enterprise risks

The Group's Enterprise Risk Management (ERM) covers the 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 Belgacom's 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 has been reviewed and updated every year since 2006. This risk assessment and evaluation takes place as an integral part of Belgacom's annual strategic planning cycle. The resulting report on major risks and uncertainties is then reviewed by the management committee, the CEO and the Audit and Compliance Committee. Among the risks identified in the ERM exercise of 2013, the following risk categories were prioritized: 1- Human resources flexibility, 2- competitive market dynamics, 3- regulatory pressure, 4- dependence on equipment and technology.

Principal risks	Description	Mitigation actions

Human resources flexibility	Through a burdened HR framework, strict HR rules and unionization of personnel, Belgacom might miss the much needed flexibility to significantly reduce its workforce costs in order to preserve the company's EBITDA.	Belgacom's human resources department is in negotiations with unions to obtain more flexibility on the company's workforce. In the meantime, Belgacom has established a simplification program aiming for increased company agility and flexibility, a lower structural need for headcount, and an improved customer service.
Competitive market dynamics	A new market entrant or radical price competition could further pressure Belgacom's market share and force Belgacom into revising its pricing downwards, negatively impacting revenue and profit. Competitive behavior could prevent Belgacom to monetize investments in new technologies.	Belgacom applies a disciplined pricing strategy, being careful not to trigger further market value destruction. It employs a multi-brand strategy to address the price-sensitive segment separately. Belgacom has other levers than price thanks to its convergence strategy and investments in a superior mobile network, providing a competitive advantage.
Regulatory pressure	Belgacom's results could be materially negatively impacted by regulatory policy changes or actions from European or national regulatory entities. Belgacom still faces a much different regulatory playing field than cable operators in Belgium.	Belgacom communicates and negotiates with the Belgian and EU regulators to try to convince them (i) not to impose unfavorable terms and conditions and (ii) to put in place a fair and balanced regulatory framework.
Dependence on equipment and technology	Network systems could be impacted by damage, computer viruses, natural disasters and unauthorized access which could lead to loss of business and liability claims. Part of Belgacom's nation-wide fixed access network has been in place for a long time. Ageing copper cables could increase fault rates and decrease network performance.	A multi-year cyber security plan is being implemented and a dedicated Cyber Defense Unit is being created. To address the ageing copper cables, Belgacom's fixed access renewal strategy is brought in line with the future target destination of its network. Legacy systems are being replaced by integrated systems. Service and license agreements with suppliers and vendors are strictly monitored.

1.1. Limited human resources flexibility

With Belgacom's revenue under pressure for the past few years, the costs of the company need to be significantly reduced in order to preserve the EBITDA. A significant part of Belgacom's expenses is driven by the costs of the workforce, whether internal or outsourced, for which the company faces a global increase that is not sustainable for the future.

Through a burdened HR framework, strict HR rules and unionization of personnel, Belgacom may lack the much needed flexibility. All this at a time when business complexity is increasing, creating a need for upgraded skills and up-staffing in customer-facing functions. Moreover, Belgium applies automatic inflation-based salary increases, leading to higher costs, not only of Belgacom's own employees but also of the outsourced workforce, with the outsourcing companies being subject to the indexation as well.

On a Belgacom Group level, about one in three employees are statutory, benefitting from substantially higher protection against dismissal than that applicable to private sector employees. This may restrict Belgacom's ability to improve efficiency and increase flexibility to levels comparable to those of its competitors.

To address the much needed structural measures, Belgacom's human resources department is in negotiations with the unions. The aim of these negotiations is to obtain more flexibility to move employees within the organization, adapt the workforce faster in line with the actual workload and align remuneration items with common market practices. Belgacom has established a comprehensive simplification program aiming for increased agility and flexibility, a lower structural need for headcount, and improved customer service. The simplification project will prepare the company for the coming wave of retiring employees (over the 2018-2023 timeframe), minimizing the need for replacement by developing strategic workforce planning, fluent mobility and drastically simplifying and/or automating Belgacom's product and services, processes, systems and organization.

1.2. Competitive market dynamics

Belgacom's business is mainly focused on Belgium, a small country with only a few large telecom players, among which Belgacom is the incumbent. Belgacom is operating in maturing, and, according to some, even saturating markets. In such circumstances, market value is vulnerable to disruptive behavior among competitors. Moreover, Belgacom's main competitors Mobistar, BASE and Telenet, are subsidiaries of France Telecom, KPN, and Liberty Global respectively, all large international operators. Regarding TV services, Belgacom plays a challenger role, facing strong cable competition.

A new market entrant or radical price competition could cost Belgacom market share and negatively impact revenue and profit. For instance, Belgium's new Telecom Law, applicable since 1 October 2012 and indicated as one of the primary risks in the Risk Management chapter of the 2012 annual report, resulted in a significant increase in Mobile customer churn. This, combined with aggressive competitor mobile pricing (in both retail and wholesale), forced Belgacom to revise its mobile pricing offer at the end of 2012 and in April 2013, greatly increasing the value for customers for similar monthly price commitments. With churn levels normalizing in 2013 and mobile customer net additions back to positive, Belgacom applies a disciplined customer pricing strategy, being careful not to trigger further market value destruction. In case of market share loss due to a significant further reduction of competitor prices, however, Belgacom could be forced to revise its mobile pricing plans accordingly, which might result in additional pressure on mobile revenue. Nevertheless, as a result of its long-term strategy and continued network investments, Belgacom build itself an advantageous competitive position providing the company with other levers than just price. Belgacom offers mobile services on a superior mobile network, and its convergence strategy provides the company with a solid ground to compete, offering attractive multi-play solutions to its customers while reducing churn.

Another differentiator for Belgacom is to take the lead in mobile innovation. In this regard, it was the first operator to launch 4G in Belgium, ending 2013 with 258 cities and municipalities covered, or 50% of Belgium's population. Belgacom intends to get a decent return on its investments by introducing speed-tiering of its mobile price plans. This translates in making the full speed capabilities of the 4G technology accessible only via its high-end mobile price packages. Subscribers to the mid- and low-end mobile offers and having a 4G-enabled device will also enjoy higher speeds, though will be capped at 20Mbps. The monetization of 4G, however, could become challenging should competitors decide to offer full 4Gcapabilities free of charge to all customers. Belgacom would then risk not being able to profit from the expensive investments made.

In the fixed market, Belgacom faces strong competition from the cable operators. Potential consolidation among cable operators or between cable and mobile network operators could further strengthen competitors' positions and open the cable network for new players. Substitution of fixed line services (e.g. by apps and social media like Skype, Facebook, etc.), TV content (such as Bhaalu, Stievie and Netflix in the future) could put further pressure on revenues and margins. Belgacom is responding to these threats through a convergent and bundled approach and by offering new services (e.g. TV Replay, Belgacom Cloud, Smart and Safe Living).

To preserve its Fixed and Mobile premium brands, Belgacom is applying a multi-brand strategy, addressing the pricesensitive segment via its subsidiary Scarlet. The latter offers attractively priced mobile and triple-play products.

In the SME market, besides the competitors also active in the Consumer market, we also face competition from niche players in the different product markets. Belgacom remains a reference in this market through its convergent offers, mixing fixed and mobile, as well as telecom and IT. In the large-company market, Belgacom faces competition from internationally oriented operators like Orange Business Services, Colt, Verizon Business and BT Belgium and from integrators such as Dimension Data, Getronics, Cegeka and RealDolmen. The scattered competitive landscape drives price competition, and might further impact revenue and margins.

In the international carrier services market, voice margins per minute have been under significant pressure over the past few years as a result of price competition, consolidation of competitors and the ease with which customers are able to change providers. If pressure on voice margins should continue and/or if the Group does not offset price decreases with increased volume, Belgacom's ICS growth rate, operating revenue and net profit could come under pressure. In addition, the pressure on the mobile data market might increase and therefore affect the growth profile of the International Carrier Services.

1.3. Regulatory pressure

Belgacom operates in highly regulated markets, limiting the flexibility to manage its business. Belgacom's results could be materially negatively impacted by regulatory policy changes or actions from European or national regulatory entities.

Among other things, the Group's revenue and profit could be affected by increased taxation, additional roaming regulation, additional consumer regulation and wholesale regulation. Current wholesale prices do not reflect the economic value of the underlying network assets. This could negatively affect the profitability of asset renewal (re-investments) and investments in next-generation networks. Belgacom still faces a much different regulatory playing field than its main competitors for fixed services, i.e. the regional cable operators. This provides them with a competitive advantage that distorts fair competition and that may negatively affect Belgacom's ability to compete for market share.

Belgacom communicates and negotiates with the Belgian and EU regulators, either personally or through trade associations such as ETNO and GSMA, to try to convince these authorities (i) not to impose unfavorable terms and conditions and (ii) to put in place a fair and balanced regulatory framework promoting investments and establishing a level playing field with the cable operators. Belgacom also develops sound regulatory cost models to defend its pricing vis-à-vis the regulators. Ultimately, Belgacom challenges unfavorable and unfair decisions before the courts.

1.4. Dependence on equipment and technology

Belgacom's business is highly dependent on technical infrastructure such as telecommunication equipment and IT platforms. Belgacom is able to deliver services only insofar as it can protect its network systems against damage from telecommunication failures, computer viruses, natural disasters and unauthorized access. Any system failure, incident, or security breach that causes interruptions to all or some of Belgacom's operations could impair its ability to provide services to its customers and could potentially have financial consequences and a reputation impact.

To mitigate the risks related to incidents (e.g. fire) affecting technical buildings, Belgacom has spread its technology across different locations and buildings (e.g. 3 data centers, splitting corporate ICT services and customer ICT services), 10 network services nodes and hundreds of local exchanges.

To ensure the security of its IT and telecom systems, a new multi-year cyber security plan is being implemented to allow more effective detection and remediation of cyber attacks. This new cyber security plan entails a wide range of actions consisting of:

best-in-class security of IT platforms and networks for improved prevention;
the creation of a Cyber Defense Unit exclusively devoted to detecting and solving cyber incidents;
organizational measures and governance and the development of a more cyber-security-oriented culture and awareness towards the internal organization as well as towards partners, vendors and suppliers.

Belgacom's service portfolio becomes increasingly dependent on numerous IT platforms. To preserve the quality of service delivered to its customers, Belgacom needs to guarantee stability, processing time and agility. Any disruption or security breach resulting in loss or damage to customers' data or applications, or leading to inappropriate disclosure of confidential information, may lead to Belgacom incurring liability. In addition, the Group may incur additional costs to remedy the damage caused by these disruptions or security breaches. Belgacom possesses errors and omissions insurance, business interruption insurance and insurance specifically aimed to protect against certain losses resulting from, for instance, computer viruses and security breaches.

For critical IT applications, an extensive resilience plan has been put in place in 2013 which allows complete segregation and substantially better disaster recovery capabilities in case of failures. Furthermore, to prevent problems in the supply chain, Belgacom monitors strictly its service and license agreements with suppliers and vendors.

Belgacom has a nation-wide fixed access network, part of which has been in place for a long time, the so-called legacy copper network. Ageing copper cables could increase fault rates and decrease performance, which could require additional copper replacement. To remedy this, Belgacom is bringing its renewal strategy in line with the target destination of its network. The mobile network might be subject to technical failures, affecting the quality of service or causing temporary service interruptions, leading to customer dissatisfaction. Elaborate network resilience programs have been put in place to further boost the ability to keep the network in operation in the event of failures.

Belgacom continues to invest in stability improvements for both its fixed and mobile network by putting new technologies and architectures in place that enable higher redundancy (e.g. 4G, Vectoring, etc.). Belgacom also focuses on simplifying its legacy network through an elaborate network transformation program, although this could be subject to delayed implementation and consequently delayed savings from the out-phasing of technical buildings.

Nonetheless, in the event of network or IT interruptions, Belgacom has multiple measures in place to remedy problems as quickly as possible. Firstly, Belgacom has an extensive monitoring center in place allowing very fast detection and identification of any problem that could jeopardize the proper functioning of operations. Secondly, Belgacom has elaborate, well-prepared procedures in place to deal with and remedy high-impact incidents as quickly as possible through Emergency Response Teams which operate 24/7 and include the best experts in their fields.

2. Financial reporting risks

In the area of financial reporting, in addition to the general enterprise risks also impacting the financial reporting (e.g. personnel), the major risks identified include: new transactions and evolving accounting standards, changes in tax law and regulations, and the financial statement closing process.

2.1. New transactions and evolving accounting standards

New transactions could have a significant impact on the financial statements, either directly in the financial statements or in the notes. An inappropriate accounting treatment could result in financial statements which do not provide a true and fair view any more. Changes in legislation (e.g. pension age, customer protection) could also significantly impact the financials. New accounting standards can require the gathering of new information and the adaption of complex (billing) systems. If not timely and adequately foreseen, the timeliness and reliability of the financial reporting could be put at risk.

It is the responsibility of the Corporate Accounting department to follow the evolution in the area of evolving standards (both local GAAP and IFRS). Changes are identified, and the impact on the Belgacom financial reporting is proactively analysed.

For every new type of transaction (e.g. new product, new employee benefit, business combination), an in depth analysis from a financial reporting, risk management, treasury and tax point of view is performed. In addition, the development requirements for the financial systems are timely defined and compliance with internal and external standards is systematically analysed. Emphasis is on the development of preventive controls and setting up reporting tools that enable posteriori controls.

On a regular base, the Audit and Compliance Committee (A&CC) and the Management Committee are informed about new upcoming financial reporting standards and their potential impact on the Belgacom Group financials.

2.2. Changes in tax law and regulations

Changes in tax laws and regulations (corporate income tax, VAT...) or in their application by the tax authorities could significantly impact the financial statements. To ensure compliance, it is often required to set up, in a short timeframe, additional administrative processes to collect relevant information or to implement updates to existing IT systems (e.g. billing systems).

The tax department continuously follows potential changes in tax law and regulations as well as interpretations of existing tax laws by the tax authorities. Based on laws, doctrine, case law and political statements as well as draft laws available etc., an impact analysis is made from a financial perspective from an operational point of view.

2.3. Financial statement closing process

The delivery of timely and reliable financial statements remains dependent on an adequate financial statement closing process.

Clear roles and responsibilities in the closing process of the group financial statements 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 crossdivisional preparatory meetings, deadlines for ending of specific processes, exact dates 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 analysed and confirmed. Specific attention is given to reasonableness tests, where financial information is being analysed against 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.

INTERNAL CONTROL SYSTEM

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 of 1992, i.e. the integrated internal control and enterprise risk management framework published by the Committee of Sponsoring Organisation of the Treadway Commission ("COSO") in 1992. 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.

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 nonexecutive 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 "licentiate" 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 Group'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 to the strictest ethical standards and principles, using the Group 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 behaviour 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 nonfinance 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.

The team of the Corporate Accounting department assumes this accounting responsibility for the mother company Belgacom and the major Belgian companies. They also provide the support to the other affiliates. 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 products & services.

2. Risk analysis

Major risks and uncertainties are reported in the caption 'Risk Management'.

3. Risk mitigating factors and control measures

Mitigating factors and control measures are reported in the caption 'Risk Management'.

4. Information and communication

4.1. Financial reporting IT systems

The accounting records of Belgacom 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 major 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 Group's 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 effectiveness 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 Group 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.

OTHER INFORMATION

Rights, commitments and contingencies as of 31 December 2013

Disclosures related to rights, commitments and contingencies are reported in note 35 of the consolidated financial statements.

Use of financial instruments

Disclosures related to the use of financial instruments are reported in note 33 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 in the sections Risk Management and Internal Control of this management report.

Research and development activities

In general, the research and development activities cover 4 key steps in the adoption cycle of a technology or of a service based on technology:

Study of the technology's potential: determination of the technological and commercial opportunities and its positioning in the technology portfolio;
Introduction of the technology: as the technology is selected, an engineered solution is necessary for deployment, exploitation and day-to-day management;
Evolution of the technology: once deployed, the technology will continue to evolve in accordance with its potential and market demand;
The preparation of the introduction of new services.

In 2013, the research and development activities covered the following:

Study of the potential of new technologies:

o Further detailed studies on solutions to phase out traditional technologies and to migrate to a fully IP based network. More specifically the solutions for replacing PSTN and ISDN (Access Gateway, ISDN Access Devices and alternatives) were further investigated on their technical, economical and operational feasibility.
o Study to define future target transport network architectures and supporting technologies, aiming to cope with disruptive traffic growth, higher resiliency, as well as backbone network simplification.
o Further studies for the introduction of IPv6 in the data networks.
o Fibre to the Home (FTTH): technical-economic studies have been further conducted and preparations continued to deploy FTTH in green-field zonings. A first pilot for fibre-based connections in a new zoning was realized in the town of Brecht.
o A study has been started to investigate the potential of deploying fibre closer to the homes, by re-using the last meters of the existing copper pair for connecting the home (solution based on G.Fast standards).
o Investigation on viable solutions to optimize the data traffic handling on fixed and mobile networks, in order to ensure the optimal Quality of Service.
o Belgacom started to investigate the capabilities of the newest video coding solutions (HEVC / H265 video coding).
o Belgacom started also to investigate the potential of the integration of WiFi technology with the mobile data network to always deliver best data experience.
o Belgacom has a continuous focus on the "Green" aspect. With "green ICT" and "ICT for green", Belgacom actively participates in reducing our own environmental impact, as well as the impact of others. Several areas are being investigated (e-prescription, smart grids...).

Introduction of new technologies:

o Belgacom introduced in its mobile network the latest evolution in the 3G technology (HSPA+ or "3G+") which doubles the average download speed and increases significantly the upload speed for devices supporting this evolution.
o Belgacom and Alcatel-Lucent have been further developing in a partnership a next step in VDSL2 technology ('Vectoring'). This solution allows for cancelling out interference in a copper cable and will allow increasing substantially the data speed that can be offered. A new modem ("Bbox3") that supports this Vectoring solution has been developed and introduced.

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

o Belgacom further improved and extended its portfolio on Cloud-based Services with a residential cloud solution (storage and sharing).
o Belgacom extended its "internet-of-things" services with the introduction of Home Control/View (multidevice view, alert and interaction with home devices).
o Belgacom TV services have been further enriched. A new decoder has been developed and a faster application for TV Everywhere has been made available. TV Replay, a totally new service, has been introduced, allowing customers to watch TV programs at the moment which is most convenient for them.
o The download speed on VDSL2 has been further increased (up to 50 Mbps) by further improving DLM ('Dynamic Line Management'), a technology which was developed in-house.

The preparation of the introduction of new services:

o Belgacom was one of the main participants in the fiber-based pilot network in Kortrijk, in which test users are provided with high-speed access. This "Living Lab" enables application developers to test new applications and services in a real-life environment with a representative number of test users. Belgacom has also been testing some advanced services.

Belgacom collaborates with universities, industrial partners and several other bodies, such as iMinds (independent research institute founded by the Flemish government), and I.W.T. (Agentschap voor Innovatie door Wetenschap en Technologie). In this way, Belgacom has been participating to several R&D programs in various domains. Belgacom takes also part in several User Committees for Strategic Research projects.

Treasury shares

Disclosures related to treasury shares are reported in note 17 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 last updated by the Belgacom Board of Directors on 25 February 2010. Since then Belgacom has committed to return, in principle, most of its annual consolidated cash flow before financing activities (or "Free Cash Flow"), to its shareholders. However, the return of such free cash flow either through dividends or share buybacks, is being 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 note 40 of the consolidated financial statements.

