annual registration...

(Translation)

Annual Registration Statement(Report form 56-1)

True CorporationPublic Company Limited

ContentsPage

Part I Executive Summary 1

Part II The Listed Company 2

1. Risk Factors 3 2. Nature of Business 8 3. Details of each Business Line 13

3.1 Products and Services 13 3.2 Marketing Strategy 21 3.3 Distribution and sales 23 3.4 Procurement of Products and Services 24 3.5 Thai Telecom Industry 24 4. Research and Development 33 5. Operating Assets 34 6. Future Projects 36 7. Legal Disputes 37 8. Capital Structure 40 8.1 Company’s Securities 40 8.2 Shareholders 49 8.3 Dividend Policy 50 8.4 Liabilities Structure 50 9. Management 66 9.1 Management Structure 66 9.2 Remuneration for the Company’s Directors and the Executive Officers 73 9.3 Corporate Governance Report 77 9.4 Insider Trading Policy 83 9.5 Personnel 84 10. Internal Controls 86 11. Connected Transactions 87 12. Financial Status and Performance 99 12.1 Company’s Auditors and Significant Accounting Policies 99 12.2 Summary of Financial Statements 100 12.3 Financial Ratios 103

12.4 Management’s Discussion and Analysis 10412.5 Audit Fees 112

13. Other Related Information 113 Appendix 1: Information of Directors and Executive Officers 115 Appendix 2: Information of Director of Subsidiaries 128

Part III Acknowledgement of the correctness of the information 132

True Corporation Public Company Limited Annual Registration Statements (Report Form 56-1)

TRUETB: Executive Summary 1

PPAARRTT IIEEXXEECCUUTTIIVVEE SSUUMMMMAARRYY

True Corporation Public Company Limited, (“TRUE” or the “Company”) and its affiliates,provide telecommunications services under the Agreement for Joint Operation and JointInvestment for Expansion of Telephone Services (“Agreement for Joint Operation andJoint Investment”) awarded by the Telephone Organization of Thailand (currently is TOTCorporation Plc. or “TOT”) and True’s subsidiary made the Agreement to Operate and toProvide Cellular System Radio Telecommunication Services of Digital PCN (PersonalCommunication Network) 1800 (“Agreement to Operate and to Provide Cellular SystemRadio Telecommunication Services”) with the Communications Authority of Thailand(currently is CAT Telecom Plc. or “CAT”).

The Company’s vision is to become the leader in convergence solutions and a lifestyleenabler. The True group is well placed to take advantage of this convergence. We areThailand’s most integrated operator and our strategy is to drive growth by being theleader in convergence solutions and a lifestyle enabler. By integrating our mobile,broadband, fixed line and pay-TV assets (with the acquisition of UBC), we will be able tooffer the “triple play” of voice, data and video services plus mobile – a so called“quadruple play”. While the True group saw many opportunities for growth in 2006,there were a number of general and specific factors that may affect the Company’sperformance and that of its subsidiaries. Please see details in “Risk Factors” in Part II

The True group’s businesses could be classified into six categories as follows:1) Wireless from which the companies earn major income about 54.40 percent of thetotal income (as of 31st December 2005), 2) Fixed line and Value Added Services, 3)Multimedia Network and Broadband, 4) Data Service, 5) Internet, and 6) OtherBusinesses

Consolidated and Company Balance Sheets and Financial Highlights as at 31 December2005 are as follows:

- Total assets Baht 108,058 million- Total liabilities Baht 107,751 million- Total shareholders’ equity Baht 307 million- Net profit (loss) Baht (4,269) million

More details could be found in Part II of this report which is corporate information.

In this Form 56-1, “TRUE”, “Company”, “Affiliates”, and “Subsidiaries” refer to True Corporation Public Company Limited and/or its affiliates and/or its subsidiaries. In case of uncertainty of which company is responsible or execute and of which businesses appeared in the Form 56-1, you may send your questions to

IR OfficeTrue Corporation Public Company Limited18 True Tower, Ratchadaphisek Road, Huai Khwang, Bangkok 10310Telephone 66 (0) 2699-2515 Fax 66 (0) 2643-0515E-mail: [email protected]


TRUETC: The Listed Company 2

PPAARRTT IIIITTHHEE LLIISSTTEEDD CCOOMMPPAANNYY

True Corporation Public Company Limited, Type of Business: Telecommunication

Head Office: 18 True Tower, Ratchadaphisek Road, Huai Khwang, Bangkok 10310

Public Company Registration No. Bor Mor Jor. 82 Home Page: www.truecorp.co.th

Telephone: 66(0) 2643-1111 Fax: 66(0) 2643-1651


TRUETD: Risk Factors 3

11.. RRIISSKK FFAACCTTOORRSS

While True group saw many opportunities for growth in 2006, there were a number ofgeneral and specific factors that affected the Company’s performance and that of itssubsidiaries.

Risks relating to our operationsWe have experienced, and expect to continue to experience, increasingcompetition in the businesses in which we operate.

True and its subsidiaries, particularly True Move (formerly TA Orange) and its Internetand broadband businesses, face increasing competition.

The Thai mobile communications sector has recently experienced intense pricecompetition, with True Move and several of its competitors significantly reducing tariffsduring the period from April to June 2005. Despite increases in tariffs after this period ofprice competition, our blended ARPU for mobile declined by 10% in the year 2005,primarily as a result of this competition. Recent changes of ownership in our keycompetitors may also expose us to competition from foreign-owned operators with moreadvanced technology, experience in other competitive markets and greater financialresources than we enjoy.

In the broadband Internet market, we face competitors ranging from start-up Internetcompanies to multinational companies, whose applications for ISP licenses have recentlybeen approved by the National Telecommunication Commission (NTC). In the wirelinebusiness, we expect to face growing competition from new licensees granted by the NTCas well as from Voice over Internet Protocol (VoIP) services, whose tariffs are lower thanthat for traditional wireline operators. To date, the NTC has issued VoIP licensesapplying only to services for calls made from computer-to-computer and computer-to-telephone, whereas telephone-to-computer and telephone-to-telephone calls via VoIPservices are still prohibited.

We expect competition to remain intense in the future, but we believe the True group iswell positioned to meet this given its leadership position in the Internet/Broadbandmarket and True Move’s expanding customer base. True, via its subsidiaries, has appliedfor new licenses to take advantage of new opportunities offered by regulatory reform.Up to the time of writing, we have been granted an ISP license and have applied forlicenses for an international Internet gateway, Internet Exchange, cellular and fixed lineservices.

Rapid technological change could also adversely affect the viability of True’sbusiness and make its own technology less competitive.

The communications industry is characterized by rapid changes in technology, evolvingcustomer needs and new products and services. These changes are, in some cases,brought about by regulators opening up the market. Key emerging technologies for theThai communications industry in the near future are expected to include third generation(3G) mobile phones, wireless broadband, and VoIP services for which the NTC has or isplanning to issue licenses. In order to respond successfully to emerging industry trends,



we may be required to make substantial capital expenditure given the industry’s capitalintensive nature.

However, we believe that integrated operators, such as ourselves, with diversifiedservices, products, revenues and customer bases, are in a better position to cope withthese rapid changes than are ‘pure play’ operators. We believe that we have a strongerability to manage potential revenue cannibalization from new technologies by being ableto keep services and revenues ‘in-house’ and by being able to balance traffic across ourmobile, broadband, and fixed line services.

Our future success depends on our key personnel and continued operations ofour network and services.

Our success depends on the continued contribution of our management and employeesas well as the continued operation of our network. We have established human resourcepolicies in order to retain and develop our management team and staff. Compensation isset at a competitive rate compared to the market. In addition, we have establishedrecruitment processes to ensure that we recruit capable staff in the first place.

Continued unrest in the southern part of Thailand, as well as unforeseen disasters, maycause temporary disruption in certain geographical areas of our business. The southernpart of Thailand has recently experienced increasingly frequent incidents of violence.True Move and several other cellular operators recently experienced temporaryinterruption of services following damages to a number of cell cites as a result of theviolence. Incidents such as these, over which we have no control, may continue to havean impact on our businesses.

Risks relating to regulatory environmentThailand’s communications industry is in a state of transition and a significantdegree of uncertainty exists regarding the regulatory environment.

In accordance with Thailand’s commitment to the World Trade Organization, or theWTO, to liberalize its telecommunications sector by 2006, the Thai governmentembarked on a reform of the country’s telecommunications regulatory regime with thepassage of two major legislative acts: the act on Organizations Allocating FrequencyWaves and Supervising Radio and Television Broadcasting and TelecommunicationsBusiness, or the NTC act, in March 2000; and the Telecommunications BusinessOperation Act, or the TBO Act, in November 2001.

