ar2007

Annual Report 2007

Unleashing potential...

Group Corporate CommunicationsTELEKOM MALAYSIA BERHAD (128740-P)

Level 8 (South Wing), Menara TMJalan Pantai Baharu, 50672 Kuala LumpurMalaysia

www.tm.com.my

Annual R

eport 2007TELEK

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pau•a [pou-uh]–nounPaua or paua is the Maori name given to three speciesof large edible sea snails, marine gastropod molluscs,which belong to the family Haliotidae (genus Haliotis).

New Zealand’s most well-known paua species is HaliotisIris. It is also the most common species, growing up to 18cm in length. What sets it apart is its distinctive iridescentcolour.

...Creating value

Unleashing Potential...In everything there lies a seed, which has the capacity tobe something better. However, to truly effect transformationsomething more than a mere stimulus is required. Thatsomething is a focus, a mission, a goal. To get there onemust have deep understanding of one’s true potential. Onlythen can that potential be recognised and then unleashed.

Creating ValueChange is good. It is driven by a desire for improvement. Itis powered by excellence. It banishes complacency andapathy with creativity and energy. It inspires people to pushfurther and become something better. It gives potential achance to be unleashed. But best of all, it rewrites thewritten, removes obstacles and destroys barriers.

Change is the herald of new beginnings, allowing for theopening up of possibilities and the unleashing of potentialtowards the creation of value.

About the cover

A Unique CreatureThe Paua is possibly one of nature’s most enigmaticof creatures. To the ordinary eye it is a large molluscthat spends its existence unobtrusively nibbling awayat seaweed. The Paua is in fact a highly sought-afterdelicacy, its iridescent shell stunningly beautiful andradiant, equally so its rare and unique blue pearl.When it comes to the humble Paua, the surface belieswhat lies underneath.

A Unique CompanyTM has been instrumental in the development ofMalaysia since its early days as The Department ofTelecommunications. As a Company, we are now thenation’s largest telecommunications provider, andmore. From having the largest fibre-optic network tooffering a diverse portfolio of products and services,TM is a name everyone knows. Going beyondconnectivity, we permeate nearly every strata ofsociety through our educational, corporate, communityand social roles. Having spread our wings beyond our shores, we are now one of Asia’s leadingtelecommunication companies.

14-50

Notice of Annual General MeetingDate:17 April 2008, Thursday

Time:10.00 a.m.

Venue:Multi Purpose Hall, Menara TM, Jalan Pantai Baharu50672 Kuala Lumpur, Malaysia

Corporate Profile 14

The Demerger Proposition 17

TM Group Products & Services 20

Milestones Over Two Centuries 22

Media Milestones In 2007 24

2007 Corporate Events 26

TM Awards & Recognition 2007 38

Corporate Information 42

Group Corporate Structure 44

Group Organisation Structure 46

Enhancing Value To Our Providers 47Of Capital

CorporateFramework

51-66

Five-Year Group 52Financial Highlights

Simplified Group 54Balance Sheets & GroupSegmental Analysis

Group Quarterly Performance 56

Group Financial Review 57

Business & Other Statistics 64

Statement & Distribution 66Of Value Added

PerformanceReview

67-86

Profile Of Directors 70

Group Senior Management 76

Leadership

87-124

Statement On 88Corporate Governance

Achieving Business Objectives 103By Improving Enterprise RiskManagement (ERM) Execution

Code Of Business Ethics 106

Additional Compliance Information 108

Audit Committee Report 114

Directors Statement 121On Internal Control

Accountability

ContentsAnnual Report 2007TELEKOM MALAYSIA BERHAD (128740-P)

Notice Of Annual General Meeting 6

Statement Accompanying The 10Notice Of Annual General Meeting

Financial Calendar 11

OUR VISIONOur vision is to be the Communications Companyof choice – focused on delivering Exceptional Valueto our customers and other stakeholders.

OUR MISSIONTo achieve our vision, we are determined to do thefollowing:

• Be the recognised leader in all markets we serve

• Be a customer-focused organisation thatprovides one-stop total solutions

• Build enduring relationships based on trust with our customers and partners

• Generate shareholder value by seizingopportunities in Asia Pacific and other selectedregional markets

• Be the employer of choice that inspiresperformance excellence

CHAIRMAN’S STATEMENT

125-143

Chairman’s Statement 126

Group Chief Executive 134Officer’s Statement

Perspective

144-210

Malaysia Business 148

Celcom (Malaysia) Berhad 158

International Operations 166– Global Cable Services, 184

International Investments& Presence

TM Ventures 186– International And Domestic 202

Infrastructure & TrunkFibre Optic Network

Asian Economies And The 204Telecommunications Sector: Review & Outlook

BusinessReview

211-250

Building Enduring Customer 214Relationships

Fostering A Nation Through 218Capacity Building

Gearing Human Capital 224Towards Business Excellence

Building Capabilities Through 230Development And Learning

Towards Greater Innovation 234

Occupational Safety, Health 238And Environment (OSHE)

Corporate Responsibility 240

KeyInitiatives

251-430

Shareholding Statistics 413

List Of Top 30 Shareholders 414

Authorised And 416Issued Share Capital

Net Book Value 418Of Land & Buildings

Usage Of Properties 419

Group Directory 420

Glossary 429

Proxy Form •••

FinancialStatements 251

OtherInformation

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TELEKOM MALAYSIA BERHADANNUAL REPORT 20076

1. To receive the Audited Financial Statements for the financial yearended 31 December 2007 together with the Reports of the Directorsand Auditors thereon. (Ordinary Resolution 1)

2. To declare a final gross dividend of 22 sen per share (less 26%Malaysian Income Tax) in respect of the financial year ended 31December 2007. (Ordinary Resolution 2)

3. To re-elect Datuk Zalekha Hassan who was appointed to the Boardduring the year and retire pursuant to Article 98(2) of the Company’sArticles of Association. (Ordinary Resolution 3)

4. To re-elect the following Directors, who retire by rotation pursuant toArticle 103 of the Company’s Articles of Association:-

(i) Dato’ Ir Dr Abdul Rahim Daud (Ordinary Resolution 4)

(ii) YB Datuk Nur Jazlan Tan Sri Mohamed (Ordinary Resolution 5)

(iii) Dato’ Azman Mokhtar (Ordinary Resolution 6)

5. To approve the payment of Directors’ fees of RM720,492.91 for thefinancial year ended 31 December 2007. (Ordinary Resolution 7)

6. To re-appoint Messrs. PricewaterhouseCoopers having consented to act as Auditors of the Company for the financial year ending 31 December 2008 and to authorise the Directors to fix theirremuneration. (Ordinary Resolution 8)

AS SPECIAL BUSINESS

To consider and if thought fit, to pass the following Resolutions:-

7. (i) Authority under Section 132D of the Companies Act, 1965 forthe Directors to allot and issue shares

“THAT pursuant to Section 132D of the Companies Act, 1965(the Act), full authority be and is hereby given to the Directorsto issue shares in the capital of the Company at any time untilthe conclusion of the next Annual General Meeting and uponsuch terms and conditions and for such purposes as theDirectors may, in their absolute discretion, deem fit providedthat the aggregate number of shares to be issued, does notexceed 10% of the issued share capital of the Company for thetime being, subject always to the approvals of the relevantregulatory authorities, where such approval is necessary.”

(Ordinary Resolution 9)

23rdNOTICE IS HEREBY

GIVEN THAT THE

TWENTY-THIRD (23RD)

ANNUAL GENERAL

MEETING OF THE

COMPANY WILL BE

HELD ON THURSDAY,

17 APRIL 2008

AT 10:00 A.M., AT

MULTI PURPOSE HALL,

MENARA TM,

JALAN PANTAI BAHARU,

50672 KUALA LUMPUR,

MALAYSIA, FOR THE

FOLLOWING PURPOSES:-

TELEKOM MALAYSIA BERHADANNUAL REPORT 2007 7

(ii) Proposed New Shareholders’ Mandate for Recurrent Related Party Transactions of a Revenueor Trading Nature

“THAT in accordance with paragraph 10.09 of the Listing Requirements of Bursa MalaysiaSecurities Berhad (Bursa Securities), approval be and is hereby given for Telekom MalaysiaBerhad (the Company) and/or its subsidiaries to enter into recurrent related party transactions ofa revenue or trading nature as set out in APPENDIX I of the Circular to Shareholders despatchedtogether with the Company’s 2007 Annual Report, which are necessary for the day-to-dayoperations provided such transactions are entered into in the ordinary course of business of theCompany and/or its subsidiaries, are carried out on an arm’s length basis, on terms not morefavourable to the related party than those generally available to the public and are notdetrimental to the minority shareholders of the Company (Proposed New Shareholders’ Mandate);

THAT such approval shall continue to be in full force and effect until:

(a) the conclusion of the next Annual General Meeting of the Company at which time theauthority will lapse, unless the authority is renewed by a resolution passed at such generalmeeting;

(b) the expiration of the period within which the Company’s next Annual General Meeting isrequired to be held under Section 143(1) of the Companies Act, 1965 (but shall not extend tosuch extension as may be allowed under Section 143(2) of the Companies Act, 1965; or

(c) revoked or varied by resolution passed by the shareholders of the Company at a generalmeeting,

whichever is earlier;

AND THAT the Board of Directors of the Company be and is hereby authorised to complete anddo all such acts, deeds and things (including executing such documents under the common sealin accordance with the provisions of the Articles of Association of the Company, as may berequired) to give effect to the Proposed New Shareholders’ Mandate.” (Ordinary Resolution 10)

(iii) Proposed Amendments to the Articles of Association of the Company

“THAT the Articles of Association of the Company be and are hereby altered, modified, added anddeleted in the form and manner as set out in APPENDIX II of the Circular to Shareholdersdespatched together with the Company’s 2007 Annual Report.

AND THAT the Board of Directors of the Company be and is hereby authorised to do all suchacts, deeds and things as are necessary and/or expedient in order to give full effect to theProposed Amendments to the Articles with full powers to assent to any conditions, modificationsand/or amendments as may be required by any relevant authorities." (Special Resolution)

8. To transact any other business of the Company of which due notice has been received.

Notice of Annual General Meeting


FURTHER NOTICE IS HEREBY GIVEN THAT a Depositor shall be eligible to attend this meeting only inrespect of:-

(a) Shares deposited into the Depositor’s Securities Account before 12:30 p.m. on 8 April 2008 (in respect of shares which are exempted from Mandatory Deposit);

(b) Shares transferred into the Depositor’s Securities Account before 4:00 p.m. on 8 April 2008 (in respect of Ordinary Transfer); and

(c) Shares bought on the Bursa Securities on a cum entitlement basis according to the Rules of theBursa Securities.

Shareholders are reminded that pursuant to the Securities Industry (Central Depositories) (Amendment No. 2) Act, 1998 (SICDA) which came into force on 1 November 1998, all shares not deposited with BursaMalaysia Depository Sdn Bhd (Bursa Depository) by 12:30 p.m. on 1 December 1998 and not exempted fromMandatory Deposit, have been transferred to the Minister of Finance (MOF). Accordingly, the person eligibleto attend this Meeting for such undeposited shares will be the MOF.

NOTICE ON ENTITLEMENT AND PAYMENT OF FINAL DIVIDEND

NOTICE IS ALSO HEREBY GIVEN THAT subject to the approval of Members at the 23rd Annual GeneralMeeting to be held on 17 April 2008, a final dividend of 22 sen (less 26% Malaysian Income Tax) for thefinancial year ended 31 December 2007 will be paid on 15 May 2008 to Depositors whose names appear inthe Record of Depositors on 24 April 2008.

FURTHER NOTICE IS HEREBY GIVEN THAT a Depositor shall qualify for entitlement to the dividends only inrespect of:

(a) Shares deposited into the Depositor’s Securities Account before 12:30 p.m. on 22 April 2008 (in respect of shares which are exempted from Mandatory Deposit);

(b) Shares transferred into the Depositor’s Securities Account before 4:00 p.m. on 24 April 2008 (in respect of Ordinary Transfers); and

(c) Shares bought on the Bursa Securities on a cum entitlement basis according to the Rules of theBursa Securities.

Shareholders are reminded that pursuant to SICDA, all shares not deposited with Bursa Depository by12:30 p.m. on 1 December 1998 and not exempted from Mandatory Deposit, have been transferred to theMOF. Accordingly, the dividend for such undeposited shares will be paid to MOF.

By Order of the Board

Wang Cheng Yong (MAICSA 0777702)Zaiton Ahmad (MAICSA 7011681)Secretaries

Kuala Lumpur26 March 2008



5. A corporation which is a Member, may byresolution of its Directors or othergoverning body authorise such person asit thinks fit to act as its representative atthe Meeting, in accordance with Article 92of the Company's Articles of Association.

6. The instrument appointing the proxytogether with the duly registered power ofattorney referred to in Note 4 above, ifany, must be deposited at the office ofthe Share Registrars, Tenaga Koperat SdnBhd, G-01 Ground Floor, Plaza Permata,Jalan Kampar, Off Jalan Tun Razak,50400 Kuala Lumpur, Malaysia not lessthan 48 hours before the time appointedfor holding the Meeting or anyadjournment thereof, or, in the case of apoll, not less than 24 hours before thetime appointed for the taking of the poll.

EXPLANATORY NOTES ON SPECIAL BUSINESS

(i) The proposed Ordinary Resolution 9, ifpassed, will give the Directors of theCompany authority to issue and allotshares for such purposes as theDirectors in their absolute discretionconsider to be in the interest of theCompany, without having to convene ageneral meeting. This authority unlessrevoked or varied by the Company in ageneral meeting, will expire at the nextAnnual General Meeting of the Company.

(ii) The proposed Ordinary Resolution 10, ifpassed, will authorise the Companyand/or its subsidiaries to enter intorecurrent related party transactions withrelated parties in the ordinary course ofbusiness which are necessary for theGroup's day-to-day operations and are onterms not more favourable to the relatedparties than those generally available tothe public and shall lapse at theconclusion of the next Annual GeneralMeeting unless authority for its renewalis obtained from shareholders of theCompany at a general meeting.

Detailed information on the proposed newshareholders’ mandate is set out inAppendix I of the Circular to Shareholdersdespatched together with the Company’s2007 Annual Report.

(iii) The proposed Special Resolution, ifpassed, will bring the Articles ofAssociation of the Company in line withthe recent amendments of the ListingRequirements of Bursa Securities, theprovisions of the Capital Markets andServices Act, 2007 as well as for betterclarity and administrative efficiency.

Detailed information on the proposedamendments to the Articles ofAssociation of the Company is set out inAppendix II of the Circular toShareholders despatched together withthe Company’s 2007 Annual Report.

NOTES:

1. A Member entitled to attend and vote atthe Meeting is entitled to appoint a proxyto attend and vote in his/her stead. A Proxyneed not be a Member of the Companyand the provisions of Section 149(1)(b) ofthe Act shall not apply to the Company.

2. A Member shall not be entitled to appointmore than two (2) proxies to attend andvote at the Meeting provided that where aMember of the Company is an authorisednominee as defined in accordance with theprovisions of the Securities Industry(Central Depositories) Act, 1991, it mayappoint at least one (1) proxy but not morethan two (2) proxies in respect of eachsecurities account it holds with ordinaryshares in the Company standing to thecredit of the said securities account.

3. Where a Member appoints two (2)proxies, the appointments shall be invalidunless the proportion of the holding to berepresented by each proxy is specified.

4. The instrument appointing a proxy shallbe in writing under the hand of theappointer or his attorney duly appointedunder a power of attorney or if suchappointer is a corporation, either underits common seal or under the hand of anofficer or attorney duly appointed under apower of attorney. If the Proxy Form issigned under the hand of an officer dulyauthorised, it should be accompanied bya statement reading "signed as authorisedofficer under an Authorisation Documentwhich is still in force, no notice ofrevocation have been received". If the ProxyForm is signed under the attorney dulyappointed under a power of attorney, itshould be accompanied by a statementreading "signed under a Power of Attorneywhich is still in force, no notice ofrevocation have been received". A copy ofthe Authorisation Document or the Powerof Attorney, which should be valid inaccordance with the laws of thejurisdiction in which it was created and isexercised, should be enclosed with theProxy Form.


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DIRECTORS RANKING FOR RETIREMENT AND RE-ELECTION AT THE

23rdANNUAL GENERAL MEETING

The following are Directors retiring pursuant to Article 98(2) and Article 103 of theCompany’s Articles of Association:-

Article 98(2): Retirement after appointment to fill casual vacancy

1. Datuk Zalekha Hassan

Article 103: Retirement by rotation

1. Dato’ Ir Dr Abdul Rahim Daud

2. YB Datuk Nur Jazlan Tan Sri Mohamed

3. Dato’ Azman Mokhtar

The respective profiles of the above Directors are set out in the Profile of the Board ofDirectors on pages 72 to 74 inclusive, of this Annual Report. Their securities holdings inthe Company and its related corporation are disclosed on page 413 of this Annual Report.

Note:Dato’ Sri Abdul Wahid Omar, the Director/Group Chief Executive Officer who is due forretirement by rotation pursuant to Article 103 of the Company’s Articles of Association atthis 23rd Annual General Meeting, has indicated his intention not to seek re-election as aDirector of the Company. Dato’ Sri Abdul Wahid shall therefore, retire as a Director uponthe conclusion of the 23rd Annual General Meeting. However, he shall remain as theGroup Chief Executive Officer of the Company.

17 April 200823rd AGM of the Company.

FinancialC

alendar


23 February 2007Announcement of the audited consolidatedresults and the proposed final dividend of30 sen per share (less 27% MalaysianIncome Tax) for the financial year ended31 December 2006.

10 December 2007Declaration of a special dividend of 65 senper share (less 26% Malaysian Income Tax)for the financial year ended 31 December2007.

8 May 200722nd AGM followed by the ExtraordinaryGeneral Meeting (EGM) of the Company.

18 January 2008Date of entitlement to the special dividendof 65 sen per share (less 26% MalaysianIncome Tax) for the financial year ended 31 December 2007.

14 May 2007Date of entitlement to the final dividend of30 sen per share (less 27% MalaysianIncome Tax) for the financial year ended31 December 2006.

31 January 2008Date of payment of the special dividend of65 sen per share (less 26% MalaysianIncome Tax) for the financial year ended 31 December 2007.

12 June 2007Date of payment of the final dividend of 30 sen per share (less 27% MalaysianIncome Tax) for the financial year ended31 December 2006.

20 February 2008Issuance of Notice of EGM.

4 September 2007Date of payment of the interim dividend of26 sen per share (less 27% MalaysianIncome Tax) for the financial year ended 31 December 2007.

15 May 2008Date of payment of the final dividend of 22 sen per share (less 26% MalaysianIncome Tax) for the financial year ended31 December 2007.

26 March 2008Issuance of Notice of the 23rd AGMtogether with the Annual Report for thefinancial year ended 31 December 2007and Circular to Shareholders.

7 November 2007Announcement of the unauditedconsolidated results for the 3rd quarterended 30 September 2007.

26 July 2007Announcement of the unauditedconsolidated results for the 2nd quarterended 30 June 2007 and the declaration ofan interim dividend of 26 sen per share(less 27% Malaysian Income Tax) for thefinancial year ended 31 December 2007.

26 February 2008Announcement of the audited consolidatedresults and the proposed final dividend of22 sen per share (less 26% MalaysianIncome Tax) for the financial year ended31 December 2007.

20 August 2007Date of entitlement to the interim dividendof 26 sen per share (less 27% MalaysianIncome Tax) for the financial year ended31 December 2007.

24 April 2008Date of entitlement to the final dividend of22 sen per share (less 26% MalaysianIncome Tax) for the financial year ended31 December 2007.

6 March 2008EGM of the Company.

CORPORATE PROFILE 14

THE DEMERGER PROPOSITION 17

TM GROUP PRODUCTS 20AND SERVICES

MILESTONES OVER 22TWO CENTURIES

MEDIA MILESTONES IN 2007 24

2007 CORPORATE EVENTS 26

TM AWARDS AND 38RECOGNITION 2007

CORPORATE INFORMATION 42

GROUP CORPORATE STRUCTURE 44

GROUP ORGANISATION 46STRUCTURE

ENHANCING VALUE TO 47PROVIDERS OF CAPITAL

CorporateFramework

Cor

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CorporateFramework


FROM ITS EARLY DAYS AS THE MALAYAN TELECOMMUNICATIONS DEPARTMENT IN1946, TM CHARTED A GROWTH PATH THAT SAW ITS CORPORATISATION IN 1987, INITIALPUBLIC OFFERING AND LISTING ON BURSA SECURITIES IN 1990, ITS EVOLUTION AS ACOMPANY WITH A RECORD FINANCIAL PERFORMANCE IN ITS COUNTRY OF DOMICILEAS WELL AS AN EXPANDING FOOTPRINT IN ASIA AND ELSEWHERE, AND THE LAUNCHOF A NEW BRAND IDENTITY IN 2005. OVER THE YEARS, TM HAS EVOLVED TO BECOMETHE LARGEST INTEGRATED TELECOMMUNICATIONS SOLUTIONS PROVIDER IN MALAYSIAAND ONE OF ASIA’S LEADING COMMUNICATIONS COMPANIES. TM’S SUCCESS ANDGROWTH HAS BEEN REMARKABLE, GIVEN THE HIGHLY-COMPETITIVE ENVIRONMENT IN WHICH IT OPERATES. WITH A CURRENT GROUP STAFF STRENGTH IN EXCESS OF36,000 WITH OPERATIONS AND INTERESTS IN 13 COUNTRIES, TM IS FOCUSED ONBEING A RECOGNISED LEADER IN ALL ITS MARKETS, DELIVERING EXCEPTIONAL VALUETO ITS CUSTOMERS AND ACHIEVING SUSTAINABLE GROWTH IN BOTH LOCAL ANDINTERNATIONAL MARKETS.


As an integrated telecommunicationscompany, TM offers a comprehensiverange of communication services andsolutions in fixed line, data, mobile andInternet, and multimedia. Supportingthis extensive range of products andservices is a world-classcommunications infrastructure,spanning the entire country and goingbeyond Malaysian shores. In facilitatingregional and internationaltelecommunications, TM has in place anextensive combination of satellite,terrestrial and submarine fibre-opticcable systems to deliver both domesticand international data services.

In August 2006, TM implemented thesecond phase of its corporate re-organisation that saw the creation of aStrategic Business Unit called MalaysiaBusiness to consolidate all domesticfixed services and align businesses witha common agenda. Incorporating TMRetail, TM Wholesale and TM Net Sdn

Bhd, Malaysia Business focuses onTM’s fixed line and data, as well asInternet and multimedia businesses. As at 31 December 2007, TM’s fixedservices customers stood at 5.7 million,inclusive of fixed line, Internet andmultimedia.

TM’s mobile arm, Celcom (Malaysia)Berhad (Celcom), is Malaysia’s premiermobile communications provider.Celcom has steadily made its presencefelt in the market through itsinnovations, which have raised industrystandards and provided product andservice benchmarks in the country.Celcom was the first mobile operator inMalaysia to launch 3G servicescommercially. Leveraging on itspartnership with Vodafone, Celcomlaunched the Vodafone Mobile Connect3G Broadband (HSDPA) data card andBlackberry by Vodafone which extendsthe product offerings to its growingsubscriber base. The Company alsolaunched PowerTools for the enterprisemarket, formed an alliance with onlinesearch engine Google, and joined handswith Maybank to introduce Malaysia’sfirst mobile financial services, theMaybank2u Mobile Service. As at 31December 2007, Celcom’s customerbase stood at 7.2 million.

In its quest for future and sustainablegrowth, TM is focused on continuedregional expansion in markets closer tohome. Today, TM is an emerging leaderin Asian communications withoperations and interests in the regionand globally. Together with its mobileoperations in Malaysia, TM’s regionalmobile customer base stood at 39.8

million as at end of 2007. Apart fromMalaysia, TM has nine key marketswithin Asia: Indonesia, Singapore,Cambodia, Thailand, Bangladesh,Pakistan, India, Sri Lanka and Iran, with businesses focusing mainly on themobile segment. TM’s investmentphilosophy is to play an active role in itsinternational operations (where it hasmanagement control), with the aim ofbuilding value in its investments byhiring and developing local talents,sharing expertise, knowledge and bestpractices, contributing to infrastructuredevelopment in the countries in which ithas investments, as well as providingopportunities for wealth creation amongthe local population. Evidence of thiscan be found in the highly-successfullisting of TM’s pioneer investment in SriLanka, Dialog Telekom Limited (Dialog)on the Colombo Stock Exchange in July2005. With a market capitalisationexceeding US$1 billion. Dialog was thelargest Initial Public Offering in SriLanka’s corporate history. Thesuccessful listing of Dialog provided theopportunity for local ownership of awell-run company and the sharing ofthe Company’s wealth with the SriLankan public. Dialog continues to leadthe mobile industry in Sri Lanka with amarket share of more than 60%.

Complementing its investment foraysabroad, the international arm of TM’swholesale business, TM Global, providesa wide array of voice, internationalbandwidth, IP and data services capacityacross six continents, namely Asia,Europe, the Americas, Oceania, MiddleEast and Africa. In the ASEAN region,TM Global has business tie-ups and

Corporate Profile

C o r p o r a t e F r a m e w o r k

Corporate Profile


On 10 December 2007, TM unveiled thefinal terms of the demerger whichwould ensure the Group continued toderive greater shareholder value fromboth businesses, and ultimately benefitall its stakeholder communities.

As a leading Company, TM remainscommitted to the principles ofCorporate Responsibility through itsvarious stakeholder activities andprojects, significantly contributingtowards the national agenda and thecommunities where it has a presence.In this, TM is driven by a belief thatgood Corporate Responsibility is afundamental tenet of good CorporateGovernance. Besides running asustainable enterprise in line withinternational best practices, TM fulfilsits corporate responsibility towards thecommunity via three major platforms,i.e. education, sports development andcommunity and nation-building. InEducation, TM has invested considerablyin establishing and growing theinternationally-recognised MultimediaUniversity into one of the top privateuniversities in Malaysia with more than20,000 students enrolled in 2007. As part of capacity-building, TMprovides scholarships to deservingstudents. More than 10,000 graduateshave benefited from TM scholarshipssince 1994. On the Sports Developmentfront, TM is involved in the promotionand strengthening of football at alllevels, while under the Community andNation-Building platform, the Groupcontributes towards causes that bringtangible benefits to society and thenation at large.

arrangements with telcos in Singapore,Philippines, Brunei, Indonesia, Thailand,Myanmar, Cambodia, Laos and Vietnam.TM Global has also set up Global IPNodes in Singapore, Hong Kong, Japan,UK, US, Netherlands, Egypt, Bahrainand Indonesia, while Sri Lanka andPakistan Global IP Nodes were inprogress in 2007.

Meanwhile, on 28 September 2007, TM proposed to undertake a demergerexercise to separate its mobile andfixed businesses currently managed asone, into two business entities as follows:

• FixedCo (TM) – This entity wouldretain TM’s domestic interests infixed-line voice, data and broadbandand other non-telecommunicationrelated services under TM Ventures.

• RegionCo (TM International) – Thisentity would include all TM’s mobileand overseas operations under TMInternational, and domestic mobileoperations under Celcom (Malaysia)Berhad. The demerged entity wouldthen seek a separate listing.

This move would create two leadingcommunication companies, each clearlyfocused on its own core business orcore competency. One will be positionedas a champion of regional mobileservices, and the other a leader indomestic fixed services including high-speed broadband.

The Dem

ergerP

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CorporateFramework

On September 28, 2007, TM’s Board of Directorsapproved the proposal for a strategic demergerexercise which was designed to lay thefoundations for the Group’s continued success. A year before, TM had begun to address theperformance issues of its domestic fixed-linebusiness which was facing revenue decline, and itsmobile operations in Malaysia, which suffered fromintense competition. A Performance ImprovementProgramme (PIP) was launched to improveoperational efficiencies at all levels in August 2006.TM executed a number of programmes to bringabout real and positive change – from the top, tothe front-liners, by way of employee-engagementand productivity-enhancement exercises. UnderPIP, TM also undertook a restructuring exercise toconsolidate and strengthen its domestic operationsunder a new Strategic Business Unit calledMalaysia Business whose team would focus onarresting fixed-line revenue decline and maximiseoperational synergies across the organisation.

The PIP initiatives resulted in an enhancedperformance of TM’s core businesses in fixed andmobile operations and demonstrated that asharper focus on each core competency wouldyield desired results. Demerger to furtherrationalise both operations was inevitable as thenext step. The proposition was to demerge TM’soperations into two separate legal entities –FixedCo (TM) and RegionCo (TM International) –each with its own leadership and teams andgrowth strategies independent of one another, withthe ultimate objective being to improve operationalexcellence and deliver better shareholder value.FixedCo would retain the listed TM’s domesticinterests in fixed-line voice, data and broadbandand other non-core services under TM Ventures.RegionCo, on the other hand, would group TM’sregional mobile operations under TM International,and domestic mobile operations under Celcom,and pursue listing status as a separate entity.Both companies would have the freedom to charttheir own growth while standing on their individualmerits with distinct investment-value propositions.

TM’s aspirations were for FixedCo to focus ongrowing the domestic broadband market even as itcontinued to boost performance for fixed voice anddata. In this regard, FixedCo was to collaboratewith the Government of Malaysia to roll out highspeed broadband (HSBB) services. While FixedCowas well positioned as a leader in the domesticmarket, RegionCo would emerge as a regionalmobile champion leveraging on its assets andexpanding and increasing its footprint across Asiaand other emerging markets.

Facts at a Glance

HSBB – The Next Generation

To propel Malaysia into a digitaleconomy

• A RM15.2 billionproject over 10 years in partnershipwith the Government of Malaysia

• To connect 2.2 millionpremises with high-speed Internetaccess

• To help achieve the national

objective of 50% householdbroadband penetration by 2010


Khazanah MI

Pre-Demerger

Khazanah MI Khazanah MI

Post-Demerger

TMB

TMI

TMITMB

TMB

TMI TESB

Fibrecomm

TESB

51%

SSRCPS

51%

All wholly-owned unless otherwise stated

TMI

Celcom

CTX

Fibrecomm

3G3G

TMB

SSRCPS

1

3 4

2

Celcom

3G3GCTX


The Demerger Proposition

DEMERGER TRANSACTION STEPS

1. The first step involves an internal restructuring exercise whichwill group all TM's mobile and overseas businesses under TMInternational;

Demerger Transaction Step 1:Internal Restructuring / Asset TransfersObjective – To group all mobile assets under TMI, and to ensureownership of fixed business under TM

1. Fibercomm1 to be transferred by Celcom (Malaysia) Berhad(“Celcom”) to MB for RM33 million (at book value)

2. Telekom Enterprise Sdn Bhd (“TESB”) to transfer Celcom to TMIfor RM4,677 million (at cost of investment)

3. Sunshare RCPS2 to be transferred to TMI for RM141 million (atbook value)

4. TMB to transfer 3G licence to Celcom for RM40 million (at bookvalue). Consideration is paid by Celcom in cash

5. Settlement of amount owing from TMI to TMB of RM3,041 million

Notes:1. Fibrecomm is 51% owned by Celcom via Celcom Transmission (M) Sdn Bhd

(“CTX”). Principally engaged in provision of fibre optic transmission networkservice.

2. SunShare Investment Ltd, a jointly-controlled entity with primary investmentin MobileOne Ltd. TMB holds redeemable preference shares (‘RCPS’) inSunShare with 51% economic interest, notwithstanding its TMB’s 80% equityinterest therein.

• Distribution> Distribution via special dividend on a one share of TMI for

every one share in TM> This approach has been adopted as it provides the highest

degree of transaction certainly and reduces execution complexity

• Listing> TMI to be listed separately

With the completion of the share distribution, TM International ceasesto be a subsidiary of TM and effectively demerged from TM.

2. The second step sees the separation of the fixed-line and mobilebusinesses into ‘TM International Group’ and ‘TM Group’.

Demerger Transaction Step 2:TMI Share Distribution to TM ShareholdersObjective – To distribute shares in TM International to existingshareholders of TM in the ratio of 1:1, as a result of which, TMI willcease to be a subsidiary of TM


TM INTERNATIONAL: THELEADING MOBILE OPERATORIN SOUTH & SOUTH-EASTASIA BY 2015TM International is on a new growthtrajectory by aiming to expand itsfootprint beyond the existing 10countries where TM has a presenceand where the mobile subscriber baseis about 39.8 million. To strengthen itsposition in high-growth markets inSouth Asia and South-East Asia, TM International will be consideringstrategic collaborations with existingand new partners especially to facilitatea mutual exchange of resources,technology and international bestpractices.

TM International has great aspirationsfor Celcom to make it a player capableof contributing significantly to thegrowth of TM International across theregion. With its track record and strongposition in mobile operations inMalaysia, Celcom will anchor TMInternational and provide continuingtechnological, brand and marketingleadership through access to productand service innovations and offerings.

In conclusion, TM Group is determinedto continue its evolution as one ofMalaysia’s foremost companies, byproviding the impetus to the growth oftwo companies which will build onMalaysia’s telecommunications legacyseparately and independently, as wellas achieve prominence at home andleadership in the region. Demerger is astrategic exercise whose valueproposition is to deliver tangible benefitsto all TM stakeholders far and widewith a new vision and renewed energy.

TM: MALAYSIA’S LEADINGNEXT GENERATIONCOMMUNICATIONS PROVIDERTM, optimising on its strengths of 95%and 96% market share in the fixed-lineand broadband businesses respectively,intends to focus on new businesssegments as its growth engine, namelybroadband, global business andwholesale.

With a commitment to embracecustomer needs through innovation andexecution excellence, TM will capitaliseon consumer demand and growthopportunities through upstreampartnerships and deploying differentiatedservice offerings under High SpeedBroadband in the downstreamconsumer segment. It will also focuson the small-medium enterprise (SME)market, as well as enhanceinternational connectivity within theregion to establish Malaysia as aregional Internet hub and digitalgateway for South-East Asia.

In the long-term, TM will drive HSBBas an important engine for nationalgrowth.

THE METAMORPHOSISThe complex exercise of demerger wassimplified for TM’s key stakeholders byopen and transparent communicationsfrom the onset. Through regulardisclosure and dialogue, TM articulatedthe rationale and benefits, and sharedthe process and way forward post-demerger plans. Demerger involvedtwo key stages of transition. The firststage called for an internal restructuringexercise to group all TM’s mobile andbusinesses under TM International,while the second stage focused onseparation of the fixed-line and mobilebusinesses into ‘TM InternationalGroup’ and ‘TM Group’ respectively.

As at end December 2007, thedemerger process was on track andkey deliverables already in place. The first quarter of 2008 saw regulatoryand compliance activities in progress,including submissions for approval tothe Malaysian Communications andMultimedia Commission, the SecuritiesCommission, Foreign InvestmentCommittee and Bursa Securities. TM obtained its shareholders’ approvalto proceed with the demerger exerciseat an Extraordinary General Meeting(EGM) held on 6 March 2008.

A Demerger Program office headed by Khairussaleh Ramli was set up tomanage the demerger exercise. The demerger is targeted forcompletion at the end of the secondquarter of 2008, when TM Internationalis expected to be listed. With that, theTM Group will effectively move forwardas two different companies, each withtheir own value proposition.

The Demerger Proposition

CELCOM (MALAYSIA) BERHAD

CELCOM CONSUMER PRODUCTSCelcom Postpaid Mobile Services• Postpaid Rate Plans

– Normal Postpaid– Minutes Postpaid– Family Postpaid– 1+3 Plan

• Postpaid Data Services• Postpaid Value Added Services• 3G Postpaid Services

Celcom Prepaid Mobile Services• Rate Plans

– Xpax Prepaid (Max, Mid, Lite)• Promotional/Limited Edition Starter Packs

i.e. Paket Baladewa, Paket Keren Peterpan,Sikat Pack for Filipinos, UOX, Kenangan

MALAYSIA BUSINESS

TM RETAILVoice Products• Home Line• Business Line• Infoblast• One Number Services• Malaysia Direct• iTalk• TM Calling Card

Data Products• VPN• Coins VPN• Global VPN• IPVPN• Metro-E• Managed Services

Solution Added Services• Conferencing Services

Access Services• Business Broadband

i. SOHOii. 1IPiii. 5IP

• 1515• 1525• EZnet 1315• Streamyx• Streamyx Hotspot

Application Services• e-health• e-secure• e-biz• e-hotel• e-Mall• e-supply chain• e-surveillance• Hosting services• Webmail

Value Added Services• Global Roaming• Corporate Roaming• Xfilter E-scan• Online Guard• Powersurf• Virus Shield &

Anti-Spamming• Xfilter Ishield• X-blocker

Content Services• Bluehyppo.com• Netmyne• Hypp.tv

TM WHOLESALETraffic Minutes• Public Switched Terminal

Network (PSTN)• Voice-over Internet Protocol

(VoIP)• Domestic Interconnect• International Interconnect

Access Services• Narrowband (Payphone)• Broadband (DSL, Fixed, Fixed

Wireless)

Bandwidth Services• Domestic (Commercial)

i. Narrowbandii. Broadbandiii. Optical Bandwidth

• Domestic (Regulated)i. In spanii. Full span POIiii. Domestic Network

Transmission Services

• Internationali. International Private

Leased Circuit (IPLC)ii. International Satellite

Servicesiii. International VSAT Servicesiv. Bandwidth Transit Servicesv. Bandwidth Backhaul

Servicesvi. Bandwidth Interconnection

Services

Data Services• Domestic

i. IP Wholesaleii. Wholesale Ethernet

• Internationali. Global IPVPNii. Global Managed Servicesiii. Global IP Transit

Infra Services• Tenancy• Co-Location• Infrastructure Sharing

Customised Services• Recovery Work Order

Terindah bersama Samsons, World Cricket’07 (West Indies) Limited Addition StarterPack

• Data Services• Value Added Services i.e. 8pax, Airtime

Share• Xpax Bonuses (Every Month Bonus, Birthday

Bonus, Reload Bonus, Stay Active Bonus)• 3G Services• Celcom Branded Content (Channel X) i.e.

Music, Movies, Games

INTERNATIONAL ROAMING PRODUCTSFOR POSTPAID & PREPAIDPostpaid• International Direct Dialling (Premium IDD,

IDD 131)• International Roaming (SMS, MMS, 3G Video

Calls, Roam Saver *120*)Prepaid• Premium IDD, IDD 131, SMS, MMS• International Roaming

(SMS, MMS, 3G Video Calls)

CELCOM ENTERPRISE MARKETPRODUCTSBusiness Voice• Power38• Business 1+3• Business Prepaid• Association Package

Business Data• Mobile Broadband (BASIC/ADVANCED/PPU)• BlackBerry® by Vodafone

– BES – BlackBerry® Enterprise Solution(For Companies)

– BIS – BlackBerry® Internet Solution(For Individuals)

• Email & Beyond Hosted Microsoft Exchange

Business Solutions• Telemetry

– Fleet Management– Remote Meter Reading

• Satellite Voice and Data• Mobile Fax• Bulk SMS/EMS• Data Roaming Packages

21

CorporateFramework

MULTINET PAKISTAN (PRIVATE)LIMITED (MULTINET)

PAKISTAN• Broadband Internet services• International bandwidth and data

services• Long distance and international voice

services• Dark fibre• Domestic private leased circuits• Corporate applications

DIALOG TELEKOM PLC (DIALOG)

SRI LANKA• Mobile Voice and Data services• 3G Mobile services• Broadband Voice and Data services• Internet services• Direct to Home (DTH) satellite TV

services• Satellite Phone services• International Voice and Data services• mCommerce services• Tele-infrastructure and carrier grade

connectivity services• Enterprise Solutions

wide coverage

PT EXCELCOMINDO PRATAMATBK (XL)

INDONESIA• Prepaid and postpaid mobile services• Mobile data services

– Corporate Push Email e.g.BlackBerry® and Microsoft PushEmail

– Consumer Push Email brandedXLMobileMail

– Location based services– E voucher Reload– 3G services i.e. Video Streaming,

Video Call, Video Downloads, FullTrack downloads, Mobile TV,Interactive Game

• Domestic and international businesssolutions

• International wholesale carrier services

TM INTERNATIONAL(BANGLADESH) LIMITED (TMIB)

BANGLADESH• Prepaid and postpaid mobile services• Mobile data services

– Infotainment Services– SMS Banking– E reload – Share a fill– Local Language messaging– Downloads: Ringtones, Operator logo,

Screen Saver, Picture Message, MMScontent

– Voice Greetings – Fun Dose– Caller Ring Back Tone

TELEKOM MALAYSIAINTERNATIONAL (CAMBODIA)COMPANY LIMITED (TMIC)

CAMBODIA• Prepaid and postpaid mobile services• Mobile data services

– Infotainment services e.g. sports– Voice SMS, Voicemail– Downloads: Ringtones, Operator logo,

Screen Saver, Picture Message, MMScontent

SPICE COMMUNICATIONSLIMITED (SPICE)

INDIA• Prepaid and postpaid mobile services• Mobile data services

– Music: Caller Ringback tone,Background music, Jukebox, MobileKaraoke

– Entertainment services: Mobile Dating– Emergency call service– Videotones

TM G

roupP

roducts &

Services

MOBILEONE LIMITED (M1)

SINGAPORE• Prepaid and postpaid mobile service• Mobile broadband• Mobile data services including:

– MeTV– mClassified– eBay Mobile– SMS 2.0

MOBILE TELECOMMUNICATIONSCOMPANY OF ESFAHAN (MTCE)

IRAN• Prepaid and postpaid mobile services• SMS services• Selective Value Added Services’ content:

Al Quran, Hafiz poems

Mile

ston

es O

ver

Two

Cen

turie

s


CorporateFramework 1800’s

1874The telephone makes its debut in Perak

1882Perak and Penang are linked by telephone via asubmarine cable

1891The first telephone exchange is commissioned inKuala Lumpur

1894A submarine cable links Labuan with Singaporeand Hong Kong

1900’s1900

The first magneto telephone service is introducedin Kudat, Jesselton (KK) and Sandakan

1908Incorporation of postal and telegraph services

1926Advent of radio communications in the country

1946Establishment of the TelecommunicationsDepartment in Malaya

1962Introduction of Subscriber Trunk Dialling (STD)between Kuala Lumpur and Singapore via thefirst long distance microwave link

1963• Expansion of the microwave network

throughout Malaysia• Launch of television services in Peninsular

Malaysia

1968The Telecommunications Department of Sabahand Sarawak merge with that of PeninsularMalaysia forming the TelecommunicationsDepartment of Malaysia

1970The first international standard satellite earthstation is commissioned in Kuantan, marking theadvent of live telecasts in Malaysia

1975Establishment of the Automatic Telex Exchange

1979Introduction of International Direct Dial (IDD)facilities

1980Malaysia commissions its own submarine cablelinking Kuantan and Kuching

1982Introduction of Telefax and International MaritimeService

1983Introduction of data communications

1984Introduction of packet switch technology, leadingto Malaysia’s own public data network

1985• Commissioning of the ATUR service using 450

analog cellular radio technology, a first in Asia• The Multi Access Radio System, providing

rural customers with easier access totelephone services, is introduced

1987Jabatan Telekom Malaysia (JTM) is corporatised,forming Syarikat Telekom Malaysia Berhad(STMB), the nation’s first privatised entity

1988Introduction of digital INTELSAT Business Service


Our Journey Continues...

1989Introduction of the 800 toll-free service

1990• Introduction of international toll-

free and prepaid cardphone(Kadfon)

• Listing of STMB on the Main Boardof Bursa Securities and introductionof the new company logo

1991• The Company rebranded its name

to Telekom Malaysia• Introduction of Malaysia Direct,

Home Country Direct

1992Introduction of Video Conferencing andCENTREX

1993Introduction of ISDN services

1996Introduction of 1800 MHz digitalTMTOUCH cellular services

1997Introduction of Corporate InformationSuperhighway (COINS), TelekomMalaysia’s state-of-the-art, high-capacity enterprise solution

20002001

• Launch of Bluehyppo.com, TelekomMalaysia’s lifestyle Internet portal,which records more than 290million searches a year

• Introduction of broadband services

• Telekom Malaysia becomes a majorpartner in the launch of the state-of-the-art submarine cable AsiaPacific Cable Network 2 (APCN2)

• Establishment of TM Net as thelargest Internet Service Provider inthe South-East Asian region

• Launch of CDMA service fixedwireless telephony

2002Award of the 3G spectrum to TelekomMalaysia

2003Merger of Celcom and TMTOUCHforming Malaysia’s largest cellularoperator

2004Restructuring of TM TelCo into twoStrategic Business Units (SBUs) – TM Wholesale and TM Retail

2005• Telekom Malaysia undergoes a

major re-branding exercise and TM is adopted as the new brand

• Launch of 3G Services – first inMalaysia

• Acquisition of 27.3% interest in PT Excelcomindo Pratama Tbk ofIndonesia

2006• TM forges strategic partnership with

Vodafone, becoming a VodafonePartner Network with a global reachof an estimated 179 million mobilecustomers worldwide

• TM implements its second phaserestructuring exercise that organisesthe Group’s business into 4 groupings– Malaysia Business, Celcom, TM International and TM Ventures

• XL, TM’s Indonesian subsidiarysecures 3G licence while Dialog,TM’s subsidiary in Sri Lankalaunches South Asia’s first 3Gservice

• Acquisition of the remaining 49% in Telekom Malaysia International(Cambodia) Company Limited,(formerly known as CambodiaSamart Communications Ltd),Cambodia and 49% interest in Spice Communications PrivateLimited, India

• TM initiates consortium to developan undersea cable system, Asia-America Gateway, linking SE Asia and the USA

2007• TM Group undertakes Demerger

exercise resulting in two distinctentities – TM (FixedCo) and TMI(RegionCo)

• TM becomes the first Malaysiancompany to be named ServiceProvider of the Year at 2007 Frost& Sullivan Asia Pacific ICT Awards

• The first commemorative booktitled “Transforming a Legacy”, was launched by YAB Dato’ SeriAbdullah Hj Ahmad Badawi, Prime Minister of Malaysia

• Divestment of TM’s Payphonebusiness to Pernec CorporationBerhad

• TM’s affiliate in India, SpiceCommunications Limitedcommences trading on the BombayStock Exchange and receives theNational and International LongDistance licences


MediaMilestones in 2007



31 January 2007The ‘Let’s Talk’ package which is aimedat boosting the usage of fixed-lineservices among customers was unveiledto the public. The campaign was aninitiative under the TM PerformanceImprovement Programme (TM PIP),which sought to turnaround thedomestic business.

8 February 2007Dialog Telekom PLC (Dialog)’ssubsidiary Asset Media (Pvt) Ltdlaunched Dialog Satellite TV – apremier satellite television service set torevolutionise Direct to Home Televisionin Sri Lanka. Dialog is TM’s subsidiaryin Sri Lanka. Dialog Satellite TVfeatures world-class entertainment andthe widest spectrum of channels with aspecial focus on News, Entertainmentand Knowledge-based Programming.

11 February 2007TM continued to support Le Tour deLangkawi, an international cycling racefor the 12th consecutive year.

23 February 2007TM announced its 2006 financial resultswhich saw TM recording higher ProfitAfter Tax and Minority Interest (PATAMI)of RM2.069 billion. The healthyperformance was attributed mainly tohigher group revenue, better cost andfinancial management and foreignexchange gain. TM also announced theextension of Dato’ Sri Abdul WahidOmar’s tenure as TM Group ChiefExecutive Officer for another 3-yearterm with effect from 1 July 2007.

17 January 2007TM along with Tenaga Nasional Berhad(TNB), Syarikat Bekalan Air SelangorSdn Bhd (SYABAS) and Indah WaterKonsortium Sdn Bhd (IWK) cametogether for a 3-month public awarenesscampaign to address cable theft.

25 January 2007TM entered into a partnership withVodafone Alliance where each partyagreed to jointly explore and identifyopportunities to enhance the businessesof their respective group companiesthrough collaboration in the area ofinternational mobile telecommunicationsproducts and services. Subsequently,Vodafone entered into a separateCooperation and Branding Agreementwith respective TM subsidiariesincluding Celcom, Dialog and XL.

17January

23 February

11February

31January


2007 Corporate Events

2007C

orporate E

vents


CorporateFramework

15 March

20 March

15 March 2007TM signed a Memorandum of Understanding(MoU) with US-based phone firm Verizon Businessto explore the development of a Malaysian-basedInternet Protocol (IP) hub.

17 March 2007Multimedia University (MMU), the first privateuniversity in the country, celebrated its 10thanniversary with a host of activities throughout theyear highlighting its many achievements.

20 March 2007Pizza Hut customers are able to enjoy both theirmeal and wireless broadband at the same timethrough tmnet hotspot services at more than 100Pizza Hut restaurants located throughoutPeninsular Malaysia, which collectively form thelargest hotspot network in the country.

20 March 2007TM signed a tripartite MoU with the Ministry ofEntrepreneur and Cooperative Development (MECD)and three financial institutions, namely Maybank,CIMB and SME Bank to further enhance theimplementation of TM’s EntrepreneurshipDevelopment Programme (EDP).

30 March 2007TM Net signed a partnership with Koreancompany, Netpia.Com Inc to supply an applicationfor Internationalised Domain Name or NativeLanguage Internet Address (NLIA). The agreementmarked the next step in the continued evolution ofTM Net’s vast array of services.

30 March 2007TM showed its support for the North Poleexpedition by contributing communication facilitiesamounting to RM100,000 which included CelcomXpax prepaid cards, satellite airtime, handphonesand a special laptop called ‘toughbook’.

30March


10 April

5 April 2007TM completed the sale of its entire 60%shareholding in Telekom NetworksMalawi Limited to MTL Mobile Limitedfor a total cash consideration of US$16million (RM55.0 million). The sale waspart of a broader re-orientation of theCompany’s international investmentstrategy to focus on geographic regionscloser to home.

10 April 2007Celcom signed a domestic roamingagreement with UMobile Sdn Bhd(formerly known as MiTV Networks SdnBhd), allowing UMobile customers toroam on Celcom’s superior 2G network.

16 April 2007TM signed an agreement with UniversitiTeknologi Petronas (UTP) for theestablishment of a “wireless campus”thereby making it the most extensivelycovered University for wirelessbroadband access.

19 April 2007In Sri Lanka, Dialog executed a rightsissue to raise SLR15.54 billion (RM482.1million) to fund the company’s aggressiveexpansion plans. The rights issue wasaccompanied by a Rated CumulativeRedeemable Preference Shares (RCRPS)issue aimed at raising up to SLR5.0billion (RM155.5 million). The proceedsof the rights issue and issue of RCRPStotalling approximately SLR20.5 billion(RM637.6 million) was for the partialfinancing of Dialog’s capital expenditureover the next three years.

21 April 2007TM adopted two primary schools inBukit Mertajam, Penang; SekolahKebangsaan Bukit Indera Muda andSekolah Kebangsaan Seri Penanti underthe PINTAR programme, giving studentsfrom the schools an opportunity toenhance their IT skills and improvetheir academic achievements. PINTAR isa programme initiated by the Ministry ofFinance and driven by KhazanahNasional together with major GLCs.

21April




27 April 2007TM led a 17-member consortium ofinternational telcos to build the firsthigh bandwidth optical fibre submarinecable system, known as the Asia-America Gateway (AAG), which will linkthe South East Asia region directly tothe United States of America.

8 May 2007For the first time, Menara TM, TM’sheadquarters hosted some 500shareholders at the Company’s 22ndAnnual General Meeting (AGM). At theAGM, shareholders voted in favour of theseven resolutions presented. TM alsoheld an Extraordinary General Meeting(EGM), where another six resolutionswere presented and approved.

11 May 2007A major achievement for Spice TMInternational’s Indian affiliate, came withthe acquisition of a licence from theDepartment of Telecommunication to

operate National and International LongDistance (NLD/ILD) services in India.This development allowed the companyto carry both voice and data trafficnationally and internationally.

14 May 2007Deputy Prime Minister, Dato’ Sri MohdNajib Tun Abdul Razak launched TM’sCorporate Social Responsibility (CSR)theme, ‘Reaching Out’ during hismaiden visit to TM’s HQ in KualaLumpur. ‘Reaching Out’ gives an identityto the Group’s CSR efforts, making iteasier for the public to relate to theCSR causes championed by the Group.In executing its CSR, TM focuses onthree platforms, namely education,sports development as well ascommunity and nation-building.

11 & 29 May 2007TM signed three collective agreements(CAs) with the National Union ofTelecommunication Employees

Peninsular Malaysia (NUTE), Union ofTelekom Malaysia Employees, Sabah(SUTE) and Union of Telekom MalaysiaBerhad Employees, Sarawak (UTES) for2007-2009. The CAs covered variousaspects, which included salaryadjustments, salary structure and salaryincrement quantum, cost of livingallowance, housing allowance andperformance-based rewards.

17 May 2007Dato’ Sri Dr Lim Keng Yaik, Minister ofEnergy, Water and Communications,launched Metro.e and Streamyx 4.0Mbps, another of TM’s latest offeringsin the Malaysian broadband market.Launched in conjunction with WorldTelecommunications Day, the offeringsboost the speed of broadband Internetfor businesses and consumers. Withthese services, subscribers can add onbandwidth from 1Mbps whenever theydesire through a concept calledbandwidth on demand.

14 May8May

11&29May 17May



27 May 2007TM International entered into a StockPurchase Agreement with AIF(Indonesia) Limited to purchase all ofthe latter’s stake in PT ExcelcomindoPratama Tbk (XL). The acquisition, for acash consideration of US$113 million(RM388.3 million), enabled the Companyto raise its shareholding to 67%,thereby capitalising on one of thefastest growing markets for mobiletelephony services in the region.

31 May 2007TM reached a pivotal milestone when ithit its one-millionth broadbandcustomer. To celebrate the occasion, TM feted its one-millionth customer,Iskandar Syah Ismail, 31, with asurprise breakfast treat with Suki, thewinner of ‘One-in-a-Million’, 8TV’sreality talent show.

24 May 2007TM bagged the Service Provider of theYear award for the second consecutiveyear at the annual Frost & SullivanMalaysia Telecoms Awards. It was atriple honour for TM as it also baggedthe 2007 Data Communications ServiceProvider of the Year and 2007Broadband Service Provider of the Yearawards.

25 May 2007Dato’ Seri Shahrizat Abdul Jalil,Minister of Women, Family andCommunity Development launched theTM Merdeka Millionaire rewardprogramme at Berjaya Times Square.The programme gave customers theopportunity to win RM1 million cash,holiday packages, Nokia 3Ghandphones, a brand new ProtonPerdana and other exciting prizes. Toparticipate, customers have to answer afew questions about themselves andcomplete a slogan on Malaysia’s 50thMerdeka celebration.

22 May 2007Chief Minister of Penang, Tan Sri DrKoh Tsu Koon launched TM’s latest callcentre situated at Level 58, MenaraKOMTAR, Penang. Dato’ Koay Kar Huah,EXCO for Transportation Utility &Infrastructure of Penang (left) and Dato’Sri Abdul Wahid Omar, Group CEO(middle) were also present during thelaunch. The new call centre receivesincoming calls on fault managementand sales & services support fortelephony services for the Northernregion. Operating 24 hours a day, thecentre houses 254 Customer ServiceRepresentatives.

22 May

31May25 May

24 May




28 June 2007Celcom introduced the innovative BlueCube outlet with a vision to attainleadership in leading edgetelecommunications retailing. Blue Cubeis a powerful ‘one-stop’ concept storefor lifestyle mobile devices, 3G servicesand mobile content. It is the firstconcept store which allows consumersto experience, touch and feel the fullrange of mobile lifestyle products andservices from Celcom.

2 July 2007TM Chairman, Tan Sri Dato’ Ir Md RadziMansor was inducted into the MalaysianInstitute of Directors (MID) Academy ofFellows at the MID’s Corporate Leaders’Banquet on 2 July 2007 at the JWMarriot, Kuala Lumpur. Incorporated in1982, the Malaysian Institute ofDirectors (MID) is the country’s onlyprofessional organisation for companydirectors in Malaysia.

5 July 2007Dialog Broadband Networks launchedtheir fixed wireless operations based onCDMA technology. This launch furtherstrengthens Dialog’s position as a totalconnectivity solutions provider.

15 June 2007TM became the first Malaysian companyto receive the coveted Service Providerof the Year award at the 2007 Frost &Sullivan Asia Pacific ICT Awardsceremony held in Singapore. Held forthe fourth consecutive year, the Frost &Sullivan Asia Pacific ICT awards serveto recognise companies in the ICTsector across the Asia Pacific region.

28 June

2 July

15 June



6 July

15July 17July

14 July 2007TM launched another channel known asHypp.TV at its lifestyle portal,BlueHyppo.com. at Suria KLCC duringNTV7’s UrbanLive roadshow. Hypp.TVoffers streaming media content throughits three main channels namely sports,news and local lifestyle andentertainment.

15 July 2007Aktel celebrated its 10th year ofoperations in Bangladesh by showingtheir appreciation to their loyalcustomers in launching “The GoldenCall” campaign. The campaign, a first ofits kind in the country, rewards Aktel’sloyal customers.

6 July 2007A signing ceremony was held for TM’ssuccessful conversion of RM2,925million of its existing Tekad Mercubonds to Syariah-compliant StapledIncome Securities on 28 June 2007.This represents the first Syariah-compliant Stapled Income Securitiesever structured and issued globally.With the conversion, about 95% of TM’sdomestic borrowings and one-third oftotal Group Borrowings are now basedon domestic principles. CitibankMalaysia was the Principal Adviser andSole Lead Arranger, while investorswere the Employee Provident Fund,Kumpulan Amanah Wang Pencen,Malaysian National Insurance andAmanah Raya Berhad.

17 July 2007TM Research & Development Sdn Bhd(TMR&D) revealed an exciting solutionknown as Fibre-to-the-home (FTTH)broadband access during a mediapreview of the trial deployment of FTTHby Dato’ Zamzamzairani Mohd Isa, CEOMalaysia Business and ShahruddinMuslimin, CEO TMR&D. The new FTTHsolution is set to offer high speedbroadband services to Malaysian homesin the Klang Valley and other majorurban centres in Peninsular Malaysia by2008. This end-to-end fibre opticconnection is capable of supporting upto 100Mbps, although TM hasdesignated a speed of 10Mbps for itsinitial rollout.




19 July 2007TM International’s Indian affiliate, SpiceCommunications Limited (Spice) made aspectacular debut on the Bombay StockExchange (BSE), opening at INR55.75(RM4.64) per share, up 20% from itsissue price of INR46 (RM3.83) pershare. The Initial Public Offering (IPO)was oversubscribed by 37.5 times.

25 July 2007Celcom signed an agreement withMerchantrade Asia Sdn Bhd,(Merchantrade) to launch Malaysia’sfirst Mobile Virtual Network Operator(MVNO) by providing a prepaid packageto overseas foreign workers in Malaysia.These include customers from ninecountries, specifically India, Nepal, SriLanka, Pakistan, Bangladesh, Vietnam,Myanmar, Cambodia and Laos.

31 July 2007Celcom Broadband, which offers thefastest wireless Internet access anytimeanywhere from as low as RM8 a day,for Celcom’s business and individualcustomers was launched. The highspeed of up to 3.6Mbps is madepossible by High Speed Data PacketAccess (HSDPA) technology, or betterknown as 3GX. The new package comesin two different plans, Daily Unlimitedand Monthly Unlimited.

1 & 2 August 2007TM organised the TM JournalismWorkshop in Kuching, Sarawak for 20journalists from 11 major media housesin the state. Co-organised by theMalaysian Press Institute (MPI), theworkshop was launched by Hj MohdNarodin Hj Majais, Assistant Minister inthe Chief Minister’s Department(Bumiputera EntrepreneursDevelopment) and Assistant Minister,Land Development of Sarawak.

11 August 2007TM unveiled iTalk Buddy, the latestfeature of its iTalk prepaid calling cardat The Curve, Petaling Jaya. iTalk Buddyallows its users to build and join anonline and offline community of buddies,families and friends. Users within thiscommunity will be able to sendmessages, make PC-to-PC calls, sharefiles and folders, share screens andInternet connections, produce and shareblogs, upload and share photos andmuch more. It is also the first InstantMessenger (IM) service introduced whichallows common online services tooperate even when there are no Internetconnections available.

15 August 2007TM flagged off its 50th MerdekaAnniversary celebrations on 15 August,2007 with a wide range of activitiesrevolving around the theme “ThankingMalaysians – Because It Takes Everyoneto Build a Beautiful Nation”.

19July 25 July

11August31July15 August



1 September 2007Dialog Telekom established one of SriLanka’s most technologically advancedEnterprise Management Centres whichhas enabled top Sri Lankan enterprisesto offer its customers the best serviceexperience from a well-trainedcustomer-centric workforce.

7 September 2007VADS Contact Centre Services (CCS)was honoured with two CorporateAwards and five individual achievementawards by the Customer RelationshipManagement & Contact CentreAssociation (CCAM). The awards weregiven in recognition of its exceptionalcommitment to managing the customerexperience through innovative, provenprocesses and technologies to maximisethe value of customer communicationswithin its sales and service operations.

15 September 2007In Indonesia, XL introduced lower tariffsfor its bebas plan to counter the stiffcompetition from existing GSM and newCDMA players. This resulted insubstantial revenue growth in the thirdand fourth quarters of the financial year.

22-23 August 2007TM International, together with TM, co-sponsored this year ’s ASEAN 100Leadership Forum which was held inHanoi, Vietnam. TM Chairman, Tan SriDato’ Ir Muhammad Radzi Hj Mansorled the delegation of 11 which includedTM Directors Dato’ Dr Abdul RahimDaud, YB Datuk Nur Jazlan Tan SriMohammed and Ir Prabahar NKSingam as well as TM International’sChief Executive Officer Dato’ YusofAnnuar Yaacob.

31 August 2007TM’s CEOs and their peers from theindustry led a 300-participant strongcontingent comprising employees fromTM, Celcom, Maxis, DiGi and PosMalaysia in a march on Merdeka Day.The contingent strode proudly incolourful uniforms inspired by thenational flag, Jalur Gemilang. Theindustry leaders included Dato’ SriAbdul Wahid Omar, Group CEO TM;Dato’ Sri Shazalli Ramly, CEO ofCelcom; Dato’ Zamzamzairani Mohd Isa,CEO of Malaysia Business TM; SandipDas, CEO of Maxis; Roslan Rosli,Regulatory Head of DiGi and Hj MohdDerus Harun, General Manager of PosMalaysia.

15 August 2007Dialog Telekom together with NDBBank, one of the leading private sectorcommercial banks in the country,unveiled eZ Pay, South Asia’s firstmCommerce (Mobile Commerce)initiative. It is a revolutionary servicethat allows consumers to purchasegoods, pay bills, transfer money andperform banking transactions via theirmobile phones.

20 August 2007TM received two accreditations, i.e.Trainee Development and ProfessionalDevelopment, from the Association ofChartered Certified Accountants (ACCA)under the latter’s Approved EmployerProgramme. Tay Kay Luan, ACCADirector for ASEAN & Australasiapresented the certificate to Dato’ SriAbdul Wahid Omar.

21 August 2007TM International’s Cambodianoperations, TMIC, rolled out its newVoIP service.

15 August 31August




30 September 2007TMIB, TM’s operations in Bangladesh,achieved its 7 millionth customer. Tomeet the demands of its growingcustomer base, TMIB expanded itscustomer service network to 19 walk-inCustomer Care Centres by year end.

2 October 2007YB Dato’ Shaziman Abu Mansor, DeputyMinister of Energy, Water &Communications announced that 999would be the only number for allemergency calls made by the public.TM manages the emergency calls bydirecting them to the relevant agenciesnamely Police, Fire Department,Hospital and Civil Defence.

4 October 2007TM and Polis DiRaja Malaysia (PDRM)launched its seventh annual Ops Sikapcampaign which ran from 7 until 21October 2007 and unveiled the first ‘OpsSikap’ Icon during the launch ceremonyheld at Bentong, Pahang. The campaignthemed, ‘Pandu Cermat SampaiSelamat’, promoted safe driving and acourteous attitude amongst road users,especially during the festive season. Thecampaign was also launchedsimultaneously in other states inMalaysia over the following two days.

12 October 2007Celcom launched its new ‘Unbeatable’campaign, which became a hugesuccess. The campaign features CelcomPower Icons, Ryan Giggs, John Terry,Peterpan and Lee Hom.

24 September 28 September

4 October2 October

12October


21 September 2007Celcom distributed RM730.1 million incash to its shareholders by way of acapital repayment exercise.

24 September 2007Dialog Telekom PLC received a US$100million financing package fromInternational Finance Corporation (IFC)– a member of the World Bank Group.The US$100 million package included aUS$70 million term loan facility and aUS$30 million equity commitment viathe acquisition of a 1.6% holding inDialog by IFC.

28 September 2007Chairman, Tan Sri Dato’ Ir Md RadziMansor announced the approval by theBoard of Directors for the demerger ofthe TM Group’s mobile and fixedbusinesses into two distinct entities.


12 November 2007PT Excelcomindo Pratama Tbk (XL)officially launched its new submarinecable system linking Batam inIndonesia and Tanjung Penyusop,Sungai Rengit in south Johor, Malaysia.The system, known as the Batam-Rengit Cable System (BRCS), is XL’sfirst international submarine cablesystem. The launch of this underseacable system automatically gives XL thestatus of the cellular operator with thewidest backbone in Indonesia.

15 November 2007TM International’s Cambodiansubsidiary, Telekom MalaysiaInternational (Cambodia) CompanyLimited (TMIC), unveiled the newidentity of its ‘‘hello’’ brand at a grandceremony in Phnom Penh. Held at the luxurious Raffles Hotel Le Royal,the launching ceremony was officiatedby His Excellency, Minister So Khun,Minister of Posts andTelecommunications and attended by officials from TMIC, corporateguests as well as local andinternational media.

1 November 2007Dialog Broadband Networks (DBN), awholly-owned subsidiary of DialogTelekom PLC, became the first in SriLanka to introduce Broadband Internet,powered by WiMAX technology.

3 November 2007Prime Minister, Dato’ Seri Abdullah Hj Ahmad Badawi, launched TM’scommemorative book titled‘Transforming a Legacy’ during the TM Hari Raya Open House held atMenara TM in Kuala Lumpur.

12 November 2007Dato’ Abdul Aziz Abu Bakar, Senior VicePresident of Group HR was awardedthe prestigious ‘HR Leader Award’under the Individual Professionalcategory by the Malaysian Institute ofHuman Resource. This Award is torecognise individual professionals whohave made an outstanding contributionto Human Resource Management, inthe context of the Malaysian Vision2020. Dato’ Aziz received a trophy and acertificate from Datin Sri RosmahMansor, wife of Deputy Prime Ministerat the Malaysia HR Awards 2007.

3November

12November

12 November

15 November




29 November 2007TM clinched the Gold Award for theOverall Excellence category of theNational Annual Corporate ReportAwards (NACRA). TM also took homethe Industry Excellence Award for theBursa Malaysia Main Board Companiescategory under the Trading & Servicessector for the 11th consecutive timeand the Gold Award for Best DesignedAnnual Report. NACRA is jointlyorganised by MIA, The MalaysianInstitute of Certificate PublicAccountants (MICPA), the MalaysianInstitute of Management (MIM) andBursa Malaysia Berhad.

30 November 2007TM rewarded 241 of its scholars whoachieved excellent results in theirstudies at an event aptly called ‘‘MajlisAnugerah Pelajar Cemerlang 2007’’held at Multimedia University (MMU)Melaka campus on 30 November 2007.The Excellence Awards serve as anencouragement for them to continuewith their outstanding performance anddemonstrate TM’s commitment insupporting excellence in education.

11 December 2007PT Excelcomindo Pratama Tbk (XL)ended the year by welcoming EtisalatInternational Indonesia Limited as oneof its shareholders.

31 December 2007XL, TM’s subsidiary in Indonesia, ended2007 with 15.5 million subscribersmaking up a market share of 15%. Thisrepresented a hefty increase of 62%from a year ago. At the end of 2007,XL’s coverage had reached 90% of theIndonesian population.

31 December 2007The total number of subscribersregistered by Spice, TM’s investment inIndia, had increased to 3.8 million from2.5 million at the start of the year.

31 December 2007M1, a leading mobile communicationsoperator in Singapore, recorded a 14.8%increase in its total customer base, with1.535 million mobile customers as at 31December 2007.

31 December 2007Malaysia Business, a strategic businessunit of TM focused on the fixed sectorin Malaysia, registered significantInternet growth in 2007 to reach a totalsubscriber base of 1.27 million byDecember 2007.

29 November

30 November

31December


TM A

war

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CorporateFramework

5 MAY 20078 JANUARY 2007

18-20 MAY 2007 7 MAY 2007

4 JUNE 200718-20 MAY 2007

The Brand Laureate Award Frost & Sullivan Malaysia Telecoms Award

Trusted Brand in Telecommunications Award

Silver Award & Innovative Product Award

Gold Award & Innovative Product Award

Malaysia Brand Equity Award


28 AUGUST 200724 AUGUST 2007

16 NOVEMBER 200710 NOVEMBER 2007

29 NOVEMBER 2007

26 OCTOBER 2007

29 NOVEMBER 2007

13 DECEMBER 200729 NOVEMBER 2007

Anugerah Citra Wangsa Malaysia Award

Six Oskar Award

UNI-APRO Outstanding Employee Partner Award

Malaysia’s Most Valuable Brands Award

Program Time 2 Award

Gold NACRA Award for Overall Excellence

NACRA Award for Industry Excellence NACRA Award for Best Design National Award for Management Accounting


8 JANUARY 2007The year opened with a bang, with TM being conferred The Brand LaureateAward 2006-2007 in the Corporate Brand –Telecommunications Industry category by theAsia Pacific Brands Foundation. Theselection criteria included Brand Strategy,Brand Culture, Brand Communications,Brand Equity and Performance.

17 JANUARY 2007Clearly emerging as the most popularBroadband Internet service provider inMalaysia, TM Net Sdn Bhd once againreceived the title of Best Broadband InternetService Provider of 2006 from PC.Commagazine. Based on a poll conducted by the magazine, the award has been wonby TM Net for five years in a row.

15 FEBRUARY 2007Dialog Telekom PLC of Sri Lanka, a memberof the TM Group, received a CommendationAward from the GSM Association at the GSMGlobal Mobile Awards event in Barcelona,Spain. Dialog was commended for itsDisaster and Emergency Warning Network(DEWN), which enables disaster warninginformation to be communicated securely andinstantaneously to emergency personnel andmobile phone users anywhere in the country.Dialog has so far had three consecutive winsat the prestigious GSM World Awards.

22 MARCH 2007Dialog Telekom PLC won further recognitionby attaining the top spot in the FinanceBrand Index as Sri Lanka’s most valuedbrand. This recognition was noted in theMarch issue of Lanka Monthly Digest.

22 MARCH 2007TM International Bangladesh Ltd (TMIB), aTM regional company, won the StandardChartered-Financial Express CSR Award 2006for its significant contributions to theservices sector.

5 MAY 2007TM took three awards at the annual Frost & Sullivan Malaysia Telecoms Awardspresentation ceremony. TM bagged the 2007Data Communications Service Provider of theYear award whilst TM Net took home the2007 Broadband Service Provider of the Yearaward. For the second time running, TM also received the coveted 2007 ServiceProvider of the Year award. This awardrecognises TM’s consistent performance andsustainable growth in revenue, substantialmarket share as well as overall leadershipin new product introductions andinnovations.

7 MAY 2007TM was voted by consumers as the TrustedBrand in Telecommunications in Reader’sDigest Trusted Brands 2007 survey. TM received the Platinum Award for thisrecognition. Surveyed consumers were askedto name their most trusted brand in each of43 different product categories based on 6key criterias – trustworthiness, credibleimage, quality, value, understanding ofcustomer needs and innovation.

18-20 MAY 2007A total of nine product development awardswere won by TM R&D in recognition of itsResearch and Development efforts. Thesewere given by the International Invention,Innovation, Industrial Design and TechnologyExhibition (I-TEX) 2007 held in KualaLumpur. The award-winning products werethe Platform for All-Service Multi-Access orPLASMA (Gold Award & Innovative ProductAward), XtreamX Home Media Centre (GoldAward), Vertical Cavity Surface EmittingLaser or VCSEL (Gold Award), AdvancedTracking System Using RFID (Silver Award &Innovative Product Award), EDFA In-Line(Silver Award), Simple & Efficient SoftwareRadio Development Platform (Bronze Award)and Distribution Point or DP (InnovativeProduct Award).

4 JUNE 2007 Celcom took 4th place in the MalaysiaBrand Equity Award 2007 for the BrandVisibility Award category. Malaysia BrandEquity Award 2007 is organised byPerception Media Sdn Bhd to recognise theperformance of local and internationalbrands in Malaysia.

15 JUNE 2007TM became the first Malaysian company toreceive the highly-prized Service Provider ofthe Year award at the 2007 Frost & SullivanAsia Pacific ICT Awards ceremony. Thiscoveted award for service providers isconferred each year to the company, inFrost & Sullivan’s judgement, that hasdemonstrated clear leadership in essentialareas, including consistent and sustainablerevenue growth, dominant market share andmarket share growth, as well as overallleadership in product introductions andinnovations.

26 JUNE 2007TM’s 2007 Chinese New Year TVC receivedthe “Silver-Phoenix Award” forCinematography from AdAsia, a leadingadvertising and marketing industrymagazine. The awards sponsored by MediaDevelopment Authority of Singaporerecognise creativity and professional skills inthe production of commercial films, videoand digital images for advertising andpromotional purposes.

6 JULY 2007Dialog Telekom PLC (Dialog) became thefirst South Asian company to receive AsiaPacific-wide recognition for excellence incustomer service and relationshipmanagement practices. It was given theOutstanding Achievement in CustomerRelationship Excellence in CustomerRelationship Excellence Award from the Asia Pacific Customer Service Consortium(APCSC) at the Customer RelationshipExcellence (CRE) Awards Ceremony held inHong Kong.


TM Awards & Recognition 2007


1 AUGUST 2007PT Excelcomindo Pratama Tbk (XL), a TMcompany in Indonesia, was judged the mostadmired knowledge enterprise in Indonesiain 2007 when it received the Most AdmiredKnowledge Enterprise (MAKE) Award, beating63 nominated organisations based on astudy conducted by renowned consultantDunamis Organisation an independent globalresearch company, Teleos.

20 AUGUST 2007TM received two accreditations from theAssociation of Chartered CertifiedAccountants (ACCA) under its ApprovedEmployer Programme. TM received thehighest recognition through the Platinum forTrainee Development whereby ACCArecognises the learning opportunities thatTM provides for its employees who areworking towards obtaining its professionaland Certified Accounting Technicianqualifications in line with global bestpractices.

24 AUGUST 2007Celcom emerged the Grand Prize Winner(Telecommunication category) in theAnugerah Citra Wangsa Malaysia 2006. The award is organised by Dewan Bahasadan Pustaka in collaboration with theMalaysian Communications and MultimediaCommission annually. The award is asignificant milestone and recognisesCelcom’s leadership in the usage of BahasaMalaysia of the highest standard.

28 AUGUST 2007TM was one of five regional companies toreceive the UNI-APRO Outstanding Employee-Partner Award which recognises employerswho have strong and cordial relationshipswith their unions.

29-31 AUGUST 2007Aogos Network Sdn. Bhd., a start-upcompany nurtured by the MultimediaUniversity or MMU, obtained the Red HerringAsia Top 100 Technology Companies Award inHong Kong on 29-31 August 2007.

7 SEPTEMBER 2007VADS Berhad was honoured with twoCorporate Awards for Best OutsoucedService Contract Centre Association ofMalaysia (CCAM) – Gold award for theCelcom Customer Premier Service teamaward, and Bronze award for the TM NetCustomer Interaction Centre Managementteam. Additionally, VADS secured five otherindividual achievements namely, Bronze andGold Awards for Best Contact CentreManager, a Silver Award for Best ContactCentre Team Leader and a Gold as well asBronze Award for Best Contact CentreProfessional Outsourced.

26 OCTOBER 2007In recognition of its effort to widen thecellular network coverage of highways,industrial areas, tourist spots and majortowns in Malaysia, Celcom was awarded theAnugerah Program Time 2: Syarikat PemberiPerkhidmatan Terbaik by the Minister ofEnergy, Water and Communications,Malaysia.

10 NOVEMBER 2007TM received awards for best cinematographyfor its TM Merdeka 2007 TVC and best TVCfor its TM Chinese New Year 2007 ad at theSixth Oskar Awards 2007 organised by theFilm Workers Association of Malaysia withthe support of FINAS.

16 NOVEMBER 2007Celcom secured 5th place in Malaysia’s Most Valuable Brands 2007 competition,initiated and promoted by the 4A’s(Association of Accredited Advertising AgentsMalaysia) as a recognition and valuationexercise, in collaboration with world-renowned Interbrand. Based on a valuationof RM4.07 billion, Celcom was selectedbased on Interbrand’s well-established brandvaluation methodology.

20 NOVEMBER 2007TM was ranked second in the CorporateGovernance Survey Report 2007 jointlyorganised by the Minority ShareholdersWatchdog Group (MSWG) and theNottingham University Business School,Malaysia Campus.

29 NOVEMBER 2007TM achieved recognition once again for itsannual report, clinching the Gold Award forOverall Excellence during the NationalAnnual Corporate Report Awards (NACRA)2007 ceremony held in Kuala Lumpur. TM also took home the Industry ExcellenceAward for Bursa Malaysia Main BoardCompanies under the Trading & Servicessector for the 11th consecutive year, as wellas winning the Gold award for Best DesignedAnnual Report.