On behalf of the Board of Directors, Brussels, February 27, 2014

Leroy Dominique De Clerck Stefaan President & CEO Chairman of the Board of Directors

Consolidated balance sheet 32
Consolidated income statement 33
Consolidated statement of other comprehensive income 34
Consolidated statement of cash flows 35
Consolidated statement of changes in equity 36
Notes to the consolidated financial statements 37
Note 1. Corporate information 37
Note 2. Significant accounting policies 37
Note 3. Goodwill 49
Note 4. Intangible assets with finite useful life50
Note 5. Property, plant and equipment51
Note 6. Investments in subsidiaries, joint ventures and associates52
Note 7. Other participating interests55
Note 8. Income taxes 55
Note 9. Assets and liabilities for pensions, other post-employment benefits and termination benefits56
Note 10. Other non-current assets 61
Note 11. Inventories 61
Note 12. Trade receivables 61
Note 13. Other current assets 62
Note 14. Investments 62
Note 15. Cash and cash equivalents 62
Note 16. Assets classified as held for sale62
Note 17. Equity 63
Note 18. Interest-bearing liabilities64
Note 19. Provisions66
Note 20. Other non-current payables 66
Note 21. Other current payables67
Note 22. Net revenue 67
Note 23. Other operating income67
Note 24. Non-recurring income68
Note 25. Costs of materials and services related to revenue 68
Note 26. Personnel expenses and pensions68
Note 27. Other operating expenses 68
Note 28. Non-recurring expenses 69
Note 29. Depreciation and amortization69
Note 30. Net finance income / (costs) 69 Note 31. Earnings per share 70
Note 32. Dividends paid and proposed70
Note 33. Additional disclosures on financial instruments 71
Note 35. Rights, commitments and contingent liabilities 80
Note 36. Share-based Payment 84
Note 37. Relationship with the auditors 85
Note 38. Segment reporting86
Note 39. Recent IFRS pronouncements87
Note 40. Post balance sheet events 87
Auditor's report88

CONSOLIDATED BALANCE SHEET

		As	o f 31 D ecemb er
(EUR mi lli o n )	No te	01/01/2012 res ta ted	2012 res ta ted	2013
ASSETS
NON-CURRENT ASSETS		6 ,238	6 ,19 2	6 ,25 4
Goodwill	3	2,323	2,339	2,320
Intangible assets with finite useful life	4	1,155	1,097	1,185
Property, plant and equipment	5	2,401	2,467	2,558
Investments in associates	6	3	1	6
Other participating interests	7	3 1	7	6
Deferred income tax assets	8	144	147	105
Other non-current assets	10	180	134	74
CURRENT ASSETS		2,09 5	2,05 1	2,16 3
Inventories	11	116	133	163
Trade receivables	12	1,328	1,341	1,289
Current tax assets	8	143	151	137
Other current assets	13	152	141	148
Investments	14	3 6	8 3	6 0
Cash and cash equivalents	15	320	202	355
Assets classified as held for sale	16	0	0	11
TOTAL ASSETS		8 ,332	8 ,243	8 ,417
LIAB ILITIES AND EQUITY
EQUITY	17	3,227	3,09 3	3,042
Sha reho ld ers ' eq u i ty	17	3,003	2,8 8 1	2,8 46
Issued capital		1,000	1,000	1,000
Treasury shares		-570	-551	-527
Restricted reserve		100	100	100
Remeasurement reserve		0	-60	-51
Stock compensation		13	14	13
Retained earnings		2,458	2,377	2,310
Foreign currency translation		2	1	1
No n -Co n tro lli n g i n teres ts	17	224	211	19 6
NON-CURRENT LIAB ILITIES		2,8 45	2,6 78	2,8 6 5
Interest-bearing liabilities	18	1,931	1,761	1,950
Liability for pensions, other post-employment benefits and termination benefits	9	576	570	473
Provisions	19	180	203	204
Deferred income tax liabilities	8	156	143	128
Other non-current payables	20	2	1	111
CURRENT LIAB ILITIES		2,26 0	2,472	2,5 11
Interest-bearing liabilities	18	41	215	316
Trade payables		1,343	1,310	1,320
Tax payables	8	229	236	132
Other current payables	21	647	711	731
		0	0	13
Liabilities associated with assets classified as held for sale	16

CONSOLIDATED INCOME STATEMENT

		Yea r en d ed 31 D	ecemb er
(EUR mi lli o n )	No te	2012 res ta ted	2013
Net revenue	22	6,415	6,239
Other operating income	23	47	79
To ta l i n co me		6 ,46 2	6 ,318
Costs of materials and services related to revenue	25	-2,611	-2,561
Personnel expenses and pensions	26	-1,126	-1,142
Other operating expenses	27	-924	-903
Non-recurring expenses	28	-15	-14
To ta l o p era ti n g exp en s es b efo re d ep reci a ti o n a n d a mo rti za ti o n		-4,6 76	-4,6 19
Op era ti n g i n co me b efo re d ep reci a ti o n a n d a mo rti za ti o n		1,786	1,6 9 9
Depreciation and amortization	29	-748	-782
Op era ti n g i n co me		1,038	9 17
Finance income		16	17
Finance costs		-146	-113
Net finance costs	3 0	-131	-96
In co me b efo re ta xes		9 07	822
Tax expense	8	-177	-170
Net i n co me		730	6 5 2
Non-controlling interests	17	19	22
Net income (group share)		712	630
Basic earnings per share (in EUR)	3 1	2.24 EUR	1.98 EUR
Diluted earnings per share (in EUR)	3 1	2.23 EUR	1.98 EUR
Weighted average nb of outstanding ordinary shares	3 1	318,011,049	318,759,360
Weighted average nb of outstanding ordinary shares for diluted earnings per share	3 1	318,688,078	318,987,711

CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE INCOME

	Yea r en d ed 31 D	ecemb er
(EUR mi lli o n )	2012 res ta ted	2013
Net i n co me	730	6 5 2
Other co mp rehen s i ve i n co me:
Items tha t ma y b e recla s s i fi ed to p ro fi t a n d lo s s
Cash flow hedges
Gain/(loss) taken to equity	1	-5
Transfer to profit or loss for the period	0
Exchange differences on translation of foreign operations	-1	-1
To ta l b efo re rela ted ta x effects	- 1	- 5
Rela ted ta x effects
Cash flow hedges:
Gain/(loss) taken to equity	0	2
In co me ta x rela ti n g to i tems tha t ma y b e recla s s i fi ed	0	1
Items tha t ma y b e recla s s i fi ed to p ro fi t a n d lo s s - n et o f rela ted ta x effects	- 1	- 3
Items tha t wi ll n o t b e recla s s i fi ed to p ro fi t a n d lo s s
Remeasurement of defined benefit obligations	-71	18
To ta l b efo re rela ted ta x effects	-71	1 8
Rela ted ta x effects
Remeasurement of defined benefit obligations	11	-6
In co me ta x rela ti n g to i tems tha t wi ll n o t b e recla s s i fi ed	1 1	- 6
Items tha t wi ll n o t b e recla s s i fi ed to p ro fi t a n d lo s s - n et o f rela ted ta x effects	-6 1	1 2
To ta l co mp rehen s i ve i n co me	669	661
Attributable to:
Equity holders of the parent	650	639
Non-controlling interests	18	22

CONSOLIDATED STATEMENT OF CASH FLOWS

	Yea r en d ed 31 D ecemb er


		630
		22
		782
		23
		1
		23
		1
		-11
		4
		0
		-32
		5 1,447

		-30 45
		2
		-9
		17
		-104
		3 0

		-79
		0
		-128 1,319


		-852
		-6
		0
		3 8
		5 -8 14
		5 05


		-701
		-38
		25
		23
		-6 -7
		249
		-128
		230
		-35 3
		15 2
		202
		355


		-83 2
Income taxes paid	-175	-249

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (EUR mi lli o n ) Is s u ed Trea s u ry Res - Remea - Fo rei g n

(EUR mi lli o n )	Is s u ed ca p i ta l	Trea s u ry s ha res (TS)	Res - tri cted res erve	Remea - s u re men t res erve	Fo rei g n cu rren cy tra n s - la ti o n	Sto ck Co mp en - s a ti o n	Reta i n ed Ea rn i n g s	Sha reho l d ers ' Eq u i ty	No n - co n tro l li n g i n teres ts (NCI)	To ta l Eq u i ty
B a la n ce a t 1 Ja n u a ry 2012	1,000	-5 70	100	0	2	1 3	2,5 32	3,078	225	3,303
Remeasurement defined benefit obligations	0	0	0	0	0	0	-75	-75	-1	-75
B a la n ce a t 1 Ja n u a ry 2012 (res ta ted )	1000	-5 70	100	0	2	1 3	245 7	3003	224	3,227
Remeasurement defined benefit obligations	0	0	0	-60	0	0	0	-60	0	-6 1
Other comprehensive income	0	0	0	-60	-1	0	0	-61	0	-6 2
Net income	0	0	0	0	0	0	712	712	19	730
To ta l co mp rehen s i ve i n co me	0	0	0	-6 0	- 1	0	712	6 5 0	1 8	669
Dividends to shareholders (relating to 2011)	0	0	0	0	0	0	-534	-534	0	-5 34
Interim dividends to shareholders (relating to 2012)	0	0	0	0	0	0	-258	-258	0	-25 8
Dividends of subsidiaries to non-controlling interests	0	0	0	0	0	0	0	0	-31	-31
Treasury shares (TS)
Exercise of stock options	0	13	0	0	0	0	0	13	0	1 3
Sale of TS under a discounted share purchase plan	0	6	0	0	0	0	-1	4	0	4
Stock options
Stock options granted and accepted	0	0	0	0	0	1	0	1	0	1
Deferred stock compensation	0	0	0	0	0	-1	0	-1	0	- 1
Amortization deferred stock compensation	0	0	0	0	0	2	0	2	0	2
Exercise of stock options	0	0	0	0	0	-1	1	0	0	0
To ta l tra n s a cti o n s wi th eq u i ty ho ld ers	0	1 9	0	0	0	1	-79 2	-772	-31	-8 04
B a la n ce a t 31 D ecemb er 2012 (res ta ted )	1,000	-5 5 1	100	-6 0	1	1 4	2,377	2,8 8 1	211	3,09 3
Cash flow hedges - gain/(loss) taken to equity	0	0	0	-3	0	0	0	-3	0	3 -
Currency translation differences	0	0	0	0	-1	0	0	-1	0	1 -
Remeasurement defined benefit obligations	0	0	0	12	0	0	0	12	0	2 1
Other comprehensive income	0	0	0	9	-1	0	0	9	0	9
Net income	0	0	0	0	0	0	630	630	22	6 5 2
To ta l co mp rehen s i ve i n co me	0	0	0	9	- 1	0	6 30	6 39	2 2	661
Dividends to shareholders (relating to 2012)	0	0	0	0	0	0	-535	-535	0	-5 35
Interim dividends to shareholders (relating to 2013)	0	0	0	0	0	0	-160	-160	0	-16 0
Dividends of subsidiaries to non-controlling interests	0	0	0	0	0	0	0	0	-38	-38
Treasury shares (TS)
Exercise of stock options	0	19	0	0	0	0	-3	15	0	1 5
Sale of TS under a discounted share purchase plan	0	6	0	0	0	0	-2	4	0	4
Stock options
Amortization deferred stock compensation	0	0	0	0	0	1	0	1	0	1
Exercise of stock options	0	0	0	0	0	-3	3	0	0	0
To ta l tra n s a cti o n s wi th eq u i ty ho ld ers	0	2 5	0	0	0	- 1	-6 9 8	-6 74	-38	-712
B a la n ce a t 31 D ecemb er 2013	1,000	-5 27	100	-5 1	1	1 3	2,310	2,8 46	19 6	3,042

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Corporate information

The consolidated financial statements at 31 December 2013 were authorized for issue by the Board of Directors on February 27, 2014. They comprise the financial statements of Belgacom SA, its subsidiaries and joint ventures (hereafter "the Group") as well as the Group's interest in associates accounted for under the equity method.

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 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 38.

The number of employees of the Group (in full time equivalents) amounted to 15,699 at 31 December 2013 and 15,859 at 31 December 2012. For the year 2013, the average number of headcount of the Group was 149 management personnel, 14,047 employees and 1,557 workers. For the year 2012, the average number of headcount of the Group was 151 management personnel, 14,176 employees and 1,625 workers.

Note 2. Significant accounting policies

Basis of preparation

The accompanying consolidated financial statements as of 31 December 2013 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 Group doesn't anticipate the application of standards and interpretations. 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 2013 and that are detailed as follows:

Improvements to IFRS's (2009-2011);
Amendments to standards:
o Amendments to IAS 1 Presentation of Items of Other Comprehensive Income (Clarification of the requirement for comparative information);
o Amendments to IFRS 7 Financial Instruments: Disclosures (Offsetting Financial Assets and Financial Liabilities);
o Amendments to IAS 12 Income Taxes (Deferred Tax: Recovery of Underlying Assets).
Newly issued standards:
o IFRS 13 ("Fair Value Measurement").
Revised standards:
o IAS 19 ("Employee Benefits"): The revision mainly relates on post-employment benefits (see notes 9.2 and 9.3). The major changes relate to the recognition of actuarial gains and losses through Other Comprehensive Income (equity) and the alignment of the expected return of assets to the discount rate. When applying the revision, Belgacom decided to classify the net periodic pension cost in operating and financing activities for their respective components. The adoption of IAS 19 Revised in 2013 requires a retrospective application, meaning that the year 2012 (including the opening balance sheet of 2012) is restated.

The adoption of these new standards and interpretations has limited impacts on the financial statements of the Group, except for the adoption of IAS 19 Revised on Employee Benefits with impacts as detailed here below:
(EUR mi lli o n )	As o f 1 Ja n u a ry 2012 a s p revi o u s ly	IAS 19 a d ju s tmen ts	As a t 1 Ja n u a ry 2012 res ta ted
Pensions and similar obligations	479	9 7	576
Pension asset	-2	2	0
Deferred income taxes (net)	3 5	-24	12
Effect o n eq u i ty - d ecrea s e		-75
Shareholders'equity	3,078	-75	3,003
Non Controlling Interests	225	-1	224
(EUR mi lli o n )	As a t 31 D ecemb er 2012	IAS 19 a d ju s tmen ts	As a t 31 D ecemb er 2012 (a s res ta ted )

Shareholders'equity	3,078	-75	3,003
Non Controlling Interests	225	-1	224

(EUR mi lli o n )	As a t 31	IAS 19	As a t 31 D ecemb er
	D ecemb er 2012 a s p revi o u s ly rep o rted	a d ju s tmen ts	2012 (a s res ta ted )
Pensions and similar obligations	402	168	570
Pension asset	-2	2	0
Deferred income taxes (net)	3 2	-35	-569
Effect o n eq u i ty - d ecrea s e		-135
Shareholders'equity	3,016	-134	2,881
Non Controlling Interests	212	-1	211

The accumulated impact on assets, liabilities and equity as per 31 December 2013 from the application of amendment to IAS 19 as revised 2011 is summarized below:
(EUR mi lli o n)		IAS 19 a d jus ted
Increase in pensions and similar obligations		152
Deferred income taxes liablitites		-29
Effect o n eq ui ty - d ecrea s e		-123
Shareholders'equity		-123
Non controlling interests		0

(EUR mi lli o n )	2012	2013
	res ta ted

Imp a ct o n o ther co mp rehen s i ve i n co me fo r the yea r o f the a p p li ca ti o n o f IAS 19 (a s revi s ed 2011)
Increasse/ (decrease) in remeasurement of defined benefit obligation and actuarial gains(losses) recognized	71	-18
Increase / (decrease) deferred income taxes	-11	6
(In crea s e) / d ecrea s e eq u i ty	-6 0	1 2
Shareholders'equity	-59	12
Non Controlling Interests	0	0

Imp a ct o n i n co me s ta temen t
Operating income before depreciation, amortization and non recurring	17	19
Non recurring expense	3	0
Net finance cost	-19	-13
Imp a ct o n p ro fi t b efo re ta x o f the yea r	1	5
(Increase)/ decrease in deferred income taxes	0	-1
Imp a ct o n n et i n co me o f the yea r	1	4
Group share	1	4
Non Controlling Interests	0	0

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 equity 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.

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 also 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 joint ventures and share in the result of the associates and joint ventures, 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.

Business Combinations

Acquisitions of businesses are accounted using the acquisition method. The consideration transferred is measured at fair value, which is calculated as the sum of the acquisition-date fair values of the assets transferred, the liabilities incurred to the former owners of the acquiree and the equity interests issued in exchange for control of the acquiree. Acquisition related costs are recognised in profit or loss as incurred.

At acquisition date, the identifiable assets acquired and the liabilities assumed are recognised at their fair value at that date including the fair valuation of unrecognised assets and liabilities in the balance sheet of the acquiree including mainly customer base and trade name.

Non-controlling interests may be initially measured either at fair value or at the proportionate share of the recognised amounts of the acquiree's identifiable net assets. The choice of the measurement principle is made on a transaction by transaction basis.

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:

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 as of 1 January 2010

The shareholders' agreement of BICS foresees decision-making rules and a deadlock procedure in force as from 1 January 2010 leading 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.

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 and 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 re-measured 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. An impairment loss recognized for goodwill is never reversed in subsequent periods, even if there are indications that the impairment loss may no longer exist or may have decreased.

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, 4G licenses, 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 (3 to 20 years). Except when the use of an asset is limited in time, for contractual reasons or reflecting the management intention on the use of the asset, the duration of an asset's useful life is set at acquisition date, for each asset individually, in such a way that the expected cumulated discounted cash flows generated by the concerned asset over its useful life represent approximately 90% of the total cumulated discounted cash flows expected from the asset.

GSM, UMTS and 4 G 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 licenses' useful lives are fixed by Royal Decree and they range from 5 to 20 years.

The useful lives are assigned as follows:

Useful life (years)

GSM, UMTS, 4G and other network licenses	Over the license period
 GSM (2G) renewed license (2010)	5
 UMTS (3G)	16
 LTE (4G)	15
 800 Mhz (4G)	20
Customer bases and trade names acquired	3 to 20
Software	5
Rights to use, football and broadcasting rights	Over the contract period
	(usually from 2 to 5)

The 800 Mhz spectrum license (acquired end 2013) is paid by installments over a 20-year period. As a financing is provided by the seller over the lifetime of the license and the period between acquisition and financing is significant, both have been treated as a non-cash transaction in the cash flow statement. Yearly payments to the seller to reduce the outstanding liability are included in the financing activities of the cash flow statement.

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 including assets rented to third parties are presented according to their nature and 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 straightline method over the estimated useful life of the asset. The useful lives are assigned as follows:

		Useful life (years)
	Land and buildings
	Land	Indefinite
	Buildings and building equipment	22 to 33
	Facilities in buildings	3 to 10
	Leasehold improvement and advertising equipment	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.

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.

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 determine 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.

Deferred tax liabilities with respect to temporary differences associated with investments in subsidiaries are recognized except when the parent company is able to control the timing of the reversal of the temporary difference and it is not probable that the difference will be reversed in a foreseeable future.

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 through Other Comprehensive Income (equity). Any past service cost and gain or loss on settlement is recognized in income statement when they occur.

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.

When applying the IAS 19 revised, the Group decided to classify the periodic cost in operating and financing activities for their respective components.

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 either considering their quote price on an active market, and if not available 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 either the Group realizes the rights to the benefits specified in the contract, either the rights expire or, either 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,

The participating interests in non-quoted companies for which no fair value can be reliably determined are carried at cost with adjustment for impairment loss if any;
All 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 in net finance cost.

Other non-current financial assets

Other non-current financial assets include derivatives (see below), long-term interest-bearing receivables such as loans to joint-ventures, personnel and cash guarantees and long-term investments such as notes and purchased bonds. Long-term receivables are accounted for as loans and receivables originated by the Group and are carried at amortized cost. Longterm 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 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 on financial assets are accounted for as other operating expenses when the assets relates to operating activities. For 'other participating interests', associates and assets relating to finance activities, allowances and impairment losses are accounted for as finance costs.

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 (more than 30%) or prolonged (more than 12 months successively) 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), interestbearing 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-fortrading, 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. When the matching between these instruments and the underlying exposure is sufficiently effective, and the effectiveness can be easily demonstrated, cash flow hedging is applied. i.e. the effective portion of the gains and losses on the hedging instrument is recognized via other comprehensive income until the hedged item occurs; the ineffective portion is recognized in profit or loss. The other forward exchange contracts 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 are neutralized by those on other derivatives.

As from September 2011, the Group started contracting derivatives to hedge its exposure to part of commodity price fluctuations for highly probable forecasted transactions. The Group applies cash flow hedge accounting; the effective portion of the gains and losses on the hedging instrument is recognized via other comprehensive income until the hedged item occurs. If the hedged transaction leads to the recognition of an asset, the carrying amount of the asset at the time of initial recognition is adjusted to include the amount previously recognized via other comprehensive income. The ineffective portion of a cash flow hedge is always recognized in profit or loss.

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. The amount recognized as provision is the best estimate of the expenditure required to settle the present obligation at the end of the reporting period. Provisions are discounted where the effect of the time value of money is material. The unwinding is recognized via the finance expense.

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

The Group classifies assets (or disposal group) as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through a continuing use. This condition is met when the asset (or disposal group) is available for immediate sale in its present condition, the sale is highly probable and expected to occur within one year. Assets and associated liabilities held for sale (or disposal group) 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

Equity and cash settled share-based payments to employees are measured at the fair value of the instrument at the grant date taking into account the terms and conditions upon which the rights 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.

For equity settled arrangement the fair value 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 regularly.

For cash settled arrangement the fair value is recognized in personnel expenses over their vesting period together with an increase in the liabilities. The liabilities are regularly re-measured to reflect the evolution of the fair values.

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 net 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 being the amount for which each component could be sold separately. However when an amount allocated to a delivered component is contingent upon the delivery of additional components or meeting specified performance conditions, the amount allocated to that delivered component is limited to the non-contingent amount.

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 from 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.

As a consequence of the new Belgian Telecom law in force as from 1 October 2012 all dealer commissions are expensed as incurred. The accumulated deferred upfront dealer commissions were expensed as 'cost of materials and services related to revenue'.

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, costs of employee restructuring programs and the effect of settlements of post-employment benefit plans.

Note 3. Goodwill

Note 3. Goodwill
(EUR mi lli o n )	Go o d wi ll
As o f 1 Ja n u a ry 2012	2,323
Acquisition of Wireless Technologies BVBA	15
As o f 31 D ecemb er 2012	2,339
Classified as held for sale	-1
Impairment	-18
As o f 31 D ecemb er 2013	2,320

In 2012 the acquisition of Wireless Technologies BVBA resulted in an increase of goodwill of EUR 15 million (see note 6.4).

In 2013 goodwill of two disposal groups was reclassified as held for sale with an impairment loss recognized for an amount of EUR 18 million (see note 16).

Goodwill is tested for impairment at the level of operating segments as these are the Group cash-generating units; the performance, financial position (including goodwill) and capital expenditures within the Group are being monitored at operating segment level.

