Proximus SA — Management Reports 2011

Mar 18, 2011

Consolidated management report¹

Belgacom Group

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

Revenues

Operating expenses

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

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

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

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

The additional revenue from BICS since the start of the year, at typically lower margins, has significantly increased the Cost of Sales for the Belgacom Group, going up 26.6% to EUR 2,642 million. However, like-for-like⁴ , the Cost of Sales was flat compared to last year. This is mainly the result of the positive effect that some regulatory measures⁵ had on the Cost of Sales.

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

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

……………………………………………………………………………………………………………………………………………

……………………………………………………………………………………………………………………………………………

¹ Detailed financial results as from page 10

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

³ On 30 November 2009, MTN transferred its international carrier services to BICS in exchange for a 20% stake in BICS. As a result, Belgacom's interest in BICS was diluted from 72% to 57.6%. On 1 January 2010, Belgacom acquired control of BICS and BICS became fully consolidated. 4

Consolidating BICS at 57.6%

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

⁶ HR expenses: i.e. personnel expenses and pensions

EBITDA

2010 EBITDA contribution per BU (in mio €)

Tax Expense

…………………………………………………………………………………………………………………………………………… * Normalized effective tax rate

The Group EBITDA for the full-year 2010, before non-recurring items, came in at EUR 1,984 million, i.e. 1.5% higher than for 2009. On a like-for-like basis⁸ , the EBITDA decreased by 1.3%, i.e. equal to the regulation impact which lowered the 2010 EBITDA by EUR 26 million. Excluding the regulation impact, Belgacom maintained its full-year EBITDA flat to last year.

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

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

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

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

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

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

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

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

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

2

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

Free Cash Flow*

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

Moreover, the 2010 Free Cash Flow was positively impacted by lower income tax payments as the legal entity merger resulted in the anticipated use of the Belgacom SA tax losses carried forward, and because of the lower tax pre-payment ratio, creating positive timing differences.

Furthermore, Belgacom ended the year 2010 with a higher EBITDA (before non-recurring items). These positive impacts were, however, partly offset by the increase in capex.

……………………………………………………………………………………………………………………………………………

……………………………………………………………………………………………………………………………………………

(*) Cash flow before financing activities

Net financial position

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

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

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

Consumer Business Unit - CBU

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

CBU revenues

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

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

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

……………………………………………………………………………………………………………………………………………

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

Fixed voice revenue of EUR 506 million declined 9.8% year-over-year, driven by the loss in access lines, the recurring discounts on Packs and some regulatory measures¹¹ . The CBU line loss of 2010 was contained to -129,000 lines versus -138,000 a year earlier. This resulted in a total fixed line base of 1,933,000 by end 2010, including Scarlet VoIP customers.

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

……………………………………………………………………………………………………………………………………………

¹⁰ 2009 results adjusted for intercompany items and changes in revenue and cost allocation

¹¹ Implementation of a financial collecting model and lower fixed-to-mobile tariffs following the cut in mobile termination rates

¹² Lower roaming tariffs, the cut in mobile termination rates and the implementation of a collecting model for Premium Rate Services

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

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

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

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

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

CBU operating expenses

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

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

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

……………………………………………………………………………………………………………………………………………

CBU segment result and contribution margin

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

¹³ 2009 results adjusted for intercompany items and changes in revenue and cost allocation

Enterprise Business Unit - EBU

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

EBU revenues

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

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

……………………………………………………………………………………………………………………………………………

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

…………………………………………………………………………………………………………………………………………… 2010 2009 2008

Fixed

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

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

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

6

1.545

1.491

1.441

¹⁵ Lower fixed-to-mobile rates consequently to the lower MTR as of 1 August 2010 and the impact of the financial collecting model for Premium Rate Services.

¹⁶ The turnover from Mobile Voice used to include intercompany revenue, which was mainly linked to inbound revenue (Fixed-to-Mobile).

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

¹⁷ Lower MTR and Roaming rates, and the collecting model for premium rate services since 1 April 2010

¹⁸ This number does not include the 8,000 internal mobile cards that have been cancelled in the first quarter of 2010 following the legal entity merger

Fixed internet customers (in '000)

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

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

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

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

EBU operating expenses

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

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

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

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

EBU segment result and contribution margin

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

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

……………………………………………………………………………………………………………………………………………

……………………………………………………………………………………………………………………………………………

¹⁹ Compared to 2009, excluding intercompany revenue

²⁰ Non-SMS mobile data

²¹ As of 1 July 2010, all customers are by default on a maximum financial limit of EUR 49.85 (excl. VAT) per month for Data roaming, unless they have opted out.