12 DECEMBER 2007VADS Berhad was awarded the ICT ServiceProvider of the year award by PIKOM. Thisprestigious award is a strong testament tothe Company’s capabilities and contributiontowards the growth of the ICT Industry inMalaysia.

13 DECEMBER 2007In recognition of its best practices inmanagement accounting, value creation andexcellent business performance, TM beat 9 other finalists to win the coveted NationalAward for Management Accounting (NAfMA)Excellence Award this year. The NAfMAAward is jointly awarded by the MalaysianInstitute of Accountants (MIA) and theChartered Institute of ManagementAccountants (CIMA).

TM Awards & Recognition 2007


BOARD OF DIRECTORS

TAN SRI DATO’ Ir MUHAMMAD RADZIHJ MANSORChairman(Non-Independent Non-Executive Director)

DATO’ SRI ABDUL WAHID OMARGroup Chief Executive Officer(Non-Independent Executive Director)

DATUK ZALEKHA HASSAN(Non-Independent Non-Executive Director)

DATO’ AZMAN MOKHTAR(Non-Independent Non-Executive Director)

DATO’ Ir DR ABDUL RAHIM DAUD(Independent Non-Executive Director)

DATO’ LIM KHENG GUAN(Senior Independent Non-ExecutiveDirector)

YB DATUK NUR JAZLAN TAN SRIMOHAMED(Independent Non-Executive Director)

Ir PRABAHAR NK SINGAM(Independent Non-Executive Director)

ROSLI MAN(Independent Non-Executive Director)

DYG SADIAH ABG BOHAN(Alternate Director to Datuk Zalekha Hassan)(Non-Independent Non-Executive Director)

SECRETARIES

• Wang Cheng Yong (MAICSA 0777702)

• Zaiton Ahmad (MAICSA 7011681)

REGISTERED OFFICE

Level 51, North WingMenara TMJalan Pantai Baharu50672 Kuala LumpurMalaysiaTel No. : 603-2240 1221/1225Fax No. : 603-2283 2415

SHARE REGISTRAR

Tenaga Koperat Sdn Bhd20th Floor, Plaza PermataJalan Kampar, Off Jalan Tun Razak50400 Kuala LumpurMalaysiaTel No. : 603-4047 3883Fax No. : 603-4042 6352

AUDITORS

PricewaterhouseCoopers(Chartered Accountants)Level 10, 1 SentralJalan Travers, Kuala Lumpur Sentral50706 Kuala LumpurMalaysiaTel No. : 603-2173 1188Fax No. : 603-2173 1288

PRINCIPAL BANKERS

• CIMB Bank Berhad

• Malayan Banking Berhad

PRINCIPAL SOLICITORS

• Zul Rafique & Partners

• Hisham Sobri & Kadir

STOCK EXCHANGE LISTING

Main Board of Bursa Malaysia SecuritiesBerhad(Listed since 7 November 1990)

MALAYSIAN TAXES ON DIVIDEND

Malaysia practices an imputation system inthe distribution of dividends whereby theincome tax paid by a company is imputedto dividends distributed to shareholders.

The Budget 2008 announced that a singletier company tax system to be introducedwith effect from year of assessment 2008.The transitional provisions for the FinanceAct, 2007 allow the imputation system tocontinue up to 31 December 2013 and theCompany shall be entitled to deduct tax atthe rate applicable to the company at thedate the dividend is paid. As gazetted inthe Finance Act, 2007, the corporate taxrate applicable to TM in 2008 is 26%.Consequently, Malaysian income tax at26% will be deducted from the proposedfinal gross dividend of 22 sen per sharefor financial year ended 31 December2007, subject to shareholders’ approval atthe forthcoming 23rd AGM.

The income tax deducted or deemed tohave been deducted from dividend isaccounted for by the income tax of thecompany. There is no further tax orwithholding tax on the payment ofdividends to all shareholders.


Corporate Information

Corporate

Information


CorporateFramework

The Annual Report is available to the public who are not shareholders of the Company, by writing to:

General ManagerGroup Corporate Communications DivisionTelekom Malaysia BerhadLevel 8, South Wing, Menara TM, Jalan Pantai Baharu50672 Kuala Lumpur, MalaysiaTel: 603-2240 2676/2657 Fax: 603-7955 2510

Gro

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CorporateFramework

AS AT 20 FEBRUARY 2008Depicting active subsidiaries, jointlycontrolled entities, associates andStrategic Business Units (SBUs)categorised under major businesssegments

Malaysia Business*1

● TM RETAIL*1

● TM WHOLESALE*1

● 100% TM NET SDN BHD● 100% TELEKOM SALES & SERVICES SDN BHD● 100% GITN SDN BERHAD● 100% TELEKOM RESEARCH & DEVELOPMENT SDN BHD● 100% TELEKOM MALAYSIA (USA) INC● 100% TELEKOM MALAYSIA (UK) LIMITED● 100% TELEKOM MALAYSIA (HONG KONG) LIMITED● 100% TELEKOM MALAYSIA (S) PTE LTD● 100% MOBIKOM SDN BHD● 100% TELEKOM APPLIED BUSINESS SDN BHD

TM International Berhad● 100% TM INTERNATIONAL (L) LIMITED

● 84.81% DIALOG TELEKOM PLC (Formerly known as Dialog Telekom Limited)● 100% DIALOG BROADBAND NETWORKS (PRIVATE) LIMITED● 100% DIALOG TELEVISION (PRIVATE) LIMITED

(Formerly known as Asset Media (Private) Limited)● 100% COMMUNIQ BROADBAND NETWORK (PRIVATE) LIMITED● 100% CBN SAT (PRIVATE) LIMITED

● 70% TM INTERNATIONAL (BANGLADESH) LIMITED● 100% INDOCEL HOLDING SDN BHD

● 66.99% PT EXCELCOMINDO PRATAMA TBK● 89% MULTINET PAKISTAN (PRIVATE) LIMITED● 49% MOBILE TELECOMMUNICATIONS COMPANY OF ESFAHAN

● 100% TELEKOM MALAYSIA INTERNATIONAL (CAMBODIA) COMPANY LIMITED● 18.97% SAMART CORPORATION PUBLIC COMPANY LIMITED● 24.42% SAMART I-MOBILE PUBLIC COMPANY LIMITED*2

● 80% SUNSHARE INVESTMENTS LTD*3

● 29.69% MOBILEONE LTD● 100% TMI MAURITIUS LTD

● 100% TMI INDIA LTD● 39.20% SPICE COMMUNICATIONS LIMITED


TM Ventures*1

● 64.77% VADS BERHAD● 100% VADS E-SERVICES SDN BHD

● 100% VADS CONTACT CENTRE SERVICES SDN BHD● 100% VADS PROFESSIONAL SERVICES SDN BHD● 100% VADS SOLUTIONS SDN BHD● 100% MEGANET COMMUNICATIONS SDN BHD

● 51% FIBRECOMM NETWORK (M) SDN BHD (Held via Celcom Transmission (M) Sdn Bhd)

● 54% FIBERAIL SDN BHD● 100% UNIVERSITI TELEKOM SDN BHD

● 100% UNITELE MULTIMEDIA SDN BHD● 100% MMU CREATIVISTA SDN BHD

● 100% MENARA KUALA LUMPUR SDN BHD● 100% TM INFO-MEDIA SDN BHD● 100% TELEKOM MULTI-MEDIA SDN BHD

● 51% TELEKOM SMART SCHOOL SDN BHD● 30% MUTIARA.COM SDN BHD

● 100% TM FACILITIES SDN BHD● 100% TMF SERVICES SDN BHD● 100% TMF AUTOLEASE SDN BHD● 100% TM LAND SDN BHD

● PROPERTY DEVELOPMENT*1

Celcom (Malaysia) Berhad● 100% TECHNOLOGY RESOURCES INDUSTRIES BERHAD● 100% CELCOM TRANSMISSION (M) SDN BHD● 100% CELCOM TECHNOLOGY (M) SDN BHD● 80% CELCOM TIMUR (SABAH) SDN BHD● 100% CELCOM MOBILE SDN BHD● 100% ALPHA CANGGIH SDN BHD● 100% CT PAGING SDN BHD

● 49% C-MOBILE SDN BHD● 20% SACOFA SDN BHD

Note:*1 SBU within Telekom Malaysia Berhad*2 TM International Berhad’s effective shareholding

in Samart I-Mobile Public Company Limited(SIM) is 35.58% by virtue of SIM being a 57.69%subsidiary of Samart Corporation PublicCompany Limited

*3 Economic benefit of TM Group in SunShareInvestments Ltd is 51% notwithstanding TMGroup’s equity interest of 80%

Gro

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CorporateFramework

CompanySecretary

Group ChiefExecutive Officer

TM

Vice PresidentPerformanceImprovement

Management Office

Group ChiefFinancial Officer

Chief ExecutiveOfficer

Malaysia Business


Celcom (Malaysia)Berhad


TM InternationalSdn Bhd


TM Ventures

SeniorVice President

Group Regulatory,Legal & Compliance

Senior Vice President Group Human

Resource

Group ChiefProcurement

Officer

Group ChiefInformation Officer

Group ChiefInternal Auditor

General ManagerGroup CorporateCommunications

Board AuditCommittee

BOARDOF

DIRECTORS

Operating Companies/SBUs

Enhancing Value ToO

ur Provid

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apital


CorporateFramework

TM DIVIDEND PAYOUT

0

1,000

2,000

3,000

4,000

5,000

200720062005200420032002

38.8%34.6%

21.6%

47.6%

112.5%*

54.8%54.1%

2,54

7.7

2,06

8.8

1,75

4.7

2,61

3.5

1,39

0.4

1,05

6.3

1,21

2.9

1,65

4.52,868.0

1,13

5.1

949.

5

1,01

4.148

1.2

228.

4

Profit Attributableto Shareholders

OrdinaryDividends

Payout Net Dividend Yield

SpecialDividends

Dividend Payout In Line with Dividend Policy of 40% to 60% of Profit Attributable to ShareholdersRMMillion

6,000

7,000

8,000

9,000

10,000

Dividend Payout Policy 20%-50%

Dividend Payout Policy 40%-60%

25%

50%

75%

100%

125%

150%

7.4%*

3.4%2.9%2.6%1.8%

0.9%

As TM evolves into the regional communications company of choice, the pursuit of operationalexcellence is not without sound financial management. 2007 has seen the continued commitmenttowards enhancing value for the providers of capital with improved shareholder payout coupled withcapital management initiatives and better economic profit.

IMPROVING PAYOUT TO SHAREHOLDERSIn our efforts to strengthen and establish TM as a leading Communications Company in this region,we have always remained focused in creating value for our shareholders. In 2007, we declared aproposed total dividend payout of RM2.9 billion to our shareholders which consists of:

• a proposed final gross dividend of 22 sen per share less tax at 26.0%.• special gross dividend of 65 sen per share less tax at 26.0%.• interim gross dividend of 26 sen per share less tax at 27.0%.

The total dividend payout of 112.5%, including special dividends was made possible through betterfinancial performance and capital management exercise. Excluding special dividends, the ordinarydividends payout represented 47.6% of profit attributable to shareholders. This is very much in linewith our dividend payout policy of 40% to 60% of profit attributable to shareholders. Net dividendyield incorporating the special dividend, rose to 7.4% based on the year end price of RM11.20.

*Including Special DividendsFY 2005 – Net Profit adjusted for provision of Dete Claim of RM879.5 millionNet Dividend Yield based on closing price at year-end


CAPITAL MANAGEMENTEXERCISEA sale and leaseback of propertyassets was carried out to facilitate theimplementation of TM’s strategy tomonetise its non-core assets with aview to unlock value while focusing onits core business of providingtelecommunications services. The saleand leaseback involved four properties,namely Menara TM, Wisma TM TamanDesa, Cyberjaya Complex and MenaraCelcom which upon completion of thetransaction were transferred from TMto Menara ABS Berhad, a specialpurpose vehicle for a totalconsideration of RM1.0 billion.

Proceeds from this capitalmanagement exercise and the capitalrepayment from Celcom of RM730.1miillion has enabled TM to distributethe cash in the form of specialdividends amounting to RM1.65 billionto reward its shareholders.

BETTER ECONOMIC PROFITIn order to provide a more accuratepicture of underlying economicperformance of the TM Group vis-à-visits financial accounting reports,Economic Profit (EP) is used as ayardstick to measure shareholdervalue. EP measures net profit afterdeducting a charge to account for thecost of capital utilised to generate thisprofit. EP is defined as capital investedmultiplied by the spread betweenReturn on Invested Capital (ROIC) andthe Weighted Average Cost of Capital(WACC). * EP has the benefit ofincorporating profitability, size of capitalbase, return on capital and the cost ofcapital into a single measure. For thefinancial year 2007, TM’s EP ofRM830.1 million has shown a RM85.4million increase from RM744.7 millionrecorded in 2006. This increase isattributed to the higher Net OperatingProfit Less Adjusted Taxes (NOPLAT)from better operational performancewhich was partially offset by theincreased economic charge fromhigher WACC.

* Economic Profit = NOPLAT –(Invested Capital x WACC), whereNOPLAT is Net Operating ProfitLess Adjusted Taxes (Source:Khazanah Nasional Berhad)

ECONOMIC PROFIT

-800

-400

0

400

800

1,200

2007200620052004

830.

1

744.

7

69.1

-444

.0

RM Million


Enhancing Value To Our Providers Of Capital


TM’S SHARE PRICE PERFORMANCE

Dec

31

Nov

30

Oct

31

Sep

27

Au

g 3

0

Jul

31

Jun

29

May

31

Ap

r 30

Mar

30

Feb

28

Jan

31

Jan

3

Source : Bloomberg

9.0

9.5

10.0

10.5

11.0

11.5

12.0

Share Price (RM)

Announcementof Proposed Demergeron 28 September 2007

DEMERGER TO FURTHERUNLOCK VALUEThe demerger of TM into 2 separateentities with distinct businessstrategies and aspirations, enablesvalue creation through acceleratedoperational improvement and growth.

Operating as a separate entity canfurther promote improvements indisclosure and boost transparencylevels. The demerger is expected tocreate value and is sound from acapital markets perspective. The twocompanies will each have a capitalstructure suitable to its business, withfunding capacity for growth andinvestment requirements.

Clearly the market is upbeat andsupportive of this exercise. This hasbeen reflected in the improved shareprice performance post announcementof the demerger.

At the point of demerger, TMshareholders will be awarded a one-for-one dividend in specie, of one TMIshare for each TM share held.Shareholders will be able to jointlyparticipate in the value creation asthese two entities pursue theirrespective goals to be a domesticbroadband champion and leadingregional mobile operator.

TM CREDIT RATINGTM continued to exhibit strongfundamentals and a sound balancesheet. This is evident from the creditrating accorded by both the local andinternational rating agencies. TM’scredit rating is as follows:

• Moody’s Investors Service A2• Standard & Poor’s A-• Fitch A-• Rating Agency of Malaysia AAA

The demerger of TM into two uniqueentities has not changed the strengthof its financial position. Following arating review, the credit rating of TMremains largely unchanged withStandard & Poor’s, Fitch, and RAMreaffirming the above ratings whileMoody’s has placed TM on RatingWatch to align its rating to thesovereign rating of A3. This review willbe continued pending the finalcompletion of the demerger.

TM remains committed at maintainingits strong investment grade ratings andadopt a prudent approach to financialmanagement moving forward.



2003 2004 2005 2006 2007

Market Capitalisation (RM Million) Share Price (RM)

9.558.40

11.60

9.7511.20

32,3

87

27,2

56

39,2

27

33,1

22

38,5

26

DecNovOctSepAugJulJunMayAprMarFebJan

200,

729

98,0

01

191,

721

118,

369

71,5

05

135,

643

69,4

31

86,1

09

125,

768

49,7

09

162,

410

190,

127

Volume ('000) Highest (RM) Lowest (RM)

2003 2004 2005 2006 2007

Market Capitalisation (RM Million) 27,255.6 39,227.4 32,386.9 33,121.9 38,525.9

Share Price (RM) 8.40 11.60 9.55 9.75 11.20

2007Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Volume (’000) 98,001 191,721 118,369 71,505 135,643 69,431 86,109 125,768 49,709 162,410 190,127 200,729

Highest (RM) 10.50 11.10 10.30 10.90 11.20 11.00 10.70 10.30 9.95 11.10 11.20 11.80

Lowest (RM) 9.65 9.75 9.50 10.00 9.60 10.00 9.85 9.20 9.35 9.85 10.10 10.80

SHARE PRICE & VOLUME TRADED2007 Monthly Trading Volume & Highest-Lowest Share Price

MARKET CAPITALISATION/SHARE PRICE



PerformanceReview

FIVE-YEAR GROUP 52FINANCIAL HIGHLIGHTS

SIMPLIFIED GROUP 54BALANCE SHEETS &GROUP SEGMENTAL ANALYSIS

GROUP QUARTERLY 56PERFORMANCE

GROUP FINANCIAL REVIEW 57

BUSINESS & OTHER STATISTICS 64

STATEMENT & DISTRIBUTION 66OF VALUE ADDED

Five

-Yea

r G

roup

Fina

ncia

l H

ighl

ight

s

52

PerformanceReview

’0311

,796

.4

13,2

50.9

13,9

42.4

16,3

99.2

17,8

42.9

’04 ’05 ’06 ’07

Operating RevenueOperating Revenue(RM Million)

’03

1,45

1.6

2,62

5.5

811.

3

2,06

8.8

2,54

7.7

’04 ’05 ’06 ’07

Profit Attributable to Equity Holders of the CompanyProfit Attributable to Equity Holders of the Company(RM Million)

’03

36,0

40.3

37,6

75.2

41,1

84.3

41,8

43.5

44,2

21.3

16,4

37.6

19,1

20.5

18,9

87.4

19,9

11.1

19,8

02.1

’04 ’05 ’06 ’07

Total AssetsTotal Assets(RM Million)

’03

12,0

53.2

11,1

17.5

12,2

15.8

12,0

85.9

11,9

24.4

’04 ’05 ’06 ’07

Total BorrowingsTotal Borrowings(RM Million)

’03 ’04 ’05 ’06 ’07

Total Shareholders’ EquityTotal Shareholders’ Equity(RM Million)

’03

9.4

14.8

4.3

10.6

12.8

’04 ’05 ’06 ’07

Return on Shareholders’ EquityReturn on Shareholders’ Equity(%)

’03

4.2

7.1

2.1

5.5

6.0

’04 ’05 ’06 ’07

Return on Total AssetsReturn on Total Assets(%)

’03

0.7

0.6

0.6

0.6

0.6

’04 ’05 ’06 ’07

Debt Equity RatioDebt Equity Ratio

IN RM MILLION 2003 2004 2005 2006 2007

1. Operating revenue 11,796.4 13,250.9 13,942.4 16,399.2 17,842.92. Profit before taxation 1,759.1 3,161.9 1,520.4 3,133.2 3,142.63. Profit for the year 1,505.4 2,688.5 855.5 2,302.3 2,631.64. Profit attributable to equity holders of

the Company 1,451.6 2,625.5 811.3 2,068.8 2,547.75. Total shareholders’ equity 16,437.6 19,120.5 18,987.4 19,911.1 19,802.16. Total assets 36,040.3 37,675.2 41,184.3 41,843.5 44,221.37. Total borrowings 12,053.2 11,117.5 12,215.8 12,085.9 11,924.4

GROWTH RATES OVER PREVIOUS YEARS1. Operating revenue 20.0% 12.3% 5.2% 17.6% 8.8%2. Profit before taxation 13.4% 79.7% -51.9% 106.1% 0.3%3. Total shareholders’ equity 13.3% 16.3% -0.7% 4.9% -0.5%4. Total assets 24.6% 4.5% 9.3% 1.6% 5.7%5. Total borrowings 49.1% -7.8% 9.9% -1.1% -1.3%

SHARE INFORMATION1. Per share

Earnings (basic) 45.5 sen 78.6 sen 23.9 sen 61.0 sen 74.4 senGross dividend * 20.0 sen 30.0 sen 35.0 sen 46.0 sen 113.0 senNet assets 505.7 sen 565.3 sen 559.9 sen 586.0 sen 575.7 sen

2. Share price informationHigh RM9.20 RM12.10 RM12.00 RM10.40 RM11.80Low RM7.15 RM8.25 RM9.15 RM8.60 RM9.20

FINANCIAL RATIO1. Return on shareholders’ equity 9.4% 14.8% 4.3% 10.6% 12.8%2. Return on total assets 4.2% 7.1% 2.1% 5.5% 6.0%3. Debt equity ratio 0.7 0.6 0.6 0.6 0.64. Dividend cover * 2.2 2.6 0.7 1.3 0.7

* Included special dividend of 65.0 sen per share declared on 10 December 2007 and paid on 31 January 2008.

Sim

plifi

edG

roup

Bal

ance

She

ets

&G

roup

Seg

men

tal A

naly

sis

54

PerformanceReview

20062006

20072007

28.9% Borrowings

5.4% Deferred

tax liabilities

0.6% Current

tax liabilities

2.0% Minority

interests

8.1% Share

capital

0.2% Provision forliabilities

30.0% Other reserves

13.7% Trade andother payables

1.7% Customer deposits

9.4% Share premium

27.0% Borrowings

0.3% Current

tax liabilities

5.2% Deferred

tax liabilities

3.7% Dividend payable

1.9% Minority

interests

7.8% Share

capital

0.2% Provision forliabilities

27.4% Other reserves

15.2% Trade andother payables

1.7% Customer deposits

9.6% Share premium

20062006

20072007

56.6% Property,

plant andequipment

11.2%Cash and

bank balances

16.9% Intangible assets

8.3% Trade and other receivables

0.1% Non-current assets held for sale

3.7% Other assets

1.9% Jointly controlled entities

1.3% Long term receivables

54.2% Property,

plant andequipment

9.4%Cash and

bank balances

16.9% Intangible assets

10.0% Trade andother receivables

2.2% Non-current assetsheld for sale

3.8% Other assets

2.3% Jointlycontrolled entities

1.2% Long termreceivables

Total Assets

Total Liabilities &Shareholders’Equity

Segment Assetsas at 31 December

BY BUSINESS BY GEOGRAPHICAL LOCATION

Segment Operating RevenueFor the year ended 31 December


Segment ResultsFor the year ended 31 December


’06 ’07

43.6

%

40.9

%

’06 ’07

27.0

%

27.8

%’06 ’07

25.3

%

27.7

%

’06

MalaysiaBusiness

Celcom InternationalOperations

TMVentures

’07

4.1%

3.6%

’06 ’07

73.7

%

71.2

%

’06 ’07

14.0

%

16.6

%

’06 ’07

12.3

%

12.2

%

Malaysia Indonesia Others

’06 ’07

35.8

%

39.5

%

’06 ’07

30.2

%

37.2

%

’06 ’07

32.3

%

21.8

%

’06

MalaysiaBusiness


TMVentures

’07

1.7%

1.5%

’06 ’07 ’06 ’07 ’06 ’07

68.0

%

76.5

%

16.1

%

14.4

%

15.9

%

9.1%


’06 ’07

41.6

%

38.2

%

’06 ’07

24.9

%

23.9

%

’06 ’07

28.3

%

33.3

%

’06

MalaysiaBusiness


TMVentures

’07

5.2%

4.6%

’06 ’07

76.2

%

71.9

%

’06 ’07

15.8

%

20.1

%

’06 ’07

8.0%

8.0%


Gro

upQ

uart

erly

Per

form

ance

56

PerformanceReview

# Included effect of cumulative rounding.* Included special dividend of 65.0 sen per share declared on 10 December 2007 and paid on 31 January 2008.

2007

FIRST SECOND THIRD FOURTH YEARIN RM MILLION QUARTER QUARTER QUARTER QUARTER 2007

FINANCIAL PERFORMANCE

Operating revenue 4,181.2 4,318.8 4,608.7 4,734.2 17,842.9

Operating profitbefore finance cost 968.4 998.6 867.0 649.3 3,483.3

Profit before tax 846.7 885.9 692.6 717.4 3,142.6

Profit attributableto equity holdersof the Company 595.7 701.0 658.5 592.5 2,547.7

Earnings per share (sen)# 17.4 20.5 19.2 17.2 74.4

Dividends per share (sen)* — 26.0 — 87.0 113.0

2006

FIRST SECOND THIRD FOURTH YEARIN RM MILLION QUARTER QUARTER QUARTER QUARTER 2006

FINANCIAL PERFORMANCE

Operating revenue 3,787.6 3,976.3 4,227.5 4,407.8 16,399.2

Operating profitbefore finance cost 954.4 723.6 848.6 964.0 3,490.6

Profit before tax 842.0 689.3 730.4 871.5 3,133.2

Profit attributableto equity holdersof the Company 545.6 453.5 478.9 590.8 2,068.8

Earnings per share (sen) 16.1 13.4 14.1 17.4 61.0

Dividends per share (sen) — 16.0 — 30.0 46.0

Group

Financial Review


PerformanceReview

8,57

5.0

869.

9

9,90

1.3

1,06

7.4

Cellular Internet andmultimedia

Non-telecommunication

related service

351.

2

253.

9

6,60

3.1

6,62

0.3

Fixed line'06 '07 '06 '07 '06 '07 '06 '07

Operating Revenue(RM Million)

OPERATING REVENUEFor the year ended 31 December 2007, the Groupregistered 8.8% (RM1,443.7 million) growth inoperating revenue to RM17,842.9 million ascompared to RM16,399.2 million recorded in 2006,largely driven by the cellular, data, Internet andmultimedia segments of the Group’s businesses.

The cellular segment continued to be the numberone revenue contributor to the Group. Current yearrevenue from the cellular segment of RM9,901.3million was 15.5% higher as compared toRM8,575.0 million recorded in the preceding yearand made up 55.5% (2006: 52.3%) of the Group’srevenue.

Revenue from fixed line segments (including voice,data services and other telecommunicationservices) of RM6,620.3 million accounted for 37.1%of the Group’s revenue, decreased from 40.3% inthe preceding year. The reduced contribution wasin tandem with global trend where customers aremigrating from the traditional fixed line services tocellular and broadband services.

Internet and multimedia services registeredencouraging year-on-year revenue growth of 22.7%to RM1,067.4 million and contributed 6.0% to theGroup’s operating revenue as compared to 5.3% in

2006. Non-telecommunication related servicescontributed only 1.4% (RM253.9 million) of theGroup’s operating revenue in 2007 as compared to2.1% (RM351.2 million) in 2006.

CELLULAR SEGMENTRevenue from the cellular segment comprisingrental, call charges, short message services,roaming and interconnect charges terminating atmobile, registered a significant growth of 15.5%(RM1,326.3 million) from RM8,575.0 millionrecorded in 2006 to RM9,901.3 million in 2007largely due to improved performance of Celcom(Malaysia) Berhad (Celcom) and PT ExcelcomindoPratama Tbk (XL).

Celcom registered an encouraging revenue growthafter inter-segment elimination of 12.2% fromRM4,424.0 million in 2006 to RM4,965.1 million in2007 amidst an intensely competitive cellularmarket. This was mainly due to strong growth inthe prepaid market resulting from aggressivemarketing activities and launching of newproducts. The push for mobility solutions alsocontributed to the increase in revenue. Celcomadded 1.1 million new customers in 2007 bringingthe total customers to 7.2 million, a growth of18.0% from 6.1 million as at end of 2006.


OPERATING COSTSFor the year ended 31 December 2007the Group’s operating costs rose by13.2% (RM1,733.0 million) to RM14,820.1million in 2007 as compared toRM13,087.1 million recorded in 2006mainly due to higher marketing relatedexpenses, impairment of property, plantand equipment, allowance fordiminution in value of long terminvestments, one-off penalty chargesand lower foreign exchange gain asexplained below.

DEPRECIATION, IMPAIRMENT ANDAMORTISATIONDepreciation, impairment andamortisation charges which compriseddepreciation, impairment and write offof property, plant and equipment (PPE)as well as amortisation of intangibleassets increased marginally by 3.5%(RM142.0 million) to RM4,143.5 millionas compared to RM4,001.5 millionrecorded in 2006 and accounted for28.0% of total operating costs. Higherimpairment of PPE of RM85.9 millionand higher write off of PPE amountingto RM33.3 million were the maincontributing factors to the higher cost.

During the current year, Celcomrecognised impairment losses on PPEamounting to RM52.4 million due toasset buyback plans in which theseassets have been written down to itsrecoverable amount. The Company, XLand other subsidiaries contributed theremaining balance.

Fixed line services contributedRM6,620.3 million to the Group’srevenue in 2007, a marginal increase of0.3% (RM17.2 million) from RM6,603.1million recorded in 2006. Thisturnaround was mainly attributed tohigher data revenue resulting from thedemand for higher speed services andhigher revenue from RWO resultingfrom new billable projects. Highercontribution from VADS Berhad (VADS)and GITN Sdn Berhad (GITN) alsocontributed to the increase in revenuefrom the fixed-line segment.

INTERNET AND MULTIMEDIA SERVICESInternet and multimedia servicescontinued to record commendablerevenue growth in 2007. Revenueincreased by 22.7% to RM1,067.4 millionas compared to RM869.9 million in 2006in line with the increase to its customerbase from 864,000 at the end of 2006 to1,265,308 at the end of 2007.

NON-TELECOMMUNICATION RELATEDSERVICESNon-telecommunication related servicescomprise services from subsidiarieswith core business in education, printingand publication of directories, propertydevelopment, trading in consumerpremises equipments, etc. Revenuefrom these services reduced by 27.7%(RM97.3 million) as compared to 2006,mainly attributed to lower revenue fromTM Facilities Sdn Bhd as there was nodisposal of land in the current year ascompared to approximately RM43.0million recorded in 2006. Telekom Salesand Services Sdn Bhd also contributedlower revenue from lower sales ofcustomer premises equipment.

XL posted a year-on-year revenuegrowth (after discounts) of 38.3% fromIDR5,777.7 billion (RM2,310.4 million) in2006 to IDR7,989.5 billion (RM3,011.0million) in the current year arising fromincrease in customer base, mainlyattributable to successful execution ofseveral key strategies, especially inpricing and distribution channelmanagement.

Dialog Telekom PLC (formerly known asDialog Telekom Limited) (Dialog)continued to show steady growth inrevenue of 26.6% from SLR25,679.5million (RM907.0 million) to SLR32,518.6million (RM1,011.3 million) despite itschallenging operating environment. TMInternational (Bangladesh) Limited(TMIB) also registered 9.5% revenuegrowth from BDT13,139.6 million(RM704.3 million) in 2006 toBDT14,390.1 million (RM718.7 million) in2007. Non-consolidation of TelekomNetworks Malawi Limited (TNM)following disposal in April 2007 reducedthe net increase. TNM contributedRM98.4 million in 2006 as compared toRM28.7 million in 2007.

FIXED LINE SERVICESFixed line services comprise businesstelephony (which also includes ISDN,interconnect, international inpayment),residential telephony, public payphoneservices, data services and othertelecommunication related services.Other telecommunication relatedservices include primarily recoverablework orders (RWO), maintenance,broadcasting, restoration of submarinecable, managed network services andenhanced value-addedtelecommunication services.

P e r f o r m a n c e R e v i e w

Group Financial Review


DOMESTIC INTERCONNECT ANDINTERNATIONAL OUTPAYMENTThe Group’s domestic interconnect andinternational outpayment increasedmarginally by 3.9% (RM77.2 million)from RM1,962.1 million recorded in2006 to RM2,039.3 million in 2007 andaccounted for 13.8% of the totaloperating costs.

STAFF COSTSThe Group’s staff costs rose by 5.8%(RM115.7 million) from RM1,991.4 millionin 2006 to RM2,107.1 million in 2007 andaccounted for 14.2% of total operatingcosts. Notable increase was noted inCelcom (RM48.2 million), Dialog (RM22.5million), VADS (RM13.5 million), XL(RM14.2 million), TM Payphone Sdn Bhd(TMP) (RM18.0 million), TMIB (RM4.9million) and GITN (RM5.5 million) arisingfrom annual increment, higher provisionfor bonus and increase in headcount tosupport business expansion. The

Company, however, recorded lower costsof RM10.1 million due to reversal ofexcess bonus provision and lower coston the employees’ share option scheme.

MARKETING, ADVERTISING ANDPROMOTIONThe Company, Celcom, XL and Dialogjointly contributed to higher marketing,advertisement and promotion costswhich grew by 19.8% (RM224.2 million)from RM1,133.7 million in 2006 toRM1,357.9 million in 2007 due toaggressive marketing activities topromote new products and services.

SUPPLIES AND INVENTORIESThe Group’s supplies and inventoriescosts grew to RM667.3 million, anincrease of 7.8% (RM48.2 million) overRM619.1 million recorded in 2006 mainlydue to the higher cost of prepaid cards,subscriber equipment and cables.

XL and Dialog registered higher cost ofprepaid cards by RM30.8 million andRM10.1 million respectively in line withtheir increased customer base andhigher revenue. Celcom, however,incurred lower cost of prepaid cards byRM16.0 million following the introductionof the 2 in 1 recharge card.

The Company registered highersubscriber equipment cost arising frominstallation for Streamyx whereas highercable cost was the result of cable theft.

4,00

1.5

4,14

3.5

Depreciation,impairment and

amortisation

'06 '07

1,99

1.4

1,96

2.1 1,

133.

7

731.

8

619.

1

303.

9

2,34

3.6

2,10

7.1

2,03

9.3

1,35

7.9

840.

3

667.

3

377.

1

3,28

7.6

Staff costs Domestic interconnect

and internationaloutpayment

Marketing,advertising

and promotion

Maintenance Supplies andinventories

Allowance for doubtful

debts

Otheroperating

costs

'06 '06 '06 '06 '06 '06 '06'07 '07 '07 '07 '07 '07 '07

Operating Costs(RM Million)



OTHER SIGNIFICANT ONE-OFFCHARGESDuring the year, TMIB has recognisedan administrative fine by the localgovernment of RM72.8 million forrevenue loss.

In addition, XL has recognised penaltycharges on late payment of withholdingtax on off-shore interest payments ofRM22.0 million following theDirectorates General for Taxation’s(DGT’s) rejection of XL’s objection onDGT’s assessment requiring XL to payhigher withholding tax on off-shoreinterest payments. Celcom alsorecognised some penalties on latepayment of taxation liabilities.

OTHER OPERATING INCOMEOther operating income increasedsignificantly from RM178.5 million in2006 to RM460.5 million in 2007 largelydue to gain on dilution and disposal ofsubsidiaries amounting to RM248.0million. During the year, the Groupdisposed its 4.62% equity interest inDialog and its entire 60.0% equityinterest in TNM.

Higher dividend income from unquotedlong term investments and gain ondisposal of non-current asset held forsale also contributed to the increase inother operating income.

FOREIGN EXCHANGE DIFFERENCESIn line with the appreciation of RinggitMalaysia against US Dollar, theCompany recorded significant gain onforeign exchange of RM197.6 million in2007, largely arising from therevaluation of borrowings in US Dollar.However, this gain was RM63.1 millionlesser as compared to the foreignexchange gain recorded in thepreceding year.

In addition, XL suffered substantiallosses on foreign exchange amountingto RM124.4 million as compared to asignificant gain of RM138.0 million in2006 primarily due to the revaluation ofborrowings in US Dollar as well aspayables in foreign currencies.

As a result, a net gain on foreignexchange of RM38.6 million wasrecorded in the current year ascompared to a net gain of RM361.0million recorded in the preceding year.

ALLOWANCE FOR DOUBTFUL DEBTSFor the current year, the Group’sdoubtful debts expense increased by24.1% from RM303.9 million recorded in2006 to RM377.1 million in 2007. TheCompany mainly contributed to thehigher expense due to a one-offallowance for wholesale global debts.Celcom, XL and Dialog registered lowerallowance for bad debts by RM8.5million, RM5.0 million and RM3.1million respectively which mitigated thenet impact of the one-off allowance tothe Group’s bottom-line.

ALLOWANCE FOR DIMINUTION INVALUE OF LONG TERM INVESTMENTSFollowing the review of impairment inthe value of long term investments, anallowance for diminution in valueamounting to RM80.0 million was madein the current year.

Profit for the Year(RM Million)

1,50

5.4

2,68

8.5

855.

5

2,30

2.3

2,63

1.659

0.2

561.

8

408.

4

534.

7 998.

9

Group Company Group Company Group Company Group Company Group Company

'03 '04 '05 '06 '07




effective 1 January 2008. The Group’sshare of the gain was RM128.8 million.SunShare Investments Ltd alsocontributed higher profits of RM42.2million as compared to RM38.0 millionin 2006.

The Group also recognised a gain ondilution of equity interest in Spice ofRM71.3 million in the current yeararising from its initial public offering.

Contributions from associates in thecurrent year of RM29.5 million was48.2% higher than RM19.9 millionrecorded in 2006 and was largelyattributed to improved performance ofCelcom’s associates.

TAXATION EXPENSESThe Group’s effective tax rate in 2007was 16.3% as compared to 26.5% in2006 mainly due to one-off capital gainthat was not subjected to tax and thereversal of excess prior years’provisions for current and deferred taxmainly at the Company level.

Excluding the reversal of excessprovisions in prior years, the currentyear effective tax rate would be 23.4%which was still lower than the statutorytax rate mainly due to one-off capitalgain that was not subjected to tax.Reduction in deferred tax arising fromthe change in tax rate from 26.0% to25.0% also contributed to the lowereffective tax rate in the current year.

PROFITABILITYConsequent from improved performanceof Celcom, one-off capital gain andhigher contribution from jointly controlledentities, the Group recorded a 23.1%increase in profit after tax and minorityinterests from RM2,068.8 million in 2006to RM2,547.7 million in 2007.

TOTAL ASSETSTotal assets of the Group grewmarginally by 5.7% to RM44,221.3million as compared to RM41,843.5million in 2006 largely due to theincrease in property, plant andequipment, intangible assets,investments in jointly controlled entities,trade and other receivables, non-currentassets held for sale net of decrease incash and bank balances.

INTANGIBLE ASSETSDuring the year, the Group acquired anadditional 7.38% equity interest in XL.The goodwill on acquisition arising fromthis transaction of RM286.3 million wasincluded in intangible assets.

In addition, goodwill totalling RM180.8million arising from the acquisitions ofequity interest in XL, Telekom MalaysiaInternational (Cambodia) CompanyLimited and Celcom Timur (Sabah) SdnBhd in 2006 which was previouslyrecorded in equity has now beenreclassified as intangible assets.

Consequent from the above, the Group’sintangible assets increased by 5.7%(RM401.8 million) from RM7,059.1 millionin 2006 to RM7,460.9 million in 2007.

NET FINANCE COSTXL and TMIB mainly contributed tohigher finance cost which increased byRM199.0 million in 2007 as compared to2006. XL incurred higher finance cost ofRM170.9 million, mainly arising fromhigher withholding tax on off-shoreinterest payments for the years 2004 to2007. TMIB recorded higher cost byRM35.5 million due to increasedborrowings. The impact of the aboveincrease was mitigated by the lowerfinance cost incurred by Celcom ofRM24.0 million due to repayment of loan.

Finance income in 2007 was 12.9%(RM30.1 million) lower as compared to2006 following lower income at theCompany, Celcom, TMIB and Dialog.

Consequent from the above, the Group’snet finance cost increased by 59.1%from RM387.9 million in 2006 toRM617.0 million in 2007.

CONTRIBUTION FROMJOINTLY CONTROLLEDENTITIES AND ASSOCIATESThe share of results in jointly controlledentities in 2007 of RM175.5 million wassignificantly higher than RM10.6 millionrecorded in 2006, largely due to share ofSpice Communications Limited’s (Spice)gain on sale of telecommunicationtowers. Spice recognised a net gain ofRM328.6 million arising from the sale oftelecommunication towers. The towerswill be leased back from the purchaser



PROPERTY, PLANT AND EQUIPMENT(PPE)The Group’s PPE increased by 1.3%(RM303.0 million) to RM23,983.3 millionin 2007 as compared to RM23,680.3million in the preceding year arisingmainly from increased capitalexpenditure for network expansions atXL, Dialog and TMIB of RM1,464.2million, RM390.2 million and RM164.6million respectively. However, PPE atthe Company level reduced significantlyby RM1,273.4 million mainly due to thenet book value of four buildings underthe sale and leaseback arrangementamounting to RM988.4 million beingreclassified to non-current assets heldfor sale as well as lower capitalexpenditure in 2007.

Celcom and TM Net Sdn Bhd alsorecorded a reduction of RM175.9 millionand RM52.3 million respectively. Theexclusion of PPE of TNM and TMPfollowing the disposal of bothcompanies during the year reduced thenet increase by RM66.7 million andRM36.5 million respectively.

In addition, the strengthening of RinggitMalaysia against the local currency offoreign subsidiaries, i.e. XL, Dialog andTMIB, resulted in foreign exchangelosses on translation of PPE for thecurrent year amounting to RM532.6million. This loss is debited directly toforeign translation reserve.

INVESTMENTS IN JOINTLYCONTROLLED ENTITIES (JCE)Consequent from share of higher profitsof JCE, the Group’s investments injointly controlled entities increased by26.9% from RM807.5 million in 2006 toRM1,024.4 million in 2007.

TRADE AND OTHER RECEIVABLESThe Group’s trade and other receivablesgrew significantly by 27.0% (RM934.5million) from RM3,464.1 million in 2006to RM4,398.6 million in 2007. TheCompany accounted for RM594.5 millionof the increase arising from theincrease in Internet access andinternational receivables and higher taxrecoverable.

CASH AND BANK BALANCESCash and bank balances of the Groupdecreased by 10.9% (RM508.6 million) toRM4,171.8 million mainly due to higherdividend payment to equity holder of thecompany of RM1,402.4 million in 2007as compared to RM1,001.9 million in2006. Consequent from aggressivenetwork expansion undertaken byforeign subsidiaries, the cash outflowfor purchase of PPE also increasedsubstantially by RM604.4 million. This was however offset by zero cashoutflow for investment in JCE ascompared to cash outflow of RM659.4million in 2006.

TOTAL LIABILITIESThe Group’s total liabilities stood atRM23,569.8 million at the end of 2007,increased by 11.7% (RM2,473.9 million)as compared to RM21,095.9 million ayear ago primarily attributed toincreased trade and other payables anddividend payable.

TRADE AND OTHER PAYABLESTrade and other payables of the Groupwhich include deferred revenue,increased substantially by 16.8%(RM961.8 million) between 2006 and2007.

Celcom, XL and TMIB recorded highertrade and other payables by RM226.9million, RM260.9 million and RM86.7million respectively consequent frombusiness and network expansion andjointly contributed to the increase intrade and other payables of RM788.7million at Group level.

The Company and XL jointly contributedto higher deferred revenue whichincreased by RM163.4 million betweenthe years under review. The Companyrecorded higher deferred revenue ofRM62.7 million due to change in basisof revenue recognition in respect ofprepaid cards from the point of sale tothe point of usage. Higher deferredrevenue of XL is in line with increase inprepaid customers.

DIVIDEND PAYABLEIn December 2007, the Company hasdeclared the payment of a special grossdividend of 65.0 sen per share less taxat 26.0% in respect of the current year.Consequently, the dividend payableamounting to RM1,654.5 million wasrecognised as liability in the GroupConsolidated Balance Sheet as at 31 December 2007.




SHAREHOLDERS’ EQUITYThe Group’s shareholders’ equityremained strong at RM19,802.1 million,despite declining marginally fromRM19,911.1 million as at 31 December2006. The slight decrease was primarilydue to higher appropriation fromdividend payments and the specialdividend declared during the yearamounting to RM3,056.9 millioncompared to the increase from profitattributable to equity holders of theCompany of RM2,547.7 million and theincrease in paid-up capital and sharepremium pursuant to employeesexercising their share options under the Company’s employees’ shareoptions scheme.

EARNINGS PER SHARE AND RETURNON SHAREHOLDERS’ EQUITYConsequent from higher profit for theyear attributable to equity holders of theCompany as mentioned above, basicearnings per share (EPS) increased from61.0 sen in 2006 to 74.4 sen in 2007.Accordingly, return on shareholders’equity (ROE) also increased from 10.6%in 2006 to 12.8% in 2007.

DIVIDENDSFor the current year ended 31 December2007, an interim gross dividend of 26.0sen per share less tax at 27.0% waspaid on 4 September 2007 toshareholders whose names appear inthe Register of Members and Record ofDepositors on 20 August 2007. Togetherwith the proposed final gross dividendof 22.0 sen per share less tax at 26.0%subject to the shareholders’ approval atthe forthcoming 23rd Annual GeneralMeeting of the Company, the totalpayout based on the issued and paid-upcapital as at 31 December 2007 wouldbe RM1,212.9 million. This represents47.6% of the net profit for the year whichis in line with the Company’s dividendpolicy of between 40.0% and 60.0% ofthe profit attributable to equity holders.

Including the special gross dividend of65.0 sen less tax at 26.0% amounting to RM1,654.5 million that was declaredon 10 December 2007 and paid on 31 January 2008, the total dividendpayout would amount to approximatelyRM2,867.4 million, representing 112.5%of the profit attributable to equity holders.

45.5

78.6

23.9

61.0

74.4

9.4 14

.8

4.3 10

.6 12.8

EPS(sen)

ROE(%)

EPS(sen)

ROE(%)

EPS(sen)

ROE(%)

EPS(sen)

ROE(%)

EPS(sen)

ROE(%)

'03 '04 '05 '06 '07

Shareholders’ Equity(RM Million)



PerformanceReview

Notes:*1: Value Added Services (VAS) are reflected in Application Services for 2006.*2: Based on forecasted value at 0.33% growth from MCMC Q3 2007 figure; 27.4 million population.

Business & Other StatisticsYEAR ENDED 31 DECEMBER 2003 2004 2005 2006 2007

MALAYSIA BUSINESSCustomer Base1. Residential Telephone 3,328,456 3,236,457 2,886,077 2,924,284 2,942,6132. Business Telephone 1,295,185 1,429,675 1,457,112 1,509,542 1,438,2203. Public Payphones 79,613 73,498 70,063 64,567 46,7874. Leased Circuits — 54,733 48,437 46,409 56,7905. ISDN 63,587 58,469 52,876 51,414 53,2846. Other Services (Telex & Maypac) 4,488 3,889 3,826 3,480 1,3657. Toll Free (1-300 & 1-800) 2,195 3,156 3,425 3,857 2,7088. Total access lines 4,623,641 4,416,135 4,343,189 4,433,826 4,380,8339. Total access lines per 100 population 18.1 17.2 16.6 16.6 16.0*2

10. Access Services 1,741,108 2,178,406 2,564,407 3,189,517 3,815,28311. Application Services 9,158 9,685 21,633 284,890*1 219,32912. Content Services 480,290 636,491 796,489 1,023,409 1,262,00713. Broadband 107,200 269,112 491,409 864,358 1,265,308

– Streamyx 100,529 257,099 478,469 736,714 999,722– Streamyx Hotspot 6,671 12,013 11,920 125,783 264,259– Direct — — 1,020 1,861 1,327

Network Capacity (’000)14. Kilometers Cable pair 31,040 31,644 32,110 32,559 32,85815. Fibre kilometers 472 637 722 790 83116. Exchange lines 8,679 8,684 8,684 8,684 8,69317. International gateway exchange 45.7 45.7 45.7 43.1 50.0

Productivity18. Number of employees — 17,846 16,097 15,228 15,62519. Number of access line per employee — 247.5 269.8 291.2 280.4

Quality of Service20. Total Faults report per line – PSTN 0.30 0.28 0.15 0.14 0.2921. Total complaints per 1,000 lines – PSTN 4.2 0.23 — — 3.8622. Leased circuits fault restoration (within 24 hrs) 97.5 93.7 99.7 99.3 99.723. Complaints of bill issued (%) – TM Net 0.09 0.07 0.02 0.02 0.0724. Number of complaints per 1,000 cust. – TM Net 46 28 22 12 4

CELCOM (MALAYSIA) BERHADCustomers1. Postpaid 1,176,860 1,104,419 1,118,138 1,230,517 1,282,2642. Prepaid 3,160,065 4,230,998 5,740,078 4,848,753 5,920,0953. Total Customers 4,336,925 5,335,417 6,858,216 6,079,270 7,202,359


* Including 981 Node B.

YEAR ENDED 31 DECEMBER 2003 2004 2005 2006 2007

CELCOM (MALAYSIA) BERHAD (CONTINUED)Network Capacity1. No. of GSM Stations 5,322 3,749 4,202 5,053 5,8012. No. of 3G Stations — not launched — 806 1,499 2,2803. Network Customer capacity (’000) 5,046 5,289 7,222 8,534 10,2234. Coverage populated area (%) 95 96 97 98 98.50

Productivity1. Number of employees 4,264 4,019 3,461 3,679 3,6922. Revenue per employee (RM’000) 858 1,063 1,306 1,239 1,3973. Customer per employee 1,017 1,328 1,982 1,652 1,951

Quality of Service1. Overall Network Availability (%) — 99.37 99.41 99.42 99.69

TM INTERNATIONAL BERHADNumber of Customers1. PT Excelcomindo Pratama Tbk 2,943,972 3,791,049 6,978,519 9,527,970 15,468,6002. Dialog Telekom PLC 825,284 1,358,641 2,123,801 3,105,649 4,259,5293. TM International (Bangladesh) Limited 401,680 1,103,465 3,051,917 5,762,093 7,183,3824. Telekom Malaysia International

(Cambodia) Company Limited 84,221 103,147 154,504 228,969 311,6505. Spice Communications Limited 3,800,6336. MobileOne Limited 1,068,000 1,162,000 1,246,000 1,337,000 1,535,0007. Mobile Telecommunications Company of Esfahan 15,536 16,211 19,042 20,459 30,568

Network Capacity (number of BTS)1. PT Excelcomindo Pratama Tbk 1,491 2,357 4,324 7,260* 11,1532. Dialog Telekom PLC 588 672 833 1,211 1,0003. TM International (Bangladesh) Limited 369 505 1,548 2,770 3,9054. Telekom Malaysia International

(Cambodia) Company Limited 96 136 170 202 5005. Spice Communications Limited 3,6636. MobileOne Limited (approx.) 1,3007. Mobile Telecommunications Company of Esfahan 20 28 29 56 64

Number of Employees1. PT Excelcomindo Pratama Tbk 1,515 1,543 1,867 2,061 2,1592. Dialog Telekom PLC 926 1,215 1,711 2,290 3,4233. TM International (Bangladesh) Limited 378 652 1,087 1,541 1,6234. Telekom Malaysia International (Cambodia)

Company Limited 387 410 466 470 7105. Multinet Pakistan (Private) Limited 3886. Spice Communications Limited 3517. MobileOne Limited 1,460 1,435 1,382 1,350 1,3428. Mobile Telecommunications Company of Esfahan 28 36 46 47 48

Sta

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PerformanceReview

IN RM MILLION 2006 2007

VALUE ADDEDRevenue 16,399.2 17,842.9Purchase of goods and services (7,094.2) (8,569.5)

Value added by the Group 9,305.0 9,273.4Other operating income 178.5 460.5Finance income 234.0 203.9Finance cost (621.9) (820.9)Share of results of jointly controlled entities/associates 30.5 205.0Gain on dilution of equity interest in a jointly controlled entity — 71.3

Value added available for distribution 9,126.1 9,393.2

DISTRIBUTIONTo Employees

Employment cost 1,991.4 2,107.1To Government

Taxation 830.9 511.0To Shareholders

Dividends 1,001.9 3,056.9Minority interests 233.5 83.9

Retained for reinvestment and future growthDepreciation, impairment and amortisation 4,001.5 4,143.5Retained profit 1,066.9 (509.2)

Total distributed 9,126.1 9,393.2

Statement Of Value AddedValue added is a measure of wealth created. The following statement shows the Group's value added for2006 and 2007 and its distribution by way of payments to employees, governments and shareholders, withthe balance retained in the Group for reinvestment and future growth.

Distribution Of Value Added(RM Million)

20062006

20072007

21.8% /1,991.4

To Employees– Employment

cost

9.1% /830.9

To Government– Taxation

13.6% /1,235.4

To Shareholders– Dividends and

minority interests55.5% / 5,068.4Retained forreinvestmentand future growth– Depreciation, impairment, amortisation and retained profit 22.4% /

2,107.1To Employees

– Employmentcost

5.4% /511.0

To Government– Taxation

33.5% /3,140.8

To Shareholders– Dividends

and minorityinterests

38.7% / 3,634.3Retained forreinvestmentand future growth– Depreciation, impairment, amortisation and retained profit

PROFILE OF DIRECTORS 70

GROUP SENIOR MANAGEMENT 76

Leadership

A Marvel of NatureThere is nothing quite like the iridescence of a Pauashell. From Greens and Pinks to Purples and Blues,the colours stand out on their own, yet merge fluidlyinto each other like magic. But magic it is not. Eachcolour comprises a single unique layer of protein andcalcium refracting light. Each shell comprisesthousands upon thousands of such layers. Suchseamless perfection of colour and form is what setsthe Paua apart. And yet another reason why wemarvel at it.

A Pure FormWhen it comes to truly standing out, a great deal ofattention is paid to detail but what is also important ishow things are put together. With its wide range ofsophisticated services, extensive portfolio of assets,partnerships, networks and a demography of customersthat spans nations, TM is all about detail. So it takes aspecial kind of vision and resolve to weave them intoan organic entity with a natural incandescence thatcomes from purity of form and synergy of function.Which is why TM stays ahead.


Leadership

TAN SRI DATO’ IR MUHAMMADRADZI HJ MANSOR

Non-IndependentNon-Executive Chairman

66 years of age – Malaysian

Tan Sri Dato’ Ir Muhammad Radzi Hj Mansor was appointed Chairman and Directorof TM on 12 July 1999. He graduated with a Diploma in Electrical Engineering in 1962from Faraday House Engineering College, London and a Masters in Science(Technological Economics) from the University of Stirling, Scotland in 1975. A Chartered Professional Engineer registered with the Board of Engineers, Malaysiaand Engineering Council, United Kingdom, he is a corporate member of the Institutionof Engineers, Malaysia, the Institution of Engineering and Technology, United Kingdomand the Institute of Management, United Kingdom.

He served in various engineering and management capacities in the former JabatanTelekom Malaysia (JTM) over a 22-year period, including a three-year secondment as

Technical Adviser to the Ministry ofEnergy, Telecommunications and Post.Tan Sri Radzi retired as DirectorGeneral of Telecommunications uponcorporatisation of JTM on 1 January1987 and was subsequently appointedas Director of Operations of TM. Heserved as Director of Marketing andCustomer Services from 1989 to 1995and later as Director of RegulatoryManagement and External Affairsbefore retiring in July 1996. From 1997to 1999, he was retained as aConsultant/Advisor on multimediaflagship application projects for theMultimedia Development CorporationSdn Bhd (MDeC).

Apart from his directorship in severalcompanies in the TM Group, Tan SriRadzi is currently Chairman of Celcom

(Malaysia) Berhad, Dialog Telekom Limited, Sri Lanka, Menara Kuala Lumpur SdnBhd and President Commissioner of PT Excelcomindo Pratama Tbk, Indonesia. He isco-chairman of the Malaysian Industry-Government Group for High Technology(MIGHT) and a Director of MDeC.

Tan Sri Radzi served as Chairman of TM’s Board Employees’ Share Option Scheme(ESOS) Committee until expiry of the ESOS on 31 July 2007. He currently serves asChairman of TM’s Board Dispute Resolution Committee. He has attended all the 12 Board of Directors’ Meetings of the Company held during the financial year. He isa Non-Executive Director nominated by the Minister of Finance, Inc., the SpecialShareholder of TM and has never been charged for any offence. He has no familyrelationship with any Director or major shareholder of the Company nor any conflictof interest with the Company.

Pro

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Dato’ Sri Abdul Wahid Omar wasappointed Group Chief ExecutiveOfficer (Group CEO) of TM on 1 July2004. An accountant by training,Dato’ Sri Abdul Wahid is a Fellow ofthe Association of CharteredCertified Accountants (ACCA), UnitedKingdom and a member of theMalaysian Institute of Accountants.

He was formerly the ManagingDirector/Chief Executive Officer ofthe then United Engineers (Malaysia)Berhad and UEM World Berhad aswell as the Executive Vice Chairmanof PLUS Expressways Berhad. Priorto his stint at UEM Group, Dato’ SriAbdul Wahid served TM as the ChiefFinancial Officer in 2001. Hepreviously served as a Director ofGroup Corporate Services cum Divisional Director, Capital Market & Securities ofAmanah Capital Partners Berhad, Chairman of Amanah Short Deposits Berhad aswell as a Director of Amanah Merchant Bank Berhad and several other companies inthe financial services sector.

He is also currently a Director of Bursa Malaysia Berhad and member of the FinancialReporting Foundation of Malaysia and the Investment Panel of Lembaga Tabung Haji.

As the Group CEO, Dato’ Sri Abdul Wahid sits on various Board committees includingthe Board Tender Committee, Board Dispute Resolution Committee and the BoardESOS Committee until expiry of the ESOS on 31 July 2007. He is also the DeputyChairman of Celcom (Malaysia) Berhad, a Director of VADS Berhad and several othercompanies in the TM Group. He was appointed an Alternate Director to Tan Sri Dato’Ir Muhammad Radzi Hj Mansor on the Board of the Multimedia DevelopmentCorporation Sdn Bhd on 1 May 2005.

Dato’ Sri Abdul Wahid has attended all the 12 Board of Directors’ Meetings of theCompany held during the financial year. He is an Executive Director nominated by theMinister of Finance, Inc., the Special Shareholder of TM. He has never been chargedfor any offence and has no family relationship with any Director or major shareholderof the Company nor any conflict of interest with the Company.

DATO’ SRI ABDUL WAHID OMARGroup Chief Executive OfficerNon-Independent Executive Director44 years of age – Malaysian

Profile of Directors


Datuk Zalekha Hassan was appointed a Director of TM on 9 January 2008. She graduated with a Bachelor of Arts (Hons) from the University of Malaya.

Datuk Zalekha began her career in the Malaysian civil service in 1977, as anAssistant Director, in the Training and Career Development division of the PublicService Department. She continued to serve the Government in numerousMinistries including the Ministry of Health, Ministry of Social Welfare, Ministry ofNational Unity and Social Development prior to commencement of her career inthe Ministry of Finance (MOF) in 1998 as the Senior Assistant Director of theBudget Division. She has since then continued to serve the MOF in variouscapacities. Datuk Zalekha was attached to the Government ProcurementManagement Division of the MOF for 7 years before taking up her current appointment as the Deputy Secretary General(Operation) in MOF.

Datuk Zalekha is also the Chairman of TM’s Board Tender Committee and a Non-Independent Non-Executive member ofTM’s Board Audit Committee. She is a Non-Executive Director nominated by the Minister of Finance, Inc., the SpecialShareholder of TM and has never been charged for any offence. She has no family relationship with any Director or majorshareholder of the Company nor any conflict of interest with the Company.

Dato’ Azman was appointed a Director of TM on 1 June 2004. He obtained hisMasters of Philosophy in Development Studies from Darwin College, CambridgeUniversity as a British Chevening Scholar. Dato’ Azman is a Fellow of theAssociation of Chartered Certified Accountants (ACCA) and a Chartered FinancialAnalyst (CFA) of the Association of Investment Management and Research(AIMR). He also holds a postgraduate diploma in Islamic Studies from theInternational Islamic University, Malaysia.

Dato’ Azman is the Managing Director of Khazanah Nasional Berhad (Khazanah) since 1 June 2004 and was the Managing Director of BinaFikir Sdn Bhd untilMay 2004. Prior to that, he was the Director, Head of Country Research,Salomon Smith Barney in Malaysia and Director, Head of Research, the Union

Bank of Switzerland in Malaysia. Prior to that, he was with the then National Electricity Board and Tenaga Nasional Berhad.

Dato’ Azman is a Director of UEM Group Berhad, UEM World Berhad and Malaysian Agrifood Corporation Berhad. He is alsothe Chairman of ValueCap Sdn Bhd and South Johor Investment Corporation Berhad. He was appointed Chairman of TMInternational Berhad on 3 March 2008.

He is currently the Chairman of TM’s Board Nomination and Remuneration Committee. He has attended 10 out of 12 Boardof Directors’ Meetings of the Company held during the financial year. Dato’ Azman is a Non-Executive Director nominated bythe Company’s major shareholder, Khazanah, and has never been charged for any offence and has no family relationship withany Director or major shareholder of the Company nor any conflict of interest with the Company.

L e a d e r s h i p


DATUK ZALEKHA HASSANNon-Independent Non-Executive Director54 years of age – Malaysian

DATO’ AZMAN MOKHTARNon-Independent Non-Executive Director47 years of age – Malaysian

Dato’ Lim Kheng Guan was appointed to the Board of TM on 23 June 2000. He is a Chartered Accountant by profession and an Associate Member of theMalaysian Institute of Accountants, Associate of the Malaysian Institute ofCertified Public Accountants, Fellow of Australian Society of Certified PracticingAccountants, Associate of the Australian Institute of Bankers and a Member ofthe Malaysian Institute of Management. He has also attended AdvancedManagement Programs at Manchester Business School, INSEAD and LondonBusiness School.

He has more than 40 years of experience in accounting, management consultingand senior managerial positions in local and multinational public listedcompanies. Currently, he is the Executive Director of Malaysian ManagementConsultants Sdn Bhd.

Dato’ Lim Kheng Guan currently serves as an Independent Non-Executive Chairman of the Board Audit Committee with effectfrom 16 August 2007 and also an Independent Non-Executive Member of the Nomination and Remuneration Committee andBoard Dispute Resolution Committee. He is also a Board Member of a number of subsidiaries and associate companies ofTM. He has attended 11 out of 12 Board of Directors’ Meetings of the Company held during the financial year. He has neverbeen charged for any offence and has no family relationship with any Director or major shareholder of the Company nor anyconflict of interest with the Company.


Dato’ Ir Dr Abdul Rahim Daud was appointed to the Board of TM on 7 July 1998. His academic and professional qualifications are: B.Eng (Hons) Electronic,Liverpool; M.Sc(Eng) Communication, Birmingham; PhD (Eng), University of Bath,United Kingdom; MBA(Ohio), USA; P.ENG - Member of Professional EngineerMalaysia; FIEM - Fellow of Institution of Engineers Malaysia.

He joined Jabatan Telekom Malaysia in 1973. He has been in various seniorpositions in TM and in 1996, he was appointed as Chief Operating Officer ofTelco. In July 1998, he was appointed as Executive Director of TM Group andremained as the Chief Operating Officer of TelCo until 1 February 2001 when heassumed the position of Executive Director, Corporate Strategy and Development.He was then appointed as the Group Deputy Chief Executive/Executive Director ofTM from 29 May 2001 until his retirement on 30 June 2004. He remained on the

Board of TM and currently as an Independent Non-Executive Director of TM.

He was the first Malaysian to be elected as Chairman of Commonwealth Telecommunications Organisation (CTO) in Londonfor 3 terms from September 1999 to November 2002. He also joined the Board of Governor of Intelsat (International SatelliteConsortium in Washington DC) for 2 years until its privatisation in 2002. He has completed the Advanced ManagementProgram (AMP) from the Harvard Business School and Senior Executive Development Program from the Wharton School ofBusiness, Pennsylvania, USA. He is an Adjunct Professor of Universiti Kebangsaan Malaysia.

Dato’ Ir Dr Abdul Rahim served as a member of the Board Tender Committee and also as Chairman/Board Member of anumber of subsidiaries of TM. He has attended all the twelve (12) Board of Directors’ Meetings of the Company held duringthe financial year. He has never been charged for any offence and has no family relationship with any Director or majorshareholder of the Company nor any conflict of interest with the Company.


DATO’ Ir DR ABDUL RAHIM DAUDIndependent Non-Executive Director59 years of age – Malaysian

DATO’ LIM KHENG GUANSenior Independent Non-Executive Director65 years of age – Malaysian


Ir Prabahar was appointed Director of TM on 23 June 2000. He is an engineerby profession and obtained his Bachelor of Science (Civil Engineering) degreefrom Portsmouth Polytechnic, United Kingdom in 1985. A member of the Boardof Engineers Malaysia and the Institute of Engineers Malaysia, he is aprofessional engineer who has wide experience in the engineering sector,especially in the areas of consultancy, contracting, project management andproject financing.

Ir Prabahar currently serves as an Independent Non-Executive Member of theBoard Nomination and Remuneration Committee and Board Audit Committee ofTM. He was a Member of TM’s Board Tender Committee until 16 August 2007. Heis also a Board Member of a number of subsidiaries and associate companies of TM. He has attended all the 12 Board ofDirectors’ Meetings of the Company held during the financial year. He has never been charged for any offence and has nofamily relationship with any Director or major shareholder of the Company nor any conflict of interest with the Company.

YB Datuk Nur Jazlan was appointed to the Board of TM on 1 June 2004. He is aFellow of the Association of Chartered Certified Accountants (FCCA), UnitedKingdom. He was a Council Member and Chairman of Public RelationsCommittee of Malaysian Institute of Accountants as well as a Council Member ofthe Asean Federation of Accountants.

In addition to his corporate experience in the financial arena, YB Datuk NurJazlan is also active in politics. He is the Head of UMNO Pulai, Johor and alsoChairman of Barisan Nasional for the division. He was an Exco Member of UMNOYouth from 1996 until 2004. He was re-elected in the recent General Election, asMember of Parliament for the Pulai Parliamentary Constituency, Johor.

YB Datuk Nur Jazlan is also a Director of United Malayan Land Bhd, Prinsiptek Corporation Berhad, Jaycorp Berhad andPenang Port Sdn Bhd, TSH Resources Berhad and Ekowood International Berhad.

YB Datuk Nur Jazlan served as an Independent Non-Executive Chairman of TM’s Board Audit Committee until 29 May 2007.He is currently a Member of TM’s Board Tender Committee, a Member of Board of Commissioners of PT ExcelcomindoPratama Tbk, Indonesia and Chairman of Multinet Pakistan (Private) Limited, subsidiaries of TM. He has attended 10 out of12 Board of Directors’ Meetings of the Company held during the financial year. He has never been charged for any offenceand has no family relationship with any Director or major shareholder of the Company nor any conflict of interest with theCompany.

L e a d e r s h i p


YB DATUK NUR JAZLAN TAN SRI MOHAMEDIndependent Non-Executive Director42 years of age – Malaysian

IR PRABAHAR NK SINGAMIndependent Non-Executive Director46 years of age – Malaysia

Rosli Man was appointed to the Board of TM on 15 July 2000. He holds aBachelor of Science degree in Electrical and Electronic Engineering (ElectricalDesign and Instrumentation) from the University of Glasgow, United Kingdom anda Diploma in Electrical and Electronic Engineering (Communications) fromTechnical College, Kuala Lumpur.

Rosli has more than 26 years of experience in the telecommunications industry. He joined JTM in 1976 as Assistant Controller where he gained wide exposure intelecommunication services including the task to implement the country’s firstmobile telecommunication service, i.e. ATUR 450. He then moved to the privatesector by joining the Fleet group as its Group Manager, Technical Services in1985. From 1988 to 1996, he was instrumental in setting up the first privatelyowned telecommunications company in Malaysia, the then Celcom (Malaysia) Sdn Bhd (Celcom), catering to the cellulartelecommunication business. He left Celcom as its President in 1996 to join Prismanet Sdn Bhd as Managing Director andheld the position until November 1998. In July 2000, he joined Natrindo Telpon Sellular (NTS), the GSM 1800 cellular operatorin East Java, Indonesia as Chief Operating Officer. He left NTS in January 2002.

Rosli currently serves as an Independent Non-Executive Member of the Board Audit Committee of TM. He was a Member ofthe Board Tender Committee until 16 August 2007. He is also a Member of the Board of Commissioners of PT ExcelcomindoPratama Tbk, Indonesia, a subsidiary of TM. He has attended all the 12 Board of Directors’ Meetings of the Company heldduring the financial year. He has never been charged for any offence and has no family relationship with any Director ormajor shareholder of the Company nor any conflict of interest with the Company.



ROSLI MANIndependent Non-Executive Director54 years of age – Malaysian

Dyg Sadiah Abg Bohan was appointed Alternate Director to Datuk ZalekhaHassan on 9 January 2008 after she ceased to be Alternate Director to Dato’ Ahmad Hashim on 7 January 2008. She graduated from the University ofMalaya with a Bachelor of Science (Hons) in 1986 and holds a Diploma in PublicAdministration from the National Institute of Public Administration (INTAN) in1989. She obtained her Masters in Business Administration from UniversitiKebangsaan Malaysia in 1998.

Dyg Sadiah began her career in the Malaysian Civil Service in 1989 as anAssistant Secretary in the Ministry of Agriculture. Thereafter, she was assigned to INTAN and subsequently in 1999, was transferred to the Ministry of Finance.She is currently the Deputy Under Secretary of the Investment, MOF (Inc) andPrivatisation Division.

Dyg Sadiah is a Director of Penang Port Holdings Berhad and an alternate Director of Malaysia Airports Holdings Berhad.

She is also the Alternate Member to Datuk Zalekha Hassan on TM’s Board Tender Committee. She has never been chargedfor any offence and has no family relationship with any Director or major shareholder of the Company nor any conflict ofinterest with the Company.

DYG SADIAH ABG BOHANNon-Independent Non-Executive Alternate Director45 years of age – Malaysian

Gro

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Leadership

Datuk Bazlan, 44, is a Fellow of the Associationof Chartered Certified Accountants, UnitedKingdom and also a Chartered Accountant of theMalaysian Institute of Accountants. He began hiscareer as an auditor with a public accountingfirm in 1986 and subsequently served the SimeDarby Group, holding various positions in itscorporate office, Singapore and Melaka. He laterhad a brief stint in American Express in 1993

before joining Kumpulan FIMA Berhadin 1994, where he was subsequentlyappointed Senior Vice President,Finance/Company Secretary. He joinedCelcom in 2001 and was the ChiefFinancial Officer (CFO) prior to hisappointment as TM Group CFO on 1 May 2005. He sits on the boards oftwo public listed companies andseveral private companies of the TM Group. He is also a member ofthe Issues Committee of the MalaysianAccounting Standards Board.

Dato’ Sri Abdul Wahid, 44, is anaccountant by training. He is a Fellow of

the Association of Chartered CertifiedAccountants (ACCA), United Kingdom and

a member of the Malaysian Institute ofAccountants. He has vast experience in

the financial services sector and was theManaging Director/Chief Executive Officer

of UEM Group, an infrastructuredevelopment conglomerate, prior to his

appointment as Group Chief ExecutiveOfficer of TM on 1 July 2004. He is currently a

Director of Bursa Malaysia Berhad, VADSBerhad and a member of the Financial

Reporting Foundation of Malaysia and theInvestment Panel of Lembaga Tabung Haji.

DATO’ SRI ABDUL WAHID OMARGroup Chief Executive Officer

DATUK BAZLAN OSMANGroup Chief Financial Officer


Dato’ Jamaludin Ibrahim, 49, was appointed as the Group CEO Designate and ExecutiveDirector of TM International Berhad (TMI) with effect from 3 March 2008.

Prior to the appointment in TMI, Dato’ Jamaludin was the Group Chief Executive Officerof Maxis Communications Berhad (Maxis). He joined Maxis in 1997 and was appointedas CEO in 1998. Prior to Maxis, Dato' Jamaludin was the Managing Director and CEO ofDigital Equipment (M) Sdn Bhd from 1993 to 1997. Before that, he spent 12 years inIBM Malaysia. He started his career in 1981 as a lecturer.

Dato' Jamaludin graduated in 1978 from California State University, United States, with a Bachelor of Science in Business Administration and a minor in Mathematics. He obtained his Masters of Business Administration from Portland State University,Oregon, in 1980, specializing in quantitative methods.

In Malaysia, Dato' Jamaludin is Chairman of the Advisory Board of the National ScienceCentre. He also sits on the boards of Universiti Tun Hussein Onn Malaysia and Universiti Tun Abdul Razak Sdn Bhd. He had previously served as board member of the Bridge MobileAlliance, World GSM Association, Malaysia Venture Capital Management Berhad, and HeiTechPadu Berhad.

Dato’ Zamzamzairani, 47, holds aBachelor of Science degree inCommunication Engineering fromPlymouth Polytechnic, United Kingdomand has attended the Kellog School ofManagement’s programme in‘Corporate Finance, Strategies forCreating Shareholder Value’. He has

vast experience in the telecommunicationsindustry and has held senior positions inseveral multinational companies within theindustry, such as Global One and LucentTechnologies (Malaysia), where he led thecompanies as the CEO. He was the SeniorVice President, Group Strategy andTechnology of TM before assuming hiscurrent position as the CEO of MalaysiaBusiness. Dato’ Zamzamzairani also sits onthe boards of several TM Group subsidiaries,including VADS Berhad.

DATO’ ZAMZAMZAIRANI MOHD ISAChief Executive Officer,

Malaysia Business /Group CEO Designate,

Telekom Malaysia Berhad

DATO’ JAMALUDIN BIN IBRAHIMGroup CEO Designate/

Executive DirectorTM International Berhad


DATO’ SRI MOHAMMEDSHAZALLI RAMLYChief Executive Officer,Celcom (Malaysia) Berhad

L e a d e r s h i p

Group Senior Management

Dato’ Yusof Annuar, 42, is a CharteredAccountant by profession. He completed hisChartered Institute of ManagementAccountants professional examination fromthe London School of Accountancy in 1987.He has both investment banking andcorporate management experience. Hisinvestment banking career included stintsat S.G. Warburg & Co (now known as UBSWarburg), ING Barings Securities Singapore

and the Merrill Lynch & Co affiliatein Malaysia. Prior to hisappointment as Chief ExecutiveOfficer of TM International Berhadon 1 June 2005, he was anExecutive Director at OCB Berhadand a Board member of a numberof other public listed companies inMalaysia. Currently, he is also aBoard member of several publiclisted and private companies, locallyand internationally. Post demerger,Dato’ Yusof will assume theposition of Group CFO/ExecutiveDirector in the enlarged TMInternational Berhad.

Dato’ Sri MohammedShazalli, 46, holds aBachelor of Science

(Marketing) degree fromIndiana University,

Bloomington, Indiana, and aMasters of Business

Administration from St. LouisUniversity, Missouri, USA. He

was appointed ChiefExecutive Officer and Directorof Celcom (Malaysia) Berhad

on 1 September 2005. Prior tothat, he was the CEO of ntv7,

Malaysia’s 7th terrestrial TVstation, since its inception in

1998. He gained vast experiencein the Fast Moving Consumer

Goods Industry, working for LeverBrothers from 1987 to 1993,

followed by Malaysian TobaccoCompany (MTC) and British

American Tobacco (BAT) from1993 until 1996, both in Malaysia

and the United Kingdom.

DATO’ YUSOF ANNUAR YAACOBChief Executive Officer,

TM International Berhad /Group CFO Designate/

Executive Director, TM International Berhad

Khairussaleh, 40, holds aBusiness Administrationdegree from WashingtonUniversity, St Louis,Missouri, in 1989. He hasmore than 17 yearsexperience, primarily infinancial services. Heserved the Public BankGroup for 7 years and

gained experience in corporatebanking, equity research and futuresbroking, where his last position in theGroup was Executive Director of PBFutures. He spent 8 years at BursaMalaysia Berhad, his last positionthere being the Chief Financial Officerbefore joining TM as the ChiefExecutive Officer, TM Ventures inSeptember 2006.

KHAIRUSSALEH RAMLIChief Executive Officer,

TM Ventures



Dato’ Adnan Rofiee, 53 holds a Bachelors degree inElectronic Engineering from Brighton Polytechnic,

United Kingdom. He has 30 years of experience inthe telecommunications industry where he began his

career with JTM in 1977 as a Planning Engineer,Customer Access Network for the Central Region.

He was later appointed General Manager of theSarawak Operations Area in 1994. He was the

Managing Director of Ghana Telecommunications CoLtd, an associate company of TM, in 2000 and

subsequently appointed the CEO of TM Cellular Sdn Bhd inFebruary 2001. He was the Senior Vice President of Major

Business & Government before assuming his current positionas the Chief Operating Officer of TM Retail since 1 July 2004.

DATO’ ADNAN ROFIEEChief Operating Officer, TM Retail

DENNIS KOH SENG HUATChief Executive Officer,

VADS Berhad

Dennis Koh, 46 holds a Bachelor of Science (Engineering)degree in Computer Science from the Imperial College ofScience & Technology, University of London, United Kingdomin 1984. He began his career in computer networking in 1985with Malaysian Airlines Systems Berhad. In 1990, he movedto Paris to join Societe Internationale de TelecommunicationsAeronautiques (SITA) as a Project Manager. He then joined a

new start-up company, VADS Berhad which was a joint-venturebetween IBM (Malaysia) Sdn Bhd and TM then. Over the next 13 years, he held various senior positions before assuming hiscurrent position as the Chief Executive Officer of VADS Berhad on1 June 2005.


L e a d e r s h i p


ZAID HAMZAHSenior Vice President,

Group Regulatory, Legal & Compliance

Zaid, 48, is a lawyer with a Bachelor of Lawdegree from National University of Singapore.He completed his Masters from FletcherSchool of Law & Diplomacy, Tufts University,USA on a Fulbright Scholarship. He has over22 years of professional work experiencespanning government service, legal practiceand in-house counsel work with an MNC. Hestarted his career with the Singapore Ministryof Foreign Affairs, where he spent almost 10

years as the Senior Assistant Director. Zaidspecialises in strategic value creation and riskmanagement in the technology sector and is theauthor of 5 books on Law, Technology and Strategy.He was a consultant to Microsoft’s Legal &Corporate Affairs, Asia Pacific, based in Singaporebefore joining TM on 2 April 2007 as Senior VicePresident, Group Regulatory, Legal & Compliance.