For the purpose of impairment testing, goodwill acquired in a business combination is, at acquisition date, allocated to each of the Group operating segments that is expected to benefit from the business combination. Therefore this allocation is based on the nature of the acquired customers and activities. At 31 December 2013, all businesses acquired were fully allocated to one single operating segment, with the exception of the goodwill resulting from the acquisition of noncontrolling interests in 2007 in Belgacom Mobile, which was allocated to the Consumer Business Unit and the Enterprise Business Unit on basis of their relative value in use for the Group at 31 December 2007. As o f 31 D ecemb er

Business Unit on basis of their relative value in use for the Group at 31 December 2007.
The carrying amount of goodwill is allocated to the operating segments as follows:
	As o f 31 D	ecemb er
(EUR mi lli o n)	2012	2013
Consumer Business Unit	1,014	996
Enterprise Business Unit	1,073	1,073
International Carrier Services	252	252
To ta l		2,320
	2,339

The recoverable amount at segment level (including goodwill) was based on the value in use estimated through a discounted free cash flow model. The key variables used in determining the value in use are

the operating income before depreciation and amortization (except for the International Carrier Services segment for which the direct margin is more important);
the capital expenditures;
the long term growth rate;
the post-tax weighted average cost of capital;
the mark-up rate to be applied on staff and support services, should Belgacom Group organize a full and at arm's length transfer pricing between the segments;
the expected rate of return on SDE capital employed, allowing the determination of SDE network related costs to be invoiced to the other segments, should Belgacom Group organize a full and at arm's length transfer pricing between the segments.

CBU and EBU operating income before depreciation and amortization is highly sensitive to the following operational parameters: number of customers by type of service (TV, fix….), traffic (if applicable) and net ARPU by customer for each type of service. The value attached to each of these operational parameters is the result of an internal process, conducted in each segment and at group level, by confronting data from the market, market perspectives, and the strategies Belgacom intends to implement in order to be adequately prepared for upcoming challenges.

For the years 2014 to 2018, the operating segments free cash flows were based on the Five Year Plan as presented by management to the Board of Directorsubsequent years were extrapolated based on a growth rate varying between 0.0% and 1.0% per year (CBU: 0.5%, EBU: 1.0% and ICS: 0.5%), reflecting management vision about the long term evolution of the market and based on historical data.

The free cash flows considered for calculating the value in use are estimated for the concerned assets in their current condition and exclude the cash inflows and outflows that are expected to arise from any future restructuring to which the Group is not yet committed and from improving or enhancing the assets performance. Free cash flows of each segment were discounted with the Group post-tax weighted average cost of capital of 6.4%, with the exception of the ICS segment for which a specific post-tax weighted average cost of capital of 9.0% was used, its activities being deemed different enough from those of the rest of the Group to justify a specific calculation. The pre-tax weighted average cost of capital, derived from the post-tax weighted average cost of capital via an iterative method, was comprised between 8.40% and 11.1%.

The calculated weighted average costs of capital at Group level and for the ICS segment are based on the relative weight of their capital structure components and include a risk premium specific to their inherent risks.

None of the goodwill was impaired at 31 December 2013. Sensitivity analysis for all segments demonstrates that in case of a reasonable change in one of the key assumptions, their values in use still exceed their net carrying values.

Note 4. Intangible assets with finite useful life

(EUR mi lli o n )	GSM a n d UMTS li cen s es	In tern a lly g en er a ted a s s ets	Cu s to mer b a s es a n d tra d e n a mes a cq u i red	TV ri g hts	Other i n ta n - g i b le a s s ets	To ta l
Co s t
As o f 1 Ja n u a ry 2012	470	5 20	79 7	15 6	831	2,773
Additions	0	76	0	5 3	77	207
Acquisition of subsidiary	0	0	5	0	4	9
Disposals	0	0	0	-33	-16	-49
Reclassifications	0	0	0	0	1	1
As o f 31 D ecemb er 2012	470	597	802	176	89 7	2,9 41
Additions	120	8 4	0	71	108	383
Disposals	0	0	0	-65	-5	-70
Classified as held for sale	0	-3	-8	0	-2	-14
As o f 31 D ecemb er 2013	590	6 77	79 3	181	999	3,241
Accu mu la ted a mo rti za ti o n a n d i mp a i rmen t
As o f 1 Ja n u a ry 2012	-29 5	-318	-16 9	-136	-6 78	-1,5 9 6
Amortization charge for the year	-25	-59	-61	-52	-77	-274
Disposals	0	0	0	3 3	16	49
Reclassifications	0	0	0	0	-1	-1
As o f 31 D ecemb er 2012	-344	-437	-29 1	-9 6	-6 76	-1,844
Amortization charge for the year	-26	-59	-61	-59	-87	-292
Impairment charge	0	0	-2	0	0	-3
Disposals	0	0	0	6 5	4	6 9
Classified as held for sale	0	3	8	0	2	13
Reclassifications	0	0	0	0	1	1
As o f 31 D ecemb er 2013	-370	-49 2	-346	-9 0	-75 7	-2,05 6

Ca rryi n g a mo u n t a s o f 31 D ecemb er 2012	126	16 0	5 11	7 9	221	1,09 7

The GSM and UMTS licenses acquisition value include the costs related 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 instalments. On 18 August 2010, Belgacom lodged an annulment procedure before the Constitutional Court against the 15 March 2010 law which the Court rejected on 17 October 2013.

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.

In 2011 Belgacom acquired a 4G license in the 2,6 GHz frequency band for an amount of EUR 20 million which was paid in 2012. The license is valid for 15 years effective as of 1 July 2012, amortization started as from July 2012.

In December 2013, the Group acquired a licence for the 800 Mhz frequency band for the amount of EUR 120 million which Belgacom decided to pay by installments. The related outstanding amount that will be settled after more than twelve months is included in other non current payables (note 20). Amortization started in December 2013.

Customer bases and trade names acquired include intangible assets recognized as part of business combinations; mainly as result of the purchase price allocation performed when the Group acquired control over BICS.

TV rights include football rights and broadcasting rights acquired. Some of these rights are acquired with a deferred payment plan. The related liability is classified as trade payable and include EUR 29 million to be settled in more than twelve months.

Internally generated assets mainly relate to development expenditures for internally developed software (mainly billing and ordering related). The aggregate amount of research expensed for these internally generated software during 2013 amounts to EUR 23 million.

Other intangible assets mainly include purchased software (mainly network related) and rights of use for cables.

Note 5. Property, plant and equipment

(EUR mi lli o n )	La n d a n d b u i ld i n g s	Techn i - ca l a n d n etwo rk eq u i p - men t	Other ta n g i b le a s s ets	As s ets u n d er co n s tru c ti o n	To ta l
Co s t
As o f 1 Ja n u a ry 2012	831	10,45 1	39 2	6	11,6 80
Additions	16	506	19	5	546
Acquisition of subsidiary	0	0	3	0	3
Disposals	-11	-281	-24	0	-316
Reclassifications	10	4	-7	-7	-1
As o f 31 D ecemb er 2012	845	10,6 80	382	5	11,9 12
Additions	11	552	19	7	589
Disposals	-40	-157	-20	-1	-217
Classified as held for sale	0	-8	-2	0	-10
Reclassifications	1	8	-2	-7	0
As o f 31 D ecemb er 2013	817	11,075	377	4	12,273
Accu mu la ted d ep reci a ti o n a n d i mp a i rmen t
As o f 1 Ja n u a ry 2012	-371	-8,6 27	-281	0	-9 ,279
Depreciation charge for the year	-37	-405	-32	0	-475
Acquisition of subsidiary	-2	-1	0	0	-4
Disposals	9	280	23	0	313
Reclassifications	17	0	-17	0	1
As o f 31 D ecemb er 2012	-385	-8,75 3	-307	0	-9 ,445
Depreciation charge for the year	-35	-424	-31	0	-490
Impairment charge	0	0	-1	0	-1
Disposals	3 5	157	19	0	212
Subsidiaries reclassified as held for sale	0	7	2	0	9
Reclassifications	0	-3	2	0	0
As o f 31 D ecemb er 2013	-384	-9 ,015	-316	0	-9 ,715
Ca rryi n g a mo u n t a s o f 31 D ecemb er 2012	46 1	1,9 27	7 5	5	2,46 7
Ca rryi n g a mo u n t a s o f 31 D ecemb er 2013	433	2,05 9	6 2	4	2,5 5 8

As a consequence of the gradual evolution to the current renting model for internet modems, Belgacom modems rented to customers are capitalized as from 1 January 2012 . This resulted in a positive impact on Cost of Sales, while increasing the level of Capex (EUR 28 million).

In 2013, the useful life of modems and decoders was increased with one year from 24 to 36 months.

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:
Na me	Reg i s tered o ffi ce	Co u n try o f i n co rp o ra ti o n		Gro u p 's p a i n teres 2012	rti ci p a ti n g ts 2013
Belgacom SA under Public Law	Bld du Roi Albert II 27	Belgium			Mother company
	1030 Bruxelles
Belgacom Finance SA	VAT BE 0202.239.951 Rue de Merl 74	Luxemburg		100%	100%
	2146 Luxembourg
Belgacom Group International Services SA	Bld du Roi Albert II 27 1030 Bruxelles	Belgium		100%	100%
	VAT BE 0466.917.220
BGC Re	Rue de Merl 74	Luxemburg		100%	100%
Connectimmo SA	2146 Luxembourg Bld du Roi Albert II 27	Belgium		100%	100%
	1030 Bruxelles
Belgacom Skynet SA	VAT BE 0477.931.965 Bld du Roi Albert II 27	Belgium		100%	100%
	1030 Bruxelles
	VAT BE 0460.102.672
Skynet iMotion Activities SA	Rue Carli 2 1140 Evere	Belgium		100%	100%
	VAT BE 0875.092.626
Tango SA	Rue de Luxembourg 177 8077 Bertrange	Luxemburg		100%	100%
Telindus - ISIT BV	Krommewetering 7	The Netherlands		100%	100%
	3543 AP UTRECHT
Telindus SA	Route d'Arlon 81– 83 8009 Strassen	Luxemburg	(1)	65%	65%
Telectronics SA	2 Rue des Mines	Luxemburg	(1)	65%	65%
Beim Weissenkreuz SA	4244 Esch sur Alzette Route d'Arlon 81– 83	Luxemburg	(1)	64%	64%
	8009 Strassen
Telindus LTD	Centurion - Riverside Way - Watchmoor Park	United Kingdom	(1)	100%	100%
Telindus France SA	Camberley - Surrey -GU15 3 YL ZA de Courtaboeuf- 12, Avenue de l'Oceanie	France	(1)	100%	100%
	91940 Les Ulis
Groupe Telindus France SA	ZA de Courtaboeuf- 12, Avenue de l'Oceanie 91940 Les Ulis	France	(1)	100%	100%
Telindus Morocco SAS	Bâtiment shore 1, 6ème étage, Casablanca
	Nearshore Park, 1100 Bd. Al Qods, Sidi Maârouf	Morocco	(1) (3)	100%	100%
Belgacom Bridging ICT NV	Casablanca Koning Albert II laan 27	Belgium		100%	100%
	1030 Brussels
Belgacom ICT - Expert Community CVBA	VAT BE 0826.942.915 Ambachtenlaan 34	Belgium		88%	84%
	3001 Heverlee
Belgacom Opal SA	VAT BE 0841.396.905 Bld du Roi Albert II 27	Belgium		100%	100%
	1030 Bruxelles
Beldiscom SA	VAT BE 0861.583.672 Bld d'Avroy 240	Belgium	(10)	100%	-
	4000 Liege
	VAT BE 0440.935.769
Mobile-For SA	Bld du Roi Albert II 27 1030 Bruxelles	Belgium		100%	100%
	VAT BE 0881.959.533
Scarlet NV	Ketelmeerstraat 182 8226JX Lelystad	The Netherlands	(2)(8)	100%	100%
Scarlet Business NV	Carlistraat 2	Belgium	(2)	100%	100%
	1140 Evere
Scarlet Luxembourg SARL	VAT BE 0463.079.780 Rue de Bonnevoie 5	Luxemburg	(2)	100%	100%
	1260 Luxembourg
Scarlet Belgium NV	Carlistraat 2 1140 Evere	Belgium	(2)	100%	100%
	VAT BE 0447.976.484
MBS TELECOM NV	Carlistraat 2	Belgium	(2) (3)	100%	100%
	1140 Evere BE 0882.760.574
Sahara Net LLC	Al-Dabal Commercial Tower (ACT) 2nd Floor, Prince		(9)	70%	70%
	Mohammad Quarter, Prince Mohammad Street (First Street)	Saudi-Arabia
	P.O. Box 5480 Zip Code 31422 - Damman
Wireless Technologies NV	Stationstraat 34	Belgium	(5)	100%	100%
	1702 Groot Bijgaarden VAT BE 0464.030.479
Belgacom International Carrier Services Mauritius Ltd	Chancery House 5th floor , Lislet, Geoffroy Street	Mauritius	(4), (6)	58%	58%
Belgacom International Carrier Services SA	Port Louis 1112-07 Rue Lebeau 4	Belgium	(4)	58%	58%
	1000 Brussels
	VAT BE 0866.977.981
Belgacom International Carrier Services Deutschland GMBH	Mendelssohnstrasse 87 60325 Frankfurt	Germany	(4)	58%	58%

		Co u n try o f		Gro u p 's p a	rti ci p a ti n g
Na me	Reg i s tered o ffi ce	i n co rp o ra ti o n		i n teres	ts
				2012	2013
Belgacom International Carrier Services UK Ltd	Great Bridgewater Street 70	United Kingdom	(4)	58%	58%
	M1 5ES Manchester
Belgacom International Carrier Services Nederland BV	Wilhelminakade 91	The Netherlands	(4)	58%	58%
	3072 AP Rotterdam
Belgacom International Carrier Services North America Inc	Corporation trust center - 1209 Orange street	United States	(4)	58%	58%
	USA - 19801 Willington Delaware
Belgacom International Carrier Services Asia Pte Ltd	80, Robinson Road # 02-00,	Singapore	(4)	58%	58%
	Singapore 066898
Belgacom International Carrier Services (Portugal) SA	Avenida da Republica, 50, 10th floor	Portugal	(4)	58%	58%
	1069-211 Lisbon
Belgacom International Carrier Services Italia Srl	Via della Moscova 3	Italy	(4)	58%	58%
	20121 Milano
Belgacom International Carrier Services Spain SL	Avenida de Aragon, 330	Spain	(4)	58%	58%
	Edificio 5,3°
Belgacom International Carrier Services Switzerland AG	28022 Madrid Papiermülhestrasse 14	Switzerland	(4)	58%	58%
	3014 Bern
Belgacom International Carrier Services Austria GMBH	Wildpretmarkt 2-4	Austria	(4)	58%	58%
	1010 Wien
Belgacom International Carrier Services Sweden AB	Drottninggatan 30	Sweden	(4)	58%	58%
	41114 Goteborg
Belgacom International Carrier Services JAPAN KK	#409 Raffine Higashi Ginza, 4-14	Japan	(4)	58%	58%
	Tsukiji 4 - Chome - Chuo-ku
	Tokyo 104-00
Belgacom International Carrier Services China Ltd	Three Pacific Place - Level 28	China	(4)	58%	58%
	1, Queen's road East
	Hong Kong
Belgacom International Carrier Services Ghana Ltd	Box GP 821 Accra	Ghana	(4)	58%	58%
Belgacom International Carrier Services Dubai FZ-LLC	P.O. Box 502307	United Arab. Emirates	(4) (7)	-	58%
	Dubai
Belgacom International Carrier Services South Africa Proprietary Ltd	Central Park n°5 - 257 Jean Avenue, Centurion	South Africa	(4)(7)	-	58%
	Gauteng 0157
Belgacom International Carrier Services Kenya Ltd	LR-N° 204861, 1st Floor Block A	Kenya	(4)(7)	-	58%
	Nairobi Business Park
	Ngong
Belgacom International Carrier Services France SAS	Rue du Colonel Moll 3	France	(4)	58%	58%
	75017 Paris

(1) Subsidiaries of the Group Telindus (2) Entity of Group Scarlet (3) Entity indirectly controlled by the Group (4) Entity of BICS Group (5) Entity acquired in 2012 (6) Entity incorporated in 2012 (7) Entity incorporated in 2013 (8) Entity in liquidation (9) Entity held for sale

(10) Entity liquidated in 2013

The financial year end of Telindus- ISIT BV is 30 June. For consolidation purpose additional financial statements are prepared as per 31 December.

Note 6.2. Investments in joint ventures

Note 6.2. Investments in joint ventures The Group has a joint-venture interest in the following companies:
Na me	Reg i s tered o ffi ce	Co u n try o f i n co rp o ra ti o n		Gro u p 's p a i n teres 2012	rti ci p a ti n g ts 2013
Belgacom Mobile Wallet SA/NV	Koning Albert II-laan 27 1030 Schaarbeek VAT BE 541.659.084	Belgium	(1)		50%
Allo Bottin SA	101/109, rue Jean-Jurès 92300 Levalloi-Perret	France	(2)	50%	50%
E-Port Communications Systems SA	Slijkensesteenweg 2 8400 Oostende VAT BE 0864.818.940	Belgium		50%	50%

(1) Entity incorporated in 2013

(2) In liquidation

In November 2013 Belgacom and BNP Paribas Fortis set up "Belgacom Mobile Wallet SA" a 50-50 joint venture to support online and mobile trade in Belgium. It will be commercially launched under the brand "Sixdots".

Note 6.3. Investments in associates

Note 6.3. Investments in associates	The Group has a significant influence in the following company:
Na me	Reg i s tered o ffi ce	Co untry o f i nco rp o ra ti o n	Gro up 's p a i nteres 2012	rti ci p a ti ng ts 2013
ClearMedia NV	Zagerijstraat 11 2960 Brecht VAT BE 0831.425.897	Belgium	40%	40%

Note 6.4. Acquisitions and disposal of subsidiaries, joint ventures and associates

Acquisition of 2012

On January 2, 2012 the Group acquired Wireless Technologies BVBA for an amount of EUR 23 million (net of cash acquired).

The fair value o f the identifiable assets and liabilities o f these acquisitions a t the date o f acquisition and the corresponding carrying amounts immediately prior to the acquisition were:

(EUR mi lli o n )	Fa i r va lu e reco g n i s ed o n a cq u i s i ti o n	Ca rryi n g va lu e
Non current fixed assets	11	6
Inventories	8	8
Trade receivables	10	9
Other current assets	9	9
Investments and cash and cash equivalents	1	1
To ta l a s s ets	3 8	3 4
Deferred income tax liabilities	-2	0
Trade payables	-18	-16
Other current payables	-9	-8
To ta l n o n -co n tro lli n g i n teres ts a n d li a b i li ti es	-30	-24
Net a s s ets a cq u i red	9	1 0
Goodwill arising on acquisition	15
Co n s i d era ti o n	2 4
The co n s i d era ti o n i s d eta i led a s fo llo ws :
Cash paid to shareholders	25
Cash to be received from shareholders	-1
Co n s i d era ti o n	2 4
The ca s h o u tflo w o n a cq u i s i ti o n i s a s fo llo ws :
Consideration paid	24
Net cash acquired of the subsidiary	-1
Net ca s h o u tflo w	2 3

Note 7. Other participating interests

Note 7. Other participating interests
The net carrying amount of other participating interests evolved on the following way:
	As o f 31 D	ecemb er
(EUR mi lli o n )	2012	2013
Net ca rryi n g a mo u n t a s o f 1 Ja n u a ry Additions	3 1 4	7 1
Participation interest absorbed or liquidated	0	-6
Reversal of impairment loss due to absorbtion or liquidation Reversal of impairment loss	0	5
Impairment loss	-27	-1
To ta l	7	6

	As o f 31 D	ecemb er
(EUR mi lli o n )	2012	2013

Cost	41	3
Accumulated impairment losses	-34	-30
Net ca rryi n g a mo u n t	7

In 2012, the Group recognized an impairment loss of EUR 27 million mainly on the investment in Onlive. In 2013 an additional impairment loss on other participating interests of EUR 1 million was recognized.

At 31 December 2012 and 2013, the other participating interests included almost exclusively shares in equity of nonconsolidated and non-quoted entities for which no fair value can be reliably determined. It is not the Group's intention to divest these participating interests in the short term.

The fair values of these participations cannot be reliably estimated as concerning start-up companies to which commonly used valuation techniques cannot be applied. The valuation technique commonly used within Belgacom Group to assess the fair value of a participating interest in an entity is its share in the present value of the entity estimated future free cash flows. However, in the case of start-up entities, the estimated future free cash flows cannot be reliably estimated as their business models are still too volatile. Furthermore, the use of other valuation techniques (such as recent arm's length market transaction, valuation of comparable entities...) is not possible seen the absence of such data.