In October 2004, the National Telecommunication Commission, or the NTC, wasestablished as the new independent regulator of the telecommunications industry,assuming the regulatory functions previously exercised by the Telephone Organization ofThailand (now known as TOT Corporation Public Company Limited or the TOT), theCommunications Authority of Thailand (now known as CAT Telecom Public CompanyLimited, or CAT), and the Post and Telegraph Department.

During the first three quarters of 2005, we faced a shortage of available mobile phonenumbers. We were finally allocated an additional one million numbers in August 2005.Since then, the NTC has allocated us an additional two million numbers in February



2006, in accordance with new regulations that stipulate a maximum 15-day period forconsideration and approval.

From its establishment until the end of the year 2005, the NTC has issued regulationsprescribing, among other things (i) licensing requirements for the various definedcategories of telecommunications services (ii) eligibility requirements and applicationprocedures for the three categories of telecommunications licenses available in Thailand(iii) interim measures for allocating telephone numbers (iv) interim telecommunicationslicense fees and (v) interim ISP license fees.

The NTC has also declared plans to issue a number of policies and regulations in 2006,including Consumer Protection, Competition Code, Interconnection and 3G regulations.These new regulations could put us at a disadvantage to our competitors. It is alsopossible that policies imposed by the NTC may affect True’s operating costs and/orincrease competition in the sectors in which we operate.

The NTC’s interim telecommunications license fee regulation has set out a lower tariffstructure for new entrants that operate under the licensing regime than the tariffs thatare applicable to the existing concessionaires, such as True and its subsidiaries, that areoperating their businesses under the concession agreements granted by TOT and CAT.This could put the existing concessionaires at a disadvantage to the new entrants. Tomitigate against this, the True group will apply for new licenses that are offered by theNTC.

The True group will also continue to play an active role in discussions with the NTCregarding the telecommunication industry’s regulatory environment and to advocatefree-and-fair competition on a level playing field.

We compete with our concession grantors and this has led to and couldcontinue to lead to disputes with them, which could affect our operations.

True and its subsidiaries operate under the “Agreement for Joint Operation and JointInvestment for Expansion of Telephone Services” and/or licenses granted by TOTCorporation Public Company Limited (TOT) and “Agreement to Operate and to ProvideCellular System Radio Telecommunication Services of Digital PCN (PersonalCommunication Network) 1800” granted by CAT Telecom Public Company Limited (CAT).

A dispute with either TOT or CAT over compliance with the said agreements could affectthe True group’s ability to conduct business. The Agreement for Joint Operation andJoint Investment could be cancelled by TOT if True violates laws relating to public ornational security, the Company is placed under receivership by a court in a bankruptcycase, or willfully and continually breaches the said agreement in any material respect.However, TOT must submit the case to the Arbitration Tribunal for adjudication before itcan cancel the said agreement with True.

Under the revenue sharing provisions of the Agreement for Joint Operation and JointInvestment, TOT collects all of True’s fixed line revenues and retains a portion forrevenue sharing. TOT may withhold or delay payments from revenues collected for Trueto offset any obligations it believes it is owed (although this has not occurred to date).



As well as being the grantor of the Agreement for Joint Operation and Joint Investment,TOT is also our main competitor in the BMA fixed line market. This has and couldcontinue to lead to disputes between the True group and TOT, which can deny or put onhold our requests to launch new services. TOT and the True group have brought somedisputes to the Administrative Court and the Arbitration Tribunal for adjudication. Wemay not be able to successfully resolve any of these disputes in our favor, and if wewere unsuccessful, our business and financial condition could be affected. Up to the timeof writing, the Courts have delivered judgments both in favor and against cases broughtto the Courts by True. For detailed information of material arbitration proceedings weare involved in with TOT, see “Legal Disputes”.

Risks relating to financial situationOur operations are restricted by debt and other financial agreements and aresubject to exchange rate and interest rate movements that may increaseinterest payments and other financial obligations.

The True group’s operation is restricted by a number of debt and other financialagreements. These agreements could prohibit us from exploiting good businessopportunities or lead to accelerated debt repayment if TOT cancels the concessionagreement with True. However, TOT must seek an arbitration decision in order to cancelthe concession agreement.

The True group is subject to exchange rate fluctuations, which could increase interestpayments. True and its subsidiaries had total consolidated debt of Baht 95.4 billion as atDecember 31, 2005, including a bridging loan to buy UBC shares. Of this totalconsolidated debt, 24 percent is denominated in foreign currencies (Japanese Yen andUS Dollar). In 2005, True group had consolidated capital expenditure of approximatelyBaht 10.3 billion, 32.4 percent of which was in foreign currencies.

The True group has put in place hedging tools to reduce its exposure to exchange ratefluctuations, primarily for the majority portion of a USD 170 million loan belonging toTrue Move and a USD 291 million bridging loan for the UBC acquisition. However, thereis no hedging in place for the Japanese Yen denominated loan of Baht 3.9 billion, whichmatures in 2014 to 2017.

Of True’s total consolidated debt 54.5 percent is subject to floating interest rates andvulnerable to rate increases. However, interest rates for some parts of True Move’sdebt will step down over time if it is able to achieve conditions set out in its loanagreement.

We may not be able to pay a dividend to shareholders.

As at the end of 2005, True reported a net loss of Baht 4.3 billion with a retained loss ofBaht 47.7 billion due largely to the Thai Baht currency devaluation in 1997. Inaccordance with Thailand’s Public Company Limited Act, True is able to pay dividends toits shareholders only from profits earned, after provision has been made for a legalreserve, and after cumulative losses have been depleted.Therefore, shareholders may not receive a dividend in the near future as is stated inTrue’s dividend policy.



Risks relating to UBC acquisition.We may not realize the anticipated benefits of the possible integration ofUnited Broadcasting Corporation Public Company Limited, or UBC, and wemay share a number of risks associated with the UBC business.

We believe that we will accrue a number of benefits from the acquisition of UBC, whichinclude, among others: improvement in our ability to drive subscriber and revenuegrowth through bundling and cross-selling of services; improvement in our ability tomanage churn rates; and improved access to rich content assets.

Achieving the anticipated benefits from the acquisition may depend on, among others,commitment of time and focus from True management, the ongoing development of ourexisting operations, and market readiness for new products and services.

We may not be able to realize the anticipated benefits from the acquisition and we mayhave to share a number of risks associated with the UBC business, including, amongothers, the following:

UBC relies on third-party suppliers for substantially all of its programming. If UBC isunable to obtain attractive programming or if the cost of this programmingsubstantially increases in the future, its revenues would be adversely affected.

Unauthorized access to UBC’s programming signals is difficult to prevent and willadversely affect its results of operations, cash flow and programming arrangements.

UBC’s core pay television business is susceptible to new competitors and indirectcompetition that could reduce its market share and cause its results of operations andcash flow to suffer.

UBC is subject to significant foreign exchange risk because a substantial portion of itsrevenues is denominated in Baht while a significant portion of its obligations isdenominated in U.S. dollars.


TRUETE: Nature of Business 8

22.. NNAATTUURREE OOFF BBUUSSIINNEESSSS

Company Background and Major Developments

True is the most integrated communications solutions provider in Thailand.

We were incorporated in November, 1990, and registered as a public limited company in1993 under our former name, TelecomAsia Corporation Public Company Limited. Webegan trading on the Stock Exchange of Thailand in December 1993 with the securitysymbol “TA”.

In April 2004, as part of a rebranding under the ‘‘True’’ brand name, we changed ourname to True Corporation Public Company Limited and adopted the security symbol“TRUE”.

Backed by Asia’s largest agro-conglomerate, the Charoen Pokphand Group (with anapproximately of 34 percent shareholding), we provide consumers, small and mediumenterprises, and corporations with a full range of voice, data and multimedia solutionscustomized to meet their needs. We are a leading fixed line service provider and thelargest broadband provider in the Bangkok Metropolitan Area (BMA), and a major playerin the cellular, Internet and pay-TV markets.

Major subsidiary and affiliated companies in the True Group include True Move (formerlyTA Orange), the third largest mobile phone operator in Thailand, True Internet, No.1ISP, and United Broadcasting Corporation (UBC), Thailand's leading pay televisionoperator.

In 1991 we entered into a Build-Transfer-Operate (BTO) Agreement with TOTCorporation Public Company Limited (TOT) to build, install, jointly operate and maintaina two million-line wireline network in the BMA for a period of 25 years. We commencedreceiving revenue from the operation of our wireline network in November 1992. InSeptember 1995, we were granted approval to expand our wireline network by anadditional 600,000 lines.