²² Compared to 2009, adjusted for intercompany Cost of Sales which are no longer included as of 2010

Service Delivery Engine & Wholesale – SDE&W

SDE&W revenues

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

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

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

……………………………………………………………………………………………………………………………………………

……………………………………………………………………………………………………………………………………………

SDE&W operating expenses

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

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

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

Staff & Support – S&S

S&S revenues

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

S&S operating expenses

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

……………………………………………………………………………………………………………………………………………

²⁴ Revenues were mainly pressured by the financial collecting model for Premium Rate services and, to a lesser extent, by the regulation on Roaming tariffs, Mobile Termination Rates and new LLU and bitstream prices as from August 2010.

International Carrier Services - BICS

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

BICS revenues

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

BICS gross margin

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

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

……………………………………………………………………………………………………………………………………………

BICS EBITDA and margin

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

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

BICS Volumes

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

Quarterly results as reported

Results have not been restated for reporting changes

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

Group – Financials

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

* before non-recurring items

Group – Capex

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

CBU - Financials

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

CBU – Operationals

	Q109	Q209	Q309	Q409	2009	Q110	Q210	Q310	Q410	2010
FROM FIXED
Number of access channels (thousands)	3,164	3,130	3,114	3,102	3,102	3,120	3,098	3,076	3,046	3,046
PSTN	2,013	1,979	1,956	1,934	1,934	1,904	1,877	1,850	1,817	1,817
ISDN	3 8	3 7	3 6	3 4	3 4	3 2	3 1	3 0	2 8	2 8
IP*	7 1	7 0	6 5	6 0	6 0	9 3	9 2	9 0	8 8	8 8
ADSL, VDSL	1,042	1,044	1,057	1,075	1,075	1,091	1,099	1,107	1,113	1,113
Traffic (millions of minutes)	1,230	1,124	1,060	1,181	4,594	1,178	1,052	1,004	1,140	4,374
National	1,022	918	869	973	3,781	976	857	824	942	3,599
Fixed to Mobile	105	109	101	108	423	104	103	9 4	102	404
International	102	9 7	9 0	100	390	9 8	9 1	8 6	9 6	371
TV (thousands)	555	589	663	752	752	814	868	920	975	975
TV - households	486	513	575	652	652	713	753	795	839	839
of which second stream users	7 0	7 5	8 8	100	100	100	115	125	135	135
ARPU (EUR)
ARPU Voice	21.7	21.6	21.5	21.7	21.7	21.2	20.3	20.3	20.9	20.7
ARPU broadband	28.6	28.1	29.1	29.0	28.7	28.7	28.5	28.1	27.6	28.2
ARPU Belgacom TV	20.4	19.2	20.6	21.3	20.4	20.7	19.1	19.3	19.7	19.7
FROM MOBILE
Number of active customers (thousands)	3,787	3,809	3,829	3,824	3,824	3,739	3,745	3,773	3,769	3,769
Pre-paid	2,229	2,224	2,235	2,199	2,199	2,169	2,160	2,153	2,123	2,123
Post-paid	1,451	1,488	1,510	1,530	1,530	1,538	1,557	1,573	1,604	1,604
MVNO	107	9 7	8 4	9 5	9 5	3 1	2 9	4 7	4 2	4 2
Annualized churn rate (blended - variance in p.p.)	19.6%	20.8%	21.5%	20.5%	20.7%	20.9%	20.1%	21.8%	22.8%	21.4%
Net ARPU (EUR)
Prepaid	13.3	14.4	13.8	14.6	14.2	14.3	15.0	14.7	15.3	14.8
Postpaid	35.3	36.4	36.5	35.8	35.7	32.5	32.9	32.1	31.4	32.2
Blended	21.6	22.7	22.6	22.8	22.5	21.5	22.3	21.8	22.0	21.9
Blended voice	15.3	15.9	15.9	15.7	15.7	14.5	15.2	14.9	14.5	14.8
Blended data	6.3	6.8	6.7	7.1	6.7	7.0	7.1	7.0	7.5	7.1
UoU (units)	262.9	290.5	275.7	312.4	286.0	318.0	335.1	307.1	345.3	326.5
MoU (min)	107.9	112.9	108.9	111.8	110.5	104.0	109.8	104.8	106.0	106.1
Normalized MoU (min)	93.6	96.5	95.6	96.9	95.6	86.1	88.9	87.6	90.5	88.7
SMS (units)	156.0	178.7	167.8	201.8	176.5	215.2	226.5	203.5	240.5	221.6
Normalized SMS (units)	68.3	72.2	69.0	80.3	73.4	85.3	87.1	85.7	101.2	90.6