Note 8. Income taxes

Gross deferred income tax assets / (liabilities) relate to the following:	As o f 31 D	ecemb er
(EUR mi lli o n )	2012 res ta ted	2013
Deferred income tax liabilities
Accelerated depreciation for tax purposes	-7	-5
Fair value adjustments on acquisition	-142	-125
Statutory provisons not retained under IFRS	-1	-1
Deferred taxation on sales of property, plant and equipment	-5	-8
Other	-6	-10
Gro s s d eferred i n co me ta x li a b i li ti es	-16 1	-15 0
Deferred income tax assets
Fair value adjustment on fixed assets	43	3 8
Remeasurement of financial instruments to fair value	7	3
Liability for post-employment and termination benefits	9 0	6 3
Tax losses carried forward	2
Capital losses on investments in subsidiaries	1
Other	22	20
Gro s s d eferred i n co me ta x a s s ets	16 5	127
Net deferred income tax assets / (liabilities), when grouped per taxable entity, are as follows :
Net d eferred i n co me ta x li a b i li ty	-143	-128
Net d eferred i n co me ta x a s s et	147	105

The deferred income tax liabilities decreased in 2013 mainly as a result of the amortization of the assets recognized in 2010 in the purchase price allocation of BICS when the Group acquired control.

The deferred income tax asset decreased in 2013 as a consequence of the payment of post employment benefits.

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 deductions available for such companies amounted to EUR 283 million at 31 December 2013 (EUR 257 million in 2012) of which EUR 205 million has no expiration date, EUR 18 million and EUR 24 million expire respectively in 2014 and 2015 and EUR 36 million has a longer expiration date.

The share of Belgacom in the undistributed retained profit of subsidiaries amounts to EUR 4,524 million at 31 December 2013 (EUR 4,938 million in 2012) and is taxable at an effective tax rate of 1.7% upon profit distribution to the parent company No deferred tax liability is recorded for temporary differences associated with investments in subsidiaries except when the parent company controls the reversal of the temporary difference and it is probable that the difference will be reversed in a foreseeable future.

In the income statement, deferred tax income/ (expense) relate to the following:	Yea	r en d ed 31 D	ecemb er
(EUR mi lli o n )	2012 res	ta ted	2013
Relating to deferred income tax liabilities
Accelerated depreciation for tax purposes Fair value adjustments on acquisition		1 16	2 16
Statutory provisons not retained under IFRS		-1	-1
Deferred taxation on sales of property, plant and equipment		0	-3
Other		18	-3
Relating to deferred income tax assets Fair value adjustment on fixed assets		0	-5
Remeasurement of financial instruments to fair value		-2	-4
Liability for post-employment and termination benefits		-31	-21
Tax losses carried forward Other		-7 10	0 -4
D eferred ta x exp en s e o f the yea r		6	-23
The consolidated income statement includes the following tax expense:
		As o f 31 D ecemb	er
(EUR mi lli o n )	2012 res	ta ted	2013
Current income tax
Current income tax expense Adjustments in respect of current income tax of previous periods		-179 -4	-159 12
Deferred income tax
Expense resulting from changes in temporary differences		13	-22
Expense resulting from use of tax losses carried forward and tax credits		-7	0
In co me ta x exp en s e rep o rted i n co n s o li d a ted i n co me s ta temen t		-177	-170
The reconciliation o f income tax expense applicable t o income before taxes a effective income tax rate for each of the two years ended is as follows:	t the statutory income tax rate t	o income tax expense a	t the group's
		As o f 31 D ecemb	er
(EUR mi lli o n )	2012 res	ta ted	2013
In co me b efo re ta xes At Belgian statutory income tax rate of 33.99%		9 07 308	822 279
Lower income tax rates of other countries		-1	-1
Income tax consequences of capital losses on investments in subsidiaries		-25	0
Non-taxable income from subsidiaries and notional interest deduction Non-deductible expenditures for income tax purposes		-131 47	-133 3 5
Other		-21	-10
In co me ta x exp en s e		177	170
Effecti ve i n co me ta x ra te		19 .49 %	20.6 5 %
The effective tax rate was 20.7% for 2013, this is slightly above the effective rate of 19.5% for the year 2012 which included an accelerated use of tax losses. The 2013 tax rate results from the application of the general principles of Belgian tax law.
The non-taxable income from subsidiaries and notional interest deduction mainly relates to the application of general principles of tax law.
Non-deductible expenditures for income tax purposes primarily relate to various expenses that are disallowed for tax purposes and unrecognized tax losses carried forward.
Note 9. Assets and liabilities for pensions, other post-employment benefits and
termination benefits
Belgacom applies IAS 19 as revised in 2011 that is applicable as from 1st January 2013 with retrospective application. This means that the opening balance sheet of 2012 and the year 2012 have been restated. The major changes relate to the recognition of actuarial gains and losses and the alignment of the expected rate of return on plan assets to the discount rate.
The Group has several plans that are summarized below:
(EUR mi lli o n )	As o f 1 Ja n u a ry 2012 res ta ted res	As o f 31 D ecemb 2012 ta ted	er 2013
Termination benefits and additional compensations in respect of restructuring programs	257	179	104
Defined benefit plans for complementary pension plans (net liability)	46	6 1	3 9
Post-employment benefits other than pensions Other liabilities	256 16	315 16	314 15

Net li a b i li ty reco g n i zed i n the b a la n ce s heet	5 76	5 70	473
The calculation of the 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.

The consolidated income statement includes the following tax expense:
	As o f 31 D	ecemb er
(EUR mi lli o n )	2012 res ta ted	2013
Current income tax
Current income tax expense	-179	-159
Adjustments in respect of current income tax of previous periods	-4	12
Deferred income tax
Expense resulting from changes in temporary differences	13	-22
Expense resulting from use of tax losses carried forward and tax credits	-7	0
In co me ta x exp en s e rep o rted i n co n s o li d a ted i n co me s ta temen t	-177	-170

The reconciliation o f income tax expense applicable t o income before taxes a effective income tax rate for each of the two years ended is as follows:	t the statutory income tax rate t o income tax expense a	t the group's

effective income tax rate for each of the two years ended is as follows:
	As o f 31 D	ecemb er
(EUR mi lli o n )	2012 res ta ted	2013
In co me b efo re ta xes	9 07	822
At Belgian statutory income tax rate of 33.99%	308	279
Lower income tax rates of other countries	-1	-1
Income tax consequences of capital losses on investments in subsidiaries	-25	0
Non-taxable income from subsidiaries and notional interest deduction	-131	-133
Non-deductible expenditures for income tax purposes	47	3 5
Other	-21	-10
In co me ta x exp en s e	177	170
Effecti ve i n co me ta x ra te	19 .49 %	20.6 5 %

Note 9. Assets and liabilities for pensions, other post-employment benefits and termination benefits

The Group has several plans that are summarized below:
(EUR mi lli o n )	As o f 1 Ja n u a ry 2012 res ta ted	As o f 31 D 2012 res ta ted	ecemb er 2013
Termination benefits and additional compensations in respect of restructuring programs	257	179	104
Defined benefit plans for complementary pension plans (net liability)	46	6 1	3 9
Post-employment benefits other than pensions	256	315	314
Other liabilities	16	16	15
Net li a b i li ty reco g n i zed i n the b a la n ce s heet	5 76	5 70	473

The discount rate used for the valuation of pension plans, other post-employment benefit plans and termination benefits is based on the yield of Eurozone high quality corporate bonds with a duration matching the duration of such plans. Publicly available yield curves for such type of bonds are usually limited to 10 years horizon.

For longer durations, such as for the complementary pension plans and other post-employment benefits, although no yield curve is directly available, the depth of the market is sufficient to allow the determination of a discount rate for IAS 19 purposes. Belgacom estimates the appropriate discount rate on the basis of available market data.

Estimations provided by independent third parties are used for validation purpose. These third party estimations are mainly based on two different methodologies.and the retained discount rate falls within the interval of the results of these methodologies. The first methodology consists in building a synthetic yield curve on the basis of the existing high quality corporate bonds. The second methodology consists in combining the risk-free rate for the duration with a credit risk premium to reflect the spread of high quality corporate bonds versus the risk free rate.

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 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 and a program for unfit statutory employees. Under the terms of this plan, the Group will pay benefits until retirement date of the participant.

In 2012, the liability increased with EUR 15 million via non-recurring expenses (see note 28) as a result of change in the legal pension age and new entrants in the plan.

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 follows :
	As o f 1 Ja nua ry	As o f 31 D	ecemb er
(EUR mi lli o n)	2012	2012	2013
	res ta ted	res ta ted
Defined Benefit Obligation	257	179	104
Plan assets at fair value	0	0	0
B enefi t o b li g a ti o n i n exces s o f p la n a s s ets	25 7	179	104

The movement in the net liability recognized in the balance sheet is as follows :
	As o f 31 D	ecemb er
(EUR mi lli o n )	2012 res ta ted	2013
At the beginning of the year	257	179
Total expense for the period	22	2
Actual employer contribution	-100	-77
At the en d o f the yea r	179	104

The liability for termination benefits and additional compensations was determined using the following assumptions:
	As o f 31 D	ecemb er
	2012	2013
	res ta ted
Discount rate	0.00% - 1.00%	0.00% - 1.00%
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 1 million.

The Group expects to pay an amount of EUR 51 million for termination benefits and additional compensations in 2014.

Note 9.2. Defined contribution and benefit plans for complementary pensions

9.2.1 Defined contribution plans

The Group has some plans based on contributions for qualifying employees. For most of the plans which are operated abroad, the Group does not guarantee a minimum return on the contribution. These plans are not material for the Group.

9.2.2. Defined benefits plans

Belgacom SA and some of its Belgian subsidiaries have a joint complementary defined benefit pension plan for their employees. This plan provides pension benefits for services as of 1 January 1997. It provides a benefit based on salary and years of service. It is financed through the Belgacom Pension Fund, a legally separate entity created in 1998 for that purpose. The financing method is intended to finance the current value of future pension obligations (defined benefit obligation – DBO) relating to the years of service already rendered in the company and taking into account future salary increase. The financing method is derived from calculations under IAS 19 standard before revision 2011. The annual contribution is equal to the sum of the service cost, the net financial cost (interest cost on DBO minus the expected return on assets) and the amortization of actuarial gains and losses exceeding the 10% corridor.

At 31 December 2012 and in 2013, the assets of the Pension Fund exceed the minimum required by the pension regulator, being the technical provision. The technical provision represents the amount needed to guarantee the short-term and long-term equilibrium of the Pension Fund. It is constituted of the vested rights increased with an additional buffer amount in order to guarantee the long-term durability of the pension financing. The vested rights represent the current value of the accumulated benefits relating to years of service already rendered in the company and based on current salaries. They are calculated in accordance with the pension rules and applicable law fixing actuarial assumptions.

As for most of defined benefit plans, the pension cost can be impacted (positively or negatively) by parameters such as interest rates, future salary increase, inflation and return on assets. These risks are not unusual for defined benefit plans.

The investment strategy of the Pension Fund is defined with a view to offer the best return on investment, within the strict limits of risk control and taking into account the profile of the pension obligations. The relatively long duration of the pension obligations (17 years) allows to allocate a reasonable portion of its portfolio to equities.

Telindus BV, a subsidiary established in the Netherlands, has a complementary defined benefit pension plan for its employees which is changed from a final pay to an average pay scheme applicable as from 2014 and is financed through an insurance company. This plan is not material for the Group.

For all pension plans, the actuarial valuations are carried out at 31 December by external independent actuaries. The present value and the current service cost and past service cost, are measured using the projected unit credit method. As o f

The funded status of the pension plans is as follows :
(EUR mi lli o n)	01/01/2012 res ta ted	31/12/2012 res ta ted	31/12/2013
Defined Benefit Obligation	277	353	383
Plan assets at fair value	-231	-292	-344
D efi ci t / (s urp lus )	4 6	6 1	3 9

	d ed
31/12/2012 res ta ted	31/12/2013
	3 5
1	2
0	-1
3 5	3 5

	-9
	-1
	-9
1 3	-19
4 8	1 6
	The components recognized in the income statement and other comprehensive income are as follows : Yea r en 3 4 3 1 4 -22

Yea r en

	d ed
	31/12/2013
46	6 1
	3 5
	-19
	-38
	3 9
	3 5 13 -34 6 1

Change in plan assets :

Change in plan assets :	As o f 31 D	ecemb er
(EUR mi lli o n )	2012 res ta ted	2013
At the beginning of the year	231	292
Interest income	12	12
Return on assets, excluding interest income	22	9
Actual employer contribution	3 4	3 8
Benefits payments and expenses	-7	-6
At the en d o f the yea r	29 2	344

Change in the defined benefit obligation :

Change in the defined benefit obligation :
	As o f 31 D ecemb er
(EUR mi lli o n )	2012	2013
	res ta ted
At the beginning of the year	277	353
Service cost	3 4	3 5
Interest cost	14	14
Benefits payments and expenses	-7	-6
Actuarial (gains) / losses	3 4	-11
At the en d o f the yea r	35 3	383

The pension liability was determined using the following assumptions :
As o	f 31 D	ecemb er
(EUR mi lli o n ) 2012		2013
res ta ted
Discount rate	4.00%	4.00%
Future price inflation	2.00%	2.00%
Nominal future salary increase 2.00% - 4.50%		2.00% - 4.50%
Nominal future baremic salary increase 3.00% - 3.95%		3.00% - 3.95%

Sensitivity analysis

Significant actuarial assumptions for the determination of the defined benefit plans obligations are discount rate, inflation and real salary increase. The sensitivity analysis has been determined based on reasonably possible changes of the respective assumptions, while holding the other assumptions constant.

If the discount rate changes by 1%, the estimated impact on the defined benefit obligation would be a decrease or increase by around 15%.

If the inflation rate varies by 0.25%, the defined benefit obligation would decrease or increase by around 4%. If the real salary increase varies with 0.25%, the defined benefit obligation would decrease or increase by around 10%.
The assets of the pension plans are detailed as follows:
	As o f 31 D	ecemb er
(EUR mi lli o n )	2012	2013
	res ta ted
Equity instruments	43.10%	46.10%
Debt instruments	40.30%	36.50%
Convertible bonds	9.70%	9.60%
Other (property, infrastructure, Private equity funds, insurance deposits)	6.90%	7.80%

Nearly all investments are done via mutual investment funds or insurance deposits. Direct investments amount for less than 1% of the assets. Virtually all equity instruments, debt instruments and convertible bonds have quoted prices in active markets. The other assets, amounting for 7.8% of the portfolio are not quoted. The Pension Fund does not directly invest in Belgacom shares or bonds, but it is not excluded that some Belgacom shares or bonds are included in some of the mutual investment funds in which we invest.

The Group expects to contribute an amount of EUR 36 million to these pension plans in 2014.

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 socio-cultural aid premium and other social benefits including hospitalization. There are no plan assets for such benefits.

The hospitalization plan is based on an indexed lump sum per beneficiary.

		ecemb er
		2013
res ta ted	res ta ted
256	315	314
		0
25 6	315	314

	As o f 1 Ja nua ry 2012 0	premium and other social benefits including hospitalization. There are no plan assets for such benefits. As o f 31 D 2012 0

The components recognized in the income statement and other comprehensive income are as follows :	Yea r en d ed 31 D	ecemb er
(EUR mi lli o n )	2012 res ta ted	2013
Current service cost - employer	2	3
Interest cost	12	11
Reco g n i zed i n the i n co me s ta temen t	1 4	1 4
Remea s u remen ts
Actuarial gains and losses from changes in financial assumptions	5 3	0
Effect of experience adjustments	6	1
Reco g n i zed i n o ther co mp rehen s i ve i n co me	5 9	1
To ta l	7 3	1 5

The movement in the net liability recognized in the balance sheet is as follows :
	As o f 31 D	ecemb er
(EUR mi lli o n )	2012 res ta ted	2013
At the beginning of the year	256	315
Expense for the period recognized in the income statement	14	14
Remeasurement recognized in other comprehensive income	5 9	1
Actual employer contribution	-14	-15
At the en d o f the yea r	315	314

Actual employer contribution	-14	-15

Change in the defined benefit obligation :
	As o f 31 D	ecemb er
(EUR mi lli o n )	2012	2013
	res ta ted
At the beginning of the year	256	315
Service cost	2	3
Interest cost	12	11
Distributions to beneficiaries	-14	-15
Actuarial (gains) / losses	5 9	1
At the en d o f the yea r	315	314

The liability for post-employment benefits other than pensions was determined using the following assumptions :
	As o f 31 D	ecemb er
	2012	2013
	res ta ted
Discount rate	3.50%	3.50%
Future cost trend (index included)	2.00%	2.00%
Mortality	MR/FR -2	MR/FR -2

The liability for post-employment benefits other than pensions is determined based on the entity's best estimate of the financial and demographic assumptions which are reviewed on an annual basis.

The average duration of the obligation is 13 years.

Sensitivity analysis

Significant actuarial assumptions for the determination of the defined benefit plans obligations are discount rate, inflation, future cost trend and mortality. The sensitivity analysis has been performed based on reasonably possible changes of the respective assumptions, while holding the other assumptions constant.

If the discount rate changes by 1%, the defined benefit obligation would decrease or increase by around 12%.

If the future cost trend varies by 1%, the defined benefit obligation (excluding medical cost) would decrease or increase by around 7%.

If the future medical cost trend varies by 1%, the related defined benefit obligation would decrease or increase by around 5%.

If the mortality correction age (MR/FR -2) changes with 1 year (to MR/FR -3), the defined benefit obligation would increase by around 3%.

The Group expects to contribute an amount of EUR 16 million to these plans in 2014.

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 re-measurement of the liability is recognized immediately in the income statement.
The funded status is as follows :
	As o f 31 D	ecemb er
(EUR mi lli o n )	2012	2013
	res ta ted
Defined Benefit Obligation	16	15
Plan assets at fair value	0	0
Net li a b i li ty reco g n i zed i n the b a la n ce s heet	1 6	1 5

The liability was determined using the following assumptions :
	As o f 31 D	ecemb er
(EUR mi lli o n )	2012	2013
	res ta ted
Discount rate	3.00%	2.30%-3.00%
Future price inflation	2.00%	2.00%

Note 10. Other non-current assets

Note 10. Other non-current assets
		As o f 31 D	ecemb er
(EUR mi lli o n)	No te	2012	2013
Other derivatives	33.1	9 0	3 5
Other financial assets
Other assets		44	3 8
To ta l		134	7 4

Note 11. Inventories

Note 11. Inventories
	As o f 31 D	ecemb er
(EUR mi lli o n)	2012	2013
Raw materials, consumables and spare parts	3 7	41
Work in progress and finished goods	24	27
Goods purchased for resale	72	9 6
To ta l	133	16 3

Inventory is reported net of allowances for obsolescence.

Note 12. 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.

		are paid via netting agreements.		receivables of the International Carrier Services segment, since major part of its trade receivables on other Telco operators
				The analysis of trade receivables that were past due but not impaired is as follows:
As o f 31 D ecemb er	Gro s s recei va b les	Allo wa n ce fo r d o u b tfu l d eb to rs	Net ca rryi n g a mo u n t	Nei ther p a s t d u e n o r i mp a i red			Pa s t d u e b u	t n o t i mp a i red
(EUR mi lli o n )					< 30 d a ys	30-6 0 d a ys	6 0-9 0 d a ys 9	0-180 d a	ys 180-36 0 d a	ys > 36 0 d a ys
2011	1,472	-144	1,328	933	9 7	5 3	3 3	6 6	5 8	8 7
2012	1,491	-150	1,341	929	128	5 8	3 4	6 3	5 7	72
2013	1,428	-138	1,289	960	120	26	28	48	5 0	5 8

As of 31 December 2012 and 2013, respectively 69% and 74% of the net carrying amount of the trade receivables were neither past due nor impaired.

For the two years presented, no trade receivables were pledged as collaterals. In 2013, Belgacom Group received bank and parent guarantees of EUR 9 million (in 2012 EUR 7 million) as securities for the payment of outstanding invoices.
The evolution of the allowance for doubtful debtors is as follows:
(EUR mi lli o n)	No te	2012	2013
As o f 1 Ja nua ry		-144	-15 0
Decrease / (increase) posted in operating expenses	27	-9	8
Variation due to subsidiary classified as assets held for sale		0	1
Other movements		3	2
As o f 31 D ecemb er		-15 0	-138

Note 13. Other current assets

Note 13. Other current assets
	As o f 31 D	ecemb er
(EUR mi lli o n)	No te	2012	2013
VAT receivables		3 0	40
Other derivatives	33.1	0	1
Prepaid expenses		9 9	9 1
Other receivables		12	15
To ta l		141	148

Note 14. Investments

		ecemb er
Note	2012	2013
		5
		3 8
		16
	8 3	6 0
	33.4 33.4 33.4	As o f 31 D 7 5 0 26

Investments include shares in funds and mutual funds, treasury certificates and deposits with an original maturity greater than three months but less than one year.
	As o f 31 D	ecemb er
(EUR mi lli o n)	2012	2013
Cost	8 3	6 0
Net ca rryi ng a mo unt	8 3	6 0

Note 15. Cash and cash equivalents

Note 15. Cash and cash equivalents
		As o f 31 D	ecemb er
(EUR mi lli o n)		2012	2013
Fixed income securities	33.4	5 0	100
Short-term deposits	33.4	12	169
Cash at bank and in hand	33.4	140	8 6
To ta l		202	35 5

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 16. Assets classified as held for sale

In December 2013, the Group entered into an agreement to dispose Sahara Network Company Limited registered in Damman, Kingdom of Saudi Arabia, which is engaged in telecommunication and information technology business.

Also in December 2013, an agreement was reached on the disposal of the business of Scarlet NV, a telecommunication service provider in the Netherlands, in the context of a liquidation of this company.