We received additional approvals to provide value-added, public payphone and otherservices, and launched the PCT service in 1999, hi-speed data transmission servicesincluding ADSL and cable modem in 2001, and Wi-Fi services in 2003.

In October 2001, we indirectly acquired a 41.1% equity interest in TA Orange. Fullcommercial launch of TA Orange’s mobile telecommunications service in Thailand tookplace in March 2002. In September 2004, we increased our shareholding in TA Orangeto 82.86% and began to fully consolidate the results of Bangkok Inter Teletech Co.,Ltd/TA Orange from the beginning of the fourth quarter of 2004.

At the end of 2005, the True group had an annual turnover more than Baht 51 billion,infrastructure investments of more than Baht 100 billion, and employed more than 9,000staff.



Key Developments in 2005

February 2005 TA Orange signs a USD 133 million contract with Alcatel to expand itsGSM/GPRS mobile network coverage and capacity and to upgrade itsnetwork with EDGE, 3G/UMTS and mobile Next Generation Network.

TA Orange launches Music World, a value-added non-voice serviceoffering mobile music.

March 2005 True launches VDSL (Very high bit-rate Digital Subscriber Line)technology for corporate and SME customers.

Launch of ‘True Sphere’, a customer affinity program targeted at elitecustomers.

April 2005 True launches Thailand’s first pre-pay hi-speed Internet service.

‘True Station’ Internet cafes make their debut in mass transit stationsthroughout Bangkok.

May 2005 True launches White Net, an Internet filtering service for families andchildren.

June 2005 NC True, a joint venture with Korea’s NC Soft, launches ‘Lineage II’, atop rating 3D Massive Multi-Player Online Role Playing Game(MMORPG).

True opens its first lifestyle concept shop, showcasing True and TAOrange services and products.

True extends the ‘All Together Bonus’ to include university students,offering a maximum bonus of Bt 5,000 free off-peak talk-time on TAOrange for university tuition fee receipts.

July 2005 True upgrades its Internet backbone to 10 Gbps.

August 2005 True lowers barriers to broadband Internet, launching a Bt 1 modemcampaign.

True partners with Intel to pilot WiMax technology in Thailand.

September 2005 True launches Trueworld.net, an online portal offering music, games,e-books, and sports content.

TA Orange launches Blackberry services.

True launches True Money subsidiary to operate an electronic cash andpayment business, and introduces Mobile Money Cash Card allowingcustomers to purchase True services and content.



December 2005 True extends its lifestyle brand by collaborating with Siam Ocean Worldto offer multi-media information at Thailand’s largest aquarium.

True shareholders approve the acquisition of pay-TV operator UBC,paving the way for True to become a ‘triple player’ with marketleadership in voice, data, and video.

The final phase of debt restructuring for the PCT business iscompleted, leading to a gain of Bt 801 million.

TA Orange subscriber base reaches 4.5 million at year-end.

The number of broadband subscribers reaches 300,322 at year-end,representing approximately 80% of the broadband market in theBangkok Metropolitan Area.

The number of True Wi-Fi hotspots exceeds 2,000 at year-end.

February 2006 TA Orange changes its name to True Move, allowing True to betterleverage the synergies of the True brand.

Awards received in 2005

True was named “Best Competitive Carrier” for the second consecutive year inthe Telecom Asia Magazine Awards

True was voted by consumers as a Thailand Superbrand for the secondconsecutive year in the Readers’ Digest Asia Superbrand Survey.

True was named “Most Promising Service Provider” in the Frost & Sullivan AsiaPacific Technology Awards 2005.

True received the 2005 Bangkok Art Directors Association’s award for CalendarGraphic Design.

True’s website received the award for the highest hits among corporate websitesfrom NECTEC, at the Truehits Web Awards 2005.

True was named as an ”Organization with Good Employee Welfare and Benefits”by the Department of Labor Protection & Welfare, Ministry of Labor.

Business Profile of the Company, Subsidiaries and Associated Companies

Currently, the Company’s products and services can be classified into major categories asfollows:

1) Wireless (PCT and Mobile Phone)2) Fixed line and Value Added Services3) Multimedia Network and Broadband4) Data Service5) Internet6) Other Businesses

True

Cor

pora

tion

Publ

ic C

ompa

ny L

imite

dAn

nual

Reg

istr

atio

n St

atem

ents

(Rep

ort

Form

56-

1)

TRU

ETE:

Nat

ure

of B

usin

ess

11

N

OTE

:

N

on a

ctiv

ities

com

pani

es

The

gro

up re

gist

ratio

n in

Tha

iland

as

follo

ws:

Tele

Eng

inee

ring

and

Serv

ices

Co.

, Ltd

. (99

.99

%),

Asia

DBS

Pub

lic C

ompa

ny L

imite

d (8

9.99

%),

Tele

com

Inte

rnat

iona

l Co.

, Ltd

.(99.

99 %

),

Tele

com

Equ

ipm

ent M

anuf

actu

ring

Co.

, Ltd

. (59

.99

%),

Song

Dao

Co.

, Ltd

. (82

.80

%)

The

gro

up re

gist

ratio

n in

fore

ign

as fo

llow

s :

Tele

com

Inte

rnat

iona

l Chi

na C

o.,L

td.(9

9.99

%),

TA O

rient

Tel

ecom

Inve

stm

ent C

o., L

td. (

99.9

9 %

), Te

leco

m A

sia

(Chi

na) C

o., L

td.(9

9.99

%),

K.I.

N. (

Thai

land

) Co.

, Ltd

.(99.

99 %

), C

hong

qing

Com

mun

icat

ion

Equi

pmen

t Co.

,Ltd

. (38

.21%

)

INVE

STM

ENT

STR

UC

TUR

E BY

BU

SIN

ESS

GR

OU

PAs

at 3

1 D

ecem

ber

2005

2.6

milli

on lin

e Te

leph

one

Serv

ices

, Val

ue A

dded

Serv

ice

and

Dig

ital D

ata

Net

wor

k

True

Cor

pora

tion

Publ

ic C

ompa

ny L

imite

d

Mul

timed

ia N

etw

ork

and

Broa

dban

dW

irele

ss (P

CT

and

Mob

ile P

hone

)

Asia

Wire

less

Com

mun

icat

ion

Co.

, Ltd

. 99.

99 %

True

Mov

e C

o., L

td. 8

2.76

%

(form

erly

nam

ed T

A O

rang

e C

o., L

td.)

Ren

tal B

usin

ess

Oth

er B

usin

ess

Con

stru

ctio

n an

d D

istri

buto

r

True

Pro

perti

es C

o., L

td.

99.9

9 %

True

Fle

et M

anag

emen

t Co.

, Ltd

. 99.

99 %

Oth

ers

Wire

& W

irele

ss C

o., L

td.

87.5

0 %

Bang

kok

Inte

r Tel

etec

h P

CL

82.8

6 %

True

Dis

tribu

tion

& Sa

les

Co.

, Ltd

. 82.

70 %

(form

erly

nam

ed T

A O

rang

e Re

tail

Co.

, Ltd

.)

Thai

Sm

art C

ard

Com

pany

Lim

ited

10.7

6%Te

leco

m T

rain

ing

and

Dev

elop

men

t Co.

, Ltd

. 99.

99%

True

Mon

ey C

o., L

td. 9

9.99

%

(form

erly

nam

ed T

pay

Co.

, Ltd

.)Tr

ue L

ifest

yle

Reta

il Co.

, Ltd

. 99.

99 %

( for

mer

ly n

amed

Yai

Kae

w C

o., L

td.),

True

Tou

ch C

o., L

td. 9

9.99

%

(form

erly

nam

ed U

-Net

Co.

, Ltd

.)

K.I.N

. (Th

aila

nd) L

imite

d 99

.99

%N

ilubo

n C

o., L

td. (

fore

ign

com

pany

) 99.

99 %

Tele

com

Hol

ding

Co.

, Ltd

.99.

99 %

NEC

Cor

pora

tion

(Tha

iland

) Co.

, Ltd

. 9.6

2 %

Asia

Rem

anuf

actu

ring

Indu

strie

s C

o., L

td. 2

0.00

%

Hol

ding

Com

pany

Bus

ines

s

Asia

Info

net C

o., L

td.

65.0

0 %

Inte

rnet

True

Dig

ital E

nter

tain

men

t Co.

, Ltd

. 82.

03 %

True

Inte

rnet

Co.

, Ltd

.99.

99 %

True

Inte

rnet

Dat

a C

ente

r Co.

, Ltd

. 70.