* As from Q1 2010 Scarlet VoIP customers are included

EBU - Financials

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

EBU – Operationals

	Q109	Q209	Q309	Q409	2009	Q110	Q210	Q310	Q410	2010
FROM FIXED
Number of access channels (thousands)	1,974	1,958	1,946	1,937	1,937	1,922	1,912	1,901	1,886	1,886
PSTN	664	657	652	649	649	647	644	641	636	636
ISDN	854	847	840	830	830	818	810	801	791	791
IP	1 1	1 1	1 2	1 2	1 2	1 1	1 2	1 2	1 3	1 3
ADSL, VDSL	445	443	442	446	446	445	446	446	445	445
Traffic (millions of minutes)	901	837	770	828	3,336	848	790	727	781	3,145
National	620	569	522	567	2,278	579	529	487	529	2,123
Fixed to Mobile	176	171	157	169	672	173	168	153	165	660
International	105	9 7	9 1	9 2	386	9 6	9 3	8 6	8 7	362
ARPU (EUR)
ARPU Voice	31.3	30.9	30.1	30.9	30.8	30.9	30.2	29.0	29.7	30.0
ARPU Broadband	40.1	39.8	40.1	39.7	39.9	39.4	39.1	39.0	38.7	39.1
FROM MOBILE
Number of active customers (thousands)	1,170	1,190	1,211	1,235	1,235	1,252	1,271	1,286	1,303	1,303
Post-paid	1,170	1,190	1,211	1,235	1,235	1,252	1,271	1,286	1,303	1,303
Annualized churn rate (blended - variance in p.p.)	10.7%	11.0%	9.0%	9.9%	10.2%	10.6%	10.9%	10.0%	10.8%	10.6%
Net ARPU (EUR)
Postpaid	54.5	53.6	51.1	50.1	52.4	46.9	47.0	44.7	42.8	45.3
Postpaid voice	42.1	40.7	37.6	37.2	39.5	34.8	34.5	32.4	30.9	33.1
Postpaid data	12.4	12.9	13.4	12.9	12.9	12.1	12.5	12.3	11.9	12.2
UoU (units)	388.5	389.2	365.4	387.8	382.4	360.7	363.6	345.3	372.8	361.3
MoU (min)	355.4	354.5	329.3	346.6	346.0	319.7	321.8	305.6	327.3	319.2
Normalized MoU (min)	337.9	338.9	313.5	327.7	327.7	287.4	282.7	265.8	281.7	279.8
SMS (units)	64.7	68.4	68.6	76.5	69.6	74.6	77.0	74.7	85.5	78.1
Normalized SMS (units)	53.3	54.3	53.8	57.6	54.5	59.1	60.0	59.2	66.9	61.4