On 31 December 2013, the criteria to classify both entities as held for sale were met leading to the recognition of impairment losses for EUR 22 million (of which EUR 17 million through non-recurring expenses) as the proceeds for both transactions will be lower than the carrying amount of the related assets and associated liabilities.

Both transactions are expected to be completed in first half of 2014 after fulfillment of conditions precedent, on which date the control of the operations will pass to the acquirers.

The major classes of assets and liabilities of the related businesses at the end of the reporting period are as follows:
	As o f 31 D ecemb er
(EUR mi lli o n )	2013
Goodwill	1
Property, plant and equipment	2
Trade receivables	6
Other current receivables	2
As s ets o f the d i s p o s a l g ro u p s	1 1
Non current liabilities	-2
Current liabilities	-11
Li a b i li ti es a s s o ci a ted wi th the d i s p o s a l g ro u p	-13
Net li a b i li ti es o f the b u s i n es s es cla s s i fi ed a s held fo r s a le	- 2

Note 17. Equity

Note 17.1 Shareholders' equity

At 31 December 2013, 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.

The Company may acquire its own shares and transfer the shares thus acquired in accordance with the provisions of the Commercial Companies Code. The Board of Directors is empowered by article 13 of the Articles of Association to acquire the maximum number of own shares permitted by law. The price paid for these shares must not be more than five percent above the highest closing price in the thirty-day trading period preceding the transaction nor more than ten percent below the lowest closing price in that same thirty-day period. Said authorization is granted for a period of five years starting on 8 April 2009.

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 2013, the number of treasury shares amounts to 18,820,954 of which 4,148,478 entitled to dividend rights and 14,672,476 without dividend rights. Dividends allocated to treasury shares entitled to dividend rights are accounted for under the caption "Reserves not available for distribution" in the statutory financial statements of Belgacom SA.

In 2012 and 2013, the Group sold respectively 208,433 and 219,935 treasury shares to its senior management for EUR 3 million under discounted share purchase plans at a discount of 16.70% (see note 36).

During the years 2012 and 2013, employees exercised respectively 464,411 and 662,581 share options. In order to honor its obligation in respect of these exercises, Belgacom used treasury shares (see note 36).

In 2013, no share options were granted by the Group to its key management and senior management . In 2012, the Group granted 840,732 share options to its key management and senior management with an exercise price of EUR 22.275 (see note 36).

In 2012 Belgacom converted 612,356 treasury shares without dividend rights into treasury shares entitled to dividend rights in order to cover the outstanding stock options with dividend rights.

Number of shares (including treasury shares):	2012	2013
As o f 1 Ja n u a ry	338,025 ,135	338,025 ,135
As o f 31 D ecemb er	338,025 ,135	338,025 ,135

Number of treasury shares:	2012	2013
As o f 1 Ja n u a ry	20,376 ,314	19 ,703,470
Sale under a discounted share purchase plan	-208,433	-219,935
Exercice of stock option	-464,411	-662,581
As o f 31 D ecemb er	19 ,703,470	18,820,9 5 4

Note 17.2 Non-controlling interests

Non-controlling interests include

The 42.4% of the minority shareholders (Swisscom and MTN Dubai) into BICS as from 1 January 2010;
The 30% stake of the minority shareholder in the equity and net income of Sahara Net LCC;
The 35.30% 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 18. Interest-bearing liabilities

Note 18.1 Non-current interest-bearing liabilities

Note 18.1 Non-current interest-bearing liabilities
		As o f 31 D	ecemb er
(EUR mi lli o n)	No te	2012	2013
Unsubordinated debentures		1,672	1,919
Leasing and similar obligations		2	2
Other derivatives	33.1	8 7	28
To ta l		1,76 1	1,9 5 0

All long term debt is unsecured. During 2012 and 2013 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.

Unsubordinated debentures in EUR and in JPY are issued by Belgacom SA. The capital is repayable in full on the maturity date.

In March 2013 the Group issued a fifteen-year unsubordinated bond of EUR 150 million under the Euro Medium Term Note program and in May 2013 a ten year unsubordinated bond of 100 million partially offsetting the reimbursement of a loan maturing in December 2013, for a nominal amount of EUR 125 million.

Non-current interest-bearing liabilities as of 31 December 2013 are summarised as follows:	Ca rryi n g a mo u n t	No mi n a l a mo u n t	Mea s u remen t u n d er IAS 39	Ma tu ri ty d a te	In teres t p a ymen t /	In teres t ra te p a ya b le	Effecti ve i n teres t ra te
					rep ri cea b le
	(EUR mi lli o n )	(EUR mi lli o n )				(b )
No n -cu rren t i n teres t-b ea ri n g li a b i li ti es
Un s u b o rd i n a ted d eb en tu res
Floating rate borrowings
JPY (a)	8 2	73	Amortized cost	Dec-26	Semi-annually	0.20%	0.20%
Fixed rate borrowings
EUR	748	750	Amortized cost	Nov-16	Annually	4.38%	4.50%
EUR	186	200	Amortized cost	Nov-16	Annually	4.38%	7.16%
EUR	497	500	Amortized cost	Feb-18	Annually	3.88%	4.05%
EUR	150	150	Amortized cost	Mar-28	Annually	3.19%	3.22%
EUR	100	100	Amortized cost	May-23	Annually	2.26%	2.29%
	1,6 80	1,700
JPY (a)	77	73	Amortized cost	Nov-15	Annually	6.18%	6.18%
JPY (a)	8 0	72	Amortized cost	Dec-15	Annually	6.21%	6.21%
	15 7	145
l u b rd i ted d eb To ta tu n n en s u o a res	1,9 19	1,9 17
Lea s i n g a n d s i mi la r o b li g a ti o n s
EUR	2	2	Amortized cost	2017	Quarterly	4.88%	4.88%
	2	2
l n t fi l li b li (d exclu d ed ) To ci i ti eri ti ta o n -cu rren n a n a a es va ves	1,9 21	1,9 19
D eri va ti ves
Derivatives held-for-trading (c)	28	0	Fair value
To ta l	1,9 5 0	1,9 19
Cu rren t p o rti o n o f i n teres t-b ea ri n g -li a b i li ti es > 1 yea r
Leasing and similar obligations
Fixed rate borrowings
EUR	2	2	Amortized cost	2017	Quarterly	4.88%	4.88%
To ta l	2	2

(b) for floating rate borrowings, interest rate is the one prevailing at the last repricing date before 31 December 2013

Non-current interest-bearing liabilities as of 31 December 2012 are summarised as follows:	Ca rryi n g	No mi n a l	Mea s u remen t	Ma tu ri ty	In teres t	In teres t ra te	Effecti ve
	a mo u n t	a mo u n t	u n d er IAS 39	d a te	p a ymen t / rep ri cea b le	p a ya b le	i n teres t ra te
	(EUR mi lli o n )	(EUR mi lli o n )				(b )
No n -cu rren t i n teres t-b ea ri n g li a b i li ti es
Un s u b o rd i n a ted d eb en tu res
Floating rate borrowings
JPY (a)	8 3	73	Amortized cost	Dec-26	Semi-annually	0.14%	0.14%
Fixed rate borrowings
EUR EUR	747 182	750 200	Amortized cost Amortized cost	Nov-16 Nov-16	Annually Annually	4.38% 4.38%	4.50% 7.16%
EUR	496	500	Amortized cost	Feb-18	Annually	3.88%	4.05%
	1,425	1,45 0
JPY (a)	8 0	73	Amortized cost	Nov-15	Annually	6.18%	6.18%
JPY (a)	8 4	72	Amortized cost	Dec-15	Annually	6.21%	6.21%
	16 4	145
l u b rd i ted d eb To ta tu n s u o n a en res	1,6 72	1,6 6 7
Lea s i n g a n d s i mi la r o b li g a ti o n s
EUR	2	2	Amortized cost	2016	Quarterly	4.72%	4.72%
	2	2
l n t fi ci l li b i li ti (d eri ti exclu d ed ) To ta o n -cu rren n a n a a es va ves	74 1,6	70 1,6
D eri va ti ves
Derivatives held-for-trading (c)	8 7	0	Fair value
To ta l	1,76 1	1,6 70
Cu rren t p o rti o n o f i n teres t-b ea ri n g -li a b i li ti es > 1 yea r
Unsubordinated debentures
Fixed rate borrowings
EUR	125	125	Amortized cost	Dec-13	Annually	6.00%	6.11%
Leasing and similar obligations
Fixed rate borrowings
EUR	2	2	Amortized cost	2016	Quarterly	4.72%	4.72%
Credit institutions
Fixed rate borrowings
EUR To ta l	4 131	4 131	Amortized cost	Nov-13	Semi-annually	3.78%	3.78%

Note 18.2 Current interest-bearing liabilities

	As o f 31 D	ecemb er
(EUR mi lli o n )	2012	2013
Current portion of amounts payable > 1 year
Unsubordinated debentures	125	0
Leasing and similar obligations	2	2
Credit institutions	4	0
Other financial debts
Other loans	8 5	314
To ta l	215	316

Note 19. Provisions

(EUR mi lli o n )	Wo rkers ' a cci d en ts	Li ti g a ti o n	Illn es s d a ys	Other Ob li g a ti o n s	To ta l
As o f 1 Ja n u a ry 2012	4 1	6 6	3 0	4 3	180
Additions	0	15	11	16	4 1
Utilisations	-4	-2	-8	-4	-19
Withdrawals	0	-2	0	-2	- 3
Unwinding and change in discount rate	2	0	2	1	4
As o f 31 D ecemb er 2012	3 8	7 7	3 4	5 4	203
Additions	0	16	2	6	2 3
Utilisations	-3	-9	0	-7	-19
Withdrawals	0	-6	0	-1	- 7
Unwinding	2	0	1	2	4
As o f 31 D ecemb er 2013	3 7	7 7	3 6	5 3	204

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 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 directly pay 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 obligations mainly include 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 2014-2044. The provision for restoration costs is estimated at current prices and discounted using a discount rate that varies between 0% and 4%, depending the expected timing to settle the obligation.

Note 20. Other non-current payables

Note 20. Other non-current payables

		As o f 31 D	ecemb er
(EUR mi lli o n)	No te	2012	2013
Other derivatives	33.4	0	3
Other amounts payable		1	108
To ta l		1	111

In December 2013, Belgacom acquired a license for the 800 Mhz spectrum for an amount of EUR 120 million payable by installments over a 20 years period. The related amount that will be settled after more than twelve months (Eur 107 million) is included in other non current payables. The fair value of this amount approximates its nominal value.

Note 21. Other current payables

		As o f 31 D	ecemb er
(EUR mi lli o n )	No te	2012	2013
VAT payables		46	5
Payables to employees		129	127
Accrual for holiday pay		8 5	9
Accrual for social security contributions		5 6	5
Advances received on contracts		3 1	27
Other taxes		111	112
Deferred income		200	201
Other derivatives	33.4	1
Accrued expenses		3 6	3
Other debts		15	19
To ta l		711	731

Deferred income mainly includes prepaid telecommunication and ICT services.

Other debts mainly relate to amounts collected on behalf of third parties and the annual installment of the 800 Mhz license that will be paid in 2014 (EUR 6 million).

Note 22. Net revenue

Note 22. Net revenue
	Yea r end	ed 31 D ecemb er
(EUR mi lli o n)	2012	2013
Sales of goods	626	643
Rendering of services	5,789	5,596
To ta l	6 ,415	6 ,239

As a consequence of the new Belgian Telecom law in force as from October 1, 2012 criteria allowing deferral in time of discounts on Proximus mobile contracts were no longer met. Therefore the accumulated deferred discounts (EUR 12 million) were reversed in reduction of revenue in 2012.

Note 23. Other operating income

Note 23. Other operating income
	Yea r end	ed 31 D ecemb er
(EUR mi lli o n)	2012	2013
Gain on disposal of intangible assets and property, plant and equipment	5	3 3
Miscellaneous reinvoicing and recovery of expenditures	3 8	43
Other income	42	46
To ta l	4 7	7 9

Other income includes compensation for network damages as well as employee and third party contributions for sundry services and capital gains on sale of technical buildings in the framework of the network simplification program.

Note 24. Non-recurring income

Gains on the disposal of subsidiaries and joint-ventures are reported as non-recurring income when they individually exceed EUR 5 million. There was no non-recurring income in 2012 and 2013.

Note 25. Costs of materials and services related to revenue

Note 25. Costs of materials and services related to revenue
	Yea r end	ed 31 D ecemb er
(EUR mi lli o n)	2012	2013
Purchases of materials	438	441
Purchases of services	2,173	2,120
To ta l	2,6 11	2,5 6 1

Purchases of materials are shown net of work performed by the enterprise that is capitalized for an amount of EUR 83 million in 2013 and EUR 103 million in 2012.

As a consequence of the new Belgian Telecom law in force as from October 1, 2012 criteria allowing deferral in time of sales commissions for Proximus mobile contracts were no longer met. Therefore the accumulated deferred commissions (EUR 22 million) were reversed into 'cost of materials and services related to revenues in 2012.

Note 26. Personnel expenses and pensions

(EUR 22 million) were reversed into 'cost of materials and services related to revenues in 2012.
Note 26. Personnel expenses and pensions
	Yea r en d	ed 31 D ecemb er
(EUR mi lli o n )	2012 res ta ted	2013
Salaries and wages	831	836
Social security expenses	210	216
Pension costs	3 1	3 4
Post-employment benefits other than pensions and termination benefits	2	8
Other personnel expenses	5 2	48
To ta l	1,126	1,142

Salaries and wages and social security expenses are shown net of work performed by the enterprise that is capitalized for an amount of EUR 89 million in 2013 and EUR 78 million in 2012.

Note 27. Other operating expenses

	Yea r en d	ed 31 D ecemb er
(EUR mi lli o n )	2012	2013
Rent expense	120	115
Maintenance and utilities	196	198
Advertising and public relations	8 3	77
Consultancy	163	159
Administration and training	6 4	6 5
Telecommunications, postage costs and office equipment	42	44
Outsourcing	146	147
Allowances for trade debtors	9	-8
Loss on realization of trade debtors	27	3 5
Impairment on intangible assets and property,	4	1
Taxes other than income taxes	23	3 4
Other operating charges (1)	47	3 4
To ta l	9 24	9 03

The operating expenses are shown net of work performed by the enterprise that is capitalized for an amount of EUR 174 million in 2013 and EUR 155 million in 2012.

Note 28. Non-recurring expenses

	ed 31 D ecemb er
2012 res ta ted	2013
	17
	-2
	-1
	1 4
	Yea r end 0 15 0 1 5

Losses on the disposal of subsidiaries and joint-ventures that individually exceed EUR 5 million, costs of restructuring programs, the effect of settlements of post-employment benefit plans are recognized as non-recurring expenses. In 2012 and 2013 the Group reviewed the estimation of the liability for termination benefits resulting in a non-recurring expense of respectively EUR 15 million in 2012 and EUR -2 million in 2013. (see note 9.1)

In 2013 the group recognized an impairment loss on reclassification of a disposal group as held for sale for EUR 17 million.

Note 29. Depreciation and amortization

Note 29. Depreciation and amortization
	Yea r end	ed 31 D ecemb er
(EUR mi lli o n)	2012	2013
Amortization of licenses and other intangible assets	274	292
Depreciation of property, plant and equipment	475	490
To ta l	748	782

The useful life for modems and decoders was increased from 24 to 36 months. This had a positive impact on depreciation expenses of EUR 9 million.

Note 30. Net finance income / (costs)

Note 30. Net finance income / (costs)

	Yea r en d	ed 31 D ecemb er
(EUR mi lli o n )	2012 res ta ted	2013
Finance income
Interest income on financial instruments
At amortized cost	2	2
At fair value through income statement	2	0
Interest income on assets
On receivables	2	2
Gain on disposal of
Associates	1	0
Fair value adjustments of financial instruments
Not in a hedge relationship	7	11
Other finance income	2	2
Finance costs
Interests and debt charges on financial instruments
At amortized cost	-76	-80
At fair value through income statement	-11	-9
On provisions	-4	-4
On termination benefits	-22	-14
On long term payables	-1	-1
Impairment losses
On other participating interests	-27	-1
Fair value adjustments of financial instruments
Not in a hedge relationship	-1	0
Other finance costs	-4	-4
To ta l	-131	-9 6

Note 31. 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 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.
	Yea r en d ed	31 D ecemb er
(i n mi lli o n s , excep t p er s ha re a mo u n ts )	2012	2013
	res ta ted
Net income attributable to ordinary shareholders (EUR million)	712	630
Adjusted net income for calculating diluted earnings per share (EUR million)	712	630
Weighted average number of outstanding ordinary shares	318,011,049	318,759,360
Adjustment for share options	677,029	228,352
Weighted average number of outstanding ordinary shares for diluted earnings per share	318,688,078	318,987,711
Basic earnings per share (EUR)	2.24	1.98
Diluted earnings per share (EUR)	2.23	1.98

The stock options granted in 2004, 2007, 2008, 2010, 2011 and 2012 are anti-dilutive and hence not included in the calculation of diluted earnings per shares, while the other options granted are dilutive.

Note 32. Dividends paid and proposed

Note 32. Dividends paid and proposed
(i n mi lli o n s , excep t p er s ha re a mo u n ts )	2012	2013
Dividends on ordinary shares:
Proposed dividends (EUR million)	535	536
Number of outstanding shares with dividend rights	318,321,665	319,204,181
Dividend per share (EUR)	1.68	1.68
Interim dividend paid to the shareholders (EUR million)	258	160
Interim dividend per share (EUR)	0.81	0.50

The proposed dividends for 2012 have been effectively paid in April 2013.

The interim dividend of 2012 was a combination of normal interim dividend (EUR 0.50 gross per share) and a one-time extra interim dividend (of EUR 0.31 per share) since Belgacom opted for an extra dividend instead of returning the EUR 100 million outstanding as a share buyback.

The interim dividends for 2013 have been paid in December 2013.

An amount of EUR 6 million was paid in 2013 at the time of exercise of stock options and corresponds to the accumulated dividends attached to the SOP since their granting.

Note 33. Additional disclosures on financial instruments

Note 33.1. Derivatives

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.

(EUR mi lli o n )	No te	2012	2013
Non-current assets
Other derivatives - interest related	10	9 0	3 5
Current assets
Other derivatives	13	0	1
To ta l a s s ets		9 1	3 7
Non-current liabilities
Other derivatives - interest related	18	8 7	28
Derivatives held-for-hedging - non-interest-bearing liabilities	20	0	3
Current liabilities
Derivatives held-for-hedging - non-interest-bearing liabilities		0	2
Other derivatives	33.4	1	2
To ta l li a b i li ti es		8 8	3 5

As o f 31 D ecemb er 2013	Fa i	r va lu e		No ti	o n a l a mo u n	t (1)
(EUR mi lli o n )	As s et	Li a b i li ty	Wi thi n 2 mo n ths	3 - 12 mo n ths	1 - 5 yea rs	o ver 5 yea rs	To ta l
Commodity swap	1	-5	-4	-17	-19	0	-40
D eri va ti ves q u a li fyi n g a s ca s h flo w hed g es	1	- 5	- 4	-17	-19	0	-40
Interest rate swaps	0	-15	0 0	0 0	144 -144	0 0	144 -144
Interest rate and currency swaps	27	0	0	0	145	73	217
			0	0	-145	-73	-217
Interests and currency related - other derivates	8	-13	0	0	0	0	0
Forward foreign exchange contracts	1	-2	19 44	16 26	0 1	0 0	3 5 72
D eri va ti ves n o t q u a li fyi n g a s hed g es (1)	3 6	-30	6 3	4 3	1	0	107
To ta l	3 7	-35	5 9	2 6	-18	0	6 7

(1) The sign "+" refers to notional amounts to be cashed in and the sign "-" to notional amounts to be cashed out.
As o f 31 D ecemb er 2012	Fa i	r va lu e		No ti o n a l a mo u n t (1)
(EUR mi lli o n )	As s et	Li a b i li ty	Wi thi n 2 mo n ths	3 - 12 mo n ths	1 - 5 yea rs	o ver 5 yea rs	To ta l
Commodity swap	0	0	-3	-7	-1	0	-11
D eri va ti ves q u a li fyi n g a s ca s h flo w hed g es	0	0	- 3	- 7	- 1	0	-11
Interest rate swaps	0	-24	0 0	0 0	144 -144	0 0	144 -144
Interest rate and currency swaps	9 0	0	0 0	0 0	144 -144	73 -73	217 -217
Interests and currency related - other derivates	0	-63	0	0	0	0	0
Forward foreign exchange contracts	0	-1	19 -61	6 -47	0 0	0 0	25 -108
D eri va ti ves n o t q u a li fyi n g a s hed g es (1)	9 0	-88	-42	-41	0	0	-83
To ta l	9 1	-88	-44	-48	- 1	0	-9 3
(1) The sign "+" refers to notional amounts to be cashed in and the sign "-" to notional amounts to be cashed out.