00 %

NC

Tru

e C

o., L

td. 4

0.96

%

True

Mul

timed

ia C

o., L

td. 9

0.45

%

Uni

ted

Broa

dcas

ting

Cor

pora

tion

PCL

40.5

9 %

Dig

ital D

ata

Net

wor

k

True

Mul

timed

ia C

o., L

td. 9

0.45

%

(Per

cent

age

of v

otin

g rig

ht)


TRUETF: Details of each business line 13

33.. DDEETTAAIILLSS OOFF EEAACCHH BBUUSSIINNEESSSS LLIINNEE

3.1 Products and Services

True Corporation is the most integrated communications solutions provider in Thailand and one of the country’s largest brands. Backed by Asia’s largest agro-conglomerate, the Charoen Pokphand Group (with approximately 34 percent shareholding), the True Group currently provides consumers, small and medium enterprises, and corporates with a full range of voice, data and multimedia solutions customized to meet their needs. We are a leading fixed line service provider and the largest broadband provider in the Bangkok Metropolitan Area (BMA), and a major player in the cellular, Internet and pay-TV markets.

Major subsidiary and affiliated companies in the True Group include True Move (formerly TA Orange), the third largest mobile phone service in Thailand, True Internet, No. 1 ISP, and United Broadcasting Corporation (UBC), Thailand’s leading pay television operator.

1. Wireline (Fixed line and Value-Added Services)

In August 1991, True was awarded a 25-year term of Agreement for Joint Operation and Joint Investment under a Build Transfer Operate (BTO) term to construct, install, maintain and jointly operate a two million-line wireline network in the BMA. We were subsequently granted to operate an additional 600,000 lines. We transferred our fixed line network to TOT. TOT collects service charges from customers and then sends back a proportion of revenue to the Company. Under the said agreements, our revenue sharing is based on gross revenue before the deduction of related expenses, at the rate of 84 percent for 2 million lines and 79 percent for 600,000 lines. The Company has 82 percent revenue sharing from each value-added service and 76.5 percent of the public phone. As at December 31, 2005 True had 1,989,664 fixed line subscribers, consisting of 1,383,291 residential lines and 606,373 business lines. True added 45,143 fixed line subscribers in the year 2005 with joint promotion with broadband services. However, ARPU declined by 8.5 percent to Baht 493 due to continued migration of traffic to mobile service.

Telephone Subscription and Installation

Customers can subscribe for wireline telephone services at 77 True Shops throughout theBMA, or through the Tele-ordering Center, an account executive or a direct salesrepresentative. Customers can contact the Call Center and report faults using the sameeasy to remember number (0-2900-9000). They can also report faults through the 1177Service Center, which provides 24-hour service. Technical support is provided by 21Bangkok Service Area and Maintenance Centers throughout the BMA, which can fixbusiness customer problems within four to eight hours and residential faults within 24hours.



The following table shows the number of fixed line subscribers and ARPU for the periodsindicated:

As of December 31Fixed Line2002 2003 2004 2005

Subscriber 2,020,402 1,962,074 1,944,521 1,989,664- Business lines 506,600 543,321 572,342 606,373- Residentiallines

1,513,802 1,418,753 1,372,179 1,383,291

ARPU (Blended) 572 542 538 493

Value-Added Services

In addition to fixed line or wireline services, the Company offers a range of value-addedservices to meet customers’ needs, including:

• The Company has provided a public phone service in the BMA since 1997 with 20,000 telephone units. In April 2002, the Company gained approval to install an additional 6,000 telephone units, bringing the total number of units to 26,000.

• Voice Mailbox, Call Waiting, Conference Calling, Call Forwarding, Hot Line, Abbreviated Dialing, Automatic Call Repetition and Outgoing Call Barring.

• Caller ID displays incoming call number on Call ID phone.The Company also provides services for corporate customers requiring a large number of telephone lines and provides a range of valued-added services including:

• Direct Inward Dialing (DID automatically directs incoming calls to a party).• The Hunting Lines service bundles two or more telephone lines at one

location into a single number.• The Integrated Service Digital Network (ISDN) enables a telephone network

to handle all forms of voice, data and image communications simultaneously on the same telephone line.

• Televoting is a special service for companies with peak periods of shortm e s s a g e traffic. It enables companies to perform a lot of marketing activity withouti n v e s t i n g in infrastructure. Vote results are available in as little as five seconds.

• Free Phone 1-800 allows businesses to provide their customers with a freecontact call service. The cost of customer Free Phone calls are automaticallybilled to the business. Customers can call from any telephone by dialing 1-800followed by six digits.

• Voice conferencing service enables customers to make conferences via telephone lines wherever and whenever they are.

2. Wireless (Personal Communications Telephone-WE PCT and Mobile -True Move)

The WE PCT business is operated by Asia Wireless Communication Company Limited (AWC),a True subsidiary. The mobile phone business is operated by True Move Co., Ltd. (formerlyTA Orange). The Company has an almost 83 percent shareholding in True Move, heldthrough Bangkok Inter Teletech Public Company Limited (BITCO).



2.1 Personal Communications Telephone Business (WE PCT)

The Company operates WE PCT through its subsidiary, AWC, in which it holds a 99.99percent equity interest. Together with AWC, the Company officially launched its PCTservice in November 1999 as a value-added service of its wireline network under wirelineagreement. The Company is entitled to 82.0 percent of the revenue generated from suchservice and AWC is entitled to approximately 70 percent of this amount. The PCT serviceis also available to TOT subscribers. TOT shares approximately 80 percent of revenuereceived from its subscriber to the Company as a PCT network rental fee.

A subscriber's PCT phone number is the same as his or her wireline number. Up to ninePCT handsets can be used with one wireline number, with each handset holder assignedan individual access code so callers to the wireline number can direct their calls to aspecific person. PCT can be used anywhere within the inner area of BMA. In September2004, the PCT brand was repositioned as “WE PCT” to reflect the strategy of buildingcommunities and bringing together people via free calls within the PCT network.

The following table shows the number of PCT subscribers and ARPU for the periodsindicated:

As of December 31WE PCT2002 2003 2004 2005

Subscriber1/ 604,340 549,295 472,846 469,125ARPU 361 282 268 318

1/ including PCT Buddy (prepaid service)

In 2005, AWC launched a Bt 300 package promotion with free on-net calls and Bt 3 percall for local and domestic long distance calls and calls to mobile. This helped to increaseARPU and retain subscriber base.

2.2 Mobile Phone Business (True Move)

The Company operates mobile telecommunications business under the Agreement toOperate and to Provide Cellular System Radio Telecommunication Service of Digital PCT1800 granted by CAT expiring in September 2013. The Company operates this businessthrough its subsidiary, True Move, in which the Company indirectly holds an 82.86percent equity interest. Under said agreement, True Move is required to pay (i) an accessfee to TOT of Baht 200 per month for each telephone number assigned to postpaidsubscribers and 18% of the gross revenues derived from sales of prepaid phone cards tosubscribers on a monthly basis and (ii) revenue sharing to CAT of 20% of net revenueafter the access charge. The revenue sharing will increase to 25.0 percent on September16, 2006 and remain at this higher rate until September 15, 2011 before increasing to30% until the end of the concession.

True Move is the third largest mobile telecommunications service provider in Thailand bynumber of subscribers with a market share of approximately 15.1% as of December 31,2005. We operate a digital network based on the Global System for MobileTelecommunications, or GSM, standard, which operates on the 1800 MHz frequencyband.



Subscribers;Since the launch of our mobile services in Thailand, True Move has recorded strongsubscriber growth each year. Most of our subscribers are prepaid subscribers. Prepaidsubscriptions minimize mobile subscriber credit risks and reduce billing and collectioncosts.

The following table sets forth certain information with respect to our mobile businessduring the periods indicated:

As of December 31True Move2002 2003 2004 2005

Subscribers - Prepaid 877,057 1,539,735 2,927,818 4,009,470 - Postpaid 459,171 285,255 452,565 449,173Total Subscriber 1,336,228 1,824,990 3,380,383 4,458,643Subscriber Growth - 36.6% 85.2% 31.9%Blended ARPU 642 508 437 393 -Prepaid ARPU 486 368 348 321 -Postpaid ARPU 763 1,016 1,030 911

True Move services

Post Pay

True Move’s post-paid service allows customers to choose a monthly services plan from arange of Baht 499, 500, 800 or 1300 per month.

Pre Pay

Pre Pay is True Move’s prepaid service. Once the prepaid balance has been spent, top-upcan be done via many channels including “Easy Top Up” range of services, which offersJust Talk customers convenient new ways to top up their mobile phone accounts. “MobileTop Up” lets Just Talk customers transfer prepaid credits from one mobile phone toanother. Another Easy Top Up is “Home Top Up”, which allows True Move customers touse their True fixed-line account to top up their mobile phone. The latest channel is ourpartners and shops displaying the Mobile Top Up logo.