SDE&W - Financials

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

S&S - Financials

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

BICS - Financials

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

BICS – Operationals

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

Other information

Rights, commitments and contingencies as of 31 December 2010

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

Use of financial instruments

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

Circumstances which may considerably impact the development of the Group

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

Research and development activities

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

• Study of the potential of new technologies:
• o Opportunities raised by IP technology that have become ubiquitous in all types of networks and services such as Synchronous Ethernet for backhauling in the mobile network, evolution to IPv6, Access Gateway to replace the old technologies supporting voice services (PSTN, ISDN);
• o Fibre to the Home study (FTTH): technical and economical studies have been conducted to determine the most appropriate evolution path, taking into account the evolution of the users" bandwidth needs;
• o Environment (Green): this is a continuous focus for Belgacom. Innovations to help increase awareness, and offer future solutions to decrease the CO2 footprint in Belgium are being demonstrated in a newly created Innovation Lounge;
• o Smart Metering: new technologies were tested concerning the putting in service of smart meters in the consumer environment.
• Introduction of new technologies:
• o IMS (IP Multimedia Subsystems): further developments were executed on this platform to support all the future voice services (Voice over IP…);
• o Important IT projects have been launched aiming at improving the customer experience by offering more interactivity and more flexibility. They also contribute at improving the internal operational efficiency, reducing the troubleshooting time and facilitating the fixed-mobile convergence;
• o Continuing research in the context of the Belgium HF project to develop ICT means allowing to better foresee heart attacks.
• Evolution of the technology in terms of improvement and existing services extension such as:
• o The IPTV platform (TV over IP): after the introduction of High-Definition television, the TV platform continues to be enriched with new functionalities to improve the customer experience. 3D TV has been investigated and demonstrated;
• o VDSL2: this technology continues to be deployed and additional functionalities are being analyzed and developed to improve its potential.
• The preparation of the introduction of new services:
• o Technical pilot projects were deployed in the framework of mobile payment. Different pilot projects in several sectors were set up in order to prepare a commercial launch.

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

Treasury shares

Disclosures related to treasury shares are reported in note 15 of the consolidated financial statements.

Major risks and uncertainties

Belgacom's operating income and net income may decline if growth in the Belgian telecommunications market continues to slow down or if pressure on margins should continue without being compensated by increased volumes in the international carrier services business. Also, the continuing strong competition in the Belgian market from both cable companies and mobile operators could result in loss of market share. However, Belgacom is taking the necessary measures to stay competitive. These measures could lead to reduced rates, through additional promotions or other means. Furthermore, pursuing a strict cost control policy continues to be one of Belgacom's priorities.

To safeguard its competitive position, Belgacom attaches great importance to maintaining and further developing a high-quality network; the broadband network, among others, continues to be renewed with fiber to the street cabinet. This is producing a strong increase in capacity, which allows new products and services, including Internet and TV services, to be developed. This in turn will enable Belgacom to retain current customers and attract new ones. The need for the development and implementation of new technologies may oblige Belgacom to make significant additional investments.

Certain products and services are subject to national or European regulation, such as broadband services, fixed telephony and mobile termination and roaming tariffs. This regulation can have an impact on the pricing of these products and services and, as a consequence, on turnover and operating profits.

Risks related to important ongoing claims and judicial procedures are reported in note 33 of the consolidated financial statements.

Capital management

The purpose of the Group"s capital management is to maintain net financial debt and equity ratios that allow for security of liquidity at all times via flexible access to capital markets, in order to be able to finance strategic projects and to offer an attractive remuneration to shareholders. The latter was updated by the Belgacom Board of Directors of 25 February 2010 and Belgacom now commits to return, in principle, most of its annual consolidated cash flow before financing activities (or "Free Cash Flow"), to its shareholders. The return of free cash flow either through dividends or share buybacks, will be reviewed on an annual basis, in order to keep strategic financial flexibility for future growth, organically or via selective merger and acquisition projects, with a clear focus on value creation. This also includes confirming appropriate levels of distributable reserves. Over the two periods presented, the Group didn"t issue new shares or any other dilutive instrument.

Post-balance sheet events

Disclosures related to post-balance sheet events are reported in notes 33 and 39 of the consolidated financial statements.

Internal control and risk management systems

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

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

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

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

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

1. Control environment

1.1 Organization of internal control

In accordance with the bylaws, Belgacom has an Audit and Compliance Committee (A&CC), which consists of five 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 "licenciate" in commercial and financial sciences. He occupied during his career several functions as CFO, CEO and COO. Amongst his non-executive functions he is also member of the Audit Committee of Avis Europe.

The A&CC"s role is to assist and advise the Board of Directors in its oversight on (i) the financial reporting process, (ii) the efficiency of the systems for internal control and risk management of Belgacom, (iii) the Belgacom"s internal audit function and its efficiency, (iv) the quality, integrity and legal control of the statutory and the consolidated financial statements of Belgacom, including the follow up of questions and recommendations made by the auditors, (v) the relationship with the Company"s auditors and the assessment and monitoring of the independence of the auditors, (vi) Belgacom"s compliance with legal and regulatory requirements, (vii) the compliance within the organization with the Belgacom"s Code of Conduct and the Dealing Code. The A&CC meets at least once every quarter.