Dato’ Abdul Aziz, 54, holds a Bachelor of Economics (Hons)degree from the University of Malaya. He began his career in1977 as a Fleet Planning Coordinator with Malaysian AirlinesSystems Berhad. He subsequently joined Shell in 1979 wherehe spent the next 20 years in several management positions

in Internal Audit, Marketing Economics, Sales & Marketing,Supply/Distribution Logistics and Human Resource.

He left for an international assignment in 1991 withthe Shell Group based in London, where he was the

shareholders’ representative, overseeing Shell’sbusiness interests in Hong Kong and China. He laterserved as Executive Vice President, Human Resource

of RHB Bank Berhad, responsible for setting thedirection, formulating and overseeing the

implementation of HR Strategies before joining TMon 18 October 2004 as Senior Vice President, Group

Human Resource.

DATO’ ABDUL AZIZ ABU BAKARSenior Vice President,Group Human Resource


Group Senior ManagementAhmad Azhar, 44, holds aBachelor of Science degree inElectrical Engineering fromOklahoma State University. He began his career as anengineer in Agilent Technologies(formerly known as HewlettPackard) in 1987. He then joinedAccenture in 1990 servicingclients in Malaysia, Asia andMiddle East in various industriesnamely communications, hightechnology, oil and gas andpublic sector services. His

experiences include strategic planningand change management, business andoperations support systems, enterpriseresource management, revenue andcustomer relationship management. He became a Partner at Accenture in2000 before joining TM as Group ChiefInformation Officer on 2 August 2004.

AHMAD AZHAR YAHYAGroup Chief

Information Officer

Hashim, 49, holds a Bachelor of Sciencedegree from Queen Elizabeth College,University of London and a Masters in

Business Administration (MBA) inInternational Management from RMIT

University in Melbourne, Australia.Hashim is the former Vice President andcurrent Chartered Fellow of The Institute

of Internal Auditors Malaysia, and amember of the Malaysian Institute of

Management. He has been amember of the Investigation

Tribunal, Advocates and SolicitorsDisciplinary Board, Bar Council

Malaysia since 2004. He is also aChartered Chemist and member of

the Royal Society of Chemistry,United Kingdom. Hashim spent 21

years in Shell Malaysia holdingvarious management positions

spanning marketing, sales,manufacturing, operations, logistics,information technology and internal

audit. He joined TM as the GroupChief Auditor in October 2002.

HASHIM MOHAMMEDGroup Chief Auditor

Gazali, 50, holds a Bachelor ofScience (Finance) degree from

Northern Illinois University,and in 1982 obtained a

Masters in BusinessAdministration (MBA) fromGovernors State University.

He gained vast experience incorporate banking and

corporate finance while servingat a local merchant bank prior

to joining TM in 1990. In TM,he was involved in treasurymanagement, fund raising

activities, mergers andacquisitions, investor relationsand overseeing the EnterpriseRisk Management Programme

for the Group. Prior to hisappointment as Group Chief

Procurement Officer of TM on1 June 2005, he was the Vice

President, Finance, of TM Wholesale.

GAZALI HARUNGroup Chief ProcurementOfficer


L e a d e r s h i p


MOHD NOOR OMARVice President,Group Performance ImprovementManagement Office

Mariam, 44, holds a Bachelor of Business(Business Administration) with Distinctionfrom RMIT University in Melbourne, Australia and a Diploma in Public Relationsfrom the Institute of Public Relations

Malaysia (IPRM). She is a memberof IPRM and is among the firstbatch of PR practitioners to beaccredited by IPRM in 2005. Priorto joining TM in September 2004 asGeneral Manager, Group CorporateCommunications, she served as theHead of Group CorporateCommunications in Amanah CapitalPartners Berhad, and later as theGeneral Manager of GroupCorporate Communications inUnited Engineers (Malaysia)Berhad/UEM World Berhad.

Mohd Noor, 53, holds aMasters of Business

Administration from theUniversity of Wales, United

Kingdom. He is also aChartered Accountant and a

member of the MalaysianInstitute of Accountants. He

was the General Managerof Strategy & Business

Analysis of TM InternationalBerhad (TM International),

before assuming his currentposition as Vice President, Group

Performance ImprovementManagement Office of TM. Mohd

Noor has contributed significantlyto the development of

TM International since 2004,particularly during the

acquisitions in Pakistan,Indonesia, Singapore, India,

Cambodia and Thailand. He started his career with

Petronas where he spent a totalof 18 years and subsequently

joined Kumpulan Guthrie Berhad.Prior to joining TM International,

he was the CEO of an ITconsultancy company in

Singapore for 3 years.

MARIAM BEVI BATCHAGeneral Manager,

Group Corporate Communications

Yong, 53, has been theCompany Secretary of TM since 1998. A qualifiedCompany Secretary bytraining, she is anAssociate member of theInstitute of CharteredSecretaries andAdministrators. She gainedaccounting and secretarial

experience in Postel InvestmentManagement Ltd in the United Kingdomin 1980 and subsequently, upon herreturn to Malaysia in 1984, as anAccountant/Company Secretary in astock/share broking company andCorporate Secretary in a secretarialcompany, affiliated to the then ArthurYoung International. She joined BHLBank Berhad in 1988 and left as theSenior Secretarial Officer in 1991 to join TM’s Company Secretarial Division.

WANG CHENG YONGCompany Secretary



Hasnul Suhaimi, 50, was appointed PresidentDirector of PT Excelcomindo Pratama Tbk (XL) in September 2006. Formerly

the President Director of Indosat, he heldvarious directorship positions in the

Company since 2003. Prior to that, he heldsenior positions at Telkomsel and Indosat’s

subsidiary, Indosel.

Hasnul graduated from Bandung Institute ofTechnology (ITB) in 1981 with an Electrical Engineeringdegree before receiving an MBA from the University of

Hawaii in 1992.

HASNUL SUHAIMIPresident DirectorPT Excelcomindo Pratama Tbk, Indonesia

DR SHRIDHIR SARIPUTTA HANSWIJAYASURIYA

Chief Executive/Executive DirectorDialog Telekom PLC, Sri Lanka

Director and Group Chief Executive of Dialog Telekom PLC, Dr Wijayasuriya,39, joined the Company in 1994 as a member of the founding managementteam and has functioned in the capacity of Chief Executive Officer of DialogTelekom since 1997.

Counting over 15 years of professional experience in mobilecommunications, Dr Wijayasuriya has published widely on the subject ofdigital mobile communications, including research papers in publications ofthe Institution of Electrical and Electronic Engineers (IEEE), USA, RoyalSociety and Institution of Electrical Engineers of the United Kingdom (IEE),UK. He has made several keynote presentations at international conferenceson digital mobile communications. Dr Wijayasuriya is also a past chairmanof GSM Asia Pacific – the regional interest group of the GSM Association.

A fellow of the Institute of Engineering Technology of the United Kingdom(IET), Dr Wijayasuriya is a Chartered Professional Engineer registered withthe IET UK. He is also a member of the Institution of Electrical and

Electronic Engineers (IEEE), USA. Dr Wijayasuriya graduated with a degree inElectrical and Electronic Engineering from the University of Cambridge, UnitedKingdom in 1989. He subsequently read for and was awarded a PhD in DigitalMobile Communications at the University of Bristol, United Kingdom. DrWijayasuriya also holds a Masters in Business Administration from the Universityof Warwick, United Kingdom.

TM InternationalSubsidiaries/AssociatedCompanies/Affiliates


L e a d e r s h i p


Adnan, one of the pioneers of Multinet Pakistan (Private)Limited, has been the driving force behind the Company andis responsible for spearheading the successful deployment of

the nationwide OFN. He has a degree in Science (CivilEngineering) from Wisconsin, USA and a Masters in Science(Civil Engineering) from Minnesota, USA. He has a rich and

progressively diverse experience of over 24 years instructural and forensic engineering, construction

management, quality control and project management.

Adnan has conducted a series of seminars onEntrepreneurship and Marketing at the Institute of

Business Administration in Karachi as well as ProjectManagement and Leadership seminars at NED University

in Karachi. He also plays advisory roles in several non-profit organisations primarily focused on Education and

Health and is on the Executive Council Board for theIndus Valley School of Art and Architecture and The

Citizen’s Foundation.

Muhammed Yusoff Mohd Zamri, 43,was appointed Chief Executive Officerof Telekom Malaysia International(Cambodia) Company Limited (TMIC)in February 2007. After obtaining hisBachelor of Engineering (Industrial)from Monash University, Australia in1987, he began his career with INTELin 1988. Subsequently, he moved intothe service industry with American

Express from 1990 to 1993.

Yusoff has both cellular operator andtelecommunications vendor experience. His mobileoperator experience includes stints at Celcom andin Uzmacom as Director of Marketing andBusiness Development for a new mobile operatorin Uzbekistan from 1996 to 2000. Prior to hisappointment in TMIC, he was attached to variousinternational companies such as LucentTechnologies, Schlumberger and Atos Origin.

MUHAMMED YUSOFF MOHDZAMRI

Chief Executive OfficerTelekom Malaysia International(Cambodia) Company Limited,

Cambodia

ADNAN ASDARChief Executive OfficerMultinet Pakistan (Private)Limited, Pakistan



NEIL MONTEFIOREChief Executive OfficerMobileOne Limited, Singapore

Navin Kaul has over 29 years of experience in managing businesses in highlycompetitive markets. He has been in the telecommunications industry right from itsinception in India. He was part of the Modi Telstra team that pioneered cellularcommunications in India.

Navin has held leadership positions in the areas of corporate sales, customer care,revenue assurance and credit risk management. He also has significant exposure inhandling joint-ventures.

In his current role, Navin will be responsible for Spice’s development and growth bycreating financial value, ensuring customer and employee satisfaction and creating strongprocesses to build a world-class organisation.

NAVIN KAULChief Executive Officer

Spice Communications Limited,India

Neil, 55, has been Chief Executive Officer of MobileOneLimited (M1) since April 1996. He was appointed to M1’s

Board of Directors on 8 November 2002. He is a Fellow ofthe Institute of Electrical Engineers and a Fellow of the

Chartered Institute of Marketing.

Neil was formerly Director of Mobile Services at Hong KongTelecom CSL Ltd, the largest cellular operator in Hong Kong,before assuming the position of Managing Director in several

telecommunication companies in Hong Kong and in theUnited Kingdom, including Paknet Ltd which launched theworld’s first public packet radio data network. His earlier

years at various units in the Cable and Wireless Group saw himmanaging and specialising in telecommunication products, projects

and services in Hong Kong and the Far East, as well as in Bahrain,Saudi Arabia and the United Kingdom.


L e a d e r s h i p


* TM International Berhad Chief ExecutiveOfficer Dato’ Yusof Annuar Yaacob overseesthe business and operations for TMInternational (Bangladesh) Limited (TMIB).

SEYED AHMAD SADJJADIManaging DirectorMobile TelecommunicationsCompany of Esfahan, Iran

Charoenrath, 48, has held the position ofExecutive Chairman and Chief Executive Officerfor Samart Corporation Public Company Limitedsince 1987. In addition, he is also Director forSamart Telcoms Public Company Limited andSamart I-Mobile Public Company Limited.

Charoenrath graduated from the University ofNewcastle, Australia with a Bachelors ofEngineering in Electrical Engineering. He also holds a certificate from the ThaiInstitute of Directors.

Seyed Ahmad Sadjjadi, 53,has been the Managing

Director of MobileTelecommunications Company

of Esfahan (MTCE) since2006. He was formerly theChairman of the Board of

Directors in KermanIndustrial Communications

and a Member of the Boardof Directors at Industrial

University of Khajeh NasirToosi from 1981 to 1989. He has

held various managerial positionswithin the Telecommunications

Company of Iran for the Kerman,Markazi Arak, Golestan and

Esfahan provinces.

He graduated from the KhajehNasir Toosi University with a

Bachelors in Telecommunicationsdegree and received his Mastersin System Management from the

Governmental ManagementEducation Centre in Tehran.

Watchai Vilailuck, 45, hashelmed Samart I-Mobileas Executive Chairmanand Chief ExecutiveOfficer since 2003. AnAccounting graduate fromThammasart University,he also holds a Certificateof Director Accreditationfrom the Thai Institute of

Directors (IOD).

Watchai began his career as anAssistant Auditor for SGV-NA Thalang& Company Limited in 1984.Subsequently, he held seniormanagement positions in the Samartgroup of companies which includedSamart Telcom Public CompanyLimited, Samart Satcom CompanyLimited and Samart EngineeringCompany Limited.

WATCHAI VILAILUCKChief Executive Officer

Samart I-Mobile PublicCompany Limited, Thailand

CHAROENRATH VILAILUCKExecutive Chairman/

Chief Executive OfficerSamart Corporation PublicCompany Limited, Thailand

STATEMENT ON 88CORPORATE GOVERNANCE

ACHIEVING BUSINESS 103OBJECTIVES BY IMPROVINGENTERPRISE RISK MANAGEMENT(ERM) EXECUTION

CODE OF BUSINESS ETHICS 106

ADDITIONAL COMPLIANCE 108INFORMATION

AUDIT COMMITTEE REPORT 114

DIRECTORS STATEMENT ON 121INTERNAL CONTROL

Accountability

Sta

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Accountability

INTRODUCTION

“Company Directors have a fiduciary duty to shareholders toensure that the principles of good corporate governance areproperly enforced. In this case, I believe that transparency andopenness remain the best deterrent against corruption andfraud. As company directors, you must always ensuretransparency in governance. You must be prepared to scrutinizeand to probe. You must be prepared to ask uncomfortablequestions, and to receive uncomfortable answers. I would like tocall upon all those charged with the responsibility of beingcompany directors to dispense it well. It is a responsibility thatyou hold, not only towards your shareholders and your ownconscience, but also towards the nation.”

– Excerpts from a speech by the Honourable Prime Minister of Malaysia, Dato’ Seri Abdullah Hj AhmadBadawi, at the Corporate Leaders’ Banquet on 7 February 2007, organised by the Malaysian Institute ofDirectors.

Transparency-hallmark of corporate governance


Corporate Governance is about the wayin which Boards oversee the running ofthe company by its managers and abouthow Boards are in turn accountable toshareholders in particular andstakeholders in general. The presenceof an effective Corporate Governanceframework provides the confidencenecessary for the proper functioning ofa market economy. Poor governanceundermines corporate integrity and canexpose the company to risk throughfraud and ultimately weakens acompany’s potential.

As one of the leading companies in thestable of Government-linked Companies(GLC) in Malaysia, TM has, apart fromabiding to the principles and bestpractices as set out in the MalaysianCode on Corporate Governance(Malaysian Code), also subscribes to theprinciples introduced by the PutrajayaCommittee on GLC High Performance(PCG) which comprise the Guidelines toEnhance Board Effectiveness. TheseGuidelines, as codified in the ‘GreenBook’ launched on 26 April 2006,reinforce the recommendationscontained in the Malaysian Code.

The PCG recommended changes andimprovements to the governance ofGLCs based on the following objectives:

• Refocus the role and mandate ofGLC Boards.

• Strengthen GLC Board composition.• Intensify GLC Board performance

management.• Upgrade Board structure and

processes.

TM has also taken cognizance of andadhered to recent amendments to theMalaysian Code which came into effecton 1 October 2007, aimed atstrengthening the roles of the Board ofDirectors and Audit Committees and theeffective discharge of their respectiveroles and responsibilities.

The Board of TM recognises thatcorporate governance is not only aboutcommitment to values and ethicalconduct and provides a framework forbest practices, but also that stakeholderexpectations must be fully understoodand managed, and not assumed. TheBoard also believes that a successfulGLC is an organisation whoseperformance must be equal if notbetter than that of a non-GLC in termsof profit and efficiency coupled withresponsible employment and corporatesocial responsibility. TM’s commitmentis evident in its internal processes,guidelines and systems, which arealigned with sound corporategovernance practices aimed atincreased efficiency, transparency andaccountability.

ANOTHER AWARD WINNINGYEAR FOR TMTM’s commitment to realiseshareholder value is evidenced by thefollowing awards conferred on theCompany in 2007:

• Corporate GovernanceTM ranked Second place in theCorporate Governance Survey Report2007, a joint study by the MinorityShareholders Watchdog Group(MSWG) of Malaysia and NottinghamUniversity Business School, MalaysiaCampus.

• National Annual Corporate ReportAwards (NACRA) 2007– TM achieved recognition once

again for its annual report,clinching the Gold Award forOverall Excellence during theNational Annual CorporateReport Awards (NACRA) 2007ceremony held in Kuala Lumpur.

– TM also took home the IndustryExcellence Award for BursaMalaysia Main Board Companiesunder the Trading & Servicessector for the 11th consecutiveyear, as well as won the GoldAward for Best Designed AnnualReport.

• National Award for ManagementAccounting (NAfMA) ExcellenceAwardTM received the coveted NAfMAExcellence Award, beating nineother finalists to take First place inmanagement accounting bestpractices. The NAfMA awardsrecognise best practices inmanagement accounting bycompanies in Malaysia that leads tovalue creation and excellentbusiness performance. The awardingbodies for NAfMA are the MalaysianInstitute of Accountants (MIA) andChartered Institute of ManagementAccountants (CIMA).

Details of other awards, local andinternational, won by TM and its Groupof Companies in 2007 is provided onpages 38 to 41 inclusive of this annual report.

Statement on Corporate Governance


COMPLIANCE STATEMENTThe Board will continue to strengthengovernance practices to safeguard thebest interests of shareholders and otherstakeholders. The Company has fullycomplied with the principles and bestpractices of the Malaysian Code and itsamendments, which took effect on 1October 2007. This Statement, togetherwith the Statement on Internal Controland the Statement on RiskManagement, sets out the manner inwhich the Company has applied theprinciples and best practices of theMalaysian Code.

Best practices adopted by TM Groupover and above the recommendationsprescribed in the Malaysian Code arethose recommended by PCG and otherglobal standards, which the Board hasdeemed to be suitable for the Group.

BUILDING A STRONG BOARDBOARD COMPOSITION AND BALANCEIn 2007, the Board consisted of 9members, comprising a Non-ExecutiveChairman, an Executive Directordesignated as the Group Chief ExecutiveOfficer (Group CEO), 2 Non-IndependentNon-Executive Directors and anAlternate and 5 Independent Non-Executive Directors, representing morethan half of the Board. The Boardbelieves that its current size, which isin line with the GLC guidelines, isappropriate for its purpose.

Dato’ Lim Kheng Guan is the SeniorIndependent Non-Executive Director, towhom concerns pertaining to the Groupmay be conveyed by shareholders andthe public. He also represents and actsas spokesperson for the IndependentDirectors as a group.

ROLES AND RESPONSIBILITIESOF THE BOARDTM Group is led and controlled by anactive and experienced Board consistingof members with a wide range ofbusiness, financial, technical and publicservice backgrounds. This brings depthand diversity in expertise andperspectives to the leadership of ahighly regulated communicationsbusiness. Directors’ biographiesappearing on pages 70 to 75 inclusive,of this annual report, represent animpressive range of experiences, whichare vital to providing strategic directionand guidance in the management of acommunications company.

The Board has assumed the following 6 core responsibilities in discharging itsstewardship:

• Review and adopt a strategic plan• Oversee and evaluate the conduct of

the Company’s business• Identify and manage principal risks• Succession planning• Develop and implement an investor

relations programme• Review adequacy and integrity of the

Company’s internal controls

Financial and Subsidiary Policy manualsare in place to ensure that prior TMBoard approvals are obtained for thefollowing transactions and activities ofthe Group within various levels ofauthorities:

• Shareholding and Capital Structure:

– Equity and long term debt issues– Corporate Guarantees– Change in nature of business

• Financial Investments and Mergers& Acquisitions:

– Mergers & Acquisitions– Investments and equity

participation/joint ventures– Divestment of investment or

business– Loan or cash advances to

subsidiaries– Investment in corporate bonds

and securities– Business alliances

• Budget

– Annual Capital Expenditure– Annual Operating Expenditure

• Procurement for:

– Network assets– Network landed property– Non-network assets/services– Non-network landed property

• Others

– Consultancy– Working capital financing

A c c o u n t a b i l i t y



Apart from the above specificresponsibilities, the Board also takesfull, independent responsibility andaccountability for the smoothfunctioning of core processes, involvingboard governance, business value andethical oversight. To facilitate effectivedischarge of these responsibilities,dedicated Board Committees have beenestablished with clear terms ofreferences, comprising Directors whohave committed time and effort asmembers. The Board committees arechaired by Non-Executive Directors whoexercise their leadership with thebenefit of in-depth knowledge of therelevant industry.

The Board meets regularly. In additionto 9 scheduled meetings during theyear to decide on core issues, 3 interimor special meetings were held whereimmediate decisions were warranted.This includes consideration of proposalsin relation to mergers and acquisitionsand quarterly financial results.

The attendance of individual Directors atthe 12 Board Meetings held in 2007 isrecorded within the Directors’ biographiespublished on pages 70 to 75 inclusive,in this annual report. Besides the 12Board Meetings, urgent issues wereconsidered via a total of 6 Directors’Circular Resolutions during the year.

ROLES OF THE CHAIRMAN, GROUPCEO AND NON-EXECUTIVE DIRECTORSThe roles of the Non-ExecutiveChairman, Tan Sri Dato’ Ir MuhammadRadzi Hj Mansor and the Group CEO,Dato’ Sri Abdul Wahid Omar, are keptseparate in line with best practice, withclear division of responsibilities betweenthem.

The Board’s principal focus is theoverall strategic direction, developmentand control of the Group. As such, theBoard approves the Group’s strategicplan and its annual budget andthroughout the year, reviews theperformance of the operatingsubsidiaries against their budgets andtargets. The Group CEO is responsiblefor the implementation of broad policiesapproved by the Board and he isobliged to report and discuss at BoardMeetings all material matters currentlyor potentially affecting the Group and itsperformance, including all strategicprojects and regulatory developments.

The Chairman is responsible for theintegrity and effectiveness of therelationship between the Non-Executiveand Executive Directors. His interactionswith global leaders of the industry andrelationships with stakeholders andvarious institutions, such as his activeparticipation as a member of the Boardof Engineers, help to bring about thebenefits of the engineering profession tothe Group and society.

Non-Executive Directors provideconsiderable depth of knowledgecollectively gained from experiences in avariety of public and private companies.The Independent Non-ExecutiveDirectors are independent ofmanagement and free from anybusiness or other relationship, whichcould materially interfere with theexercise of their independent judgementas defined under paragraph 1.01 of theListing Requirements of Bursa MalaysiaSecurities Berhad (Bursa Securities).They provide unbiased and independentviews in ensuring that the strategiesproposed by the management are fully

deliberated and examined, in theinterest of shareholders, employees,customers, and the many communitiesin which the Group conducts itsbusiness. The independence of theNon-Executive Directors is constantlyreviewed and benchmarked against bestpractices and regulatory provisions.

BOARD APPOINTMENT PROCESSThe Company has in place formal andtransparent procedures for theappointment of new Directors. Theseprocedures ensure that all nominees tothe Board are first considered by theNomination and RemunerationCommittee, taking into account therequired mix of skills and experienceand other qualities, before making arecommendation to the Board andshareholders.

BOARD EFFECTIVENESS EVALUATIONThe formal Performance EvaluationFramework (the Framework) adopted in2004 and reviewed in 2006, comprises aBoard Effectiveness Assessment and aBoard of Directors' Self/PeerAssessment. The Framework isdesigned to maintain cohesiveness ofthe Board and, at the same time,serves to improve the Board’seffectiveness.

The broad performance indicators, onwhich Board Effectiveness is evaluated,include board composition, boardadministration, board accountability andresponsibility and board conduct.Performance indicators for individualdirectors include their interactivecontributions, understanding of theirroles and quality of input.



DIRECTORS’ REMUNERATIONThe framework for the remuneration ofExecutive and Non-Executive Directorsis reviewed regularly against marketpractices. The remuneration of Non-Executive Directors is based on astandard fixed fee. Additional allowancesare also paid in accordance with thenumber of meetings attended duringthe year.

As an Executive Director, the GroupCEO is paid a salary, allowances,bonuses and other customary benefitsas appropriate to Senior Managementmembers. TM carries out salarybenchmarking of equivalent jobs in themarket of similar-sized companies toarrive at appropriate base pay levels.

TM’s Group CEO’s remuneration isbenchmarked against the remunerationof CEOs of other GLCs, taking intoaccount job size as determined by HayManagement Consultant (M) Sdn Bhd.Subsequently, other salary benchmarkswere also considered with adjustmentsprovided for the industry TM is in andits regional exposure. For the seniormanagement directly reporting to theGroup CEO, the same salarybenchmarks are also done but againstboth internally equivalent jobs and alsoexternal jobs in similar sizedcompanies.

To ensure integrity and independence ofthe appraisal process,PricewaterhouseCoopers AdvisoryServices Sdn Bhd was engaged as theindependent Adviser to tabulate andreport to the Chairman the results ofthe evaluation process. Every boardmember is provided with the results ofthe self-evaluation marked against peerevaluation to allow for comparison. TM’sBoard Effectiveness Evaluation has beeninstrumental in drawing the Board’sattention to areas to be addressed.During the year, similar BoardEffectiveness Evaluations were alsoimplemented by major subsidiarieswithin the Group.

RE-ELECTION OF DIRECTORSIn accordance with the ListingRequirements of Bursa Securities andthe Company’s Articles of Association,all Directors are subject to re-electionby rotation once at least every 3 yearsand a re-election of Directors shall takeplace at each Annual General Meeting.Executive Directors also rank for re-election by rotation. The re-election ofDirectors ensures that shareholdershave a regular opportunity to reassessthe composition of the Board.Particulars of Directors submitted toshareholders for re-election areenumerated in the Statementaccompanying the Notice of AnnualGeneral Meeting (AGM).

TM has also implemented guidelinesset out in the ‘Blue Book’ applicable toGLCs, on “Intensifying PerformanceManagement Practices andPerformance-linked Compensation”introduced by PCG. According to theseguidelines, a significant portion of TM’scompensation package for executiveshas been made variable in nature, to bedetermined based on performance. Thisis determined by how well the individualhas performed in the year based on theapproved individual Key PerformanceIndicators (KPIs), which are aligned tothe Group Scorecard. The actual size ofthe Company’s performance bonus poolis dependent on how well the Grouphas performed on its Scorecard and willbe determined and endorsed by theBoard.

The Group CEO and his direct reportswould be rewarded according to acombination of how well they havedelivered their KPIs and their ratings ontheir 360 degrees feedback, which isthen moderated within a peer group inorder to arrive at a relative rankingaccording to a normal distribution curve.



Details of the fees and remuneration of each Director of the Company, categorised into appropriate components for the financialyear ended 31 December 2007, are as follows:

BENEFITS TOTALNAME OF DIRECTORS SALARY FEE ALLOWANCE BONUS IN-KIND AMOUNT

Non-Independent andExecutive Director:

Dato' Sri Abdul Wahid Omar 1,263,030.00 1 — 60,000.00 2 387,000.00 3 61,057.54 4 1,771,087.54

Non-Independent andNon-Executive Directors:

Tan Sri Dato' Ir MuhammadRadzi Hj Mansor — 212,619.71 78,646.47 — 32,476.99 323,743.17

Dato’ Ahmad Hj HashimResigned on 7 January 2008 — 36,000.00 28,950.00 — 1,884.00 66,834.00

Datuk Zalekha HassanAppointed on 9 January 2008 — — — — — —

Dato’ Azman Mokhtar — 36,000.00 5 15,000.00 5 — 1,900.92 52,900.92

Alternate Directors(Non-Independent andNon-Executive Directors):

Leonard Wilfred Yussin[Alternate Director to Dato’ Ahmad Hj Hashim]Resigned on 8 February 2007 — — 1,000.00 — 166.03 1,166.03

Dyg Sadiah Abg Bohan[Alternate Director toDato’ Ahmad Hj Hashim]Appointed on 8 February 2007 andresigned on 7 January 2008 — — 1,000.00 — 1,948.37 2,948.37Dyg Sadiah Abg Bohan[Alternate Director toDatuk Zalekha Hassan]Appointed on 9 January 2008 — — — — — —

Independent andNon-Executive Directors:

Dato' Ir Dr Abdul Rahim Daud — 106,295.77 51,227.46 — 17,786.79 175,310.02

YB Datuk Nur JazlanTan Sri Mohamed — 36,000.00 33,109.86 — 1,884.00 70,993.86

Ir Prabahar NK Singam — 139,098.57 123,885.74 39,447.15 49,616.02 352,047.48

Dato’ Lim Kheng Guan — 118,478.86 76,507.19 39,447.15 49,872.02 284,305.22

Rosli Man — 36,000.00 42,346.48 - 2,140.00 80,486.48

TOTAL AMOUNT 1,263,030.00 720,492.91 511,673.20 465,894.30 220,732.68 3,181,823.09


NOTES:1 Inclusive of Company’s contribution to provident fund (RM273,030).2 Car allowances (RM60,000) in lieu of provision of company car.3 Bonus for financial year ended 2006, paid in 2007.4 Apart from the above benefits-in–kind, Dato’ Sri Abdul Wahid Omar is entitled to Performance Link ESOS which resulted in a total cost of RM483,137 to the Company

pursuant to FRS 2.5 Paid directly to Khazanah Nasional Berhad.


BOARD COMMITTEESIn accordance with TM’s Articles ofAssociation, the Board delegates certainresponsibilities to Board Committees,namely, the Audit Committee,Nomination and RemunerationCommittee, Tender Committee,Employee Share Option SchemeCommittee and Commercial DisputeResolution Committee. All Committeeshave written terms of reference andoperating procedures and the Boardreceives regular reports of theirproceedings and deliberations. WhereCommittees have no authority to makedecisions on matters reserved for theBoard, recommendations would behighlighted in their respective reportsfor the Board of Directors’ deliberationand endorsement. The Chairpersons ofthe various Committees report theoutcome of the committee meetings tothe Board and relevant decisions areincorporated into the minutes of theBoard of Directors’ meetings. Thedetails and activities of BoardCommittees during the year areoutlined below:

AUDIT COMMITTEEA full Audit Committee report detailingthe membership, its role and activitiesin 2007 is set out on pages 114 to 120inclusive, of this annual report.

Nomination and RemunerationCommittee

Membership

Dato’ Azman Mokhtar(Non-Independent Non-Executive)

Ir Prabahar NK Singam(Independent Non-Executive)

Dato’ Lim Kheng Guan(Senior Independent Non-Executive)

TM has a combined NominationCommittee and Remuneration Committeefor the purpose of expediency, since thesame members are entrusted with thefunctions of both the Committees. Themembers of the Nomination andRemuneration Committee are mindfulof their dual roles, which are clearlyreflected and demarcated in theAgendas of each meeting.

The main objectives and principal dutiesand responsibilities of the Nominationand Remuneration Committee (NRC)are as follows:

Nomination Function

Main Objectives

• To ensure that the Directors of theBoard bring characteristics to theBoard, which provide a required mixof responsibilities, skills andexperience.

• To assist the Board to review on anannual basis the appropriatebalance and size of Non-Executiveparticipation and to establishprocedures and processes towardsan annual assessment of theeffectiveness of the Board as awhole and contribution of eachindividual Director and BoardCommittee member.

Principal Duties and Responsibilities

• Recommend to the Boardcandidates for directorship on theBoard of the Company and Group aswell as membership of all otherBoard Committees.

• Examine the size of the Board witha view to determine the number ofDirectors on the Board in relation toits effectiveness and review itsrequired mix of skills andexperience and other qualities.

• Recommend suitable orientation,educational and trainingprogrammes to continuously trainand equip existing and newDirectors.

Remuneration Function

Main Objectives

• To set the policy framework and tomake recommendations to theBoard on all elements of theremuneration package includingterms of employment, rewardstructure and fringe benefits forExecutive Director(s) and pivotalmanagement positions. The aim isto attract, retain and motivateindividuals of the highest quality.

Principal Duties and Responsibilities

• Set, review, recommend and advisethe policy framework on allelements of the remuneration suchas reward structure, fringe benefitsand other terms of employment ofthe Executive Director(s) havingregard to the overall Group policyguidelines and framework.




• Advise the Board on theperformance of the ExecutiveDirector(s) and an assessment oftheir entitlement to performancerelated pay and advise the ExecutiveDirector(s) on the remunerationterms and conditions of seniormanagement.

• Establish and recommend a formaland transparent procedure fordeveloping a policy on theremuneration of the Non-ExecutiveChairman, Non-Executive Directorsand Board Committees, whichrecommendation shall be decided bythe Board of Directors as a whole.

Authority

• The Nomination and RemunerationCommittee has the authority toexamine a particular issue andreport back to the Board withrecommendations. Thedetermination of remunerationpackages of Directors is a matterfor the Board as a whole andindividuals are required to abstainfrom discussion on their ownremuneration.

Main Activities in 2007

During the year, the Nomination andRemuneration Committee fulfilled anumber of key activities as listed below:

• Facilitated the administration andconduct of the Board effectivenessevaluation process and ensured theintegrity and independence of theprocess.

• Monitored the rollout of the Boardeffectiveness evaluation process bymajor subsidiaries.

• Monitored closely the status ofDirectors’ training and ensured amore appropriate distribution oftraining needs according toknowledge gaps highlighted by theBoard effectiveness evaluationresults.

• Endorsed appointments of keymanagement positions pursuant tothe TM Demerger exercise approvedby the Board on 28 September 2007,involving the creation of 2 separateentities with distinct businessstrategies and aspirations.

• Reviewed Committees’ membershipsand composition to ensure alignmentwith recommendations of the ‘GreenBook’ and the Malaysian Code.

• Considered and recommended tothe Board a long-term incentivescheme for the ExecutiveDirector/Group CEO.

Meeting Attendance

The Nomination and RemunerationCommittee met 5 times in 2007, dulyattended by all Members. A total of 2resolutions in writing were passed bythe Committee during the year.

Tender Committee

Membership

Dato’ Ahmad Hj Hashim(Chairman – Non-Executive,

resigned on 7 January 2008)

Datuk Zalekha Hassan(Chairman – Non-Executive,

appointed on 9 January 2008)

Dato’ Sri Abdul Wahid Omar(Group CEO – Executive)

Dato’ Ir Dr Abdul Rahim Daud(Independent Non-Executive)

Datuk Nur Jazlan Tan Sri Mohamed(Independent Non-Executive)

Rosli Man(Independent Non-Executive,

resigned on 16 August 2007)

Ir Prabahar NK Singam(Independent Non-Executive,

resigned on 16 August 2007)

Dyg Sadiah Abg Bohan(Ceased as Alternate to Dato’ Ahmad

Hj Hashim on 7 January 2008 andappointed as Alternate to DatukZalekha Hassan with effect from 9 January 2008)

Membership of the Board TenderCommittee was reviewed in August2007 by the Board and reduced from 6 to 4 members, in line with therecommendations of the ‘Green Book’for GLCs and other best practices.

Objectives, Principal Duties andResponsibilities

• To ensure that the procurementprocess complies with the relevantprocurement ethics, policies andrequirements.

• To consider, evaluate and approve orrecommend awards which arebeneficial to the Company, takinginto consideration various pricefactors, usage of product andservices, quantity, duration ofservice and other relevant factors.



The ESOS Committee was disbandedupon expiration of the scheme on 31 July 2007.

Ad-Hoc Board Committees

Apart from the above, ad-hoc or specialpurpose Board Committees, such asthe Commercial Dispute ResolutionCommittee (CDRC), were established ona needs basis to deliberate andexpedite decision-making processes inrespect of specific aspects of thebusiness. These short-term Committeeswere established with their terms ofreference duly approved by the Board.

BOARD PERFORMANCEIMPROVEMENT PROGRAMME(BPIP)This programme was implemented inMarch 2006 with a view to improve theBoard’s functions and structure andensure alignment between Board’spriorities and the Group CEO’s mandate.Various initiatives were introduced asdeliverables under the BPIP to enhanceBoard effectiveness.

BOARD TRAINING AND KNOWLEDGEACQUISITION

Bursa Malaysia Securities Berhad (BursaSecurities) – Listing Requirements

All the Directors have successfullycompleted the Mandatory AccreditationProgramme (MAP) prescribed by BursaSecurities during the year 2007.Induction briefings, which includeinformation on the corporate profile andactivities of the Group, as well asbusiness plan targets and groupperformance are organised for newlyappointed Directors.

Meeting Attendance

The Board Tender Committee met 11times during the year, duly attended byall members except for YB Datuk NurJazlan who attended 8 meetings andRosli Man who attended 10 meetings,during the year. 1 Circular Resolutionwas duly issued and approved by allmembers during the year.

Employee Share Option Scheme (ESOS)Committee

Membership

Tan Sri Dato’ Ir MuhammadRadzi Hj Mansor

(Chairman – Non-Executive)

Dato’ Sri Abdul Wahid Omar(Group CEO – Executive)

Dato’ Ahmad Hj Hashim(Non-Executive)

Dato’ Ir Dr Abdul Rahim Daud(Independent Non-Executive)

Dyg Sadiah Abg Bohan(Alternate to Dato’ Ahmad Hj Hashim)

Principal duties and responsibilities

To construe and interpret the ESOS and options granted under it, to definethe terms therein and to recommend tothe Board to establish, amend andresolve rules and regulations relating tothe scheme and its administration.Authority was given to any 2 Committeemembers to approve allotment ofshares pursuant to exercise of ESOS byemployees.

The ESOS Committee met twice in 2007 duly attended by all 4 Members.55 Circular Resolutions, were passed by the ESOS Committee on shareallotments in 2007.

Following the repeal of Practice NoteNo. 15 on the Continuing EducationProgramme (CEP) prescribed by BursaSecurities, the Board of Directors ofeach listed issuer has a duty toevaluate and determine the trainingneeds of its Directors on a continuousbasis. The training must be one thataids the Director in the discharge of hisduties as a Director.

Board Training Programme (BTP) andEnhancement

The Board of Directors had dulyadopted a set of BTP Guidelines,effective from 1 January 2005, toaddress the training needs of Directorsin the absence of the Bursa Securities’CEP requirements. The BTP Guidelinesimpose a minimum of 36 training hoursto be accomplished by the Directorswithin a calendar year, compared to theminimum of 24 training hours underthe CEP.

The BTP Guidelines allow for speakingroles at conferences to be included inthe allocated training hours. During theyear, all the Directors achieved over andabove the minimum of 36 traininghours by attending various seminarsand international conventions to gaininsight into the state of the economy aswell as the latest regulatory andtechnological developments in relationto the Group’s business. Directors havealso participated as speakers at localand international conventions on topicsrelevant to their roles.




• Summary of Analysts' views on TM• Key local trends and events

including competitive intelligenceand Key global trends and events

• Interesting industry reports fromexternal research houses, includingrelated periodicals ontelecommunications

• Domestic and overseas regulatoryupdates

ENSURING EFFECTIVE BOARDOPERATIONS AND INTERACTIONSThe effectiveness of the Board is, to alarge extent, determined by the qualityof its procedures, processes andoperations. Board processes have beenstrengthened and enhanced during theyear as evidenced by the followinginitiatives:

Board Meetings Schedule andPredetermined Agendas

A Board and Board Committeemeetings calendar and draft agendashave been established 12 months inadvance and synchronized withmanagement’s planning cycle. Themeeting agenda is communicated tomanagement in advance and thePerformance Improvement ManagementOffice (PIMO) acts as facilitator toensure board papers and presentationsare in line with Board expectations.

The Meeting Agenda is structured toaddress priority strategic issues alignedwith the Company’s aspirations, andconsistent with the mandate that theBoard provides to the Group CEO. The said mandate specifies what theCEO needs to accomplish within clearparameters. A review conducted at theend of 2007 showed that the actualtime spent by the Board on the Meeting

As a result of close monitoring of the BTP by the Nomination and RemunerationCommittee, the Directors’ training structure has improved in 2007 and aligned withthe Directors’ training needs with focus on training on Human Capital Management,Industry as well as Strategy and Risk Management. The progress in the Directors’training structure in 2007 compared to 2006 is depicted as follows:

Directors’ Training Structure in 2006 and 2007

Whilst the charts reflect an ideal training structure for the Directors in 2007,continuous efforts are being made to ensure that an appropriate training structure isin place for the Board according to changing business needs.

Industry Workshops and Quarterly Industry Information packs

The Board is invited to Industry Workshops organised by management at quarterlyintervals. Quarterly industry information packs on the following matters are compiledand issued to the Board and senior management members:

8% PerformanceManagement

5% Human Capital

Management

23%Strategy/

Risk

45% Industry

4%Financial/

Audit

12% Corporate Governance

3%Others

5% PerformanceManagement

22% Human Capital

Management

16%Strategy/

Risk

37% Industry

5%Financial/

Audit

9% CorporateGovernance

6%Others

20062006

20072007



Agenda matched closely the timeallocated to Agenda topics determinedat the beginning of the year.

Availability of Information to the BoardAn indicator of good CorporateGovernance lies in the application ofinformed and independent judgement byexperienced and qualified Directors.Hence, it is essential that relevantinformation required to make informeddecisions by the Board are provided ina timely manner. The Board and itsCommittees are supplied with anagenda and relevant up-to-dateinformation 5 days prior to eachmeeting to enable them to makeinformed decisions. Board papers arealso disseminated via a securelyencrypted electronic Board DocumentManagement System, which acts as anefficient archival and retrieval systemfor all Board papers and minutes ofmeetings.

The Board welcomes the presence ofmanagers who can provide additionalinsights into items being discussed. The information regularly supplied tothe Board includes inter alia:

• Annual business plans and budget.• Monthly and Quarterly financial and

operating results.• Reports from meetings of major

operating companies.• Reports from meetings of board

committees.• Material litigations.• Regulatory matters with substantial

impact on the business.• Details of proposed corporate

exercises, acquisitions orcollaboration agreements.

• Transactions of material nature, not in the ordinary course of thebusiness.

• Human resource policies andsignificant issues.

• General notices of interest.

All Directors have access to the adviceand services of the company secretary.The Board is constantly advised andupdated on statutory and regulatoryrequirements pertaining to their dutiesand responsibilities. Procedures are inplace for Directors and Boardcommittees to seek independentprofessional advice in the course offulfilling their responsibilities, at theCompany’s expense.

Prompt communication of Board decisions

All Board decisions are clearly recordedin the minutes, including the rationalefor each decision, along with clearactions to be taken and individualsresponsible for implementation.Relevant Board decisions arecommunicated verbally to themanagement within 1 working day ofthe Board meeting and relevant extractsof the minutes are distributed within 3 to 5 working days depending on theurgency of agenda items.

Board and Management Interactions

The Board and managementacknowledge the importance of positiveinteraction dynamics and opencommunication to build trust in order todeliver significant and positiveperformance and shareholder value.

The quality of information received bythe Board affects the effectiveness ofthe Board to a considerable extent. The Board has, therefore, adopted arating process for papers andpresentations by management at eachBoard meeting with constructivefeedback on the quality of informationand analysis received. This process hasenabled management to ensure thatpapers are of high quality and standard.The overall review of Board ratings onquality of Management papers andpresentation has shown an increase inoverall average ratings by the Board to3.5 points out of the total of 5.0 pointsas at 31 December 2007, compared toan average rating of 3.0 points recordedduring the mid-year review.

Similarly, management is given theopportunity to also rate the Board atsemi-annual intervals, in terms ofwhether Board deliberations have beenfocused, constructive, supportive, andwhether clear decisions have beenarrived at based on relevant factsavailable. In the year under review, theManagement’s average rating of theBoard increased to 3.98 points out of atotal of 5.0 points, compared to anaverage rating of 3.85 points recordedduring the mid-term review.




INDEPENDENT DIRECTORS’DISCUSSIONIn pursuit of a greater degree ofindependence, the Board has agreed ona process whereby Non-ExecutiveDirectors could meet and activelyexchange views on a regular basis inthe absence of management. With thispractice, the Board is able to fulfil oneof its principal responsibilities toeffectively and independently assess thedirection of the Company and theperformance of the management. This practice is in line with Chapter 4of the Malaysian Code regarding therelationship of the Board and theManagement.

In 2007, the Independent and Non-Executive Directors had one suchmeeting without the presence of theExecutive Director/Group CEO and theManagement, to exchange views andassess the strategic direction of theCompany and performance of theManagement.

BOARD CONDUCTCODE OF BUSINESS ETHICSTM’s Code of Business Ethics, launchedin 2004, supports the Company’s visionand core values by instilling,internalising and upholding the value of“uncompromising integrity” in thebehaviour and conduct of the Board ofDirectors, Management, Employees andall stakeholders of the Company. TheGroup CEO, Management and allemployees are required to declare theirassets and interests according to theCode of Business Ethics. Updateddeclarations are required to besubmitted each year. TM’s Code of

Business Ethics covers the followingareas:

• Responsibilities of the Directors, themanagement and employees.

• Group dealings with shareholders,customers, employees, suppliers,business partners and stakeholdercommunities at large.

• Group dealings with respectiveGovernments.

• Group dealings with competitors.• Group dealings in respect of

Company assets.• Trading on Insider information.• Conflict of interest.

CONFLICT OF INTERESTThe Directors have a continuingresponsibility to determine whether theyhave a potential or actual conflict ofinterest in relation to any matter, whichcomes before the Board. The Companyand the Group have adopted a practicewhereby each Director is required tomake written declarations whether theyhave any interest in transactions, tabledat regular Board meetings of the Group.A paper is also tabled at each Boardmeeting to remind Directors of theirstatutory duties and responsibilities asDirectors and to provide updates on anychanges or amendments thereon, suchas the recent Companies (Amendment)Act 2007 requiring Directors to alsodisclose the interests of their spouse,child including adopted and step child,in the Company.

RELATED PARTY TRANSACTIONSDirectors recognise that they mustdeclare their respective interest intransactions with the Company andGroup and abstain from deliberationand voting on the relevant resolution in

respect of such transactions at theBoard or any general meetingsconvened to consider the matter.

TRADING ON INSIDER INFORMATIONTM’s Directors and employees are notallowed to trade in securities or anyother kind of property based on pricesensitive information and knowledgewhich have not been publiclyannounced. TM’s Code of BusinessEthics expressly states that insidertrading is an offence under theSecurities Industry Act 1983 (Act 280).

Notices on close period for trading inthe Company’s shares are sent toDirectors and Key Management on aquarterly basis specifying the closeperiod where Directors and KeyManagement personnel are prohibitedfrom dealings in the Company’s shares.Directors are also prompted not to dealin the Company’s shares at the pointwhen price sensitive information isshared with them, occasionally in theform of Board Meeting papers.

DIRECTORS’ INDEMNITYThe Company has in place a liabilitiesinsurance policy for Directors andOfficers in respect of liabilities arisingfrom holding office as Directors andManagement of the Company. Theinsurance does not provide coverage inthe event a Director or Managementmember is proven to have actednegligently, fraudulently or dishonestly.The Directors contribute annuallytowards the payment of the premiumfor this policy.



ANNUAL REPORT AND ANNUALGENERAL MEETINGSIn addition to quarterly financial reports,the Company communicates withshareholders and investors through itsannual report, which is comprehensivelylaid out and containing sufficient depthand breadth of information about notonly financial results but also activitiesand operations of the Group. In aneffort to save costs and encourageshareholders to enhance their ICTexperience, TM has started to despatchannual reports to shareholders inelectronic format (CD-ROM) togetherwith a summarised version of thefinancial statements in a readablebooklet incorporating the notice of AGMand related proxy form. Shareholdersare also given the option to request forhard copies of the annual report ineither the English or Bahasa Malaysiaversions.

The AGM provides an open forum atwhich shareholders and investors areinformed of current developments andwhere ample time is allowed forquestions to be asked of Boardmembers and Committees’Chairpersons. The Company supportsthe Malaysian Code’s principles toencourage shareholder participation.The Company’s Articles of Associationallow a member entitled to attend andvote to appoint a proxy to attend andvote instead of the member and alsoprovide that a proxy need not be amember of the Company. A pressconference is held immediately after theAGM where the Chairman, ExecutiveDirector and Group Chief FinancialOfficer are present to clarify and explainissues raised by the media.

WHISTLE BLOWER POLICYThe Securities Industries Act, 1983, wasamended to make it mandatory forauditors and key officers of companiesto report corporate misdeeds to theauthorities. This practice, known aswhistle blowing, gained prominencefollowing the passing of the SarbanesOxley Act, 2002 in the United States andpreviously, the Public Interest DisclosureAct, 1999 in United Kingdom.

Since the introduction of TM’s Code ofBusiness Ethics, the employees havebecome much more aware of what isacceptable and unacceptable businessconduct and became better acquaintedwith the channels through whichreports of violation of the Code ofBusiness Ethics can be made. Adequateprotection is provided for whistleblowers against reprisals.

RELATIONSHIP ANDCOMMUNICATION WITHSHAREHOLDERS ANDINVESTORSSHAREHOLDERS/INVESTORSThe Company communicates regularlyand proactively with investors andshareholders. Care is taken to ensurereporting to shareholders is balancedand sufficiently comprehensive andobjective to allow performance to bemeasured. The Board also maintainslines of communications with majorshareholders to take heed of theirconcerns over matters related tocorporate governance and Groupperformance.

RISK MANAGEMENTTM has an integrated approach inmanaging risks inherent in variousaspects of its business. A detailed RiskManagement Report is provided onpages 103 to 105 inclusive.

ACCOUNTABILITY AND AUDITFINANCIAL REPORTINGThe Board aims to provide and presenta balanced and meaningful assessmentof the Group’s financial performanceand prospects at the end of eachfinancial year, primarily through annualfinancial statements, quarterly and half-yearly announcement of results toshareholders as well as the Chairman’sStatement and review of operations inthe annual report. The Board isassisted by the Audit Committee tooversee the Group’s financial reportingprocesses and the quality of its financialreporting. The Audit Committee reviewsthe Group’s annual financial statementsand the quarterly condensed financialstatements focusing particularly onchanges in accounting policies,management judgement in applying theaccounting policies as well asassumptions and estimates applied inaccounting certain materialtransactions.

DIRECTORS’ RESPONSIBILITYSTATEMENTThe Directors are required by theCompanies Act 1965 to ensure thatfinancial statements prepared for eachfinancial year give a true and fair view ofthe state of affairs of the Company andthe Group as at the end of the financialyear and of the results and cash flow ofthe Group for the financial year.




The Statement of Responsibility byDirectors is as enumerated on page 252of this annual report.

INTERNAL CONTROLSThe Board recognises and affirms itsoverall responsibility for the Group’ssystem of internal control, whichincludes the establishment of anappropriate control environment andcontrol framework as well as reviewingits effectiveness, adequacy and integrity.The Board’s evaluation of the adequacyof the system of internal controls in theGroup is based on the criteriadeveloped under COSO (Committee ofthe Sponsoring Organisations of theTreadway Commission) Internal ControlIntegrated Framework, which is agenerally-accepted framework forinternal control assessments.

RELATIONSHIP WITH AUDITORSAn appropriate relationship is maintainedwith the Company’s Auditors through theAudit Committee. The Audit Committeehas been explicitly accorded the powerto communicate directly with bothexternal Auditors and internal Auditors.

The role of the Audit Committee inrelation to the Auditors is set out in theTerms of Reference on pages 118 to120 inclusive, in this annual report.

AUDIT COMMITTEEThe Audit Committee also conductsreviews of the Internal Audit Function interms of its authority, competenciesand scope as defined in the InternalAudit Charter, thus ensuring thefunction to address the emerging risksof today as well as future risks.Furthermore, it ensures theindependence of the internal auditors

Briefing was held at TM’s Head Officeand via webcast for the virtualcommunity while the SeniorManagement team was involved in aroadshow both domestically andregionally to address matters raised bykey institutional shareholders.

Key Investor Relations initiativesundertaken in 2007 and aimed atimproving corporate governanceincluded:

Quarterly Financial ResultsAnnouncement and BriefingTM conducted briefing sessions toanalysts and fund managers’ viateleconferencing subsequent to therelease of TM’s quarterly earningsdisclosure to Bursa Securities. These sessions were chaired by theGroup CEO and attended by SeniorManagement representing TM’s keyoperations. These were aimed atproviding an avenue for a clearunderstanding of the financial andoperational performance of the Group.

Presentation Slides on FinancialResultsThe quality of disclosure of informationhas seen improvements reflecting TM’smulti-faceted businesses andincorporating feedback from theinvestors who are the primary users ofsuch information. Presentation slides ofthe announced results are prepared inan investor-friendly manner to aidunderstanding of the Group’s financialresults and performance. These aremade available promptly on theCompany’s website following the releaseof information first to Bursa Securities.A copy of the presentation slides is alsodistributed by e-mail to analysts andinvestors who are on the InvestorRelations distribution list.

and unrestricted access to information,property and people in the Group.Highlights of activities conducted by theCommittee are detailed in the AuditCommittee Report on pages 115 to 116inclusive, in this annual report.

INVESTOR RELATIONSWith a firm belief that value creation forshareholders stems from goodcorporate governance, TM is committedto communicating its strategy andactivities regularly and clearly to itsshareholders and, to that end,maintains an active dialogue withinvestors through a planned programmeof investor relations activities andengagement.

TM, through its Investor Relations Unit,proactively disseminates relevant andtimely information to the investmentcommunity to keep investors abreast ofthe Group’s strategies, performanceupdates and key business activitieshappening at home and across theregion.

Communication with the capital marketis governed by the Investor RelationsPolicy and Guidelines to ensureadherence to best practicecommunication guidelines and fair andtimely disclosure of information to allshareholders.

The announcement of the demerger ofTM Group towards the end of 2007heightened interest from the regionaland global investment community.Careful steps were taken to ensureclear communication and equitabledissemination of information toshareholders and analysts. An Analysts’



Annual Analysts’ DayContinuing on the success of theinaugural Analyst Day in 2006, TMorganised an Analyst Day for the year2007 at its Head Office, Menara TM.About 60 analysts and fund managersfrom both local and foreign institutionsattended the event. They had theopportunity to listen to keypresentations and interact with TM’sSenior Management members fromboth domestic and internationaloperations in breakout sessions. Hostedby the Group CEO, and attended by keySenior Management personnel,including several CEOs of TM’sinternational operations, such asExcelcomindo, Dialog, TMIB andMobileOne, the event has continued toreceive positive feedback fromparticipants, and demonstrated TM’scommitment in improving its disclosureand transparency. TM believes that suchefforts will encourage a fair valuation ofthe Company.

A Graph on dividend payment and shareprice performance of TM is available onpages 47 and 49 of this annual report.

Signed on behalf of the Board ofDirectors pursuant to a resolution dulypassed on 26 February 2008.

Tan Sri Dato’ Ir Muhammad Radzi Hj MansorChairman

One-on-one Meetings, Conference Callsand Investor ConferencesThe Group CEO, Group Chief FinancialOfficer and Investor Relations team areactively involved in Investor Relationsactivities through regular meetings andconference calls with institutionalinvestors. TM has participated in variousinvestor conferences held in Malaysiaand abroad. Throughout 2007, close to400 meetings and conference calls withinvestors and analysts were held.

WebsiteThe TM website, www.tm.com.my iscontinuously updated, and provides anexcellent medium of communicationand source of information toshareholders, and the general public.The updated information on the websiteincludes, among others, the Group’sannual reports, financial results,investor presentations, capital structureinformation, press releases, andinformation on TM’s internationaloperations.

FeedbackEngagement with the capital market isnot a one-way communication. TMrecognises that feedback from theinvestment community is critical tomeeting the information needs ofshareholders and improving itsrelationship with them. As such, TMseeks feedback through ongoingsurveys and engagement with investorsand analysts. The positive feedbackreceived over the year on the Group’simproved Investor Relations effortswould not have been possible withoutthese strategies. TM continuouslylistens to the investing community toenhance our Investor Relations.



Achieving B

usiness Objectives B

yIm

proving E

nterprise R

isk M

anagement (E

RM

) Execution


Accountability

No organisation operates in a risk-freeenvironment. A proactive approach in identifyingcurrent and potential risks and to put in placereasonable and adequate mitigation plans remainpriorities for management, to ensure businesstargets and stakeholder expectations are met.

Enterprise Risk Management (ERM) has beeneffectively institutionalised throughout the TMGroup. It began with the ability to embed riskassessment processes into business decision-making to enable TM Group to achieve its shortand medium-term business objectives. ERMbenefits are not merely restricted to the strategiclevel but have also to be extended to theoperational level so that employees as a whole willbe responsible for managing their strategic andoperational business risks freely.

In 2007, ERM was embedded into businessplanning and strategy management processes. Thesuccessful implementation at strategic levelprovided the impetus for the ERM team to moveforward to institutionalise the ERM framework atthe operational level as part of the on-goingexercise to improve ERM implementation withinthe Group.

RISK ASSESSMENT IN BUSINESSPLANNINGThe identification of risk from the onset isnecessary for business to be proactive about bothopportunity and threat. In defining strategy,direction-setting, and allocation of resources, riskassessment comes in handy to identify the actualor potential internal and external roadblocks thatmay prevent the achievement of businessobjectives. Having assessed both businessopportunities and uncertainties up-front, theorganisation can then be in a better position tochart the control elements and resources requiredto facilitate the journey towards success.

Achieving Strategic Objectivesby Managing Risks

TM GROUP

Divisions & OPCOs

STR

ATEG

IC

CO

MP

LIA

NC

E

SYST

EM

OP

ERAT

ION

AL

FIN

AN

CIA

L

Corporate Centre,Malaysia Business,

Celcom, TM Ventures &TM International

Aligning Risk Profiles with Strategic Objectives

In 2007, TM had its first experience of embeddingrisk assessment in the business planning processwhereby all the operating companies diligentlycomplied with the ERM framework. As a result,the TM Group Corporate Risk Map has become apart of the Corporate Strategy Map using theBalanced Scorecard methodology.

RISK ASSESSMENT IN STRATEGYMANAGEMENTWhile the strategy management team uses theBalanced Scorecard as performance measurementtools, as well as Key Performance Indicators (KPIs)and the initiatives to achieve its objectives, ERMlooks into utilising some of the KPIs as riskindicators to gauge the level of risk performancethat may prevent the organisation from achievingits business objectives.


current risk levels, trends and changes.The monthly KRI status has beenmonitored by the ERM Resource team totrack risk changes. Since its introductioninto the Group, KRI has brought value tothe overall ERM implementation in TM. It has also supported the performancemanagement report by giving a usefulongoing view of the underlying behaviourof the risk profile that can influence theachievement of strategic objectives.

RISK AWARENESSCreating and maintaining a strong riskmanagement culture within theorganisation is necessary for a lastingand meaningful ERM programme. Increating such a culture and improvingERM implementation, communication iskey. It is critical to collaborate withstakeholders and TM employees toensure that consistent, meaningful ERM-related information sharing takes placethroughout the organisation. Theseactivities of the ERM function includeengagement and communication withinternal stakeholders, internalrelationship management and facilitation,and awareness and training programmesabout ERM. In conjunction with this,communication and training programmesto raise awareness of risk were plannedand conducted with the MultimediaCollege. Moving forward, these trainingmodules have since been improved toreflect the actual and current risksituation affecting TM business andoperations as a whole.

The year also marked the firstcollaboration of ERM awarenessprogrammes with Strategy Developmentand Management teams. A total of 11awareness sessions were conductednationwide involving Malaysia Business,

In line with the cascading principle ofthe Balanced Scorecard methodology,risk drivers will also be cascaded downfrom the strategic risk map to theoperational division risk map withproper alignment to overall strategicobjectives. Thus, risk and strategy aremutually interdependent through thebalance between value creation bystrategy execution and the avoidance ofvalue destruction by risk management.

RISK REPORTINGThe year 2007 saw ERM evolvedsignificantly in TM whereby an ERMreport was regularly escalated anddiscussed at the Board of Directors(BOD), Board Audit Committee (BAC)and senior management meeting. Thereport highlighted changes in the riskrating, mitigation plan status and itstimeline for completion, controleffectiveness and the health of the KeyRisk Indicators. Any other significantissues affecting the achievement ofobjectives that required the attention ofthe BOD was channelled through theERM report in line with the TM Group’sRisk Management and Internal ControlPolicy statement to provide reasonableassurance of achieving businessobjectives, while safeguarding andenhancing shareholder investment andCompany assets.

KEY RISK INDICATORSBesides providing reports on the riskrating, mitigation plan status andcontrol effectiveness, Key RiskIndicators or KRI have become a part ofthe report to provide early warningsignals, express escalation criteria forrisk management, as well as highlight

TM Ventures, Celcom and CorporateCentre. These were followed by anadditional seven awareness eventsconducted for other business entities atcorporate and state levels.

To share ERM experiences with otherGLCs, a seminar for the ERM ResourceTeam was successfully conducted on 21May 2007 involving representatives fromPetronas, Tenaga Nasional and KPMG.Following on its success, similarseminars will be continued as part ofthe ERM knowledge-sharing initiative bythe TM Group on an annual basis.

BUSINESS RISKAs a business entity operating in ahighly-regulated market, TM Groupcontinues to be exposed to a multitudeof business risks either originating frominternal sources or the externalenvironment. What follows are anumber of significant business risksthat TM Group manages under the ERMprogramme.

QUALITY OF SERVICETM is often judged by its ability todeliver a reliable service network to itscustomers. The key to customersuccess and a stimulant for new salesefforts is effective churn management.In delivering service commitment to itscustomers, TM recognises that thereare factors which are beyond its controlthat may adversely affect its servicequality and thereby impact the revenueand profitability of the Group.

These include natural disasters, networkfailure, equipment or cable damage andother operational problems. Acontinuous risk management effort orrisk mitigation measures are needed to


Achieving Business Objectives By Improving Enterprise Risk Management (ERM) Execution


address these but there cannot be anabsolute assurance that these eventswill not occur.

GOVERNMENT POLICY & REGULATORYISSUESBeing in a highly-regulated industry,government decisions and actions oncommunication and multimedia policyor regulatory issues may have negativeimpact on the business of TM. Forinstance, the withdrawal of the 2.5 GHzand 3.5 GHz spectrum as announced bythe Ministry of Energy, Water andCommunications of Malaysia on 19November 2007 may either be anopportunity or a threat to TM.Considering that TM has limited controlover these external developments,continuous monitoring of industrychanges and government policiesremains one of the priorities ofmanagement to minimise surprises tothe business.

Risks related to anti competition,trespassing, customer servicemanagement and apparatus assignmentremain priority regulatory risks to bemanaged under the Operational RiskAssurance Program (ORAP).

TECHNOLOGY CHANGESRapidly changing technology continuesto dominate the communicationsindustry, creating both threats andopportunities. While TM needs to seizebusiness opportunities via IT innovationsand its ability to offer multi-businesssolutions to meet the new customerdemands, strategic and well-managedplans are needed by Management,working with project resources,business users and technology partners.In particular, proper and realisticplanning in the rollout of High Speed

Broadband (HSBB) and Next GenerationNetwork (NGN) implementation willensure TM remains competitive andfocused.

COMPETITIONThe telecommunications industry facesintense competition from new entrantstargeting lucrative customer segments.Furthermore, there is increasingdemand for freedom of choice as aresult of mobile lifestyles, high peerinfluence and changing customerbehaviour. Such competition both inMalaysia and abroad needs to becontinually monitored so that risks canbe kept at acceptable levels in order toensure business continuity and viability.

STAFF COMPETENCY & PERFORMANCEMANAGEMENTGiven growing competition and therobust technological changes, there isalways an urgent need to upgrade staffcompetencies. Besides technicalcompetencies, soft skills need to beenhanced in order to produce personnelwith scalability, and strong and stablecharacters that will ensure continuingkeen focus despite volatility in themarketplace and changingorganisational structures. This includesenhancing and retaining core skills anddriving fundamental culture change tobreak silo mentalities and legacymindsets. Performance managementneeds to be broadened to all staff, toenable a more effective deployment ofBalanced Scorecard principlesthroughout the organisation.

TERRORISM & POLITICAL RISKTerrorist activity and political instabilityin some parts of the region may affectthe performance of TM’s regionalinvestments. Even though such risks

are beyond TM’s direct control, theManagement has put in place certainmitigation plans in order to safeguardtheir investments in high-risk countriesincluding:

• Continuous surveillance of thepolitical position in investedcountries.

• Spreading the risk by going forregional expansion.

• Improved investment strategy byidentifying countries that providebetter investment protection, andbilateral agreement.

• Other financial protection.

At the ground level, special terrorisminsurance, disaster recovery plans,crisis communication and businesscontinuity plans remain key riskmitigation plans. Continuous monitoringand appropriate action will not eliminatethe risks but can minimise their impacton the Group.

CONCLUSIONIn summary, year 2007 provided a test-bed opportunity to embed andinstitutionalise ERM practicesthroughout the Group. Considering thesize, culture, geographical spread andmultitude of service offerings, ERM wasa challenge to execute andinstitutionalise. Nevertheless, it has nowbeen integrated into the strategicbusiness planning process andcascaded down to the operational level.With the strong support of the Board ofDirectors and senior Management, ERMwill continue its journey to help build astronger and more resilient culturethroughout the Group.

Achieving Business Objectives By Improving Enterprise Risk Management (ERM) Execution

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Accountability

TM expects that its directors, managers,employees and representatives observe the higheststandards of integrity in the conduct of itsbusiness. TM’s reputation as a responsiblecorporate citizen depends on its completeunderstanding of best practices and compliancewith policies as enunciated in its Code of BusinessEthics (“CBE”).

TM prides itself on observing high ethicalstandards. In 2007, it continued to infuse goodvalues and ethics into the Group’s basic businessconduct by promoting an organisational culturethat encourages ethical behaviour with acommitment to full regulatory and legalcompliance. TM expects that business conductmust be carried out transparently and fairly. Allvendors and suppliers must be given equal andfair access to information.

New employees are introduced to the Code toraise awareness of ethical business issues, andexisting employees are continuously given lecturesto ensure that they are able to apply soundjudgment in deciding on the most ethical meansof dealing with any given situation involvingcustomers, suppliers, competitors, regulators,other stakeholders and the public in general.Employees of TM are also expected to treat eachother with respect and fairness at all times in linewith TM’s Core Values (KRISTAL) which emphasiseRespect and Care. To achieve the objectives, TMmonitors and investigates complaints received.Disciplinary action is taken against employees, andvendors or suppliers who are found to be inbreach of the Code are either reprimanded orblacklisted. In 2007, disciplinary action was takenagainst a number of employees who were found tobe acting in concert with a vendor.


One of the key instruments formaintaining integrity in a corporation isthe requirement for employees todeclare their assets. Since 2004, allemployees within the TM Group arerequired to declare all properties andassets which have been acquired ordisposed by him, his spouse or hischildren in the year under review. TheCode requires the employee to providea reasonable explanation if he is foundto live beyond his legitimate means.

In 2006, a manual on ProcurementEthics was introduced to complementthe CBE in outlining the principles, theapplications and the Do’s and Don’tsrelated to the procurement process. Itclarifies and institutionalises:

• What is considered to be acceptablebusiness behaviour and byimplication, behaviour that is nottolerated by the organisation;

• Available channels to communicateand report unethical behaviour; and

• The implications of non-compliancewith the Procurement Ethics.

The Procurement Ethics is applicable toall employees and suppliers. Any breachof the Procurement Ethics may result indisciplinary action being taken, inaddition to contractual and legalremedies.

The guidelines on Procurement Ethicscan be downloaded from TM’s corporatewebsite. Briefings to employees of TMincluding overseas subsidiaries areconducted on an ongoing basis toupdate them on matters related toprocurement and ethical sourcing.

The CBE was amended in March 2007to include expressly the confidentialityobligation and also Intellectual Property(IP) provisions to ensure that anemployee or ex-employee will notinfringe the IP rights or leak any

confidential information of TM and/or itsGroup to unauthorised parties. Prior tothis the CBE only touched briefly on theobligations of employees to protectcorporate information and intellectualproperty.

TM will always press for commitmentfrom its workforce to promote an ethicalbusiness environment founded onintegrity in line with international bestpractices to ensure business continuityand sustainability of the Group.

Ethical Business Practices

Code of Business Ethics


The following information is provided in compliance with the Bursa Securities ListingRequirements:

1. SHARE BUY-BACKThe Company did not make any proposal for share buy-back during thefinancial year.

2. AMERICAN DEPOSITORY RECEIPT (ADR) OR GLOBALDEPOSITORY RECEIPT (GDR) PROGRAMMEThe Company did not sponsor any ADR or GDR programme during thefinancial year.

3. IMPOSITION OF SANCTIONS/PENALTIESThere were no public sanctions and/or penalties imposed on the Company andits subsidiaries, directors or management by the relevant regulatory bodiesduring the financial year.

4. NON-AUDIT FEESThe amount of non-audit fees incurred for services rendered to the Group bythe external auditors and their affiliated companies for the financial year ended31 December 2007 are as follows:

RM

(a) PricewaterhouseCoopers, Malaysia 913,825(b) PricewaterhouseCoopers Taxation Services Sdn Bhd 2,071,900(c) Member firms of PricewaterhouseCoopers

International Limited 453,037

Total 3,438,762

Services rendered by PricewaterhouseCoopers are not prohibited by regulatoryor other professional requirements, and are based on globally practisedguidelines on auditor independence. PricewaterhouseCoopers is engaged forthese services when their expertise and experience of TM are important. It isalso the Group’s policy to use the auditors in cases where their knowledge ofthe Group means it is neither efficient nor cost effective to employ another firmof accountants.

5. OPTIONS, WARRANTS ORCONVERTIBLESECURITIESThe Company has not issued anyoptions, warrants or convertiblesecurities during the financial yearended 31 December 2007. Detailsof the Company’s Employees’Share Option Scheme 3 (ESOS 3)are as disclosed in note 12(a) tothe financial statements. ESOS 3has expired on 31 July 2007.

The Company has been granted anexemption by the CompaniesCommission of Malaysia via aletter dated 18 February 2008 fromhaving to disclose in this reportthe names of the persons towhom options have been grantedduring the period and details oftheir holdings pursuant to Section169(11) of the Companies Act,1965, except for information onemployees who were grantedoptions representing 100,000ordinary shares and above.

The Company has not granted anyoptions during the financial yearended 31 December 2007.However, disclosure of employeeswho were granted options underthe Performance Linked OptionScheme (PLES) in 2005 havingmore than 100,000 of the PLESoptions vested during the financialyear 2007 is disclosed on pages254 and 255 of the annual report.


Additional Compliance Information

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Accountability

6. UTILISATION OF PROCEEDSFROM CORPORATE PROPOSALSTM – Proceeds from Sale of a SubsidiaryOn 5 April 2007, TM completed its divestmentof a 60.0% interest in Telekom NetworksMalawi Limited to MTL Mobile Ltd for a totalcash consideration of USD16 million.Proceeds from the divestment were used tofinance TM’s working capital.

TM’s RM1.0 billion Islamic Sale and LeasebackTransaction

On 15 January 2008, TM completed its RM1.0 billion Islamic Sale and LeasebackTransaction that involved the issuance ofRM1.0 billion of Islamic Asset Backed SukukIjarah by Menara ABS Berhad (MAB). Thetransaction was completed with the sale andpurchase of Menara TM, Menara Celcom, TM Cyberjaya Complex and Wisma TM(Taman Desa) to MAB for a total purchaseconsideration of RM1.0 billion. TM has alsoentered into a 15-year lease agreement under the Ijarah principle. MAB issued 3classes of Sukuk, namely RM345 millionClass ‘A’, RM155 million Class ‘B’ and RM500million Class C. Rating Agency Malaysia Bhdhas rated Class A and B, with Class C beingun-rated. TM has utilised the proceeds fromthe transaction to partially pay a specialgross dividend of RM0.65 per share (lessMalaysian Income Tax of 26%).

Spice Communications Ltd (Spice) – Proceedsfrom Initial Public Offering (IPO)

TM’s jointly controlled entity in India, SpiceCommunications Ltd commenced trading onthe Bombay Stock Exchange (BSE) on 19 July2007 with a debut price of INR55.75 pershare. The issuance had successfully raisedINR6,322 million (approximately USD156

million). As at 30 September 2007,approximately 50% of the IPO proceeds hasbeen utilised as part payment of its long-term debt. The remaining funds were used tofinance its network rollout involvingacquisition of network equipment andpayment of licence fee.

Spice Communications Ltd – Proceeds fromSale and Leaseback of Towers

On 25 December 2007, the Board of Directorsof Spice approved the sale and leaseback ofthe company’s 875 telecom towers to a toweroperating company in India for a totalconsideration of INR6.0 billion (approximatelyUSD150 million). The proceeds from the salewas used to partially support the company’sfinancial obligations arising from the issuanceof Letters of Intent for the Award of Licenceto provide Unified Access Services in 4additional new Circles in India.

Dialog Telekom PLC – Rights Issue & RatedCumulative Redeemable Preference Share

On 27 June 2007, TM’s subsidiary in SriLanka, Dialog Telekom PLC, completed aRights Issue and Rated CumulativeRedeemable Preference Share (RCRPS)issuance exercise to raise SLR20.54 billion(approximately USD188.52 million). The rightsissue of 740.3 million shares at SLR21 pershare raised SLR15.54 billion (approximatelyUSD142.63 million), from its existing ordinaryshareholders while RCRPS placed withinstitutional investors raised the additionalSLR5.0 billion (approximately USD45.89million). The proceeds will partially financeDialog’s capital expenditure planned for thenext 3 years.


9. MATERIAL CONTRACTSINVOLVING DIRECTORS’AND MAJORSHAREHOLDERS’INTERESTSThere were no material contractsentered into by the Companyand/or its subsidiaries involvingDirectors and major shareholders’interests either subsisting as at 31 December 2007 or entered intosince the end of the previousfinancial year ended 31 December2006, except for the followingcontracts/agreements in respect ofthe joint venture between TM, TM International Berhad (TM International) and our majorshareholder, Khazanah NasionalBerhad (Khazanah) in relation toMobileOne Ltd (M1):-

(a) Restated Joint Venture andShareholders’ Agreementdated 23 September 2005entered into betweenKhazanah, TM Internationaland TM, which amended andreplaced the previous JointVenture and Shareholders’Agreement dated 17 August2005 to regulate the affairs ofSunShare Investment Ltd(SunShare) as a specialpurpose vehicle for theacquisition of shares in M1;and

7. VARIATION IN RESULTSThere were no profit estimations,forecasts or projections made orreleased by the Company duringthe financial year.

However, the Company had on 19 March 2007 announced itsHeadline Key PerformanceIndicators (KPIs) for the financialyear ended 31 December 2007 toenhance greater transparency tothe public, as part of the broaderperformance managementframework that TM has in place,and as prescribed under theGovernment Linked Company(GLC) Transformation Programme.

These Headline KPIs are targets oraspirations set by the Companyand shall not be construed eitheras forecasts, projections orestimates of the company orrepresentation of any futureperformance.

8. PROFIT GUARANTEEDuring the financial year, theCompany did not give any profitguarantee.

(b) Subscription Agreement dated23 September 2005 betweenSunShare, Khazanah and TMfor the subscription ofredeemable convertiblepreference shares of USD0.01each in SunShare at the issueprice of USD1.00 each byKhazanah and TM for aconsideration ofUSD35,965,998 andUSD37,433,992 respectively.

10. REVALUATION POLICY ONLANDED PROPERTIESThe Company has not adopted anyrevaluation policy or carry out anyrevaluation exercise on its landedproperties during the financial year.

11. RECURRENT RELATEDPARTY TRANSACTIONSOF A REVENUE ORTRADING NATURE (RRPT)At the last EGM held on 8 May2007, the Company obtained ageneral mandate from itsshareholders on the RRPT enteredinto by the Company and/or itssubsidiaries (RRPT Mandate). The RRPT mandate is valid untilthe conclusion of the forthcoming23rd AGM of the Company to beheld on 17 April 2008.




Pursuant to paragraph 10.09 (1)(b) of the Bursa Securities Listing Requirements, the details of the RRPT entered into during thefinancial year ended 31 December 2007 pursuant to the said shareholders’ mandate are as follows:

Transacting Transacting Interested Value ofcompanies Related Related Nature of Nature of Transactions

within TM Group Parties Parties relationship Transaction RM’000

53,429

7,811International roaming andinterconnection charges by XLto M1 and vice-versa

In addition to their interest inXL through their shareholdingsin TM, MoF Inc. and Khazanahhave an interest of 16.81% inXL.

In addition to their interest inM1 through their shareholdingsin TM, MoF Inc. and Khazanahhave an interest of 29.73% inM1 through their 20% interestin SunShare Investments Ltd.

MoF Inc.,Khazanah,Datuk ZalekhaHassan, PuanDyg Sadiah AbgBohan andDato’ AzmanMokhtar

MobileOneLimited (M1)

XL

– Provision of Voice OverInternet Protocol (VoIP)related services by TM, TMInternational, TM(S) andCelcom to XL and vice-versa. Provision of VoIPrelated services by XL to TMHK

– International roaming andinterconnection charges byCelcom and TM(S) to XL andvice-versa

– Interconnection and leasedline charges by TM toExcelcomindo and viceversa. Interconnection andleased line charges by XL toTM International and TMHK

– Other telecommunicationservices cost andreimbursement expensescharged by TM, TM(S) andCelcom to XL and vice-versa

– Lease of bandwidth tosupport Network AccessPoint product for corporatesolutions by TM to XL


Datuk Zalekha Hassan is arepresentative of MoF Inc. onTM Board. Puan Dyg SadiahAbg Bohan is the alternateDirector to Datuk ZalekhaHassan.

Dato’ Azman Mokhtar is theManaging Director of Khazanahand also a representative ofKhazanah on TM Board.