Direct Business

True Move offers Direct Business, an advisory service dedicated to helping businessesfind the best possible solutions to their communication needs. Through careful analysis,dedicated teams can identify and create customized communication solutions forbusinesses.



Multi-Media Services

True Move provides a range of multi-media services to enhance customer’s lifestyles.These can be downloaded via GPRS under trueworld.net portal and include four newservices launched in 2005:

“Music World”, which offers an attractive selection of mobile music services

with activities to build communities of music lovers.

“Voice SMS”, which enables customers to express their feeling easier and

longer.

“Color Mail”, a mix and match MMS service.

“Mobile Chat”, a new chat experience over a GPRS network.

Other True Move services launched in 2005 include:

Dual Phone: integrates GSM mobile phone and mobile office phone systems

(PCT).

Nan Jing Jing SIM for customers who want to top up less but have a longer

period of validity.

BlackBerry: provides users with superior email and text messaging capabilities

and delivers an end-to-end solution unmatched in the industry. BlackBerry

features are comprehensive and proven security architecture.

3. Data Transmission Services

True provide data transmission services using various technologies including:

Digital Data Network (DDN) or Leased Line - a private network that facilitates voice, data and image transmission between two different points at a stable speed. This service is especially suited to customers, such as banks and financial institutions, which rely upon continuous transmission of accurate data or information, often in large volumes. The Company can provide a wide range of DDN speeds to suit customer needs, starting from 64 kbps to more than 140 Mbps with guaranteed service quality. As of December 31, 2005 the Company had installed 10,216 circuits. The Company and its subsidiary, True Multimedia, are offering DDN service in BMA and upcountry areas. IP Access Service (IPAS), offered under the name Megaport, provides a total remote dial access solution for customers who require an external access port. These include Internet service providers, Web information providers, and business groups, which require a Virtual Private Network Service, but do not want to bear the additional cost for equipment and management of the access port.

Trunking access is an Internet connection circuit, which connects to your access server to receive 30 lines (or multiple of 30 lines) dialing concurrently from a nationwide telephone system, with a single easy to remember number.



Metronet is fiber-to-the-building technology that enables high-speed data transmission through Fiber-optic cable, with reliable ring network architecture. It is designed to provide a simple network configuration, with wider bandwidth capacity for business customers. Metronet offers a range of data transmissions speeds from 512 Kbps to 1 Gbps.

Network Manager is an outsourced network management service that can

advise on a range of functions, from infrastructure investment to network

design and implementation. The service also provides network system

monitoring, performance reporting and planning for future network expansion.

Mail Fax enables customers to send via a traditional fax and recipients to

receive it via their e-mail.

MPLS VPN is a virtual private network which operates by generating secure

channels within a shared network, maintaining the privacy and security of

organization’s communications and data. MPLS VPN exploits the advantages

of IP (Internet Protocol) which are its extensibility, scalability, and low cost

compared with leased line communications, together with the benefits of

Frame Relay, which offers stability and improved information management

(Quality of Service). The service is suitable for organizations, which have

branches in different regions and wish to connect them together in the most

cost-effective way.The following table shows the number of DDN circuit and ARPU for the periods indicated:

As of December 31DDN2002 2003 2004 2005

Circuit 7,104 7,835 9,001 10,216ARPU 18,659 16,591 11,014 10,411

4. Multimedia and Consumer Broadband Services

The Company provides broadband (both wireline and wireless) and Hybrid Fiber-OpticCoaxial, or HFC, network services. These services are provided by our subsidiary, TrueMultimedia, in which we hold a 90.5% equity interest. Under the terms of our multimediaservices agreement, which we refer to as the Non-POTS license, TOT has granted us thenon-exclusive right to provide analog and digital high-speed transmission services,excluding voice communication services, throughout Thailand until October 20, 2017.

Consumer Broadband services;

True Multimedia provides broadband network access using cable modem and DSLtechnologies to ISPs including our subsidiaries, True Internet and Asia Infonet, as well asto corporate subscribers. As at December 31, 2005 the Company had 300,322 broadbandsubscribers, mostly using DSL technology.ADSL is an always-on, high-speed Internet service up to 4 Mbps. Customers can surf theInternet and talk on the phone at the same time.



Our wireline network was designed to carry voice and data traffic on a reliable and costeffective basis. As a result, our network is fiber-rich, has advanced, intelligent electronicswith Internet Protocol (IP) capabilities, and a relatively short 'last mile’ copper loop,averaging 3-4 kilometers.

This allows us to provide a faster, more stable broadband service and to realize lowerinstallation, operating and maintenance costs. The network not only provides ADSL, butalso ADSL2+, G.SHDSL and Gigabit Ethernet, and is well positioned for eventual evolutioninto an IP-based Next Generation Network (NGN).

In March 2005, The True Group launched VDSL (Very High-Speed Digital Subscriber Line)technology that provides high-speed Internet data transmission at rates of 6 Mbps - 10Mbps to its business customers. The VDSL service is available in two special packagesthat enable enterprises and SMEs to run their businesses more efficiently and smoothly.

In April 2005, we also launched Thailand’s first Pre Pay hi-speed Internet service. Pre Payhi-speed Internet delivers speeds up to four times faster than an ordinary dial-upmodem, at a rate of only 0.24 Baht per minute charged on actual usage and with nomonthly fee. The new service provides an alternative for hi-speed Internet customersseeking value for money and convenience.

In 2003, The Company and certain other service providers, such as MKSC, startedoffering wireless broadband services or Wi-Fi (Wireless Fidelity). As of December 31,2005, we had over 2,000 Wi-Fi hot spots in locations such as coffee shops, restaurants,hotels, hospitals, department stores, movie theaters, convention centers and officebuildings.

5. Internet

The Company provides Internet (including content and applications) services through, (i)Asia Infonet, in which the Company has a 65.0% equity interest, under a concessionwhereby CAT granted a non-exclusive right to provide commercial Internet services tousers throughout Thailand until 2006 over facilities leased from CAT or any entityapproved by CAT, and (ii) True Internet, in which the Company has a 99.99% equityinterest. In September 2005, True Internet received approval from the NTC for a TypeOne ISP license effective from August 18, 2005. The True Group maintained its No. 1 ISPwith 716,703 subscribers as at Dec 31, 2005, representing a decline from 1.2 mnsubscribers as at the end of 2004. The subscriber decline reflected the transfer of dial-upsubscribers to broadband and an adjustment in a calculation method for the dial upusers.

The following table certain Internet subscribers, during the periods indicated.

As of December 31Internet Users2002 2003 2004 2005

Internet subscriber 344,618 652,726 1,231,344 716,703** The decline was due to the transfer of dial up users to broadband and a change incalculation method in dial up users.



Service offerings

To capitalize on the growth opportunities, our Internet-based services business offersInternet access, Internet content and applications, web page development, portal, andeCommerce consulting services.

Internet access services. Our Internet-based services business offers dial-up, broadband,free e-mail and web page hosting to subscribers in Bangkok and other major provinces.The Company currently provides access speeds from 56 Kbps - 4 Mbps to consumers andfrom 6 Mbps – 10 Mbps to business customers.

Corporate network and technology services. The True Group provides our corporatesubscribers with a full range of e-Commerce services, including end-to-end webdevelopment solutions, such as web design, development, implementation and hostingservices. In May 2004, the Company opened our Internet Data Center to provide server-based support in the form of co-location, dedicated server hosting and web hosting toour corporate subscribers.

Online portal and content. The True Group operates our online portal atwww.trueworld.net through which the Company offers a comprehensive range ofmultimedia content and services to subscribers. Our online portal is a subscription-basedportal and aggregates content and services from local and international providers,including music, sports, animated cartoons and links to online versions of certainpublications.

NC True, a joint venture between the Company and NC Soft, the world’s leadingdeveloper and publisher of online computer games in Korea, launched Lineage II,number one 3D Massively Multiplayer Online Role Playing Game (MMORPG) in 2005.

Applications services. The True Group offers various applications to enhance Internetsecurity and Internet content filtering software applications. The True Group also offersTrue White Net, which is an Internet filtering software that enables users to detect andfilter out obscene or other objectionable content on the Internet. The True Group alsoplans to offer email filtering and anti-virus services.

6. Cable Television services;United Broadcasting Corporation Public Company Limited, or UBC, our associatedcompany, transmits cable television programs to a portion of its customers through 35analog channels on our HFC network leased from True Multimedia. True Multimediaconnects a drop wire to link our HFC network to the homes of these UBC customers, andinstalls and maintains the cable television set-top boxes used by these customers. As atDecember 31, 2005 UBC had 483,816 cable TV subscribers.