1.2. Ethics

The Board of Directors has approved a Corporate Governance Charter and a Code of Conduct "The way we do responsible business". All employees must perform their daily activities and their business objectives according the strictest ethical standards and principles, using the company values (Respect, Can do and Passion) as guiding principle.

The Code "The way we do responsible business", which is available on www.belgacom.com, sets out the above-mentioned 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 non finance staff on accounting policies and procedures.

1.4. Roles & Responsibilities

Belgacom"s internal control system benefits from the fact that throughout the whole organization, roles and responsibilities are clearly defined. Every business unit, division and department has its vision, mission and responsibilities, while on individual level, everybody has a clear job description and objectives.

The main role of the Finance Division is to support the divisions and affiliates by providing accurate, reliable and timely financial information for decision making, to monitor the business profitability and to manage effectively corporate financial services. The establishment of the external financial reporting falls under the responsibility of the Corporate Accounting department that is structured on the principles of local accounting units combined with centralized support and consolidation.

Through the local accounting units, the accounting responsibility for the different affiliates of the same "subgroup" are centralized into one accounting team, taking into account the geographical location and the integration into these affiliates, which positively contributes to the accuracy and reliability of reported figures.

The accounting teams of the mother company Belgacom assume this accounting responsibility for the major Belgian companies, but also provide the central support to the other accounting teams. For this centralized support, the organization is structured according to the major (financial) processes. These major processes include capital expenditures and assets, inventories, contracts in progress & revenue recognition, financial accounting, operational expenditures, provisions & litigations, payroll, post employment benefits and taxes. This centralized support organized around specific processes and IFRS standards allows for in depth accounting expertise and ensures compliance with group guidelines.

The consolidation of all different legal entities into the Consolidated Financial Statements of the Belgacom Group is realized centrally. The consolidation department defines and distributes information relating to the implementation of accounting standards, procedures, principles and rules. It also monitors changes in regulations to ensure that the financial statements continue to be prepared in accordance with IFRS, as adopted by the European Union. The monthly instructions for consolidation set forth not only the schedules for preparing accounting information for reporting purposes, but also includes detailed deadlines and items requiring particular attention, such as complex issues or new internal guidelines.

1.5. Skills & Expertise

Adequate staffing is a matter to which Belgacom pays careful attention. This requires not only sufficient headcount, but also the adequate skills and expertise. These requirements are taken into account in the hiring process, and subsequently in the coaching and formation activities, facilitated and organized by the Belgacom Corporate University.

For financial reporting purposes, a specific formation cycle was put in place, whereby junior as well as senior staff have to participate mandatory. These internally and externally organized accounting seminars cover not only IFRS but local accounting rules & regulations, Tax and Company law & regulations as well. In addition, the knowledge and expertise is also kept up to date and extended for more specific domains for which staff is responsible (revenue assurance, pension administration, financial products, etc.) through attendance to seminars and self-study. Furthermore, employees also attend general formations session on Belgacom new business product & services.

2. Risk analysis

Belgacom believes that Risk Management is fundamental to corporate governance and the development of sustainable business. The group has adopted a risk philosophy that is aimed at maximising business success and shareholder value by effectively balancing risk and reward.

The objective of Risk Management is not only to safeguard the Group"s assets and financial strength but also to protect Belgacom"s reputation.

The Group"s Enterprise Risk Management (ERM) covers the full spectrum of risks ("potential adverse events") and uncertainties that Belgacom could encounter. Belgacom ERM is a structured and consistent framework for assessing, responding to and reporting on risks that could affect the achievement of company strategic development objectives. It seeks to maximise value for shareholders by aligning risk management with the corporate strategy, assessing the emerging risk from regulation, new technologies or the market, and developing risk tolerance and mitigating strategies. Belgacom ERM is reviewed and updated every year since 2006. This risk assessment and evaluation takes place as an integral part of Belgacom annual strategic planning cycle. The resulting report on major risks and uncertainties is then reviewed by the management committee, the CEO and the A&CC.

Financial Reporting - new transactions and new upcoming standards

It is the responsibility of the Corporate Accounting department to follow-up on the evolution in area of new upcoming standard (both local GAAP and IFRS). Changes are identified, and the impact on the Belgacom financial reporting is proactively analyzed.

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

On a regular base, the A&CC is informed about new upcoming financial reporting standards and their potential impact on the Belgacom Group financials.