PTExcelcomindoPratama Tbk(XL)

TM and its wholly-owned subsidiaries,namely TMInternational Berhad(TM International),Telekom Malaysia(Hong Kong) Limited(TMHK), TelekomMalaysia (S) Pte Ltd(TM(S)) and Celcom(Malaysia) Berhad(Celcom)





5,306

10,142Supply of fibre optic cables byFiberail to Multinet

In addition to their interest inFiberail through theirshareholdings in TM, MoF Inc.and Khazanah have an interestof 36% in Fiberail through MoFInc.’s wholly-owned subsidiary,Keretapi Tanah Melayu Berhad.


Fiberail SdnBhd (Fiberail)

Multinet Pakistan(Pte) Limited(Multinet)

Supply of Multi Protocol LevelSwitch and Global System formobile communicationservices from XL to LippoBank


MoF Inc. and Khazanah havean interest of 87.8% in LippoBank.




PT Bank LippoTbk (LippoBank)

XL



XL (Continued)




The Company proposes to obtain a new RRPT Mandate at the forthcoming 23rd AGM of the Company. This new RRPT Mandate,if approved by shareholders, would be valid until the conclusion of the next AGM of the Company.




28,350Sales and purchases ofinterconnection services oninternational and domestictraffic to/from Time DotComBerhad and its subsidiaries

MoF Inc. and Khazanah havean interest of at least 5% inKhazanah Companies.




Khazanahand/orcompanies inwhich Khazanahholds aninterest of atleast 5% (otherthan throughTM) (KhazanahCompanies)

TM and/or itssubsidiaries



Multinet Pakistan(Pte) Limited(Multinet)(Continued)

Aud

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Accountability

Datuk Zalekha Hassan (appointed 31 January 2008)Non-Independent Non-Executive Director

Rosli Man Independent Non-Executive Director

Ir Prabahar NK Singam (appointed 16 August 2007)Independent Non-Executive Director

Hashim Mohammed Group Chief Auditor/Secretary to the Audit Committee

5

4

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2

MEMBERSHIPThe Audit Committee comprises 3 Independent Non-Executive Directors and 1 Non-Independent Non-Executive Director. The composition of the Audit Committee in 2007 was as follows:

YB Datuk Nur Jazlan Tan Sri Mohamed(Chairman, resigned 29 May 2007)Independent Non-Executive Director

Dato’ Lim Kheng Guan (Chairman, appointed 16 August 2007)Senior Independent Non-Executive Director

Dato’ Ir Dr Abdul Rahim Daud(resigned 16 August 2007)Independent Non-Executive Director

Dato’ Ahmad Hj Hashim(resigned 7 January 2008)Non-Independent Non-Executive Director

1

2

4

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Members of the Audit Committee shall not have arelationship, which in the opinion of the Board, would interferewith the exercise of independent judgement in carrying outthe functions of the Audit Committee. Members of the AuditCommittee shall possess wisdom, sound judgement,objectivity, independent attitude, management experience andknowledge of the industry.

YB Datuk Nur Jazlan Tan Sri Mohamed, the Chairman of theAudit Committee up till May 2007 and Dato’ Lim Kheng Guan,Chairman from August 2007, are both Independent Non-Executive Directors and members of the Malaysian Institute ofAccountants (MIA).

MEETINGS & ATTENDANCEThe Audit Committee had a total of seven (7) meetings in thefinancial year 2007. The attendance record was as follows:

Member Attendance Percentage

YB Datuk Nur JazlanTan Sri Mohamed 3/3 100%

Dato’ Lim Kheng Guan 7/7 100%Dato’ Ir Dr Abdul Rahim Daud 4/4 100%Dato’ Ahmad Hj Hashim 5/7 71%Rosli Man 7/7 100%Ir Prabahar NK Singam 3/3 100%

The Group Chief Executive Officer, Group Chief FinancialOfficer, other Senior Management members and ExternalAuditors attended these meetings upon invitation to brief theAudit Committee on specific issues. A key feature prior toeach Audit Committee Meeting is a private session betweenthe Chairman and the Group Chief Auditor and the ExternalAuditors (separately) without the Management’s presence. TheAudit Committee also had several meetings with the ExternalAuditors without the Management’s presence.

Minutes of meetings of the Audit Committee were circulatedto all members of the Board and significant issues werediscussed at Board Meetings.

SUMMARY OF ACTIVITIES IN 2007The Audit Committee carried out its duties as set out in theterms of reference published elsewhere in this annual report.The Audit Committee also reviewed and deliberated on reportsand updates as provided by the following Committees.

(a) The Best Practice Committee (formerly known as TaskForce for Best Practices) which was established by theAudit Committee in 2001 mainly to provide support asfollows:

• New updates and developments of best businesspractices and exposure drafts, principally onCorporate Governance, statutory and regulatoryrequirements, compliance with accounting standardsand other business guidelines.

• Establishment of Group Business AssuranceCommittee (GBAC) following the consolidation of RiskManagement Unit, Fraud Management Unit andRevenue Assurance Unit under Group Finance.

• Establishment of Enterprise Risk Management (ERM)Standard Operating Procedures in order to improvethe standardisation of ERM implementation processesthroughout the Group.

• Reviews and reports on the adequacy, effectivenessand reliability of the system of internal controls basedon control self-assessments performed annually bykey senior management of the Operating Companies/Subsidiaries through the Annual Internal ControlAssurance Letter reporting, and Internal ControlIncidents submitted to the Group Chief ExecutiveOfficer and the Group Chief Auditor.

• Reviews and reports on the status of financialcontrols based on self-assessments conductedquarterly by the CEO/CFO of the OperatingCompanies/Subsidiaries through the FinancialControls Compliance and Assurance Letter submittedto the Group CFO.

• Reviews and reports on new policy updates, revisionsor enhancements of the Business Process Manualand Subsidiaries Policy as recommended by theManagement to ascertain that the improvementsmade are aligned to business best practices andeffective internal control processes.

Audit Committee Report


(b) The Management Audit Issues Action Committee whichwas established by the Audit Committee in 2002 toupdate on progress of:

• Management actions to resolve significant internalcontrols and accounting issues as highlighted by theInternal and External auditors.

• Any other recommendations made by the AuditCommittee for Management action.

(c) The Internal Control Incident Committee, established in2003, which deliberates alleged major control incidents orfailures based on reports submitted from Management orspecial investigation/audit conducted and proposes thenext course of action. The reports are summarised by theGroup Chief Auditor and updated to the Audit Committeeat least on a quarterly basis describing the following:

• The nature and root causes of control failures whichhave financial impact and/or affect the image andreputation of the Group.

• Lateral learnings to prevent recurrence of similarincidents within the Group.

• Status of actions taken by Management to remedycontrol weaknesses and appropriate disciplinaryaction taken.

(d) Reports from Management on the following:

• The extent of non-audit work performed by theExternal Auditors to ensure that the provision of non-audit services does not impair theirindependence or objectivity.

• The implementation preparation and progress of themajor projects that have been developed andimplemented in 2007 such as Group EnterpriseResource Management System (GEMS).

• Group Business Assurance Report, which comprisedRisk Management activities, Revenue Assurance andFraud Management.

• Treasury Investment status report on a quarterlybasis which focused on TM’s equity and fixed incomeportfolios.

(e) COSO (The Committee of Sponsoring Organisations of theTreadway Commission) which has been adopted as thegenerally-accepted integrated framework for internalcontrols and which is widely recognised as the definitivestandard against which the Group measures theeffectiveness of its systems of internal control.

GROUP INTERNAL AUDITGroup Internal Audit (“GIA”) strives to provide greater value asa key contributor to the Group’s governance framework. Manynew areas of governance now require a different type ofauditing skills and this has led to a fundamental shift in thenature of audit services provided by GIA. Effective internalaudit functions help the Group to accomplish the businessobjectives by establishing a structured, disciplined approach toreview and evaluate the effectiveness of governance, riskmanagement and internal control processes. The purpose,authority and responsibility of GIA as well as the nature ofassurance and consultancy activities provided to the Group isclearly articulated in the Internal Audit Charter that has beenapproved by the Audit Committee.

GIA reports directly to the Audit Committee. The Group ChiefAuditor periodically reports the activities and key strategic andcontrols issues noted by GIA to the Audit Committee. TheAudit Committee reviews and approves the GIA’s annualbudget and Human Resource requirements to ensure that thisimportant function is adequately resourced with competentand proficient internal auditors.

INTERNAL AUDIT PRACTICES & FRAMEWORKTo ensure standardisation and consistency in providingassurance on the adequacy, integrity and effectiveness of theGroup’s overall system of internal controls, risk managementand governance, GIA has realigned its current audit practicestowards COSO Internal Controls – Integrated Framework.Using this framework, all internal control assessmentsperformed by GIA must be based on the five (5) internalcontrol elements as follows:

• Control Environment• Risk Assessment• Control Activities• Information & Communication• Monitoring




To further improve the existing internal audit processes, andachieve greater efficiency and productivity, GIA has acquiredan electronic document management system. Key auditprocesses that have been enhanced through the documentsmanagement system are risk assessment, schedulingactivities, electronic working paper and on-line audit review.

SCOPE & COVERAGEGIA maintains a flexible audit approach and a dynamic auditplan that addresses the emerging risks of today as well aspotential future risks. This has enhanced its ability to effectand facilitate change, and foster continuous improvementswithin the Group. The end-to-end process audit has positionedGIA at the forefront of positive change by recommending andfacilitating the alignment of people, processes and technology.

The scope of the audit engagement is aligned with the primaryrisks of the organisation mainly arising from previous auditissues, TM Group Risk Strategy and strategic initiatives underthe Performance Improvement Programme (PIP) from entity,subsidiary, business or process levels. Identified key auditareas in 2007 in line with COSO broad objectives are as follows:

1. Effectiveness and efficiency of operations• Information Technology & Systems Reviews• SAP Post Implementation Reviews• Key Business Process (i.e. end-to-end process)• Reviews on Shared Services Organisation (SSO)• Contract Management• Reviews on IT Governance

2. Reliability of Financial Reporting• Financial Reporting Reviews• Quarterly Interim Financial Reviews• Billing System Reviews

3. Compliance with applicable laws and regulations• Recurrent Related Party Transactions Reviews

GIA has also been requested to collaborate with Managementto review and evaluate the risk exposure for TM’s majorprojects and ensure that the controls are adequate to mitigatethose identified risks.

COMMITMENT TO COMPETENCEGiven the ever-increasing range of new technologies, processrisks and changes to the business environment, it is criticalthat internal auditors are well trained and equipped with therequisite skills and knowledge. In 2007, the Group investedheavily in developing and executing training programmes tomeet its business requirements and to enable internal auditorsto perform their duties better. Among the seminars andworkshops attended by GIA in 2007 were:

Corporate Governance• Update on Corporate Law and Capital Markets• Revised Malaysian Code on Corporate Governance• Corporate Boards and Challenges

Management & Leadership• Building and Nurturing High Performance Teams• National Management Conference 2007• Effective Middle Management

Process Knowledge• Telecoms Fraud and Fraud Risk Prevention• Strategic Procurement & Supply Chain Management• Strategic Marketing Planning• Financial Reporting Environment in Malaysia, Updates• SAP Authorisation Concept• World Continuity Congress on Business Continuity and

Disaster Growth• IT Audit for IT Managers• Risk Based Auditing

INTERNAL AUDIT QUALITYIn line with The Institute of Internal Auditor (IIA) Standards,GIA carries out periodic and on-going assessments on theentire spectrum of audit work performed by the internalauditors via an external quality assessment by a qualifiedindependent reviewer once every five years. The assessmentincludes the evaluation of areas such as compliance with IIAstandards and GIA Manuals, contribution to the governance,risk assessment and control processes as well as performancemanagement. Group Internal Audit generally conforms to theInternational Standards for the Professional Practice ofInternal Auditing.



TERMS OF REFERENCE OF THE AUDIT COMMITTEE1. COMPOSITION

The Audit Committee (AC) Members shall be appointedby the Board of Directors (“Board”) from amongst theirmembers. No alternate director shall be appointed as amember of the Audit Committee.

The AC must be composed of no fewer than threemembers and the majority shall be Independent Non-Executive Directors. All members of the AC, including theChairman, will hold office only so long as they serve asDirectors of Telekom Malaysia Berhad (TM).

The composition of the AC shall meet the independenceand experience requirements of the Bursa SecuritiesListing Requirements and other rules and regulations ofthe Securities Commission. The Board of Directors mustreview the term of office and performance of the AC andeach of its members at least once every three years todetermine whether the AC has carried out its duties inaccordance with Terms of Reference.

2. MEETINGS

The AC shall meet at least four times a year and suchadditional meetings as the Chairman shall decide. Inorder to form a quorum, a majority of the membersmust be present and the majority of those present mustbe Independent Non-Executive Directors. The Notice andagenda for the meeting shall be sent in advance to allmembers of the AC. The Chairman of the AC shallprovide to the Board a report of the AC Meetings.

3. AUTHORITY

In carrying out its duties and responsibilities, the ACshall have the following rights, in accordance with theprocedures to be determined by the Board of Directorsand at the cost to the Company:

a. Have explicit authority to investigate any matterwithin its terms of reference;

b. Have the resources which are required to performits duties;

c. Have full, free and unrestricted access to anyinformation, records, properties and personnel of TMand of any other companies within the TM Group;

d. Have access to the minutes, reports and informationof all subsidiary AC;

e. Have direct communication channels with theExternal Auditors and person(s) carrying out theinternal audit function or activity (if any);

f. Be able to obtain independent professional or otheradvice and to invite outsiders with relevantexperience to attend the AC’s meetings (if required)and to brief the AC thereof;

g. The attendance at any particular AC meeting byother Directors and employees of TM at the AC’sinvitation and discretion and must be specific to therelevant meeting;

h. Be able to convene meetings with External Auditors,excluding the attendance of the executive membersof the AC, whenever deemed necessary;

i. Have immediate access to reports on findings andrecommendations from Group Internal Audit inrespect of any fraud or irregularities discovered andreferred to Group Internal Audit by theManagement;

j. Be able to seek clarification from the subsidiaryBoard or CEO;

k. Have step-in rights in the situation where there ispossible fraud, illegal acts or code of conductviolation is suspected involving senior managementor members of the Board;

l. Be able to direct the centralisation of the GroupInternal Audit (GIA) and that GIA providesrepresentation at the subsidiary AC;

m. Have authority and ability for placement of internalaudit resources TM Group wide;

n. Require the Head of Internal Audit at subsidiary andthe Group Chief Auditor to escalate and inform theAC immediately on urgent matters.




4. DUTIES AND RESPONSIBILITIES

The following are the main duties and responsibilities ofthe AC collectively, (and shall review and report the sameto the Board of Directors):

4.1 Risk Management and Internal Control

• Review the adequacy and the integrity of theGroup’s internal control systems andmanagement information systems, includingsystems for compliance with applicable laws,rules, directives and guidelines.

• Propose an adequate system of riskmanagement for Management to safeguard theGroup’s assets.

• Review the risk profile of the Group and majorinitiatives having significant impact on thebusiness.

4.2 Financial Reporting Review

• Review the quarterly interim results, half-yearlyresults and annual financial statements reviewof the Company and the Group, focusingparticularly on:

a) Any changes in accounting policies andpractices;

b) Significant or material adjustments withfinancial impact arising from the audit;

c) Significant unusual events or exceptionalactivities;

d) Financial decision-making with thepresumptions of significant judgments;

e) The going concern assumptions; and

f) Compliance with approved accountingstandards, stock exchange and otherregulatory requirements.

• Review with the External Auditors the financialstatements for the purpose of approval beforethe audited financial statements are presentedto the Board for adoption including:

a) Whether the auditors’ report contained anyqualifications which must be properlydiscussed and acted upon for purposes ofresolving the contentious point of disputesin the current audits and to remove thecause of the auditors’ concern in theconduct of future audits;


b) Significant changes and adjustments in thepresentation of financial statements;

c) Compliance with laws and local andinternational accounting standards;

d) Material fluctuations in balances in thefinancial statements;

e) Significant variations in audit scope andapproach; and

f) Significant commitments or contingentliabilities.

• Discuss problems and reservations arising fromthe interim and final audits and any matter theauditor may wish to discuss in the absence ofManagement where necessary;

• Propose best practices on disclosure in financialresults and annual reports of the Company inline with the principles set out in the MalaysianCode of Corporate Governance, other applicablelaws, rules, directives and guidelines.

• Review the follow-up actions by Management onthe weaknesses of internal accountingprocedures and controls as highlighted by theExternal and Internal Auditors as permanagement letters.

• Where there is an audit assignment initiated by the GIA central office that have bearing upon all subsidiaries or that the subsidiaries’results would affect the audit opinion of theGroup, the respective subsidiaries’ internal auditoffice must adhere to the request and include inits audit plan.

4.3 External Audit

• Consider the appointment of a suitable accountingfirm to act as External Auditors and amongst thefactors to be considered for the appointment arethe adequacy of the experience and resources ofthe firm and the persons assigned to the audit, toconsider any question of resignation (including anyletter of resignation) or removal and whetherthere is a reason (supported by grounds) tobelieve that the External Auditors are not suitablefor re-appointment and to recommend the auditfee payable thereof.

• Discuss with the External Auditors before theaudit commences, the audit plan, nature, approachand scope of the audit and ensure coordinationwhere more than one audit firm is involved.


• Monitor the extent of non-audit work to beperformed by the external auditors to ensurethat the provision of non-audit services does notimpair their independence or objectivity.

4.4 Group Internal Audit (GIA)

• To approve the Internal Audit Charter, whichdefines the independent purpose, authority,scope and responsibility of the internal auditfunction in the Company and Group.

• Review the Internal Audit Plan and results of theinternal audit process and where necessary toensure:

a) That appropriate action is taken on therecommendations of the internal auditfunction;

b) That Group Internal Audit has adequate andcompetent resources and that it has thenecessary authority to carry out its work; and

c) That the goals and objectives of GroupInternal Audit are commensurate withcorporate goals.

• Review and appraise the performance andremuneration of the Group Chief Auditor andsenior staff members of Group Internal Audit,approve the appointment or termination of theGroup Chief Auditor and senior staff membersof Group Internal Audit and inform itself ofresignations of the Group Chief Auditor andsenior staff members of the Group InternalAudit and provide the resigning staff member anopportunity to submit his reasons for resigning.

• Be informed, referred to and agree on theinitiation, commencement and mechanism of anydisciplinary proceedings/investigations, includingthe nature and reasons for the said disciplinaryproceedings/investigations, as well as thesubsequent findings and proposed disciplinaryactions against the Group Chief Auditor andsenior staff members of Group Internal Audit. Asemployees of TM, the Group Chief Auditor andsenior staff members of Group Internal Audit aresubject to TM’s human resource policies andguidelines, including disciplinaryproceedings/investigations and actions.

• The internal audit function should be independentof the activities that they audit and should beperformed with impartiality, proficiency and dueprofessional care. The Board or the AC shoulddetermine the remit of the internal audit function.

4.5 Related Party Transactions

• Consider and review any significant transactions,which are not within the normal course ofbusiness and any related party transactions andconflict of interest situations that may arisewithin the Company and the Group including anytransaction, procedure or course of conduct thatraises questions of Management integrity.

4.6 Employee Share Option Scheme (ESOS)

• Verify the allocation of share options to theGroup’s eligible employees in accordance withthe Bursa Securities Listing Requirements at theend of each financial year.

4.7 Other Matters

• Establish a process for dealing with complaintsreceived by the Company and the Groupregarding accounting issues, internal controlmatters or auditing matters and the confidential,anonymous submission by employees ofconcerns regarding questionable accounting orauditing matters.

• To report to Bursa Securities, if the AC viewsthat a matter resulting in a breach of the BursaSecurities Listing Requirements reported by theAC to the Board has not been satisfactorilyresolved by the Board.

• Such matters as the AC considers appropriateor as defined by the Board.

Dato’ Lim Kheng GuanChairman



Directors S

tatement

On Internal C

ontrol


Accountability

RESPONSIBILITY ANDACCOUNTABILITYThe Board of Directors (“Board”) is responsibleand accountable for maintaining a sound systemof internal control which covers governance, riskmanagement, financial, organisational, operationaland compliance controls to safeguardshareholders’ investments, customers’ interestsand the Group’s assets. The Board recognises andaffirms its overall responsibility for the Group’ssystem of internal control which includes theestablishment of an appropriate controlenvironment and framework as well as reviewingits effectiveness, adequacy and integrity. However,the Board recognises that this system is designedto manage, rather than eliminate the risk of non-achievement of the Group’s objectives. It therefore,provides reasonable and not absolute assurance,against the occurrence of any materialmisstatement or loss.

The Board is assisted by the Management in theimplementation of the approved policies andprocedures on risk and control. Managementidentifies and assesses the risk faced and thendesigns, implements and monitors appropriateinternal controls to mitigate and manage theserisks.

This Statement on Internal Control ("theStatement") has been prepared in compliance withthe Listing Requirements of Bursa MalaysiaSecurities Berhad and in accordance with theguidance in the “Statement on Internal Control –Guidance for Directors of Public Listed Companies”.

RISK MANAGEMENT GOVERNANCEThe Group has in place an on-going process foridentifying, evaluating, monitoring and managingthe significant risks affecting the achievement ofthe Group’s objectives throughout the period. Thisprocess is regularly reviewed by the Board takingcognisance of changes in the regulatory andbusiness environment to ensure the adequacy andintegrity of the system of internal controls.

TM Group is committed to implementingEnterprise Risk Management (ERM) as a keystrategic risk management tool to proactivelyidentify and manage risks throughout the Group. Itis inevitable that risks will always exist in anorganisation and these risks are managed orcontrolled. Managing risk is a shared responsibilityand therefore, the management of risk isintegrated into the managerial framework of anorganisation. It is an interactive process consistingof steps which, when undertaken in sequence,enable continual improvement in decision-making.

Principal risks that have been identified by theBoard are:

• Strategic Risk: Human Resource risk, Market riskand Technology risk

• Operational Risk: Process risk (e.g. Network risk,Procurement risk, IT risk)

• Reporting Risk: Information System risk andFinancial Reporting risk

• Compliance Risk: Regulatory risk and Legal risk

INTERNAL CONTROL FRAMEWORKThe Board’s evaluation of the adequacy of theinternal controls in the Group is based on thecriteria developed under COSO (Committee of theSponsoring Organisations of the TreadwayCommission) Internal Control IntegratedFramework. It is a generally-accepted frameworkfor internal control and is widely recognised as thestandards against which the Group measures theeffectiveness of its systems of internal control. Theinternal control system is intertwined with theGroup’s operating activities and exists forfundamental business reasons.

Under the COSO model, internal controlframework is segregated into five inter-relatedcomponents as follows.


A. CONTROL ENVIRONMENTControl environment is the organisational structure andculture created by management and employees to sustainorganisational support for effective internal control. TheManagement’s commitment to establishing and maintainingeffective internal control are cascaded down and permeatedthroughout the Group control environment, aiding in thesuccessful implementation of internal controls. Key activitiesinvolved are:

Organisation Structure• TM Group has a formal organisation structure in place

with clearly defined lines of responsibility andaccountability aligned to business and operationsrequirements.

Assignment of Authority and Responsibility• Clear definition of limits of authority and responsibilities

through the Group’s Business Process Manual andSubsidiaries Policy that have been approved by the Boardand subject to regular reviews and enhancements.

Core Values• Internalisation of TM Group’s Core Values of “Total

Commitment to Customers”, “Uncompromising Integrity”and “Respect and Care” sets the guiding principles of theGroup’s culture.

Code of Business Ethics• All employees are required to sign and adhere to the

Group’s Code of Business Ethics, which outlines theminimum standard of behaviour and ethical conductexpected of employees in business matters.

Competency – Based Development Framework• TM Group has established a framework to analyse current

human capital development needs and challengesundertaken to ensure key assets, being its people andtheir dedication and abilities, are competitive in thepresent and remain so in the future.

Board and Audit Committee• The various Board Committees, namely the Audit

Committee, the Nomination and Remuneration Committee,the Tender Committee, Employee Share Option Scheme(ESOS) Committee and other ad-hoc Committees that areall governed by clearly defined terms of references.

• The Audit Committee, comprising all non-executivedirectors and a majority of independent directors, bringwith them wide ranging in-depth experience, knowledgeand expertise. They continue to meet and have full andunimpeded access to both the internal and externalauditors during the financial year.

Human Resource Policies and Procedures• Efforts have been made by the Group to realign its

existing Human Resource policies and procedures with theinitiatives developed by the Government under the GLCTransformation Programme.

B. RISK ASSESSMENTRisk assessment is the identification and analysis of relevantrisks to achieve the Group’s objectives, forming a basis fordetermining how risk is managed in terms of likelihood andimpact. Key activities involved within this area are:

Enterprise Risk Management (ERM)• Risk management is firmly embedded in the Group’s

system of internal control as it is regarded by the Board tobe an integral part of the operations. Managing risk is ashared responsibility and therefore the management ofrisks is integrated within the Group’s governance, businessprocesses and operations. It is an interactive processconsisting of steps which, undertaken in sequence, enablecontinual improvement in decision-making. Employees’appreciation and commitment to ERM is continuallyemphasised and enforced.

• Group Internal Audit complements the role of RiskManagement Unit by performing post-implementationreviews of ERM workshops, to independently review riskprofiles, risk management strategies and adequacy andeffectiveness of the controls identified and implemented inresponse to the risks identified.

Control Self-Assessments (CSA)• Control Self-Assessments (CSA) is a process that allows

the employees in the Group to identify the risks within theirbusiness environment and evaluate adequacy andeffectiveness of the controls in place. The CSA’s result isused as one of the key information in identifying high-riskareas within the Group.


Directors Statement On Internal Control



C. CONTROL ACTIVITIESControl activities are the policies and procedures that helpensure management’s directives are carried out. Relevantactivities within TM Group are as follows:

Business Performance Management (BPM) Policy and Guidelines• BPM provides a comprehensive reference to TM Balanced

Scorecard (BSC) implementation, stating the guidingprinciples and policies for TM Group on BSC developmentand deployment processes;

• It supports TM’s Corporate Governance, providing aninternal control framework to manage strategyimplementation for better business performance results.

IT Governance Policy• TM Group has in place an IT Governance policy which is

established based on the current Information Technology(IT) issues identified internally and raised by the internaland external auditors. It consists of 6 core policies, namelyIT Security Policy, IT Network Policy, IT Application ControlPolicy, IT Desktops, PDA, Email, Internet and IntranetPolicy, Purchasing, Licensing and Usage of CorporateSoftware and Business Continuity Facility Policy.

Subsidiaries Policy• Subsidiaries Policy (SP) is positioned to ensure that the

Group's interests are protected and prioritised at all timeswhile providing adequate flexibility for subsidiaries todeliver their respective business objectives.

Performance Improvement Programme (PIP)• TM’s PIP journey is synchronised with the overall GLC

Transformation Programme as envisioned in the GLCTransformation Manual issued by the Putrajaya Committeeon GLC High Performance (PCG). It is included as part ofTM’s Group Strategy Map in ensuring positiveimprovements to overall Group performance.

Insurance and Physical Safeguard• Adequate insurance and physical safeguards on major

assets are in place to ensure that assets of the Group aresufficiently covered against any mishap that will result inmaterial losses to the Group.

D. INFORMATION AND COMMUNICATIONInformation and Communication ensures that pertinentinformation is identified, captured and communicated in aform and time frame that enables people to carry out theirresponsibilities. Relevant key activities within the Group are:

Communications Policy• TM Group is committed to open and effective

communication as an essential component of its culture inorder to motivate the workforce in delivering high qualityservices and exceptional value to customers and otherstakeholders as well as anticipating their feedback.

• Its purpose is to ensure that communication across theTM Group is well coordinated, effectively managed andmeets the diverse needs of the organisation.

Group Enterprise Resource Management Systems (GEMS)• GEMS Project is a major initiative towards improving the

business performance of TM Group via integratedinformation and processes across TM Group. Through theimplementation of GEMS, a significant portion of businessprocesses will be aligned to a SAP solution and TM willemerge as a tightly-integrated, vibrant and dynamicenterprise.

Internal Control Incident (ICI) Reporting• Internal Control Incident (ICI) Reporting is meant to

capture and disseminate lessons learnt from internalcontrol incidents with the objective of preventing similarincidents from occurring in other operating companieswithin the Group.

Best Practice Committee• The Best Practice Committee is a management committee

that reports to the Audit Committee. It provides updatesand developments of best practices and exposure draftson corporate governance, statutory and regulatoryrequirements set by all statutory bodies/relevantauthorities, compliance to accounting standards and otherbusiness guidelines and issues. All requisite remindersand updates are raised through its secretariat, theCompliance Unit.


E. MONITORINGMonitoring the effectiveness of internal control is embedded inthe normal course of the business. Periodical assessmentsare being integrated as part of management’s continuousmonitoring of internal control. There are systematic processesavailable in addressing deficiencies such as:

Management Committees• Group Executive Committee (EXCO) meetings are held on a

regular basis to identify, discuss and resolve strategic,operational, financial and key management issues.

• Management Audit Issues Action Committee, comprisingmembers of Senior Management and CEO/COOs of majorOperating Companies regularly monitors major internaland external audit issues to ensure they are promptlyaddressed and resolved.

• The TM Group Performance Improvement ManagementOffice (PIMO) was established with a full mandate to driveand coordinate the Performance Improvement Programme(PIP) as part of the strategy to achieve the Group’s ultimateaspirations.

Periodical Self-Assessments• Annual disclosures are made by the Group’s Operating

Companies’ CEO/CFO/COO and senior management on theoverall effectiveness, reliability and adequacy of theirrespective companies’ systems of internal controls andfinancial controls respectively.

• Quarterly disclosure on Financial Controls Compliance andAssurance as part of the initiative to inculcate self-awareness on the “financial and internal controls”requirements within the Group.

Headline Key Performance Indicators (KPIs)• These Headline KPIs are a subset of broader performance

indicators approved by the Board. The Board agreed inyear 2007 on 3 KPIs taken from TM Group CorporateScorecard to be reported as “Headline KPIs”, e.g.Revenue, EBITDA Margin and Return on Equity.

Group Internal Audit• Group Internal Audit carries out continuous assessments

of the quality of risk management and existing internalcontrols. It also assists to promote effective riskmanagement in the lines of business operations.

• Group Internal Audit continues to independently andobjectively monitor compliance with policies andprocedures and effectiveness of the internal controlsystems. Significant findings and recommendations forimprovements are highlighted to Senior Management andthe Audit Committee, with periodic follow up reviews ofaction plans. Group Internal Audit’s practices and conductare governed by the Internal Audit Charter.

Special Affairs Unit• Special Affairs Unit is responsible to review and monitor

the ethical conduct and practices of all employees includingSenior Management. Investigation of Internal ControlIncident (ICI) cases is also undertaken by the Unit (whereapplicable) and tabled to the ICI Committee and to theBoard via the Audit Committee. Appropriate actions are thentaken based on the strengths and merits of the findings.

REVIEW OF THE STATEMENT BY THE BOARDOF DIRECTORSThe Board considers the system of internal control describedin this Statement to be adequate and the risks are consideredto be at an acceptable level within the context of the Group’sbusiness environment. The Board and Management continueto take measures to strengthen the control environment andmonitor the health of the internal controls framework.

For the financial year under review, the Board is satisfied thatthe system of internal control was satisfactory and has notresulted in any material losses, contingencies or uncertainties.

TM’s internal control system does not apply to its associatedcompanies and joint controlled entities, which fall within thecontrol of their majority shareholders. Nonetheless, theinterests of TM is served through representation on the Boardof Directors and Senior Management posting(s) of theassociated companies and joint controlled entities through thereview of management accounts received. These provide theBoard with performance related information to enableinformed and timely decision making on the Group’sinvestments in such companies.



CHAIRMAN’S STATEMENT 126

GROUP CHIEF EXECUTIVE 134OFFICER’S STATEMENT

Perspective

Cha

irman

’sS

tate

men

t


Perspective


It was the year when TM completed 20 years as a privatised entity coincidingwith Malaysia’s 50th year of nationhood.Over this period, we grew from acompany with a revenue of RM1.5 billionand Loss After Tax of RM97.0 million toa revenue of RM17.8 billion and ProfitAfter Tax of RM2.6 billion.Commemorating these separatemilestones, we published “Transforminga Legacy”, a commemorative book

which captures in words and picturesthe growth and evolution of Malaysia’stelecommunications industry forposterity. As TM was at the centre ofthat growth, we believed it wasnecessary to trace our developmentfrom our humble beginnings to thepresent day. The book was launched by the Prime Minister of Malaysia, Dato’ Seri Abdullah Haji Ahmad Badawi,during TM Group’s Hari Raya openhouse held on 3 November 2007.

It was also a year in which weembarked on a bold and strategic moveto demerge our businesses into two –one, a company dedicated to the fixed-sector business with all theopportunities that high-speed broadbandand next-generation networks offer, andtwo, a company whose focus would bemobile services in several majormarkets in South and South-East Asia,including Malaysia. Both would bepositioned to strongly compete in their

TAN SRI DATO’ Ir MUHAMMAD RADZI HJ MANSORNON-INDEPENDENT NON-EXECUTIVE CHAIRMAN

OVERVIEWDear Shareholders,

You will be pleased to know that TM’s performance in 2007 was favourablein more ways than one. Building on the momentum gained from thePerformance Improvement Program (PIP) that we launched in mid 2006, we saw the full year impact of PIP initiatives which have enabled us todeliver outstanding financial results despite an increasingly competitiveenvironment. We also delivered on our Key Performance Indicators infurtherance of the process of transformation which continued to be an over-arching theme, improved our productivity, grew our mobile and broadbandcustomer base and stabilised traditional fixed-line revenues. Outside Malaysia,we continued our growth momentum while corporate developments in Indiaculminating in the listing of Spice Communications Ltd (Spice), provided afurther boost to our regional presence.


FINANCIAL & OPERATINGHIGHLIGHTSGroup revenue increased by 8.8% toRM17.8 billion in the year under review,against the record RM16.4 billion postedin 2006. This was largely driven bygrowth in mobile, leased services, andInternet and multimedia sectors. The Group’s Profit After Tax andMinority Interest (PATAMI) registered acommendable 23.1% growth to RM2.6billion from RM2.1 billion previously.Earnings Before Interest, Tax,Depreciation and Amortisation (EBITDA)was also an improvement at RM7.6billion, compared to RM7.5 billionrecorded in 2006. The year 2007 sawus adding 401,000 new broadbandcustomers bringing the total broadbandcustomer base to 1.3 million, whilefixed-line customers continued toremain stable at 4.4 million.

On the international front, I am pleasedto report that TM International Berhad(TMI) sustained growth despitechallenging macro-economic conditionsin nearly all our markets, particularlySri Lanka, Indonesia and Bangladesh.The Group’s overseas contributionsposted positive revenue growth of 19.7%contributing 26.2% to revenuecomposition which was an improvementover the 24.2% recorded in 2006.

It was heartening to note from ourresults that the Group’s mobile businesscontinued to strengthen in spite of afairly challenging macro-economic andpolitical environment. The totalcontribution from mobile to Grouprevenue was 53.2%, which was anindication of sustainable growth. Our mobile customer base grew to arecord 39.8 million customers from 28.5 million a year ago, which was arobust 39.6% increase.

DELIVERING SHAREHOLDERVALUEIn line with the dividend payout policy of40.0% to 60.0% of PATAMI, the Board ofDirectors has proposed to declare afinal gross dividend of 22 sen per shareless tax of 26.0%, amounting toRM560.0 million net. Combined with theinterim dividend of 26 sen per shareless tax of 27.0% paid on 4 September2007, the total dividend payout inrespect of financial year 2007 wouldamount to RM1,212.9 millionrepresenting a payout ratio of 47.6%.This is in addition to the RM1,654.5million special dividend which was paidto shareholders on 31 January 2008.

respective businesses and enhanceshareholder value. The Board believesthat demerger will help accelerateperformance improvement throughgreater performance transparency,organisational focus and improvedexecution capacity. At the time ofpublication of this annual report, theprocess of demerger was well underway,having obtained shareholders approvalto proceed with it. I am happy to reportthat we are on target to complete itwithin the second quarter of 2008 and anew organisation structure andmanagement team had been put intoplace to lead the two entities forward.

P e r s p e c t i v e

Chairman’s Statement


One of the key areas is developmentand management of human resources.How do we mould and shape thebehaviour and mindset of a dynamicand progressive workforce? To this end,TM has embraced an enhancedPerformance Driven Culture byintroducing better performance rewardsto incentivise and motivate highperformers. TM has also embarked ona Talent Management Programme. Todate, more than 400 executives havebeen identified to be in the Talent Poolwhere they are provided leadershiptraining and deployment to morechallenging positions. This is supportedby a Succession Planning frameworkwhich was implemented to identifypotential successors to key positionsacross the Group. Capacity building isalso given due emphasis. A CompetencyBased Development Model and LearningProgrammes (SmartOrange) wasintroduced to give staff adequate ‘softskills’ training to ensure they acquirethe critical behavioural competencies atevery stage of their career.

To measure the effectiveness of allthese efforts, we carried out twoassessments, 360˚ Feedback andEmployee Satisfaction Index (ESI)surveys. 360˚ Feedback gives aCompetency Index (CI) reading whichmeasures individual and organisationcompetency level based on a set of

PROGRESS ANDACHIEVEMENTSTo illustrate the depth of progress thatTM has achieved, allow me to share thetransformation journey that we havetaken since the Government-linkedCompanies (GLCs) transformationinitiative was launched in 2004. Over thelast four years, we have continued toimplement our strategy to transformTM into a more competitive andperformance driven company.

When we launched our new identity in2005, we said that it was not a merecosmetic change. Over the last threeyears, we have worked hard to ensurethat we did exactly that. I must say thatthe change in the ‘form’ is easilynoticeable, taking on a more vibrantand global identity. Along with that, we have also transformed ourselvesinto an emerging leader in Asiancommunication, and grown from aRM11.8 billion into a RM17.8 billionrevenue company with 39.8 millionregional mobile customers. Strategiesalone cannot bring about thistransformation without the change inmindset of our employees and how we run the Company – the part whichis not easily seen but crucial to deliverthe kind of transformation that we have seen.

behavioural attributes aligned toCompetency Based DevelopmentFramework. The CI has improved to7.54 in 2007 from 6.89 in 2004. WhileESI measures employees satisfaction inrelation to their workplace environment.ESI has also improved to 75.4% in 2007from 72.1% in 2004.

We have also improved the way wemanage our finances. We undertook afinancial integration exercise across theCompany with the implementation of aGroup-wide Enterprise ManagementSystem (GEMS) in mid 2007 thatresulted in timely reporting, analysisand operational efficiency. In addition,the implementation of the SharedService Organisation (SSO) unitsbeginning 2006 helped to furtherimprove efficiency. To ensure that TM remains a strategy-focusedorganisation, we also adopted Group-wide, the Balanced Scorecard in 2005,followed by incorporation of a riskassessment component in our BalancedScorecard monthly BusinessPerformance Report.

Maintaining a high standard ofcorporate governance has always beenan important element of the way weconduct ourselves. Over the last fouryears, the internal controls frameworkin TM Group has been strengthenedwith effective governance and



independent oversight provided by theBoard Audit Committee and a strongGroup Internal Audit function at theGroup level. This is supported by therespective Audit Committees andInternal Audit functions at the majorsubsidiaries. We have put in place astructured and disciplined approach toreview and evaluate effectiveness ofgovernance, risk management andinternal processes with enterprise riskmanagement processes embedded inkey processes. In addition, morecontrols are automated through theimplementation of the enterpriseresource planning system (SAP),enabling speed in information sharingand decision making.

For the procurement functionspecifically, we have created a morefocused, proactive and proficientenvironment which is rooted in bestpractice management and exemplarycorporate governance in term ofaccountability, transparency andperformance. TM led the way with aunique strategic supplier partnershipmodel for its network transformationinto the Next Generation Network(NGN). Given the size of the project andthe technological and operationalcomplexities involved, TM decided toadopt an Establish, Operate andTransfer (EOT) procurement approachrather than outright purchases. Overall,TM has adopted a holistic approach inits procurement transformation. As partof the strategic initiatives, TM has

driven its cost saving efforts throughstandardisation of specifications andvolume aggregation across the Group.This has delivered significant bottomline benefit through cost avoidance andreduction showing that procurementlevers can be used in parallel to createvalue and efficiency across the Group.

TM now is a matured organisation.From my years at TM, I am pleased tonote that all the transformation that wehave put in place as mentioned abovehave brought about a change-in-progress in TM’s culture over the lastfour years. While there is no hard andfast rule in quantifying the change thathave taken place, I can say that TM hasbeen on the positive track in embracing‘private sector work culture’, one whichemphasises sense of urgency,punctuality, Group interest, teamworkand open communication. This is in linewith the GLC Transformation effort inmaking GLCs such as TM morecompetitive and performance-driven. I believe this is also made possible byopen and transparent internalcommunications which over the lastfour years has helped to promote acommunicative culture in TM. We usevarious tools to ensure that staff arewell informed of the Group’s keydevelopments and aspirations. Most ofall, this transformation is largely due tothe presence of a strong and capableleader who through his actions, shapedand inspired the whole organisation todrive better performance.

We continued to register improvementsfrom all the initiatives that have beenimplemented as evident from the manyaccolades that we received. In 2007, weachieved triple honours and recognitionwhen we won the Frost & SullivanMalaysia Telecoms Awards as ServiceProvider of the Year for the secondconsecutive year, in addition to beingnamed 2007 Data CommunicationsService Provider of the Year and 2007Broadband Service Provider of the Year.These awards were followed closely bythe 2007 Frost & Sullivan Asia PacificICT Awards in Singapore, where TMbecame the first Malaysian company tobe named Service Provider of the Yearin recognition of its leadership in theAsia-Pacific region.

We clinched the Gold Award for theOverall Excellence category of theNational Annual Corporate ReportAwards (NACRA) and the overall winnerof the 2007 National Award forManagement Accounting (NAfMA).

We also recently won Merit awards forThe Malaysian Business CSR Awards2007 under the category of the OverallWinner and Best Innovation in CSR.Participating companies were evaluatedbased on their compliance with theenvironmental, and workplaceregulations, contributions to thecommunity at large, compliance andcontributions to the marketplace, andcompliance with ethical standards.




GOVERNANCE ANDCORPORATE RESPONSIBILITYCorporate Responsibility is evidentacross all aspects of our operations andhas been an integral part of ourbusiness since inception. We arecommitted to operating in an ethical,sustainable and socially responsible way.We have always subscribed to the notionof supporting host governments andhost communities wherever we operateby being good corporate citizens anddischarging good corporate governance.We have a number of clear policies inrespect of Corporate Governance,Enterprise Risk Management,Environmental Management and alsoProcurement Practices in place thatgovern our behaviour towards ourshareholders, our stakeholders, ourpartners and last but not least, ouremployees. Besides this, our CorporateSocial Responsibility Policy prescribesthat TM companies will also undertakea variety of programmes that arealigned with their businesses and alsobenefits the wider interests of thesocieties which we serve.

From a social perspective, TM continuedto intervene in efforts to supportcommunity initiatives and charitableorganisations. We put in place a CSRand Donations/Sponsorships Policy andBest Practices which set out theguidelines and criteria for the award ofdonations and approval of sponsorships,

to ensure alignment of the corporateresponse across the Group. The Groupalso subscribed to the Silver BookGuidelines prescribed for GLCs whichare designed to evaluate value creationand the impact of donations andsponsorships.

As part of our commitment towardsustainable efforts in the communityand society, we continued to direct ourefforts towards Education, SportsDevelopment and Community & Nation-Building. The Group invested more thanRM73.0 million towards discharging ourresponsibility to the community andsociety in the year under review.

2008 OUTLOOKTelecommunication industry continuesto move at a rapid pace. As a player inan industry where its competitivelandscape is constantly changing, we understand that we need to be agile and an adaptive communicationsservice provider to ensure our continuedgrowth and survival.

Upon completion of the demerger, TM will move from being a fixed-linecommunications service provider intothe next generation service provider.That means providing integratedservices of access, voice and data tohelp our customers enrich their lifestyleand also grow their business.


Looking ahead, the preference istowards digital lifestyle wherebroadband access and contents arebecoming more prevalent amongst ourcustomers in their everyday lives.Broadband and broadband-enabledservices are also a major part of mostbusinesses. In this regard, we lookforward to working in partnership withthe Government of Malaysia to developand roll-out a high-speed broadband("HSBB") infrastructure and services.With speeds up to 1000 times forbusinesses and 100 times for homesHSBB will allow a whole new way of‘living online’ – and allow Malaysians toreally make the most out of whatinternet can offer.

Across the region, the economies withinthe Asia Pacific continue to show robustgrowth and the region contains some ofthe highest growing economies i.e. Indiaand China. This development is helpingto increase demand for communicationservices, both in the consumer andbusiness segments. According to theFrost & Sullivan’s MobileCommunication Outlook 2007, theregion posted a CAGR of 24.0% from2002 to 2006, reaching a customer baseof almost 1 billion.


Post demerger, the TMI Group will bewell positioned to reap the growthpotential of the markets it currentlyoperates. It has a strong presence inthe fast growing South/Southeast Asiawith a unique portfolio of assets across10 markets in Asia, 8 of which aremobile operations. These markets arecharacterised by high economic growthand/or low mobile penetration rates.Based on our experience operating inthese markets, we know how importantit is to make the services affordable tothe masses and capitalise on thesynergies with our operations in othermarkets.

Moving forward, the TMI Group intendsto continue to focus on growing itsmarket share in its existing marketsand expanding its footprint into theSouth and South East Asian mobiletelecommunications markets throughorganic expansion as well as selectiveacquisition opportunities.

Clearly, TM is right in the heart of thesector where the new economic andsocial model for the 21st century isbeing developed. We will certainlyleverage on these opportunities tocreate exciting growth and value for ourstakeholders. Looking ahead, the Boardis confident the demerger will furtherenhance shareholders value throughaccelerated operational improvements,as the demerged entities will havegreater execution capacity, more focusand flexibility which will make it easierfor each company to seize opportunitiesand respond to the challenges in theirrespective businesses.

ACKNOWLEDGEMENTSOn 26 February 2008, TM announcedthat its Group Chief Executive Officer(Group CEO), Dato’ Sri Abdul WahidOmar, had tendered his resignation totake up a top appointment with afinancial institution. He is retiring byrotation as a Director of the companybut would remain as the Group CEO ofTM until completion of the demerger,expected by the end of the secondquarter of 2008. The Board alsoannounced the appointment of Dato’Azman Mokhtar as the Chairman and

Dato’ Jamaludin Ibrahim as the GroupCEO Designate of TMI with effect from3 March 2008. Post demerger, theenlarged TMI which is TM’s investmentarm overseeing TM’s internationalinvestment and operations includingdomestic mobile operations underCelcom (Malaysia) Berhad, will be alisted pure-play regional mobileoperator with 39.8 million customersacross Asia.

I am delighted to hand over thechairmanship of TMI to Dato’ Azmanwho is no stranger to the Group, havingbeen a Director of TM since June 2004.As the current Managing Director ofKhazanah Nasional Berhad, Dato’Azman will be able to provide multi-dimensional perspectives to the Boardand management of TMI. I have nodoubt TMI will benefit from his vastexperience and insights. As for the roleof Group CEO for TMI, I believe Dato’Jamaludin is an ideal candidate to takethe Company forward in its next phaseof development. He brings to TMIextensive experience in the telco(specifically mobile) and IT industries,not only in Malaysia but internationally.His track record will prove essential aswe groom TMI to be the leading mobileoperator in South and South-East Asia.




Post demerger, TM (FixedCo) will behelmed by Dato’ Zamzamzairani MohdIsa as Group CEO. Given his 23 yearsof experience in telecommunications,having begun his career in 1984 withthe then TelecommunicationsDepartment, Dato' Zamzamzairanidistinguished himself as CEO ofMalaysia Business, overseeing TMRetail, TM Wholesale, TM Net Sdn Bhdand several other related subsidiaries.Prior to this position, he served asSenior Vice President, Group Strategyand Technology for a number of years.

I would like to take this opportunity tothank Dato’ Sri Abdul Wahid for hisvalued contributions to the TM Group.Dato’ Sri Abdul Wahid has beeninstrumental in implementing severalkey initiatives crucial to TM’stransformation and continuing growthsince he came on board in July 2004.At that time, TM was a RM11.8 billionCompany, with 61.0% of its revenuefrom the fixed-line business. We havenow grown into a RM17.8 billionrevenue Company with 53.2% of itsrevenue contribution from mobileoperations. This does not happen by astroke of luck but by determination and

hard work by everyone here in TMGroup, and I must stress, under theleadership of a very capable man.

It was during his tenure that the PIPwas launched to rejuvenate the flaggingdomestic fixed-line business. TM alsomade the strategic decision to focus itsinternational expansion and strengthenits presence in emerging marketscloser to home. He leaves a group thatis financially sound and with a strongpresence in a fast-growing region. Onthat note, it is only fitting that I take thisopportunity to thank Dato’ Sri AbdulWahid for his immense and positivecontributions to the continuingtransformation of TM and record theBoard of Directors' and Management'sgratitude and appreciation to him uponhis retirement as a Director at ourforthcoming Annual General Meeting.

The Board also like to record itsappreciation to Dato’ Ahmad HajiHashim who retired on 7 January 2008,for his services rendered to TM duringhis tenure as director of the Company.We also warmly welcome Datuk ZalekhaHassan who was appointed in Dato’Ahmad’s place effective 9 January 2008.

Finally, on behalf of the Board, I wishto express my sincerest appreciation toall our stakeholders – shareholders,customers, business partners,regulators, the Government, employees,the media and others – who have alldone their part in helping us build andgrow the TM brand, and in particular,for their contributions of the past year.Going forward, as TM enters a new andexciting chapter, we will need theircontinuing support.

Tan Sri Dato’ Ir Muhammad Radzi Hj MansorChairman



OVERVIEWThe year 2007 will go down in corporate history as one where TM

took a number of major strategic decisions in its continuing journey

to transform the Group and position it as a leading regional

communications company of choice. As such, we have chosen

what we believe to be an apt theme for our annual report, which is

Opening Up Possibilities: Creating Value, Unleashing Potential.

DATO’ SRI ABDUL WAHID OMARGROUP CHIEF EXECUTIVE OFFICERNON-INDEPENDENT EXECUTIVE DIRECTOR

In last year’s Annual Report, Ihighlighted how the PerformanceImprovement Program (PIP) welaunched in mid 2006 has shown earlypositive results. Those PIP initiativeswere intensified further in 2007 andhave indeed brought about furtherimprovements with our fixed-linerevenue recording 2.0% growth in 2007compared to negative 0.9% in 2006whilst Celcom (Malaysia) Berhad’s(Celcom) revenue grew by 13.1%compared to 0.7% in 2006.

As a follow through to the PIP andfollowing a strategic review of ourbusinesses and core competencies, theBoard in September 2007 announcedthe proposed demerger to separate theGroup’s fixed and mobile businessesinto two separate entities. This will

result in the emergence of TMInternational Berhad (TMI) or RegionCoas the Regional Mobile Operator andTM or FixedCo as the DomesticBroadband Champion. The demerger isexpected to accelerate operationalimprovements and growth throughclearer strategic and organisationalfocus and further unlock shareholdervalue. I am pleased that theshareholders have approved theproposed demerger at the recently held Extraordinary General Meeting(EGM) on 6 March 2008. Withshareholders approval in place andsubject to obtaining other relevantapprovals, we expect the proposeddemerger to be completed and TMIseparately listed on Bursa Securities inthe second quarter of 2008.

The year 2007 was also notable for thefact that we have been identified by theGovernment to participate in the Public-Private Partnership (PPP) arrangementto roll out High Speed Broadband(HSBB) infrastructure and services forthe nation. The cost of the HSBBinvestment is approximately RM15.2billion with TM investing RM10.4 billionover the next 10 years and theGovernment co-investing RM4.8 billionor one third of the total cost. The HSBBcoverage is expected to be availableacross 2.2 million premises over thenext 3 years. The execution of this long-awaited infrastructural development isexpected to be entrusted to TM’sFixedCo, giving us the responsibility toensure that Malaysia continues to stayat the forefront of ICT throughbroadband deployment and joins therest of the best-in-league nations withdeep broadband penetration to furtherpropel economic growth.

Group C

hief Executive Officer’s

Statem

ent

135

Perspective


To sum up the year in review, I wouldsay we continued with our theme oftransformation, begun more than 20years ago when we metamorphosedfrom an incumbent fixed-line companyto a regional communications player, inline with the Government-linkedCompanies (GLCs) Transformationprogram. But the metamorphosis hasnot ended by any means. TM is nowpoised to continue its journey as twoseparate and independent companies,each with its own strengths andstrategies, and in the process, seizeopportunities to unlock its full potential.Both TM and TMI will offer fresh valuepropositions to its stakeholders.

GROUP PERFORMANCEThe Group delivered another set ofcommendable financial performancedespite the challenging macro andpolitical environment overseas, andintense competition, both domesticallyand on the international front. I am alsopleased to report that the Groupsuccessfully met its Headline Revenueand Return on Equity (ROE) KeyPerformance Indicators (KPIs).

Overall Group revenue in 2007 grew by8.8% to RM17.8 billion against theRM16.4 billion recorded in 2006, drivenlargely by positive results from mobile,leased services, and Internet andmultimedia segments. The Group’sProfit After Tax and Minority Interest(PATAMI) increased by 23.1% to RM2.6billion as compared to RM2.1 billionrecorded in 2006. This was mainlyattributed to stronger contributions byCelcom, higher other operating income,gain on the Initial Public Offering (IPO)of Spice Communications Ltd (Spice) ofRM71.3 million, higher share of results

For 2007, the Group successfully met itsHeadline Revenue and ROE KPIs. Actual2007 EBITDA margin of 42.8%, however,fell below the target of 44.5%, as aresult of one-off charges such asprovision for impairment of investmentin a quoted security (RM80.0 million),withholding taxes on USD bondinterests at PT Excelcomindo PratamaTBK (XL), regulatory compensation atTM International (Bangladesh) Limited(TMIB), and other operating expenses.The Group’s actual ROE of 12.8% forthe year 2007 was nevertheless higherthan 2006’s ROE of 10.6%, andexceeded its 2007 KPI of 9.8%.

DOMESTIC REVIEWI am happy to report that the PIPlaunched in the middle of 2006continued to bring in positive results.The Group’s fixed services under

Malaysia Business performedsatisfactorily, achieving a full-yeargrowth of 2.0% in the year underreview, compared to a decline of 0.9%the year before to register RM7.6 billionin revenue for the financial year ended2007. This was driven by greaterbroadband push through aggressivemarketing initiatives resulting in arobust growth of 22.7% in Internet andmultimedia revenue. Data revenue alsosaw an encouraging growth of 25.4%led by demand for higher bandwidth bythe corporate and business customers.

A success factor was the introduction ofthe successful Let’s Talk campaignaimed at rejuvenating the usage offixed-line services. Offered in severalpackages to suit different customerlifestyle and usage needs, this productoffered some of the lowest domesticand international call rates with highvoice quality.

in Spice and lower taxation charges.Gains on placement of 4.6% of sharesin Dialog Telekom Ltd (Dialog) totallingRM234.8 million as part of efforts toboost liquidity of Dialog’s shares on theColombo Stock Exchange contributed tohigher operating income. The highershare of results in Spice was mainlydue to proportionate gain on disposal oftowers of RM128.8 million.

2007 Headline KPI Achievements:

Headline KPIs FY2006 Actual FY2007 Actual FY2007 KPI

1. Revenue RM16.4 billion RM17.8 billion RM17.7* billion2. EBITDA Margin 45.9% 42.8% 44.5%3. Return on Equity (ROE)** 10.6% 12.8% 9.8%

* Restated to reflect actual foreign exchange rates in the translation of foreign subsidiaries’ revenue into RM** ROE is computed as PATAMI/Average Capital & Reserves Attributable to Equity Holders of the Company

The Group also registered betterEarnings Before Interest, Tax,Depreciation and Amortisation (EBITDA)of RM7.6 billion, an improvement overthe RM7.5 billion registered the yearbefore.

The Group’s overseas operationscontinued to deliver positive revenuegrowth of 19.7%, despite a challengingoperating environment – therebycontributing 26.2% to Group revenue.


Group Chief Executive Officer’s Statement


We also continued to retain ourleadership in VoIP through severalfestive promotions. Other productofferings included iTalk Buddy later inthe year to cater to the youth segmentwith exciting interactive online features.

As at end 2007, fixed-line customerscontinued to remain stable at 4.4million while 401,000 new broadbandcustomers were brought on board,resulting in a total broadband customerbase of 1.3 million. All of theseindicators showed we had consolidatedour leadership in the broadbandmarket. This provides solid foundationfor TM as it positions itself to beMalaysia’s leading next generationcommunications provider focusing onaggressive implementation of HSBBproducts and services.

On domestic mobile operations, Celcomfor the first time delivered a healthydouble-digit growth of 13.1%, with arevenue of RM5.2 billion. Celcom alsomoved to reach out to more customersby launching Malaysia’s first MobileVirtual Network Operator (MVNO) in2007 to provide a prepaid package toforeign workers in Malaysia i.e. thosefrom India, Nepal, Sri Lanka, Pakistan,Bangladesh, Vietnam, Myanmar,Cambodia and Laos. This collaborationwith MVNOs was a serious effort tostep up sales in targeted segmentswhere Celcom has lacked presencewhile utilising some excess capacity onits network.

It was encouraging to note that Celcomadded 1.1 million new customers in2007, bringing its total customer baseto 7.2 million – another record,representing a growth of 18.0% fromthe 6.1 million posted a year before.Prepaid customers increased by 22.9%

or over 1 million net additions to 5.9million from 4.8 million in 2006, whilepostpaid customers totalled 1.3 millionat the end of 2007.

Post demerger, Celcom has a big roleto play. Celcom will provide a stablesource of cash flow for TMI that willenable it to actively seek and capitaliseon investment overseas in the region.Moreover, TMI’s emerging mobileoperations across the region will benefitfrom Celcom’s expertise and allow it toserve as a strong base to groom talentand future leaders for TMI.

For TM Ventures, steps were takentowards the re-integration of networksystem integration businesses ofMeganet Communications Sdn Bhd intoVADS Berhad. The year also saw TMVentures completing the divestment ofTM Payphone to Pernec Corporation on31 December 2007.

INTERNATIONAL REVIEWOn the international front, the year 2007closed with a number of positiveindicators to reflect our favourableexpansion in the countries where TMhas a presence. Through TMI we forgedahead in 2007 to build on the activitiesof the previous years and focusparticularly on revenue-generatinggrowth strategies in Cambodia,Indonesia, Singapore, India, Pakistanand Thailand. Nevertheless, our regionaloperations were impacted by thepressures of growing competition andthe entry of several new players intoour markets, political issues andregulatory challenges in somecountries, as well as forex losses as aconsequence of a stronger RinggitMalaysia against most currencies.Despite these challenges, I am pleased

to report that TM’s overseas operationscontinued to grow, contributing RM5.0billion or 26.2% to Group revenue ascompared to 24.2% the previous year.

The year 2007 saw our key overseasinvestments in Sri Lanka and Indonesiadelivering encouraging performance. For the financial year 2007, Dialog andits subsidiaries (Dialog Group) posted arevenue of SLR32.5 billion, a growth of26.6% as compared to SLR25.7 billionposted in 2006 despite its challengingoperating environment. Dialog registereda year-on-year customer growth of37.2% and further consolidates itsleading position as the number onemobile operator in Sri Lanka with atotal customer base of 4.3 million as atend of 2007.

In Indonesia, the telecommunicationsindustry recorded strong growth and XLenjoyed a boost to its customer base byadding on 62.4% more customers tobreach the 15.5 million mark. XL posteda year-on-year revenue growth of 29.4%to Rp 8,364.7 billion for financial year2007 arising from 62.4% growth incustomer base as a result of theintroduction of a nationwide single-tariffstrategy which was well-received. XL’snet income, however, decreased by61.5% due to forex losses and therecognition of withholding taxes includingpenalty on off-shore interest in the 2007financial year. By year-end, the numberof XL’s BTSs increased by 3,897 to bringthe total to 11,153, achieving a 90.0%network coverage of the Indonesianpopulation of 220 million.

In Bangladesh, we saw valuableadditions to our customer base despitemore competitor activity, growing by 1.3 million in the year under review toexceed 7.0 million customers by year



ownership and project a strong image.Already the biggest company on theCSE, Dialog has moved into quadrupleplay and convergence services in SriLanka and has launched fixed wirelessoperations based on CDMA technologymaking it the first quadruple player inSouth Asia.

We also witnessed the successful debutof our Indian affiliate company, Spice,on the Bombay Stock Exchange. TheIPO enabled Spice, first founded in 1997as a cellular services provider, to makedebt repayments and fund growth inKarnataka and Punjab, the two circles itcurrently operates in. Applications forlicences in 20 other circles as part ofthe company’s pan-Indian strategy arepending. Following the listing in July,TM’s shareholding was reduced from49.0% to 39.2%, which tied in with theGroup’s philosophy of value-add tostakeholder communities in localpopulations. Spice is now in the processof reconstructing its culture to reflectthat of a listed company, with greaterincorporation of the tenets of goodcorporate governance and managementbest practices.

The review of our internationaloperations would not be completewithout a mention of the effort by TM totake a lead role in the 17-memberconsortium of telcos to establish thefirst submarine cable system linkingSouth-East Asia directly to the US. The 20,000-kilometre-long Asia-AmericaGateway is designed to help strengthenthe communication and businesslinkages between Asia and the US, aswell as increase broadband uptake andenhance the competitiveness of eightAsian countries.

KEY INITIATIVESShareholders will remember that earlyin 2006 we had noted a declining trendin our fixed-line revenue which wasgreater than the average whenbenchmarked regionally, and at thesame time, faced competitive pressuresfrom the domestic mobile segment. As an essential part of our response,we launched a five-year PIP in August2006 to strengthen our domestic fixedbusiness through a series of proactivemeasures, as well as regain ourposition in the highly-competitive mobilesegment. In the first phase of PIP, thefocus was to arrest the decline in thedomestic business. For fixed services,the targets were to mitigate the declinein fixed-line revenue and drivebroadband deployment aggressively.While for mobile business, the focuswas to increase segment focus, spendand rejuvenate the Celcom brand andits distribution channels.

PIP efforts begun in the middle of 2006bore fruit in 2007 as the decline in fixedservices was arrested mainly as aresult of more aggressive sales andpricing stimulation. Stated objectives todrive broadband growth were also fairlysuccessful, despite continuing churn inthis segment, and the year 2007 endedwith a cumulative broadband customerbase of 1.3 million. Lastly, qualityenhancements were delivered aspromised and notably, achievement time to restore service to customersimproved from 4.5 days in 2006 to 1.5 days in 2007.

end. TMIB posted a revenue growth of9.9% to BDT 14.4 billion as comparedto BDT 13.1 billion recorded in thecorresponding period last year.

Over in Cambodia, where TMI justcompleted its acquisition of theremaining 49.0% in Telekom MalaysiaInternational (Cambodia) CompanyLimited (TMIC) in 2006, a noteworthydevelopment in the past year was arebranding exercise revolving around thepopular word ‘hello’. The new identitywas designed to be the basis for abrand promise in this growing market,focusing on improved service qualitythrough a number of ‘hello’ points orshops, as well as a fundamental shift indirection. The rebranding campaigncame along with increased investmentsof US$150.0 million to be spent from2007 to 2009 to upgrade networkcapacity and extend coverage into therural and provincial communities. In theyear under review, TMIC achieved a33.7% growth in revenue along with a36.1% increase in the customer base to311,650 at year end.

Keeping to our commitment to createvalue for stakeholders, on the 2ndanniversary of Dialog’s listing on theColombo Stock Exchange (CSE), TMsold 4.6% of its shareholding in Dialogas an effort to boost liquidity of Dialog’sshares and therefore passing on moreopportunity of ownership to the SriLankan public. This liquidityenhancement will indirectly support thegrowth of the capital market in SriLanka by potentially attracting largeforeign funds, thus enhancing theprofile of the CSE, for its potentialinclusion into global equity indices. At the same time, Dialog would be ableto achieve a broader scale of public




Meanwhile, PIP initiatives also impactedpositively on Celcom. The year sawincreased segment focus in bothprepaid and postpaid as evidenced inthe daily average prepaid rechargerecord of RM9.1 million posted in theyear under review. Celcom adopted abold new position with a rejuvenatedbranding strategy and reform of itsdistribution channels. The launch ofBlue Cube resulted in greaterawareness of its service offerings andas at the end of December 2007, 32Blue Cube outlets were in operationnationwide offering virtual recharge.

For TMI, it is yet to feel the full impactfrom PIP measures although XL, Dialogand TMIB have pushed for revenuegrowth, while throughout the Group,network optimisation through synergisticrelationships and efforts to innovate andshare common products and serviceswere conspicuous.

At the same time, our commitment toimproving the quality of our customerservice has never wavered. Wecompleted the transformation of 104TMpoint nationwide which serves as aone-stop centre for our customers topay bills and find out more about ourproducts and services. TM once againreceived recognition for its efforts inupgrading service quality. Continuing the tradition of previous years, TM wonthe top Frost & Sullivan MalaysiaTelecoms Awards by being namedService Provider of the Year for thesecond consecutive year as well as the2007 Data Communications ServiceProvider of the Year and 2007Broadband Service Provider of the Year.TM capped this achievement by winningyet more awards at the 2007 Frost &Sullivan Asia-Pacific ICT Awards in

Singapore. It emerged as the firstMalaysian company to receive thecoveted Service Provider of the YearAward which recognised TM’scommitment in delivering customerservice not only in Malaysia but also inthe Asia-Pacific region.

Execution capacity of our people is keyin making all our initiatives a successand this was given strong emphasis inPIP. In line with this, TM has put inplace a lot of effort towards instilling aperformance driven culture. This issupported by effective internalcommunications to ensure that all staffare well informed of the Group’s keydevelopments and aspirations. Webelieve that staff who are well informedare more motivated and understandhow their roles fit into the biggerpicture.

In 2007, we introduced a newcommunication program, a series of"Teh Tarik" sessions to provide aplatform for direct interaction betweenstaff and me. It gave the opportunity toshare knowledge, exchange feedback,ideas and provide explanation overspecific topics.

PIP is a success as TM’s entireworkforce rallied behind the programand took ownership of the initiativesthat we set out to do. For PIP, we had527 face-to-face briefing sessionstalking to all staff across the Group toexplain the program, motivate and geteveryone to work towards the sameuniversal targets set by the Company.

Clearly, all measures that have beenput in place have enabled a shift in theemployees mindset towards becomingmore performance driven.

GLOBAL & REGIONALENVIRONMENTFrom a fairly buoyant performance in2006, the global economic environmentwas fragile but thankfully stable in 2007despite fears of a credit crunch in theUS, rising oil prices, global recessionarytrends, conflict tensions and growingconcerns over the issue of climatechange. The two Asian giants, Chinaand India, grew 11.5 and 8.9%respectively, and secured leadingpositions as the world’s main growthengines. Nevertheless, even as thebalance of power shifts from thetraditional biggest economy in theworld, USA, to the emerging economiesof Asia and elsewhere, economicinterdependence will still be vital tomaintain orderly and sustainable growthin the global economy.

Asia recorded a surprising overallgrowth of 9.8%, which comparedfavourably with the 8.7% achieved in theprevious year, and augurs well for thedevelopment blueprints of emergingmarkets in Asia. Generally, the outlookfor Asia remained bullish in the yearunder review, despite contrarian trendsnoted elsewhere particularly in Europeand North America, which became moreapparent in the second half of the year.

The ICT sector, meanwhile, remained intransition as players grappled to findsustainable business models in anincreasingly convergent world. At theheart of this uncertainty were importantdecisions to be made towards migrationto Next Generation Networks (NGN), beit at the core, transport or accessnetworks. Many developing countriesperceive NGN as an essential leap-frogging step towards closing the digitaldivide and helping economies become



more resilient Information Societies.Companies such as TM continued toredefine and transform itself from theperspectives of strategy, operations andculture, in order to deal with theconstant ebb and flow of change in theoperating environment.

As such, telecommunications serviceproviders need to mount a search fornew revenue streams from theincreasingly popular triple or quadrupleplay bundled package of IPTV, voicecalls and ultra-high-speed broadbandInternet access. This calls for theaccelerated roll-out of fibre networkscloser to homes and offices. Accordingto the ITU, mobile operators now seekto collect advertising revenue from therange of user-generated, social-networking and other content runningon ever-higher speed broadbandnetworks, which the ITU calls ‘ultrabroadband’ or ‘broaderband’ technology.

Growth in the ICT sector has beenbreathtaking over the last few years,aided by these continually changingtechnological developments and productand service innovations which are inhigh demand. There are also ongoingchallenges in the ways in which theseinnovations are being delivered acrossmultiple platforms and devices inresponse to new end-user lifestyleneeds. By ITU accounts, at the end of2006, there were nearly 4 billion mobileand fixed-line phone customers, plusover 1 billion Internet users worldwide.This included 1.3 billion fixed-linecustomers and 2.7 billion mobilecustomers. Revenue in the globaltelecom services and equipment marketgrew by an estimated 7.8% in 2006,reaching US$1.7 trillion and accountingfor more than half of the total ICTmarket; of this, Asia’s share was 26.0%.

Our research shows that for 2007,mobile customers alone were expectedto grow to over 3.3 billion, with over60.0% coming from developing countriesand around 50.0% from Asia. Revenuefor the telecom market is expected toreach over US$1.8 trillion, growing8.5%, with Asia recording an above-average growth of 9.6%. Going forward,it is our expectation that regulators willseek to be more pro-growth and pro-end user, thus more liberalisation isexpected in a convergence era. Further,the concept of technology neutrality andnet-neutrality will come to the fore asregulation moves away from a one-service-on-one network approach tomultiple services running on multipleplatforms. It is also worth noting that ina world of IP-based convergence,consumer protection and cybersecuritywill be paramount. As always, thesetechnological developments will impactnot only how the industry continues tobe regulated, but the way in which wedo business ourselves.

DOMESTIC ENVIRONMENTMalaysia’s GDP in 2007 grew by 6.3%mainly driven by strong privateconsumption, public sector spendingand investment activities. The businessoutlook remained fairly cautious butwas still positive, given that theconsumer outlook continued to seeencouraging spending behaviour. TheICT Industry (Services and Equipment)in the year under review was worthRM36.6 billion or 13.2% of Malaysia’sGDP, representing a hefty growth overthe previous year’s RM23.9 billion.

Competition in Malaysia remainedintense as players mounted price andbranding wars to regain falling ARPUsand win back customers. The Malaysianmarket continued to move closertowards saturation with mobilepenetration estimated at more than80% at year end. Meanwhile, global andregional telcos and IT players wereamong the new entrants attracted tothe local market, with some aiming forMalaysia’s Enterprise Market and otherstaking advantage of the demand forbroadband services.

Malaysia’s MyICMS 886 initiative in linewith the 3rd Industrial Masterplan wasfocused on delivering broadband via alltechnologies, hence the push for WIMAXlicences and spectrum allocationsthrough the Malaysian Communications& Multimedia Commission. Further,regulatory compliance issuesparticularly in respect to MobileNumber Portability and MandatoryQuality of Service continued to impacton the operations of TM. With growingcompetition on the one hand andtighter regulatory supervision on theother, the year offered its fair share ofdemands and challenges.

In such an industry, customers areservice and price-sensitive, alwaysexpecting more for their money. Asplayers fight for their share of wallet,they need to continually provide productand service differentiation and be savvywith micro-segmentation. We find thatthere is a demand for highly-personalised and customised services,driven by content and community needs.Customers demand freedom of choiceand in the process, operators canexpect high churn.




GOVERNMENT-LINKEDCOMPANIESTRANSFORMATIONSince the GLC transformation exercisebegan in 2004, TM has made clearprogress towards the 10 overarchingthemes or improvement initiativesrecommended for all GLCs. In essence,our transformation may be divided intothree categories – Strategic, Operationaland Cultural. A key strategic changeinvolved a shift of focus from overseasand international operations to regionalinvestments or a presence closer tohome. We began to assess theopportunities presented by emergingmarkets in South and South-East Asia,particularly those with high-growthpotential. Towards this end, wesuccessfully made three acquisitions inrecent years – in Indonesia, Pakistanand India. Additionally, we have alsobegun to sharpen our focus on growingour mobile and broadband businessdomestically. On matters of operations,we introduced PIP which not only setout specific roadmaps towards achievingour aspirations of becoming a domesticchampion as well as a regionalcommunications company of choice, but was also in line with GLCTransformation expectations. Culturalchanges instituted by the Company inrelation to work and performance havealso been evident and brought aboutpositive results. These included theneed to set measurable targets,succession planning, drivingperformance consequence managementas well as maintaining active employeeengagement, among others.

In summary, the GLC transformationinitiatives have enabled us to deliver amuch improved performance asevidenced by our results which havebeen on an upward trend since 2004.

CORPORATE GOVERNANCE &BOARD EFFECTIVENESSTM has always prized its reputation asa leading company with a high respectfor the principles of good corporategovernance. This commitment has beenreinforced alongside the rest of theGLCs in Malaysia, TM has dulycomplied with the principles and bestpractices as set out in the MalaysianCode on Corporate Governance firstrolled out in 2002 and subsequentlyrevised in 2007. Additionally, TM abidesby the best-practice principles appliedto GLCs as contained and prescribed inthe Guidelines to Enhance BoardEffectiveness, also known as the GreenBook, which was launched in 2006.

In recent years, TM has taken steps tostrengthen its corporate governance inline with Green Book recommendationsby reviewing the role and mandate ofits Board, improving Board compositionand balance, enhancing the performancemanagement of the Board and alsoupgrading the Board structure andprocess. Besides strengthening the roleof its Board, TM has also institutionalisedthe recommended board committeeswhich include the Audit Committee, theNomination & Remuneration Committee,the Tender Committee and the EmployeeShare Option Committee. Additionally,TM has in place a number of approvedpolicies with respect to communicationsethics, disclosure, whistle-blowers,investor relations and corporateresponsibility. These provide guidelinesand guidance to management in theirday-to-day conduct.

In recognition of its standing in thisarea, TM was once again recognised bythe Minority Shareholders WatchdogGroup of Malaysia which conducted a

study jointly with the NottinghamUniversity Business School (Malaysia)and gave TM second place in itsCorporate Governance Survey Report2007. In a further show of appreciationfor its commitment to good governance,TM was also conferred awards for thequality of its corporate and financialreporting. We clinched the Gold Awardfor the Overall Excellence categoryduring the National Annual CorporateReport Awards (NACRA) 2007 held inKuala Lumpur in November 2007. TM also took home the IndustryExcellence Award for the BursaMalaysia Main Board Companiescategory under the Trading & Servicessector for the 11th consecutive timeand the Gold Award for Best DesignedAnnual Report. TM also won theExcellence Award in the National Awardfor Management Accounting (NAfMA)2007, beating nine other finalists toearn recognition for its best practices inmanagement accounting.

In its Compliance Statement, TM statesthat the Board will continue tostrengthen governance practices tosafeguard the best interests ofshareholders and other stakeholderswhich is a move beyond merecompliance with the principles and bestpractices of the Malaysian Code onCorporate Governance.

CORPORATE RESPONSIBILITYTM’s corporate responsibilities (CR)have traditionally been centred aroundthe three platforms of Education, SportsDevelopment and Community/Nation-building. However, the practice of CRtoday takes into consideration all thoseinternal policies and procedures thatgovern the Group’s relations with itsvarious stakeholder constituencies.



Thus TM takes into account its role asan employer vis-à-vis its staff, andpromotes good staff relations. Inaddition, it also ensures that severalcodes of conduct are in place to ensuresound and ethical business practices.TM has guidelines to support qualityrelationships with partners and vendors.It also practises transparent performancemanagement and employee satisfactionschemes. Health and safety of theworking environment are valued. Inthese ways, TM demonstrates thatcorporate responsibility is not an ad-hoccommunity project, neither is it aboutsponsoring programmes that merelypromote its brand. In TM’s response tothe community as a whole, it considersseriously what constitutes good corporatepractice and bases its decisions onbusiness principles and ethics.

I am proud to inform that TM recentlywon Merit awards for The MalaysianBusiness CSR Awards 2007 under thecategory of the Overall Winner and BestInnovation in CSR. Participatingcompanies were evaluated based ontheir compliance with the environmental,and workplace regulations, contributionsto the community at large, complianceand contributions to the marketplace,and compliance with ethical standards.

OUTLOOK FOR 2008The sub-prime fallout in the US hascast a cloud on global economicprospects for the current year, withworld growth expected to slow down to4.8%. Nevertheless, predictions are thatthis will be offset by continuing growthin emerging market economies – Asiain particular, which is expected toregister growth of 8.8%. Despite recordperformance by the Chinese and Indianeconomies in 2006, growth can be

expected at a slower pace to 10% and8.4% respectively, in the current year,given the effect of US recessionarypressures and a weakening dollar. This will be somewhat mitigated if Asia maintains the strength of itsdomestic demand from its sizeablepopulation. Malaysia, meanwhile, isexpected to maintain its growthmomentum and achieve a 5.8% GDPgrowth rate for 2008.

We can expect that the downside riskswill come from any negative shocks toglobal capital markets arising from theUS economic situation, as well as highoil prices. Trade and capital flows toemerging markets may be disrupted asa result. However, overall the worldeconomy should be able to ride outthese difficulties, provided economies donot resort to protectionist measures.