7. Other services

The Company also provides vehicle rental services, network installation services, sale oftelecommunications equipment, accessories and other wireline products, call centeroutsourcing services, building rental services and network leasing services.



3.2 Marketing Strategy

The Company aims to provide customers with tailored solutions and a range of bundledtelecommunications services. It believes that demand for a combination of wireline,wireless, Internet and multimedia products and services will increase significantly infuture. In addition to providing access to the latest products and services, the Companyand its subsidiaries want to become more customer-centric and improve distributionchannels. During 2005, the True Group launched different solutions to match needs ofeach group of customers, examples of which are as follows;

For consumers, True launched its Cyber Home services, offering home monitoring,automation, security and communication services through a one-stop-shop portal atwww.truecyberhome.com. The portal also offers financial services and links to partnerhousing and condominium developers.

True also launched ‘True delivery’, allowing consumers and business customers to orderTrue products and services via 02-900-8000 or www.truecorp.co.th, for delivery within 24hours in the Bangkok Metropolitan Area.

True provided the communications infrastructure and network for Siam Paragon,Thailand’s premier retail complex, installing an Internet Protocol (IP) telephony system totenants as part of a ‘Smart Shop’ concept – the first of its kind in Thailand. True alsopartnered with aquarium developer Oceanis International Pty, extending the scope of itslifestyle brand by providing multimedia content on marine life at Siam Ocean World,Thailand’s largest aquarium, located at Siam Paragon.

For SME customers, True launched an innovative ‘Dual Phone’ solution that integratesGSM mobile phone and WE PCT phone systems, offering convenience and a very costeffective solution.

True partnered with Siemens to provide corporate customers with solutions for fixed linevoice communications, combining True’s fixed line telephone and managed voice serviceswith Siemens’ communications systems and advanced technology.

True offered its Managed Network Services solution to corporate customers and signedan agreement with Sammitr Motors Group to manage, monitor and maintain all of itsnetworks from the True Internet Data Center (TIDC).

In addition, the True Group intends to execute the following core strategies for its keygrowth drivers, Consumer Broadband and True Move, as follows;

Strategies for Consumer Broadband business

Maintain market leading access speeds

During 2005 we launched new services to maintain our market leading access speeds. InMarch, we launched Very high bit-rate Digital Subscriber Line (VDSL) technologydelivering data transmission at speeds up to 10 megabits per second, with a packagespecially designed for small and medium enterprises. In July, we upgraded the Internetbackbone to 10 Gbps, the fastest in Thailand, marking continued development by Truetowards an IP NGN. We also expanded services to more provinces upcountry.



Lowering barriers to entry

During the year 2005 we continued to lower the barriers to entry for ConsumerBroadband. In April we launched a promotion offering the first two-month’s subscriptionfree of charge and introduced Pre-pay broadband for light broadband users. In the thirdquarter, we offered new subscribers a broadband modem and wireline connection for 1Baht and provided double free off-peak talk time on True Move through the All TogetherBonus.

Content to fuel demand

In September 2005, the True Group launched the Trueworld.net subscription-basedportal, offering rich content that includes music, gaming (including Lineage II), sports, e-books, and TV programming to fuel demand for broadband.

Wi-Fi Hotspots

During the year we significantly expanded the number of Wi-Fi hotspots to 2,000 –maintaining leadership as the largest provider in Thailand – and bundled Wi-Fi packageswith our Consumer Broadband offers. We signed partnerships in 2005 to provide Wi-Fiservices to The Mall Group department stores and shopping centers, including the newSiam Paragon, and to the Siam Center.

As we move into 2006, bundling offers that combine True Move, Wi-Fi and our contenton Trueworld.net will continue to drive broadband usage, and to grow market share forTrue Move.

Other

Other strategies included showcasing the lifestyle benefits of broadband Internet toconsumers at our True Cafes and True Stations, partnering with property developers tooffer Cyber Home services, providing value-added services including White Net filteringand Norton Anti-Virus software, and launching video conferencing for SMEs and largeenterprises.

Strategies for True Move‘Best Value’ Positioning

True Move differentiates itself through ‘best value’ positioning that combines competitivepricing with the True group’s strength in bundling services and integrating its rich contentassets.

Bundling allows True Move to win market share by competing on value not just on price,and helps to manage churn rates, since subscribers with two or more services are slowerto churn. Through the All Together Bonus, we are able to offer value through free off-peak talk time for spending on other True services. Since its launch in April 2004, the AllTogether Bonus has helped to drive subscriber growth, manage churn rates and improvenetwork efficiency (since the talk time is redeemable in off-peak hours).

Looking forward to 2006, True Move will bundle its services with broadband, dial-upInternet and WiFi services, and content on Trueworld.net.



Non-Voice Services Growth

True Move has led the market with its content offerings, and its subscriber base of largelyyoung, early adopters has responded strongly to them. During the year 2005 True Moveadded Music World, offering mobile music services and downloads, complementing itsexisting gaming, photo, cartoon, and financial information services. True Move alsolaunched Visual Radio, a service allowing users to see pictures and information whilelistening to the radio on their mobile handset, enhanced its Voice SMS service, andintroduced ‘Color Mail’, an MMS service offering customized multimedia messages.

For SME and enterprise customers, True Move partnered with Research in Motion to bringBlackberry email services to Thailand.

Non-voice revenues grew 136.2% in 2005, GPRS subscribers more than doubled and970,000 subscribers signed up to the Ring Back Tone in the first twelve months. Withthis rapid uptake, True Move has the highest percentage of non-voice users of the topthree mobile operators.

Looking forward, True Move is well positioned to use content as a growth driver byleveraging the content assets of Consumer Broadband and UBC.

Convenient payment solutions

True has introduced convenient payment solutions for its customers, launching TrueMoney in 2005, which operates an electronic cash and payment business to introduce the‘Mobile Money Cash Card’ that replaces cash for True Move and True customers.

Network Expansion & Development

During 2005 we continued to expand capacity to meet strong subscriber growth andextend our network coverage. True Move had capacity for 5.6 million subscribers atyear-end 2005. We are increasing population coverage and expect to achieve 92 percentby mid-2006, with capacity increasing to approximately 6 million by year-end 2006. Theincreased capacity and coverage will open up opportunities for True Move subscribergrowth within the BMA and in upcountry areas.

During the year the True Group partnered with Intel Corporation to trial WiMax, anemerging wide-area wireless broadband technology that offers high data rates of up to75 Mbps and wider cell coverage - typically 2-10 kilometers in urban areas and 50kilometers in rural areas.

True Move also signed a US$133 million contract with Alcatel to expand the Alcatel-powered GSM/GPRS mobile network and to upgrade it with EDGE and 3G/UMTS.

3.3 Distribution and sales

Our sales efforts are divided into three major segments: consumer, SME and corporatesegments. To reach the consumer segment, the Company offers all of our servicesthrough our 77 Shops in the BMA and 39 shops in the provinces. Each of these outlets isstaffed with our personnel and is equipped for “one-stop” shopping, offering a range ofwireline and wireless communications services and wireline telephone, PCT and mobilehandsets, accessories, ADSL modems and other telecommunications equipment, as well



as, in the case of the larger True stores, Internet access service. The Company also sellsour products and services throughout Thailand through accredited dealer shops andindependent distributors and dealers who work on a commission basis. The Company hastele-ordering centers to allow customers to order or purchase our products and servicesover the telephone.

The Company has an account executive dedicated to each of the SME and corporatesegments, and sales managers and sales executives servicing the various SME andcorporate subscribers. The Company also employs a direct sales force to market ourservices to SME and corporate subscribers.

3.4 Procurement of Products and Services

Network Capacity for Services

The Company believes that its extensive fiber-optic network covering all over BMA givesit a key competitive advantage. Voice and data travel through the fiber-optic cablenetwork at a higher speed than through copper wire or radio wave. In addition, thenetwork architecture can eliminate call failures due to accidental interruption or any othercauses. The network has a spider web design covering all of the service area, whichenables True to utilize other routes when one breaks down.

Network Acquisition

The Company primarily imports network equipment directly from leadingtelecommunications technology suppliers from around the world, including Siemens,Alcatel, Lucent, NEC and Huawei. The Company has also employed a number of suppliersto assist in network acquisition and installation to expand its service coverage, and is notdependent upon any specific distributor or supplier.

Technical and Management Support

The Company has acquired technical and management support from VerizonCommunications, Inc. No further support has been provided since the middle of 2003after Verizon sold its shareholding in the Company. However, Verizon had transferredsubstantial telecommunication expertise to the Company during the time when it was ashareholder of the Company. The Company’s management team is capable of operatingwithout support from Verizon.