Note 33.2 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 2012-2013 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 (including their current portions, 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 2012 and 2013. As o f 31 D ecemb er 2013

						As o f 31 D	ecemb er 2013
	D i	rect b o rro wi n g			IRCS a g reemen ts			IRS a g reemen ts		Net cu	rren cy o b li g a ti	o n s
	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 mi lli o n )		(i n yea rs )	(EUR mi lli o n )		(i n yea rs )	(EUR mi lli o n )		(i n yea rs )	(EUR mi lli o n )		(i n yea rs )
EUR
Fixed	1,700	4.00%	5				144	6.20%	2	1,844	4.17%	4
Variable				217	0.23%	6	-144	-0.35%	2	73	1.38%	13
JPY
Fixed	217	4.99%	6	-217	-4.99%	6				0
To ta l	1,9 17	4.11%	5	0			0			1,9 17	4.06 %	5

Fixed	217	4.99%	6	-217	-4.99%	6				0

				(1) Weighted average interest rate taking into account last repriced interest rates for floating borrowings.
						As o f 31 D	ecemb er 2012
	D i	rect b o rro wi n g			IRCS a g reemen ts			IRS a g reemen ts		Net cu	rren cy o b li g a ti o	n s
	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 mi lli o n )		(i n yea rs )	(EUR mi lli o n )		(i n yea rs )	(EUR mi lli o n )		(i n yea rs )	(EUR mi lli o n )		(i n yea rs )
EUR
Fixed	1,579	4.34%	4				144	6.20%	3	1,723	4.50%	4
Variable JPY				217	0.22%	7	-144	0.36%	3	73	-0.04%	14
Fixed To ta l	217 1,79 6	4.99% 4.42%	7 4	-217 0	-4.99%	7	0			0 1,79 6	4.31%	4

The Group expects immaterial impacts for 2014 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 hand.

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, 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 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 and currency options.

In 2012 and 2013, the Group only incurred currency exposures relative to its operating activities. Re-measurement to fair value of underlying open trade positions in foreign currencies as a rule 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. In a limited number of cases however, hedge accounting has been applied, whereby such re-measurement results are temporarily being recorded on the balance sheet, awaiting final occurrence and settlement of underlying, so-called "hedge effective", exposures, when the foreign exchange results ultimately are included in the income statement.

The Group performed a sensitivity analysis on the exchange rates EUR/USD, EUR/SDR²⁰ EUR/GBP, and EUR/CHF, four currency pairs to which it is typically exposed in its operating activities, for the years 2012 and 2013. For 2012 and 2013, there was no material impact on the Group's income statement. For 2014, the Group does not expect any material impact of currency fluctuations on its overall financial performance either. This results 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 and bank guarantees granted.

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 long term credit ratings equal at least A- (S&P).

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 33.1). However, the Group does not anticipate non-performance by any of these counterparties, 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 2013, it had granted bank guarantees for an amount of EUR 46 million (and EUR 43 million at 31 December 2012).

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.

²⁰ SDR: Special Drawing Rights: basket of currencies, transactional money used in netting agreements between telecom operators

The table below summarizes the maturity profile of the Group's unsubordinated debentures as disclosed on note 18 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 2012 and 2013, respectively).

cash outflows are the ones prevailing at their last price fixing date before reporting date (as of 31 December 2012 and 2013, respectively).
(EUR mi lli o n )	2013	2014	2015	2016	2017	2018-2027
As o f 31 D ecemb er 2012
Capital	129	0	145	950	0	573
Interests	78	70	70	6 2	21	3 0
Total	207	7 0	215	1,012	2 1	603
As o f 31 D ecemb er 2013
Capital		0	145	950	0	823
Interests		79	79	72	3 0	118
Total		7 9	223	1,022	3 0	941

Bank credit facilities at 31 December 2013

In addition to the interest-bearing liabilities disclosed in notes 18.1 and 18.2, the Group is backed by long term credit facilities of EUR 550 million and short term credit facilities of EUR 310 million. These facilities are provided by a diversified group of banks. As at 31 December 2013, there were no outstanding balances under any of these facilities. A total of some EUR 860 million of credit lines was therefore available for drawdown as at 31 December 2013.

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 2013, there was an outstanding balance under the EMTN Program of EUR 1,700 million and EUR 313 million under the CP Program.

Note 33.3 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). The net financial position does not include vendor financing. The outstanding amount from the deferred payment arrangement for the 800 Mhz license, which is classified as other current/non current payables, amounts to EUR 114 million per end 2013

not include vendor financing. The outstanding amount from the deferred payment arrangement for the 800 Mhz license,
which is classified as other current/non current payables, amounts to EUR 114 million per end 2013

(EUR mi lli o n )	No te	2012	2013
As s ets
Current investments (1)	14	8 3	6 0
Cash and cash equivalents (1)	15	202	355
Non-current derivatives	10	9 0	3 5
Li a b i li ti es
Non-current interest-bearing liabilities (1)	18	-1,761	-1,950
Current interest-bearing liabilities (1)	18	-215	-316
Net fi n a n ci a l p o s i ti o n		-1,6 01	-1,815
(1) after remeasurement to fair value, if applicable.

Non-current interest-bearing liabilities include non-current derivatives at fair value amounting to EUR 87 million in 2012 and EUR 28 million in 2013 (see note 18.1).

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 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.

Note 33.4 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 33.2).

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. Based on market conditions at 31 December 2013, the fair value of the unsubordinated debentures, which are accounted for at amortized cost, exceeds by EUR 179 million, or 9%, their carrying amount. The Group does not intend to reimburse these loans before their maturity.

The fair values, calculated for each debenture separately, were obtained by discounting the cumulated cash outflows generated by each debenture with the interest rates at which the Group could borrow at 31 December 2013 for similar debentures with the same remaining maturities. As o f 31 D ecemb er 2013

As o f 31 D ecemb er 2013 (EUR mi lli o n ) ASSETS No n -cu rren t a s s ets Other participating interests Other non-current assets Other derivatives Other financial assets Cu rren t a s s ets Trade receivables Other current assets VAT and other receivables Other derivatives Investments Investments Cash and cash equivalents Fixed income securities Short-term deposits	No te	Ca teg o ry a cco rd i n g to IAS 39 (1)	Ca rryi n g a mo u n t	Amo u n ts Amo rti zed	reco g n i zed i n b a la	n ce s heet a cco rd

				co s t	Acq u i s i ti o n co s t n et o f i mp a i rmen t lo s s es , i f a n y	Fa i r va lu e a d ju s tmen t reco g n i zed i n eq u i ty	i n g to IAS 39 Fa i r va lu e a d ju s tmen t reco g n i zed i n i n co me s ta temen t


	7	AFS	6		6	0

	33.1	FVTPL	3 5				3 5
	10	LaR	3 8	3 8


	12	LaR	1,289	1,289
	13	N/A	5 5	5 5
	33.1	FVTPL	1				1
	14	AFS	16		16	0
	14	HTM	44	44

	14	HTM	100	100
	14	LaR	255	255
LIAB ILITIES
No n -cu rren t li a b i li ti es
Interest-bearing liabilities
Unsubordinated debentures not in a hedge relationship	18	OFL	1,919	1,919
Leasing and similar obligations	18	OFL	2	2
Other derivatives	33.1	FVTPL	28				28
Non interest-bearing liabilities
Derivatives held-for-hedging	33.1	HeAc	3			3
Other non-current payables	20	OFL	108	108
Cu rren t li a b i li ti es
Interest-bearing liabilities, current portion
Leasing and similar obligations	18	OFL	2	2
Interest-bearing liabilities
Other loans	18	OFL	314	314
Trade payables		OFL	1,320	1,320
Other current payables
Derivatives held-for-hedging	33.1	HeAc	2			2	0
Other derivatives	33.1	FVTPL	2				2
V.A.T. and other amounts payable

AFS: Available-for-sale financial assets

HTM: Financial assets held-to-maturity

LaR: Loans and Receivables financial assets

FVTPL: Financial assets/liabilities at fair value through profit and loss

OFL: Other financial liabilities

Hedge activity

HeAc: Hedge accounting

			Belgacom Annual Report 2013

As o f 31 D ecemb er 2012
(EUR mi lli o n )	No te	Ca teg o ry	Ca rryi n g	Amo u n ts	reco g n i zed i n b a la	n ce s heet a cco rd	i n g to IAS 39
		a cco rd i n g to IAS 39 (1)	a mo u n t	Amo rti zed co s t	Acq u i s i ti o n co s t n et o f i mp a i rmen t lo s s es , i f a n y	Fa i r va lu e a d ju s tmen t reco g n i zed i n eq u i ty	Fa i r va lu e a d ju s tmen t reco g n i zed i n i n co me s ta temen t
ASSETS
No n -cu rren t a s s ets
Other participating interests	7	AFS	7		7	0
Other non-current assets
Other derivatives	33.1	FVTPL	9 0				9 0
Other financial assets	10	LaR	44	44

Cu rren t a s s ets
Trade receivables	12	LaR	1,341	1,341
Other current assets
VAT and other receivables	13	N/A	42	42
Investments	14	AFS	26		26	0
Investments	14	HTM	5 7	5 7
Cash and cash equivalents
Fixed income securities	15	HTM	5 0	5 0
Short-term deposits	15	LaR	152	152
LIAB ILITIES
No n -cu rren t li a b i li ti es
Interest-bearing liabilities
Unsubordinated debentures not in a hedge relationship	18	OFL	1,672	1,672
Leasing and similar obligations	18	OFL	2	2
Other derivatives	33.1	FVTPL	8 7				8 7
Non interest-bearing liabilities
Other non-current payables	20	OFL	1	1
Cu rren t li a b i li ti es
Interest-bearing liabilities, current portion
Unsubordinated debentures not in a hedge relationship	18	OFL	125	125
Leasing and similar obligations	18	OFL	2	2
Credit institutions	18	OFL	4	4
Interest-bearing liabilities
Other loans	18	OFL	8 5	8 5
Trade payables		OFL	1,310	1,310
Other current payables
Other derivatives	33.1	FVTPL	1				1
V.A.T. and other amounts payable	21	N/A	363	363
(1) The categories according to IAS 39 are the following : AFS: Available-for-sale financial assets

HTM: Financial assets held-to-maturity LaR: Loans and Receivables financial assets

FVTPL: Financial assets/liabilities at fair value through profit and loss

OFL: Other financial liabilities

Hedge activity

HeAc: Hedge accounting

Note 33.5 Assets and liabilities measured at fair value

The Group held as at 31 December 2013 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.

The Group holds financial instruments classified in Level 1 or 2 only.

The valuation techniques for fair value measuring the Level 2 financial instruments are:

Other derivatives in Level 2

Other derivatives include mainly the interest rate swaps (IRS) and interest rate and currency swaps (IRCS) the Group entered into to reduce the interest rate and currency fluctuations on some of its long-term debentures. The fair values of these instruments are determined by discounting the expected contractual cash flows using interest rate curves in the corresponding currencies and currency exchange rates, all observable on active markets.

Unsubordinated debentures

The unsubordinated debentures not in a hedge relationship are recognized at amortized costs. Their fair values, calculated for each debenture separately, were obtained by discounting the interest rates at which the Group could borrow at 31 December 2013 for similar debentures with the same remaining maturities.

(EUR mi lli o n )				Fa i r va lu es	mea s u remen t a	t en d o f the
		Ca teg o ry	B a la n ce a t	rep o	rti n g p eri o d u	s i n g :
		a cco rd i n g	31 D ecemb er
		to IAS 39 (1)	2013	Level 1	Level 2	Level 3
	No te
ASSETS
No n -cu rren t a s s ets
Other non-current assets
Other derivatives	33.1	FVTPL	3 5		3 5
Cu rren t a s s ets
Other current assets
Other derivatives	33.1	FVTPL	1	1
Investments	14	AFS	16	16
LIAB ILITIES
No n -cu rren t li a b i li ti es
Interest-bearing liabilities
Unsubordinated debentures not in a hedge relationship (2)	33.1	OFL	1,919		2,093
Other derivatives	33.1	FVTPL	28		28
Non interest-bearing liabilities
Derivatives held-for-hedging	33.1	HeAc	3	3
Cu rren t li a b i li ti es
Non interest-bearing liabilities
Derivatives held-for-hedging	33.1	HeAc	2	2
Other derivatives	33.1	FVTPL	2	2

(1) The categories according to IAS 39 are the following :

AFS: Available-for-sale financial assets

FVTPL: Financial assets/liabilities at fair value through profit and loss

(2) The debentures fair values are net of the attached embedded derivatives fair values,

which are included in the non-current other derivatives.

(EUR mi lli o n )				Fa i r va lu es	mea s u remen t a	t en d o f the
		Ca teg o ry	B a la n ce a t	rep o	rti n g p eri o d u	s i n g :
		a cco rd i n g to IAS 39 (1)	31 D ecemb er 2012	Level 1	Level 2	Level 3
	No te
ASSETS
No n -cu rren t a s s ets
Other non-current assets
Other derivatives	33.1	FVTPL	9 0		9 0
Cu rren t a s s ets
Other current assets
Investments	14	AFS	26	26
LIAB ILITIES
No n -cu rren t li a b i li ti es Interest-bearing liabilities
Unsubordinated debentures not in a hedge relationship (2)	33.1	OFL	1,672		1,869
Other derivatives	33.1	FVTPL	8 7		8 7
Cu rren t li a b i li ti es Interest-bearing liabilities
Unsubordinated debentures not in a hedge relationship	33.1	OFL	125		132
Credit institutions	33.1	OFL	4		4
Non interest-bearing liabilities
Other derivatives	33.1	FVTPL	1	1

(1) The categories according to IAS 39 are the following :

AFS: Available-for-sale financial assets

FVTPL: Financial assets/liabilities at fair value through profit and loss

(2) The debentures fair values are net of the attached embedded derivatives fair values,

which are included in the non-current other derivatives.

Note 34. Related party disclosures

Note 34.1. 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.

The transactions between Belgacom SA and its subsidiaries, being related parties, are eliminated for the preparation of the consolidated financial statements. The transactions between Belgacom SA and its subsidiairies are as follows:
Yea r en d ed	31 D ecemb er
2012	2013
104	106
-111	-101
-327	-324
43	5 1

Net finance costs	-327	-324


Ou ts ta n d i n g b a la n ces o f B elg a co m SA wi th s u b s i d i a ri es	As o f 31 D	ecemb er
(EUR mi lli o n )	2012	2013
Trade receivables	116	118
Trade payables	-57	-46
Interest bearing receivables/liabilities	-10,260	-10,532
Other receivables and liabilities	-46	-47

Associates

ClearMedia SA

In 2010, the Group acquired 40% of ClearMedia SA but the Group had no significant transactions with this minority participation in 2012 and 2013.

Joint ventures

Belgacom Mobile Wallet SA

In November 2013 Belgacom and BNP Paribas Fortis set up "Belgacom Mobile Wallet SA" a 50-50 joint venture to support online and mobile trade in Belgium. The company is expected to start its operational activities in 2014.

Note 34.2. Relationship with shareholders and other State-controlled entreprises.

The Belgian State is the majority shareholder of the Group, with a stake of 53.51%. The Group holds treasury shares for 5.83%. The remaining 40.66% are traded on the First Market of Euronext Brussels.

Relationship with the Belgian State

The Group supplies telecommunication services to the Belgian State and State-related entities. State related enterprises are those that are either State-controlled or State-jointly-controlled or State-influenced. 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 State-related enterprises do not represent a significant component of the Group's net revenue, meaning less than 5%.

Note 34.3. Relationship with key management personnel

The remuneration and compensation of the Directors was decided by the General Shareholders Meeting of 2004. The principles of this compensation did not change in 2013: 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. This fee is doubled for the Chairman.

Attendance fees of EUR 2.500 are foreseen for each member of an advisory committee of the Board of Directors, with the exception of the President & CEO. For the Chairman of the respective advisory committee these 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 Chairman of the Board of Directors is also Chairman of the Joint Committee and of the Pension Fund. Mrs. Martine Durez and Mr. Theo Dilissen are members of the Board of the Pension Fund. They do not receive any fees for these participations.

The total remuneration for the directors amounts to EUR 1,140,250 for 2013 and EUR 1,118,000 for 2012 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:

	2012	2013
Board of Directors	8	8
Audit and Compliance Committee	5	8
Nomination and Remuneration Committee	7	6
Strategic and Business Development Committee	2	3

In its meeting of 24 February 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 has contractual relationships and is also a vendor for telephony, Internet and/or ICT services for many of the companies in which Board members have an executive or non-executive mandate. Belgacom is also a Partner of Guberna, the Belgian Institute for Directors (affiliated with Ms. Lutgart Van den Berghe who is Executive Director of Guberna), for which it has paid a fee of 30,250 € in 2013.

For the year ended 31 December 2012, a total amount of EUR 9,373,347 (social security costs of EUR 1,694,708 and sharebased payments included, as well as long term share-based payments) was paid or granted in aggregate to the members of the "Belgacom Management Committee" (BMC), Chief Executive Officer included. In 2012, the members of the Belgacom Management Committee were D. Bellens, S. Alcott (6 months), B. Chauvat, M. Georgis, D. Leroy (7 months), G. Standaert (10 months), R. Stewart, and B. Van Den Meersche.

For the year ended 31 December 2013, a total amount of EUR 9,762,050 (social security costs of EUR 2,039,278 and sharebased payments included, as well as long term performance value based payments) was paid or granted in aggregate to the members of the "Belgacom Management Committee" (BMC), Chief Executive Officer included. In 2013, the members of the Belgacom Management Committee were D. Bellens (10,5 months), B. Chauvat (12 months), M. Georgis, D. Leroy, G. Standaert, R. Stewart, and B. Van Den Meersche.

These total amounts of key management compensation include the following components:

Short-term employee benefits: annual salary (base and short-term variable) as well as other short-term employee benefits such as medical insurance, private use of management cars, meal vouchers, and including employer 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 16.66% compared to the market price in Discounted Share Purchase Plan and, only for 2012, also the fair value of stock options (that is expensed over the vesting period in accordance with the graded vesting method);
Performance Value based payments (long term): gross amounts, granted under Performance Value, which create possible exercising rights as from May 2016, depending on the achievement of market conditions based on Belgacom's Total Shareholder Return compared to a predefined group of other European telecom operators. Possible exercising will happen in cash, which implies that employer social contributions have been taken into account. Only as from 2013 as replacing the former Stock Options Plan;
Termination benefits: paid or accrued

	31 D ecemb er
	2013

6,921,826	6,700,283
	928,392
	2,133,375
9 ,373,347	9 ,76 2,05 0

Yea r en d ed	31 D ecemb er
2012	2013
	219,935
	Yea r en d ed 2012 710,540 1,740,981 138,211

Note 34.4. 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.

Options (Stock Option Plan) 310,924 0

The company is also governed by certain provisions and principles of Belgian public and administrative law whereby Belgacom has obligations such as the delivery of regulated services and public services.

Note 35. Rights, commitments and contingent 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 124 million in 2013 and EUR 127 million in 2012.

Future minimum rentals payable under the non-cancellable operating leases are as follows at 31 December 2013:
---------------------------------------------------------------------------------------------------------------	--	--

Wi thi n o n e	Fro m 1 to 3	Fro m 3 to 5	Mo re tha n 5
yea r	yea rs	yea rs	yea rs	To ta l
				6 9
				172
				12
				73
0	0	0	0	0
				326
	22 21 10 29 8 3	3 0 40 1 3 5	operating leases amounted EUR 124 million in 2013 and EUR 127 million in 2012. 13 3 8 1 9 106 6 2	furniture and vehicles under operating leases with terms of one year or more. Rental expenses in respect of these Future minimum rentals payable under the non-cancellable operating leases are as follows at 31 December 2013: 4 72 0 0 7 6

Other material	0	0	0	0	0

Future minimum rentals payable under the non-cancellable operating leases are as follows at 31 December 2012:
	Wi thi n o n e	Fro m 1 to 3	Fro m 3 to 5	Mo re tha n 5
(EUR mi lli o n )	yea r	yea rs	yea rs	yea rs	To ta l
Buildings	24	27	11	3	6 5
Sites	21	3 9	3 6	6 8	163
Technical and network equipment	16	5	2	1	24
Vehicles	29	28	7	0	6 5
Other material	0	0	0	0	1
To ta l	9 0	9 9	5 7	7 2	318

In the scope of its normal activities, the Group rents the equipment for its own use and needs. The Group is therefore not involved in significant sublease contratcs with customers. The rent contracts do not include contingent rent payable or other special features or restrictions.

Claims and legal proceedings

From time to time, Belgacom has been subject to legal, regulatory and tax proceedings and claims arising in the ordinary course of its business. Belgacom is currently involved in various judicial and regulatory proceedings, including those for which a provision has been made 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.

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, annulled the aforementioned decision, arguing amongst other lack of reasoning.

However, Tele2 did not ask the President to adopt a new decision on its request for interim measures but (i) 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) and (ii) requested the proceedings in front of the Competition Authority on the merits to be dealt with.

It is to be noted that given different reorganizations within the KPN Group, KPN Belgium became the claimant in the aforementioned case.

On 29 November 2012, two decisions regarding Belgacom's Happy Time offer were adopted.