The global ICT industry is expected tocontinue to grow favourably in 2008,albeit at a slower rate of 6.4% versusthat of 2007’s expected growth of 8.5%.This is due not only to the anticipatedeconomic slowdown but also as a resultof declining fixed voice revenues andgiven that fixed-to-mobile substitutiondoes not compensate in terms ofrevenue gains in the mobile sector.Further, the migration of services ontoIP platforms may also erode previousmargins enjoyed in the traditionalnetwork as operators fight to delivermore value to the customers to securetheir loyalty.

The Internet will prove to be the newcompetitor to both fixed and mobileplayers as content and software cometo the forefront of services. We canexpect these to be key drivers indetermining pricing schemes both forthe consumer and enterprise markets.

Mobile broadband will gain increasingtraction and fixed players will focus onrising above this threat by rolling outhigh-speed broadband networks andmaking the digital home a reality.Formidable threats will also come fromthe likes of Apple and Google who arere-shaping the way telecom companiesought to do business. Hence the onuswill be on TM’s RegionCo and othertelcos to innovate and find way-forwardsolutions to deal with the changingnature of the competitive landscape andthe changes in customer behaviour.

On the domestic front, PIP initiativeswill be accelerated to deliver moretangible outcomes in the fixed,broadband and data-related services aswell as better Celcom delivery channelsand customer experiences. On theinternational front, revenues will needto be driven aggressively in the face ofmounting competition and economicand political uncertainties.

Finally, demerger will cause a numberof fundamental changes to be made,mainly at staff and operating level.Although it will be business as usual,there will be additional responsibilitiesfor us all such as training anddeployment of talents to new positions,new roles for management and thecontinuing effort to boost operationalexcellence and evaluate value-enhancinginvestment opportunities for the long-term. As two organisations operating inthe knowledge economy, the prevailingchallenge will always be to develop,attract and retain good talent and builda knowledge-centric workforce toensure high executional capabilities.These would indeed be majorconsiderations that will impact on theoutlook for 2008. It would be fair to saythat 2008 will be a crucial year in that




TM going forward will be a differentorganisation, with two sets of financialreporting as its businesses successfullydemerge.

The prospects for TM, whichencompasses the retail as well asdomestic and global wholesale fixed-linevoice, data and broadband servicescontinue to be exciting. Having arresteddeclining revenue in 2007, TM aims tostabilise revenue and create momentumby focusing on Internet, Data Services,and Value Added Services forconsumers and businesses in 2008.Additionally, efforts will be targetedtowards implementation of HSBBnetwork, in partnership with theGovernment of Malaysia.

TMI is expected to continue to registerfurther revenue growth in 2008, in linewith its aspiration to become the leadingregional mobile operator. TMI willcontinue to strengthen market shareand improve its financial position in Sri Lanka, Bangladesh, Indonesia andCambodia. TMI will also try to expandits presence in the South and South-East Asian regions by selectively lookingfor new investment opportunities.

Although the domestic mobile industryis reaching saturation point, Celcom isexpected to register revenue growth in2008 through a combination of wellcrafted strategies targeted at specificcustomer segments, as well as theintroduction of new and competitiveproducts. However TMI will have to bemindful of the challenges and risksfacing its international operations,where unfavourable changes in politicalregimes, regulations and currencyexchange rates may have financialimpact.

ACKNOWLEDGEMENTSAs announced, I will be retiring as theGroup CEO of TM to take up theappointment as President and CEODesignate of Maybank effective 2 June2008. At this juncture, allow me toexpress my sincere gratitude to Tan SriRadzi, Dato’ Azman Mokhtar and othermembers of the Board for the trust andsupport extended to me from day one.Without such support, I wouldn’t havebeen able to discharge my dutieseffectively. It has certainly been anhonour and pleasure to serve the TM Group and to have worked closelywith Tan Sri Radzi as the Chairman andfatherly figure of TM. I would also liketo extend my utmost appreciation to allmy colleagues in the ManagementTeam and elsewhere throughout the TM Group for the opportunity to haveled this Group for the past four years,and for their support and guidance. Tothe entire 35,000 TM Group employees,thank you for your support. I am gladthat I had the opportunity to interactwith you during the many dialogsessions during my tenure here. Iespecially cherish the 17 ‘Teh Tarik’sessions we had last year as thesessions provided us with an excellentplatform to open up and communicatewith each other.

I wish to also record the appreciation of the TM community to all ourstakeholders which includes theGovernment of Malaysia and other hostgovernments, regulators, partners,suppliers, customers and localcommunities who have collectivelyfacilitated the delivery of our brandpromise.

As this is a watershed year, in that wemove on as two companies post-demerger, it is incumbent upon me asretiring Group CEO, to also recognisethe efforts of everyone who have gonebefore me in the effort to transform ourlegacy. I am happy with the fact thatupon completion of the demerger, I willbe passing the batons over to twocapable leaders in Dato’ ZamzamzairaniMohd Isa and Dato’ Jamaludin Ibrahim.Dato’ Zam as the Group CEO designateof TM, has been in thetelecommunication industry for morethan 20 years. He has the benefit oflooking at TM from both the inside andoutside having been in TM during theJabatan Telekom days before holdingsenior positions in several multinationalcompanies and coming back to TM.While Dato’ Jamaludin as the GroupCEO designate of TMI is a well-knowncorporate figure in Malaysia. He hasextensive experience in thetelecommunications industry, specificallythe mobile business, both in Malaysiaand internationally. With their wealth ofexperience and deep knowledge of theindustry, I am confident that they willlead both TM and TMI to greaterheights into 2008 and beyond. With theefforts of all our 35,000 employeesbehind us, we remain confident of thefuture for TM.

Dato’ Sri Abdul Wahid OmarGroup Chief Executive Officer


Malaysia Business

Facts at a GlanceOverview

Broadband Internet Customers

1,265,308 + 46.4%

Celcom

Facts at a GlanceOverviewTotal Customer Base

7.2 million + 18%

International Operations

Facts at a GlanceOperations

Mobile Customers

32.6 million + 45.3%PATAMI

RM744.9 million + 19.7%

Total Revenue

RM5,157.1 million + 13.1%Prepaid Customer

5.9 million + 22.9%Postpaid Customer

1.3 million + 8.3%

BusinessReview

MALAYSIA BUSINESS 148

CELCOM (MALAYSIA) BERHAD 158

INTERNATIONAL OPERATIONS 166– GLOBAL CABLE SERVICES, 184

INTERNATIONAL INVESTMENTS& PRESENCE

TM VENTURES 186– INTERNATIONAL & 202

DOMESTIC INFRASTRUCTURE & TRUNK FIBRE OPTIC NETWORK

ASIAN ECONOMIES AND 204THE TELECOMMUNICATIONSSECTOR: REVIEW & OUTLOOK

TM Ventures


EBITDA

RM462.3 million + 114.6%PATAMI

RM189.5 million + 247.1%

A Galaxy of ColoursIt is said that looking into the Paua shell is like steppinginto a galaxy of shimmering colour. One should be preparedto be entranced by its constantly changing hues, light andshades. The radiance and iridescence of the Paua is aslimitless as the imagination.

A Universe of PossibilitiesOne needs to be given the key to unlock the imaginationand to look beyond fixed and mobile services … once there,you will begin to catch a glimpse of the vast potentialBroadband is capable of delivering. As the appetite forhigh-speed broadband grows, Malaysians will be empoweredfor the future – a future where there are no limits, onlyendless possibilities.

DATO’ ZAMZAMZAIRANI MOHD ISACHIEF EXECUTIVE OFFICERMalaysia Business

Mal

aysi

aB

usin

ess


BusinessReview

OVERVIEW

Malaysia Business (MB) was established in August

2006 as a Strategic Business Unit (SBU) to

consolidate all TM’s domestic fixed services under

a single leadership team. The establishment of

Malaysia Business was also a strategic response to

address the challenges faced by the domestic

business, particularly in the fixed sector. By creating

a focused and dedicated team under the

leadership of one CEO, TM’s strategic priorities for

the domestic market could be better aligned and

decision making would also be improved. As a

result, performance improvements were noticeable

in the year under review.

Broadband Internet Customers


1,265,308 + 46.4%


FINANCIAL PERFORMANCEHaving launched its PerformanceImprovement Programme (PIP) inAugust 2006, and continued itsinitiatives into 2007, MB successfullyarrested revenue decline in its fixedoperations as part of the turnaroundplan. In the financial year ended 31 December 2007, operations under MB recorded revenues of RM7.6 billion,an improvement of 2.0% over 2006. Thisled to EBITDA of RM3.0 billion for theyear. However, EBITDA margins declinedby 5.0% from 2006 as a result ofcorresponding increase in direct costsand higher support costs as well asone-off costs and bad-debt provisions.

Voice remained the key revenuegenerator for MB in 2007, contributing64.2% to the unit’s income which,although substantial, represented adrop of 4.5% over the revenuecontribution registered in 2006 due tocontinuing migration to mobile andInternet-based communications.However, the decline was much lowercompared to the 6.5% declineregistered in the year before.

In line with industry trends showingconsumer preferences for Internet andmultimedia services, revenue from thissegment posted a strong year-on-yeargrowth of 22.7%, contributing 14.1% ofthe total operating revenue as comparedto 11.7% in 2006.

A growth of total broadband customerscomprising Streamyx, Streamyx Hotspotand Direct customers to 1,265,308 wasrecorded in 2007, representing a marked46.4% improvement over the previousyear. Data contributed 14.7% of revenuefor MB, while other telecommunicationand non-telecommunication servicescontributed the remaining 7.0% ofrevenue.

Total cost in MB including depreciationfor the financial year ended 31 December2007 increased by 4.9% from 2006 toRM6.6 billion in 2007. The increase incost was due to increases in direct andoperating cost, as well as higherprovision for bad and doubtful debts.Positively, there were decreases insupplies and materials costs as well aslower depreciation and amortisationcharges.

Driven by the need to align businesseswith a common agenda as well as tocapitalise on synergies, MB continues tofocus on three core business segmentsnamely retail, domestic wholesale andglobal business.

RETAILServicing key retail customer segmentsnamely consumers, SME, enterpriseand government, MB’s retail businessconcentrated on sales activities andbuilding customer relationships in theyear under review.

CONSUMER SEGMENT

VOICE SERVICESIn 2007, MB increased its effortstowards arresting the decline in fixed-voice usage and sustaining a stablefixed-line customer base. One of itsmajor initiatives was the introduction ofthe successful Let’s Talk campaignaimed at rejuvenating the usage offixed-line services. Let’s Talk was offeredin several packages to suit differentcustomer lifestyle and usage needs,including some of the lowest domesticand international call rates with highvoice quality. As a result of theaggressive promotional activities underthis campaign, MB experienced apositive change in behaviour towardsfixed-line usage, particularly evident inthe increase of fixed-to-fixed calls.

MB also continued to retain itsleadership in the prepaid VoIP marketthrough several promotional offersespecially during festive seasons. In conjunction with the Visit MalaysiaYear 2007 campaign, MB introducediTalk Travellers featuring a new range ofiTalk special edition card designs ofMalaysia’s attractions, mainly to serveinbound tourists. More productenhancements followed, with MB


launching iTalk Buddy later in the yearto cater for the youth segment withexciting interactive online features. MBalso entered into a collaboration withAmBank (M) Bhd to launch NexG-iTalkPrepaid MasterCard which providedconsumers with a new avenue to shopand call at the same time.

As a result of these activities, the overallyear-on-year revenue experienced aslower decline from negative 13.2% in2006 to negative 11.4% in 2007.

INTERNET/BROADBAND SERVICESMB registered significant Internetgrowth in 2007 to reach a totalcustomer base of 1.3 million byDecember 2007. The growth was drivenby aggressive broadband promotionsand sales activities such as theStreamyx Super Duper Deal and animproved reseller programme under thePIP initiative. The promotion was aimed

at encouraging higher adoption ofbroadband services among Malaysiansby giving customers extra value in anall-in-one digital lifestyle package.

MB also teamed up with severalpartners to expand its Streamyx Hotspotcoverage, giving customers moreoptions to access the Internet at theirfavourite locations. The customergrowth of Streamyx Hotspot in 2007 alsoindicated a growing popularity ofwireless computing through laptops andother mobile devices among Malaysians.

SALES & MARKETINGIn terms of sales, MB focused on twonationwide events namely the TMSyoknya Fiesta and Let’s Talk Road Showto serve as platforms to createawareness and introduce various TM’sproducts and services to the population.As part of its customer serviceimprovement drive, MB introduced

Frontliner Goes to Customer, aninnovative programme designed toenhance customer interaction usinghigh-tech wireless tablet PCs thatfunction as a virtual counter to assistcustomers with simple enquiries andintroduce TM’s latest product offerings.

The PIP also focused on delivering animproved reseller programme with clearguidelines and selection criteria ofresellers that enabled MB to push forfurther reach of its sales activities.

SME SEGMENTS

VOICE SERVICESFor the SME segment, MB offered arange of customised call plans such asMerdeka Plan and Smartcall package toallow customers to get in touch withtheir clients and business associates atattractive low flat rates. These call plansmanaged to protect fixed-voice usagefrom the continuous threat of alternativevoice service providers. In terms of totalrevenue performance in this segment,MB managed to record a slower year-on-year decline rate from negative 6.4%in 2006 to negative 1.3% in 2007.

INTERNET/BROADBAND SERVICESInternet services such as Streamyxcontinued to be heavily promoted by MB to drive penetration of broadbandInternet in the SME sector. Promotionalpackages included product offeringsdesigned for small businessperformance such as the SOHO andBusiness Broadband packages.

DATA SERVICES & SOLUTIONSWhilst the growth of traditional dataservices was challenged by priceerosion, MB continued to evolve its dataservices by providing managed

Service with a smile

B u s i n e s s R e v i e w

Malaysia Business


networking services and solutions suchas TM IPVPN range of networkingsolutions, hosting and e-commerceapplications.

As SMEs expanded their business, thegrowing need for accessibility andefficiency were met by MB’s dataservices and solutions. As a result of itsefforts, MB experienced a slower datarevenue decline from negative 11.9% in2006 to negative 0.5% in 2007.

SALES & MARKETING ACTIVITIESThe SME market presented a clearopportunity for MB in the year underreview. Annual Industrial BusinessSolution Seminar and SMI Biz Netactivities were conducted to promotenew business solutions to the SMEcommunity as well as to improvecustomer interaction and furtherunderstand their business needs torecommend the most appropriatesolutions.

SME Save N Grow loyalty programmewas an innovation to further assistSMEs in their quest for business growthwhile establishing a sense of

Malaysia Business

partnership with existing customers. In2007, SME Save N Grow membersreached 58,000. Membership benefitsincluded the following:

(a) Cost savings ontelecommunications services.

(b) Business consultation CDs toassist members in streamliningtheir business processes and growtheir business.

(c) Invitations to enrol into skill-building programmes in the areasof finance, marketing and IT.

(d) Cost savings and businessenhancement tools via partners’offerings on financial, insurance,logistical and office securitysystems.

(e) Use of TM facilities to conductbusiness meetings and seminars.

ENTERPRISE & GOVERNMENTSEGMENTS

VOICE SERVICESA major thrust for the year wasretention of revenue and supportingcustomers’ business by providingcompetitive call rates and high servicequality. Customised call plans such as

Smartcall were used effectively tomanage voice churn as well as to satisfycustomer needs for cost efficiencies.

DATA SERVICESMB launched Metro Ethernet Services, aCarrier Class Ethernet standard-basedtechnology, on 17 May 2007 offeringhigh-speed and secured connectivitybandwidth ranging from 4.0Mbps up to1Gbps. With these services, customerscan add on bandwidth in multiples of1.0Mbps whenever required, a conceptcalled bandwidth on demand. TM MetroEthernet services are offered on privatenetworks and as connectivity-basedsolutions. Meanwhile, MB also workedin partnership with value-added solutionservice providers to offer applicationsalongside its networking services.Among the solutions on offer aremanaged security services, bandwidthmanagement applications and managedstorage services.

With a strong account managementteam, MB managed to grow its year-on-year data revenue from negative0.1% in 2006 to 15.3% in 2007 in thissegment. The contribution was mainlydue to up selling opportunities andtimely project completion, resulting inrevenue realisation within 2007.

SALES & MARKETING ACTIVITIESSales and marketing activities weredirected towards establishingoutstanding customer relationshipssupported by personalised andexperienced sales teams to handleenterprise customers. MB alsoembarked on a sales incentiveprogramme to further motivate its salespersonnel.


DOMESTIC WHOLESALEBUSINESSOverall, the Domestic WholesaleBusiness or DWB posted a lowerrevenue of RM18.4 million against 2006mainly due to lower achievement ofPSTN Minutes and VoIP revenue andslow take-up on DSL Wholesaleservices. However, domesticinterconnect revenue achieved 6.0%growth from 2006 to 2007. This wasmainly contributed by improvements incategorisation of call types.

VOICEVoIP traffic minutesDWB provides the facility for VoIPService Providers to establish andoperate voice calls and fax services aswell as a range of value-addedapplications. Utilising TM’s extensivedomestic network coverage, DWB offersVoIP Access that enables voiceconnectivity over VoIP platform, a morecost-effective solution for the wholesalemarket. With its established Clearing

House service, VoIP Premium service,extensive network of partners andcoverage, DWB is well positioned toserve the domestic licensed carriers’business needs.

Interconnect serviceIn addressing growing competition inthe existing telecommunications market,DWB has positioned itself well throughits competitive interconnect serviceswhere licensed carriers can nowinterconnect fixed and mobile voice,ISDN and fixed SMS services.

INTERNET/BROADBAND SERVICESBroadbandTargeting Internet Service Providers(ISP), Network Service Providers (NSP)and Application Service Providers (ASP),the broadband service delivers DSLconnectivity from end user RemoteTerminal Units up to the TM IP networkplatform. At the end of 2007, DWB haddelivered 1.6 million broadband portsnationwide.

Bringing the web into schools

DATA SERVICESBandwidth ServicesAs the main wholesale bandwidthservices provider and with theprogressive demand for higherbandwidth services especially to bringwireless services like 3G to endcustomers, DWB is offering a reliableand managed transmission media viaDense Wave Division Multiplexing(DWDM) across the country. However,DWB still continues to offernarrowband, broadband and opticalbandwidth services over its legacytechnology platform such as DigitalData Network (DDN) and SynchronousDigital Hierarchy (SDH).

Data ServicesAs one of DWB’s technologicalbreakthrough solutions, data servicesaddress the connectivity needs ofcustomers over geographically-diversesites. The domestic data servicesoffered include Frame Relay, ATM andMPLS based IP networks to fullyintegrate customers’ networking needs.Wholesale Ethernet service is availableto support TM products and servicepackages such as TM Direct, TM IPVPNand Digital Home services.

INFRASTRUCTURE SERVICESInfrastructure services allow for acustomer’s nationwide networkexpansion in a timely and cost-effectivemanner. It is gaining popularity as asubstitute for infrastructuraldevelopment through infrastructuresharing, network co-location andtenancy services. DWB provides theentire support infrastructure forcustomer equipment that ranges fromtower space for fixed antenna andmicrowave dishes, power supply,climate control and buildingmanagement.


Malaysia Business


Malaysia Business

Enhancing vendor relationships

GLOBAL BUSINESSMB’s Global Business (GB) has acontinuing focus to drive new revenueswhile maximising TM assets insubmarine cable systems, data centresand satellite earth stations. In 2007,GB’s revenue achievement increased by30.4%, compared to 2006. This wasmainly due to high growth in bilateralvoice and bandwidth businesses.

VOICEGB provides voice services on twoplatforms namely, PSTN and VoIP. GB’s core voice function is to ensureline-cost reduction and profitability forTM’s international outbound voice trafficgenerated from its retail and domesticwholesale business entities, as well asaddressing the International CarrierWholesale market in respect of hubbingtraffic business.

The performance of GB’s voice trafficbusiness was largely contributed byhigh growth in hubbing traffic and otherinitiatives as detailed below:

1. Demand for Bangladesh trafficincreased as a result of regulatoryaction to cut off all grey routes.

2. Business collaboration with TMIsubsidiaries and Celcom to routetheir organic traffic through GB.

3. Contribution of value-addedservices, successful alliances withcarriers on delivery of premiumservices via VoIP and upgrading ofTMUSA Softswitch.

4. Streamline Volume Commitmentthat limits the mass availability ofMalaysia fixed-voice traffic supply,resulting in stability of Malaysiafixed-voice market rate.

5. Implementation of automatedrouting and monitoring tools forintegrity control of GB voicebusiness.

INTERNET/BROADBAND SERVICESGlobal IP TransitIn support of the rapid demand forInternet access requirement fromregional markets in 2007, TMrepositioned Global IP Transit service asone of its premium core serviceofferings. Riding on ATOM (AnyTransport over MPLS) IP networkplatform, it currently supports Streamyxservice international requirements andis recognised as one of the leadingcarriers in the region.

The service is offered with a dedicatedaccess link to customers from its globalpoint of service with speeds rangingfrom 64kbps up to 10Gbps viasubmarine cable systems, satelliteservices and in-country local leasedcircuits or Metro Ethernet connections.In addition, the product also providesoptions for bundling with Global Co-location, Managed Router, and IPv6Transit services.

IP Transit Point of Services

Region Country of Presence

Asia MalaysiaSingaporeHong KongJapanKoreaJakarta*

North America Palo AltoSan JoseLos AngelesAshburnNew York*

Europe LondonAmsterdam

South Asia Sri Lanka

Middle East Bahrain*Egypt*

* Provided through Global Ethernet network


DATA SERVICESInternational bandwidth servicesEnabling contact beyond Malaysianshores, a range of bandwidth services isoffered via TM’s extensive internationalnetwork infrastructure, which includes acombination of terrestrial, submarinefibre optic cable systems and satellite.Accentuating One Stop Shopping (OSS)and Full Channel Service (FCS),international bandwidth services linkMalaysia to any destination in the world.

TM’s major submarine systems areSMW3, SMW4, SAFE/WASC/SAT-3,APCN2, JUSCN, CUSCN, DMCS andBRCS which connect Malaysia to Northand South Asia, Europe, Africa, MiddleEast and United States of America. Tomeet the growing demand, TM is alsoin the process of upgrading SMW4,APCN2 and SAFE submarine cables,expected to be ready as early as 2009.

International Private Leased Circuit (IPLC)TM’s IPLC offers high-speed dedicateddigital connections not only fromMalaysia to the world but also links onecountry to another via the global arteryof vital submarine cable systems.

International Satellite ServicesWith more than 10 satellites over Asia,TM’s Bandwidth via Satellite servicesoffers a point-to-point dedicatedconnectivity from Malaysia to the world.TM utilises major satellite systems suchas MEASAT, INTELSAT, PANAMSAT,ASIASAT and JSAT which providefootprints to most locations around theworld. Global VSAT offers a satellite-

based Single Channel Per Carrier(SCPC) technology, which uses a VerySmall Aperture Terminal (VSAT) antennaand indoor unit to provide reliablemulti-way communication links globally.

Bandwidth TransitBandwidth Transit is a fast and reliableconnectivity solution that is establishedin one country and terminates inanother country while transiting viaMalaysia.

Bandwidth BackhaulBandwidth Backhaul is a focused anddedicated capacity solution betweenCable Landing Stations or BorderStations in Malaysia which thecustomer owns or Indefeasible Right ofUse (IRU) capacity within theinternational submarine cable system orborder facilities.

Exploring possibilities with broadband


Malaysia Business

Global IPVPNTM’s Global IPVPN is a cost-effectivemanaged networking solution thatoffers a simplified, secured and scalablecommunication network.

In 2007, TM continued to expand itsown node in Sri Lanka to penetrate theIP market in the South Asia region.This will complement the existing nodethat has been located in the MiddleEast, North Africa, Europe, US, ASEANand North Asia regions. In order toexpand global reachability, Network-to-Network Interconnection (NNI) initiativeshave been initiated to allow TM and itspartners to leverage on each other’sextensive IPVPN networks. A strategicNNI project has been successfullyimplemented with AsiaNetcom, ACASIAand C&W. Under this arrangement, TMcan now offer its customers enhancedand seamless services covering a muchwider service area.


Malaysia Business

Enhancing commercial excellence to drivetopline revenue.

For retail business, focus for theconsumer and SME segment is tomaintain strong broadband growth andstabilise the voice decline, whereas inthe enterprise segment, newopportunities lie in the managedservices and business processoutsourcing areas. In the domesticwholesale business, the priority is tomaintain current leadership position andcapture growth opportunities in voiceand bandwidth services. For the globalbusiness, the focus is to grow beyondcurrent existing businesses.

Driving operational excellence towardsstronger cost and profitabilitymanagement.

Initiatives planned for the year willfocus on driving procurementexcellence, deploying lean network andbusiness operations ‘best practices’ andenhancing quality and customer serviceoperations. The overarching controlframework across each business lineswill be strengthened to ensure tightercost and profitability management.

PROSPECTSOverall, the Malaysia fixed servicesmarket is expected to grow in 2008,with a strong bias towards data andbroadband across all customersegments. MB is ideally positioned tocapitalise on these growth opportunities,with its leading position in basic voice,broadband and data services, providinga springboard towards becomingMalaysia’s leading next generationcommunications provider, embracingcustomer needs through innovation andexecution excellence. MB will enrichconsumer lifestyles and experiences,improve performance of its businesscustomers – by providing nextgeneration services, high-value solutionsand upholding customer-drivenprinciples.

2008 will be an important year for MBas it participates in the strategicdemerger exercise and embark on itsnext wave of PIP anchored on twothrusts:

• Enhancing commercial excellence todrive topline revenue; and

• Driving operational excellencetowards stronger cost andprofitability management.

Broadband wherever you are

A Thing Of BeautyRated as the most beautiful of all pearls, the Blue Pearl istruly unique. It is only the Paua that can produce pearls ofits fine quality and spectacular luster whilst its naturaloccurrence is exceedingly rare. Thus every pearl representssomething borne from patience, perfection and carefulnurturing.

A Crown JewelCelcom represents one of TM’s finest creations. Determinedto revolutionise Malaysia’s mobile industry, Celcom hasestablished its leadership, and offers some of the mostinnovative products and services. It is indeed one of TM’scrown jewels. While Celcom can attribute its shiningsuccess to its rich potpourri of skills, creativity andtechnology, a key stimulus comes from the recognition ofits full potential by TM. With careful nurturing and shaping,Celcom has been unleashed to carve a new future for itself.

A Thing Of BeautyRated as the most beautiful of all pearls, the Blue Pearl istruly unique. It is only the Paua that can produce pearls ofits fine quality and spectacular luster whilst its naturaloccurrence is exceedingly rare. Thus every pearl representssomething borne from patience, perfection and carefulnurturing.

A Crown JewelCelcom represents one of TM’s finest creations. Determinedto revolutionise Malaysia’s mobile industry, Celcom hasestablished its leadership, and offers some of the mostinnovative products and services. It is indeed one of TM’scrown jewels. While Celcom can attribute its shiningsuccess to its rich potpourri of skills, creativity andtechnology, a key stimulus comes from the recognition ofits full potential by TM. With careful nurturing and shaping,Celcom has been unleashed to carve a new future for itself.

Cel

com

(Mal

aysi

a) B

erha

d


BusinessReview

DATO’ SRI MOHAMMED SHAZALLI RAMLYCHIEF EXECUTIVE OFFICERCelcom (Malaysia) Berhad

OVERVIEW

Celcom’s performance in 2007 was its

strongest in recent years. The turnaround

efforts started in 2006 were further

intensified, and the sustained momentum

resulted in a record-breaking performance

beyond market expectations.

Total Customer Base


7.2 million + 18%Total Revenue

RM5,157.1 million + 13.1%Prepaid Customer

5.9 million + 22.9%Postpaid Customer

1.3 million + 8.3%


Celcom’s successful implementation ofthe Performance ImprovementProgramme resulted in aggressive salesand marketing activities, intensifiedinitiatives to reform distributionchannels and efforts to implement asegment-focused brand strategy. As aresult Celcom strengthened its marketposition, providing a strong foundationfor further growth in 2008.

Celcom continued to maintain itsleadership in coverage and networkquality both in terms of 2G, 2.5G, 3Gand HSDPA, customer service standardshave been taken to new heights and theoverall brand perception is at thehighest ever recorded.

2007 also saw Celcom leading theindustry in initiating a number ofindustry-firsts. Celcom was the firstoperator to rollout its own brandedretail stores, Blue Cube. Celcom’spartnership strategy resulted in

The postpaid segment presented achallenge for Celcom in 2007 withincreasing price pressure and aggressivecompetition. Despite an erosion in thecustomer base during the first half ofthe year, the introduction of various newinnovative postpaid products in thesecond half resulted in the trend beingreversed, successfully addressing thedecline, and even resulting in netpostpaid growth for the year. On a netbasis, postpaid customers grew from 1.2 million in 2006 to 1.3 million as ofDecember 2007.

As at 31 December 2007, Celcom’scumulative customer base exceeded the7 million mark, growing by 18.0% from6.1 million to 7.2 million customers.

The stronger revenue base coupled withcontinued cost control resulted inCelcom posting an earnings beforeinterest, tax, depreciation andamortisation (EBITDA) of RM2,310.6million in 2007 from RM1,962.9 millionin 2006, an improvement of 17.7%. Inline with this, EBITDA margins alsoimproved from 43.0% to 44.8% in 2007.

In September 2007, Celcom distributedRM730.1 million in cash to itsshareholders by way of a capitalrepayment exercise. This has resultedin an improvement in a number of keyfinancial indicators namely earnings pershare and return on equity, from 36.1sen to 66.6 sen, and from 32.1% to37.9% respectively.

Malaysia’s first MVNO, and the firstnationwide domestic roamingagreement. Celcom was also the firstoperator to launch the concept ofbranded customer service, introducingthe ‘Anna’ icon. Its innovative broadbandand data strategy also resulted in theintroduction of the first ‘daily use’ and‘monthly capped’ data plans.

FINANCIAL PERFORMANCEThe Celcom Group delivered acommendable performance for thefinancial year ended 31 December 2007,despite an environment of mountingand intense competition. The Groupchalked up 3 significant recordachievements: profit after taxationexceeded RM1 billion, revenuesurpassed the RM5 billion mark, and its total customer base expanded toover 7 million.

Profit after tax and minority interests ofRM1,051.6 million represented a healthyand significant growth of 28.8% fromthe RM816.4 million posted in the lastfinancial year. This was attributable to astrong growth momentum in revenuesduring the year. Total revenue, includesother operating income posted for theyear grew by 13.1% from RM4,560.1million in 2006 to RM5,157.1 million in2007, the highest recorded to date.Revenue growth came mainly from thebuoyant prepaid segment, whichrecorded an increase in the customerbase of 1.1 million or 22.9%, bringingthe total number of prepaid customersto 5.9 million from 4.8 millionpreviously.


In an effort to reach out to the foreignworkers segment, Celcom alsointroduced targeted packages andcustomised promotions for the Indian,Indonesian and Filipino communities.

SALESOn the sales front, 2007 saw thecontinuation of Celcom’s dealerincentives programme, which was a key success factor in the turnaroundexperienced by the Group in the secondhalf of 2006. Celcom’s retail universealso grew to exceed 15,000 outlets.

Celcom also introduced the innovativeBlue Cube retail store concept, aimedat revolutionising telecommunicationsretailing by providing consumers thechance to experience cutting-edgetechnologies. Blue Cube is a powerful‘one-stop’ concept store for lifestylemobile devices, 3G services and mobilecontent. It is the first concept storewhich allows consumers to experience,touch and feel the full range of mobilelifestyle products and services fromCelcom. As of December 2007 over 30 Blue Cube outlets have beenestablished nationwide.

In 2007, Celcom also launched ChannelX, the New and Ultimate Mobile ContentChannel, offering customers the latestmobile content and downloads rangingfrom music and movies to games.Channel X is the first cross mediacontent brand which allows customersto experience mobile content via theInternet, mobile WAP, TV and radio.

The Channel X portal is accessible atwww.channelx.com.my or by dialing*118# from mobile phones.

XPAXThe Xpax prepaid product continued tobe the main contributor to Celcom’soverall revenue. This was mainly due tothe success of the Xpax Bonuscampaign which featured four differentbonuses – Every Month Bonus, BirthdayBonus, Reload Bonus and Stay ActiveBonus. As a result, the prepaid customerbase grew by 22.9%, to 5.9 million.

The ‘Xpax Who Says’ campaign wasalso another major success aimed atrepositioning Xpax as the only prepaidthat offers the best rates, the widestcoverage, the fastest network and thebest bonuses.

OPERATIONSLeveraging on its leadership in networkcoverage and 3G, Celcom continued toexpand its network capacity to meet thesurge in demand for its services. Itsleadership in the mobile sector wasfurther reinforced when it won the bestT2 service provider among cellularoperators in 2007, an award conferredby the Malaysian Communications andMultimedia Commission (MCMC).

Capitalising further on its strengths,Celcom launched its new ‘Unbeatable’campaign, which emphasized thecompany’s superiority in speed,coverage, rates and service. Thecampaign was a huge success andfeatured Celcom’s latest line-up ofPower Icons such as Ryan Giggs, JohnTerry, Wang Lee Hom and Peterpan.

In 2007, Celcom also unveiled its newBranded Customer Service initiativeaimed at providing a total customerexperience. In line with this, Celcomintroduced Anna, its Customer ServiceAmbassador, an icon who representsthe very essence of excellent customerservice, being courteous, attentive andhelpful.

During the launch of this innovation,Celcom also introduced other customerservice initiatives from online webregistration for postpaid customers, tofree calls to its contact centrethroughout the day. New uniforms inline with the new Branded CustomerService also drew attention as did thelaunch of nationwide kiosks for cash,cheque and credit card payments.

Mobile connectivity – enhancing one’s options


Celcom (Malaysia) Berhad


Complementing Blue Cube, over 70micro kiosks have been constructed andsituated strategically at all majorshopping centres throughout thecountry, reinforcing Celcom’s brandpresence within these key locations.

Introduction of Celcom’s easy reloadanchored by a newly developed onlinerecharge platform with a capacity of 1.2 million transactions per day hasalso resulted in a stable performancein-market.

CELCOM BUSINESSDespite an increasingly competitiveenvironment, Celcom continued to growits presence in the Enterprise marketand is believed to be the country’slargest business mobile provider byrevenue.

The Celcom Business name wasintroduced in 2007 to crystallize thedivision’s product offerings, servicecommitment and overall valueproposition to business customers. This involved further enhancement of itsproduct portfolio – marketed under thePowerTools brand – and diversificationaway from basic voice and dataconnectivity to higher value-addedservices and business applications. This repositioning was reinforced by theintroduction of a Customer ServiceCharter with defined service levelcommitments for large corporatecustomers.

Celcom Business enjoyed robust growthof advanced data services in 2007. Itrecorded the fastest BlackBerry salesgrowth in the region and secured largemachine-to-machine (M2M) customercontracts for remote meter reading,vehicle tracking, and wireless POS and

ATM connectivity. Core voice productsales in 2007 were also boostedthrough channel expansion, with thecreation of a Value-Added Resellerprogramme and tie-ups with regionaland national Associations.

CELCOM BROADBANDRecognising the increasing demand for‘anytime, anywhere’ broadbandconnectivity, Celcom launched itsbranded broadband service, “CelcomBroadband” in July 2007, for bothbusiness and personal connectivity. Theproduct provides the best value offering,providing a fully mobile, high speedbroadband offering at affordable rates.

Bringing the community spirit into schools – Celcom XCHANGE



Celcom Broadband provides speeds upto 3.6Mbps based on High Speed DataPacket Access (HSDPA) technology, withthe widest 3G and HSDPA in thecountry, covering approximately 60% ofthe population. Celcom Broadbandcustomers can also roam globally on2.5G or 3G networks over 168 operatorsand 59 operators respectively. A uniquefeature of the broadband offering is thatcustomers have the flexibility to chooseeither a Celcom Broadband modem, orto use their existing 3G phones as amodem.

Celcom successfully launched a varietyof innovative pricing packages providingsimple consumer propositions, meetingthe needs of all consumers: light users,can opt for a pay-per-use plan, withcapped monthly charges; occasionalusers can opt for Malaysia’s only dailyunlimited plans whilst heavy users canopt for either of two monthly unlimitedpackages with speeds up to 384k or3.6Mbps respectively.

STRATEGIC ALLIANCESTo widen its reach and take advantageof new business opportunities, Celcomformed alliances with several majorcorporations. In 2007, Celcom becamethe first and only mobile operator inMalaysia to join forces with variousMobile Virtual Network Operators(MVNOs) to complement Celcom’sexisting business. A MVNO targetingforeign workers was launched withMerchantrade Asia Sdn Bhd in July2007, whilst MoUs have been signedwith REDtone and Tune Talk, targetedto launch in 2008. These alliances willallow Celcom to further concentrate onspecific target segments for its corebrands, whilst allowing it to penetratenew markets via partners.

Furthermore, Celcom also signedMalaysia’s first-ever nationwidedomestic roaming agreement withUMobile Sdn Bhd (formerly known asMiTV Networks Sdn Bhd). UMobilecustomers will now be able to roam onCelcom’s superior 2G network.

Celcom also entered into a MoU withTune Money to launch Malaysia’s firstMobile-enabled Prepaid Visa card, to belaunched in 2008.

Celcom Broadband – ‘Anytime Anywhere’




Celcom is also confident that post-demerger, being part of a focusedmobile operation, RegionCo will providefurther opportunities for value creationvia identifying and implementingregional best practices and by workingin closer collaboration with other TMIcompanies to realise cost savingopportunities.

• focus on value retention and growthwhile maintaining profitability byprioritising key market segments

• expand the enterprise business viapartnerships and increasedcustomisation.

• work towards improving customerretention by leveraging on theinitiatives introduced in 2007.

• continue to upgrade the distributionnetwork and create new channels,enhancing operational processesand implementing cost-savingsynergies.

• expand its leadership in mobilebroadband and increase usage inmobile data services and content.

• Create new revenue streams in m-commerce and mobileadvertising.

PROSPECTSThe year 2008 is anticipated to be anexciting and challenging year in theMalaysian mobile telecommunicationsindustry. In addition to the expectedlaunch of the Mobile Number Portability(MNP) exercise and the entrance ofvarious MVNOs, two other 3G operatorsare expected to fully launch theirservices in competition with Celcom.These developments are expected tointensify the already competitive natureof the telco industry, thus forcingmobile operators to become moreaggressive and more segment-focusedespecially in customer acquisition in anincreasingly saturated marketplace.

Despite the likely industry challenges in2008, Celcom believes that theinitiatives and strategies implementedwill form a strong foundation forcontinued strong performance. For2008, Celcom aims to:

Celcom’s simple and innovative pricing packages


Greatly AppreciatedWhile the Blue Pearl can only be found in one species, itsfame is not as limited. Across the world, people covet itfor its almost unearthly beauty as much as for its rarity.No matter what the reason, the Blue Pearl will never be amere purchase. It will be a treasure for always. That isbecause its monetary value is paled by its intrinsic quality.

Regional AppealIn the business of communication, there is a constant need toexpand reach. Through years of dedication and strongpartnerships TM has established an intricate and extensivecommunication network and a portfolio of mobile assetsacross the region. This track record has earned TMrecognition as one of the leading Asian telcos. But moreimportantly, through adherence to high standards, TM isbetter known and trusted for the intrinsic quality of its brand.

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BusinessReview

DATO’ YUSOF ANNUAR YAACOBCHIEF EXECUTIVE OFFICERTM International Berhad

OVERVIEWTM International Berhad (TM International)

oversees the Group’s international operations and

investments in nine Asian countries — Sri Lanka,

Bangladesh, Indonesia, Cambodia, Pakistan, India,

Iran, Singapore and Thailand. The year 2007 saw

the Company building on the previous years’

acquisitions and focusing on post-acquisition

implementation activities. Among the highlights

were the successful listing on the Bombay Stock

Exchange of TM International’s Indian associate,

Spice Communications Limited in July and the

announcement of the demerger between TM and

TM International in September. In December, TM

International was converted into a public company.

Mobile Customers

Facts at a GlanceOperations

32.6 million + 45.3%PATAMI

RM744.9 million + 19.7%


AS AT 31 DECEMBER 2007

OPERATIONAL HIGHLIGHTSInternational operations continued torecord an impressive number of mobilecustomers in the year under review.International operations attracted 32.6million customers as at end 2007, anincrease of 45.3% from the 22.4 millioncustomers the previous year.

For the financial year ended 31 December 2007, internationaloperations recorded operating revenueof RM4,987.2 million compared toRM4,165.4 million the previous year.This translated to a growth of 19.7%.

Profit After Tax and Minority Interest(PATAMI) from international operationsstood at RM744.9 million in 2007compared to RM677.5 million in theyear before.

The strengthening of the Ringgit againstother local currencies in 2007 hadadversely affected the Group’s numbersin Ringgit terms. The stronger Ringgithas resulted in lower translated revenueand PATAMI numbers by 7.9% and3.8%, respectively.

Company Country Business Effective interest Customers

PT Excelcomindo Pratama Tbk. Indonesia Cellular 66.99% 15,468,600

Dialog Telekom PLC Sri Lanka Quadruple play 84.81% 4,259,529

TM International (Bangladesh) Limited Bangladesh Cellular, ISP 70.00% 7,183,382

Telekom Malaysia International Cambodia Cellular 100.00% 311,650(Cambodia) Company Limited

Multinet Pakistan (Private) Limited Pakistan Long Distance/ 89.00% - na -International voice;Broadband

Spice Communications Limited India Cellular 39.20% 3,800,633

MobileOne Limited* Singapore Cellular 29.69% 1,535,000

Mobile Telecommunications Company of Esfahan Iran Cellular 49.00% 30,568

Samart I-Mobile Public Company Limited** Thailand Mobile content and 35.58% - na -mobile telephonedistribution

Samart Corporation Public Company Limited Thailand Holding company 18.97% - na -

* TM International and Khazanah Nasional Berhad jointly have a shareholding in M1 through a Company known as SunShare Investments Ltd. On 6 February 2008,TM International and TM International’s indirect wholly-owned subsidiary, Indocel, entered into a Sale and Purchase Agreement (SPA) with Khazanah to acquire allof Khazanah’s equity interests in SunShare and XL, to be satisfied through the issuance of new ordinary shares of RM1.00 each in TM International.

** TM International held directly 24.42% equity interest in Samart I-Mobile Public Company Limited (SIM). TM International also held indirect equity interest in SIM of11.16% (2006: 10.90%) by virtue of its equity interest in Samart Corporation Public Company Limited.


CONSOLIDATION ACTIVITIESAfter a succession of acquisitions inIndonesia, Singapore, Pakistan,Cambodia, Thailand and India over thepast three years, TM Internationalfocused on strengthening its existinginvestments in 2007.

Among the more notable developmentswas the completion of the sale of theentire 60.0% shareholding in TelekomNetworks Malawi Limited to MTLMobile Limited for a total cashconsideration of US$16.0 million(RM55.0 million) in April 2007. The salewas part of a broader re-orientation ofTM Group’s international investmentstrategy to focus on geographic regionscloser to home.

In Sri Lanka, Dialog Telekom PLC(Dialog) executed a rights issue to raiseSLR15.5 billion (RM482.1 million) tofund the Company’s aggressive

expansion plans. The rights issue wasaccompanied by a Rated CumulativeRedeemable Preference Shares (RCRPS)issue aimed at raising up to SLR5.0billion (RM155.5 million). The proceedsof the rights issue and RCRPS totalilngapproximately SLR20.5 billion (RM637.6million) went to the partial financing ofDialog’s capital expenditure for the nextthree years. The capital expenditurewould target accelerated expansion ofnetwork capacity and coverage as wellas transformational investments inconvergent technologies spanning themultiple business lines of the Group.Dialog also received a US$70.0 million(RM240.6 million) package fromInternational Finance Corporation (IFC)– a member of the World Bank Group –in September and entered into a deedwith TM International (L) Limitedallowing IFC to purchase up to 1.6%holding in Dialog. As at end 2007, TM’sshareholding in Dialog stood at 84.81%.

Satellite farm – Cyberjaya




Moving from strength to strength, TMInternational’s Indian jointly controlledentity, Spice Communications Limited(Spice) made a spectacular debut onthe Bombay Stock Exchange (BSE) inJuly. The stock opened at INR55.75(RM4.60) per share, up 21.2% from itsissue price of INR46.0 (RM3.80) pershare. The Initial Public Offering (IPO),which was oversubscribed by 37.5times, would enable the Company tofund debt repayments, pay for itsrecently acquired National andInternational Long Distance (NLD/ILD)licence fees and related capitalexpenditure as well as drive businessexpansion in the current two circles itoperates in, i.e. Punjab and Karnataka.

In a move to further boost its presencein Indonesia, TM International enteredinto a Stock Purchase Agreement withAIF (Indonesia) Limited to purchase allof the latter’s stake in PT ExcelcomindoPratama Tbk (XL). The acquisition, for acash consideration of US$113.0 million(RM388.3 million), enabled the Companyto raise its shareholding by 7.38%,thereby capitalising on one of thefastest-growing markets for mobiletelephony services. XL ended the yearby welcoming Etisalat InternationalIndonesia Limited as one of itsshareholders on 11 December 2007.

TM International’s Cambodianoperations, Telekom MalaysiaInternational (Cambodia) CompanyLimited (TMIC), directed its efforttowards acquiring a larger customerbase in the year under review. Havinginvested more than US$76.0 million (RM261.2 million) over the years, TMICplans to further invest US$150.0 million(RM515.5 million) over the next twoyears to upgrade network capacity andadd 500 new Base Transceiver Stations(BTS) for coverage in rural andprovincial areas. TMIC also rolled out itsnew VoIP service in August 2007.During the year, the Companyunderwent a major re-branding exercisewhich included the unveiling of its new‘hello’ logo in November and substantialbudget allocations for employee trainingprogrammes to boost operationalefficiency and effectiveness.



The renewed focus on boostingexecutional capability throughout itsoperations abroad in 2007 culminated inthe decision by TM’s Board of Directorsin September 2007 to de-merge themobile and non-Malaysian businessesfrom TM Group. The proposed de-merger would accelerate operationalimprovements and growth effortsthrough clearer strategic andorganisational focus. It would alsoprovide greater transparency of thefinancial and operational performanceof both entities. The exercise wouldresult in the proposed listing of theentire issued and paid-up ordinaryshare capital of TM InternationalBerhad on the Main Board of BursaMalaysia Securities Berhad.

VODAFONE ALLIANCEOVERVIEWTM entered into a partnership withVodafone Alliance on 25 January 2006where each party agreed to jointlyexplore and identify opportunities toenhance the businesses of theirrespective companies throughcollaboration in international mobiletelecommunications products andservices. This would be achieved via theadoption of Vodafone Global Productsand Services under the internationally-recognised Vodafone brand throughoutthe Group.

Subsequently, Vodafone entered into aseparate Cooperation and BrandingAgreement with respective TMsubsidiaries namely Celcom, Dialog and XL.

The overall objective of the CooperationAgreement was to establish an effectiveand efficient framework for thefollowing:

• Increased roaming revenue for bothVodafone Group and TM Groupcompanies via the implementation ofVodafone Global Product andServices in the area of internationalmobile telecommunications.

• A segmented dual brand andcoordinated brand and advertisinginitiatives.

• Cooperation in the acquisition,service provision and managementof internationally-operating corporatecustomers.

• Reciprocal Roaming Agreementsbetween members of the VodafoneGroup, TM Group and any PartnerNetworks.

PRODUCTS & SERVICES LAUNCHHIGHLIGHTSAmong the key Products and Serviceslaunches which took place throughoutthe tenure of the Partnership were:

• Vodafone Enterprise Propositionincluding BlackBerry from Vodafonewhich was successfully launched byCelcom, Dialog and XL respectively.

• Vodafone Mobile Connect cards andother PC connectivity products.

• Collaboration in MNC initiatives forthe acquisition, provision andmanagement of services tointernational corporate customers.

• Vodafone Roaming propositions suchas the establishment of VirtualHome Environment, PrepaidRoaming, GPRS, 3G Roaming,Assisted/Managed Roaming andData Roaming Tariff.

• Segmented dual branding in respectof Vodafone Global Products andServices.

• Participation in ProcurementArrangements/Supply ChainManagement of handsetsparticularly Ultra Low CostHandsets (ULCH).

ASIA MOBILITY INITIATIVE(AMI) ALLIANCETM’s participation in AMI was formedthrough Celcom, XL and MobileOneLimited (M1). M1 has been a membersince April 2003 while Celcom and XLjoined the alliance in June 2005.

Formed in 2003, AMI was one of thefirst Asian alliances set up to worktowards various business initiatives formember countries and providedeliverables for mobile customers inthese areas. It also helps increase itsmembers’ market shares in theirrespective home markets as well asimprove profitability through strategickey initiatives like developing selectivemarketing packages and cross-borderservice offerings. In addition, AMIfacilitates economies of scale by havingvendor benchmarking, group-wideprocurement, and content sharing. Italso serves as a common platform forsharing technological know-how andexperience.




In the year under review, AMI welcomedIdea Cellular and Sun Cellular to thesix-member group, replacing SMARTand Telstra. The number of customersrepresented by Celcom, XL, DTAC, M1,Idea and Sun totalled 60 million. Amongthe key programmes introduced in 2007were flat rate roaming service, fullinterconnect for VHE services, RoamingVoucher Recharge (RVR) and AirtimeExchange (ATE) Project, CAMEL IIInterconnectivity and EnterpriseProgrammes.

INDUSTRY CHALLENGESWhile consolidation activities dominatedTM International’s focus throughout theyear, the Company underwent anumber of industry-related challenges.In Sri Lanka, Dialog’s revenue potentialwas diluted by intermittent disruption ofservices in the country’s Northern andEastern provinces during the first halfof 2007 and a reduction in touristarrivals which, in turn, dilutedInternational Roaming Revenues relativeto their full potential. The Companyalso experienced operational and directcost expansion during the second halfof 2007, largely arising from macro-economic conditions, aggressive rolloutof multiple new services and expansionof customer base.

In Bangladesh, TM International(Bangladesh) Limited (TMIB) encounteredchallenges in the area of VoIP regulationand pricing. The Company tookimmediate measures to counter thesechallenges including the execution of its100-day Performance ImprovementProgramme (PIP) exercise to addressrevenue and market share issues.

In Indonesia, XL introduced lower tariffsfor its bebas plan to boost revenue andvoice traffic in the third and fourthquarters of the financial year. TheCompany also implemented a hybriddistribution system which led to theexpansion of more than 400,000 directand indirect distribution channels. Interms of improving its networkinfrastructure, XL ended the year with11,153 BTSs or an additional 3,897BTSs in 2007. The Minutes of Use(MoU) per customer in Indonesia is stilllow compared to other countries. Thisis mainly because the Average RevenuePer Minute (ARPM) in Indonesia is stillrelatively high compared to othercountries. With interconnect ratescoming down in 2008, the Companyexpects continued decline inrevenue/minute.

REGIONAL PRESENCEThe year 2008 will see TM Internationalhousing all international investmentsand Celcom post-Demerger. TheCompany’s investment strategy willremain focused on high growth andemerging markets closer to home. This is in line with the Company’s aimto become the leading South andSouth-East Asian mobile operator.

The Company will continue to manageand expand investments in India andIndonesia, two of the fastest growingmobile markets in the region. Particularemphasis will also be given to thedynamic economies of Indochina wherethe telecommunications sector hasimmense growth potential.



IndonesiaPT EXCELCOMINDO PRATAMA TBK (XL)

OVERVIEWIn 2007, the Indonesiantelecommunications industry hadanother year of strong growth. At theend of 2007, there were approximately102 million cellular customers inIndonesia. This was an increase of50.0% from the previous year, andamounted to a penetration rate of42.0%. With the existence of 11 playersoffering more than 20 products in themarket, XL faced mounting competitionin the year under review.

Nevertheless, the Company grew itscustomer base and revenue by 62.4%and 29.4%, respectively, clearlyoutperforming the industry. XL’s fortifiedmarket position was driven by itsinnovative pricing strategy and newmarket positioning. XL ended the year2007 with 15.5 million customers.

XL’s stellar performance in 2007 led tothe Company making a clean sweep ofseveral industry awards. The awardsincluded Best E-Corp 2007 Award forBest IT System category from SWAmagazine; Best Prepaid GSM CellularAward 2007 for its bebas prepaid card;Best Innovation in Marketing; BestCustomer Care Cellular Award 2007 forCustomer Service and the IndonesianMAKE (Most Admired KnowledgeEnterprise) Winner 2007.

FINANCIAL PERFORMANCEXL’s gross revenue increased by 29.4%to IDR8,364.7 billion [RM3,153.5 million]in 2007. This growth was mainlyattributable to the successful executionof several key strategies, especially inpricing and distribution channelmanagement. A nationwide single tariffof IDR25 per second was introduced inFebruary 2007. In April 2007, XL furtherenhanced the offering by introducing areduced on-net tariff of IDR10 persecond which resulted in a progressiveincrease in call volume. This was thenfollowed by the launching of IDR1 persecond for on-net tariff and IDR10 persecond for off-net tariff which hadstimulated duration per call andsuccessfully increased the revenue andvoice traffic in the third and fourthquarters of 2007. At the same time, XLwas able to enhance its operationalprofitability leading to EBITDA marginimprovement of 2.5% to 42.0% ascompared to 2006. XL’s EBITDA showeda significant growth of 37.4% toIDR3,509.2 billion [RM1,323.0 million].

On the other hand, XL’s net incomedecreased by 61.5% to IDR250.8 billion[RM94.5 million] in the year underreview. This was mainly due toManagement’s decision to book theIDR368.5 billion [RM138.9 million]withholding tax (including penalty) onUS$ bond interest for the period of2004-2007, and forex losses as a resultof the depreciation of the IDR againstthe US$ in 2007.

A total of IDR7.1 trillion [RM2.7 billion]was added to fixed assets for networkinfrastructure and other investments.XL’s cash flow from operating activitieswas IDR3,959.4 billion [RM1,492.7million] while cash flow from financingactivities was IDR3,382.9 billion[RM1,275.3 million]. Cash flow from

financing activities was in the form ofRupiah Bond of IDR1.5 trillion and newbank loans of US$230.0 million andIDR400.0 billion. At the end of 2007,XL’s cash and cash equivalent stood atIDR805.8 billion [RM283.6 million].

OPERATIONSXL’s customer base registeredsignificant growth in 2007 with theacquisition of 5.9 million newcustomers. At the end of 2007, XL’scustomer base was 15.5 million, anincrease of 62.4% from 2006.

XL’s customer base mostly consisted ofprepaid customers which represented96.9% of its total customer base. Net-adds from prepaid services contributed98.4% to the total net-adds or 5.8million new customers. The increase inprepaid customers was mainly driven bybebas which accounted for 87.9% of thetotal net-adds and recorded 106.7%customer growth. This was a result ofXL’s pricing strategy of IDR1 per secondwhich was launched in July 2007.

At the end of 2007, XL recorded 10.1 million bebas customers and 4.9 million jempol customers. Itspostpaid service (Xplor) grew by 24.3%to 481,000 customers or 3.1% of itstotal customer base.

In 2007, XL’s coverage reached 90.0% ofthe Indonesian population. Around75.0% of its capital expenditure for theyear was spent on improving coveragewhile the rest was spent on improvingcapacity. XL’s focus was still in Java,Bali and Lombok with 67.0% of its newcustomers from these areas.




ARPUSince applying its pricing strategy ofIDR1 per second, XL was able toimprove ARPU. As a result of thereduction in on-net and off-net tariffs,MoU per customer significantlyincreased by 74.0% to 50 minutes, thehighest growth over the last 5 years.Therefore, the ARPU increased slightlyto IDR47,000 from IDR46,000 in 2006,despite the reduction in average tariffsper minute.

ARPU from bebas services increased7.0% to IDR47,000, while ARPU fromjempol decreased by 5.0% to IDR37,000.Overall, XL’s prepaid ARPU increasedslightly by 2.0% to IDR43,000 comparedto last year. ARPU from Xplor decreased10.0% to IDR155,000.

PRODUCTS & SERVICESIn February 2007, bebas simplified itscore voice service by offering a flat tariffof IDR25 per second – for any type ofcall, at any time, to any operator, to anydestination. The offering was thenenhanced by another promotion in April2007, introducing a reduced on-net tariffof IDR10 per second. To make theproduct even more appealing, bebasfurther offered a reduction of its tariffto IDR1 per second for on-net tariff andIDR10 per second for off-net tariff inJuly 2007.

In April 2007, to further enhance itsposition as a product with the mostaffordable SMS tariff, jempol reduced itsSMS on-net tariff by 55.0%, offering itat IDR45 per SMS to other XL numbersduring off-peak hours. These off-peakhours were extended in June 2007.Recognising the demand for overseascalls, jempol also offered an affordabletariff starting at IDR16 per second to 51 countries through VoIP (Voice OverInternet Protocol).

XL’s postpaid service, Xplor, followedsuit by simplifying its voice tariff in theyear under review.

Under its “Business Solutions” label, XLcontinued to provide:

1. Fixed Communication Services,including Domestic Leased Line,International Leased Line,Domestic MPLS, InternationalMPLS, Broadband Internet Access(including NAP), VoIP andCollocation

2. Mobile Communication Services,including Corporate User Group,Corporate Data (GPRS 3G), PushMail (XPand, BlackBerry), MobileApplication and Corporate SMSBroadcast; and

3. Convergence CommunicationServices, including Office Zone,GSM PBX Integration, InstantOffice, Hosted PBX, Machine toMachine (Wireless ATM, WirelessEDC), WiFi over Picocell, andVehicle Tracking System (XLocate).

In 2007, XL expanded and reinforced itsfibre-optic network in Medan, Bandung,Surabaya, Semarang and Denpasar withits inner ring road network. It alsoreinforced more than 2,000 km fibreoptic from Medan to Jakarta followingthe construction of submarine fibre-optic spread out from Jakarta to Batamand Riau island.

In anticipation of high network capacitydemand, XL built about 500 km fibreoptic in Jakarta; a multiplex networkwith a capacity of 10 Gbps, DWDM,MPLS and NGN networks to replacethe conventional TDM technology. It alsobuilt a network building in Bintaro aspart of the DRP system (DisasterRecovery Plan).

BTSXL continued to build its BTS networkto expand and strengthen its coverageand minimise its dependency on otheroperators. XL’s committed capitalexpenditure in 2007 was US$700.0million. Half of that amount was usedto expand and reinforce its coverage inJava, Bali and Lombok while one thirdwas used to build a BTS network inSumatera island. The rest wasdedicated to East Indonesia. At the endof 2007, XL’s coverage had reached90.0% of the Indonesian population. The Company added 3,897 BTSs,bringing its total number of stations to11,153 by year end.

XL – forging ahead in Indonesia



Sri LankaDIALOG TELEKOM PLC (DIALOG)

The fixed-line sector also grew by30.0% in 2007 led by CDMA technology-enabled phone sales (58.0% growth)that catered to a largely unfulfilleddemand for low-cost fixed-linetelephony in the market. Severaltelecommunications projects were inprogress during the year to enhanceproduct, service quality and coverage.Third-generation mobile technologywitnessed an increased take-up byconsumers for both voice and data.

Internet penetration in Sri Lanka grewby 24.0% to reach 0.16 millioncustomers. This was largely due to theintroduction and aggressive promotionof fixed broadband Internet.

Aggressive adoption and marketing ofwireless broadband within the SriLankan market was one of the keyhighlights for the year with deploymentof High Speed Downlink Packet Access(HSDPA) and High Speed Uplink PacketAccess (HSUPA) applications in additionto 3G. Dialog, the first entrant into theSri Lankan wireless broadband market,still remained the market leader despitethe entry of Mobitel through theprovision of 7.2 Mbps speed wirelessdata access.

OVERVIEWIn 2007, the telecommunications sectorgrew by approximately 25.0% andcontributed over 20.0% to the GDP.Total tele-density in Sri Lanka saw asharp increase with approximately50.0% of the population owning somemode of telecommunication (fixed andmobile phones). The mobile industryhad 7.1 million users by September2007 relative to 5.4 million in 2006,representing a 32.4% growth in mobiletelephony ownership. The industrygrowth was fuelled by increasedcompetitiveness with all four operatorscompeting intensely on all four strategicdimensions of price, quality, coverageand convenience, giving the Sri Lankanconsumer total value for money.

The Pay TV industry saw modest growthdue to the economic downturn whichled to low customer additions to theindustry. The perception of Pay TV in SriLanka as a luxury service with highertaxes being targeted at imports of keyequipment and services was one of thekey factors for its lower-than-expectedperformance in 2007.

In 2007, Dialog established one of SriLanka’s most technologically-advancedEnterprise Management Centre that hasenabled top Sri Lankan enterprises tooffer their customers the best serviceexperience from a well-trainedcustomer-centric workforce.

Dialog’s superior business strategy in2007 led to its recognition in severalareas of the telecommunicationsindustry. Among the awards that itreceived in 2007 were Best Use ofMobile for Social & EconomicDevelopment for Disaster and EmergencyWarning Network (DEWN); OutstandingAchievement in Customer RelationshipExcellence; Customer Service Centre ofthe Year; Best Use of KnowledgeManagement of the Year and InnovativeTechnology of the Year at the CustomerRelationship Excellence (CRE) Awardsheld in Hong Kong.

Dialog’s eZ Pay service – South Asia’s first in mobile commerce initiative




FINANCIAL PERFORMANCEFor the 2007 financial year, Dialogrecorded SLR32.5 billion (RM1.0 billion)in revenue, representing an increase of26.6% from the previous year.

The Company chalked up gross profit ofSLR19.1 billion (RM594.4 million) for the2007 financial year. This represents a13.4% increase from the SLR16.9 billion(RM553.6 million) recorded for the yearended 31 December 2006.

Earnings Before Interest, Tax,Depreciation and Amortisation (EBITDA)stood at SLR13.7 billion (RM427.3million) for the year ended 31December 2007. This represents amarginal decline of 0.03% from theprevious year’s reported figures.

Dialog recorded a Profit After Tax (PAT)of SLR9.0 billion (RM278.9 million)representing a drop in performance by11.4% relative to the year ended 31December 2006.

OPERATIONSVenturing into the spheres of satellitebroadcasting, Dialog launched DialogSatellite TV, a Direct-to-Home satellitetelevision service in Sri Lanka inFebruary 2007. Dialog Satellite TVfeatures world-class entertainment andthe widest spectrum of channels with aspecial focus on News, Entertainmentand Knowledge-based Programming.

In July 2007, Dialog BroadbandNetworks (DBN) launched its fixedwireless operations based on CDMAtechnology. With its entrance into CDMA,Dialog became a provider of a totalconnectivity solution, encompassingMobile, Fixed, Broadband and Media.

Dialog together with NDB Bank, one ofthe leading private sector commercialbanks in Sri Lanka, unveiled eZ Pay,South Asia’s first mCommerce (MobileCommerce) initiative in August 2007, arevolutionary service that allowsconsumers to purchase goods, pay bills,transfer money and perform bankingtransactions via their mobile phones.

Dialog, the pioneer in InternationalRoaming in the South Asian region,celebrated 10 years of Roamingexcellence in October 2007 with a hostof special promotions and privilegesdesigned to reward its roamingcustomers who have extended loyalpatronage to its roaming service.

DBN, a fully-owned subsidiary of Dialog,became the first in Sri Lanka tointroduce Broadband Internet, poweredby WiMAX technology in November2007.

A milestone was reached when Dialogachieved four million customers inOctober 2007, further strengthening itsmarket position in the Sri Lankantelecommunications industry.

PREFERENCE SHARE ISSUEDialog entered into an agreement withbanks and financial institutions in SriLanka to raise SLR5.0 billion (RM155.5million) via the issuance of 5.0 billionRated Cumulative RedeemablePreference Shares of SLR1 per share.

RIGHTS ISSUEDialog shareholders approved a RightsIssue worth SLR15.5 billion (RM482.1million) which represented the single-largest equity-raising exercise in the SriLankan capital market.

The Company’s principal shareholderTelekom Malaysia Berhad (TM) haspledged to enhance its directinvestment in the country throughsubscribing in full for its entitlementunder the rights issue.

1,000 2.5 G BASE STATIONSDialog unveiled their 1,000th basestation at Yodakandiya. The largest andfastest growing cellular company in thecountry, Dialog’s local coverage spansall provinces of the country. TheCompany’s extensive network coverageis a reflection of its commitment tocater to all segments of societyregardless of demographic disparity,which is an important part of theCompany’s corporate responsibilityphilosophy.

ENTRY INTO BPODialog recently launched a newprogramme to provide BusinessProcess Outsourcing (BPO) services forboth local and international enterprises.The programme, known as EnterpriseContact Management (ECM), offers awide range of contact options includingmultiple modes of Agent Voice,Automated Voice, SMS, fax, email andweb chat.



BangladeshTM INTERNATIONAL (BANGLADESH)LIMITED (TMIB)

network. Nonetheless, due to a one-offGovernment compensation in the thirdquarter of 2007 and higher customeracquisition cost, particularly arisingfrom the SIM tax subsidy, EBITDA andPAT fell from BDT5,998.1 million[RM321.5 million] and BDT4,333.4million [RM232.3 million] in 2006 toBDT4,263.7 million [RM212.9 million]and BDT105.2 million [RM5.3 million] in2007, respectively.

OPERATIONSIn 2007, TMIB embarked on variousmarketing initiatives to create morevalue for its customers. AKTEL Prepaidattracted customers with its PhurtiCampaign, Power re-launch, rechargebonuses and special rates from Powerand Joy. On the other hand, postpaidsolutions saw offers like BTTB FnF,insurance and zero-line rent. AKTELcustomers also received special bundleoffers of free AKTEL PA, SMS and MMS.

For its corporate clients, AKTELintroduced its Power Pack solution andCorporate Messaging Platform foradditional savings. Its InternationalRoaming Unit also launched additionalbilateral voice roaming and GPRSRoaming in 2007.

In terms of network capacity, TMIB hada total of 3,905 BTSs at the end of 2007.The Company added an impressive 1.4million new customers to end the yearwith 7.2 million customers. To meet thedemands of its growing customer base,TMIB expanded its customer servicenetwork to 19 walk-in Customer CareCentres in 2007.

OVERVIEWTM International (Bangladesh) Limited(TMIB) was incorporated on 15December 1997. TMIB operates a GSMcellular service on the 900 and 1800MHz frequency bands under the brandname AKTEL. The year 2007 saw theindustry facing steep competitionamongst the six mobile operators inBangladesh.

FINANCIAL PERFORMANCEFor the year ended 31 December 2007,TMIB recorded a gross revenue ofBDT14,390.1 million [RM718.7 million],an increase of 9.5% from BDT13,139.6million [RM704.3 million] achieved inthe previous financial year. This resultwas achieved despite declining ARPUbrought about by the falling averagetariff from intense competition in theindustry. The increase in revenue wasmainly attributed to the increase of 1.4 million new customers in 2007arising from various marketinginitiatives, improved network capacityand expanded customer service

Boosting performance at AKTEL




OPERATIONSAs at 31 December 2007, TMIC had acustomer base of 311,650. Prepaidcustomers totalled 308,243 whilepostpaid customers totalled 3,407.TMIC’s blended ARPU is the highestamong TM International subsidiaries,and currently stands at US$9.4 permonth.

The Company will continue to focus onnetwork expansion in the year 2008. Inline with this, TMIC will execute Phase6.1 of Project Expansion, which will givethe Company a wider coverage areaand higher quality network in theKingdom of Cambodia.

OVERVIEWTelekom Malaysia International(Cambodia) Company Limited (TMIC)provides services on the GSM 900frequency band under a 35-year cellularconcession commencing 1996 from theMinistry of Posts andTelecommunications. In November 2007,TMIC launched a re-branding campaignto introduce its identity “hello” whichwill spearhead the Company’s plan toaggressively add new business,especially with the establishment of 500additional base stations.

The re-branding process was crucial asit was a key factor in achieving TMIC’sprojected target to eventually becomethe leading mobile operator inCambodia. The re-branding campaignalso focused on areas such as thedistribution network, customer servicequality, manpower and new brandidentity for 10 "hello point" outletslocated in Phnom Penh and theprovinces.

FINANCIAL PERFORMANCETMIC achieved a 33.7% growth inrevenue, from US$30.9 million [RM113.3million] recorded in financial year 2006to US$41.3 million [RM142.0 million] in2007. The surge in revenue was theresult of a healthy 36.1% increase in itscustomer base as well as high blendedARPU, which currently stands at US$9.4per month as compared to US$8.9 permonth in the previous year. On the backof stronger revenue figures, EBITDAmargin stood relatively stable at 44.4%.Profit after tax for the financial year2007 was US$9.8 million [RM33.7million], an increase of 46.3% fromUS$6.7 million [RM24.6 million] reportedpreviously. The Company achieved aReturn on Total Assets (ROTA) above thelocal industry rate of 15.1%.

CambodiaTELEKOM MALAYSIA INTERNATIONAL(CAMBODIA) COMPANY LIMITED(TMIC)

“hello” – spearheading TMIC in Cambodia



OVERVIEWMultinet’s predominant area of businessis broadband connectivity. Broadbandtake-up, however, has been slow inPakistan due to various reasonsincluding the availability of content andcost of bandwidth which is moreexpensive compared to other countriesin the region.

Introduced in 2002, DSL is the oldestform of broadband connectivity inPakistan. Due to its long presence inthe market, it is the dominant means ofconnectivity.

The year 2007 saw the incumbentoperator’s entry into the DSL market,resulting in greater accessibility andaffordability for end users. However,DSL cannot handle the rapidly-increasing bandwidth and customernumbers. This has led to an extensiverollout of FTTH and Wireless networks.

Due to the growing market size,problems in service delivery anddecreasing ARPUs, there has beentremendous interest in the data deliverybusiness with massive WiMax rollouts in2007.

FINANCIAL PERFORMANCEFor the year ended 31 December 2007,Multinet registered total revenue andnegative EBITDA of PKR345.5 million[RM19.6 million] and PKR13.5 million[RM0.8 million], respectively. Thisrepresents a 121.9% and 71.1% growthfrom the results reported last year.Loss after taxation reduced fromPKR106.4 million [RM6.4 million] in2006 to PKR36.6 million [RM2.1 million]recorded in 2007.

OPERATIONSIn 2007, Multinet maximised its revenuethrough the development of newproduct lines such as MPLS and Co-location services, aggressive customeracquisition and retention, businessprocess enforcement and skill setsenhancement. The Company is in thefinal stage of completion of its 4,250km fibre network across Pakistanthrough Project Ittehad. As at 31December 2007, 82.3% of the projectwas completed. Multinet expects toachieve 100.0% project completion inthe second quarter of 2008.

As at 31 December 2007, Multinet’scustomer base stood at 3,300 with amajority of them being Broadband DSLcustomers.

PakistanMULTINET PAKISTAN (PRIVATE)LIMITED (MULTINET)

Multinet – moving broadband in Pakistan




respectively. Spice has one of thelargest roaming networks with over 450 roaming agreements with operatorsworldwide.

The Company’s IPO was completedsuccessfully in 2007 with 37.5 timesoversubscription rate. The stock enjoyslisting status on the Bombay StockExchange.

A major achievement for Spice in 2007was the acquisition of a licence tooperate National and International LongDistance (NLD/ILD) services in India bythe Department of Telecommunications.This development allowed the Companyto carry both voice and data trafficnationally and internationally.

Further, on 10 January 2008, Spicereceived a Letter of Intent (LoI) for theAward of Licence to provide UnifiedAccess Services (UAS) in 4 additionalcircles or service areas i.e. Delhi,Maharashtra, Andhra Pradesh andHaryana. The licences will be issued ona non-exclusive basis subject tocompliance of the UAS Guidelines.

FINANCIAL PERFORMANCEIn 2007, the Company recorded totalrevenue of INR10,346.3 million [RM861.3million] compared to INR8,323.5 million[RM670.9 million] in 2006. Thistranslates to a year-on-year increase of24.3%. EBITDA saw an increase toINR7,396.2 million [RM615.7 million] in2007 from INR2,283.0 million [RM184.0million] recorded in 2006. The Companyregistered profit after tax of INR3,801.3million [RM316.4 million] for thefinancial year ended 31 December 2007as compared to loss after tax ofINR245.2 million [RM19.7 million]recorded in the previous financial year.

Improved performance of Spice wasmainly attributed to 55.5% growth incustomer base, wider populationcoverage from the increased number ofcell sites and gain on sale oftelecommunication towers.

OPERATIONSSpice operates in two circles – Punjaband Karnataka – which are stillundergoing network expansion. Thenumber of cell sites in Punjab increasedfrom 1,192 in December 2006 to 2,031in December 2007, taking thepercentage of population covered to67.0% from 50.0%. In Karnataka, thenumber of cell sites increased from 838in December 2006 to 1,632 in December2007, taking the percentage ofpopulation covered to 40.0% from 20.0%.

The ARPU in both Punjab andKarnataka has decreased from INR364and INR423 in December 2006 toINR269 and INR260 in December 2007respectively.

In January 2007, Spice had a total of2.5 million customers (1.8 million inPunjab and 0.7 million in Karnataka).By December 2007, this number hadswelled to 3.8 million customers (2.3 million in Punjab and 1.4 million inKarnataka).

OVERVIEWIndia’s telecom industry experienced ahealthy increase of activity in 2007. Inan effort to further open up the telecomsector to competition, the industry sawthe emergence of Unified Access ServiceLicence (UASL); Letters of Intent (LoIs)issued to eligible licence seekers as perthe telecom policy; and spectrumallocated to new players. The customergained the most as telecom servicesbecame more affordable and innovativeofferings flooded the market. Telecomregulations were also being developedto ensure better service to the customersuch as the launch of National Do NotCall registry (NDNC) – an effort to reinin telemarketers who contact customersusing their mobile numbers. NDNC isexpected to put a stop to unwantedtelemarketing calls and thus improvemobile customer experiences.

In 2007, wireless customers in Indiareached 233.6 million, a 56.1% increasefrom 149.6 million the previous year. In December 2007, mobile phonecustomers in India grew by over 8million, making it the world’s fastest-growing telecom market. The markethas been consistently adding more than8 million customers every month sinceJuly 2007. The major drivers for thisgrowth are low call rates (as low asUS$0.01 a minute) and cheap handsets.Still, only about a quarter of thepopulation has a telephone. India had272.9 million (23.9% of the population)telephone users at the end ofDecember 2007. The government hastargetted 500 million users by 2010.

Spice is amongst the first private GSMoperators to commence operations inIndia. The cellular operator providesGSM services in Punjab and Karnatakain the 900 MHz range. The totalspectrum allocated in Punjab andKarnataka is 7.8 MHz and 6.2 MHz,

IndiaSPICE COMMUNICATIONS LIMITED(SPICE)

Spice’s successful IPO



OVERVIEWM1 is a leading mobile communicationsprovider in Singapore, with more thanone million customers. It provides a fullrange of mobile voice and datacommunications services over its2G/3G/3.5G network.

M1 also provides international callservices to both mobile and fixed-linecustomers. It has partnered operatorsglobally to provide its customerscoverage and roaming services in over200 countries and territories.

With a newly-upgraded 3G network, M1 became the first mobile operator inSingapore to offer High Speed DownlinkPacket Access (HSDPA) in 2006 when itlaunched ‘M1 Broadband’, Singapore’sfirst island-wide wireless broadbandservice.

M1 is listed on the Singapore Exchangeand its current major shareholders areSunShare Investments Ltd, KeppelTelecoms Pte Ltd and SPH MultimediaPrivate Limited. As at 31 December2007, SunShare Investments, a joint-controlled entity between TMInternational and Khazanah Nasional,held a 29.69% equity interest in M1.

FINANCIAL PERFORMANCEFor the year ended 31 December 2007,operating revenue increased by 3.9% toSG$803.3 million [RM1,832.2 million]driven by the 6.4% growth in servicerevenue to SG$727.1 million [RM1,658.4million]. Postpaid revenue andinternational call revenue for the yearunder review was recorded at SG$538.5million [RM1,228.3 million] andSG$127.1 million [RM289.9 million], andrepresenting a growth of 6.2% and11.5% respectively from the previousyear. Contribution from mobile datarevenue increased from 6.3% of theservice revenue in 2006 to 8.4% in 2007. PAT for the year increased by 4.4% toSG$171.8 million [RM391.9 million]while earnings per share (EPS)improved 11.4% to 18.5 cents.

OPERATIONSM1 recorded a 14.8% increase in itstotal customer base, with 1.535 millioncustomers as at 31 December 2007,comprising 856,000 postpaid customersand 679,000 prepaid customers.Postpaid and prepaid ARPU increasedquarter-on-quarter. Monthly postpaidchurn remained stable at 1.2%.

For 2008, M1 expects to see sustainedgrowth in data traffic from M1Broadband and mobile devices. Apart from driving operating efficiencies,M1 will tap on the continuing telecommedia convergence and develop newbusinesses anchored on its corecompetencies. To manage growing leasecircuit requirements, the Company hasstarted to roll out its own cellularbackhaul network.

SingaporeMOBILEONE LTD (M1)

M1 – Breaking new ground in Singapore




OVERVIEWMobile Telecommunications Company ofEsfahan (MTCE) commenced itsoperations on 24 June 2002 as the firstprovider of mobile prepaid SIM cards inIran. The Company is licensed tooperate a GSM 900 MHz mobilecommunication service with a capacityof 35,000 customers in the Esfahanprovince of the Islamic Republic of Iran.This licence is valid for a 15-year periodcommencing 19 May 2001.

The telecommunications industry in Iran saw a major change at the start of 2007 with the introduction of asecond nationwide mobile operator. This introduction marked the initialphase of Iran’s liberalisation of thetelecommunications sector, resulting ina near doubling of mobile customersfrom 15.4 million in 2006 to 27.5 millionat the end of 2007. Correspondingly, thecountry’s mobile customer penetrationrate also increased from 22.2% to39.0% during the year.