3.5 Thai Telecom Industry

Fixed line Telephone BusinessAt the end of 2004, Thailand's wireline penetration rate was approximately 11.0%.According to estimates from TOT, telephone lines in Thailand have grown fromapproximately 5.9 million lines in 2001 to approximately 6.5 million lines by the end of2004, representing a compound annual growth rate of approximately 3.1%. In the year2005, True added 45,143 in new fixed line subscribers, mostly from offering fixed lineservice together with broadband Internet service.



Table: Number of fixed line subscribers as of December 31, 2004

As of December 31, 2004Fixed-lineoperator BMA Provinces Total

TOT* 1,485,690 1,912,762 3,398,452The Company** 1,944,521 1,944,521

TT&T* 1,188,013 1,118,013Total 3,430,211 3,100,775 6,460,986

Source: * Data from www.tot.co.th**Data from the Company

The wireline market in Thailand is currently serviced by three companies. TOT, the stateenterprise that formerly regulated the provision of wireline telephone services, is still theonly nationwide provider of local and domestic long distance wireline telephone servicesin Thailand. There are two other providers of wireline telephone services in Thailand,both operating under concessions granted by TOT. We provide wireline telephoneservices in the BMA and TT&T Public Company Limited, or TT&T, provides wirelinetelephone services in certain provinces of Thailand. As of December 31, 2004, we believewe had approximately 56.7% of the wireline market in the Bangkok Metropolitan Area(BMA) based on the number of subscribers.

Our wireline telephone business has been affected in recent years by the increasingavailability of alternative services, in particular, mobile telephone services. Consumers areincreasingly substituting wireline telephone services with mobile phone services as aresult of the convenience offered by mobile services, value-added features of mobilephones, improvements in the quality of mobile phone calls and the setting of mobiletariffs below wireline tariffs, in particular, the aggressive price promotions launched in thesecond quarter of 2005 by mobile operators.

In addition, our wireline telephone business is expected to face growing competition fromVoIP services whose tariffs are lower than that for traditional wireline operators. RisingInternet usage and the growing availability of personal computers (PCs) are alsoexpected to be factors driving increasing use of PCs by Thai consumers to make VoIPcalls. To date, the National Telecommunication Commission (NTC) has issued VoIPlicenses applying only to services for calls made from computer-to-computer andcomputer-to-telephone, whereas telephone-to-computer and telephone-to-telephone callsvia VoIP services are still prohibited. We plan to apply for licenses to provide full VoIPservices and offer them when granted.

Since September 1, 2003, wireline operators have been permitted to launch reduced-tariff promotions for domestic long distance calls and calls to mobile phones. In early2004, wireline operators were permitted to launch six-month promotions under a flexibletariff structure, with the pre-existing tariff rates as the ceiling rates. The flexible tariff isavailable until the end of 2006. In addition, wireline telephone operators have also beenoffering value-added services, such as caller ID services, to better serve customers'needs. All these measures have made wireline services more competitive althoughwireline operators continue to be adversely affected by mobile substitution. Theliberalization of the telecommunications sector may also result in new entrants in thewireline telephone business, creating even further competition.



Cellular and PCT businesses

The Thailand mobile market has experienced significant growth in recent years.According to estimates from the International Telecommunications Union (ITU), theThailand mobile market has grown from approximately 7.9 million subscribers in 2001 toapproximately 30 million subscribers by the end of 2005. Excluding the operators ThaiMobile and Hutch, the mobile market in Thailand added 3 million subscribers in 2005, andreached a penetration rate of 46 percent at year-end.

However, compared to other countries in the region, the rate of mobile penetration inThailand is still low as the following table shows:

As of 2004CountryMobile Penetration

Hong Kong 114.5%Singapore 89.1%South Korea 76.1%Malaysia 57.1%Thailand 44.2%Philippines 39.9%China 25.5%Indonesia 13.5%

Source: ITU World Telecommunication Indicators Database, 2004

The following operators offer mobile services in Thailand: Advanced Info Service PublicCompany Limited, or AIS, and its majority-owned subsidiary, Digital Phone Company, orDPC; Total Access Communication Public Company Limited, or DTAC; our majority-ownedsubsidiary, True Move; Hutchison-CAT Wireless Multimedia Co. (CAT's marketing serviceprovider under the “Hutch” brand name); TOT and Thai Mobile (an unincorporated jointventure between CAT and TOT). Our two largest competitors, AIS (together with itsmajority-owned subsidiary, DPC) and DTAC hold approximately 55.5 percent and 29.4percent market share respectively as of December 31, 2005. We were the third largestmobile provider with a market share of approximately 15.1 percent, increasing from 12.8percent at the end of 2004.

The following table shows the breakdown of mobile subscribers over the past four years:

As of December 312002 2003 2004 2005

AIS 10,662,500 13,239,200 15,184,000 16,408,900DTAC 5,454,562 6,550,496 7,786,165 8,676,940True Move 1,336,228 1,824,990 3,380,383 4,458,643Total Subscribers 1/ 17,453,290 21,614,686 26,350,548 29,544,483True Move market share 7.7% 8.4% 12.8% 15.1%

Source: Company filings of respective mobile operators

Remark: 1/ Excluding Hutch and Thai Mobile



The mobile industry in Thailand has experienced high levels of competition. Mobileservice providers have been competing for market share through promotional activitiesand by providing prepaid plans that offer competitive pricing to attract low-incomesubscribers and that are easily refillable at various places such as convenience stores andgas stations. This has been one of the reasons for a significant increase in the number ofprepaid subscribers during the period from 2002 to 2005. Mobile service providers arealso focusing on the growth in non-voice services, which has been facilitated by thelaunch of new feature-rich handset models with expanding range.

In 2005, the Thai mobile sector experienced intense price competition with True Moveand several of its competitors significantly reducing tariffs during the period from April toJune 2005. Despite increases in tariffs after this period of price competition, our blendedARPU for mobile declined by 10 percent primarily as a result of this competition.

Despite significant competition in the Thailand mobile market, True Move was able toincrease its market share from 12.8 percent in 2004 to 15.1 percent in 2005. This ispartly due to its competitive advantage in being able to offer mobile services togetherwith other products and services from within the True Group, allowing True Move tocompete on value, and not purely on price.

As at December 31, 2005 True Move had 4,458,643 subscribers and WE PCT had469,125 Subscribers.

Digital Data Network (DDN) business

The DDN market in Thailand continues to grow at about 15-20 percent a year due to thepopularity of on-line data transmission and an increase in Internet users. There is highcompetition between the large number of DDN operators and suppliers of alternatives,such as ADSL providers. The major players in the data communications market inThailand currently include TOT, CAT, United Information Highway Co., Ltd. and UnitedBroadband Technology Co., Ltd. (collectively, “UCOM”), Advanced DatanetworkCommunications Co., Ltd. (“ADC”) under the Shin Corporation Group, TT&T and TrueCorporation. All these carriers provide leased line and frame relay services. Our principalcompetitors are TOT (which has the widest coverage throughout Thailand) and UCOM(which has broader coverage outside of the BMA than we do).

The Company has a competitive advantage in having the most modern network. Inaddition, it seeks to differentiate itself from competitors through a focus on servicequality. In 2003, the Company launched the Managed Data Network service, whichcombines three network operation services including network performance management,fault management and configuration management. In 2004, True launched data networksolutions to suit the different needs of customers. In 2005, True launched MPLS VPN - avirtual private network which operates by generating secure channels within a sharednetwork, maintaining the privacy and security of an organization’s communications anddata. The service is suitable for organizations which have branches in different regionsand wish to connect them together in the most cost-effective way.



Broadband business

The broadband subscriber base in Thailand is relatively small with a broadbandpenetration rate of less than 1%, compared to that in other countries in the region suchas Korea (24.9%), Hong Kong (20.9%), Japan (14.1%) and Singapore (11.6%) (Source:ITU World Telecommunication Indicators Database, 2004).

There are several operators in the Thailand broadband market, including UnitedBroadband Technology Co., Ltd., or UBT, under the UCOM group; Lenso DataCom Co.,Ltd. (under Q-Net service); Samart; CS Loxinfo; TOT; TT&T; ADC and us. Only TOT andthe Company own a wireline network in the BMA, which gives both companies acompetitive advantage in providing broadband services in this area.

The Company has experienced significant growth in its broadband subscriber base, from3,708 subscribers as of December 31, 2002 to 11,661 as of December 31, 2003, 164,775as of December 31, 2004 and 330,322 as of December 31, 2005. The True Groupbelieves it is one of the largest providers of broadband services in Thailand based on thenumber of subscribers with approximately 80 percent market share in the BMA.