Through a decision on the merits of the case, the Competition Council concluded that there are no grounds for actions against Belgacom for its Happy Time offer. This ruling follows the complaint lodged in 2005 by Tele2 arguing that such tariff amounted to a price squeeze. After having performed four different margin squeeze tests for the period 2005-2008, the Competition Council decided not to follow the Statement of Objections of the College of Competition Prosecutors issued in September 2009 that concluded that Belgacom abused and was still abusing its dominant position. The Competition Council has now indicated that none of the tests that it performed has led to the conclusion that a margin squeeze existed or has existed. The Competition Authority therefore closed the case. On 4th February 2013, KPN lodged an appeal before the Court of Appeal.
In the damage claim case before the Commercial Court, based on an alleged abuse of dominance, the Commercial Court issued an interim ruling. It stated that it did not see evidence of an infringement but nevertheless appointed an expert to carry out further verifications on price squeeze and predatory pricing. In the meantime, this expert has refused the task entrusted to him by the Commercial Court so that a new expert should be appointed.
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. 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.)

During the investigation of October 2010, a large numbers of documents were seized (electronic data such as a full copy of mail boxes and archives and other files). Belgacom and the prosecutor of the Competition authority exchanged extensive views on the way to handle the seized data. Belgacom wanted to be sure that the lawyers "legal privilege" (LPP) and the confidentiality of in house counsel advices are guaranteed. Moreover, Belgacom sought to prevent the Competition authority from having access to (sensitive) data that were out of scope. Not being able to convince the prosecutor of its position, Belgacom started two proceedings, one before the Brussels Court of Appeal and one before the President of the Competition Council, in order to have the communication of LPP data and data out of scope to the investigation teams suspended. On 5 March 2013, the Court of Appeal issued a positive judgment in this appeal procedure by which it ruled that investigators had no authority to seize documents containing advices of company lawyers and documents that are out of scope and that these documents should be removed/destroyed. To be noted that this is a decision on the procedure in itself and not on the merit of the case. On 14 October 2013, the Competition authority launched a request for cassation against this decision. Belgacom has joined this cassation procedure

In June 2003, KPN Group Belgium (operating under the brand name BASE) filed an action for damages against Belgacom (former Belgacom Mobile – operating under the brand name Proximus) before the Commercial Court of Brussels, with Mobistar joining this action with an own claim in March 2004. KPN and Mobistar claimed that Belgacom had abused its dominant position by applying inappropriately low prices for on-net calls (calls from Proximus to Proximus) with KPN also claiming that Belgacom had applied mobile termination rates (MTR) that were too high. Both operators claimed for compensation.

On 29 May 2007, an interim decision of the Commercial Court of Brussels found Belgacom to be dominant between 1999 and 2004, rejected several claims and appointed two experts to examine questions related to the allegations concerning price squeeze and anti-competitive network effects, and to assess whether damage was caused, and -if so- to attempt evaluating the damage. On 2 October 2009, these experts filed a (first) preliminary report that concluded to the existence of the alleged competition law infringements and in particular, on the basis of an unprecedented and prospective method, that it could be considered that the alleged impact on Mobistar and KPN Group Belgium of the Proximus on-net tariffs during the years 1999-2004 amounted to EUR1.182 million. On 10 December 2010, the two experts filed another (second) preliminary report.

Notwithstanding the detailed critical observations that had been submitted to the experts by Belgacom on all aspects of their first report, this second report basically reiterated the findings of the first report, but found the alleged impact amounted to EUR 1.840 million. According to Belgacom, this second report did not provide any demonstration of the alleged infringements of the competition rules. Belgacom also noted that the vast majority of its observations remained unanswered and that moreover Belgacom's own expert reports were largely disregarded. For this and a number of other reasons, Belgacom introduced on 21 January 2011 a motion with the Commercial Court in respect of the expert panel, requesting their recusal/replacement. Following the dismissal by the Commercial Court on 17 March 2011 of Belgacom's motion, an appeal procedure was initiated by Belgacom. The Court of Appeal decided on 6 March 2012 that the experts indeed committed several errors, refrained systematically from replying appropriately to Belgacom's observations, thus affecting the rights of defence, and failed to respect several other principles governing judicial expert proceedings. The Court consequently decided that the experts had to be replaced and that the judicial expert proceedings should be restarted by new experts.

Upon a joint proposal by the parties, the Court of Appeal of Brussels appointed on 1 October 2012 such new experts. Both Mobistar and KPN Group Belgium continue to contest the replacement of the former court experts through actions with the Cour de cassation. These former court experts also started a procedure ("tierce opposition") against the judgment of 6 March 2012 replacing them. On 31 December 2012, the newly appointed court experts informed the Court of Appeal and the Commercial Court of their decision that, for various reasons, they would not pursue their assignment.

On 14 October 2013, the Cassation Court rejected the appeal of Mobistar and KPN Group Belgium. Following to this ruling, Mobistar and KPN Group Belgium relaunched the designation procedure, which led to a joint proposal of all the parties to designate two new experts. The latter's still have however to indicate if they accept the mission.

In the meantime, Belgacom lodged an appeal against the initial decision of 29 May 2007 of the Commercial Court and this was followed by the filing of cross-appeals against the said judgment by both KPN and Mobistar. The Court will ultimately need to determine (i) whether anti-competitive practices have been committed and whether Belgacom's MTR failed to respect its regulatory obligations, (ii) whether Belgacom is liable for such practices, and (iii) whether damages are to be paid and -if so- the amount of these possible damages. 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. 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 infringements is to be demonstrated. Belgacom continues to contest the claims of both KPN Group Belgium and Mobistar.

In October 2009, seven parties (Telenet, KPN Group Belgium (former Base), KPN Belgium Business (Tele 2 Belgium), KPN BV (Sympac), BT, Verizon, Colt Telecom) 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. These cases have been postponed for an undefined period.

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: amongst other the fact that the market impact was not examined. Also KPN Group Belgium and Mobistar filed an appeal against said ruling. The parties are exchanging briefs to organize the access to the file.
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 (years 2004, 2005 and 2006 together) excluding interests and has started legal proceedings before Court.

Since 2003, Belgacom considers some enrolments of real estate tax on telecom equipment as undue and therefore recognizes an asset against the tax authorities in the 'current tax assets' caption for an amount of EUR 120 million at 31 December 2013 (with a related liability of EUR 28 million).

Capital expenditure commitments

At 31 December 2013, the Group has contracted commitments of EUR 77 million, mainly for the acquisition of intangible assets and technical and network equipment.

Other rights and commitments

At 31 December 2013, the Group has the following other rights and commitments:

The Group received guarantees for EUR 9 million from its customers to guarantee the payment of its trade receivables and guarantees for EUR 9 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 52 million (including the bank guarantees mentioned in note 33.2) 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 a compensation for offering Social Tariffs as from July 1st, 2005. This right was contested by some operators and the European Commission brought Belgium before the European Court for this Belgian legislation. Begin October 2010, the European Court has passed judgement and in January 2011, the Constitutional Court has annulled certain provisions of the Belgian law. On 29 June 2012 a new law was voted to comply with the European legislation. No results concerning the application of this new law are available at 31 December 2013. On 29 December 2013 the Constitutional Court has confirmed the possibility of the retroactivity of the financing since 2005. However, the I.B.P.T. still has to decide if there is a net cost and an unsupportable burden per operator.

Note 36. Share-based Payment

Discounted Share Purchase Plans

In 2012 and 2013, the Group launched Discounted Share Purchase Plans.

Under the 2012 and 2013 plans, Belgacom sold respectively 208,433 and 219,935 shares to the senior management of the Group at a discount of 16.66% compared to the market price (discounted price of respectively EUR 18.56 per share and EUR 14.51). The cost of the discount amounted to EUR 0.6 million in 2012 and EUR 0.7 million in 2013 and was recorded in the income statement as personnel expenses (see note 26).

Performance Value Plan

In 2013, Belgacom launched a new "Performance Value Plan" for its senior management. Under this Long-Term Performance Value Plan, the granted awards are conditional upon a blocked period of 3 years after which the Performance Values vests. The possible exercising rights are dependent on the achievement of market conditions based on Belgacom's Total Shareholder Return compared to a group of peer companies.

After the vesting period rights can be exercised during four years. The settlement method in equity or cash is defined at grant date. In case of voluntary leave during the vesting period, all the non-vested rights and the vested rights not exercised are forfeited. In case of involuntary leave or retirement, except for serious cause, the rights continue to vest during the normal 3 year vesting period.

The group determines the fair value of the arrangement at inception date and the cost is linearly spread over the vesting period with corresponding increase in equity for equity settled and liability for cash settled shared based payments.

For cash settled share-based payment the liability is periodically re-measured.

The initial fair value amounts to EUR 5.9 million for the 2013 tranche. The calculation of simulated total shareholder return under the Monte Carlo model for the remaining time in the performance period for awards with market conditions included the following assumptions as of April 30th and December 31, 2013: As o f

under the Monte Carlo model for the remaining time in the performance period for awards with market conditions included the following assumptions as of April 30th and December 31, 2013:
	As	o f
	30 Ap ri l	31 D ecemb er
	2013	2013
Weighted average risk free of return	0.47%	0.60%
Expected volatility - company	23%	24%
Expected volatility - peer companies	15% - 62%	15% - 58%
Weighted average remaining measurement period	3.0	2,5

Employee Stock Option Plans

In 2012, Belgacom launched a last yearly tranche of the Employee Stock Option Plan whereby 840,732 share options were granted to the key management and senior management of the Group. The Plan rules were adapted early 2011 according to the Belgian legislation. Therefore as from 2011, the Group launched two different series: one for the Belgacom Management Committee" (BMC), Chief Executive Officer included (298,259 share options in the 2012 tranche) and one for the other key management and senior management (542,473 share options in the 2012 tranche).

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 in accordance with the graded vesting method and periodic remeasurement of the liability component. Black&Scholes is used as option pricing model. Such fair value amounted to EUR 2.5 million for the 2012 tranche. The annual charge of the graded vesting including the liability component re-measurement is recognized as personnel expenses and amounts to EUR 8.7 million in 2012 and EUR 4.5 million in 2013.

At the moment of exercise, the employee will pay the exercise price of 22.275 EUR for the 2012 tranche, with physical delivery of the share. The share options are exercisable 13 May 2019 for the 2012 tranche at the latest.

The tranches granted in 2004, 2005, 2006, 2007, 2008, 2009, 2010, 2011 and 2012 are still open. All the tranches except the 2004 tranche provide the beneficiaries with a right to the dividends declared after granting the options. The dividend liability amounted to EUR 17 million on 31 December 2012 and EUR 11 million on 31 December 2013 and is included under the caption "Other current payables'. The right to dividends granted to the beneficiaries of the tranches 2005-2012 is not limited in time and corresponds to the contractual life of the tranches.

In 2009, the Group gave the opportunity to its option holders to voluntary extend the exercise period of all the former tranches (except the 2009 tranche) with 5 years, within the guidelines as established by the law.

For all the tranches except the 2004 tranche and the BMC series of 2011 and 2012 tranches (as described below),

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 prior to the second anniversary following the termination date of the contract, as for all vested options;
in case of involuntary leave of the employee, except for serious cause, all unvested options vest immediately and must be exercised prior to the second anniversary following the termination date of the contract or prior to the expiration date of the options whichever comes first , as for all vested options;
in case of involuntary leave of the employee for serious cause, all options forfeit immediately.

For the BMC serie of the 2011 and 2012 tranches:

in case of voluntary leave of the BMC member during a period of three year following the grant 50% of the options immediately forfeit. If the voluntary leave takes place after that date, the options continue to vest according to the plan rules and regular vesting calendar. The exercise may only take place at the earliest on the first business day following the 3rd anniversary of the offer date. The exercise should take place prior to the 5th anniversary following the termination of the contract or prior to the expiration date of the options, whichever comes first, otherwise the options become forfeited;
in case of involuntary leave of the BMC member, except for serous cause, the options will continue to vest according to the plan rules and regular vesting calendar. The exercise may only take place at the earliest on the first business day following the 3rd anniversary of the offer date. The exercise should take place prior to the 5th anniversary following the termination of the contract or the expiration date of the options, whichever comes first, otherwise the options become forfeited;
In case of involuntary leave of the BMC member for serious cause, all options forfeit immediately.

The evolution of the stock option plans is as follows:
				Nu mb er o	f s to ck o p	ti o n s
	2004	2005	2006	2007	2008	2009	2010	2011	2012
Ou ts ta n d i n g a t 31 D ecemb er 2012	17,35 9	5 4,130	9 5 ,9 6 0	339 ,9 38	6 28,9 6 4	85 4,200	9 9 5 ,116	1,002,019	840,732
Exerci s a b le a t 31 D ecemb er 2012	17,35 9	5 4,130	9 5 ,9 6 0	339 ,9 38	6 28,9 6 4	85 4,200	729 ,29 8	244,879	5 ,000
Movements during the year 2013
Granted									0
Forfeited	0	0	-1,332	-48,257	-98,723	-23,030	-116,051	-116,582	-135,414
Exercised	0	-12,812	-50,616	0	-15,257	-577,963	-1,650	-2,257	-2,026
Expired	0	0	0	0	0	0	0	0	0
Total	0	-12,812	-51,948	-48,257	-113,980	-600,993	-117,701	-118,839	-137,440
Ou ts ta n d i n g a t 31 D ecemb er 2013	17,35 9	41,318	44,012	29 1,6 81	5 14,9 84	25 3,207	877,415	883,180	703,29 2
Exerci s a b le a t 31 D ecemb er 2013	17,35 9	41,318	44,012	29 1,6 81	5 14,9 84	25 3,207	877,415	449 ,9 84	19 2,802
Exerci s e p ri ce	24.5 0	29 .9 2	25 .9 4	32.71	29 .14	22.71	26 .44	25 .02	22.28

The volatility has been estimated based on the actual trading statistics of the share and taking into account alignment to

Note 37. Relationship with the auditors

certain peers, comparable in terms of risk profile (volatility: 28%).

The Group expensed for the Group's auditors during the year 2013 an amount of EUR 1,266,590 for the annual audit mandate fees and EUR 251,595 for non-mandate fees.
This last amount is detailed as follows:
EUR	Aud i to r	Netwo rk o f a ud i to r
Other mandatory audit missions	35,940	0
Tax advice	0	13,420
Other missions	87,042	115,193
To ta l	122,9 82	128,6 13

Note 38. 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.

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.

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. Yea r en d ed 31 D ecemb er 2013

			Yea r en d	ed 31 D ecemb	er 2013
(EUR mi lli o n )	Co n s u mer B u s i n es s Un i t	En terp ri s e B u s i n es s Un i t	Servi ce D eli very En g i n e & Who les a le	Sta ff & Su p p o rt	In tern a ti o n a l Ca rri er Servi ces	In ter s eg men t eli mi n a ti o n s	To ta l
Net revenue	2,201	2,184	223	7	1,623	0	6,239
Other operating income	21	8	5	44	1	0	79
Intersegment income	3	6	6 6	9	42	-127	0
TOTAL SEGMENT INCOME	2,226	2,19 8	29 4	6 0	1,6 6 6	-127	6 ,318
Costs of materials and services related to revenue	-611	-603	-40	0	-1,412	106	-2,561
Personnel expenses and pensions	-349	-418	-172	-157	-45	0	-1,142
Other operating expenses	-294	-155	-204	-201	-69	20	-903
TOTAL OPERATING EXPENSES b efo re d ep reci a ti o n & a mo rti za ti o n	-1,25 5	-1,175	-417	-35 8	-1,5 26	126	-4,6 05
TOTAL SEGMENT RESULT (1)	9 71	1,023	-122	-29 8	140	- 1	1,713
Non-recurring expenses	-17	1	0	2	0	0	-14
OPERATING INCOME / (LOSS) b efo re d ep reci a ti o n & a mo rti za ti o n	954	1,024	-122	-29 6	140	- 1	1,6 9 9
Depreciation and amortization	-155	-14	-464	-69	-80	1	-782
OPERATING INCOME / (LOSS)	79 9	1,010	-5 86	-36 5	6 0	0	9 17
Net finance costs							-96
INCOME B EFORE TAXES							822
Tax expense							-170
NET INCOME							6 5 2
Non-controlling interests							22
Net income (Group share)							6 30
(1) Operating income before depreciation and amortization and before non-recurring income and expenses

			Yea r en d	ed 31 D ecemb	er 2013
(EUR mi lli o n )	Co n s u mer	En terp ri s e	Servi ce	Sta ff &	In tern a ti o n a l	In ter	To ta l

Non-controlling interests							22

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

	Yea r en d ed 31 D ecemb er 2013
(EUR mi lli o n )	Co n s u mer	En terp ri s e	Servi ce	Sta ff &	In tern a ti o n a l	In ter	To ta l
	B u s i n es s Un i t	B u s i n es s Un i t	D eli very En g i n e &	Su p p o rt	Ca rri er Servi ces	s eg men t eli mi n a ti o n s
			Who les a le

Ca p i ta l exp en d i tu re	16 4	1 3	725	3 3	3 7	0	9 72

	Belgacom Annual Report 2013



(EUR mi lli o n )	Co n s u mer	En terp ri s e	Yea r en d ed Servi ce	31 D ecemb Sta ff &	er 2012 - res ta ted In tern a ti o n a l	In ter	To ta l
	B u s i n es s Un i t	B u s i n es s Un i t	D eli very En g i n e & Who les a le	Su p p o rt	Ca rri er Servi ces	s eg men t eli mi n a ti o n s
Net revenue	2,298	2,278	240	7	1,592	0	6,415
Other operating income	19	9	3	16	1	0	47
Intersegment income	5	8	6 2	11	5 1	-137	0
TOTAL SEGMENT INCOME	2,321	2,29 4	304	3 4	1,6 45	-137	6 ,46 2
Costs of materials and services related to revenue	-666	-619	-37	-2	-1,400	114	-2,611
Personnel expenses and pensions	-354	-402	-174	-153	-43	0	-1,126
Other operating expenses	-309	-160	-187	-217	-73	22	-924
TOTAL OPERATING EXPENSES b efo re d ep reci a ti o n & a mo rti za ti o n	-1,330	-1,181	-39 8	-372	-1,5 16	136	-4,6 6 1
TOTAL SEGMENT RESULT (1)	991	1,113	-9 4	-338	129	- 1	1,801
Non-recurring expenses	0	0	0	-15	0	0	-15
OPERATING INCOME / (LOSS) b efo re d ep reci a ti o n & a mo rti za ti o n	991	1,113	-9 4	-35 3	129	- 1	1,786
Depreciation and amortization	-139	-16	-440	-74	-80	1	-748
OPERATING INCOME / (LOSS)	85 2	1,09 7	-5 34	-427	4 9	0	1,038
Net finance costs							-131
INCOME B EFORE TAXES							9 07
Tax expense							-177
NET INCOME							730
Non-controlling interests							19
Net income (Group share)							712
(1) Operating income before depreciation and amortization and before non-recurring income and expenses
			Yea r en d	ed 31 D ecemb	er 2012
(EUR mi lli o n )	Co n s u mer	En terp ri s e	Servi ce	Sta ff &	In tern a ti o n a l	In ter	To ta l

Non-controlling interests							19
Net income (Group share)							712
(1) Operating income before depreciation and amortization and before non-recurring income and expenses

Yea r en d ed 31 D ecemb er 2012
(EUR mi lli o n )	Co n s u mer	En terp ri s e	Servi ce	Sta ff &	In tern a ti o n a l	In ter	To ta l
	B u s i n es s Un i t	B u s i n es s	D eli very	Su p p o rt	Ca rri er	s eg men t
		Un i t	En g i n e &		Servi ces	eli mi n a ti o n s
			Who les a le
Ca p i ta l exp en d i tu re	16 4	1 5	5 14	4 0	2 0	0	75 3

In respect of geographical areas, the Group realized EUR 4,236 million net revenue in Belgium in 2012 and EUR 4,011 million in 2013 based on the country of the customer. The net revenue realized in other countries amounted to EUR 2,179 million in 2012 and EUR 2,227 million in 2013. More than 90% of the segment assets are located in Belgium.

Note 39. Recent IFRS pronouncements

The Group does not early adopt the standards or interpretations that are not yet effective at 31 December 2013.

This means that the Group did not apply the following standards or interpretations that are applicable for the Group as from 1 January 2014 or later:

Annual Improvements to IFRS's (2010-2012 cycle) and (2011-2013 cycle);
Amendments to standards:
o Amendments to IAS 27 ("Separate Financial Statements") and IAS 28 ("Investments in Associates and Joint Ventures");
o Amendments to IAS 32 ("Offsetting Financial Assets and Liabilities");
o Amendment to IAS 39 ("Novation of Derivatives and Continuation of Hedge Accounting");
o Amendment to IAS 19 ("Employee Benefits Employee Contributions");
o Amendment to IAS 36 ("Impairment of Assets Recoverable Amount Disclosures for Non-Financial Assets").
Newly issued standards:
o IFRS 9 ("Financial Instruments"),
o IFRS 10 ("Consolidated Financial Statements") that supersedes part of IAS 27 ("Separate Financial Statements") and SIC-12 ("Consolidated – Special Purpose Entities"),
o IFRS 11 ("Joint Arrangements") that supersedes part of IAS 31 ("Interests in Joint Ventures") and SIC-13 ("Jointly Controlled Entities – Non Monetary Contributions by Venturers"),
o IFRS 12 ("Disclosure of Interests in Other Entities"),
o IFRIC Interpretation 21 ("Levies")

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 2014.

The Group does not anticipate material impacts from the initial application of IFRS 10-11. The application of IFRS 12 will result in more extensive disclosures in the consolidated financial statement and applies to interests in subsidiaries, joint arrangements and associates.