FINANCIAL PERFORMANCEDespite greater competition with athreat of declining ARPU, MTCE wasable to marginally improve its revenuecontribution to IRR45.3 billion [RM16.8million] from IRR43.8 billion [RM17.5million] previously recorded in 2006.

However, due to higher direct andoperational costs arising from anenlarged network and high inflationrate, the Company was not able tosustain its EBITDA. Comparatively,EBITDA decreased to IRR21.8 billion[RM8.1 million] in 2007 from IRR27.7billion [RM11.1 million] in the previous year.

IranMOBILE TELECOMMUNICATIONSCOMPANY OF ESFAHAN (MTCE)

OPERATIONSIn 2007, the Company continued tofocus on growing its prepaid services.Taking advantage of its newly-installedcustomer network capacity of 35,000,the Company embarked on a marketingdrive which resulted in an increase inits customer base from 20,459 at theend of 2006 to 30,568 by the end of2007. The Company operates 64 BTSsin 12 cities within the Esfahan Province.

Moving the prepaid market in Iran


182

ThailandSAMART I-MOBILE PUBLIC COMPANYLIMITED (SIM)

OVERVIEWSamart I-Mobile Public CompanyLimited (SIM), a Company listed on theStock Exchange of Thailand (SET), is amajority-owned subsidiary of SamartCorporation Public Company Limited(Samart).

In February 2006, TM Internationalinitiated its investment in SIM byacquiring a direct 24.42% stake in theCompany. SIM provides wirelessinformation services and mobile contentin addition to distributing mobiletelephones and accessories. TMInternational’s share acquisition wascompleted on 27 March 2006.

In 2007, SIM saw a decrease in revenuedue to the discontinued export ofselected mobile telephone brands to athird country. However, the Companycontinued to achieve higher handsetsales for its house brand in both thelocal and overseas markets. TheCompany chalked up impressive salesin Malaysia, followed by countries likeIndonesia, Laos, Vietnam, Cambodia andBangladesh.

FINANCIAL PERFORMANCEIn 2007, SIM recorded total revenue ofTHB15.4 billion (RM1,587.4 million) a37.3% decrease from THB24.6 billion(RM2,370.7 million) recorded in theprevious year. The Company registereda net profit of THB321.1 million (RM33.0million), which was a 34.2% decreasefrom the previous year’s figure ofTHB488.1 million (RM47.0 million).

OPERATIONSSIM recently underwent a businessrestructuring to support its growth andglobal expansion. Using the strategy ofadvanced product development with newproduct lines, SIM redefined theCompany and created more distinctbusiness groups, which consisted of the‘i-mobile’ brand, other main mobilebrands, multimedia content and newbusinesses. These initiatives furtherstrengthened SIM’s ability to maximiseits assets and penetrate the market foreach group.

More importantly, the introduction ofnew product lines, both for mobilephones and other communicationdevices, provided customers with more

options, and attracted customers topurchase products and goods from theCompany’s multiple channels ofdistribution. The variety ofcommunication products on offer,special content and applications, SIM’scomprehensive national and regionaldistribution network furtherstrengthened the Company’s leadershipin the Asian market.

In 2007, approximately 2.5 million I-mobile handsets were sold in Thailand.This propelled the brand to take thenumber two spot in the Thai handsetmarket. I-mobile’s market shareincreased from 28.0% in 2006 to 31.0%in 2007.

The year 2008 will see the Companylooking towards regional marketexpansion after successful penetrationin Malaysia, Indonesia, Vietnam,Bangladesh, Laos, Cambodia and India.SIM’s content business will also beexpanded regionally where I-mobile hasa strong presence, namely Malaysia,Indonesia and Vietnam. New businesseswill be introduced to partners in orderto serve a wider customer base.




FINANCIAL PERFORMANCEFor the year ended 31 December 2007,Samart recorded a total revenue ofTHB19.6 billion (RM2,021.0 million) andnet profit of THB573.6 million (RM59.0million). This represents a decrease of36.6% and 71.2%, respectively, duemainly to the economic slowdown andpolitical uncertainties. However, theCompany’s performance was stilldeemed satisfactory when benchmarkedagainst industry performance.

OPERATIONSIn 2007, Samart focused on internalorganisation improvement, businessrestructuring, value-added services,market channel expansion and humancapital development. The Companydeveloped many new business initiativesnotably its collaboration with theNational Nuclear Institute for furtherinvestment and development in nucleartechnology, the newly-designed I-mobilephone, ICT business realignment andinternational market expansion in ICToutsourcing, content and mobilebusinesses.

A robust increase in the number offlights in Cambodia by 16.7% in theyear under review contributed to anencouraging growth of 15.6% in revenue(US$20.6 million) for Air Traffic ServicesCo. Ltd, a company wholly-owned bySamart. The Company’s concessionperiod was extended an additional 10years, bringing it to a total of 27 years.Kampot Powerplant Co. Ltd. produceselectricity for Kampot Cement under a10-year contract.

In 2008, Samart aims to achieve asubstantial revenue increase of 40.0% to50.0% by providing products andservices that match customer needs, aswell as expanding its operations inmarkets with high potential.

OVERVIEWEstablished in 1989, Samart CorporationPublic Company Limited (Samart) isinvolved in three main areas ofbusiness:

1. Mobile multimediaIntegrated mobile and interactivemedia including infotainment, billingsystems for 1900 MHz mobilephones as well as media productionand development.

2. ICT solutions and servicesTelecommunications networks andtotal ICT solutions system designedfor the government and privatesectors.

3. Technology-related businessesManufacture and distribution oftelevision and radio antennas andsatellite dishes, provision of CallCentre services for government andprivate sectors, distribution,installation and maintenance ofCommunication and SecuritySystems including Total WasteManagement Solution inSuvarnabhumi Airport, provision ofair traffic control services inCambodia and electric generatingsupply to Kampot Cement factory inCambodia.

TM’s interest in Samart was formalisedon 9 June 1997. In February 2006, TMInternational repositioned its businesspartnership with Samart by obtaining adirect 24.42% stake in Samart I-Mobile Public Company Limited (SIM),a majority-owned Samart subsidiary. Asat 31 December 2007, TM Internationalheld a 18.97% stake in Samart.

ThailandSAMART CORPORATION PUBLICCOMPANY LIMITED (SAMART)

Samart – diversified communication services inThailand and the region


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N

NPC

CU

SCN

JUSCN

MIDWAY ISLANDS (+808)

ALASKA

CANADA (+1)

UNITED STATES (+1)

MEXICO(+52)

CUBA (+53)

PANAMA(+507)

COLOMBIA (+57)

BRAZIL (+55)

PERU(+51)

BOLIVIA (+591)

ARGENTINA (+54)

CHILLE (+56)

PUERTO RICO(+787)

VENEZUELA(+58)

LOS ANGELES

NEW YORK

Ashburn

Palo Alto

San Jose

Reston,VA(2002)

Global Data ServicesIPLC, Frame Relay, ATM,IPVPN, IP Transit

Frame Relay, ATM

IPVPN & IP Transit

Submarine CablesAPCNAPCN2CUSCNFLAGFLAG ATLANTIC 1

JUSCNMDSCSDMCSBRCSR-J-K

SAT3-WASC-SAFESEA-ME-WE-3SEA-ME-WE-4TAT-12/TAT-13TPC-5TVH

LegendLanding Point

TM PoP

Satellite

TM Overseas Presence

TM Regional Office

TM International Investment

TMVe

ntur

es


BusinessReview

EBITDA

PATAMI

TM Ventures Group was established as a

Strategic Business Unit in 2006 under its

own CEO, Khairussaleh Ramli, as part of the

recommendations of the Performance

Improvement Programme to streamline the

various business activities under one group

for better accountability and performance

and to rationalise the non-core businesses.

TM Ventures is supported by three key units

– Financial Advisory, Subsidiary Management

and Programme Management Office-cum-

Business Support.

KHAIRUSSALEH RAMLICHIEF EXECUTIVE OFFICERTM Ventures


RM462.3 million + 114.6%

RM189.5 million + 247.1%


TM VENTURESPortfolio of Companies and Assets

Subsidiaries

CEO TM Ventures

Mutiara.Com Sdn Bhd

MEASAT Global Bhd

Property Development(SBU)

VADS Berhad FiberailSdn Bhd

FibrecommNetwork (M)

Sdn Bhd

TM Info-MediaSdn Bhd

TM FacilitiesSdn Bhd

TMFServicesSdn Bhd

TMFAutoleaseSdn Bhd

UniversitiTelekomSdn Bhd

(MultimediaUniversiti)

TelekomSmart School

Sdn Bhd

FinancialAdvisory

Associates /Investment

CEOTM

Ventures’sOffice

SubsidiaryManagement

PMO & BusinessSupport

MenaraKuala Lumpur

Sdn Bhd

FINANCIAL OVERVIEWFor the year ending 2007, the TMVentures Group recorded growth of9.2% in revenue to RM1,326.6 millionfrom RM1,214.5 million previously. The Group also achieved a higherEBITDA of RM462.3 million in 2007which represented a significant increaseof 114.6% from the previous year’s ofRM215.4 million. This was mainlyattributable to the gain on disposal ofWisma TM in Kuala Lumpur for RM46.0million. PATAMI grew 247.1% fromRM54.6 million posted in 2006 toRM189.5 million in the year underreview.

Operating costs (excluding depreciation)increased by 14.9% to RM1,148.0 millionas compared to the previous year’s

RM999.1 million. In 2007, the Groupalso spent RM141.4 million on Capex ascompared to RM302.3 million previously,with most of the investment comingunder Property Development in respectof the TM Annex 2 and the TM R&DComplex as well as development ofPhase II of the Multimedia University at Cyberjaya.

In the year under review, TM Venturescompleted four strategic initiativesunder its planned rationalisation of non-core businesses as follows:

• Disposal of its 16.2% stake inmySpeed.com Sdn Bhd to MyEgServices Berhad

• Integration of Telekom AppliedBusiness Sdn Bhd (TAB) into TM Malaysia Business

• Integration of Meganet Sdn Bhd intoVADS Berhad; and

• Disposal of TM Payphone Sdn Bhdto Pernec Corporation Berhad

In 2008, in line with the demergerexercise, TM Ventures will continue torationalise non-core assets, enhancebusiness performance of variousbusinesses under its stable andreintegrate subsidiaries and affiliates tothe respective businesses underFixedCo (TM), to support FixedCo’sobjective of creating a one-companymindset dedicated to achieving theexcellence of a domestic champion.


VADS continued to strengthen itsposition as a leading Managed ICTServices Provider focused onempowering companies to be moreproductive and efficient. The winner of the coveted PIKOM 2007ICT Service Provider of the Year award,VADS provides niche offerings from itsthree core business segments i.e.Managed Network Services (MNS),Systems Integration Services (SIS) andContact Centre Services (CCS).

VADS is continuing its growthmomentum by delivering healthyrevenue growth for the 16th year in arow. VADS reached new heights whenits revenue crossed the RM500 millionmark, recording a turnover of RM523.3million and PAT of RM54.1 millionwhich represented significant increasesof 42.2% and 67.0% respectively overthe previous year.

All three VADS business segmentsrecorded commendable performance in2007. MNS continues to be the largestrevenue contributor for VADS withRM263.5 million, an increase of 30.4%.Despite a very competitive SIS market,VADS managed to increase the revenuefrom this segment to RM78.4 million ascompared to a lower RM57.6 million theyear before, an increase of 36.1%. Onthe other hand, CCS maintained its pastyear’s growth momentum as itchartered a 67.3% increase in revenueto RM181.4 million in 2007.

VADS BERHAD

2007 2006Revenue by Segment RM Mil % RM Mil %

MNS 263.5 50.4 202.1 54.9SIS 78.4 15.0 57.6 15.6CCS 181.4 34.7 108.4 29.4

Total 523.3 100 368.1 100

Managed Network Services – VADS


TM Ventures

compared to 47.8% in 2006. VADS’sbalance sheet was strengthened as thenet cash position rose from RM29million last year to almost RM110million on 31 December 2007, or 85.7sen per share of RM0.50 par value.

MANAGED NETWORKSERVICES (MNS)VADS Managed Network Services,complemented by its host of value-added services, namely ManagedNetwork Data Centre, ManagedBusiness Internet Services, ManagedSecurity Services, Managed WANAccelerator Services (a new serviceintroduced in 2007) and Managed IPTelephony, continued to successfullyserve the enterprise market. VADSstrengthened its synergistic relationshipwith TM Retail by supporting theTMPremier product, a move which sawa significant growth in the number ofcustomers.

To improve the liquidity of the sharestraded on Bursa Securities, theCompany, pursuant to approval by theshareholders, undertook a share spliton the basis of 1 share of RM1.00 eachto RM0.50 each, hence increasing thenumber of shares to 128,307,800 as atOctober 2007. As at December 2007,the number of shares was 128,596,800.With improved liquidity, the marketcapitalisation of the company reachedRM862 million as at end of 2007, amore than 10-fold increase since VADSwas listed in 2002.

The Board of Directors is proposing afinal tax-exempt dividend of 13 sen pershare of RM0.50 par value, in additionto the interim tax-exempt dividend of 17 sen per share of RM1.00 par valuealready paid on 4 September 2007. The total tax-exempt dividend in thefinancial year ended 31 December 2007was 72.0% higher than a year ago,reflecting a more generous dividendpayout of 50.4% of PAT for the year


TM Ventures

In line with its ongoing efforts to raiseservice standards, MNS launched itscustomer service portal to providecustomers with easy access to reportsand performance analyses. VADS wasre-certified as Cisco’s Silver Partner andreceived the following awards fromCISCO in 2007:

• Outstanding Leadership in AdvanceServices Sales – Top performingpartner

• Outstanding Leadership in ManagedServices – 3rd consecutive year

• Outstanding Leadership in AdvanceTechnology – Delivering the highestcontribution to Cisco AdvanceTechnology business

VADS acquired MeganetCommunications Sdn Bhd on 1 June2007 for a consideration of RM8.2million from TM and NTTCommunications Corporation of Japan.This was to expand the MNS productsuite and strengthen its capabilities inthe provision of LAN services.

SYSTEMS INTEGRATIONSERVICES (SIS)SIS’s forte is in Microsoft OfficeCommunications Server 2007 (OCS),Servers, Managed Storage and SoftwareTools.

In March 2007, as a National &Regional Systems Integrator forMicrosoft Unified Communications,VADS was commissioned by a US-basedmultinational company to deploy thefirst Unified Communications

implementation in ASEAN. The newsolution provides features such as VoiceOver IP (VoIP), instant messaging andWeb conferencing. Such capabilitieshelp the customer to reduce costs,facilitate communication, increasemobility, and accelerate productivity.

VADS’s continued efforts to fortify itsSIS capabilities were rewarded when itreceived the Microsoft Gold Partneraward, IBM Platinum award and IBMPremier Partner award in 2007.

CONTACT CENTRE SERVICES(CCS)2007 was a year of rapid growth forVADS Contact Centre Services. InJanuary 2007, VADS was awarded anin-sourcing contract to manage the TMRetail Contact Centre (TMRC). Thisinvolved the handling of TM’s inboundand outbound calls including thedirectory assistance services (103),domestic and international assistanceservices (101) and emergency services(999), TM 100 services (Sales andService, Telephone Fault Management,Credit Management (inbound andoutbound) and Telegraph), MaritimeOperator assisted service and outboundTelemarketing which operate accrossvarious locations accross the country.VADS succeeded in ensuring aseamless transition with undisruptedservice for the TMRC services. As aresult, VADS is now the largest contactcentre service provider in Malaysia withover 3,700 Customer ServiceRepresentatives across 8 locationsaround the country.

Setting its sights to be a regional CCSplayer, VADS has been building itscapabilities and expertise to meetinternational standards. VADS won 2 offshore contracts; Mobile One(Singapore) and Linksys (USA). VADSalso tied up with AVAYA, a leadingglobal provider of businesscommunications applications, systemsand services, to offer hosted contactcentre solutions on a pay-as-you-usebasis. This is aimed at reducingcustomer’s capital outlay while stillmeeting their business objectives.

VADS managed contact centres receivedseven CCAM (Contact Centre Associationof Malaysia) awards in 2007 while theVADS managed Celcom Contact Centreachieved the Customer OperationsPerformance Centre (COPC) 2000certification.

VADS is optimistic about 2008 as it isconfident that managed ICT serviceswill continue to be well received bybusinesses that are looking to increasetheir operational effectiveness andproductivity while containing costs.

VADS will continue to aggressively drivebusiness growth by keeping abreast ofindustry and technology developmentsso as to offer better innovations inservice offerings, as well as leverage onthe synergistic strengths within the TMGroup.

VADS will also continue to explore newopportunities as it strives towardsimproving its services and offerings tomeet customer expectations and the newchallenges that growth inevitably brings.



TM Ventures

FIBERAILSDN BHD

Fiberail Sdn Bhd was incorporated in1992 as a joint-venture between TM and Keretapi Tanah Melayu Berhad(KTM) to provide telecommunicationnetwork-related services. In 2006,Fiberail purchased Petrofibre Network(M) Sdn Bhd, as a result of which, thelatter became a shareholder in Fiberail.The acquisition was designed to bringsynergistic benefits to the parties and to give Fiberail usage of two corridors,namely the KTM railway corridor andPetronas’ gas pipeline corridor. A "carrier’s carrier", Fiberail owns fibre-optic cable networks alongsiderailway and gas pipelines. The companyprovides the backbone infrastructure inthe form of dark fibre leasing,

bandwidth services, Metro Ethernet,ancillary services and turnkey networksolutions to Telco providers, managednetwork service providers, globaloperators, discounted voice operatorsand broadcasting operators.

Given its fibre network across thelength and breadth of the country inboth rural and urban locations, Fiberailplays a vital role in complementing TM Group’s efforts in supporting theGovernment’s aspirations to establishMalaysia as a global hub forcommunications and multimedia.

For the financial year ended 31December 2007, Fiberail reportedrevenues of RM111.2 million,representing a growth of 12.6%, whilePAT stood at a record RM15.0 million.The significant growth in profit of135.2% was mainly attributable to thecontribution from project managementservices provided to MMC Gamuda JointVenture for the establishment of anElectrified Double Track Projectbetween Ipoh and Padang Besar forKTM Berhad. This, coupled with a


TM Ventures

steady growth in sales from coreproducts mainly fibre optic core andbandwidth, as well as other contractservices, ensured profitability.

Fiberail currently owns 140,525 km offibre optic core network compared with138,293 km in the preceding year. The network rides along KTM’s andPetronas’ railway and gas pipelinecorridors respectively and stretchesthroughout the length of the peninsularwith an additional network along thegas pipeline corridor to the east coast.This offers customers diversity,resilience, and wide coverage, which isof vital importance in the fast-expandingtelecommunications arena.

In 2006, Fiberail was granted anextension of its operating licence by the Malaysian Communications andMultimedia Commission, a move whichallows the delivery of additional value toits customers via a wider network reachin line with the Company’s continuingeffort to extend and improve its networkcoverage.

In furtherance of the objective to alwaysboost customer confidence and enhancecustomer service, Fiberail hasimplemented its ISO 9002 certificationwhich encompasses planning,development, operations andmaintenance, business managementand support services of the fibre opticnetwork for telecommunications, as well

as business development for newproducts. Fiberail’s strict adherence toISO 9002 procedures ensuresconsistency and customer satisfactionat all times.

To support its growing customer base,Fiberail has 20 operation centresnationwide, the National Control Centreat KTM Berhad’s hub in Kuala Lumpurand a 24-hour Helpdesk.

The year 2007 was clearly a growthyear for Fiberail, given its sterlingperformance, and the major opportunityit secured with MMC-Gamuda JointVenture for the electrified double-tracking project. This is an initiative by the Malaysian Government and KTMBerhad under the Railway InfrastructureDevelopment Project to convert theexisting single-track railwayinfrastructure to a modern electrifieddouble-tracking network which wouldoffer increased line speed andthroughput to Peninsular Malaysia’srailway network. Work is in progressand due for completion in five years.

Fiberail will also see its resilientinfrastructure and technical expertisesupporting the WiMAX rollout. AsiaspaceSdn Bhd, one of the four companiesawarded the WiMAX licence hasselected Fiberail, together with TM, toprovide the use of a fibre-optic networkfor Asiaspace’s backhaul.



TM Ventures

MENARAKUALA LUMPURSDN BHD

success of the international tourismcampaign under Visit Malaysia Year2007 which saw an influx of inboundtourists into the country.

Additionally, in conjunction withMalaysia’s 50th IndependenceCelebrations in 2007, Menara KualaLumpur introduced a ‘Unity & Harmony’theme into its promotions whichportrayed the beauty and strengths ofMalaysia through the blending ofcultures of people from different ethnicbackgrounds, traditions and religions.These activities received widespreadcoverage from both local andinternational media and footage wasalso viewed worldwide through theInternet.

As an icon for Brand Malaysia, Menara Kuala Lumpur has contributedto the country’s international profiling byintroducing a number of signature eventswhich are exclusive and have provenpopular internationally. These are theKL Tower International Jump Malaysiaand the KL Tower International ForestTowerthon Challenge where participantsventure up the flight of 2,058 stepsending at 382 meters above sea level.

Having played host to the KL TowerInternational Jump Malaysia for the past nine years, Menara Kuala Lumpurhas been acknowledged as the WorldBasejump Centre among those seekingadventure and thrills. The objective ofthis event is not only to cater forprofessional jumpers from all over theworld who relish the opportunity tojump from tower to tower in Malaysia,but to promote every participating towernamely Menara Pelita (Sarawak),Menara Tun Mustapha (Sabah), Menara Alor Star (Kedah), MenaraKomtar (Penang), Menara Kuala Lumpurand Menara TM (Kuala Lumpur).

The fourth tallest telecommunicationtower in the world and the tallest inSouth-East Asia at 421 meters aboveground level, Menara Kuala Lumpuroffers a unique blend of culture,adventure and nature not easily foundelsewhere in Kuala Lumpur. Situatedwithin the landmark Bukit Nanas ForestReserve, one of the oldest forestreserves in the country, the Towerblends into the natural surroundingsand offers splendid panoramic views tothose who venture up to the top.

Besides being a major tourist attraction,Menara Kuala Lumpur plays a vital rolein broadcasting and telecommunications,of which its main partners are nationalbroadcaster Radio Televisyen Malaysia(RTM) and its parent company, TM.Originally constructed to improve thequality of telecommunications andbroadcasting transmission services inthe country, Menara Kuala Lumpur hasbecome a symbol of Malaysia as aprogressive regional business hub.

The number of visitors to the tower hasincreased markedly from the day it wasfirst opened in 1996. As at December2007, Menara Kuala Lumpur received atotal of 9,615,240 visitors. The year 2007alone saw Menara Kuala Lumpurreceiving 765,584 visitors comprisingmore than half a million foreign touristswho came mainly from India, Japan,United Kingdom, Hong Kong andAustralia.

For the financial year ended 31December 2007, Menara Kuala Lumpurrecorded a revenue of RM93.3 million,representing a growth of 5.1% over theprevious year’s of RM88.8 million, whilePAT was RM50.4 million compared tothe RM47.2 million achieved in 2006, oran increase of 6.8%. A key factor forthe improved performance was the


TM Ventures

Also for the first time, Menara KualaLumpur was given the honour of hostingthe World Federation of Great TowersConference from 3-8 September 2007,which involved participants from famoustowers all over the world. Participantsof the conference were exposed toMalaysian culture and heritage andmade a visit to Putrajaya, the federaladministrative capital. At this conference,Menara Kuala Lumpur recorded thelargest number of participants since theFederation was formed in 1989, andhistory was made when Eiffel Towerwas welcomed back into the Federationduring the conference.

Sometimes referred to as the ‘Tower ofHope’, Menara Kuala Lumpur has alwaysplayed its role in Corporate SocialResponsibility. In 2007, Menara KualaLumpur responded with aid to floodvictims and also organised a series ofcharity activities alongside the DownSyndrome Association and for cancerpatients at hospital paediatric wardsthroughout six locations in Malaysia.

In line with the Government’s initiativeto promote Agro-Tourism, Menara Kuala Lumpur has organised activitieswith the Ministry of Agriculture, theMalaysian Pineapple Board and RISDA,among others, with the aim of creatingawareness among visitors to the towerof some of Malaysia’s best agroproducts that have left their mark inthe international marketplace.

In 2007, Menara Kuala Lumpur alsolaunched an international campaign insearch of its 10th million visitor whostands a chance of visiting the EiffelTower Paris through a collaborationbetween Menara Kuala Lumpur andEiffel Tower as members of the WorldFederation of Great Towers.

Moving forward, Menara Kuala Lumpurwill continue to focus on Culture,Adventure and Nature (CAN). This is itsunique offering to both local andinternational visitors. The tower isexpected to receive another 1.5 millionvisitors in 2008.

Menara KL – providing a ‘bird’s eye view’ of famous

Malaysian hospitality



TM Ventures

TM INFO-MEDIASDN BHD(TMIM)

Highlights of 2007 included theintroduction of a new product called theMini YP (Mini Yellow Pages), designedfor the consumer and positioned as aconsumer directory-in-the-car. Given itstargeted distribution strategies, Mini YPis set to be a winning product in 2008.

The IYP has also shown improvementsin revenue and page views. Charting thehighest revenue growth rate in 2007 atalmost double the previous year, IYP isone of TMIM’s most promising products.The growth of IYP is indicated by amonthly average number of visits ofmore than 300,000, a five-fold increasefrom the previous year. This is a resultof richer content that also includesmaps.

TMIM’s initiatives to be a broad-basedmulti-channel company that offers acomprehensive electronic and printmedia solution will be fully realised inthe near to medium term. Its currentdirections are to grow the traditionalbusiness while penetrating new marketsthat are technology driven such asmobile and the Internet. YellowPost, theKlang Valley’s Free City Paper, is oneinitiative designed to ensure a positivevalue chain and new marketingplatform for Yellow Pages advertisers.

TM Info-Media Sdn Bhd (TMIM) is thepublisher of the Yellow Pages, WhitePages, Malaysian Chinese Pages,Malaysia Tourist Pages, Halal Pages, Oil& Gas Directory and CorporateAgriculture Pages. In 2006 the companyembarked on a business transformationexercise involving the enhancement ofInternet Yellow Pages (IYP) features andthe revamping of several industry-baseddirectories to create a new look andfeel to the Yellow Pages main books.Successful collaboration with variousgovernment agencies and ministrieswere chartered in respect of its nicheproducts.

Transiting into 2007, TMIM undertook tofocus on improved distribution,marketing and sales for well-roundedand balanced progress. New strategieswere put in place, especially indistribution, and a more competitive andincentive-driven sales strategy wasdevised to spur sales growth. All in all,the year 2007 was focused onenhancing operational capabilities andsystems. With minimal capitalexpenditure in 2007, together with awell-planned and controlled operatingexpenditure, TMIM registered PAT ofRM11.9 million, an increase of about97.0% over 2006.

A stable of consumer and business directories


TM Ventures

FIBRECOMMNETWORK (M)SDN BHD

Fibrecomm Network (M) Sdn Bhd wasincorporated as a joint-venture companybetween a subsidiary of Celcom (M)Bhd, Celcom Transmission (M) Sdn Bhd,and Tenaga Nasional Bhd. Fibrecomm’score business is in telecommunicationnetwork services provision with a focuson connectivity and application servicesdesigned to cater for the needs ofservice providers. To date, Fibrecommhas installed approximately 98,000 fibrekilometers (running on high speedcapacity of up to 10 Gbps), that form aunique transport and access networkthroughout Peninsular Malaysia.

Fibrecomm offers a focused range ofservices including dark fibre, wavelength,bandwidth, IP, Ethernet and Co-locationservices. With its full-service offerings,Fibrecomm is well positioned toaddress the needs of customers for areliable network performance, shorttime to market, cost-effective solutionsand excellent service. In its effort tostrengthen and establish Fibrecomm asthe “network carrier of choice” in notonly Malaysia but also the region,Fibrecomm has extended its networkreach to Thailand, Singapore and EastMalaysia.

At Fibrecomm, the company recognisesthat its customers demand nothing lessthan the best when it comes toreliability of the network, productinnovations and quality service. Fromtime to time customer satisfaction ismeasured through surveys. In thisregard, Fibrecomm was ranked first interm of customer satisfaction based ona survey conducted by an independentresearch company in 2007.

The year 2007 was one of strong growthfor Fibrecomm which saw its financialand market position within the industryfurther strengthened. Revenue grewfrom RM49.3 million to RM64.5 million,representing a 31.0% improvementyear-on-year. In terms of profitability,Fibrecomm reached a new milestonewith PAT at RM11.1 million, marking ayear-on-year growth of a record 576.0%.The improved performance wasattributed not only to effective costmanagement, aggressive efforts toacquire new customers from newmarkets and timely rollout of productsand services, but also from thecontinued confidence of the customersin Fibrecomm’s network and services.

Moving forward, Fibrecomm remainscommitted to boosting shareholdervalue by sustaining, if not improving,upon the growth momentum set inmotion in 2007. This will be done byfurther enhancing customers’experiences, developing people andseizing opportunities to accelerategrowth. The Company will continue tostrive to bring state-of-the-arttechnologies and solutions to themarketplace, to live up to its core visionwhich is to be the “network carrier ofchoice” in Malaysia and the region.



TM Ventures

UNIVERSITITELEKOMSDN BHD(MULTIMEDIAUNIVERSITY)

• Student Exchange and StaffExchange, Proposed Joint R&D(Taiwan University of Science andTechnology, Taiwan)

• Student Exchange and StaffExchange, Proposed Joint R&D(Qazwin Azad Islamic University, Iran)

• Student Exchange and StaffExchange, Proposed Joint R&D(Shariff University of Technology, Iran)

• Student Exchange and StaffExchange, Proposed Joint R&D (Al-Hosn University, UAE)

• Student Exchange and StaffExchange, Proposed Joint R&D(University of Science and Culture,Iran)

• To Run IELP Programme (Aryanpour Language Centre, Iran)

MMU graduates are renowned for theirquality, as demonstrated in theirachieving a consistently high employmentrate in industry. In the year underreview, the MMU produced a total of461 diploma graduates, 2,603 bachelordegree graduates, 181 master degreegraduates and 10 PhD degreegraduates. Student postgraduateenrolment rose to 2,020. The number ofMMU students in 2007 totalled 19,464,as compared to 19,144 in the previousyear and comprised 15,693 localstudents and 3,771 internationalstudents. The international studentscame from 79 countries.

As the first wholly-private university tobe established in Malaysia, MultimediaUniversity (MMU) strives to be a world-class academic institution in its chosenfields of engineering, informationtechnology, management andmultimedia technology. The year 2007brought outstanding successes inMMU’s ongoing mission to positionitself as a major international institutionas it engaged within the Asia-Pacificregion across the full range of itsresponsibilities, including research,undergraduate and postgraduateeducation and community services.

Faculties in MMU have also stepped uptheir alliances with the best teachingresources in the world to offercompelling degree programmes. Such partnerships have brought awealth of learning opportunities to MMUstudents and enhanced the marketvalue of MMU degrees worldwide.Notable partnerships initiated orlaunched in the year included:

• Student Exchange and StaffExchange, Proposed Joint R&D,Joint Research and SeminarProgrammes (Dian NuswantoroUniversity, Semarang, Indonesia)

• Student Exchange and StaffExchange, Proposed Joint R&D, Run IELP Programme (LanzhouForeign Languages and VocationalCollege, China)

• Student Exchange and StaffExchange, Proposed Joint R&D(Payame Noor University, Iran)

• Student Exchange and StaffExchange, Postgraduate Scholarships,Proposed Joint R&D (Tashkent StateTechnical University, Uzbekistan)


TM Ventures

Members of the Faculty and studentbody also received several noteworthyawards including:

• CISCO Networks Innovation Awards2007. Best Converged CampusNetwork Award. CISCO NetworksInnovation Awards 2007

• 2nd Prize - Altera InNoCom 2006.Altera InNoCom 2006

• Outstanding Engineering AchievementAward (IEM)

• 18th International Invention, Innovationand Technology Exhibition (ITEX 07).Silver Medals

• Flat Gain Optical

• Best Student Chapter Website Awardfor 2006. The Institution ofEngineering and Technology (MalaysiaBranch) Awards

• IET Malaysia Leadership Award2006/2007. The Institution ofEngineering and Technology (MalaysiaBranch) Awards

• IET Malaysia Best Student Chapter2006/2007. The Institution ofEngineering and Technology (MalaysiaBranch) Awards

• SoftPedia 100% Clean Awards.SoftPedia Clean Awards

• 1st Runner-up. Agilent MalaysiaInnovator Award 2007

• ICRC International Humanitarian LawMoots Competition (National Level).ICRC International Humanitarian LawMoots Competition

• Universiti Malaya’s (UM) EngineeringInvention ‘N’ Innovation Challenge(EINIC) 2007 – ‘Best PostgraduateAward’

The Ministry of Education approvedseven new courses in 2007. The newcourses include Doctor of Engineering(Microelectronics), Doctor of Engineering(Telecommunications), Foundation inEngineering, Master of ComputerScience in Software Engineering andSoftware Architecture, Foundation inInformation Technology, Master ofAccounting and Diploma in BusinessAdministration. Under the AcademicQuality Assurance, MMU promotespublic confidence that quality ofprovision and standards of its academicprogrammes are continuallysafeguarded and enhanced. A newly-accredited course by the NationalAccreditation Board (LAN) is the MMUDiploma in Electronic Commerce.

The year 2007 saw the Centre forCommercialisation and TechnopreneurDevelopment (CCTD) of MMU making aserious commitment to infuse theentrepreneurial spirit throughout theMMU community. This centre alsoreceived several noteworthy awardswhich recognised innovative studentsand other projects.

The year saw MMU consolidating effortsto improve its facilities in support of theUniversity’s scholarly pursuits andresearch activities. In October 2007,MMU was awarded the MS ISO9001:2000 Quality Management System

for certification for both campuses inrespect of the provision of LibraryServices and management of StudentRecords. In achieving ISO, MMU isbetter placed to be on par with otherolder reputable academic institutions inMalaysia who implemented ISO muchearlier.

Financially, MMU continues to be aself-sustaining university and fundingfor the development of the Phase IICyberjaya Campus came frominternally-generated funds.

On 2 January 2008, MMU appointedProf Dr Zaharin Yusoff as its newPresident. Dr. Zaharin, a Professor with experience in ComputationalLinguistics and Artificial Intelligence,was formerly the Dean of the College ofGraduate Studies at Universiti TenagaNasional (UNITEN).

MMU – pushing quality education to new heights

MMU – establishing strong international links

TELEKOMSMART SCHOOLSDN BHD

Telekom Smart School Sdn Bhd (TSS)was established on 22 July 1999 todevelop and implement the MalaysianSmart School pilot project incollaboration with the MalaysianMinistry of Education (MOE) andMultimedia Development Corporation(MDeC). Since the completion of theproject in December 2002, TSS, anMSC-Status Company, has establishedseveral key businesses in e-Educationsuch as web-based school applications(eSkool - School Management Systemand eLearn - Learning and ContentManagement System) and contentdevelopment services, both for theeducation and corporate sectors locallyand abroad.

As Malaysia’s foremost e-Educationsolutions provider, TSS has completednumerous content development projectsfor the Ministry of Education (MOE),Ministry of Higher Education (MOHE),Multimedia College (MMC) and BruneiMinistry of Education, amongst others.

In a sustained effort to reinforce itselfas the leading e-Learning player in themarket, TSS is also dynamically involvedin promoting its products and servicesvia exhibitions and seminars to targetedaudiences and collaborating with bothinternational and established localpartners and associates, to offer awider range of e-Learning products andservices.



TM Ventures

Widening the Smart School curriculum in schools


TM Ventures

TM FACILITIESSDN BHD

TM Facilities Sdn Bhd (TMF), a wholly-owned subsidiary of TM established in2002, is focused on performanceimprovement and transforming itsbusinesses into profitable entities. Thecompany has successfully undertakentwo phases of transformation with theobjective of streamlining its businessactivities.

TMF is the holding company of twowholly-owned subsidiaries, namely TMFAutolease Sdn Bhd (TMFA) and TMFServices Sdn Bhd (TMFS). TMFAprovides auto-leasing and vehicle-related business, whilst TMFS providesfacilities management services to TMGroup.

For the financial year ended 31December 2007, TMF Group recordedtotal revenue of RM237.6 million andPAT of RM29.9 million. The maincontributor to revenue was TMFS(72.0%) and TMFA (24.9%).

The Group will continue to remainfocussed on creating wealth andenhancing its shareholder value byproviding better quality services anddelivering operational efficiencies.

TMF AUTOLEASE SDN BHD

TMF Autolease Sdn Bhd (TMFA)oversees the fleet management of TMGroup nationwide. The key tasks are toensure all vehicles are roadworthy,utilised optimally and available at alltimes for the purpose of businessoperations and support. As at 31December 2007, the total number ofvehicles stood at 5,478 units withvarious makes and models ranging fromutility vans, saloon cars, four-wheeldrives and lorries. Besides its fleet,TMFA manages a total of seven zoneoffices and 30 service outletsnationwide.

TM’s Fleet

Malaysia Business remains the majorTMFA customer with 3,966 units leased,or 70%, while the remaining units areleased to related subsidiaries of TM.

In pursuit of quality, TMFA in 2007conducted several quality programmesfor its customers including safe driving.It also scored 88.5% in a CustomerSatisfaction Index (CSI) based on astudy completed in October 2007.

For the financial year ended 31December 2007, TMFA registered arevenue of RM59.1 million. Withoperating costs at RM27.8 million, thePAT recorded was RM22.6 million. Mostof the revenue or 99.0% was derivedfrom the Management and MaintenancePackage (MMP) fee for TM vehicles.

As for prospects in 2008, stakeholderswill be assured of further improvementsin performance and positive growth inshareholder value as TMFA strives tocontinue providing greater efficiency inits services to the TM Group.


Throughout 2007, TMFS has takenvarious measures in improving servicequality to customers. This was reflectedin a significant improvement in itsCustomer Satisfaction Index of 92.4%,whereas power availability remained ata high level of 99.9%. In 2007, TMFScompleted the EMS ISO 14001 and QMSISO 9001:2000 exercise, as well asconducted a quality programme basedon the 5S (Sort, Set in order, Shine,Standardise and Sustain).

In 2007, TMFS also constructed a totalof 20 telecommunication towers worthRM15 million for the MalaysianCommunication and MultimediaCommission (MCMC) in respect of itsUniversal Service Provision (USP)project along the East West Highwaywhich is aimed at providing seamlessnetwork coverage along the highway.

TMF SERVICES SDN BHD

TMF Services Sdn Bhd (TMFS) providesservices in relation to the dailyoperations and maintenance services forall TM facilities and installationsnationwide, which include exchanges,telecommunication towers, masts, officebuildings, AC & DC, generators, hillstations, cabins, retail outlets, museums,warehouses, staff quarters, multimediacolleges and resorts. TMFS comprisestwo primary units – the Operations &Maintenance Unit, responsible for dailyoperations, and the Project Management& Consultancy Unit, which is involved inproject-related activities.

For the financial year ended 31December 2007, TMFS registered arevenue of RM171.0 million and PAT ofRM5.5 million. A total of RM147.3million or 86.1% of the revenue wasgenerated from ComprehensiveFacilities Management servicesrendered to TM, whilst the rest camefrom requested services, includingproject management fees.

In 2008, TMFS will continue to enhanceits operating efficiencies and improvethe quality of its services to the TMGroup.


TM Ventures

TM Resort Cameron Highlands


PROPERTYDEVELOPMENT

disposed of, and the remaining jointlydeveloped with partners over periodsranging from three to seven years.

In 2008, PD will continue on theinitiatives to ‘unlock’ TM’s Group landbank. Another key objective for 2008would be the securitisation of non-network assets, which is in line withTM’s rationalisation exercise.

Property Development division or PD,the in-house adviser on land andbuilding matters, manages TM’s landbank and assets. PD contributes to theCompany’s bottom line by ‘unlocking’TM’s idle land bank through disposal ordevelopment of identified parcels ofland jointly with reputable developers.As the custodian of all TM’s non-network assets, PD is also responsiblefor property and land administration ofthese assets. Apart from creating valuefrom the land bank, PD also proposescost-savings options particularly inrespect of utilities consumption andrelated property taxes.

In 2007, PD contributed savings ofRM5.1 million in reduction of land leaseexpenses. In line with TM’s objective to‘unlock‘ value of non-core assets, PDalso concluded the sale of Wisma TM inKuala Lumpur to Pesuruhjaya TanahPersekutuan for a purchaseconsideration of RM70 million. To date,PD has successfully unlocked over 1,694acres of land, of which 56 acres were

On 14 August 2007, in line withcontinued rationalisation of non-coreassets, TM entered into a Sale andPurchase Agreement to dispose itsentire equity interest in its wholly-owned subsidiary, TM Payphone SdnBhd (TM Payphone), to PernecCorporation Berhad (Pernec), for a totalconsideration of RM22.0 million. The

divestment which was completed on 31 December 2007 supports thestrategic intention of TM to focus on itsrole as mainstream network facility andservice provider. TM Payphone ceasedto be a subsidiary of TM, effective from1 January 2008 and is now wholly-owned by Pernec.

TM PAYPHONESDN BHD

Enhancing value of TM’s landbanks

TM Ventures

Intelsat (IOR)60E 62E 64E

Palapa C2113E

Measat-1 & Measat-391.5E

Thai Com578.5E

FLAGSEA-ME-WE-3

SAT-3/WASC/SAFE

SEA-ME-WE-4

DMCS

To Europe,Middle East & South Asia

To Europe, Middle East & South Asia

To Indonesia

BRCSTo Indonesia

SEA-ME-WE-3

To ASEAN,Asia Pacific,Oceania & USA

To ASEAN,Asia Pacific & USA

To Africa,India & Europe

APCN

APCN2

Kuala Muda

KualaLumpur

Shah Alam

Tg. MalimRawang

SerembanCyberjayaKlang

Melaka

Mersing

K. Terengganu

Padang Hiliran

Kota Bharu

Penang

Kangar

Alor StarBedong

Sg.Petani

Bkt. Kayu Hitam

Banting

Kota Tinggi

CheratingTemerloh

Segamat

Kluang

Sg. Jaya

Taiping

Ipoh

Port Dickson

Muar

Batu Pahat

Skudai

KulimKuala Krai

Dungun

Pasir Mas

Bayan Baru

Sitiawan

Kuantan

JohorBahru

Kijal

Beserah

International & Domestic

Infrastructure & Trunk Fibre Optic Network


ASIASAT 4122.2E

JCSAT3 128E

Thai Com1A120E

Trunk cable

Malaysian domestic submarine cable system (MDSCS)

Fibrecomm

Fiberail

Legends

Satellite

Earth Station

4 International cable landing stations

7 Domestic cable landing stations

Trunk nodes

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Labuan

Kota Kinabalu

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BusinessReview

OVERVIEW 2007The global economy saw growth in nearly all themajor regions in 2007. China continued to be agrowth engine for the Asia Pacific region, with itshealthy growth rate of over 11.0% in 2007, whileIndia, the second most-populous country, trailedbehind with growth of over 9.0%. Malaysia itselfrecorded a robust 6.1% growth in 2007.

Comparatively, the year witnessed 2.6% growth inEurope, 2.1% in the United States and 1.9% inJapan. That economic growth continued to comeprimarily from emerging markets can be reinforcedby a comparison of stock market indices globally.The S&P and the NASDAQ Composite indicesimproved by 4.8% and 10.6% respectively comparedto more than 90.0% gains for the Shanghai stockmarket, and an average of over 40.0% for most ofthe other emerging markets.

Chart 1: GDP Growth Rates in 2007 (Estimates): Select Countries in Asia Pacific, Europe and the US

OUTLOOK 2008The prospect of an economic slowdown in the USmarked by a falling US dollar and continuing highoil and commodity prices have begun to tempergrowth prospects for 2008. The exposure to thesub-prime market for American financialinstitutions and its concomitant impact on the USeconomy is further exarcebated by the challengeof maintaining a high current account deficit. It isexpected that global growth will trend downwardsfrom 3.6% in 2007 to 3.3% in 2008 (Source: WorldBank). Meanwhile, a falling US dollar willpotentially result in lower margins for some of theexport-led Asian and other emerging economies

(outside of pegged exchange-rate countries),thereby impacting regional and global growthprospects. Such economies can be expected toquickly diversify their markets from the US toEurope and elsewhere, as evident in the decline ofthe US’s share of world imports from 19.0% in2000 to 14.0% in 2007.

Continuing high oil prices reinforced by highcommodity prices as well as rising food costsglobally can also be expected to increase inputcosts across all industries. The potential impact ofall these factors could result in a re-rating of riskleading to a slowdown in investments and a dropin consumer spending in certain markets.

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Source: Country Central Banks, Economic development units, The Economist and others


However, the risks of a global economicslowdown should be looked at in thecontext of growth drivers in theemerging markets. For a number ofemerging markets, growth is led byendogenous factors (especially India, butalso for Malaysia, Thailand, Indonesiaand Vietnam). While ostensibly Chinacan be expected to be impacted, givenits status as the world’s largestexporter, the risks are likely to bemitigated by strong domestic demand.The emerging markets led by China andIndia would be the key demand centresand a key focus of investments andgrowth for multinational and domesticfirms, as witnessed recently byVodafone’s buyout of Hutchison’s mobileplay in India. The World Bank, forexample, remains optimistic in itsestimates of GDP growth for developingcountries which is 7.1% in 2008, ascompared to 2.2% for high-incomecountries. Moreover, non-traditionalmarkets are now emerging as a keysource of investment and capital boththrough the private sector, andincreasingly, through sovereign funds.

TELECOMS OUTLOOK 2008A critical measure of the developmentof any economy is the usage oftelecommunication services in thatcountry. Telecom services can be saidto have a symbiotic relationship withthe economic conditions in a particularcountry. While the growth in anyeconomy is a causal factor for theincreasing penetration of telecomservices, given increasing disposableincomes to buy telecom services, thepervasiveness of telecom services is initself a contributor to GDP growth byincreasing the efficiency and productivityof transactions and business processes.

Critical to the growth of the globaleconomy would be therefore the abilityto bridge the "connectivity divide". Theglobal mobile customer base hasreached around 3 billion by the end of2007 with about 1 billion peopleconnected through home or office to

some form of Internet connectivity,including dial-up and broadband. Thekey challenge would be to extend themobile connectivity to more than 50.0%and 85.0% of global unconnectedmobile and Internet populationsrespectively.

From Chart 2, it is apparent that mobilepenetration growth was driven by Asianeconomies in 2007. Going forward, acritical aspect of the growth momentumwould be the application of businessmodels focusing on a scale strategy (incontrast to market skimming) whichwould mean lower end-user prices,sharing of infrastructure and in certaincases, sharing of end-user terminals.

The liberalisation of the telecoms sectorhas enabled market forces to deriveoptimal business models dependingupon the socio-economic conditions in asaid market to inevitably diffusetechnologies in the country. Playing onthe Bottom of the Pyramid strategies inIndia, for example, meant that while a

mobile call at US 1 cent a minute isprobably the cheapest in the world, themarket is the fastest growing (addingaround 5-6 million customers a month)and the players remain profitable.

The hunt for the next 500 millionsubscribers in the Asia-Pacific regionwould require innovative marketpenetration strategies in all emergingmarkets. Telecom service providers willneed to figure out different ways toconnect the unconnected at increasinglylower price points. This will involve bothcommunity level connectivity (e.g. asmall village with one wireless basedvoice and or data connectivity) as wellas concomitant pressure on vendors tocontinuously reduce equipment prices.

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2007 End Mobile Penetration (estimated)

Chart 2: Estimated Mobile Penetration end 2007: Select Countries in Asia Pacific,Europe and the US

Source: Company 3rd Quarter 2007 results and F&S estimates

Asian Economies and the Telecommunications Sector:Review & Outlook


For provision of broadband access, theemerging markets would see a greaterusage of mature technologies of thexDSL kind given the rapid equipmentcommoditisation advantages; in somemarkets, however, wireless connectivitythrough both GPRS/HSPA and or any ofthe WiMAX flavours could be used tobridge the gap.

More developed markets in the region(including Malaysia) would see higherpenetration of data specific technologies(3G and HSPA in the wireless space,potential fibre rollout in the fixed space)to provide the infrastructure and aninevitable doubling of bandwidth year-on-year usage by the consumers (drivenby growth in the Peer to Peer or P2P

The fixed line market on the other handhas been stagnant over the last twoyears globally at around 1.25 billionsubscribers. The Asia-Pacific regionaccounts for about 500 millionsubscribers although the rate has beengrowing at less than 4.0% annually. Themarket growth had been primarily led

by China although there are signs of aslowdown there as well. Not muchgrowth has been evident in the South-East Asian and South Asian markets.Nevertheless, the mobile substitution offixed has been to a certain extenttempered due to the growth of the fixedbroadband market. It is thus expected

traffic along with the various Web 2.0based video streams). 2008 will alsosee the provision of converged servicesso as to offer enhanced functionalitythrough service blending – by blendingvoice, video, data and wirelesstechnologies.

While the monetisation end-game of avariety of newer services (e.g. mobileTV, IPTV etc.) is still uncertain, giventhe twin imperatives of competition andthe reality of no alternatives, telecomservice providers will inevitably go onupgrading their last-mile accessspeeds. The expectation is that anavailability of infrastructure would drivethe growth of traffic and help delivervalue for infrastructure providers.

that the total fixed line subscriber basewould remain stable regionally andglobally, for the next few years.

The global broadband access marketstood at about 330 million subscribersat the end of the third quarter of 2007.The Asia-Pacific region accounted forabout 125 million subscribers at theend of the same period. The biggestmarkets in Asia include China withabout 63 million lines, Japan with 28million and South Korea with 14 millionlines. The South-East Asian market isstill in broadband infancy with Malaysia,currently the largest market, registeringaround 1.2 million subscribers and therest of the countries in the region withbroadband subscriber bases of lessthan one million. The broadband marketis being driven globally by changingconsumption and lifestyle patterns onthe one hand, and productivityenhancements to businessesconsequent to high access Internetservices on the other.

The South Asian markets have one ofthe lowest broadband penetrations inthe region with India having a total ofabout 2.3 million subscribers and therest of the countries having penetrationrates of under 1.0%. The South-EastAsian and South Asian markets are ripefor double-digit growth rates in theirbroadband subscriber base for the nextfew years.

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2007 End MobilePenetration (estimated)

2011 End MobilePenetration (estimated)

Source: F&S Analysis

Chart 3: Change in Mobile Penetration (2007-2011): Select Countries in Asia Pacific,Europe and the US




The global Shared Services andOutsourcing (SSO) market is estimatedto be valued at around US$ 930 billionin 2006 and is projected to reach US$1,430 billion by 2009, growing at acompound annual growth rate or CAGRof 15.0%. Offshore SSO activity (definedhere as including in-sourcing and out-sourcing) constituted around just 10% ofthe total pie, and is expected to grow atdouble the rate for the SSO industry.The key drivers for SSO have continuedto be cost benefits through

standardisation, leveraging of scalebenefits, and cost arbitrage in countrieslike India, China and Malaysia. Otherbenefits include the ability to free upmanagement time to allow companiesto focus on their core competencies,the drive for more business innovationeven in non-core areas and the abilityto reap benefits from standardisationand resulting efficiencies. All of this hasencouraged large corporations toexplore further expansion of theircurrent SSO operations.

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Source: F&S Analysis

Chart 4: Estimated Broad Mobile Penetration end 2007: Select Countries in AsiaPacific, Europe and the US

Spend on SSO by Vertical ($bn)

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Chart 5: Global SSO Spend across the various Industry Verticals (2006 and 2009)


In summary, it is expected that theprospect of a global slowdownconsequent to the economic challengesfaced in late 2007/early 2008 in theUnited States will be tempered by highexpectations of sustained growth in theAsian economies. Led by China,followed by economies like India, andother emerging markets such asVietnam, Asian economies will continueto realise their growth potential. Suchgrowth will also have positive impact onprospects for the telecommunicationssector especially in the mobile andbroadband sectors.

SOUTH-EAST ASIANMARKETS OUTLOOK 2008The South-East Asian region is a mix ofmore developed countries likeSingapore and just emerging economieslike Cambodia and Laos. The disparityin economic development across theregion can be seen in mobilepenetration rate comparisons – above100.0% in the case of Singapore andless than 10.0% in the case of Laos.

The Singapore economy maintained itsrobust expansion, growing in excess of7.0% in 2007. Robust growth wasrecorded across most industries notablyin the non-IT industries and assetmarket-related activities. Lookingahead, the Monetary Authority ofSingapore (MAS) expects the economyto continue to expand in 2008, albeit ata more moderate pace. Strong domesticdemand and improved prospects fortrade in the Asian region will continueto provide support and drive GDPgrowth at a medium-term potential rateof 4.5% to 6.5% in 2008.


On the back of strong exports andhigher consumer spending, theIndonesian economy continued to gainmomentum in 2007 to register a growthin excess of 6.0% – its bestperformance since the Asian financialcrisis of 1997. The growth was mainlysupported by private consumptionexpenditure and a rapid expansion innet exports. Bank Indonesia recentlyrevised its projection for GDP growthfrom 6.5% to 7.0% for 2008 in line withanticipated export gains from risingcommodity prices and increasedGovernment spending on infrastructuresuch as roads and ports.

Indonesia is one of the fastest-growingmobile markets in the South-East Asianregion. The local mobile marketcomprises predominantly prepaid users,which accounted for approximately96.0% of its total subscriber base as atthe third quarter of 2007. Due to thedisproportionately large prepaid segmentand high price sensitivity, the ARPU inIndonesia is among the lowest in theregion. However, mobile penetration isexpected to reach about 67.0% by 2011,and will account for a staggering 175million subscribers.

According to the Cambodian Ministry ofEconomy and Finance, the economy isestimated to have grown by 8.5% in2007. Growth was expected to be lowerthan 2006 due mainly to the expectedslowdown in the manufacturing ofgarments attributable to increasedcompetition from other producers,including Vietnam, which was inductedinto the World Trade Organisation inJanuary 2007. For 2008, the Ministry ofEconomy and Finance projects a GDPgrowth of 7.0%.

Cambodia is another fast-growingmobile market in South-East Asia,having registered phenomenal CAGR of36.6% between 2003 and 2006. At theend of 2007, its subscriber base wasabout 2.4 million, with a correspondingmobile penetration rate of 17.2%. Thelocal mobile market comprisedpredominantly prepaid users, whichaccounted for close to 90.0% of its totalsubscriber base in 2006. TheCambodian mobile market is expectedto achieve a penetration rate of around38.0% by 2011 which will be accountedby about 6 million subscribers.

The prognosis for the rest of South-East Asia remains positive. In particular,Vietnam, Thailand and the Philippinescan expect their mobile and broadbandmarkets to grow at double-digit rates in2008 and beyond.

SOUTH ASIAN MARKETSOUTLOOK 2008South Asia with a population in excessof 1.5 billion has been one of thefastest growing mobile markets in theworld, having recorded more than 6.0%economic growth in 2007. Given itssheer size, South Asia’s telecomsindustry for both fixed and mobilesectors can only be expected to grow in2008 and beyond.

India, the largest South Asian market,achieved economic growth in excess of9.0% in 2007. Most of the growth camefrom the services and manufacturingsectors. It is expected that the growthmay marginally slip to 8.0% in 2008 onthe back of higher interest rates whichcould adversely impact consumerspending. The rapid appreciation of the

With a penetration rate in excess of110.0%, the mobile services market inSingapore can be considered as one ofthe most saturated markets in theregion. The mobile subscriber base inSingapore is expected to grow at aCAGR of 7.4% between 2006 and 2011on account of demand emanating fromthe prepaid segment which caters tothe lower-end market as well as theforeign-worker population.

The Malaysian economy expanded byaround 6.1% in 2007. On the supplyside, the growth was attributed to theexpanding services and manufacturingsectors. Robust domestic demand and aprojected improvement in exports ofelectrical goods are expected to sustainthe economy’s momentum into 2008.Consumer spending will again be themain driver of growth, supported byexpected increases in incomes. TheMalaysian government budgetannounced in September 2007 is basedon expectations of 6.0% to 6.5% growthin 2008.

With a mobile penetration in excess of80.0%, the mobile market in Malaysia ismaturing. It is expected that the totalmobile subscriber market will sustainpositive growth to reach 27.5 millionsubscribers by 2011 growing at a CAGRof 7.1% between 2006 and 2011. In linewith impending market saturation, themobile market is already showing signsof slow down in growth.




Indian currency vis-à-vis the US dollarmay also make Indian exports lesscompetitive. While overall economicfundamentals look strong, India needsto remove infrastructure bottlenecks tofully realise its growth potential.

India’s mobile industry is fast rising,with subscribers growing at a CAGR ofover 73.7% between 2003 and 2006. Themobile subscriber base is expected togrow at a reduced CAGR of 28.1% from2006 to 2011. A penetration of 44.2% isexpected by 2011 leading the subscriberbase to touch more than 500 million.GSM is the most widely-used standard,accounting for more than 70.0% of totalsubscribers as at the end of 2006. TheIndian mobile market comprisedpredominantly prepaid users, whichaccounted for more than 85.0% of thetotal subscriber base. Due to thedisproportionately large prepaidsegment and their high price sensitivity,the ARPU in India is around US$7.

The Sri Lankan economy continued itsupward trend, registering growth ofmore than 6.0% in 2007. The growth ismainly attributed to value-addedagricultural products such as rubberand livestock. Growth from the servicesector was attributed mostly towholesale and retail trade. Theeconomy is expected to expand byanother 6.0% in 2008.

The mobile market in Sri Lanka hasexpanded very rapidly as a result ofsignificant foreign investments in thetelecommunications sector. The currentpenetration rate in Sri Lanka is around27.0% and this is expected to grow toaround 69.0% by 2011. The totalsubscriber base is 15 million mobile


subscribers and the positive outlook isexpected to be driven by its largeaddressable market, increasedaffordability of prepaid plans and aconducive regulatory environment fortelecommunications operators. The SriLankan mobile market is largelydominated by the prepaid segment, withprepaid subscribers accounting for morethan 90.0% of total subscriber base.

The Bangladesh GDP grew by 6.5% in2007. Overall, the economic performancecontinued to remain strong, driven byimproved domestic and external demand.The growth was fuelled by a dynamicgarment sector, acceleration in privateconsumption, and a record increase inoverseas workers’ remittances. In thecurrent year, GDP growth is forecast tobe below 6.0%, partly as a result of anumber of natural disasters that haveaffected the country recently.

The mobile industry in Bangladesh hasbeen witnessing year-on-year growth ofwell over 100.0% in the past few years.The market has grown at a rapid paceof 113.1% CAGR between 2003 and2006. At a penetration rate of 20.9%,there still remains room for growthconsidering its population size andeconomic growth. The mobile marketcomprised predominantly prepaid users,which accounted for approximately94.2% of the total subscriber base in2006. Due to the disproportionatelylarge prepaid segment and high pricesensitivity, the ARPU in Bangladesh wasamong the lowest at US$5. The numberof mobile subscribers in Bangladesh isexpected to reach 58.8 million by 2011as it achieves a CAGR of 22.5%, bringingthe mobile penetration rate to 36.0%.

The economy of Pakistan is expected togrow slightly below 7.0% in 2007. Thegrowth came from the industrial andservices sectors. The outlook for 2008remains positive although there is somerisk from political instability andanticipated slowdown in themanufacturing sector.

The mobile subscriber base in Pakistanis expected to grow at a CAGR of 26.8%from 2006 to 2011, to achieve apenetration of 63.9% accounted byaround 112 million subscribers.Subscriber growth rate is likely to slowdown as the market saturates. Howeverfactors such as expansion of ruralmarket coverage, increasing competitionand innovative cellular servicepackages, acceleration of fixed-to-mobile substitution, and lower costs ofentry level handsets are likely tostimulate growth.

OTHER EMERGING MARKETSOUTLOOK 2008While most of the South-East andSouth Asian markets have seen a hugegrowth in their telecoms sectors in thepast few years, it is expected that Westand Central Asia can be new engines ofgrowth going forward. Countries likeIran, Iraq, Jordan, and Lebanon in WestAsia and Kazakhstan and others inCentral Asia present huge untappedpotential, particularly in the mobiletelephony sector, given existing levels ofmobile penetration.


Taking Iran as an example, the Iranianeconomy expanded by around 5.4% in2007. Economic growth is expected totaper slightly in 2008 as incremental oilrevenues may not be as high as in2007. The Iranian mobile market is stillin an early growth stage, with a mobilepenetration of approximately 30.0% asat 30 June 2007. The mobile subscriberbase in Iran is expected to grow at aCAGR of 27.2% from 2006 to 2011, andreach a penetration rate of 61.9% to46.6 million subscribers by 2011.Factors such as network coverageexpansion, the acceleration of fixed-to-mobile substitution, increasingcompetition, the introduction ofinnovative cellular service packages andthe anticipation of a third nationalservice provider in 2008 are likely toencourage further growth.

CONCLUSIONAsian markets offer an eclectic mix oftechnologically-advanced markets likeJapan and South Korea, top performerslike India and China and infant marketslike Cambodia and Laos. There is tacitagreement amongst the governmentsand the private sector that bridging theconnectivity gap is not only desirable

but can provide significant impetus toeconomic growth. Maturing individualmarkets in the region are drivingindustry players to achieve globaleconomies of scale by diversifying theirmobile asset base across the region.

Beyond mobile services, high-speedbroadband or HSBB is the other majorgrowth area in Asia where broadbandpenetration rates vary considerably.Generally, across Asia, broadbandpenetration rates are significantly lowerthan mobile penetration; and as theeconomies in Asia grow, there would bean increased demand for high-speedInternet connectivity. The broadbandrollouts will see a mix of fixed (whichwill offer high-speed access) andwireless technologies (to fill gaps andcover under-served areas) playing totheir individual strengths. A broadbandrevolution is on the cusp of replicatingthe mobile revolution of the last fewyears in Asia.

Overall, Asian markets with their growingpopulations and fuelled by growingconsumer appetite for telecoms, willprovide the scale and scope for not onlyindustry growth but GDP growth aswell. For sure, the global futuretelecoms market belongs to Asia.



BUILDING ENDURING 214CUSTOMER RELATIONSHIPS

FOSTERING A NATION 218THROUGH CAPACITY BUILDING

GEARING HUMAN CAPITAL 224TOWARDS BUSINESSEXCELLENCE

BUILDING CAPABILITIES 230THROUGH DEVELOPMENTAND LEARNING

TOWARDS GREATER INNOVATION 234

OCCUPATIONAL 238SAFETY, HEALTH ANDENVIRONMENT (OSHE)

CORPORATE RESPONSIBILITY 240

KeyInitiatives

Sustaining LifeThe Paua shell’s primary significance is not beauty butsafety. Growing as the Paua reaches maturity it offers theotherwise vulnerable creature shelter from harshconditions of the ocean as well as protection fromnumerous predators. Its natural design allows it amodicum of mobility as well. The shell is also highlydurable as it can withstand constant wear and impact.Thus the true value of the shell is the preservation of life.

Securing DestinyAlthough TM plays a leading role in propelling peopletowards a knowledge-based future, we have never forgottenour primary objective of Helping People Lead Better Lives.This we do not only in our country of domicile but alsowherever we operate. Regionally, as well as locally, ourextensive Corporate Responsibility efforts are delivered ona variety of platforms – Education, Sports, Nation &Community Building, and Humanitarian Aid. It is our hopethat we respond to the needs of local communitieswherever we are, so that we help secure their destinies.

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KeyInitiatives

In today’s highly-competitive environment, customer relationship management or CRM is no longer acatch-phrase; it has become a necessary strategy that is widely adopted across industries. In thecommunications sector as with other industries, customers are the lifeblood of an organisation and effortsare geared towards building enduring and mutually-satisfying customer relationships based on trust. Thisis what TM believes in and strives for.

Each customer is unique, with different needs and expectations. Thus, our integrated and evolving CRMprogramme is focused on garnering customer insights and using the intelligence gained to betterunderstand customers and meet their needs.

As part of the TM transformation exercise, CRM within the Group has evolved toward a more holisticapproach that strives to make customer centricity a reality. Over the years, the Group has focused itsenergies and merged the effective deployment of appropriate strategies, processes, people and systems inacquiring, satisfying and retaining customers.

CONTINUOUS COMMITMENT TOWARD CUSTOMER CENTRICITYAs the Group moves ahead towards becoming the communications company of choice, one of the keyaims of its CRM programme is to know, identify and target valued customers, generate quality salesleads, plan and implement marketing campaigns with clear goals and objectives that are aligned withenhancing customer relationships. At the same time, the programme aims to provide a better experiencefor the customer-in service interactions at the frontline. Notable CRM programmes implemented in 2007are iCARE (Integrated Customer Allied Relationship System), TMOnline (customer self-service portal), SingleNumber Access (100) for call centres and New Payment Collection Systems at TMPoints.

Facts at a Glance • 103 TMpoint outlets

• 12 TMpoint transformed asOne-Stop Service Centres

• 29 e-Kiosks

• 2 Drive-Thru TMpoint facilities

• TM Online CustomerSelf-service Portal

• Single Number Accessfor call centres


An integrated programme with far-reaching benefits, the iCARE projectwas implemented in three phases fromMay 2005. The system for Phase 1 wascompleted in December 2006 while thesecond and third phases werecompleted in April and October 2007respectively.

Specifically, iCARE provides TM with afully-integrated CRM programme tobetter serve its wide base of customersand to transform the entire customervalue chain based on global bestpractices, guidelines and businessprocesses.

The full deployment of iCARE will bringimprovements in operationaleffectiveness while enhancing acustomer’s experience when in contactwith TM. Customer interaction pointsnow have the same 360-degree view ofthe customer across departments,enabling a consistent reponse andattention to the customer’s requests.

In call centres, the Integrated CustomerInteraction capabilities and WorkforceScheduling have resulted in improvedefficiency in call handling. The QualityManagement Assignment Systemmonitors the quality of customerinteractions resulting in improvedmanagement of customer interactions.

At the back office, the introduction ofField Service Workforce Scheduling andend-to-end visibility of order status hasenabled tracking of the effectiveness ofdelivery service fulfilment and servicerestoration which is vital to customersatisfaction. With this new system, themost updated customer information isavailable to the field-force whichenables them to address and resolvecustomers’ complaints quickly.

The enhancement of the Sales ForceAutomation or SFA system wascompleted in December 2005, enablingsales personnel with the ability toaccess real-time customer informationto pursue sales leads and concludetransactions effectively. They are now

able to proactively identify valuableprospects and target them with salesefforts and campaigns to generategreater returns. The SFA system alsocomes equipped with a MarketingEncyclopaedia, which includes a productlibrary with information on all TM’sproducts and services.

In an effort to better understand thecustomer and equip the sales force withthe intelligence needed to better servicecustomers, the Business IntelligenceUnit has continued with the secondseason of its RM1 Million RewardProgramme, a Group-wide initiative toenrich the customer profile data.Launched on 25 May 2007, the targetpopulation was TM Fixed, Celcom and

Building relationships with customers


FOCUS ON CUSTOMERSERVICE EXCELLENCEAs the transformation journeycontinues, each point where a customercomes into contact with the Group willshape his or her perception of TM. Assuch, in the pursuit of customer servicedelivery excellence, all TM customerservice representatives in our contactcentres are being re-trained continuallyin specific areas. TM subsidiary, VADSBhd, has been assigned the task tomanage the operations of TM ContactCentres. During the year 2007, VADStrained and retrained all TM CustomerService Representatives.

Throughout the year, the customer-centric programme ensured that twokey modules were covered: CRMSystem Tools & Training andCompetency Based Training. In theeffort to change mindsets and improvecustomer management/servicing skills,the programme will be further

enhanced with Business ProcessTraining for all frontliners. This is acommitment by the management tofurther improve the customer serviceculture in TM.

BUSINESS WITH A CLICK ON TM ONLINETM Online is a customer interactionplatform which is complementary to theCRM systems. Launched in 2005, theBusiness to Customer (B2C)functionality enables residential as wellas small and medium enterprisecustomers to obtain information,download, make online payments orconduct transactions directly over theInternet, providing customer onlineconvenience while lowering customerservice costs. In June 2007, theBusiness to Business (B2B) functionalitywas added which extends these on-lineservices to business and corporatesector customers.

TM Net customers. The campaign wassuccessfully run and concluded on 31 December 2007 with a total of1,163,821 application forms fromcustomers.

The valuable customer insights generatedcoupled with the Business Analytics toolsof iCARE will enable TM to conduct moreeffective and targeted marketingcampaigns specific to customers’ needswhile improving customer retentionthrough predictive churn analysis.

ENHANCING CUSTOMERCONTACT POINTSThe Call Centre Rationalisationprogramme has achieved economies ofscale and effective management controlover business process and humancapital utilisation improvements whileenhancing the skill levels of customerservice representatives.

A key initiative to improving customerservice and operational effectivenesswas the transformation, rationalisationand consolidation of the call centrenetwork. The physical relocation of 19 centres to four strategic locations,namely in Kuala Lumpur, Penang,Kuching and Malacca in the first quarterof 2006, was further enhanced with theintroduction of the TM Single NumberAccess (SNA) across the Group.

SNA refers to the ‘100’ number, whichis one of the three key numbers thatTM customers need to rememberwhenever they require customerservices via the contact centres. SNAwas introduced to cover the threeOpcos in TM (Malaysia Business,

Celcom and TM Net) on 22 May 2007.With this streamlining, customers havesimpler and faster access to allservices within the TM Group.

By just dialling “100” the call will bediverted automatically to the appropriateCall Centres.

SNA Number Purpose

100– TM’s Products and Customers can call the ‘100’ number to enquire about

Other Services products and services, fault reporting, payments andbilling or to speak directly with TM customer servicerepresentatives.

101– Domestic and Customers only need to dial ‘101’ to be connected to

International Call either a domestic or an international number.Assistance Services

103– Directory Services The directory services number ‘103’ remains unchanged.

K e y I n i t i a t i v e s

Building Enduring Customer Relationships


DELIVERING THE PROMISEAT TMPOINTFollowing TM’s rebranding exerciselaunched on 14 April 2005, all KedaiTelekom nationwide underwent asuccessful transformation aimed atimproving efficiency, productivity,customer service and customerexperience (convenience, reach, grade ofservice, and image). A total of 103 KedaiTelekom (now transformed as TMpoint)were rationalised at the end of 2007.This includes the conversion of TM Netservice centres called Clickers intoTMpoint. Remaining TMpoints will betransformed in 2008.

The transformation entailed acomprehensive identity change in termsof physical look and feel, relocation ofstores, an evaluation and review of frontand back-end processes and systems,and improved staff skills andcompetency levels.

E-kiosk facilities were deployed atselected TMpoints to provideconvenience for customers to pay theirbills around the clock. At the end of theyear under review, 29 e-kiosks weremade available nationwide. Additional e-kiosks will be deployed in 2008.

A Drive-Thru facility was deployed inselected TMpoints namely TMpoint Alor Setar and Jalan Burmah, Penangto provide added convenience forcustomers to pay their bills using drivethrough facilities at high traffic andcongested areas. More Drive-Thrucounters will be made available in 2008.

To expand TM channels and providebetter reach for customer convenience,the TMpoint dealership programme wascreated for roll-out in 2008. Thisprogramme will support theentrepreneur development initiativeembarked upon by Government-linkedCompanies or GLCs.

To enrich and upgrade TMpoint as a“One-Stop Service & Retail Centre”,selected TMpoints will undergo furthertransformation aimed at integratingCelcom services as well as introducingmobile retail corners (known as BlueCube) in order to offer a complete rangeof telecommunication products andservices under one roof. A total of 12TMpoints have been transformed underthe One-Stop Service concept in 2007.

TM successfully launched the NewPayment Collection System (Phase 1)for front-end Points of Sale. This hassignificantly improved the customerpayment collection process at allTMpoints while rendering it able tohandle larger volumes of transactions.The average customer waiting andserving time has improved significantly.Phase 2 of the system which involvesthe back-end payment clearing house isscheduled to be rolled out in 2008.When implemented, updating ofcustomer payments will be doneefficiently in real-time thereby providingupdated customer billing.

At TMpoint, every effort is made toprovide customers with solutions. In linewith best practices and internationalstandards of service, TM service

personnel are accountable for everytransaction, treating every appointmentwith customers as a top priority.Visitors to TMpoint can expect a friendlygreeting and service that is efficient andknowledgeable. That is TM’s promise tocustomers.

As a result of the transformation,Telekom Sales & Services Sdn Bhd(TSSSB) won the coveted TM GroupAward 2006. Additionally, TSSSB wonawards in two categories – Best CounterService and Most Innovative Company inthe KTAK Minister Award 2007.

Good customer relationships are at theheart of a successful business. At TM,CRM is not only a process but acommitment. CRM helps to gathercustomer information, sales information,and market trends, and use this data forgreater effectiveness while establishingloyal relationships with customers thatare not only profitable but enduring.

Building Enduring Customer Relationships

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KeyInitiatives

PROF DR ZAHARIN YUSOFFPRESIDENTUNIVERSITI TELEKOM SDN BHD (Multimedia University)

DATO’ DR IR AHMAD ZAINI MOHD AMINCHIEF EXECUTIVE OFFICERMultimedia College

DR NAS TAMIMI IBRAHIMCHIEF EXECUTIVE OFFICERTelekom Smart School Sdn Bhd

Facts at a Glance • MMU student enrolment in 2007:

– 3,771 from 79 countries

• Courses conducted by MMC in 2007:

– 2,988• Web-based Smart School solutions

of eSkool and eLearn introduced byTSS in 2007

– 91 smart schools

Malaysia’s drive towards becoming a regional ICT hub requiresa pool of talents to support the rapid development of the ICTindustry. For the past 60 years, Malaysia has been at theforefront of telecommunications growth and change, havingchampioned early on the privatisation of itstelecommunications department which resulted in the creationof TM. As an employer of thousands of people, TM has longrecognised the need for skills training and capacity-building –not only for its own needs but also for the industry, both inMalaysia and the region. There are a number of institutionsthat support TM’s thirst for knowledge workers, the oldest ofwhich is the Multimedia College, first established as a trainingwing in 1948. This is followed by the 10-year old MultimediaUniversity, which enjoys the distinction of being the firstprivate tertiary institution in Malaysia. Under the innovativeSmart Schools programme, TM also helps to build a cadre ofIT-savvy young Malaysians who are poised to launch their owncareers in a competitive global marketplace. In these variousways, TM has also fulfilled a key social responsibility – that offostering a nation through capacity-building at various levels.


MULTIMEDIA UNIVERSITYMultimedia University (MMU), a tertiary educationinstitution set up through Universiti Telekom Sdn Bhd (UTSB), a wholly-owned subsidiary ofTM, fulfills the noblest of corporate socialresponsibilities – educating the next generation,the nation’s leaders and knowledge workers ofthe future. As Malaysia’s first private university,MMU’s successful model paved the way for theestablishment of several private universities in the country. It is the university at the heart ofMSC Malaysia (formerly known as MultimediaSuper Corridor), the country’s dynamic ICT hub,and thereby serves as a catalyst for thedevelopment of the nation’s ICT industry much as Stanford University does in Silicon Valley in theUnited States.

In 10 years, MMU has achieved an internationalstudent population of 20,000 and growing, on two campuses – the first, its original site in thehistoric city of Melaka, and the second inCyberjaya, the intelligent city in MSC Malaysia. It has produced 13,110 graduates, most of whomhave found employment within six months ofgraduation according to a recent survey. Buildingtechnological and managerial capacity not only forMalaysia but many markets in the region andelsewhere, MMU has been responsible fornurturing an outstanding pool of internationaltalent. The current enrolment of students includesa record 3,771 from 79 countries as compared to2,799 from 81 countries in 2006.

In 2007, MMU produced a total of 461 diplomagraduates, 2,603 bachelor degree graduates, 181 masters degree graduates and 10 PhDdegree graduates. MMU has 26 centres ofexcellence, establishing itself as a major player in research and development, and maintainsexcellent ties with the industry throughcollaboration and research partnerships.

MMU continues to innovate to differentiate itself inthe field of education, and recent measures topromote a holistic education has resulted in theestablishment of the Centre of Commercialisationand Technopreneur Development which promotesa spirit of enterprise among staff, students andalumni of the university. A new programme waslaunched in 2007 called e-SILK which promotesthe development of soft-skills, innovation,leadership and knowledge among theundergraduate community. Although new, theCentre has already produced several award-winning projects including:

• The MSC-IHL Business Plan Competition 2006(Business Idea Category) 2nd Runner-Up,Students Team called ‘Nestkom’. Organised by Multimedia Development Corporation(MDeC) on 8 February 2007.

• Aogos Network Sdn Bhd (MMU start-upcompany) obtained the Red Herring Asia Top 100 Technology Companies Award in Hong Kong 29-31 August 2007.

• IP Creators Challenge Series 2006 ComputerGame Category – organised by MDeC on 20 December 2006. MMU Start-up CompanyTeam ‘Hatchlings Games’, FIT – Winner ofRM50,000 Grant Fund from MDeC.

• IP Creators Challenge Series 2006 MobileContent Category – organised by MDeC on 20 December 2006. New Start-up Team‘NexWave’ – Winner of RM50,000 Grant Fundfrom MDeC.


• Xirien Sdn Bhd, an MMU start-up companysuccessfully obtained the MDeC Pre-SeedTechnopreneur Development Grant in 2007.