There are several reasons for the rapid increase in the number of broadband subscribers,including the decrease in the cost of modems, the increased popularity of online content,such as games, and the decrease in broadband monthly fees as broadband serviceproviders increase the size of their customer bases. In addition, the Thai government hasalso reduced international Internet gateway fees, lowering costs for service providers.

Internet Services

The Thailand Internet market has experienced significant growth in recent years.According to estimates by the ITU, the Thailand Internet market has grown fromapproximately 3.5 million users in 2001 to approximately 7.0 million subscribers by theend of 2004, representing a penetration rate of approximately 11.3%, which was stillrelatively low when compared with other countries in the region.

As of 2004CountryInternet Penetration

South Korea 65.7%Singapore 56.1%Taiwan 53.8%Japan 50.2%Hong Kong 48.9%Thailand 11.3%

Source: ITU World Telecommunication Indicators Database, 2004

There are a number of commercial Internet service providers, or ISPs, operating inThailand, some of which operate under concessions granted by CAT and others whichoperate under new licenses issued by the NTC. Each of the ISPs operating under aconcession issued by CAT is required to assign to CAT a certain percentage of the sharesin the ISP in exchange for the concession. During the period from June to earlySeptember 2005, the NTC awarded licenses for the provision of Internet services toseveral ISPs, including True Internet Company Limited, our subsidiary.



Competition among Internet businesses was intense in 2005 because of the large numberof ISPs and we expect to face increasing competition from telecommunicationscompanies entering the ISP market. In terms of content services, the Company expectsto face increasing competition from content providers that seek to establish their ownweb portals as platforms for their content offerings. Despite the intense competition,service charges remained relatively stable at approximately Baht 7-9 per hour for dial-upInternet service and a minimum of Baht 500 per month for broadband service.

The Company provides Internet services through its subsidiaries, Asia Infonet Co., Ltd.(AI), and True Internet which has been Thailand’s largest ISP by subscriber numberssince 2004 as a result of its leadership position in the broadband market. As at December31, 2005, True had 716,703 Internet subscribers, including Consumer Broadband. Othermajor operators include CS Loxinfo, KSC Internet (of which the Company acquired a 40percent shareholding in January 2006), and Internet Thailand.

Regulatory Update

The regulatory regime for Thailand's telecommunications industry is transitioning fromone where state enterprises act, as the regulators of the telecommunications market andas telecommunications service providers, to one where the telecommunications market isprivatized and liberalized.

In accordance with Thailand’s commitment to the World Trade Organization (WTO) toliberalize its telecommunications sector by 2006, the Thai Government embarked on areform of the country’s telecommunications regulatory regime with the passage of twomajor legislative acts; the Act on Organizations Allocated Frequency Waves andSupervision of the Radio and Television Broadcasting and Telecommunications Business,or the NTC Act, in March 2000; and the Telecommunications Business Operations Act, orthe TBO Act, in November 2001.

In October 2004, the National Telecommunication Commission, or the NTC, wasestablished as the new independent regulator of the telecommunications industry,assuming the regulatory functions previously exercised by the Telephone Organization ofThailand (now known as TOT Public Company Limited), the Communications Authority ofThailand (now known as CAT Telecom Public Company Limited), and the Post andTelegraph Department. A further regulatory body, the National BroadcastingCommission, or the NBC, has its role in overseeing the radio and television broadcastingindustry. However, commissioners for the NBC have yet to be appointed and, as such,the NBC has yet to commence work.

The NTC commissioners are appointed to hold office for a single term of six years. Aftercompleting the third year of the initial six-year term, three commissioners will be requiredto leave the office.

From its establishment until the end of the year 2005, the NTC has issued regulationsprescribing, among other things: (i) licensing requirements for various defined categoriesof telecommunications service; (ii) eligibility requirements and application procedures forthe three categories of telecommunications licenses available in Thailand; (iii) interimmeasures for allocating telephone numbers; (iv) interim telecommunications license fees;and (v) interim ISP license fees.



The NTC has also declared plans to issue a number of policies and regulations in 2006,including a Consumer Protection Code, Interconnection and 3G regulations.

Licensing regime

All telecommunications service providers, other than service providers operating withinthe scope and term of the concessions which existed on the date that the TBO Act cameinto force, must obtain one of the following categories of licenses from the NTC:

Type One Licenses: the first category of licenses applies to telecommunications serviceproviders which intend to operate a telecommunications business in Thailand withouthaving their own networks, and whose telecommunications businesses are, in the opinionof the NTC, in an area which should be liberalized in Thailand. The NTC is required togrant a license to any applicant qualified to carry out a telecommunications businessfalling within this category. Under a regulation issued by the NTC, licenses for providingInternet services, or ISP licenses, fall within this category.

Type Two Licenses: the second category of licenses applies to telecommunicationsservice providers which intend to supply telecommunications services only to a certaingroup, or to telecommunications businesses which, in the opinion of the NTC, would nothave a major impact on free and fair competition or would not have an adverse effect onthe interests of the general public or consumers. Applicants in this category may or maynot have their own network. The NTC is required to grant a license to applicants in thiscategory if they fulfill the criteria that the NTC has set forth in advance.

Type Three Licenses: the third category of licenses applies to telecommunications serviceproviders which have their own networks and whose telecommunications businessprovides services to the public as a whole or, in the opinion of the NTC, may have amajor impact on free and fair competition or the public interest or where, in the opinionof the NTC, there is a special need to protect consumers. The NTC has the discretionwhether to grant licenses to applicants in this category.

In addition, if the telecommunications services require the use of radio frequencies,applicants must also obtain a license for the use of radio frequencies.

The NTC has already started to grant licenses. Apart from the licenses granted to theTOT and CAT, during the period from June 2005 to early September 2005, the NTCawarded several ISP licenses, including one to True Internet Company Limited, ourconsolidated subsidiary.

In early August 2005, the NTC issued a licensing fee structure for telecommunicationservices as follows:

Type one license; registration fee of Baht 5,000 and annual fee of Baht 20,000.

Type two license (without network); registration fee of Baht 10,000 and annualfee of Baht 25,000.

Type two license (with network); registration fee of Baht 25,000 and annual feeof Baht 250,000.

Type three license; registration fee of Baht 500,000, annual fee of 3 percent ofoperating revenue, and extension fee of Baht 500,000 per year.



New numbering plan

The NTC has recently issued a regulation concerning interim measures for allocatingtelecommunications numbers. Under this, any person who wishes to be allocated atelecommunications number is required to make an application with the NTC. A personwho has been allocated a telecommunications number is required to pay monthly fees,which have been set at Baht 12, per number, per year.

Universal service obligations

Under the new regulatory regime, telecommunications business licenses may be requiredto provide universal services which may encompass, among other things, the provision oftelecommunications services to low income groups, the disabled and people in rural areaswhich have insufficient telecommunications services. If a licensee is unable to providethese services, it may be required to allocate 4 percent of its gross revenue to theTelecommunications Development Fund for Public Interest.

The responsibilities of undertaking universal service are imposed on Type Two licenseswhich have their own networks and Type Three licenses.

Radio frequency allocationThe NTC and the NBC are jointly required to manage radio frequency allocations. TheJoint Commission has the power, among other things, to prescribe policies for theallocation of radio frequencies, allocate radio frequencies between thetelecommunications business and the radio and television business, and establish criteriafor the efficient use of radio frequencies. However, as the NBC has yet to be appointed,the Joint Commission is not yet in existence. Therefore, it is uncertain when new radiofrequencies will be allocated.

Conversion of concessionsThe parties to the concessions in existence prior to the adoption of the TBO Act areallowed to enter into negotiations on a bilateral and voluntary basis to convert theirconcessions into a license. In such cases, the NTC must issue a license with the samescope and duration as the concession (together with any conditions the NTC mightinclude for the benefit of the existing subscribers, for the development for better qualityand more efficient services or for enabling the objectives of the TBO Act) to such person,if such license is not contrary to, or inconsistent with, the TBO Act. No provision of theTBO Act authorizes the NTC or any other governmental authority to convert existingconcessions into other forms of arrangement.

Because the True Group was granted the Agreements by TOT to provide wirelinecommunications and multimedia (Non-POTS) services, and by CAT to provide mobilecommunications and Internet services, prior to the adoption of the TBO Act, the TrueGroup has the right to conduct its existing telecommunications businesses in accordancewith the scope of the current concessions, without having to apply for licenses from theNTC, until the expiry of their respective terms. The True Group is also able, subject to theagreement of TOT or CAT, as applicable, to convert such concessions to licenses underthe TBO Act. The True Group believes that, as a result of the protection afforded by theConstitution and the TBO Act, any attempt to amend its concessions would require theconsent of both parties to the arrangements. Although a number of entities, including theCompany, have held negotiations to convert their arrangements, no agreements h

annual registration...

Documents