Note 40. Post balance sheet events

Belgacom has entered into exclusive negotiations with Vivendi with respect to the sale of its fully owned subsidiary "Groupe Telindus France". Completion of the transaction is subject to the satisfaction of certain conditions precedent among which approval by the French Competition Authorities.

AUDITOR'S REPORT

THE REGULATORY FRAMEWORK

Mobile termination rates (MTR)

In application of the BIPT decision of 29 June 2010, MTR in Belgium have been set at a rate of 1,18 eurocents/min (incl. inflation) for the three mobile operators since 1 January 2013. This last step of the glide path imposed in 2010 has therefore finally established fully symmetric MTR in Belgium.

BIPT decision of 29 June 2010 on MTR
€ct	Before*	01-Aug-10*	01-Jan-11*	01-Jan-12*	01-Jan-13*
Proximus	7,20	4,62	3,94	2,62	1,18
Mobistar	9,02	5,05	4,29	2,79	1,18
Base	11,43	5,81	4,90	3,11	1,18

*Including inflation

The BIPT is currently developing a new cost model to determine MTR tariffs for the period 2014-2017. On 21 November 2013, the BIPT communicated the preliminary version of this cost model to the mobile operators.

On 14 July 2010, Mobistar and KPN /BASE each filed a separate appeal before the Brussels Appeal Court against the BIPT decision of June. After rejecting the request for suspension on 15 February 2011, the Appeal Court considered, on 16 May 2012, that the BIPT had failed to consult the regional regulators, but rejected the substantial arguments in the case on the merits. Awaiting another decision of the Appeal Court or a BIPT repair decision, the current MTR rates remain fully valid.

On 16 January 2014, the Luxembourg regulator, ILR, published its decision concerning its review of the MTR market analysis. The three mobile operators (EPT, Tango and Orange) are considered as having significant market power. ILR intends to define the MTR on the basis of a pure bottom-up long run incremental cost (LRIC) cost model. Until the finalisation of this model, ILR has set symmetrical MTR at 0,98 eurocent/min as from 1 February. MTR were previously at 8,2 eurocents for EPT and Tango and 10,5 eurocents for Orange. Tango has decided to introduce an appeal against this decision.

International roaming

The first Roaming Regulation of 2007 introduced caps on retail and wholesale voice roaming prices. In July 2009, the EU authorities adopted revised rules (Roaming II Regulation) that cut roaming charges further for voice, SMS and wholesale data roaming in 2010 and 2011.

The Roaming III Regulation that entered into force on 1 July 2012 has introduced two so-called "structural measures" to encourage competition: (i) MVNO wholesale access from 1 July 2012 and (ii) decoupling, i.e. separate selling of roaming services from domestic mobile services, from 1 July 2014. The Regulation also lays down rules aimed at increasing price transparency and improving the provision of information on charges to roaming customers.

Awaiting the full effects of the structural measures, the Regulation has imposed a further lowering of the existing regulated retail and wholesale price caps (from 35 eurocents on 30 June 2012 to 19 eurocents for retail outgoing calls by 1 July 2014 and from 11 eurocents to 6 eurocents for retail SMS) and has extended the Roaming Regulation to retail data as from July 2012 (70 eurocents on 1 July 2012 decreasing to 20 eurocents as from 1 July 2014).

The Roaming III Regulation will expire in principle on 30 June 2022. However, in the meantime, the EU Commission has proposed in its package of measures to address the fragmentation of the EU telecom sector, referred to as "Connected continent", to impose additional measures to abolish roaming surcharges in the coming years.

Spectrum

A law of 25 March 2010 has required the mobile operators to pay for the tacit extension of their 2G licenses until 2015. The amount of EUR 74 million for Belgacom for this extension corresponds to the original 2G license fee proportionate to the spectrum quantity and duration. The mobile operators appealed this law before the Constitutional Court that, in June 2011, submitted a certain number of questions to the European Court of Justice in order to ascertain whether the Belgian law complies with the EU directives. By judgment issued on 21 March 2013, the EU Court confirmed that imposing a fee for the renewal of a license is in conformity with the directives. Based on this ruling, the Constitutional Court finally rejected Belgacom, Mobistar and KPN/BASE appeals on 17 October 2013. These decisions did not have any impact on Belgacom that had anyway decided to make the payments. Beside this annulment procedure, Belgacom initiated on 7 October 2010 an action against the Belgian State and the BIPT to ensure the possibility to recover the undue license fees. On 22 December 2010, 2G licenses were also extended until 15 March 2021. An additional payment for the period 2015- 2021 will be due. The one-off fee to be paid for this spectrum is set in the telecom law and has remained unchanged.

Through the acquisition of its 2100 MHz spectrum in 2011, Telenet Tecteo Bidco obtained rights for 900/1800MHz spectrum. For that purpose, existing operators would have had to give back 24 channels in the 900 MHz band and 18 channels in the 1800 MHz band by November 2015. However, on 12 December 2013, Telenet Tecteo Bidco informed the BIPT of their decision to renounce to these 900/1800 MHz rights. As a consequence, this released spectrum is open again. The draft Royal Decree setting the modalities for reselling this spectrum has been adopted in first reading by the Council of Ministers in February 2014. The draft foresees that the operators will be allowed to choose how many channels they want to acquire up to a max of one third (8 channels each in the 900 MHz band). If one operator asks for less spectrum, the remaining amount will be divided among the two others to obtain more than 8 channels. Those additional channels will be subject to the payment of a concession fee as foreseen in the telecom law. The Royal Decree foresees the possibility of having more than three candidates. In such case, an auction would be organized for three lots of 8 channels. The Royal Decree however recognizes that it would be rather unlikely to have more than three candidates (because of the small amount of spectrum and the short duration of the license). The spectrum award is expected to happen by the end of 2014. The process for reallocation should be finalized by November 2015. After the redistribution, a reshuffling of the spectrum could be requested. Before 27 November 2015, the operators will have the possibility to increase their 1800MHz spectrum up to max 124 channels (Belgacom has currently 104 channels). The usage rights on the total spectrum obtained at the end of this procedure will be valid until 15 March 2021.

On 12 November 2013, the BIPT has proceeded with the auction of the 800 MHz spectrum (resulting from the digital dividend). This auction was concluded after two rounds and the three blocks were sold at the minimum price of EUR 120 mio each. Each lot entails national coverage obligations (with a minimum speed of 3Mbps): 30% after 2 years, 70% after 4 years and 98% after 6 years. Belgacom acquired lot 2 which has the advantage to facilitate coordination with foreign operators at the national borders. Lot 3, which has been acquired by Mobistar, includes additional coverage obligations in rural areas (60 municipalities mainly in Wallonia) that must be reached within three years. KPN Group Belgium acquired the third lot. On 30 November 2013, the authorization was formally notified to Belgacom. The license is valid until 29 November 2033. Belgacom has decided to pay the concession fee in annual instalments.

The norm for electromagnetic fields in Belgium is a regional matter. These norms are different depending on the region. In the Brussels Capital Region, the norm was 3V/m to be shared between all operators and all technologies. The mobile operators have repeatedly criticized this norm which is the most stringent in the world, obliges them to deploy additional sites and seriously hinders the possibility to roll out new mobile technologies in Brussels such as 4G LTE on top of 2G and 3G. Finally, end October 2013, a political agreement was reached to modify the current environmental framework. The agreement provides a global norm of 6 V/m (4 times more than the current 3 V/m) and 25% of the global norm per operator. Exceptionally 33% and even 50% will be granted for periods of 18 months. The modification of the Ordinance has been adopted on 24 January 2014 and the executing decrees should be adopted in March.

In December 2013, the Walloon government decided to levy, as of 2014, a tax on mobile telecom equipment of EUR 8.000 per 'site'. Belgacom intends to safeguard its legal right to contest this legislation.

Networks

The BIPT market analysis decision of 1 July 2011 on wholesale broadband obliges Belgacom to provide a "multicast" functionality in its bitstream offer (to be used for broadcasting). The multicast functionality has been implemented since April 2013.

On 11 September 2013, the European Commission adopted its "Recommendation on consistent non-discrimination obligations and costing methodologies to promote competition and enhance the broadband investment environment". This Recommendation provides guidelines on how costing of copper assets should be done and under which circumstance price regulation on new network investments can be lifted and provides guidelines on how to ensure non-discrimination. Belgacom's prices for unbundled lines are situated at the low end of the new EU Recommendation.

On 28 February 2014, the European Council and Parliament endorsed new rules aimed at lowering the cost of deploying new broadband networks. The text aims to achieve this by measures such as promoting sharing of infrastructure, easier access to civil engineering resources, better coordination, etc. Civil engineering, such as digging up roads to lay fibre, can account for up to 80% of the costs of deploying high-speed networks and the Commission claims that these measures can save as much as 30% on the cost of rolling out a fibre network. The text still needs to be formally adopted by the Parliament in April and by the Council in June. Member States will then have to adopt national provisions to comply with the directive by 1 January 2016 and they must apply the new measures by 1 July 2016. As the directive only sets minimum requirements, Member States may adopt additional measures in this area.

In December 2013, the BIPT published a decision on operational aspects of the unbundling and bitstream which covers a.o. a series of modifications to improve the readability and transparency of Belgacom's reference offers and re-evaluates the objectives and compensations of some SLAs (mainly repair) which are made stricter than the former levels.

By its decision of 19 February 2014, the BIPT has authorized Belgacom to deploy the vectoring technology on its VDSL2 network as from February 2014 [Vectoring is a technology that allows to boost download speeds by reducing interference between the copper loops in the same bundle].

Fiber to the home (FTTH) and fiber to the building (FTTB) technologies are currently not included in the scope of the Belgian regulation. The BIPT will address the question regarding the regulatory treatment of FTTH in the context of its review of the market analysis for broadband, which is foreseen in 2014.

Consumer protection

The telecom Minister has, since 2012, strengthened different aspects of the Belgian consumer protection rules.

In 2013, several decrees have pursued the implementation of the 10 July 2012 Law, a.o. (i) the Royal Decree implementing the one day delay for number portability that entered into force on 1 October 2013, (ii) the Royal Decree defining the modalities to be applied to send free-of-charge alerts to the customers in case of abnormal or excessive consumption to avoid bill shocks that has been applicable since 1 February 2014, (iii) the Royal Decree defining the content of the standard information sheets that the operators will have to prepare for each price plan in order to allow a comparison between the offers will enter into force on 1 July 2014.

In addition, the operators have been obliged since 28 October 2013 to publish a series of information in favour of disabled people and since 1 July 2013, all fixed broadband operators need to inform new customers about the internet speed (download and upload) they can expect.

In December 2013, the Minister has launched a 'Switch & Save' campaign to encourage mobile consumers to find a cheaper service plan. Proximus, Mobistar, KPN/BASE, Telenet and Voo are expected to contact, by 30 September 2014, 90 % of their customers on plans more than two years old. The commitment of the operators will be controlled by the BIPT.

The BIPT monitors the application of the law by the operators and, in February 2013, it has imposed a fine of EUR 30.000 to Telenet and Mobistar and of EUR 10.000 to Scarlet for incomplete information on the customers' invoices.

Universal service

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

The law of 10 July 2012 implementing the EU framework of 2009 has opted for a new organisation of the Universal Service by foreseeing that the BIPT or the Government can decide or advise to abolish certain obligations depending on market offer conditions. The BIPT decided on 6 May 2013 to lift the universal payphone obligation for Belgacom or any other provider, with immediate effect. Likewise, the Government, on advice of the BIPT, decided by Royal Decree of 15 December 2013 that no new obligations must be imposed for the directory enquiry services as well as for the paper and electronic directories. The BIPT will have to monitor the quality and (financial) availability of these services that will continue to be provided on a commercial basis. In case they would state a negative impact on the level of consumer protection, new obligations might be imposed.

The notion of functional internet access has been extended to include broadband provisioning and a Royal Decree will have to determine the required minimum speed that Belgian citizens are entitled to. In December 2013, the BIPT has proposed to set this minimum speed at 1 Mbps (100% coverage for reasonable requests) all the time except 1 hour/day maximum. Once the minimum speed will have been formally set, the provision of internet access with this minimum speed will have to be guaranteed to all. The BIPT proposes an open procedure and will make sure that this procedure will allow application by consortiums of operators using different technologies. Belgacom may submit an application or, in absence of a successful open procedure, the BIPT might decide to assign Belgacom or any operator as default broadband USO provider.

So far, Belgacom has never been compensated for providing the Universal service. The former funding system set in 2005 was withdrawn following appeals introduced by competitors before the Belgian and EU Courts. The law of 10 July 2012 has modified the financing system of social tariffs and has foreseen calculation of the net cost and a potential financing as from mid-2005. Belgacom renewed its request for compensation immediately after the entering into force of this law. Mobistar and KPN/BASE jointly filed a request for annulment of the new legal provisions before the Belgian Constitutional Court regarding the inclusion of the social tariffs for mobile voice and internet subscriptions in the universal service obligations compensation system and the retro-activity of the right to ask for compensation for the net costs related to the offer of social tariffs. On 19 December 2013, the Constitutional Court rejected the appeal and confirmed the possibility of retroactive funding since 2005. The Court also decided to submit a prejudicial question to the EU Court of Justice regarding the compatibility with the Universal service directive of social tariffs related to internet and mobile voice.

Net neutrality

'Net neutrality' that represents the idea that all data on the internet should be treated equally, whatever its source or destination, has been on the EU and Belgian agenda for some time.

This issue has been debated in the context of the package presented on 12 September 2013 by the European Commission to address the fragmentation of the EU telecom sector. The Commission has proposed to address the issue of 'net neutrality' via a ban on blocking or throttling of competing services. In addition, operators would need to be more transparent about the actual broadband speeds. However, they would still have the right to offer higher or guaranteed speeds at an increased price to customers in need of a premium service. The EU Parliament on its side pushes for more strict net neutrality rules. The adoption of this so-called 'Connected continent' package will not be achieved during this term of the European Parliament, but probably come to a conclusion with the new European Parliament installed after the May 2014 elections.

In Belgium, the 2005 Law as revised by the law of July 2012 contains transparency obligations regarding traffic management and impact on quality of service. The law also gives BIPT the possibility to impose minimum quality of service requirements to prevent the degradation of service and the hindering or slowing down of traffic over networks. Legislative proposals have been made in 2011 with a view either to create a specific 'net neutrality Act' or even to enshrine this principle in the Belgian Constitution. In January 2014, the Belgian law was suspended awaiting the definition of new net neutrality rules at EU level in the context of the abovementioned 'Connected continent' package.

Cable regulation

On 1 July 2011, the Belgian telecom and media regulators (BIPT, CSA, Medienrat and VRM) decided to regulate the dominant cable operators in their respective coverage areas and to require them to resell analogue TV, to open up their digital TV platform, and to resell broadband. Belgacom could only obtain access to analogue TV.

In 2013, the regulators have completed the framework for the opening of the cable on basis of their decisions of July 2011. On 29 October, they published the reference offers of Telenet, Tecteo, Brutélé and Coditel (Numéricable) and on 12 December their decisions on the regulated wholesale prices applicable to these operators. These pricing decisions set the (i) non-recurrent one-time fees and per-line fees to be paid when a customer leaves a cable operator for an alternative operator (EUR 2 to EUR 5) and the (ii) monthly rental fees set on a retail minus basis (minus 20 to 30% depending on the case). The six-month implementation period has started with the request made by Mobistar to Telenet and Tecteo on 17 January 2014. To be noted that in the meantime Belgacom has abandoned the possibility to resale analogue TV since this technology is outdated.

KEY FINANCIAL EVENTS

2013

Significant impact of the regulatory context and mobile price decreases
Investments in 800 MHz licence, in technological development of fixed and mobile networks and in their simplification

2011

Telindus France acquires Eudasys
Divesture Telindus Spain
Belgacom acquires 4G-license
Belgacom issues new 7-year senior unsecured institutional bond for EUR 500 million
Successful early bond buyback operation, followed by redemption in cash of remaining balance of the November 2011 EUR 775 million notes

2009

BICS and MTN combine their International Carrier Services
Activity of WIN SA sold

2007

Remaining stake in Mobistar (acquired via Telindus group transaction) sold
Acquisition of Dutch storage specialist ISIT

2005

Launch Belgacom TV
Exclusive broadcasting rights for Belgian soccer
Disposal of shares in Eutelsat
Belgacom ICS concludes Joint Venture with Swisscom ICS, proportionally consolidated
Belgacom sells Belgacom Directory Services, Expercom and liquidated Infosources

2012

Acquisition of the chain of The Phone House stores

Accounting adjustment for EUR -34 million at the EBITDA level due to the introduction of the new telecom law

2010

Integration of Belgacom and some of its subsidiaries in one legal entity – impacting segments but neutral on Group level

BICS fully consolidated following acquisition of control, effective as from 1 January 2010

Belgacom concludes strategic partnerships with OnLive (gaming), Jinni (search engine) and In3Dept Systems (3D-gesture recognition)

2008

Divesture of all non-core presences of Telindus International

Acquisition of Scarlet, Tango and Mobile-for >> Exclusive broadcasting rights for Belgian soccer

2006

Acquisition of Telindus Group >> Sale of stake in Neuf Cégétel >> Launch of EUR 1.65 billion bond >> Acquisition of Vodafone's 25% share in Proximus

ICS outsourcing deal with MTN

2004

Belgacom IPO >> Extensive launch Broadway project (Fibre & VDSL)

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

Disclaimer

For further information

Dirk Lybaert Executive Vice President Corporate Affairs Bd. du Roi Albert II/Koning Albert II-laan, 27 B - 1030 Brussels Tel: +32 2 202 16 48 E-Mail: [email protected]

For financial information

Nancy Goossens Vice President Investor Relations Bd. du Roi Albert II/Koning Albert II-laan 27 B - 1030 Brussels Tel: +32 2 202 82 41 Fax: +32 2 201 54 94 E-Mail: [email protected]

AI assistant

Proximus SA — Annual Report 2013

3989_10-k_2014-04-02_c49f1492-9fed-4f66-881e-c79d0683f0b0.pdf

WE ARE...

GLOSSARY

CONTENT

A COLLECTIVE RESPONSIBILITY

You have been Chairman of the Board of Directors since September 2013. A lot has changed over those few months...

Why is this such a crucial period?

How can the different stakeholders help achieve that successful transition?

Is the public shareholding a guarantee for stability?

What is your view of the company today?

BUILDING ON OUR STRENGTHS TO GENERATE SUSTAINABLE GROWTH

What are these assets?

What will be the new drivers of growth?

What were the innovations in 2013 that responded to these new needs?

What are your priorities for the coming months?

How are these priorities implemented within the company?

The Chairman, in the previous pages, talks about the "collective responsibility" of Belgacom. What is your view of the company's social role?

What does sustainable growth mean for Belgacom?

HIGHLIGHTS 2013

A NEW TELEVISION EXPERIENCE

FIRST 4G OPERATOR

POINTS-OF-SALE USING GREEN ENERGY

SIMPLIFICATION OF OUR NETWORKS

THE MOBILE OFFENSIVE

AN INTERNATIONAL FIRST FOR BICS

LUXEMBOURG STRONGER TIES WITH BNP PARIBAS FORTIS

SCARLET, THE LOW-COST REFERENCE

HISTORIC CONTRACT FOR TELINDUS

TANGO IS ENTERING A NEW ERA

FLEX, A NEW WAY OF WORKING

KEY FIGURES 2013

FINDING A GOOD BALANCE IN A SATURATED MARKET

Navigating through an adverse economic climate

Rationalization for business customers

Offering a low-cost alternative in the residential market

Adapting to the explosive growth of data traffic

Monetizing the investments in the networks

THE BELGIAN MARKET AND ITS REGIONAL SPECIFICITIES

Taking advantage of the momentum in Belgium

>> Wi-Fi hotspots in Belgium ±800,000

FOCUSA REGULATORY FRAMEWORK THAT PUTS PRESSURE ON MARGINS

>> Prolonged effects of the "new telecom law"

>> Roaming

>> Opening-up of the cable network

Winning the mobile war

Stabilizing the fixed telephony market

Taking advantage of opportunities

BELGACOM COMPETITIVE POSITION (MARKET SHARE)

Differentiating services in the cloud

FIT FOR GROWTH

CONVERGENCE AT BELGACOM

Building on our assets

The best convergent networks

Talented employees

Our own cloud and cyber security expertise

An advanced digital television platform

A distribution network close to the customer

Consolidating our leadership

A deep transformation to anticipate the future

Belgacom focuses on 4 levers to become more agile and restore sustainable growth

Enhancing the customer experience

Making our organization more efficient

BELGACOM FOCUSES ON 4 LEVERS TO BECOME MORE AGILE AND RESTORE SUSTAINABLE GROWTH

Simplifying at all levels

Standing out from the competition with differentiated brands

Proximus, the banner of a single brand

One brand: Proximus. One company: Belgacom

Building the future culture: "From Good to Gold"

Always more simplicity

CONTENT TO VIEW, EXPERIENCE AND SHARE, EVERYWHERE AND ANYTIME

Content creates added value

Convergence with 4 dimensions

A customer retention argument

At any time and on any type of screen

An expanded offer for all tastes

Football news

TV Replay

Privileged partnerships

Proximus SA Annual Report 2013