• Enveluv Sdn Bhd, an MMU start-up companysuccessfully obtained the MDeC Pre-SeedTechnopreneur Development Grant in 2007.

• MSC Malaysia APICTA 2007 Merit Award forTertiary Student Projects – Software/HardwareCategory for ‘Mobile Interactive Television’project.

• Winner in the MSC Malaysia APICTA 2007 forBest of Tertiary Student Project – CreativeMultimedia Category for ‘Project 57’.

MULTIMEDIA COLLEGEThe nation’s premier provider oftelecommunications training, theMultimedia College (MMC) was foundedin 1948 to train employees of theTelecommunications Department, ofthen Malaya. Having started life in amodest way, the next key milestone inits evolution was the establishment of anew telecommunications training centrein 1961 as a joint-venture between theUnited Nations and the MalaysianGovernment under the United NationsDevelopment Programme. The need forspecialised technical training grew asthe provisioning of telecommunicationsservices was privatised, and MMCresponded by setting up, in 1980, fivetraining schools throughout the country– in Taiping, Kuala Terengganu, Melaka,Kuching and Kota Kinabalu.

While delivering training courses for anincreasing number of employees of TM year-on-year, MMC also rose to thechallenge of being a training provider toother Commonwealth countries throughan arrangement with the CommonwealthTelecommunications Organisation (CTO).The CTO, headquartered in London, hasa membership of more than 130countries.

MMC was also given the responsibilityof spearheading the Malaysian TechnicalCooperation Programme (MTCP) underthe Prime Minister’s Department with

the objective of encouraging knowledge-sharing and facilitating capacity-buildingespecially in the telecommunicationsand ICT industries of emergingmarkets. The participants came fromsuch countries as Mauritius, Malawi,Indonesia, Bosnia Herzegovina, Laos,Vietnam, Gambia, Myanmar, Cambodia,Burkina Faso, Philippines, DPR Korea,Timor-Leste and Yemen. Today, MMCalso collaborates with the Asia PacificTelecommunity (APT) and Organisationof Islamic Countries (OIC) as a leadingtelecommunications training provider.


Fostering A Nation Through Capacity Building

MMU Library


In 1998, MMC was awarded the ISO9002 certification by the Standards &Industrial Research Institute of Malaysia(SIRIM) in recognition of the quality ofits training programmes. It receivedfurther recognition when it wassubsequently appointed sole CertifyingAgency for the Malaysiantelecommunications industry by theMalaysian Communication & MultimediaCommission which regulates theindustry under the Ministry of Energy,Water and Communications.

As the training wing of TM,headquartered in Kuala Lumpur, MMCis chiefly responsible to provide trainingand development for TM employeesthroughout the organisation. In thepursuit of excellence, TM continues toinvest in MMC to ensure its manytraining initiatives and programmes arein line with current industry needs. TM’s

human resource development policiesare focused on staff developmentthrough continuing professional and on-the-job training at all levels. MMC isthe vehicle through which staff skillsare delivered and upgraded.

In 2007, MMC conducted a total of2,988 courses for over 51,273participants compared to 2,475 coursesfor 41,364 participants in the previousyear. Besides its popular coreprogrammes, MMC has successfullyinnovated programmes for TMexecutives such as the SmartOrangeand Structured Training Programmes.These are designed to enhance bothbehavioural and functionalcompetencies of employees. Theselection of participants for suchprogrammes is based on a 360-degreeFeedback Assessment conducted by theGroup HR division whereby executives

are prescribed courses to meet theirspecific skills-set requirements. MMCalso works closely with the NationalUnion of Telecommunication Employees(NUTE) in the provisioning ofcustomised training programmes fornon-executive employees. This ensuresa growing pool of skilled workersthroughout the organisation.

To ensure it keeps abreast withtechnological developments, MMC hasinvested in the provisioning of E-Learning facilities such as BalancedScorecard (BSC) E-Learning modulewhich has been well received.

In 1995, MMC was given college statusunder the Ministry of Higher Educationin recognition of its track record androle. Since 2000, MMC has beenoperating as a Private HigherEducational Institution (PHEI) which

MMC – fostering education for all ages



puts it on par with the best educationaland technical colleges in the country.As an educational institution, MMC nowoffers diploma-level courses that meetthe exact requirements of the ICT andKnowledge economies. In 2007, MMCadded three new programmes to itsexisting six diploma-level courses – theDiploma in Creative Media, Diploma inMobile & Wireless Communication, and the Diploma in Accounting withMultimedia. The other six programmesoffered are: Diploma in Multimedia(Business & Computing), Diploma inMultimedia Technology, Diploma inTechnology (TelecommunicationsEngineering), Diploma in ComputerScience, Diploma in Marketing withMultimedia and Diploma in Managementwith Multimedia. All six diploma-levelcourses have been recognised by the

Malaysia Qualifications Agency (MQA)while the additional three courses arein the process of obtaining MQAcertification. At MMC’s 11th Convocationin 2007, 477 graduates received theirdiplomas.

Meanwhile, as a leading trainingprovider, MMC has a clientele whichincludes TM vendor organisations,Malaysian companies, regionalcompanies, the armed forces and thepolice force. With respect to its ownCorporate Responsibility effort, MMCoffers ICT training to teachers and theirpupils under the PINTAR Project, whilealso initiating community programmessuch as educational and learningcamps for school-going children andwelfare activities for orphanage homes.

On 30 January 2007, MMC introducedthe Training Reservation and InformationSystem (TRIS), a friendly web-basedsystem accessible via TM’s intranetnetwork to facilitate the management oftraining. It provides information fromtraining requests to training evaluations.With TRIS, TM employees may also viewtraining programmes and schedules,while management can request trainingand evaluation reports. The interactivitywill help MMC to further improve itstraining offerings.

TM has also put in place a networkupgrade plan to implement NextGeneration Networks (NGN) and HighSpeed Broadband (HSBB). The entirenetwork will evolve into an NGN/HSBBenvironment over the next five years andin line with this transition, MMC ispoised to ensure that TM employees areequipped for change to a new operatingenvironment and are fully able to meettheir customers’ expectations.

New courses and modules have beenintroduced already and in 2007, MMCdelivered a range of new workforceprogrammes such as Broadband SavvyTCP/IP, NGN Technology Evolution, Triple Play and IP Convergences. More than 5,000 staff have been trainedvia these various programmes and in2008, MMC is expected to train afurther 12,500 employees under thesespecialised programmes.




TELEKOM SMART SCHOOLSDN BHDTelekom Smart School (TSS) continuesto support the implementation of SmartSchools as one of the flagshipapplications of MSC Malaysia.Recognised as one of the country’spremier e-Education providers, TSSattained the Capability Maturity ModelIntegration (CMMI-SWV1.1) MaturityLevel 3 in June 2006, in line with itsmission to become a world-classmultimedia education solutions provider.CMMI offers a process improvementapproach that provides organisationswith essential tools and is now beingadopted worldwide as a qualitymethodology.

In addition, three of TSS’s projectmanagers were recently certified forProject Management Professional(PMP), which is a globally-recognisedcertification in project management,thereby giving TSS the edge to provideexcellent and high quality projectmanagement services in delivering anyproject, locally and globally. The web-based Smart School solutions of eSkool(School Management System) andeLearn (Learning and ContentManagement System) introduced by TSSin 2006 to the 88 smart schools inMalaysia were further enhanced in 2007to support additional user requirements.Continuous improvement is key inensuring that TSS solutions arebenchmarked globally and that TSSremains at the cutting edge oftechnological offerings to young andaspiring ICT professionals.

Besides the 88 smart schools, theeSkool and eLearn solutions were alsointroduced to three other schools inKuala Lumpur in 2007 as part of TMGroup’s Corporate Responsibility effortin community relations initiatives underthe TM eSchool project – SMK USJ 12,SMK (L) Methodist KL and SMKSeksyen 11 Shah Alam. In addition tothe solutions given, the schools werealso given touch-card access systemsthat are integrated to the eSkoolapplication, giving the schoolsimmediate real-time attendanceupdates. In order to encourage andexpose teachers and students to novelways of creating teaching and learningcontent using eLearn, a content creationcompetition was organised at thesethree schools. Depending on thefeedback, more schools may be adoptedby TM in the coming years for this CSRinitiative and TSS will continue to take alead in the provisioning of systems,maintenance and support services forthe TM eSchool project.

To reinforce its position as the leadinge-Learning player in local and regionalmarkets, TSS collaborates with bothinternational and established localpartners and associates to enhance itsproduct and service offerings. UnderTSS, e-learning tools are marketed atexhibitions and TSS experts participateat seminars to share their knowledgeand expertise. In this way, TM fulfils itsobligations to the society in which itoperates.

Enriching education in schools


Facts at a Glance

A new 3-yearCollective Agreement with TM Unionswas signed

348 employees

rewarded for PIP contributions

281 employees

received the Group CEO Merit Award

Enhancing employee productivity through IT

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To bring TM closer towards its goal of greater efficiency and operationalexcellence, its Human Resource (HR) Division has been playing its role as astrategic business partner by emphasising and inculcating a performance-drivenwork culture with innovative performance management and rewards systems. The role of the HR Division is also to nurture the organisation’s future leaders byidentifying and developing a pool of high-potential employees that can be a sourceof future talents and resources.

DRIVING EMPLOYEES PERFORMANCE THROUGH STRATEGICREWARD PLANSOne of the initiatives taken to instill a performance-based culture in theorganisation is through the implementation of strategic reward plans. On top ofensuring deserving employees are given their due recognition and reward, theperformance-based reward component has been carefully designed to addressvarious pay and compensation issues facing the organisation such as the following:

• Realising pay-for-performance – Performance-Linked Bonus is derived from TM Group’s overall achievement results and thus is distributed based onindividual performance level using the factoring (f) approach.


• Pay competitiveness (external equity)& compression (internal inequity) –Performance-Linked Incrementincorporates dimensions such ascost of living, individual performanceas well as individual salarypositioning against the marketwhich are all included into the pay-matrix to serve as a two-prongedmechanism in addressing externaland internal equity issues.

• Honouring the “superstars” – The Group CEO Merit Award wasinspired to further recognise theunsung heroes in the organisationwho have truly gone the extra mileto deliver on responsibilitiesentrusted to them. Furthermore, the scope of the award has alsobeen widened to recognise thosewho uphold CSR/CR values byrendering their services to society.The complexities of today’s businessenvironment and the growingaccountabilities for executives callfor greater flexibility and promptnessin TM’s internal reward system. The Group CEO Merit Awardrecognises these challenges andprovides a platform on which toreward exceptional achievements orrecognise honourable deeds byemployees. In 2007, a total of 348 employees were rewarded fortheir contributions under thePerformance ImprovementProgramme and another 281employees were rewarded directlythrough the Merit Award.

Based on tangible results from thesereward systems, TM will continue withtheir implementation into 2008 andbeyond, and work towards bringing theorganisation a step closer to becominga fully performance-based organisation.

Besides the above reward scheme, TM has also introduced a number ofrecognition plans in its effort toenhance the performance andcontributions of their employees. Someof these plans are as follows:

MARKET PREMIUMTM has completed a feasibility studyacross the organisation, which explores the possibility of offeringspecial market premiums for employeescategorised as “hot skills”, where theirskill sets are in high demand in theindustry. This is seen as critical to allow TM to be able to retain employeeswith such skill sets via a structuredmechanism. The implementationframework for the market premiumprinciple has been endorsed and will be implemented in 2008.

SALES INCENTIVE SCHEMEIn view of TM’s aspiration to become aperformance-driven organisation, HR is entering the second year of thedifferentiated rewards programme,namely the Sales Incentive Scheme(SIS). Looking at the performance of theGroup, the scheme has successfullyinculcated a performance-based cultureamong its Sales Personnel. For 2007, atotal of 164 employees have enrolled inthe programme, which represents53.0% of the Sales workforce in theMalaysia Business. The schemepropagates rewards through salesachievement.

TM GROUP AWARDS NITEIn April 2007, TM continued its yearlyrecognition for its employees throughthe TM Group Awards Nite. The AwardsNite held in Putrajaya brought togethera total of 3,500 employees, includingthose from regional subsidiaries. Thebest of the employees received awardsfor excellent performance,innovativeness and exemplary behaviour.


INNOVATIVE PERFORMANCEMANAGEMENTTM has now built a credible andeffective performance-managementsystem which has adopted the BalancedScorecard principle. The system has theability to ensure that results across theorganisation are aligned. Individual KPIsnow have direct links with the BalancedScorecard of the respective division. Inthe effort to ensure betterunderstanding of Balanced Scorecardmethodology, HR has introduced theBalanced Scorecard E-Learning to allemployees. This is to allow consistencyin the development and creation of KPIsamongst employees. To date, 92.0% ofthe workforce has completed the onlineprogramme.

Moving forward, the performance-management system is being enhancedto capture non-executive performance.

Employee Productivity Enhancement(EPE)Employee Productivity Enhancement(EPE) is a programme designed tosupport the current Performance-Management System. The focal point ofthe programme is to enhance theperformance levels of non-performers.In its second year, EPE has shown58.0% performance improvement inthose who have enrolled in theprogramme.

pipeline. Throughout the year, 327Leaders and Talents attended 14selected leadership developmentprogrammes by top ExecutiveDevelopment Institutions such as theHarvard Business School, INSEAD (incollaboration with Petronas), Universityof Melbourne, and the CorporateLeadership Council, Washington D.C.

The high-potential talent, currentlynumbering about 400 for the wholeGroup, were assessed through astructured methodology and endorsedby the Board of Directors. They arecurrently rated as to whether they havethe potential to reach top leadership orsenior management positions in theGroup.

In addition, leadership practices havebeen strengthened by engaging about150 members of Senior Management inthe leadership and talent managementprocess. This was done through a oneand a half-day Talent Spotting exercise.In these sessions, besides

EXCELLENCE THROUGHLEADERSHIP & TALENTMANAGEMENTUnder the Strengthening LeadershipDevelopment Framework, the keyinitiatives have been to ensure thatthere is a clear plan for a strongcurrent and future leadership in TM.The Leadership and Talent Management(LTM) unit has been established as itsown unit under Group HR. Efforts havebeen focused on nurturing and retaininghigh-potential employees by giving themopportunities to fill up vacant keypositions in Senior Management, whileensuring that their remuneration is wellaligned to the market. From a longer-term perspective, pivotal positions havebeen identified and their successionplans completed.

Those employees who have beenidentified for succession plans havebeen targeted for further leadershipdevelopment and mentoring to ensurethat there is continuity in the leadership

Best Manager Award, TM Group Awards Nite 2007


Gearing Human Capital Towards Business Excellence


Inculcating a healthy lifestyle


understanding the overall framework ofTalent Management, they are specificallytaught the skills of identifyingleadership behaviour among theirexecutive populations so that they canidentify who are their high-potentialreports for succession grooming, and atthe same time, support their continuousdevelopment in the work place.

Alongside that strategy, as part ofleadership’s continuing directengagement with employees on theground, TM leaders regularly visited andmet with employees from otherfunctions and divisions, to discuss day-to-day or organisational issues they facein their work environment. Theseactivities are coordinated through theLeaders Role Modelling – “TurunPadang” or grassroots programme.

Randomly-selected employees have alsobeen given the opportunity to meet theGroup CEO under the EmployeeEngagement Programme held bi-monthly. A total of 17 sessions wereheld in 2007, involving about 250executives and non-executives. Theywere given the opportunity to sharetheir personal and career aspirationswith the Group CEO Dato’ Sri AbdulWahid Omar. This has helped to closegaps between the top leadership andthe employees at large and hastherefore contributed to better culturalalignment throughout the organisation.Based on the employees’ feedbackduring these sessions, some initiativeshave been implemented as part of thebusiness improvement programme.

Younger high-potential employees havealso been engaged by Top Managementto ensure there is better alignmentbetween the business and theirpersonal aspirations. Work has alsostarted to ensure that this youngertalented group is exposed to theappropriate leadership developmentprogrammes. Similarly, under theLeaders Dialogue programme, selectedleaders were given the opportunity topresent and share their workexperiences and career growth with anaudience of about 150-200 employees toprovide exposure about personal careerdevelopment experiences.

Another milestone in TM’s search forleadership excellence was the Leaders’Convention 2007, where about 220 topand senior leaders of the entire Group,including those from regionalsubsidiaries, converged over two days inApril 2007, to share their successstories and experiences. This gave themfirst-hand insights into how each leaderhas developed and handled issuesfacing their business.


PERFORMANCEIMPROVEMENT PROGRAMME(PIP)In 2007, the HR Divison spearheadedthe boosting execution capacityinitiatives in the PIP. The role played byHR was to execute actions that supportand build the execution capacity ofother divisions involved in theturnaround of the fixed-line businessand mobile business. Several strategicinitiatives were implemented as follows:

• Communicated key messagesrelated to PIP and other fixed-business and mobile businessconcerns to the entire organisation

• Intensified performancemanagement for top managementand revenue earners

• Accelerated leadership changes inpivotal positions and among GMs

• Revamped HR to become an effectivestrategic partner to the business

• Developed critical institutionalcapabilities (e.g. Regulatory, Salesand Marketing)

• Reinforced core execution disciplines(e.g. Project Management Office,Intra-Company governance)

Prompt execution of these initiativeshelp to yield positive results in thefixed-line and Celcom businessturnaround for 2007.

MANAGEMENT-UNIONRELATIONSHIPIn 2007, the long-standing relationshipbetween the Management of TM andthe three Unions, i.e. KesatuanKebangsaan Pekerja-PekerjaTelekomunikasi Semenanjung Malaysia(NUTE) representing non-executiveemployees in Peninsular Malaysia,



Towards a strong management-union relationship


Kesatuan Pekerja Telekom MalaysiaBerhad Sarawak (UTES) representingnon-executive employees in Sarawakand Kesatuan Pekerja-Pekerja TelekomMalaysia Berhad Sabah (SUTE)representing non-executive employees inSabah, continued to improve withmutual respect and betterunderstanding of each other’s strengthsand areas for growth.

The year also marked the successfulnegotiation of a new set of CollectiveAgreements (CA) with the three unionsconcerned.

First begun in November 2006, the CAswere signed with the respective Unionsas follows:

1. 11 May 2007 with NUTE (7th CA);2. 29 May 2007 with SUTE (4th CA);

and3. 31 May 2007 with UTES (7th CA).

A number of improvements in terms ofsalary and benefits were noticeable inthe CAs which benefit the non-executivestaff of TM. Some of the highlights are:

1. Effective from 1 January 2007 allnon-executive employees within theambit of the respective three CAsare given an “Across the Board”salary revision of 5.5% of theirbasic salary as at 31 December2006;

2. Cost of Living Allowance (COLA)was introduced and the amountagreed with the respective Unionswere RM50.00 for NUTE, RM35.00for UTES and RM80.00 for SUTE.Adding this amount to the HousingAllowance which were agreed atRM120.00 per month with NUTE,

RM135.00 with UTES and RM90.00with SUTE, the total amountreceived by non-executivesrepresented by the three Unionsare the same, i.e RM170.00 permonth.

All Unions have also agreed in principleto the introduction of Performance-Based Incentives for non-executiveemployees. The system is aimed atrewarding non-executive employees

whose performance exceed the pre-setKPI targets. A Committee comprisingmembers from both the Managementand each Union was formed to ensuresmooth implementation of the initiative.

TM continues to maintain a healthy andamiable working relationship with theUnions to ensure mutual trust, respectand understanding of each other’sneeds.

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TM continues to promote the development of staff capabilities as one of its important initiatives tosupport the Group’s vision. As a key asset, the employees’ dedication and competencies are crucial toensure TM is competitive in the present and remains so in the future. At the same time, emphasis isplaced on achieving excellence and delivering quality products and services. Hence, TM Group iscommitted to developing its strategic human capital assets, which are paramount to improvingoperational efficiency within the Group and to realising its vision of being the ‘CommunicationsCompany of Choice’. Individually, TM employees are expected to continually learn, unlearn and relearnnew technical and functional skills. Training is still an important intervention and treated as an on-going process to optimise manpower development and to improve productivity.

360-DEGREE FEEDBACK ASSESSMENTTo serve as a measurement tool to check on the health of employees’ competencies, a ‘360-DegreeFeedback Assessment’ is used to measure the organisation’s competency level. Also known as a multi-source assessment, an executive is rated by his/her subordinates, peers, supervisors as well as internalcustomers. Results obtained, known as the ‘Competency Index’ (CI), can determine the level of one’sbehavioural competencies. For the Balanced Scorecard set in 2007, the targeted rate was for 50.0% ofthe TM population to achieve a CI of 7.5 (on a scale of 1 – 10). Based on the annual 360-degreeFeedback Assessment done for 8,259 executives in TM and local subsidiaries, 56.0% of the populationsuccessfully achieved a CI of 7.5 and above. The 2007 CI has shown significant improvement over 2006.In 2006, 44.0% of the population achieved a CI of 7.5 and above. Employees have clearly shownimprovements in their behavioural competencies while performing their day-to-day tasks.


SMARTORANGE INITIATIVESAnother intervention programme asinitiated by the management tocontinuously develop and enhance staffcapabilities is called SmartOrange.Conducted initially for staff of MalaysiaBusiness, it was newly introducedGroup-wide for all TM subsidiaries in2007 to support gaps in any employeecompetencies. SmartOrange is aninitiative by Group Human Resource toidentify and address those behaviouralcompetencies that need to be acquiredby all TM executives. TheTransformation and DevelopmentDivision (TDD), a division responsible forthe overall structure of TMCompetency-Based DevelopmentFramework and SmartOrangeprogrammes have continuously receivetestimonials from the participants aswell as Heads of Units or Divisionsrecognising the effectiveness of thescheme. A senior manager from a localsubsidiary remarked in praise ofSmartOrange: ‘Thank you for your effortin encouraging me to attend theprogramme. It is indeed an enrichingprogramme and I highly recommend thatothers be sent, as I believe they will allbenefit from it as well.’

FUNCTIONAL COMPETENCIESBesides behavioural competencies,functional competencies are also seenas crucial to develop skills, knowledgeand abilities of an employee. Whilstbehavioural competencies focus moretowards soft skills for the executives,functional competencies covers the hardskills for both executives and non-executives. Sets of framework havebeen developed for employees at Sales,Marketing and Technical. TheseStructured Training Programmes, in thenon-executive framework set, forexample, a non-executive should beable to understand the type offundamental and functionalcompetencies that he/she should obtainwhile sitting in his/her current positionand types of functional competencieshe/she should acquire in order to beupgraded to a higher position. Whilebehavioural competencies are assessedvia on-line 360-Degree FeedbackAssessment, functional competenciesare assessed via one-to-one interviews,written questionnaires and livepresentations.

INSTITUTIONALISEFUNCTIONAL CAPABILITIESA thorough work study has been donefor Group Regulatory, Legal andCompliance to assess their employees’functional capabilities in areas such ascommunication and strategic skillsconducted through interviews, groupdiscussions and presentations as wellas tests. With the assessment findings,

a set of training and developmentprogrammes are recommended. Theother areas involved are Sales andMarketing and Technical CompetencyFramework. Acting on the framework,some work has been undertaken toassess the competencies of sales andmarketing.

As a training arm of TM, theMultimedia College (MMC) isresponsible for the delivery of bothSmartOrange and the Structured TrainingProgrammes. In 2007, 17,188 employeesexecutives were trained at MMC whichcontinues to play its part in ensuringthat TM employees have everyopportunity to acquire the skills,knowledge and expertise to carry outtheir duties effectively and to achievetheir full potential.

INDUCTION PROGRAMMESFor newcomers in the organisation,Induction Programmes are conducted togive them an overview of theorganisation, and to share theCompany’s vision and aspirations,business direction and environment,policies, procedures and systems andwell as culture and values. A series ofsuch programmes are also conductedfor externally-recruited managementgroups at TM and subsidiaries, as wellas front liners. Being very committedtowards staff development and training,the Group CEO does make time tomeet new employees and share hispersonal aspirations for theorganisation.


TM SCHOLAR CAREERMANAGEMENT PROGRAMMEThis was introduced to provide aframework for various engagement anddevelopment programmes that coverboth new TM Scholars and also existingTM Ex-Scholars. The main focus of theprogramme is to provide emphasis ontalent creation, improving theirengagement level towards theCompany, nurturing a sense ofbelonging towards their jobs, and alsoaddressing their functional andbehavioural competencies. For TMScholars hired as new executives, it iscompulsory for them to undergo theManagement Trainee Programme whichincludes an induction programmeknown as My TM Training Progammeand on the job training known as TMInternship Programme.

HIGH CONTRIBUTORSDEVELOPMENT PROGRAMMEThis programme focuses on thedevelopment of those executives whoare not in the talent pool list but haveachieved desired work performancelevels. A key aspect of the programmeis coaching, job rotation, attachment todivisions in TM or subsidiaries, specialassignments and training.

In 2007, TM Group continued to investin several training and developmentinitiatives to enhance staff capabilities inpursuit of excellence. Continuouseducation is critical to create a highlyskilled and efficient workforce to givethe Group a competitive advantage inthe challenging telecommunicationsmarket.

EMPLOYEE ASSISTANCEPROGRAMME (EAP)Group Human Resource is committedtowards crystallising TM’s Vision andMission. With a high-performingworkforce, TM can perform beyondexpectation. With that in mind, GroupHR through its Transformation andDevelopment Division (TDD) hasembarked on a journey formulating anEmployee Assistance Programme (EAP)for all employees. EAP is a form of ahuman performance intervention toolfor effective personnel managementbeyond training and development.Through it employees will be able tomanage, overcome and avoid personal,career, family, interpersonal and workrelated problems that can impede theirperformance and productivity.


Building Capabilities Through Development And Learning

National Day Parade


EAP is a confidential resource at nocost. It provides counseling, coachingand mentoring for TM’s employeesthrough our trained multi-discipline EAPPractitioner nationwide. It has beendesigned by incorporating the existingHuman Resource as well as TMtransformation initiatives. Thus EAP hasbeen proven to be an effectivemechanism in improving employees’performance, quality and productivity.

Given the dramatic developments in thetelecommunications business eitherdomestically or internationally, TMemployees can face drastic change andbecome overwhelmed with their addedresponsibilities and market demands.This may affect their confidence,performance, health, motivation, andrelationships. Hence the EAPprogramme’s objectives are as follows:

• To enhance employee performanceand productivity

• To create a harmonious workenvironment

• To reduce organisational cost byproviding preventive education andearly constructive intervention

• To encourage employees withpersonal problems to seek help

In the near future, it is the aspiration ofGroup HR to establish a platform forspecial learning and sharing of bestpractices in counseling, coaching andmentoring through benchmarking. TMintends to share resources throughcross-organisational counseling andcoaching with other willing partnerorganisations (especially amongst GLCs)to successfully implement suchprogrammes Group-wide.

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Telekom Research & Development Sdn Bhd (TMR&D) was established in 2000 to harnesstechnology and innovation for improved and new product development and to provide relatedservices to existing and potential markets. With a clear focus on innovation, TMR&D is set ongrowing its competency in technology development and management, usage of knowledge-intensive applications, networking, and accelerated industrial skills upgrading of its mostimportant asset, which is human capital.

As the research arm of TM, TMR&D has identified its priority research areas in ICT. All researchinitiatives are designed to match TM’s business objectives and direction by considering emergingglobal technology trends, the national ICT blueprint, user requirements and market needs.

A total of 79 research projects were undertaken in 2007, of which 27 were successfullycompleted by year end as scheduled, with the rest planned for completion in 2008 and beyond.

In anticipation of the market demand for high speed broadband, in July 2007, TMR&Dsuccessfully showcased the Fibre-to-the-Home (FTTH) products as well as the digital homesconcept to the Malaysian Communications and Multimedia Commission and the media at SriHartamas Kuala Lumpur. This was in support of TM’s business plan which includes theimplementation of high speed broadband (HSBB) infrastructure by the second half of 2008, whichwill allow users new lifestyle experiences with digital home services such as IPTV and HSBBinternet access.

Facts at a Glance

27 research projectssuccessfully completed


KEEPING UP WITH THEINDUSTRY THROUGHCOMMERCIALISATION &QUALITY ASSURANCEAs part of the move towards greatercommercialisation of its innovations,TMR&D successfully commercialised atotal of four new products in 2007.Commercialisation initiatives called forTMR&D to participate actively in productexhibitions, roadshows and internationalconferences as well as submit entriesfor recognition at award competitions.

Continuing the trend of previous years,TMR&D collected several awards duringthe International Invention, Innovation,Industrial Design & Technology

Enriching lifestyle through broadband

Exhibition (ITEX’07) in 2007. The awardsincluded:

1. Platform for All-Service Multi-Access (PLASMA) – Gold Award &Innovative Product Award

2. XtreamX Home Media Centre –Gold Award

3. Vertical Cavity Surface EmittingLaser (VCSEL) – Gold Award

4. Advanced Tracking System UsingRFID – Silver Award & InnovativeProduct Award

5. EDFA In-Line – Silver Award6. Simple & Efficient Software

Radio Development Platform –Bronze Award

7. Distribution Point (DP) – InnovativeProduct Award

Whilst focusing its research activities onniche technologies, TMR&D also placedemphasis on quality initiatives includingCapability Maturity Model Integrated(CMMI) and Product Quality Assurance.

In August 2007, TMR&D successfullypassed the SCAMPI 1.2 Class Aappraisals for Capability MaturityModel® Integration (CMMI) and basedon the model set by the SoftwareEngineering Institute (SEI) of CarnegieMellon University, USA, was successfullyappraised to CMMI - DevelopmentVersion 1.2 Staged RepresentationMaturity Level 3. TMR&D is the firstcompany within the Group to beappraised under CMMI Version 1.2.Following the appraisal, TMR&D is setfor the appraisal of the CMMI Maturity


Level 4, scheduled to take place in 2008where all relevant activities will beintensified. Project managers will beinducted through training into theprocesses and guidelines as outlined inthe CMMI Process Quality Manual andother process documents.

INTELLECTUAL PROPERTY &COLLABORATION TOENHANCE CAPACITYBUILDINGIn 2007, TMR&D successfully filed 16patents, 13 industrial designs, 21 layoutdesigns for integrated circuits and 65copyrights. The realisation thatIntellectual Property is a reflection of acompany’s competitive edge hasbrought about an increase of 3.0% offiled applications compared to theprevious year.

Continuing the effort towards capacitybuilding, TMR&D formed numerouspartnership agreements with severalorganisations to collaborate onapplications for next generationservices, product prototyping anddevelopment, GEPON, new generation ofoptical fibre, cable and accessories forFTTH deployment, designs, fabrications,model development and manufacturing.Its partners include many local andinternational companies/institutionsinvolved in equipment/componentmanufacturing, higher learning andresearch and development.

• International Symposium onManagement Engineering, 10-12 March 2007, Japan.

• IASTED International Conference onCommunication Systems, Networksand Applications, 8-10 October 2007,Beijing, China.

• Konferensi Nasional SistemInformasi, 14-15 February 2007,Bandung, Indonesia.

• International Conference on SignalProcessing, Communications andNetworking, 22-24 February 2007,Chennai.

• Asia Modeling Symposium, 27-30 March 2007, Thailand.

• The Optoelectronics andCommunications Conference, 9-13 July 2007, Yokohama, Japan.

• International Conference on theOptical Internet and the AustralianConference on Optical FiberTechnology, 24-37 June 2007,Melbourne, Australia.

• International Conference onElectrical Engineering andInformatics, 17-19 June 2007,Bandung, Indonesia.

• IEEE TENCON 2007, 30 October – 2 November 2007,Taipei, Taiwan.

• Twelfth Optoelectronics andCommunications Conference/16th International Conference on Integrated Optics FiberCommunication 9-13 July 2007,Yokohama, Japan.

HUMAN & INTELLECTUALCAPITALTo provide a wider intellectual resourceto meet current and expected marketdemand, TMR&D increased its researchpersonnel strength from 270 in 2006 to287 in 2007.

A Post-Graduate Scheme firstintroduced in 2004 to provideopportunities for MSc and PhDqualifications remains, and producesmulti-skilled experts in specialisedareas. As of 31 December 2007, 68 full-time employees were offered post-graduate opportunities as compared to43 a year ago. In the year under review,13 scholars completed their post-graduate studies while in full-timeemployment. As part of the continuingeffort to build human and intellectualcapital, researchers at TMR&D are alsooffered opportunities for industrialattachments through sabbatical andother programmes as a commitmenttowards individual skill enhancement.

TMR&D also encourages scholarship inother ways. In 2007, 87 papers weresubmitted by researchers at TMR&D,out of which 61 were accepted atinternational conferences and forpublication by journals. These included:

• Optical Express International JournalVolume 15(6), March 2007 publishedby Optical Society America.

• Journal of Optics & LaserTechnology.


Towards Greater Innovation


• The 7th Pacific Rim Conference onLasers and Electro-Optics, 26-31August 2007, Seoul, Korea.

• 7th International Symposium onCommunications and InformationTechnologies, 16-19 October 2007,Sydney, Australia.

• SPIE APOC 2007 Asia Pacific OpticalCommunications, 1-5 November2007, Wuhan, China.

• Ninth @WAS InternationalConference on InformationIntegration and Web-basedApplications & Services for theMaster and Doctor Colloquium, 3-5December 2007, Jakarta, Indonesia.

• IASK International Conference E-Activity and Leading Technologies2007, 3-6 December 2007, Oporto,Portugal.

• 12th WSEAS Conference on AppliedMathematics, 29-31 December 2007,Cairo, Egypt.

• The International conference onInformation Networking 2008, 23-25January 2008, Busan, Korea.

GIVING BACK TO SOCIETYTHROUGH KNOWLEDGE &SKILLS ENHANCEMENTINITIATIVESTMR&D continued to play a vital role innation-building via its commitment toprovide education and internshipopportunities. During the year, 70students at various levels participated inits internship programmes. Industrialtraining programmes were alsoconducted through collaboration withlocal universities throughout thecountry.

TM R&D’s new premises

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The OSHE performance in TM for the year saw a reduction of 6.2% of accidents with continued efforts tocreate greater awareness and to step up improvements in the workplace from both the safety and healthaspects.

In 2007, we exceeded our target for accident reduction by 6.2% (actual: 31.2% against target of 25.0%) butfell short of maintaining the “zero fatality” record we achieved in 2006. Nevertheless, in Malaysia, twostates, Terengganu and Pahang, achieved ‘zero accident’ records. A single fatal accident was recorded inKelantan, and Kuala Lumpur recorded the second-highest number of workdays lost due to major accidents.

A number of positive steps were taken during the year under review. They are described below.

1. The TM Group Occupational Safety, Health & Environment Management System which contains twoseparate management systems, was completed. The systems are:

• ISO 14001:2000 – Environmental Management System Specification

• OSHAS 18001: 1999 – Occupational Safety & Health Management System Specification.

The ISO 14001:2000 provides tools for managing environmental impact consistently. It was succesfullydeveloped and later implemented by Menara TM Operation and Maintenance Unit (MTOM) in 2007 intheir day-to-day operations and maintenance activities at Menara TM. Certification is targetted for 2008.

The implementation of the ISO system was a significant step towards having all TM properties andoffices managed to the same standards.

Meanwhile, the OSH Management System Specification was also officially rolled out.

Facts at a Glance Reduction of accidents:

6.2%

‘Zero Accident’in Terengganu & Pahang

Safety first


2. The NIOSH-TM safety passporttraining programmes for TMcontractors and vendors were alsoimplemented. These were initiatedin late 2006 in collaboration with theNational Institute of OccupationalSafety and Health (NIOSH). About400 contractors’ personnel attendedthe programme. It will be continuedin 2008.

3. Training for TM Group OSHE SteeringCommittee members to equip themwith the requisite knowledge andunderstanding of various OSHEstatutory and regulationsrequirements was inaugurated.

4. The OSHE Audit Programme wasconducted at state level to ensureall activities and processesimplemented were in compliancewith the relevant statutoryregulations.

5. The First OSHE Personnel Workshopwas held to enhance skills andcompetency.

6. The OSHE Campaign & Exhibition,held annually since 2005, had itsroadshow at Menara TM,Kedah/Perlis, Sarawak and Johor.

7. Celcom launched its new OSHEPolicy in July in conjunction with aHealth Carnival. The carnivalprovided a necessary platform forCelcom and TM employees toappreciate the merits of a healthymind and body in increasingproductivity.

8. An Environmental AwarenessCampaign made its debut in August.This was organised by TMF ServicesSdn Bhd at Menara TM based onthe theme ‘Creating Habits Today,Safe Environment for Tomorrow’.

A total of 10 organisations fromdifferent sectors participated in thisevent. Dialogues, lectures anddistribution of pamphlets focusingon the 3Rs (Reduce, Recycle, Reuse)were the main activities andinformation was shared among theparticipants with an emphasis onthe importance of protecting forests,planting trees, decreasing pollutionand protecting the quality ofdrinking water.

9. TM has initiated other efforts toreduce emissions of ozone-depletingsubstances by phasing out thechlorofluorocarbons (CFCs) used inolder, less-efficient chillers such asthe large cooling systems ofcommercial office buildings, toensure full compliance withregulations. As old inefficient chillersand air-conditioning equipment arereplaced with new technology, itcould mean more energy savingsthroughout the Company.

10. Radiation Safety Assessment at TMHill Stations and Celcom Towerswas conducted by the Non-IonizingRadiation Group of the MalaysianNuclear Agency (Nuclear Malaysia)on all telecommunication andbroadcast towers at hill stations.

The main objectives were as follows:

■■ to identify work places aroundtelecommunication andbroadcast towers where theradiation levels may be perceivedto be higher than exposurelimits allowed by the MalaysianCommunication and MultimediaCommission (MCMC), and

■■ to determine the radiofrequencyand microwave radiationexposure to employees locatedin the vicinity oftelecommunication andbroadcast towers.

As at December 2007, three hillstations (Ulu Kali, Genting Highlands,Bukit Tampin, Negeri Sembilan andGunung Pulai, Johor) had beenassessed. Seven hill stations will beassessed in 2008. Meanwhile,continuing surveys by Celcom haveindicated that the radiofrequency andmicrowave radiation present in theareas around the towers of a sampleof sites were well below theexposure limits stipulated by theMCMC and ICNIRP guidelines foremployees as well as the public.

The launch of TM’s Safety Campaign

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Corporate Responsibility (CR) is relevant across all aspects of the Group’s operations. It hasalways been an integral part of the Group’s business strategies, creating value for theGroup’s different stakeholders over the years. TM’s commitment is clearly outlined in itsCorporate Responsibility (CR) Policy where it is stated that TM companies shall undertake avariety of programmes that are aligned with their business strategies or that benefit thebroader interests of the community, while complementing the efforts of the Government innation-building.

TM’s scope of CR embraces a culture of good governance and accountability throughout theorganisation. TM believes CR makes good business sense in the long run as it contributestowards building lasting goodwill and trust in the TM brand. A keen awareness of itscorporate responsibility towards stakeholders in line with good corporate governance hasalso given TM the edge in attracting and retaining talent, enhancing customer loyalty andretaining its position as a leading responsible corporate citizen. In real terms, a culture ofcorporate responsibility has proven its worth in ensuring consistently-strong performance anddelivering better returns to shareholders. TM’s CR initiatives are evident through itsengagement with all stakeholders including employees, customers, suppliers, investors, localcommunities and the host governments where it operates.

TM’s contribution towards CRin community was in excessof RM73 million for 2007

Education:

RM32.05 millionSports Development:

RM17.33 millionCommunity & Nation-Building:

RM24.03 million

Facts at a Glance

Malaysian Business CSR Merit Awards 2007


A FINANCIAL PERSPECTIVECORPORATE GOVERNANCEHaving been one of the first listedcompanies to respond to the call forgreater corporate governance, TM hasestablished positions for independentnon-executive directors on its board.Out of a total of 9 Board members,more than one-third is made up ofindependent directors, while theChairman is non-executive in line withbest practice. The board overseesfunctions such as strategy, audit, riskmanagement, nomination andremuneration of board members andtop management, as well as corporatesocial responsibility. A Statement ofCorporate Governance is availableelsewhere in this annual report and itcarries information about theremuneration of Board members.

A clear demarcation of the roles of theBoard and the Management Committeehas provided for smooth running ofGroup operations. Strict financialauthority limits have been set formanagement personnel throughout theGroup.

TM’s high corporate governancestandards are further consolidated byseveral codes of conduct that governthe way it conducts its business. Thesecodes include a Corporate SocialResponsibility or CSR Policy Manual, aCode of Business Ethics Manual, aguide to procurement calledProcurement Ethics and a manual of itsKRISTAL core values. To furtherconsolidate its efforts, the Group hasinstituted a yearly asset declarationexercise for all employees.

In summary, TM has put in place aneffective internal system of checks andbalances governed by codes of bestpractice to ensure that its business iscarried out in an ethical manner in linewith the highest internationalbenchmarks.

INVESTOR RELATIONSIn line with good corporate governancepractice worldwide and the MalaysianCode of Corporate Governance, TMsubscribes to the expectation ofmaintaining a high level of transparencyvis-a-vis its dealings with the investingcommunity. This is done via variouscommunication channels such asregular face-to-face briefings anddialogue sessions, teleconferences,press releases, press conferences andbriefings, frequent and timely disclosureto Bursa Securities, e-mails, investorconferences, annual general meeting,annual report and regular postings onthe Company website.

ENTERPRISE RISK MANAGEMENTIn dealing with enterprise risk, theCompany has established andembedded a TM Enterprise RiskManagement Framework (ERM) andGuideline that allows the Group toidentify, assess and report businessrisks from an enterprise perspective. Inassessing corporate risk, the Companyreviews all key and significant businessdrivers such as corporate governance,bribery/corruption, environmental issues,supply chain issues, human rights,employee relations, safety and healthand other business-related risk

exposure. In ensuring standardisation ofrisk management practices within theGroup, the ERM framework has beenembedded into daily business strategyand operations through the Group’sBalanced Scorecard process. This willassist the Group to proactively identifykey risks that may prejudice theachievement of business performancefor the Group and the delivery ofshareholder value.

PROCUREMENT PRACTICESIn managing issues related toprocurement and to standardisepractices across the Group, TM haslaunched a handbook called‘Procurement Ethics – Rules andPractices’, consistent with theProcurement Red Book, published byPutrajaya Committee for the HighPerforming GLCs (PCG). TM’s handbookoutlines the principles, applications andDo’s and Don’ts related to theprocurement process. The handbookalso complements TM’s Code ofBusiness Ethics which guides theCompany’s dealings with employees,customers, business partners,competitors and other parties. Inconducting business with TM, allsuppliers are also required to adhere tothe Environmental Quality Act 1974,Factories and Machinery Act, 1967 and the Occupational Safety and HealthAct 1994.


AN ENVIRONMENTALPERSPECTIVEENVIRONMENTAL MANAGEMENTTM Group’s Occupational Safety, Health and Environmental (OSHE) Policy addresses the management ofOSHE risk and the environmentalimpact of business activities. TheCompany’s OSHE Policy is based on the standard requirements of OHSAS 18001:1999 and ISO14001:2004,designed to ensure consistency inenvironmental management.

A WORK ENVIRONMENTPERSPECTIVEPERFORMANCE MEASUREMENTTM has instituted a transparent on-lineperformance management system that istied in with the Company’s BalancedScorecard. Through this system, KeyPerformance Indicators (KPIs) for allemployees are directly related to theCompany’s key business performancetargets. Individual KPIs are identified andkeyed into the system at the beginningof the year and a mid-term evaluation isconducted at all levels to ensure thatachievement of targets are on courseand, where necessary, corrective actionsare recommended. A final evaluation isthen conducted at the end of the year.Payment of bonuses and increments arethen decided, based on the outcome ofthe evaluation process.

EMPLOYEE SATISFACTION MONITORINGSince 1997, TM has conducted anannual Employee Satisfaction IndexSurvey (ESI) to gauge employees’perceptions of the Company on variousmatters such as management andleadership, compensation,communications and other workplaceissues. For 2007, 40.0% of employeeswere covered by the ESI, with the indexat 75.4% compared with 72.8% in 2006.

EMPLOYEE BENEFITSTM has adopted a transparent andobjective remuneration and benefitssystem for all employees. Company-wide benefits provided for all employeesinclude the Employees Provident Fundpay-as-you-earn pension scheme,health and accident insurance, medicalcare for families, disability insurance,maternity and paternity leave, in-housesports sessions, two child-care centres(Menara TM and Multimedia CollegeTaiping), employee counselling,employee volunteering options duringwork hours, on-going learningopportunities available at theMultimedia College and access toacademic scholarships.

Remuneration and benefits for theunionised workforce are mutuallyagreed upon between TM and the tradeunions via a Collective Agreement. In2007, a new agreement was formalisedand signed covering a 3 year periodfrom January 2007 to December 2009.

STAFF TRAININGCareer development is one of the mainpriorities of the Group HR division. In2007, each member of staff wasrequired to attend at least 40 hours oftraining related to their functional areasof work and behavioural competencies,identified through a yearly competencyassessment exercise. A total of 117,661trainee days were registered for a totalof 941,288 training hours in the yearunder review.

SAFETY & HEALTHTo govern safety and health, theCompany has put in place a safety andhealth management system calledOHSAS 18001. In 2007, the Companyset an employee occupational safetyand health target for a 25.0% reductionin accidents and zero fatalities. The yearsaw a 31.2% reduction in accidents. Toraise awareness of safety and healthprocedures, the Company organisesregular annual occupational safety andhealth campaigns at its head office aswell as at state locations, offering freehealth screenings and health talksconducted by the Company’s panel ofmedical doctors. Safety and Healthtraining is provided to employees infurtherance of the Company’s goals forbetter safety records and in 2007, 400TM contractors underwent the NIOSHTM Safety Passport Programme, while35 staff went through the OSHPersonnel Workshop Programme and240 staff received the OSHE MSAwareness Training Programme.


Corporate Responsibility


CHILDCARE & EARLY DEVELOPMENTFACILITYProvision of childcare services for thefamilies of employees has always beena feature of TM’s responsibilities tostakeholders. At the end of 2007, therewere 128 employees' children, betweenthe age of 2 months and 6 years,registered with TM’s childcare and earlydevelopment facility, TM Taska. TMTaska was established to provide qualityand affordable childcare services inclose proximity to the work place foremployees and is in line with therecommendations set by the Ministry ofWomen, Family & CommunityDevelopment, Malaysia.


Assisting the needy

communicative culture to ensureinformation is shared with stakeholdersbeyond the shareholders and financialcommunity.

COMMUNITY & CHARITABLEORGANISATIONSCR efforts in the community supportsone of the Group’s strategic objectives,to be a responsible corporate citizen.TM has taken the effort to integrate CRin community into its business strategyand this is reflected in governance,policy, process and reporting. It is alsoincluded as one of the items in TM’sannual budgeting process and a KeyPerformance Indicator (KPI) which ismonitored as a performance measurein the Group’s Balanced Scorecard.

A SOCIAL PERSPECTIVESTAKEHOLDER ENGAGEMENTTM is continually engaged with itsvarious stakeholders such asgovernment departments and agencies,regulators, customers, localcommunities, the media, suppliers,trade unions, investors, shareholdersand employees through planned andunplanned face-to-face meetings andbriefings, dialogue sessions, informationroadshows, newsletters, e-mails, videoand audio conferencing, web streaming,media briefings/press conferences andpress releases, annual general meeting,customer satisfaction surveys,newspaper advertorials andadvertisements and on-linecommunication channels such as thewebsite. TM maintains a highly


To ensure responsible and ethicalpractices in the management of itscommunity efforts, TM’s CorporateSocial Responsibility (CSR) and Donations/Sponsorships Policy and Best Practicesmanual sets out the guidelines and thecriteria for the award of donations andthe approval of sponsorships,recommended allocations, limits ofauthority, approval process, budgeting,monitoring and evaluation of donationsand sponsorships. The policy states thatCSR opportunities and programmesshall be pursued with professionalismand guided by the core values of theTM Group. The CSR policy manualexpects that decisions must be takenwith integrity and the highest regard forgood corporate governance andtransparency. An overview of TM’s CSRPolicy is available at www.tm.com.my.

In line with the policy recommendations,TM’s community efforts are summarisedand analysed for presentation to theBoard on a quarterly basis.

During 2007, TM also adopted PCG’sSilver Book Guidelines incorporating therecommended assessmentmethodologies in evaluating valuecreation and impact of donations andsponsorships approved and conductingperiodic reviews of contributions givenfor all of TM’s community efforts. These guidelines include:

• Standardised monthly tracking ofCSR activity by all CSR custodiansin the Group.

• Adoption of standardised cost-benefits assessment tools on CSRcontributions by all CSR custodians.

• Adoption of a standardised evaluationprocess by all CSR custodians.

• Submission of a consolidatedquarterly CSR management reportby the CSR project champion (GroupCorporate Communications Division).

• Maintaining a CSR web-page on theCompany’s website.

TM launched its theme “Reaching Out”which encapsulated the essence of its corporate citizenship initiatives in year 2007, a year which saw TM re-invigorate and consolidate itscommitment to its CSR practices withthe aim of making a difference topeople’s lives both within and outsidethe country.

COMMUNITY CAUSES WE SUPPORTSustainability is an important elementin TM’s community efforts. Thereforethe emphasis in TM’s community effortsis towards providing the opportunity toacquire ‘knowledge or skills’. These arethe tools which will enable the

community to sustain and improve theirlives long after each TM-supportedcommunity project is completed. Thereare three key platforms through whichTM’s community efforts are directed:

• Education – the focus of which is tocontribute towards human capitaldevelopment and capacity building.

• Sports Development – the focus ofwhich is contribution towardsdeveloping sporting talent atgrassroots level, as well aspromoting the nation as aninternational sporting destination.

• Community and Nation-Building –the focus of which is towardsproviding assistance to the needyand underprivileged as well aspromoting community developmentand nation-building activities whilebridging the digital divide betweenurban and rural communities.

TM Group spent in excess of RM73million towards CR in community effortsin 2007 as highlighted below:

CR Platform Amount (RM)

Education RM32.05 million

Sports Development RM17.33 million

Community and Nation-Building RM24.03 million

Total RM73.41 million

Community service




TM IN EDUCATION – PROVIDINGOPPORTUNITY TO PURSUEKNOWLEDGEIn Education, TM’s objective is to assistthe nation in the development of humancapital and capacity-building, andthereby meet its socio-economicdevelopmental goals. Towards this end,TM has contributed and continues tocontribute through the provision ofscholarships from its foundation,Yayasan Telekom Malaysia (YTM),through its own training and staffdevelopment programmes and alsothrough the establishment of theMultimedia University.

Education made up the major chunk ofexternal social contributions, taking up44.0% of total contributions. The TMfoundation, YTM, was the majorcontributor in this area. Established in1994 and having provided financialsupport valued at over RM350 million tomore than 10,070 students to date, YTM provided over RM32 million in theform of scholarships and loans to 823students in various academic levelprogrammes in the year under review.

These scholarships and loans wereawarded to students to follow academicprogrammes at Preparatory, Diploma,First Degree and Post-Graduate levelsin recognised local and overseasinstitutes of higher learning. Thefinancial support provided also includedthat for 700 needy secondary schoolstudents in government schools underYTM’s Minor Secondary School Schemewhich identifies deserving students forfinancial assistance to continue theirstudies up to SPM level.

Multimedia University (MMU), a tertiaryeducation institution, was set up in 1997by TM at a cost of more than RM800million. Today, the university has 2campuses – Melaka and Cyberjaya –with a current student enrolment ofover 21,000. MMU offers programmesand degrees in creative multimedia,information technology, managementand engineering from foundation todoctorate level.

To date, MMU has produced over 13,000graduates with 96.0% of them gainingemployment within 6 months ofgraduation. MMU has an outstandingpool of international students, totalling3,771 from 79 countries and hasestablished 26 centres of excellence. It is now a major player in researchand development. The establishment ofMMU as a research university alsoserves to benefit the nation’s ICTaspirations which are for the industry tobe a creator and not just a consumer


of technology. Through theestablishment of a local privateuniversity, the nation can have a pool of talented human resources within itsborders, ensuring sustainability from theperspective of economic managementand human capital development withinthe country.

TM IN SPORTS DEVELOPMENT –INSTILLING A HEALTHY AND POSITIVELIFESTYLEIn Sports Development, TM seeks toidentify and promote grassroots talentas well as assist in promoting thenation as an international sportingdestination. Towards the latter, TM hascontributed towards the sponsorship ofseveral notable events including LigaMalaysia, the Le Tour de Langkawi,Monsoon Cup, the JB InternationalChallenge and the Mount KinabaluClimbathon, among others.

Le Tour de Langkawi


The year 2007 saw TM contributeRM17.33 million towards SportsDevelopment, representing 24.0% of itstotal allocations to community, insupport of various sports developmentcauses that benefited individual sports

as well as fulfilled the nation’sobjectives to promote the country as aninternational sports tourism destination.

In response to the Government’s call forcorporate support to help develop

identified core sports in the country, TM continued to support football; it was the sport that received the mostcontributions from TM in 2007. Liga Malaysia received RM8.5 million insupport and this has provided aninjection of funds that has benefited theadministration and development of thegame at national and state level. Year 2007 also saw TM carry its supportfor football development even further by its major sponsorship support ofRM1.2 million for the TM Unileague, apopular inter-varsity football leaguecompetition, TM’s Syoknya Bola Carnival(RM2.4 million), TM’s Cage Futsal(RM1.2 million) and the TM ERA Ole K.Ofutsal tournament (RM288,000).

Other major contributions from TM in2007 for sports, that helped bringinternational sporting attention to thecountry, included cash and in-kindsponsorship support for the Le Tour deLangkawi, the premier internationallevel bicycle race in Asia, the Monsoon



Monsoon Cup

Liga Malaysia


Cup, an international world-classprofessional match-race sailing regattain Terengganu, the FEI World Cup ShowJumping event, the Mount KinabaluInternational Climbathon and the KLTower International Jump 2007.

TM IN COMMUNITY AND NATION-BUILDING – GIVING THE OPPORTUNITYTO LEARN NEW SKILLS AND IMPROVELIVESThe major focus here is towardsproviding assistance to the needy andunderprivileged through donations towelfare homes, NGOs and charitableorganisations as well as promotingcommunity development and nation-building activities while bridging thedigital divide between urban and ruralcommunities.

The year 2007 saw TM contributingRM24.03 million towards variouscommunity and nation-buildinginitiatives and social activities. Thiscomprised 33.0% of the total allocationfor CR in the community for the year.

a. Graduate Employment ProgrammeTM initiated a graduate re-trainingprogramme to retrain unemployedgraduates and equip them with skillsrelevant to current employment needs.Called the Certificate in BusinessEnglish & Communication SkillsProgramme or CiBEC, the program wascarried out in collaboration with theBusiness Advanced Technology Centreof UTM. Kicking off in 2006 andcontinuing on in 2007 with a budget ofRM2 million, TM targeted a total of1,000 graduates and provided them withintensive English language,communication and other soft-skills

training relevant to the needs of thebusiness environment. In 2007, TMspent in excess of RM500,000 to providethis training and as of end 2007, a totalof 1,053 graduates were re-trained outof which, 72.1% gained employmentupon completing the programme.

b. School Adoption ProgrammeThis initiative saw TM contributing cashand in-kind resources in the adoption of2 rural schools, namely, SekolahKebangsaan Bukit Indera Muda andSekolah Kebangsaan Seri Penanti, both inBukit Mertajam, Penang under thenational PINTAR programme. ThePINTAR programme, an initiative of theMinistry of Finance and implemented byKhazanah Nasional, is an effort tobridge the digital divide between ruraland urban schools and to enhance theiracademic performance.

PINTAR Programme


With an allocation of RM1 million incash and in-kind to be utilised over a 3-year period beginning 2007, TM’sinvolvement in these schools has beenthrough the provision of ICTinfrastructure such as broadbandconnectivity and PC equipment, ICTtraining and instruction, study visits,motivational talks, IT camps, financialassistance and scholarships to studentswith academic potential as well asschool maintenance and repair. Allthese activities were carried out withthe involvement of students, teachers,parents and the local communities.Several TM subsidiaries also played asignificant role to ensure theprogramme’s success.


and nationality. ROLF consists of sevencampaigns, with each campaign taggeda different colour for each year denotingsupport for children in differentsituations. The year 2007 was the yearof the blue ribbon. TM weighed in withRM5.35 million in financial assistancefor the campaign.

e. Other Community InitiativesIn keeping with its yearly practice, TMcontinued its sponsorship of schoolstudents to the Formula 1 race inSepang. Year 2007 saw TM sponsoringthe full cost of tickets, F&B andtransport for 152 underprivilegedstudents from 5 welfare homes in andaround Kuala Lumpur and Selangor towitness the world class sporting event.

The TM Group has always beensensitive towards the plight of the lessfortunate and the needy. In view of this,TM continued to provide financialcontributions to NGOs, charitable andwelfare organisations. Groups receivingaid included senior citizens, thedisabled, the orphaned and the abused.

Other notable contributions from theGroup included cash and in-kindcontributions (prepaid cards) to theArmed Forces for the Hari Rayacelebrations, assistance to Tabung Hajipilgrims in the form of prepaid cardsand prayer amenities, cashcontributions for Workers Day andWarriors Day celebrations as well assponsorship support for Federation ofMalaysian Consumer Association’s(FOMCA) consumer education activities.

c. Broadband in SchoolsTM kicked off its 3-year broadbandinitiative for schools in 2007 through itsTM eSchool project with an allocation ofRM2 million. Having as its goal a targetof adopting 50 schools nation-wide overthis period, TM commenced a pilotproject in the Klang Valley by adopting 3 schools, namely, SMK USJ 12 SubangJaya, Selangor, SMK Seksyen 11, ShahAlam, Selangor and SM(Laki-laki)Methodist Kuala Lumpur. A further 4schools have been identified for theproject in and around Kuala Lumpur.

Providing these schools with broadbandaccess, applications, services andspecialised training for students andteachers at a cost of over RM781,000,the project aims to raise awareness ofthe benefits and usage of broadband toenhance learning and research andimprove lifestyles. A TM eSchool webportal incorporating the Web SchoolManagement System (WSMS) and theLearning Content Management System(LMCS) was introduced in the schoolsinvolved to help facilitate the broadbandassimilation process.

d. Blue Ribbon CampaignTM lent its hand to this nationwidemobilisation awareness and fund-raisingcampaign to improve the lives ofchildren suffering from cancer in 2007.The campaign is focused on brighteningthe lives of terminally-ill children inorder to allow them to forget their pain,fear and isolation of their illnesses. TheBlue Ribbon Campaign is part of theRainbow of Life Forces (ROLF) which isa seven-year community CSR campaigninitiated to give hope to all childrenregardless of race, religion, background

TM Scholars




NATION-BUILDING INITIATIVES

a. 50th Year National Day (Merdeka)Celebrations

For the nation’s 50th year National Dayevents in August 2007, the TM Groupspent in excess of RM10 millionthrough sponsorships and distribution of the national flag, parade celebrations,TV commercials, banners and buntingsto celebrate the milestone achievementof the nation’s independence anddevelopment as well as to help instil a sense of pride and patriotismamongst staff, stakeholders and thegeneral public.

b. Khazanah Global Lecture Series 2007Initiatied by Khazanah Nasional inconjunction with the 50th Merdekacelebrations, the lecture series wasdesigned to encourage debate andshare intellectual thinking at a globallevel for the benefit of the generalMalaysian public. Lectures by prominentNobel laureates such as Kofi Annan,Professor Muhammad Yunus ofGrameen Bank and Professor JosephStiglitz were beamed to selected publicand private universities nationwide vialive video-conferencing and web-streaming facilities with the support ofTM’s in-kind sponsorship assistancevalued at about RM500,000.

c. Langkawi International Maritime &Aerospace Exhibition 2007

This international biennial eventreturned to Langkawi in 2007. Over 500international and local companiesparticipated in the event which saw thedisplay of the latest technologies in theaerospace and maritime industries inLangkawi, helping yet again to put theisland on the world map as a majortourist attraction. TM contributed to this

effort by providing sponsorship ofcommunications infrastructure worthabout RM500,000.

d. Other Nation-Building InitiativeOther major sponsorships for the yearundertaken by TM in cash and in-kindcontributions in excess of RM2 millionin total were the MSC Asia Pacific ICTAwards (MSC APICTA) 2007, 10th MSCInternational Advisory Panel (IAP)Meeting, 3rd World Islamic EconomicForum (WIEF), Langkawi InternationalDialogue 2007, Kuala LumpurInternational Film Festival 2007 (KLIFF2007), GK3 Global KnowledgePartnership and the Pekan Fest.

TM in Community – Beyond MalaysianShoresCSR initiatives continue to beextensively pursued in countries abroadwhere TM International has businessoperations and investments, namely Sri


Lanka, Indonesia, Bangladesh,Cambodia, Thailand, Singapore, India,Pakistan and Iran.

In Sri Lanka, Dialog Telekom PLC(Dialog) continued through its ChangeTrust Fund to help disadvantagedcommunities across the island throughcommunity projects based on 5 themes— digital inclusion, empowering thedifferently-abled, youth and education,environment and humanitarianism.Dialog’s community projects included:

• Dialog’s Digital Learning Bridge, ajoint project with the Ministry ofEducation to minimise differences ineducation standards between urbanand rural areas;

• Disaster and Emergency WarningNetwork (DEWN), a cost effective,multi-modal mass alert systemwhich can be used to alert thegeneral public in the event of adisaster; and

TelCo Industry Leaders participation in the 50th Merdeka Day celebration


• State-of-the-art Ratmalana AudiologyCentre for the Hearing Impaired.

Dialog has now joined the steeringcommittee of the United Nations GlobalCompact (UNGC), the world’s largest CRnetwork comprising 4,400 organisations,to influence other Sri Lankan companiesto adopt UNGC principles.

TM International’s Indonesian subsidiary,PT Excelcomindo Pratama Tbk (XL),also launched a broad range ofprogrammes to address communityneeds in the critical areas of educationand community service. In 2007, XL’sCSR projects included the building ofkindergartens and schools in ruralareas and the establishment of amuch-needed mobile library to servicechildren from underprivilegedcommunities. XL also donatedmultiplexer equipment to severaluniversities and provided Internetconnection for the Indonesian OlympiadPhysic Team. In terms of disaster relief,XL provided free public telephones andInternet services for flood victims inJakarta as well as earthquake survivorsin Yogyakarta and Bengkulu. XLwrapped up its CSR initiatives for theyear by conferring the IndonesiaAchievement Award to 4 Indonesiancitizens under the categories of Science,Technology, Education and Culture.

In Bangladesh, TM International(Bangladesh) Limited (TMIB) focused onfour core values — Education, Health,Environment and Poverty Eradication –

under its continuing CSR programme.Besides awarding annual scholarshipsto deserving students, improving thelives of street children in the greatermetropolitan areas and distributingwinter necessities to underprivilegedcitizens, the year saw the companycoming to the aid of Cyclone STDRsurvivors in the Patuakhali district.

TM International’s Cambodianoperations, TM International (Cambodia)Company Limited (TMIC), also initiatedseveral activities under its CSR effortsin 2007. A key activity was the provisionof 35 hotline numbers to the MilitaryPolice Headquarters to promotenational security. TMIC also providedfinancial aid to thousands of needyMuslim families in villages throughoutCambodia in the month of Ramadan.

In Thailand, the Samart Groupcontinued with its CSR initiatives byplanting 3 million trees under the I-mobile Stop Global WarmingCampaign, providing scholarships worth195,000 baht, establishing the SamartTelecom Technician School andsponsoring a number of sportingevents.

Other subsidiaries and affiliates initiatedtheir respective CSR programmes forthe year in the areas of education,sports development as well ascommunity and regional projects, tohelp continue the tradition of goodcorporate citizenry and in furtherance ofgood corporate governance.



STATEMENT OF 252RESPONSIBILITY BY DIRECTORS

DIRECTORS’ REPORT 253

SIGNIFICANT ACCOUNTING 261POLICIES

INCOME STATEMENTS 279

BALANCE SHEETS 280

CONSOLIDATED STATEMENT 282OF CHANGES IN EQUITY

COMPANY STATEMENT 284OF CHANGES IN EQUITY

CASH FLOW STATEMENTS 285

NOTES TO THE 286FINANCIAL STATEMENTS

STATEMENT BY DIRECTORS 409

STATUTORY DECLARATION 409

REPORT OF THE AUDITORS 410

GENERAL INFORMATION 411

FinancialStatements

Financial Statements

Statement ofResponsibility byDirectors

IN RESPECT OF THE PREPARATION OF THE ANNUALAUDITED FINANCIAL STATEMENTS


The Directors are required by the Companies Act, 1965 to prepare financialstatements for each year which have been made out in accordance with theapplicable approved accounting standards in Malaysia and give a true and fair viewof the state of affairs of the Group and the Company at the end of the year and ofthe results and cash flows of the Group and the Company for the year.

In preparing the financial statements, the Directors have:

• adopted appropriate accounting policies and applied them consistently;

• made judgements and estimates that are reasonable and prudent;

• ensured that all applicable approved accounting standards have been followed;and

• prepared financial statements on the going concern basis as the Directors havea reasonable expectation, having made enquiries, that the Group and theCompany have adequate resources to continue in operational existence for theforeseeable future.

The Directors have the responsibility to ensure that the Group and the Companykeeps accounting records which disclose with reasonable accuracy the financialposition of the Group and the Company and which enable them to ensure thefinancial statements comply with the Companies Act, 1965.

The Directors have the overall responsibilities to take such steps as are reasonablyopen to them to safeguard the assets of the Group and for establishment andimplementation of appropriate accounting and internal control systems for theprevention and detection of fraud and other irregularities.

FOR THE YEAR ENDED 31 DECEMBER 2007


Directors’Report


1. The Directors have pleasure in submitting their annual report and the audited financial statements of the Group and theCompany for the year ended 31 December 2007.

PRINCIPAL ACTIVITIES2. The principal activities of the Company during the year are the establishment, maintenance and provision of

telecommunication and related services under the licence issued by the Ministry of Energy, Water and Communications.The principal activities of the subsidiaries are set out in note 50 to the financial statements.

There was no significant change in the nature of these activities during the year except that the Group disposed itsnational payphone network and related services following the sale of its wholly owned subsidiary, TM Payphone Sdn Bhd(now known as Pernec Paypoint Sdn Bhd). In addition, a subsidiary, TM Net Sdn Bhd transferred the Internet andbroadband business to the Company with effect from 1 January 2007 to focus on content and application developmentfor Internet services.

RESULTS3. The results of the operations of the Group and the Company for the year were as follows:

The Group The CompanyRM million RM million

Profit for the year attributable to:– Equity holders of the Company 2,547.7 998.9– Minority interests 83.9 —

Profit for the year 2,631.6 998.9

4. In the opinion of the Directors, the results of the operations of the Group and the Company during the year were notsubstantially affected by any item, transaction or event of a material and unusual nature.


F i n a n c i a l S t a t e m e n t s

Directors’ Reportfor the year ended 31 December 2007

DIVIDENDS5. Since the end of the previous year, the dividends paid, declared or proposed on ordinary shares by the Company are as

follows:RM million

(a) In respect of the year ended 31 December 2006, a final gross dividend of 30.0 sen per share less tax at 27.0% was paid on 12 June 2007 749.5

(b) In respect of the year ended 31 December 2007(i) an interim gross dividend of 26.0 sen per share less tax at 27.0% was paid on

4 September 2007 652.9(ii) a special dividend of 65.0 sen per share less tax at 26.0% was paid on 31 January 2008 1,654.5

(c) In respect of the year ended 31 December 2007, the Directors now recommend a final gross dividend of 22.0 senper share less tax at 26.0% subject to the shareholders’ approval at the forthcoming Twenty-Third Annual GeneralMeeting (23rd AGM) of the Company.

EMPLOYEES’ SHARE OPTION SCHEME6. Details of the Company’s Employees’ Share Option Scheme (ESOS 3), which expired on 31 July 2007, are as disclosed in

note 12(a) to the financial statements.

The Company has been granted an exemption by the Companies Commission of Malaysia via a letter dated 18 February2008 from having to disclose in this report the names of the persons to whom options have been granted during theyear and details of their holdings pursuant to Section 169(11) of the Companies Act, 1965, except for information onemployees who were granted options representing 100,000 ordinary shares and above.

The Company has not granted any options during the year ended 31 December 2007. However, the following employeeswho were granted options under the Performance Linked Option Scheme (PLES) in 2005 have more than 100,000 of thePLES options vested during the year.

Number of Number of options Options options granted/ vested exercised Balance vested as during during Lapsed on as at

Name Designation at 1.1.2007 2007 2007 31.7.2007 # 31.12.2007

Dato’ Sri Abdul Group Chief 53,700 2 652,500 2 250,000 456,200 —Wahid Omar Executive Officer

Datuk Bazlan Group Chief 27,000 1 116,600 2 27,000 151,300 —Osman Financial Officer 34,700 2



EMPLOYEES’ SHARE OPTION SCHEME (continued)

Number of Number of options Options options granted/ vested exercised Balance vested as during during Lapsed on as at

Name Designation at 1.1.2007 2007 2007 31.7.2007# 31.12.2007

Dato’ Yusof Annuar Chief Executive 27,000 1 116,700 2 27,000 116,700 —Yaacob Officer

TM International Berhad

Hashim Group Chief Auditor 27,000 1 116,600 2 27,000 151,300 —Mohammed 34,700 2

Dennis Koh Chief Executive 34,700 2 116,600 2 — 151,300 —Seng Huat Officer

VADS Berhad

Prof Datuk Dr Former President, 34,700 2 116,600 2 — 151,300 —Ghauth Jasmon Universiti Telekom

Sdn Bhd (resigned on 31.12.2007)

1 These options were granted at RM9.22 per share2 These options were granted at RM10.24 per share under the PLES# These options have expired on 31 July 2007 and any unexercised options were deemed lapsed

SHARE CAPITAL7. On 8 May 2007, the authorised share capital of the Company was increased to include 2,000 Class C Non-Convertible

Redeemable Preference Shares of RM1.00 each and 1,000 Class D Non-Convertible Redeemable Preference Shares ofRM1.00 each.

8. During the year, the issued and fully paid-up share capital of the Company was increased by the issuance of 42,152,800ordinary shares of RM1.00 each for cash under ESOS 3 and PLES, detailed as follows:

Number of ordinary shares of RM1.00 each issued Exercise price per share

18,934,000 RM7.0913,000 RM8.022,170,000 RM9.3215,838,300 RM9.224,864,000 RM8.69333,500 RM10.24

These shares rank pari-passu in all respects with the existing issued ordinary shares of the Company.




SHARE CAPITAL (continued)9. On 20 July 2007, the Company redeemed 1,000 Class A Redeemable Preference Shares (RPS) (TM RPS A) and 1,000 Class

B RPS (TM RPS B) that was issued in 2003 to Rebung Utama Sdn Bhd, a special purpose entity of the Company, as partof the exchange of TM Islamic Stapled Income Securities with the existing Tekad Mercu bonds as explained in paragraph10 below.

NON-CONVERTIBLE REDEEMABLE PREFERENCE SHARES (NCRPS)10. On 20 July 2007, the Company had, through itself and its wholly owned subsidiary, Hijrah Pertama Berhad (HPB), issued

the TM Islamic Stapled Income Securities (TM ISIS) consisting of:

(a) (i) RM2.0 million Class C Non-Convertible Redeemable Preference Shares (NCRPS) (TM NCRPS C) consisting of2,000 Class C NCRPS of RM1.00 each at a premium of RM999 issued by the Company at an issue price ofRM1,000 each;

(ii) Sukuk Ijarah Class A of nominal value RM1,998.0 million issued by HPB; and

(b) (i) RM925,000 Class D NCRPS (TM NCRPS D) consisting of 925 Class D NCRPS of RM1.00 each at a premium ofRM999 issued by the Company at an issue price of RM1,000 each;

(ii) Sukuk Ijarah Class B of nominal value RM924,075,000 issued by HPB.

Details of TM NCRPS C, TM NCRPS D, Sukuk Ijarah Class A and B are set out in note 14(g)(I) and (II) to the financialstatements.

11. The TM NCRPS shall rank pari-passu among themselves but below the Special Share and ahead of the ordinary sharesof the Company in a distribution of capital in the event of the winding up or liquidation of the Company.

The TM NCRPS are effectively linked to the Sukuk in that the TM NCRPS and the Sukuk are issued simultaneously tothe same parties and the periodic distribution obligations under the Sukuk are dependent on the payments made underthe TM NCRPS. The outstanding amount of Sukuk Ijarah Class A and B are treated as borrowing by the Company as theSukuk are effectively obligations of the Company.

The issuance of the TM ISIS was made in exchange for the existing RM3,000.0 million redeemable unsecured bonds(Tekad Mercu bonds) issued by a special purpose entity Tekad Mercu Berhad. Details of the exchange transaction isexplained in note 14(g) to the financial statements.

The TM ISIS are classified as debt instruments and hence are reported as liabilities. Consequently, dividend payableunder TM NCRPS and rental payable under Sukuk are reported as finance cost.

MOVEMENTS ON RESERVES AND PROVISIONS12. All material transfers to or from reserves or provisions during the year have been disclosed in the financial statements.



STATUTORY INFORMATION ON THE FINANCIAL STATEMENTS13. Before the financial statements of the Group and the Company were prepared, the Directors took reasonable steps to:

(a) ascertain that actions had been taken in relation to the writing off of bad debts and the making of allowance fordoubtful debts and satisfied themselves that all known bad debts had been written off and that adequate allowancehad been made for doubtful debts; and

(b) ensure that any current assets which were unlikely to be realised at their book value in the ordinary course ofbusiness had been written down to their expected realisable values.

14. At the date of this report, the Directors are not aware of any circumstances which:

(a) would render the amounts written off for bad debts or the amount of allowance for doubtful debts in the financialstatements of the Group and the Company inadequate to any substantial extent or the values attributed to currentassets in the financial statements of the Group and the Company misleading; and

(b) have arisen which render adherence to the existing method of valuation of assets or liabilities of the Group and theCompany misleading or inappropriate.

15. In the interval between the end of the year and the date of this report:

(a) no items, transactions or other events of material and unusual nature has arisen which, in the opinion of theDirectors, would substantially affect the results of the operations of the Group and the Company for the year inwhich this report is made; and

(b) no charge has arisen on the assets of any company in the Group which secures the liability of any other personnor has any contingent liability arisen in any company in the Group except as disclosed in note 45(c)(i) to thefinancial statements.

16. No contingent or other liability of any company in the Group has become enforceable or is likely to become enforceablewithin the period of 12 months after the end of the year which, in the opinion of the Directors, will or may affect theability of the Group or the Company to meet their obligations when they fall due.

17. At the date of this report, the Directors are not aware of any circumstances not otherwise dealt with in this report orthe financial statements of the Group and the Company, which would render any amount stated in the financialstatements misleading.




DIRECTORS18. The Directors in office since the date of the last report are as follows:

Directors Alternate Director

Tan Sri Dato’ Ir Muhammad Radzi Hj Mansor

Dato’ Sri Abdul Wahid Omar

Datuk Zalekha Hassan Dyg Sadiah Abg Bohan(appointed on 9 January 2008) (appointed on 9 January 2008)

Dato’ Ahmad Hj Hashim Dyg Sadiah Abg Bohan(resigned on 7 January 2008) (ceased on 7 January 2008)

Dato’ Azman Mokhtar

Dato’ Ir Dr Abdul Rahim Daud

Dato’ Lim Kheng Guan

YB Datuk Nur Jazlan Tan Sri Mohamed

Ir Prabahar NK Singam

Rosli Man

19. In accordance with the Article 98 (2) of the Company’s Article of Association, Datuk Zalekha Hassan who was appointedto the Board before the general meeting, shall retire from the Board at the Company’s 23rd AGM and being eligible,offers herself for re-election.

20. According to Article 103 of the Company’s Articles of Association, Dato’ Ir Dr Abdul Rahim Daud, YB Datuk Nur JazlanTan Sri Mohamed and Dato’ Azman Mokhtar shall retire by rotation from the Board at the Company’s 23rd AGM andbeing eligible offer themselves for re-election.

21. Dato’ Sri Abdul Wahid Omar who is also retiring by rotation pursuant to Article 103, will not seek re-election and willtherefore retire as a Director of the Company upon conclusion of the 23rd AGM of the Company. However, he will remainas Group Chief Executive Officer thereafter.

DIRECTORS’ INTEREST22. In accordance with the Register of Directors’ Shareholdings, the Directors who held office at the end of the year and

have interest in shares and options over shares in the Company and subsidiaries are as follows:

Number of ordinary shares of RM1.00 each

Balance at Balance atInterest in the Company 1.1.2007 Bought Sold 31.12.2007

Tan Sri Dato’ Ir Muhammad Radzi Hj Mansor 123,500 — 1,500 122,000

Dato’ Sri Abdul Wahid Omar — 250,000 @ — 250,000

Dato’ Ir Dr Abdul Rahim Daud 145,000 — — 145,000

@ Being options under PLES exercised during the year



DIRECTORS’ INTEREST (continued)Number of options over ordinary shares of RM1.00 each

Balance at Balance atInterest in the Company 1.1.2007 Vested Exercised Lapsed* 31.12.2007

Dato’ Sri Abdul Wahid Omar 53,700 1 652,500 2 250,000 456,200 —

1 Options granted and vested under PLES on 6 September 2005 as detailed in note 12(a) to the financial statements2 Options granted in 2005 under PLES and vested on 24 April 2007* These options have expired on 31 July 2007 and any unexercised options were deemed lapsed

Number of ordinary shares of RM1.00 each of RM0.50 each #

Balance at Balance atInterest in VADS Berhad 1.1.2007 Bought Sold Share split 31.12.2007

Tan Sri Dato’ Ir Muhammad 15,000 — — 15,000 3 30,000Radzi Hj Mansor

Dato’ Ir Dr Abdul Rahim Daud 15,000 — — 15,000 3 30,000

# On 25 October 2007, VADS Berhad’s existing ordinary shares of RM1.00 each was subdivided into 2 ordinary sharesof RM0.50 each following a share split exercise

3 Additional shares created due to share split exercise carried out by VADS Berhad

23. In accordance with the Register of Directors’ Shareholdings, none of the other Directors who held office at the end ofthe year have any direct or indirect interests in the shares and options over ordinary shares in the Company and itsrelated corporations during the year.