3. Risk mitigation factors and control measures

3.1. General risk mitigation factors and control measures

Belgacom mitigation response strategies depend on the nature of the risk and may often combine various actions, including insurance, increased vendors SLA"S/ liabilities, credit scoring, risk avoidance or active risk management through people, processes and systems.

The cost of risk mitigation is considered in determining response strategies. Certain risks are consciously accepted based on their potential limited impact on the Belgacom organization and/or their low level of materiality. Risk such as political, economic, regulatory are beyond Belgacom control and mitigation is limited to responsive actions to limit their impact.

For every important transaction which is submitted to the Belgacom Management Committee or Board of Directors, the risk & uncertainties triggers and the necessary mitigation actions to be taken are reported, as well as the potential accounting impact on the Belgacom Financial Statements.

3.2. Detailed and structured Financial Statement Closing Process

Clear roles and responsibilities in the Closing Process of the Group Financial Statement have been defined. During the monthly, quarterly, half-yearly and annual financial statement closing processes, there is a continuous monitoring on the different steps. In addition, different controls are performed to ensure quality and compliance with internal and external requirements and guidelines.

For Belgacom and its major affiliates, a very detailed closing calendar is established, which includes in detail cross-divisional preparatory meetings, deadlines for ending of specific processes, exact date and hours when IT sub-systems are locked, validation meetings and reporting deliverables.

For every process and sub-process, different controls are performed, including preventive controls, where information is tested before being processed, as well as detective controls, where the outcome of the processing is being analyzed and confirmed. Specific attention is given to reasonableness tests, where financial information is being analyzed by more underlying operational drivers, and coherence tests, where financial information from different areas is brought together to confirm results or trends, etc.. Tests on individual accounting entries are performed for material or non-recurrent transactions and on a sample basis for others. The combination of all these tests provides sufficient assurance on the reliability of the financials.

4. Information and Communication

4.1. Financial reporting IT systems

The accounting records of the Company and most of its affiliates are kept on large integrated IT systems. Operational processes are often integrated in the same system (e.g. supply chain management, payroll). For the billing systems, which are not integrated, adequate interfaces and a monitoring system have been developed. For the consolidation purposes, a specific consolidation tool is used.

The organizational set-up and access management are designed to support an adequate segregation of duties, prevent unauthorized access to the sensitive information and prevent unauthorized changes. The set-up of the system is regularly subject to the review by the internal audit department or external auditors.

4.2. Effective Internal communication

Most of the accounting records today are kept under IFRS as well as local GAAP. In general, financial Information delivered to management and used for budgeting, forecasting and controlling activities is established under IFRS. A common financial language used throughout the organization positively contributes to an effective and efficient communication.

4.3. Reporting and validation of the financial results

The financial results are internally reported and validated on different levels. On the level of processes, there are validation meetings with the business process owners. On the level of the affiliates, a validation meeting is organized with the accounting and controlling responsible. On Belgacom group level, the consolidated results are split per segments. For every segment, the analysis and validation usually includes comparison with historical figures, as well as budget-actual and forecast-actual analysis. Validation requires (absences of) variances to be analyzed and satisfactorily explained.

Afterwards, the financial information is reported and explained to the Belgacom Management Committee (monthly) and presented to the A&CC (quarterly).

5. Supervision and assessment of internal control

The effectiveness and efficiency of the internal control are regularly assessed in different ways and by different parties:

• Each owner is responsible for reviewing and improving its business activities on a regular basis: this includes a.o. the process documentation, reporting on indicators and monitoring of those.
• In order to have an objective review and evaluation of the activities of each organization department, Belgacom"s Internal Audit department conducts regular audits across the company" operations. The independence of Internal Audit is ensured via its direct reporting line to the Chairman of the A&CC. Audit assignments performed may have a specific financial processes scope but will also assess the 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 company with the Code of Conduct and Dealing Code is regularly discussed.
• Except for some very small foreign affiliates, all legal entities of the Belgacom Group are subject to an external audit. In general, this audit includes an assessment of the internal control, and leads to an opinion on the statutory financials and on the (half-yearly and annual) financials reported to Belgacom for consolidation. In case the external audit reveals a weakness or identifies opportunities to further improve the internal control, recommendations are made to management. These recommendations, the related action plan and implementation status are at least annually reported to the A&CC.