DIRECTORS’ BENEFITS24. Since the end of the previous year, none of the Directors have received or become entitled to receive any benefit (except

for the Directors’ fees, remuneration and other emoluments as disclosed in note 5(b) to the financial statements) byreason of a contract made by the Company or a related corporation with the Director or with a firm of which he is amember or with a company in which he has a substantial financial interest and any benefit that may deem to have beenreceived by certain Directors.

Neither during nor at the end of the year was the Company or any of its related corporations, a party to any arrangementwith the object(s) of enabling the Directors to acquire benefits by means of the acquisition of shares in, or debenturesof the Company or any other body corporate.




AUDITORS25. The auditors, PricewaterhouseCoopers, have expressed their willingness to continue in office.

In accordance with a resolution of the Board of Directors dated 26 February 2008.

TAN SRI DATO’ Ir MUHAMMAD RADZI HJ MANSORChairman

DATO’ SRI ABDUL WAHID OMARGroup Chief Executive Officer



SignificantAccounting

Policies


The following accounting policies have been used consistently in dealing with items that are considered material in relationto the financial statements, and have been consistently applied to all the years presented, unless otherwise stated.

1. BASIS OF PREPARATION OF THE FINANCIAL STATEMENTSThe financial statements of the Group and the Company have been prepared in accordance with the provisions of theCompanies Act, 1965 and Financial Reporting Standards, the Malaysian Accounting Standards Board (MASB) approvedaccounting standards in Malaysia for Entities Other Than Private Entities. The Group and the Company had adopted newand revised Financial Reporting Standards which are mandatory for the Group’s and the Company’s financial yearbeginning on 1 January 2007 as described in (a) below.

The financial statements have been prepared under the historical cost convention except as disclosed in the SignificantAccounting Policies below.

The preparation of financial statements in conformity with Financial Reporting Standards, requires the use of certaincritical accounting estimates and assumptions that affect the reported amounts of assets and liabilities and thedisclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of therevenue and expenses during the reported period. It also requires Directors to exercise their judgement in the processof applying the Group’s accounting policies. Although these estimates and judgement are based on the Directors’ bestknowledge of current events and actions, actual results may differ.

The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates aresignificant to the Group’s and the Company’s financial statements are disclosed in note 2 to the financial statements.

(a) Standards and amendments to published standards that are effectiveThe new accounting standards and amendments to published standards effective for the Group’s and the Company’sfinancial year beginning on 1 January 2007 are as follows:

• FRS 6 Exploration for and Evaluation of Mineral Resources

• FRS 117 Leases

• FRS 124 Related Party Disclosures

• Amendments to FRS 119 Employee Benefits – Actuarial Gains and Losses, Group Plans and Disclosures – inrelation to the option of an alternative recognition approach for actuarial gains andlosses.

• TR i-1 Accounting for Zakat on Business

• TR i-2 Ijarah

All changes in the accounting policies, where applicable have been made in accordance with the transitionalprovisions in the respective standards and amendments to the published standards. All standards and amendmentsto the published standards, where applicable adopted by the Group require retrospective application.

A summary of the impact of the new accounting standards and amendments to the published standards on thefinancial statements of the Group and the Company is set out in note 53 to the financial statements.



Significant Accounting Policiesfor the year ended 31 December 2007

1. BASIS OF PREPARATION OF THE FINANCIAL STATEMENTS (continued)(b) Standards, amendments to published standards and Interpretations Committee (IC) Interpretations that are not

yet effective and have not been early adoptedThe new standards, amendments to published standards and IC Interpretations which are effective for accountingperiods beginning on or after 1 July 2007 and hence are mandatory for the Group’s and the Company’s financialyear beginning on 1 January 2008, which the Group and the Company have not early adopted, are as follows:

(i) Standards, amendments to published standards and Interpretations Committee (IC) Interpretations that arerelevant for the Group’s and the Company’s operations

• FRS 107 Cash Flow Statements

• FRS 112 Income Taxes

• FRS 118 Revenue

• FRS 120 Accounting for Government Grants and Disclosure of Government Assistance

• FRS 134 Interim Financial Reporting

• FRS 137 Provisions, Contingent Liabilities and Contingent Assets

• FRS 139 Financial Instruments: Recognition and Measurement (effective date yet to bedetermined by MASB)

• Amendments to FRS 121 The Effects of Changes in Foreign Rates – Net Investment in Foreign Operations

• IC Interpretation 1 Changes in Existing Decommissioning Restoration & Similar Liabilities

• IC Interpretation 8 Scope of FRS 2

FRS 107, FRS 118, FRS 134 and FRS 137 have no significant changes compared to the original standards.

FRS 112 removes the requirements that prohibit recognition of deferred tax on unutilised reinvestmentallowances or other allowances in excess of capital allowances.

FRS 120 allows the alternative treatment of recording non-monetary government grant at nominal amount oninitial recognition.

Amendment to FRS 121 requires exchange differences on monetary items that form part of the net investmentin a foreign operation to be recognised in equity instead of in profit or loss regardless of the currency in whichthese items are denominated in.

FRS 139 establishes principles for recognising and measuring financial assets, financial liabilities and somecontracts to buy and sell non-financial items. Hedge accounting is permitted only under strict circumstances.The Group has applied the transitional provision in FRS 139 which exempts entities from disclosing the possibleimpact arising from the initial application of this standard on the financial statements of the Company. TheGroup will apply this standard when effective.

IC Interpretation 1 deals with changes in the estimated timing or amount of the outflow of resources requiredto settle the obligation or a change in the discount rate.



1. BASIS OF PREPARATION OF THE FINANCIAL STATEMENTS (continued)(b) Standards, amendments to published standards and Interpretations Committee (IC) Interpretations that are not

yet effective and have not been early adopted (continued)

(i) Standards, amendments to published standards and Interpretations Committee (IC) Interpretations that arerelevant for the Group’s and the Company’s operations (continued)

IC Interpretation 8 clarifies that FRS 2 "Share-based Payment" applies even in the absence of specificallyidentifiable goods or services.

With the exception of FRS 139, the above standards, amendments to published standards and Interpretationsto existing standards are not anticipated to have any significant impact to the financial position of the Groupand the Company.

The Group and the Company will apply the above revised standards, amendments to published standards andIC Interpretations where applicable from financial year beginning on 1 January 2008.

(ii) Standards and IC Interpretations to existing standards that are not relevant or material for the Group’s operations

• FRS 111 Construction Contracts

• IC Interpretation 2 Members’ Shares in Co-operative Entities & Similar Instruments

• IC Interpretation 5 Rights to Interests arising from Decommissioning, Restoration & EnvironmentalRehabilitation Funds

• IC Interpretation 6 Liabilities arising from Participating in a Specific Market-Waste Electrical &Electronic Equipment

• IC Interpretation 7 Applying the Restatement Approach under IAS 29 “Financial Reporting inHyperinflationary Economies”

FRS 111 has no significant changes compared to the original standards.

IC Interpretation 2 deals with liability or equity classification of financial instruments which give the holder theright to request redemption, but subject to limits on whether it will be redeemed.

IC Interpretation 5 deals with accounting in the financial statements of a contributor for its interests arisingfrom decommissioning funds.

IC Interpretation 6 provides guidance on the recognition, in the financial statements of producers, of liabilitiesfor waste management under the European Union Directive in respect of sales of historical householdequipment.

IC Interpretation 7 provides guidance on how to apply the requirements of FRS 129 in a reporting period inwhich an entity identifies the existence of hyperinflationary in the economy of its functional currency, when thateconomy was not hyperinflationary in the prior period.




2. ECONOMIC ENTITIES IN THE GROUP(a) Subsidiaries

Subsidiaries are those corporations or other entities (including special purpose entities) in which the Group haspower to exercise control over the financial and operating policies so as to obtain benefits from their activities,generally accompanying a shareholding of more than one half of the voting rights. The existence and effect ofpotential voting rights that are currently exercisable or convertible are considered when assessing whether theGroup controls another entity.

Subsidiaries are consolidated using the purchase method of accounting except for the following businesscombinations which were accounted for using the merger method:

• subsidiaries that were consolidated prior to 1 April 2002 in accordance with Malaysian Accounting Standard 2‘Accounting for Acquisitions and Mergers’, the generally accepted accounting principles prevailing at that time

• business combinations consolidated on/after 1 April 2002 but with agreement dates before 1 January 2006 thatmeet the conditions of a merger as set out in FRS 1222004 ‘Business Combinations’

• internal group reorganisations, as defined in FRS 1222004, consolidated on/after 1 April 2002 but with agreementdates before 1 January 2006 where:

– the ultimate shareholders remain the same, and the rights of each such shareholder, relative to the others,are unchanged; and

– the minorities' share of net assets of the Group is not altered by the transfer

• business combinations involving entities or businesses under common control with agreement dates on/after 1 January 2006

The Group has taken advantage of the exemption provided by FRS 1222004 and FRS 3 to apply these Standardsprospectively.

Under the purchase method of accounting, subsidiaries are fully consolidated from the date on which control istransferred to the Group and are excluded from consolidation from the date that control ceases. The cost of anacquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred orassumed at the date of exchange, plus costs directly attributable to the acquisition.

Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination aremeasured initially at their fair values at the acquisition date, irrespective of the extent of any minority interest. Theexcess of the cost of acquisition over the fair value of the Group’s share of the identifiable net assets acquired atthe date of acquisition is recorded as goodwill (see Significant Accounting Policies note 3(a)). If the cost ofacquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recogniseddirectly in the Consolidated Income Statement.



2. ECONOMIC ENTITIES IN THE GROUP (continued)(a) Subsidiaries (continued)

Minority interests represent that portion of the profit or loss and net assets of subsidiaries attributable to equityinterest that are not owned, directly or indirectly through the subsidiaries by the parent. It is measured at theminorities’ share of the fair values of the subsidiaries’ identifiable assets and liabilities at the acquisition date andthe minorities’ share of changes in subsidiaries’ equity since that date. Separate disclosure is made of minorityinterests.

Where more than one exchange transaction is involved, any adjustment to the fair value of the subsidiary’sidentifiable assets, liabilities and contingent liabilities relating to previously held interests of the Group is accountedfor as a revaluation.

Under the merger method of accounting, the results of subsidiaries are presented as if the merger had beeneffected throughout the current and previous years. The assets and liabilities combined are accounted for based onthe carrying amounts from the perspective of the common control shareholder at the date of transfer. Onconsolidation, the cost of the merger is cancelled with the values of the shares received. Any resulting creditdifference is classified as equity and regarded as a non-distributable reserve. Any resulting debit difference isadjusted against any suitable reserve. Any share premium, capital redemption reserve and any other reserves whichare attributable to share capital of the merged enterprises, to the extent that they have not been capitalised by adebit difference, are reclassified and presented as movement in other capital reserves.

Intragroup transactions, balances and unrealised gains or losses on transactions between Group companies areeliminated. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with theaccounting policies adopted by the Group.

The gain or loss on disposal of a subsidiary is the difference between the net disposal proceeds and the Group’sshare of the subsidiary’s net assets as of the date of disposal, including the cumulative amount of any exchangedifferences that relate to that subsidiary which were previously recognised in equity, and is recognised in theConsolidated Income Statement.

(b) Transactions with Minority InterestsThe Group applies a policy of treating transactions with minority interests as transactions with parties external tothe Group. Disposals to minority interests result in gains and losses for the Group that are recorded in the IncomeStatement. Purchases from minority interests result in goodwill, being the difference between any consideration paidand the relevant share of the carrying value of net assets of the subsidiary acquired.




2. ECONOMIC ENTITIES IN THE GROUP (continued)(c) Jointly Controlled Entities

Jointly controlled entities are corporations, partnerships or other entities over which there is contractually agreedsharing of control by the Group with one or more parties where the strategic financial and operation decisionsrelating to the entity requires unanimous consent of the parties sharing control.

The Group’s interest in jointly controlled entities is accounted for in the consolidated financial statements using theequity method of accounting. Equity accounting involves recognising the Group’s share of the post acquisition resultsof the jointly controlled entities in the Consolidated Income Statement and its share of post acquisition movementwithin reserve in reserves. The cumulative post acquisition movements are adjusted against the cost of theinvestment and includes goodwill on acquisition (net of accumulated impairment loss).

The results of jointly controlled entities are taken from the most recent unaudited financial statements of the jointlycontrolled entities concerned, made up to dates not more than 3 months prior to the end of the financial year ofthe Group.

Equity accounting is discontinued when the Group ceases to have joint control in the jointly controlled entities.

The Group recognises the portion of gains or losses on the sale of assets by the Group to the jointly controlledentities that is attributable to the other venturers. The Group does not recognise its share of profits or losses fromthe jointly controlled entities that result from the purchase of assets by the Group from the jointly controlled entitiesuntil it resells the assets to an independent party. However, a loss on the transaction is recognised immediately ifthe loss provides evidence of a reduction in the net realisable value of current assets or an impairment loss. Wherenecessary, in applying the equity method, adjustments are made to the financial statements of jointly controlledentities to ensure consistency of the accounting policies with those of the Group.

(d) AssociatesAssociates are corporations, partnerships or other entities in which the Group exercises significant influence butwhich it does not control, generally accompanying a shareholding of between 20% and 50% of the voting rights.Significant influence is the power to participate in the financial and operating policy decisions of the associates butnot control over those policies.

Investments in associates are accounted for in the consolidated financial statements using the equity method ofaccounting. Equity accounting is discontinued when the Group ceases to have significant influence over theassociates. The Group’s investments in associates includes goodwill identified on acquisition, net of any accumulatedimpairment loss (see Significant Accounting Policies note 3(a)).

The Group’s share of its associates’ post-acquisition profits or losses is recognised in the Consolidated IncomeStatement, and its share of post-acquisition movements in reserves is recognised within reserves. The cumulativepost-acquisition movements are adjusted against the carrying amount of the investments. When the Group’s shareof losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables,the Group’s interest is reduced to nil and recognition of further loss is discontinued except to the extent that theGroup has incurred legal or constructive obligations or made payments on behalf of the associate.



2. ECONOMIC ENTITIES IN THE GROUP (continued)(d) Associates (continued)

The results of associates are taken from the most recent unaudited financial statements of the associatesconcerned, made up to dates not more than 3 months prior to the end of the financial year of the Group.

Unrealised gains on transactions between the Group and its associates are eliminated to the extent of the Group’sinterest in the associates; unrealised losses are also eliminated unless the transaction provides evidence of animpairment of the asset transferred. Where necessary, in applying the equity method, appropriate adjustments aremade to the financial statements of the associates to ensure consistency of accounting policies with those of theGroup.

Dilution gains and losses are recognised in the Income Statement.

For incremental interest in associates, the date of acquisition is the date at which significant influence is obtained.Goodwill is calculated at each purchase date based on the fair value of assets and liabilities identified. Thepreviously acquired stake is stepped up to fair value and the share of profits and equity movements for thepreviously acquired stake are not recognised since they are embedded in the step up.

3. INTANGIBLE ASSETS(a) Goodwill

Goodwill represents the excess of the cost of acquisition of subsidiaries, jointly controlled entities and associatesover the Group’s share of the fair value of the identifiable net assets including contingent liabilities of subsidiaries,jointly controlled entities and associates at the date of acquisition. Goodwill on acquisition occurring on or after 1January 2002 in respect of a subsidiary is included in the Consolidated Balance Sheet as an intangible asset.

Goodwill is carried at cost less accumulated impairment losses. Goodwill is tested for impairment at least annually,or when events or circumstances occur indicating that an impairment may exist. Impairment of goodwill is chargedto the Consolidated Income Statement as and when it arises. Impairment losses on goodwill are not reversed. Gainsand losses on the disposal of an entity include the carrying amount of goodwill relating to the entity disposed.

Goodwill is allocated to cash-generating units for the purpose of impairment testing. Each cash-generating unit ora group of cash-generating units represents the lowest level within the Group at which goodwill is monitored forinternal management purposes and which are expected to benefit from the synergies of the combination. The Groupallocates goodwill to each business segment in each country in which it operates.

Goodwill on acquisition of jointly controlled entities and associates occurring on or after 1 January 2002 is includedin the investments in jointly controlled entities and associates respectively. Such goodwill is tested for impairmentas part of the overall balance.

Goodwill on acquisitions that occurred prior to 1 January 2002 was written off against reserves in the year of acquisition.




3. INTANGIBLE ASSETS (continued)(b) Licences

Acquired licences are shown at cost. Licences have finite useful lives and are carried at cost less accumulatedamortisation. Amortisation is calculated using straight line method, from the effective date of commercialisation ofservices, subject to impairment, to the end of the assignment period. Licences are not revalued.

4. PROPERTY, PLANT AND EQUIPMENTProperty, plant and equipment are stated at cost less accumulated depreciation and impairment losses. Cost includesexpenditure that is directly attributable to the acquisition of the items.

(a) CostCost of telecommunication network comprises expenditure up to and including the last distribution point before thecustomers’ premises and includes contractors' charges, materials, direct labour and related overheads. The cost ofother property, plant and equipment comprises their purchase cost and any incidental cost of acquisition. Thesecosts include the costs of dismantling, removal and restoration, the obligation which was incurred as a consequenceof installing the asset.

Subsequent cost is included in the carrying amount of the asset or recognised as appropriate only when it isprobable that the future economic benefit associated with the item will flow to the Group and the cost of the itemcan be measured reliably. The carrying value of the replaced part is derecognised. All other repairs and maintenanceare charged to the Income Statement during the period in which they are incurred.

(b) DepreciationFreehold land is not depreciated as it has an infinite life. Other property, plant and equipment are depreciated ona straight line basis to write off the cost of the assets to their residual values over their estimated useful lives inyears as summarised below:

Telecommunication network 3 – 20Movable plant and equipment 5 – 8Computer support systems 3 – 5Buildings 5 – 40

Depreciation on property, plant and equipment under construction commences when the property, plant andequipment are ready for their intended use. Depreciation on property, plant and equipment ceases at the earlier ofderecognition and classification as held for sale.

The assets’ residual values and useful lives are reviewed and adjusted as appropriate at each balance sheet date.

(c) ImpairmentAt each balance sheet date, the Group assesses whether there is any indication of impairment. If such indicationexists, an analysis is performed to assess whether the carrying value of the asset is fully recoverable. A write downis made if the carrying value exceeds the recoverable amount (see Significant Accounting Policies note 8 onImpairment of Assets).



4. PROPERTY, PLANT AND EQUIPMENT (continued)(d) Gains or Losses on Disposal

Gains or losses on disposal are determined by comparing the proceeds with the carrying amount of the relatedasset and are included in the Income Statement.

(e) Asset Exchange TransactionProperty, plant and equipment may be acquired in exchange for a non-monetary asset or for a combination ofmonetary and non-monetary assets and is measured at fair values unless;

(i) the exchange transaction lacks commercial substance; or

(ii) the fair value of neither the assets received nor the assets given up can be measured reliably.

The acquired item is measured in this way even if the Group cannot immediately derecognise the assets given up. Ifthe acquired item is not measured at fair value, its cost is measured at the carrying amount of the asset given up.

(f) Repairs and MaintenanceRepairs and maintenance are charged to the Income Statement during the period in which they are incurred. Thecost of major renovations is included in the carrying amount of the asset when it is probable that future economicbenefits in excess of the originally assessed standard of performance of the existing asset will flow to the Group.This cost is depreciated over the remaining useful life of the related asset.

5. INVESTMENT PROPERTIESInvestment properties, principally comprising land and office buildings, are held for long term rental yields or for capitalappreciation or for both, and are not occupied by the Group or the Company.

Investment properties are carried at cost less accumulated depreciation and impairment losses. Investment propertiesare depreciated on a straight line basis to write off the cost of the investment properties to their residual values overtheir estimated useful lives in years as summarised below:

Leasehold land over the period of the respective leasesBuildings 5 – 40

On disposal of an investment property, or when it is permanently withdrawn from use and no future economic benefitsare expected, then it shall be derecognised (eliminated from balance sheet). The difference between the net disposalproceeds and the carrying amount is recognised as profit or loss in the period of the retirement or disposal.




6. LAND HELD FOR PROPERTY DEVELOPMENTLand held for property development consists of land on which no significant development work has been undertaken orwhere development activities are not expected to be completed within the normal operating cycle. Such land is classifiedas non-current asset and is stated at cost less accumulated impairment losses.

Cost associated with the acquisition of land includes the purchase price of the land, professional fees, stamp duties,commissions, conversion fees and other relevant levies. Where an indication of impairment exists, the carrying amountof the asset is assessed and written down immediately to its recoverable amount (see Significant Accounting Policiesnote 8 on Impairment of Assets).

Land held for property development is transferred to property development cost (under current assets) when developmentactivities have commenced and where the development activities can be completed within the Company’s normaloperating cycle of 2 to 5 years.

7. INVESTMENTSInvestments in subsidiaries, jointly controlled entities and associates are stated at cost less accumulated impairmentlosses. Where an indication of impairment exists, the carrying amount of the investment is assessed and written downimmediately to its recoverable amount (see Significant Accounting Policies note 8 on Impairment of Assets).

Investments in International Satellite Organisations, quoted shares within non-current assets and other unquoted sharesare stated at cost and an allowance for diminution in value is made where, in the opinion of the Directors, there is adecline other than temporary in the value of such investments. Such allowance for diminution in value is recognised asan expense in the period in which the diminution is identified.

Marketable securities (within current assets) are carried at the lower of cost and market value, determined on anaggregate portfolio basis by category of investment. Cost is derived at based on the weighted average basis. Market valueis calculated by reference to stock exchange quoted selling prices at the close of business on the balance sheet date.Increases/decreases in the carrying amount of marketable securities are credited/charged to the Income Statement.

On disposal of an investment, the difference between the net disposal proceeds and its carrying amount ischarged/credited to the Income Statement.

8. IMPAIRMENT OF ASSETSAssets that have an indefinite useful life are not subject to amortisation and are tested for impairment annually, or asand when events or circumstances occur indicating that an impairment may exist. Property, plant and equipment andother non-current assets, including intangible assets with definite useful life, are reviewed for impairment losseswhenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairmentloss is recognised for the amount by which the carrying amount of the asset exceeds its recoverable amount. Therecoverable amount is the higher of an asset’s fair value less cost to sell and value-in-use. For the purpose of assessingimpairment, assets are grouped at the lowest level for which there is separately identifiable cash flows (cash-generatingunits). Assets other than goodwill that suffered an impairment are reviewed for possible reversal at each reporting date.



8. IMPAIRMENT OF ASSETS (continued)The impairment loss is charged to the Income Statement unless it reverses a previous revaluation in which case it ischarged to the revaluation surplus. Impairment losses on goodwill are not reversed. In respect of other assets, anysubsequent increase in recoverable amount is recognised in the Income Statement unless it reverses an impairment losson revalued asset in which case it is taken to revaluation surplus.

9. GOVERNMENT GRANTSGrants from the government are recognised at their fair value where there is a reasonable assurance that the grant willbe received and the Group will comply with all attached conditions.

Government grants relating to costs are deferred and recognised in the Income Statement over the financial periodnecessary to match them with the costs they are intended to compensate.

Government grants relating to the purchase of assets are included in non-current liabilities as deferred income and arecredited to the Income Statement on the straight line basis over the estimated useful lives of the related assets.

10. INVENTORIESInventories are stated at lower of cost and net realisable value.

Cost is determined on a weighted average basis and comprises all costs of purchase and other costs incurred in bringingthe inventories to their present location. The cost of finished goods and work-in-progress comprises design costs, rawmaterials, direct labour, other direct costs and related production overheads (based on normal operating capacity). Itexcludes borrowing costs.

Net realisable value represents the estimated selling price in the ordinary course of business, less all estimated coststo completion and applicable variable selling expenses. In arriving at the net realisable value, due allowance is made forall obsolete and slow moving items.

Inventories include maintenance spares acquired for the purpose of replacing damaged or faulty plant or spares andsupplies used in constructing and maintaining the network.

11. NON-CURRENT ASSETS (OR DISPOSAL GROUP) CLASSIFIED AS ASSETS HELD FOR SALENon-current assets (or disposal group) are classified as assets held for sale if their carrying amount will be recoveredprincipally through a sale transaction rather than through a continuing use.

Assets held for sale are stated at the lower of carrying amount and fair value less cost to sell.




12. TRADE RECEIVABLESTrade receivables are carried at anticipated realisable value. Bad debts are written off and specific allowances are madefor trade receivables considered to be doubtful of collection. In addition, a general allowance based on a percentage oftrade receivables is made to cover possible losses which are not specifically identified.

13. CASH AND CASH EQUIVALENTSFor the purpose of the Cash Flow Statements, cash and cash equivalents comprise cash on hand, deposits held at callwith banks, other short term, highly liquid investments with original maturities of 3 months or less and bank overdrafts.Deposits held as pledged securities for term loans granted are not included as cash and cash equivalents.

Bank overdrafts are included within borrowings in current liabilities in the balance sheet.

14. SHARE CAPITAL(a) Classification

Ordinary share and non-redeemable preference shares with discretionary dividends are classified as equity. Othershares are classified as equity and/or liability according to the economic substance of the particular instrument.

Distribution to holders of a financial instrument classified as an equity instrument is charged directly to equity.

(b) Share issue costsIncremental external costs directly attributable to the issuance of new shares or options are shown in equity as adeduction, net of tax from the proceeds.

(c) Dividend to shareholders of the CompanyDividends on redeemable preference shares are recognised as a liability and expressed on an accrual basis. Otherdividends are recognised as a liability in the period in which they are declared.

15. BONDS, NOTES, DEBENTURES AND BORROWINGSBonds, notes and debentures, are stated at the net proceeds received on issue. The finance costs which represent thedifference between the net proceeds and the total amount of the payments of these borrowings are allocated to periodsover the term of the borrowings at a constant rate on the carrying amount and are charged to the Income Statement.

Interests, dividends, losses and gains relating to a financial instrument, or a component part, classified as a liability isreported within finance cost in the Income Statement.

Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of theliability for at least 12 months after the balance sheet date.

Borrowing cost incurred in connection with financing the construction and installation of property, plant and equipmentis capitalised until the property, plant and equipment are ready for their intended use. All other borrowing costs arecharged to the Income Statement.



16. OPERATING LEASESLeases of assets where a significant portion of the risks and rewards of ownership are retained by the lessor areclassified as operating leases. Payments made under operating leases (net of any incentives received from the lessor)are charged to the Income Statement on the straight line basis over the lease period.

When an operating lease is terminated before the lease period has expired, any payment required to be made to thelessor by way of penalty is recognised as an expense in the period in which termination takes place.

Upfront payments on leasehold land are classified as prepaid lease payments and amortised on a straight line basis overthe remaining lease period.

17. INCOME TAXESCurrent tax expense is determined according to the tax laws of each jurisdiction in which the Group operates and includeall taxes based upon the taxable profits, including withholding taxes payable by foreign subsidiaries, jointly controlledentities or associates on distributions of retained earnings to companies in the Group, and real property gains taxespayable on disposal of properties.

Deferred tax is recognised in full, using the liability method, on temporary differences arising between the amountsattributed to assets and liabilities for tax purposes and their carrying amounts in the financial statements. Howeverdeferred tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than abusiness combination that at that time of the transaction affects neither accounting nor taxable profit or loss.

Deferred tax assets are recognised to the extent that it is probable that taxable profit will be available against which thedeductible temporary differences or unutilised tax losses can be utilised.

Deferred tax is recognised on temporary differences arising on investments in subsidiaries, jointly controlled entities andassociates except where the timing of the reversal of the temporary difference can be controlled and it is probable thatthe temporary difference will not reverse in the foreseeable future.

The Group’s share of income taxes of jointly controlled entities and associates are included in the Group’s share of resultsof jointly controlled entities and associates.

Deferred tax is determined using tax rates (and tax laws) that have been enacted or substantially enacted by the balancesheet date and are expected to apply when the related deferred tax asset is realised or the deferred tax liability is settled.

18. PROVISIONSProvisions are recognised when the Group and the Company have a present legal or constructive obligation as a resultof past events, when it is probable that an outflow of resources will be required to settle the obligation, and when areliable estimate of the amount can be made. Where the Group expects a provision to be reimbursed (for example, underan insurance contract), the reimbursement is recognised as a separate asset but only when the reimbursement isvirtually certain. Provisions are not recognised for future operating losses.




18. PROVISIONS (continued)Where there are a number of similar obligations, the likelihood that an outflow will be required in a settlement isdetermined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of anoutflow with respect to any one item included in the same class of obligations may be small.

Provisions are measured at the present value of the expenditures expected to be required to settle the obligation usinga pre-tax rate that reflects current market assessments of the time value of money and the risks specific to theobligation. The increase in the provision due to passage of time is recognised as interest expense.

19. CONTINGENT LIABILITIES AND CONTINGENT ASSETSThe Group does not recognise a contingent liability but discloses its existence in the financial statements. A contingentliability is a possible obligation that arises from past events whose existence will be confirmed by uncertain future eventsbeyond the control of the Group or a present obligation that is not recognised because it is not probable that an outflowof resources will be required to settle the obligation. A contingent liability also arises in the extremely rare circumstancewhere there is a liability that cannot be recognised because it cannot be measured reliably.

A contingent asset is a possible asset that arises from past events whose existence will be confirmed by uncertain futureevents beyond the control of the Group. The Group does not recognise a contingent asset but discloses its existencewhere inflows of economic benefits are probable, but not virtually certain.

In the acquisition of subsidiaries by the Group under a business combination, the contingent liabilities assumed aremeasured initially at their fair values at the acquisition date, irrespective of the extent of any minority interest.

The Group recognises separately the contingent liabilities of the acquirees as part of allocating the cost of a businesscombination where their fair values can be measured reliably. Where the fair values cannot be measured reliably, theresulting effect will be reflected in the goodwill arising from the acquisitions.

Subsequent to the initial recognition, the Group measures the contingent liabilities that are recognised separately at thedate of acquisition at the higher of the amount that would be recognised in accordance with the provisions of FRS 137 andthe amount initially recognised less, when appropriate, cumulative amortisation recognised in accordance with FRS 118.

20. REVENUE RECOGNITIONOperating revenue comprises the fair value of the consideration received or receivables for the sale of products andrendering of services net of returns, duties, sales discounts and sales taxes paid, after eliminating sales within the Group.Operating revenue is recognised or accrued at the time of the provision of the products or services.

Dividend income from investment in subsidiaries, jointly controlled entities, associates and other investments isrecognised when a right to receive payment is established.

Interest income includes income from deposits with licensed banks, finance companies, other financial institutions andstaff loans, and is recognised on an accrual basis.



21. EMPLOYEE BENEFITS(a) Short Term Employee Benefits

Wages, salaries, paid annual leave and sick leave, bonuses and non-monetary benefits are accrued in the period inwhich the associated services are rendered by employees of the Group.

(b) Contribution to Employees Provident Fund (EPF)The Group’s contributions to EPF are charged to the Income Statement in the period to which they relate. Once thecontributions have been paid, the Group has no further payment obligations. Prepaid contributions are recognisedas an asset to the extent that a cash refund or a reduction in the future payments is available.

(c) Termination BenefitsTermination benefits are payable whenever an employee’s employment is terminated before the normal retirementdate or whenever an employee accepts voluntary redundancy in exchange for these benefits. The Group recognisestermination benefits when it is demonstrably committed to either terminate the employment of current employeesaccording to a detailed formal plan without possibility of withdrawal or to provide termination benefits as a resultof an offer made to encourage voluntary redundancy. Benefits falling due more than 12 months after the balancesheet date are discounted to present value.

(d) Share-Based CompensationThe Group operates an equity settled, share-based compensation plan for the employees of the Group. Employeeservices received in exchange for the grant of the share options is recognised as an expense in the IncomeStatement over the vesting periods of the grant with a corresponding increase in equity.

The total amount to be expensed over the vesting periods is determined by reference to the fair value of the optionsgranted, excluding the impact of any non-market vesting conditions. Non-market vesting conditions are included inthe assumptions about the number of options that are expected to vest. At each balance sheet date, the Grouprevises its estimates of the number of options that are expected to vest. It recognises the impact of the revision oforiginal estimates, if any, in the Income Statement, and a corresponding adjustment to equity. For options grantedto subsidiaries, the expense will be recognised in the subsidiaries' financial statements over the vesting periods ofthe grant.

The proceeds received net of any directly attributable transaction costs are credited to share capital (nominal value)and share premium when the options are exercised.

22. FOREIGN CURRENCIES(a) Functional and Presentation Currency

Items included in the financial statements of each of the Group’s entities are measured using the currency of theprimary economic environment in which the entity operates (‘the functional currency’). The consolidated financialstatements are presented in Ringgit Malaysia, which is the Company’s functional and presentation currency.




22. FOREIGN CURRENCIES (continued)(b) Transactions and Balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at thedates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions andfrom the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currenciesare recognised in the Income Statement.

(c) Group CompaniesThe results and financial position of all the group entities (none of which has the currency of a hyperinflationaryeconomy) that have a functional currency different from the presentation currency are translated into thepresentation currency as follows:

(i) assets and liabilities for each balance sheet presented are translated at the closing rate at the date of thatbalance sheet;

(ii) income and expenses for each Income Statement are translated at average exchange rates (unless this averageis not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, inwhich case income and expenses are translated at the dates of the transactions); and

(iii) all resulting exchange differences are recognised as a separate component of equity.

On consolidation, exchange differences arising from the translation of the net investment in foreign operations aretaken to shareholders’ equity. When a foreign operation is disposed of or sold, such exchange differences that wererecorded in equity are recognised in the Income Statement as part of the gain or loss on disposal.

Goodwill and fair value adjustments arising on the acquisition of a foreign entity completed on or after 1 January2006 are treated as assets and liabilities of the foreign entity and are recorded in the functional currency of theforeign entity and translated at the exchange rate prevailing at balance sheet date. For acquisition of foreign entitiescompleted prior to 1 January 2006, goodwill and fair value adjustments continued to be recorded at the exchangerates at the respective date of acquisitions.

(d) Closing RatesThe principal closing rates (units of Malaysian Ringgit per foreign currency) used in translating significant balancesat year end are as follows:

Foreign Currency 31.12.2007 31.12.2006 Foreign Currency 31.12.2007 31.12.2006

US Dollar 3.30500 3.52700 Singapore Dollar 2.29307 2.29967Japanese Yen 0.02969 0.02964 Thai Baht 0.11054 0.09958Sri Lanka Rupee 0.03043 0.03284 Indian Rupee 0.08393 0.07996Bangladesh Taka 0.04843 0.05107 Special DrawingIndonesian Rupiah 0.00035 0.00039 Rights 5.22510 5.30659Pakistani Rupee 0.05370 0.05807



23. FINANCIAL INSTRUMENTS(i) Description

A financial instrument is any contract that gives rise to both a financial asset of one enterprise and a financialliability or equity instrument of another enterprise.

A financial asset is any asset that is cash, a contractual right to receive cash or another financial asset fromanother enterprise, a contractual right to exchange financial instruments with another enterprise under conditionsthat are potentially favourable, or an equity instrument of another enterprise.

A financial liability is any liability that is a contractual obligation to deliver cash or another financial asset to anotherenterprise, or to exchange financial instruments with another enterprise under conditions that are potentiallyunfavourable.

(ii) Financial Instruments Recognised on the Balance SheetThe particular recognition and measurement method for financial instruments recognised on the balance sheet isdisclosed in the individual significant accounting policy statements associated with each item.

(iii) Financial Instruments Not Recognised on the Balance SheetFinancial derivative hedging instruments are used in the Group’s risk management of foreign currency and interestrate exposures of its financial liabilities. Hedge accounting principles are applied for the accounting of the underlyingexposures and their hedge instruments. These hedge instruments are not recognised in the financial statements oninception.

Exchange gains and losses relating to hedge instruments are recognised in the Income Statement in the sameperiod as the exchange differences on the underlying hedged items. No amounts are recognised in respect of futureperiods.

(iv) Fair Value Estimation for Disclosure PurposesThe fair value of publicly traded financial instruments is based on quoted market prices at the balance sheet date.The fair value of interest rate swaps is calculated as the present value of the estimated future cash flows. The fairvalue of forward foreign exchange contracts is determined using forward exchange market rates at the balancesheet date.

In assessing the fair value of non-traded financial instruments, the Group uses a variety of methods and makesassumptions that are based on market conditions existing at each balance sheet date. Quoted market prices areused if available or other techniques, such as estimated discounted value of future cash flows, are used todetermine fair value. In particular, the fair value of financial liabilities is estimated by discounting the futurecontractual cash flows at the current market interest rate available to the Group for similar financial instruments.

The carrying values for financial assets and liabilities with a maturity of less than 1 year are assumed toapproximate their fair values.




24. SEGMENT REPORTINGSegment reporting is presented for the enhanced assessment of the Group’s risks and returns. A business segment isa group of assets and operations engaged in providing products or services that are subject to risks and returns thatare different from those of other business segments. A geographical segment is engaged in providing products orservices within a particular economic environment that is subject to risks and returns that are different from othergeographical segments.

Segment revenue, expense, assets and liabilities are those amounts resulting from the operating activities of a segmentthat are directly attributable to the segment and the relevant portion that can be allocated on a reasonable basis to thesegment. Segment revenue, expense, assets and liabilities are determined before intra-group balances and intra-grouptransactions are eliminated as part of the consolidation process, except to the extent that such intra-group balances andtransactions are between group enterprises within a single segment. Inter-segment pricing is based on similar terms asthose available to other external parties.

These accounting policies form an integral part of the financial statements set out on pages 279 to 408.



IncomeStatements


The Group The Company

All amounts are in millions unless Note 2007 2006 2007 2006otherwise stated RM RM RM RM

OPERATING REVENUE 4 17,842.9 16,399.2 7,418.9 6,753.5

OPERATING COSTS– depreciation, impairment and amortisation 5(a) (4,143.5) (4,001.5) (2,087.6) (2,199.6)– other operating costs 5(b) (10,676.6) (9,085.6) (4,656.4) (3,954.1)

OTHER OPERATING INCOME 6 460.5 178.5 656.7 292.8

OPERATING PROFIT BEFORE FINANCE COST 3,483.3 3,490.6 1,331.6 892.6

FINANCE INCOME 7 203.9 234.0 95.3 100.5FINANCE COST 7 (820.9) (621.9) (408.6) (376.0)

NET FINANCE COST 7 (617.0) (387.9) (313.3) (275.5)

JOINTLY CONTROLLED ENTITIES– share of results (net of tax) 175.5 10.6 — —– gain on dilution of equity interest 71.3 — — —

ASSOCIATES– share of results (net of tax) 29.5 19.9 — —

PROFIT BEFORE TAXATION 3,142.6 3,133.2 1,018.3 617.1

TAXATION 8 (511.0) (830.9) (19.4) (82.4)

PROFIT FOR THE YEAR 2,631.6 2,302.3 998.9 534.7

ATTRIBUTABLE TO:– equity holders of the Company 2,547.7 2,068.8 998.9 534.7– minority interests 83.9 233.5 — —

PROFIT FOR THE YEAR 2,631.6 2,302.3 998.9 534.7

EARNINGS PER SHARE (sen)– basic 9 74.4 61.0– diluted 9 74.4 60.8

The above Income Statements are to be read in conjunction with the Significant Accounting Policies on pages 261 to 278 and theNotes to the Financial Statements on pages 286 to 408.

Report of the Auditors – Page 410.


BalanceSheets AS AT 31 DECEMBER 2007




SHARE CAPITAL 11 3,439.8 3,397.6 3,439.8 3,397.6SHARE PREMIUM 4,262.1 3,941.9 4,262.1 3,941.9OTHER RESERVES 13 12,100.2 12,571.6 6,172.6 8,243.4

TOTAL CAPITAL AND RESERVESATTRIBUTABLE TO EQUITY HOLDERSOF THE COMPANY 19,802.1 19,911.1 13,874.5 15,582.9

MINORITY INTERESTS 849.4 836.5 — —

TOTAL EQUITY 20,651.5 20,747.6 13,874.5 15,582.9

Borrowings 14 9,747.2 10,282.8 4,913.1 2,368.0Payable to subsidiaries 15 — — 1,652.5 4,747.0Deferred tax liabilities 17 2,313.2 2,261.9 1,411.8 1,434.0Provision for liabilities 18 87.2 64.6 — —

DEFERRED AND LONG TERM LIABILITIES 12,147.6 12,609.3 7,977.4 8,549.0

32,799.1 33,356.9 21,851.9 24,131.9

INTANGIBLE ASSETS 19 7,460.9 7,059.1 39.7 43.6PROPERTY, PLANT AND EQUIPMENT 20 23,983.3 23,680.3 10,620.5 11,893.9PREPAID LEASE PAYMENTS 21 387.0 346.2 52.9 38.0INVESTMENT PROPERTY 22 — — — 179.8LAND HELD FOR PROPERTY DEVELOPMENT 23 165.4 168.4 — —SUBSIDIARIES 24 — — 9,398.9 9,836.8JOINTLY CONTROLLED ENTITIES 25 1,024.4 807.5 141.2 141.2ASSOCIATES 26 252.5 220.6 — —INVESTMENTS 27 138.9 226.7 138.9 220.5LONG TERM RECEIVABLES 28 511.5 557.7 511.1 557.3DEFERRED TAX ASSETS 17 179.4 115.6 — —



Non-current assets held for sale 29 988.4 24.0 988.4 24.0Inventories 30 181.1 172.8 82.3 68.4Trade and other receivables 31 4,398.6 3,464.1 3,092.5 2,498.0Short term investments 32 378.1 320.1 376.4 318.4Cash and bank balances 33 4,171.8 4,680.4 1,528.1 2,035.3

CURRENT ASSETS 10,118.0 8,661.4 6,067.7 4,944.1

Trade and other payables 34 6,702.7 5,740.9 2,606.9 2,348.7Customer deposits 35 732.6 718.9 590.2 590.3Borrowings 14 2,177.2 1,803.1 244.1 736.0Current tax liabilities 155.2 223.7 23.3 48.3Dividend payable 1,654.5 — 1,654.5 —

CURRENT LIABILITIES 11,422.2 8,486.6 5,119.0 3,723.3

NET CURRENT (LIABILITIES)/ASSETS (1,304.2) 174.8 948.7 1,220.8

32,799.1 33,356.9 21,851.9 24,131.9

The above Balance Sheets are to be read in conjunction with the Significant Accounting Policies on pages 261 to 278 and the Notesto the Financial Statements on pages 286 to 408.



Balance Sheetsas at 31 December 2007


ConsolidatedStatement ofChanges in Equity FOR THE YEAR ENDED 31 DECEMBER 2007


Attributable to equity holders of the CompanyIssued and Fully

Paid of RM1 eachSpecial Share*/Ordinary Shares

CurrencyShare Share Translation ESOS Retained Minority Total

All amounts are in millions Note Capital Premium Differences Reserve Profits Interests Equityunless otherwise stated RM RM RM RM RM RM RM

At 1 January 2007 3,397.6 3,941.9 (282.4) 25.0 12,829.0 836.5 20,747.6Currency translation differences

arising during the year– subsidiaries — — (243.6) — — (85.8) (329.4)– jointly controlled entities — — 81.6 — — — 81.6– associates — — 14.2 — — — 14.2

Net loss not recognised in theIncome Statement — — (147.8) — — (85.8) (233.6)

Profit for the year — — — — 2,547.7 83.9 2,631.6

Total recognised (expense)/income for the year — — (147.8) — 2,547.7 (1.9) 2,398.0

Acquisition of additional equityinterest in subsidiaries — — — — — (44.7) (44.7)

Dilution, disposal and partialdisposal of equity interest insubsidiaries — — 17.6 — — 23.3 40.9

Increase in net assets due torights issue of a subsidiary — — — — — 67.7 67.7

Reclassification to intangibleassets 19(b) — — — — 180.8 — 180.8

Final dividends paid forthe year ended31 December 2006 10 — — — — (749.5) — (749.5)

Interim dividends paid forthe year ended31 December 2007 10 — — — — (652.9) — (652.9)

Special dividends payable forthe year ended31 December 2007 10 — — — — (1,654.5) — (1,654.5)

Dividends paid to minorityinterests — — — — — (36.0) (36.0)

Employees' share optionscheme (ESOS)– shares issued 42.2 304.2 — — — — 346.4– options granted — — — 3.2 — 4.5 7.7– options exercised — 16.0 — (16.0) — — —– ESOS expired — — — (12.2) 12.2 — —

At 31 December 2007 3,439.8 4,262.1 (412.6) — 12,512.8 849.4 20,651.5

Attributable to equity holders of the Company

Issued and FullyPaid of RM1 each

Special Share*/Ordinary Shares

CurrencyShare Share Translation ESOS Retained Minority Total

All amounts are in millions Note Capital Premium Differences Reserve Profits Interests Equityunless otherwise stated RM RM RM RM RM RM RM

At 1 January 2006 3,391.5 3,904.2 (251.2) — 11,942.9 654.0 19,641.4

Currency translation differencesarising during the year– subsidiaries — — (134.4) — — (2.5) (136.9)– jointly controlled entities — — 18.5 — — — 18.5– associates — — 84.3 — — — 84.3

Net loss not recognised inthe Income Statement — — (31.6) — — (2.5) (34.1)

Profit for the year — — — — 2,068.8 233.5 2,302.3

Total recognised (expense)/income for the year — — (31.6) — 2,068.8 231.0 2,268.2

Acquisition of equity interestin subsidiaries — — — — — 28.1 28.1

Dilution of equity interest insubsidiaries — — 0.4 — — 23.6 24.0

Transaction with minorityinterests — — — — (180.8) (77.4) (258.2)

Final dividends paid forthe year ended31 December 2005 10 — — — — (610.9) — (610.9)

Interim dividends paid forthe year ended31 December 2006 10 — — — — (391.0) — (391.0)

Dividends paid to minorityinterests — — — — — (33.6) (33.6)

Employees' share optionscheme (ESOS)– shares issued 6.1 37.7 — — — — 43.8– options granted — — — 25.0 — 10.8 35.8

At 31 December 2006 3,397.6 3,941.9 (282.4) 25.0 12,829.0 836.5 20,747.6

* Issued and fully paid shares include the Special Rights Redeemable Preference Share (Special Share) of RM1.00. Refer tonote 11 to the financial statements for details of the terms and rights attached to Special Share.

The above Consolidated Statement of Changes in Equity is to be read in conjunction with the Significant Accounting Policies on pages261 to 278 and the Notes to the Financial Statements on pages 286 to 408.



Consolidated Statement of Changes in Equityfor the year ended 31 December 2007


CompanyStatement ofChanges in Equity FOR THE YEAR ENDED 31 DECEMBER 2007


Issued and FullyPaid of RM1 each Non-Distributable Distributable

Special Share*/Ordinary Shares

Share Share ESOS Retained TotalAll amounts are in millions Note Capital Premium Reserve Profits Equityunless otherwise stated RM RM RM RM RM

At 1 January 2007 3,397.6 3,941.9 25.0 8,218.4 15,582.9Profit for the year — — — 998.9 998.9Final dividends paid for the year ended

31 December 2006 10 — — — (749.5) (749.5)Interim dividends paid for the year ended

31 December 2007 10 — — — (652.9) (652.9)Special dividends payable for the year ended

31 December 2007 10 — — — (1,654.5) (1,654.5)Employees' share option scheme (ESOS)– shares issued 42.2 304.2 — — 346.4– options granted to employees of the

Company — — 2.5 — 2.5– options granted to employees of the

subsidiaries 24 — — 0.7 — 0.7– options exercised — 16.0 (16.0) — —– ESOS expired — — (12.2) 12.2 —

At 31 December 2007 3,439.8 4,262.1 — 6,172.6 13,874.5

At 1 January 2006 3,391.5 3,904.2 — 8,685.6 15,981.3Profit for the year — — — 534.7 534.7Final dividends paid for the year ended

31 December 2005 10 — — — (610.9) (610.9)Interim dividends paid for the year ended

31 December 2006 10 — — — (391.0) (391.0)Employees' share option scheme (ESOS)– shares issued 6.1 37.7 — — 43.8– options granted to employees of the

Company — — 8.0 — 8.0– options granted to employees of the

subsidiaries 24 — — 17.0 — 17.0

At 31 December 2006 3,397.6 3,941.9 25.0 8,218.4 15,582.9

* Issued and fully paid shares include the Special Rights Redeemable Preference Share (Special Share) of RM1.00. Refer tonote 11 to the financial statements for details of the terms and rights attached to Special Share.

The above Company Statement of Changes in Equity is to be read in conjunction with the Significant Accounting Policies on pages261 to 278 and the Notes to the Financial Statements on pages 286 to 408.




Cash FlowStatements




CASH FLOWS FROM OPERATING ACTIVITIES 36 5,947.0 5,233.8 2,303.7 2,592.7

CASH FLOWS USED IN INVESTING ACTIVITIES 37 (5,878.7) (6,397.2) (939.0) (1,531.9)

CASH FLOWS USED IN FINANCING ACTIVITIES 38 (586.3) (501.8) (1,852.0) (1,205.0)

NET DECREASE IN CASH AND CASHEQUIVALENTS (518.0) (1,665.2) (487.3) (144.2)

EFFECT OF EXCHANGE RATE CHANGES (55.5) (69.4) (19.9) (31.0)

CASH AND CASH EQUIVALENTS ATBEGINNING OF THE YEAR 4,666.4 6,401.0 2,035.3 2,210.5

CASH AND CASH EQUIVALENTS AT ENDOF THE YEAR 33 4,092.9 4,666.4 1,528.1 2,035.3

The above Cash Flow Statements are to be read in conjunction with the Significant Accounting Policies on pages 261 to 278 and theNotes to the Financial Statements on pages 286 to 408.



Notes to theFinancialStatements FOR THE YEAR ENDED 31 DECEMBER 2007


All amounts are in millions unless otherwise stated

1. PRINCIPAL ACTIVITIESThe principal activities of the Company during the year are the establishment, maintenance and provision oftelecommunication and related services under the licence issued by the Ministry of Energy, Water and Communications.The principal activities of the subsidiaries are set out in note 50 to the financial statements.

There was no significant change in the nature of these activities during the year except that the Group disposed itsnational payphone network and related services following the sale of its wholly owned subsidiary, TM Payphone Sdn Bhd(now known as Pernec Paypoint Sdn Bhd). In addition, a subsidiary, TM Net Sdn Bhd transferred the Internet andbroadband business to the Company with effect from 1 January 2007 to focus on content and application developmentfor Internet services.

2. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTSEstimates and judgements are continually evaluated by the Directors and are based on historical experience and otherfactors, including expectations of future events that are believed to be reasonable under the circumstances.

2.1 Critical judgements in applying the entity’s accounting policiesIn determining and applying accounting policies, judgement is often required in respect of items where the choiceof specific policy could materially affect the reported results and financial position of the Group. The followingaccounting policies require subjective judgements, often as a result of the need to make estimates about the effectof matters that are inherently uncertain.

(i) Intangible AssetsThe Group has applied judgement in determining the treatment of the annual fees payable over 10 years inrespect of a 3G spectrum licence granted to a foreign subsidiary. The annual fee is charged to the IncomeStatement when incurred based on management’s judgement that future annual fees will no longer be payableupon the decision by the subsidiary to return the licence. The Directors consider the annual payment to beusage fees based on interpretation of the licence conditions, written confirmation from the Directorate Generalof Post and Telecommunication, Indonesia and current year assessment of 3G operations. The annual fees aretherefore not considered part of the acquisition cost of the licence.

Should the regulations and conditions with regards to the payment of the annual fees be amended in the futurewith the consequence that payment of the remaining outstanding annual fees cannot be avoided upon thesubsidiary surrendering the licence, the Group will recognise an intangible asset and a corresponding liabilityat the present value of the remaining annual fees at that point in time.

2. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (continued)2.1 Critical judgements in applying the entity’s accounting policies (continued)

(ii) Sale and LeasebackThe Company has applied judgement in determining the treatment of the sale and subsequent leaseback of 4 of the Company's property assets (Properties) with carrying value of RM988.4 million at 31 December 2007to Menara ABS Berhad (MAB), a special purpose vehicle which was completed on 15 January 2008. Subsequentto the sale, the Properties will be leased back to the Company on a portfolio basis, under the Ijarah principle,for a lease term of up to 15 years. MAB will issue RM1,000.0 million Islamic Asset Backed Sukuk Ijarah (Sukuk)to finance the purchase of the Properties.

The Directors consider the sale and subsequent leaseback result in an operating lease. This conclusion isderived based on the Directors’ conclusion that the Company does not retain substantially all the risks andrewards incidental to the ownership of the Properties and that the lease payments and the sale price are at fairvalues. Furthermore, the Directors are of the view that MAB is not a subsidiary of the Company as the Companydoes not control MAB and the risks and rewards of owning the Properties lie with the Sukuk investors.

The carrying value of the Properties involved was reclassified as non-current assets held for sale at the balancesheet date as disclosed in note 29 to the financial statements, as the criteria for reclassification was met.

2.2 Critical accounting estimates and assumptionsThe Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition,rarely equal the related actual results. To enhance the information content of the estimates, certain key variables thatare anticipated to have material impact to the Group’s results and financial position are tested for sensitivity to changesin the underlying parameters. The estimates and assumptions that have a significant risk of causing a materialadjustment to the carrying amounts of assets and liabilities within the next year are mentioned below.

(i) Impairment of GoodwillThe Group tests goodwill for impairment annually in accordance with its accounting policy or whenever eventsor change in circumstances indicate that this is necessary. The assumptions used, results and conclusion ofthe impairment assessment are stated in note 19 to the financial statements.

(ii) Impairment of Property, Plant and Equipment, Intangible Assets (other than goodwill) and InvestmentsThe Group assesses impairment of the assets mentioned above whenever the events or changes incircumstances indicate that the carrying amount of an asset may not be recoverable i.e. the carrying amountof the asset is more than the recoverable amount. Recoverable amount is measured at the higher of the fairvalue less cost to sell for that asset and its value-in-use. The value-in-use is the net present value of theprojected future cash flow derived from that asset discounted at an appropriate discount rate.

Projected future cash flows are based on Group’s estimates calculated based on historical, sector and industrytrends, general market and economic conditions, changes in technology and other available information.


Notes to the Financial Statementsfor the year ended 31 December 2007




2. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (continued)2.2 Critical accounting estimates and assumptions (continued)

(iii) Estimated Useful Lives of Property, Plant and EquipmentThe Group reviews annually the estimated useful lives of property, plant and equipment based on factors suchas business plan and strategies, expected level of usage and future technological developments. Future resultsof operations could be materially affected by changes in these estimates brought about by changes in thefactors mentioned. A reduction in the estimated useful lives of property, plant and equipment would increasethe recorded depreciation and decrease the property, plant and equipment.

(iv) Taxation(a) Income taxes

The Group is subject to income tax in numerous jurisdictions. Judgement is involved in determining thegroup-wide provision for income taxes. There are certain transactions and computations for which theultimate tax determination is uncertain during the ordinary course of business. The Group recognisesliabilities for tax matters based on estimates of whether additional taxes will be due. If the final outcomeof these tax matters result in a difference in the amounts initially recognised, such differences will impactthe income tax and/or deferred tax provisions in the period in which such determination is made.

(b) Deferred tax assetsDeferred tax asset is recognised to the extent that it is probable that future taxable profit will be availableagainst which temporary differences can be utilised. This involves judgement regarding future financialperformance of a particular entity in which the deferred tax asset has been recognised.

(v) Share-based PaymentsEquity settled share-based payments (share options) are measured at fair values at the grant dates. In addition,the Group revises the estimated number of performance linked share options that participants are expected toreceive based on non-market conditions at each balance sheet date. The assumptions used in the valuation todetermine these fair values are explained in note 12 to the financial statements.

(vi) Contingent LiabilitiesDetermination of the treatment of contingent liabilities is based on management’s view of the expectedoutcome of the contingencies after consulting legal counsel for litigation cases and experts internal andexternal to the Group for matters in the ordinary course of business. Please refer to note 42(b) to (m) to thefinancial statements for legal proceedings that the Group is involved in as at 31 December 2007.

3. SIGNIFICANT ACQUISITIONS AND DISPOSALS(I) Acquisitions

(a) Acquisition of additional interest in PT Excelcomindo Pratama Tbk (XL)On 19 April 2007, the Group through TM International (L) Limited (TMIL), a wholly owned subsidiary, enteredinto an agreement with AIF (Indonesia) Limited (AIF) to purchase 523,532,100 ordinary shares of IndonesianRupiah 100 each in XL, representing approximately 7.38% of the issued and paid-up share capital of XL fromAIF (the AIF Purchased Shares) for a cash consideration of USD113.0 million. The acquisition of the AIFPurchased Shares was completed on 4 June 2007. Consequently, the Group’s effective equity interest in XLincreased to 67.02%.

RM

Purchase consideration 384.1Carrying value of net assets acquired (97.8)

Goodwill 286.3

The goodwill on acquisition arising from the above transaction was included in intangible assets.

The Group's equity interest in XL reduced to 66.99% as at 31 December 2007 following the disposal of 2,050,000shares of XL through the open market in December 2007.

(b) During the year, the Group also acquired the following companies for a total consideration of RM15.0 million:

(i) Additional 11.0% equity interest in a subsidiary, Multinet Pakistan (Private) Limited (Multinet) for USD2.42million (RM8.8 million). Consequently, the Group's equity interest in Multinet increased from 78.0% to89.0% as at 31 December 2007.

(ii) Additional 30.0% equity interest in a subsidiary, Meganet Communications Sdn Bhd (Meganet) for RM2.5million, making Meganet a wholly owned subsidiary.

(iii) Additional 10.0% equity interest in a subsidiary, Dialog Television (Private) Limited (formerly known asAsset Media (Private) Limited) (DTV) for a consideration of USD0.35 million (RM1.2 million), making DTV awholly owned subsidiary.

(iv) 49.0% equity interest in C-Mobile Sdn Bhd for RM2.5 million representing 2,450,000 ordinary shares ofRM1.00 each.

The above acquisitions have no material effect to the results of the Group in the current year.






3. SIGNIFICANT ACQUISITIONS AND DISPOSALS (continued)(I) Acquisitions (continued)

(c) Acquisition of 49.0% equity interest in Spice Communications Limited (Spice) through the acquisition of TMIIndia Ltd (TMI India)

On 10 May 2006, the Group through TMI Mauritius Ltd completed the acquisition of 100.0% equity interest inTMI India. TMI India is an investment holding company having a 49.0% equity interest in Spice.

The provisional goodwill on acquisition arising from the above transaction was INR8,654.7 million (RM691.1million) as at 31 December 2006, being the excess of the purchase price over the Group’s share of theprovisional fair value of Spice’s identifiable assets and liabilities as at 10 May 2006. Following the completionof the fair value determination during the year, the goodwill on acquisition increased by INR1,461.4 million(RM116.7 million) to INR10,116.1 million (RM807.8 million).

The above goodwill has been included in the cost of investment in jointly controlled entities.

(II) Disposals

(a) Disposal of Telekom Networks Malawi Limited (TNM)On 5 April 2007, the Company disposed its entire 60.0% shareholding in TNM to MTL Mobile Ltd for a total cashconsideration of USD16.0 million. The disposal resulted in a net gain on disposal to the Group of RM6.9 million.

(b) Disposal of Dialog Telekom PLC (formerly known as Dialog Telekom Limited) (Dialog)During the year, the Group through TMIL, disposed its 4.62% equity interest in Dialog through varioustransactions as summarised below:

(i) Disposal of 277,000,000 ordinary shares equivalent to 3.82% equity interest in Dialog through marketplacement on 17 and 21 May 2007 for a total cash consideration of RM227.3 million.

(ii) Disposal of 64,086,800 ordinary shares equivalent to 0.8% equity interest in Dialog to International FinanceCorporation (IFC), a member of the World Bank Group, on 24 September 2007 for a total cashconsideration of RM51.1 million.

The above disposals resulted in a net gain on disposal to the Group of RM234.8 million.

The above disposals reduced the Group's equity interest in Dialog to 85.6%. The Group's equity interest in Dialogwas further reduced to 84.8% following issuance of shares under Dialog's Employees' Share Option Scheme.

(c) Dilution of equity interest in Spice Communications Limited (Spice)On 5 June 2007, Spice, a 49.0% owned jointly controlled entity, held through TMI India Limited, concluded aPre-Initial Public Offering (Pre-IPO) placement of 24,873,889 shares at INR45 per shares. On completion of thePre-IPO placement, the Group’s equity interest in Spice reduced from 49.0% to 46.89%.

Pursuant to the IPO, 113,111,111 equity shares were issued at INR46 per share and Spice commenced tradingon the Bombay Stock Exchange (BSE) on 19 July 2007 with a debut price of INR55.75 per share. Consequently,the Group’s shareholding was further diluted from 46.89% to 39.2%.

3. SIGNIFICANT ACQUISITIONS AND DISPOSALS (continued)(II) Disposals (continued)

(c) Dilution of equity interest in Spice Communications Limited (Spice) (continued)The dilution of equity interest in Spice from the initial public offering resulted in a net gain of RM71.3 millionto the Group in the current year.

The Group’s shareholding in Spice remained unchanged at 39.2% as at 31 December 2007.

(d) Disposal of TM Payphone Sdn Bhd (TMP)On 14 August 2007, the Company entered into a Sale and Purchase Agreement to dispose its entire equityinterest in TMP to Pernec Corporation Berhad for a total consideration of RM22.0 million. The disposal wascompleted on 31 December 2007. This disposal has no significant effect to the results of the Group in thecurrent year.

Subsequent to the disposal, the name of TMP was changed to Pernec Paypoint Sdn Bhd.

4. OPERATING REVENUEThe Group The Company

2007 2006 2007 2006RM RM RM RM

Calls/usage 2,849.3 2,966.8 2,851.0 2,933.6Rentals 1,322.1 1,415.6 1,337.0 1,435.6Interconnect and international inpayment 553.5 615.4 586.4 576.8Others 102.3 128.7 103.2 129.3

Total voice 4,827.2 5,126.5 4,877.6 5,075.3Data services 1,091.8 870.4 1,186.7 1,374.8Internet and multimedia 1,067.4 869.9 1,080.3 —Other telecommunication related services 701.3 606.2 274.3 303.4Non-telecommunication related services 253.9 351.2 — —

Total Malaysia Business and TM Venturessegments 7,941.6 7,824.2 7,418.9 6,753.5

Calls/usage 6,126.3 5,402.4 — —Rentals 137.2 171.8 — —Interconnect and international inpayment 934.3 957.5 — —Messaging and roaming 2,193.4 1,801.7 — —Other services 510.1 241.6 — —

Total cellular segment 9,901.3 8,575.0 — —

TOTAL OPERATING REVENUE 17,842.9 16,399.2 7,418.9 6,753.5






5(a) DEPRECIATION, IMPAIRMENT AND AMORTISATIONThe Group The Company

2007 2006 2007 2006RM RM RM RM

Depreciation of property, plant and equipment(PPE) 4,004.8 3,979.8 2,030.9 2,186.4

Depreciation of investment property — — 11.6 11.6Impairment of PPE 85.9 4.1 9.9 —Reversal of impairment of PPE (5.5) (7.4) — (3.9)Write off of PPE 33.3 2.0 31.3 1.7Amortisation of intangible assets 25.0 23.0 3.9 3.8

TOTAL DEPRECIATION, IMPAIRMENT ANDAMORTISATION 4,143.5 4,001.5 2,087.6 2,199.6

5(b) OTHER OPERATING COSTSThe Group The Company

2007 2006 2007 2006RM RM RM RM

Allowance for amount owing by subsidiaries — — — 134.7Allowance for diminution in value of a subsidiary — — 13.2 0.2Allowance for/(reversal of) diminution in value

of long term investments 80.0 (10.3) 80.0 (10.3)Allowance for doubtful debts (net of bad debt

recoveries) 377.1 303.9 222.0 111.2Business licence – current year 282.7 135.7 8.8 8.5

– prior year 5.6 (26.1) 5.6 (26.1)Charges and agencies commissions 156.4 132.0 168.2 165.1Domestic interconnect and international

outpayment 2,039.3 1,962.1 1,174.5 1,183.7Impairment of goodwill 23.8 — — —Maintenance 840.3 731.8 480.6 310.1Marketing, advertising and promotion 1,357.9 1,133.7 287.0 142.6Net loss/(gain) on foreign exchange – realised 28.2 72.3 (7.4) (0.3)Net gain on foreign exchange – unrealised (66.8) (433.3) (190.2) (260.4)Outsourcing costs 28.2 25.6 115.9 —Rental – equipment 67.9 42.9 46.3 29.5Rental – land and buildings 314.2 243.0 96.0 92.7Prepaid rental – leasehold land 42.7 34.7 0.9 0.2Rental – others 37.4 44.1 0.8 6.1Research and development — — 80.0 76.9Reversal of diminution in value of quoted

investments (49.1) (28.7) (49.1) (28.1)

5(b) OTHER OPERATING COSTS (continued)The Group The Company

2007 2006 2007 2006RM RM RM RM

Reversal of impairment of land held forproperty development — (3.6) — —

(Reversal of)/allowance for diminution in valueof an associate — — (1.5) 1.5

Staff costs 2,107.1 1,991.4 1,116.0 1,126.1Staff costs capitalised into property, plant and

equipment (79.7) (74.9) (68.1) (60.6)Supplies and inventories 667.3 619.1 283.2 273.5Transportation and travelling 132.7 128.7 40.6 42.3Universal Service Provision contribution 347.4 398.4 94.7 113.7Utilities 369.8 295.3 192.2 172.9Waiver of amount due from a subsidiary

(trading and non-trading) — — 61.3 —Others 1,566.2 1,367.8 404.9 348.4

TOTAL OTHER OPERATING COSTS 10,676.6 9,085.6 4,656.4 3,954.1

Staff costs include:– salaries, allowances, overtime and bonus 1,673.8 1,555.0 884.0 875.2– termination benefit 49.5 38.8 31.1 37.2– contribution to Employees Provident Fund (EPF) 220.0 209.8 139.7 145.1– other staff benefits 153.1 149.4 56.4 58.7– ESOS expense 7.2 35.5 2.0 7.7– remuneration of an Executive Director of the

Company– salaries, allowances and bonus 1.4 0.9 1.4 0.9– contribution to EPF 0.3 0.2 0.3 0.2– ESOS expense 0.5 0.3 0.5 0.3

– remuneration of Non-Executive Directors of theCompany

– fees 0.7 0.8 0.3 0.4– salaries, allowances and bonus 0.6 0.7 0.3 0.4

Others include:– statutory audit fees

– PricewaterhouseCoopers Malaysia 2.4 2.2 1.0 0.9– Member firms of PricewaterhouseCoopers

International Limited 1.3 1.1 — —– others 0.2 0.3 — —

– audit related fees 4.0 2.7 3.3 1.0– tax and other non-audit services 3.4 2.3 1.1 1.0

(a) Estimated money value of benefits of Directors amounted to RM220,733 (2006: RM125,141) for the Group and RM87,766(2006: RM40,729) for the Company.






6. OTHER OPERATING INCOMEThe Group The Company

2007 2006 2007 2006RM RM RM RM

Dividend income from subsidiaries — — 250.8 142.4Dividend income from a jointly controlled entity — — 71.2 —Dividend income from quoted shares 3.8 4.5 3.8 3.3Dividend income from unquoted shares 30.2 2.7 30.2 2.7Gain on dilution and disposal of subsidiaries 248.0 13.8 60.2 —Income from subsidiaries – interest — — 6.6 8.0

– others — — 17.9 16.7Penalty on breach of contract 18.4 10.7 1.6 6.4Profit on disposal of property, plant and equipment 6.1 12.4 20.2 11.7Profit on disposal of non-current asset held

for sale 46.0 — 46.0 —Profit/(loss) on disposal of an associate 0.2 — (1.3) —Profit/(loss) on disposal of fixed income securities 0.4 (0.2) 0.4 (0.2)Profit/(loss) on disposal of long term investments 1.6 68.5 0.6 (8.9)Profit/(loss) on disposal of short term investments 17.3 (1.7) 17.3 (1.7)Rental income from buildings 21.9 9.2 44.3 39.7Rental income from vehicles — — 21.7 14.7Revenue from training and related activities 11.6 13.2 12.2 14.1Sale of scrap stores 8.1 7.4 8.0 7.2Others 46.9 38.0 45.0 36.7

TOTAL OTHER OPERATING INCOME 460.5 178.5 656.7 292.8

7. NET FINANCE COST2007 2006

Islamic IslamicForeign Domestic Principles Total Foreign Domestic Principles Total

RM RM RM RM RM RM RM RM

The Group

Finance income 48.5 116.1 39.3 203.9 80.9 110.5 42.6 234.0

TOTAL FINANCEINCOME 48.5 116.1 39.3 203.9 80.9 110.5 42.6 234.0

7. NET FINANCE COST (continued)2007 2006

Islamic IslamicForeign Domestic Principles Total Foreign Domestic Principles Total


The Group

Finance cost from– Borrowings (680.4) (93.2) (46.3) (819.9) (500.4) (90.6) (79.0) (670.0)– Rated Cumulative

RedeemablePreferenceShares (note 14(f)) (4.0) — — (4.0) — — — —

– TM Islamic StapledIncome Securities(note 14(g)) — — (64.9) (64.9) — — — —

Amortisation of fairvalue adjustmenton borrowings 19.2 8.7 — 27.9 19.2 18.6 — 37.8

Accretion of financeincome 41.2 0.5 — 41.7 10.8 1.0 — 11.8

Amortisation ofdiscounts — (1.7) — (1.7) — (1.5) — (1.5)

TOTAL FINANCECOST (624.0) (85.7) (111.2) (820.9) (470.4) (72.5) (79.0) (621.9)

NET FINANCE COST (575.5) 30.4 (71.9) (617.0) (389.5) 38.0 (36.4) (387.9)

The Company

Finance income 15.2 63.4 16.7 95.3 30.5 52.7 17.3 100.5

TOTAL FINANCEINCOME 15.2 63.4 16.7 95.3 30.5 52.7 17.3 100.5

Finance cost from– Borrowings (257.2) — (19.8) (277.0) (285.3) — (22.4) (307.7)– Redeemable

PreferenceShares — (106.7) — (106.7) — (78.6) — (78.6)

– TM Islamic StapledIncome Securities(note 14(g)) — — (64.9) (64.9) — — — —

Accretion of financeincome 41.2 0.5 — 41.7 10.8 1.0 — 11.8

Amortisation ofdiscounts — (1.7) — (1.7) — (1.5) — (1.5)

TOTAL FINANCECOST (216.0) (107.9) (84.7) (408.6) (274.5) (79.1) (22.4) (376.0)

NET FINANCE COST (200.8) (44.5) (68.0) (313.3) (244.0) (26.4) (5.1) (275.5)






8. TAXATIONThe Group The Company

2007 2006 2007 2006RM RM RM RM

The taxation charge for the Group and theCompany comprise:

MalaysiaIncome Tax

Current year 560.6 413.7 208.1 255.3Prior year (187.8) 269.8 (166.4) 87.9

Deferred Tax (net)Current year 21.0 (95.7) 3.9 (141.5)Prior year (33.4) (54.3) (26.2) (119.3)

360.4 533.5 19.4 82.4

OverseasIncome Tax

Current year 19.9 31.1 — —Prior year (3.6) (0.4) — —

Deferred Tax (net)Current year 134.3 266.7 — —

150.6 297.4 — —

TOTAL TAXATION 511.0 830.9 19.4 82.4

Current taxation:Current year 580.5 444.8 208.1 255.3Under/(over) accrual in prior years (net) (191.4) 269.4 (166.4) 87.9

Deferred taxation:Origination and reversal of temporary differences 238.9 393.0 64.6 (89.6)Benefit from previously unrecognised deductible

temporary differences and tax losses (7.7) (157.2) — —Change in tax rate (75.9) (64.8) (60.7) (51.9)Over accrual of deferred tax (33.4) (54.3) (26.2) (119.3)

511.0 830.9 19.4 82.4

8. TAXATION (continued)The explanation of the relationship between taxation expense and profit before taxation is as follows:

Numerical reconciliation between taxation expense and the product of accounting profit multiplied by the Malaysian tax rate:


2007 2006 2007 2006RM RM RM RM

Profit Before Taxation 3,142.6 3,133.2 1,018.3 617.1

Taxation calculated at the applicable Malaysiantaxation rate of 27.0% (2006: 28.0%) 848.5 877.3 274.9 172.8

Tax effects of:– shares of results of jointly controlled entities

and associates (55.3) 1.0 — —– different taxation rates in other countries 40.0 45.4 — —– expenses not deductible for taxation purposes 190.0 192.7 70.1 107.9– income not subject to taxation (190.3) (260.2) (50.5) (86.6)– expenses allowed for double deduction (18.4) (11.4) (18.4) (11.4)– previously unrecognised temporary differences (7.7) (157.2) — —– tax incentives (3.4) (17.0) (3.4) (17.0)– change in tax rate (75.9) (64.8) (60.7) (51.9)– current year tax losses not recognised 8.3 10.0 — —– over accrual of deferred tax (net) (33.4) (54.3) (26.2) (119.3)– (over)/under accrual of income tax (net) (191.4) 269.4 (166.4) 87.9

TOTAL TAXATION 511.0 830.9 19.4 82.4

9. EARNINGS PER SHARE(a) Basic earnings per share

Basic earnings per share of the Group is calculated by dividing the profit attributable to equity holders by theweighted average number of ordinary shares of the Company in issue during the year.

The Group

2007 2006

Profit attributable to equity holders (RM million) 2,547.7 2,068.8Weighted average number of ordinary shares in issue (million) 3,426.2 3,394.0

Basic earnings per share (sen) 74.4 61.0






9. EARNINGS PER SHARE (continued)(b) Diluted earnings per share

For the diluted earnings per share calculation in 2006, the weighted average number of ordinary shares in issue isadjusted to assume conversion of all dilutive potential ordinary shares.

For ESOS 3 offered since 2002 and PLES offered since 2005, a calculation is done to determine the number ofshares that could have been acquired at fair value (determined as the average annual share price of the Company’sshares) based on the monetary value of the subscription rights attached to outstanding share options. Thiscalculation serves to determine the unexercised shares to be added to the ordinary shares in issue for the purposeof computing the dilution. No adjustment is made to profit attributable to equity holders for the share optionscalculation.

The Company’s Employees’ Share Option Scheme (ESOS 3) expired on 31 July 2007 and the remaining optionsunexercised as at 31 July 2007 had lapsed and became null and void. There is no dilutive potential ordinary sharesas at 31 December 2007. Thus, diluted earnings per share is equal to basic earnings per share.

For details of the Company’s Employees’ Share Option Scheme, please refer to note 12(a) to the financial statements.

The Group

2007 2006

Profit attributable to equity holders (RM million) 2,547.7 2,068.8

Weighted average number of ordinary shares in issue (million) 3,426.2 3,394.0Adjustment for ESOS 3 (million) — 7.3

Weighted average number of ordinary shares for computation of dilutedearnings per share (million) 3,426.2 3,401.3

Diluted earnings per share (sen) 74.4 60.8

10. DIVIDENDS IN RESPECT OF ORDINARY SHARESDividends approved and paid/payable in respect of ordinary shares:

The Group and Company

2007 2006

Gross Amount of Amount of Gross Amount ofdividend dividend, net dividend, net dividend dividend, net

per share of 27.0% tax of 26.0% tax per share of 28.0% taxSen RM RM Sen RM

Interim dividends paid in respectof the year ended:– 31 December 2007 26.0 652.9 — — —– 31 December 2006 — — — 16.0 391.0

Final dividends paid in respectof the year ended:– 31 December 2006 30.0 749.5 — — —– 31 December 2005 — — — 25.0 610.9

Special dividend payable inrespect of the year ended:– 31 December 2007 65.0 — 1,654.5 — —

DIVIDENDS RECOGNISED ASDISTRIBUTION TO ORDINARYEQUITY HOLDERS OF THECOMPANY 121.0 1,402.4 1,654.5 41.0 1,001.9

The special gross dividend of 65.0 sen per share less tax at 26.0% was paid on 31 January 2008.

The Board now recommends a final gross dividend of 22.0 sen per share less tax at 26.0% (2006: a final gross dividendof 30.0 sen per share less tax at 27.0%) for shareholders’ approval at the forthcoming Annual General Meeting of theCompany.

The total dividend payout for the current year (excluding special dividend) based on issued share capital as at 31December 2007 is approximately RM1,212.9 million, representing 47.6% of the profit attributable to equity holders. Thisis in line with the dividend payout policy of between 40.0% to 60.0% of profit attributable to equity holders. These financialstatements do not reflect this final dividend which will only be accrued as a liability when approved by shareholders.






11. SHARE CAPITALThe Group and Company

2007 2006

Number of Number of shares RM shares RM

Authorised:Ordinary shares of RM1.00 each 5,000.0 5,000.0 5,000.0 5,000.0Special share of RM1.00 (sub-note a) — — — —Class A Redeemable Preference Shares of

RM0.01 each (sub-note b) — — — —Class B Redeemable Preference Shares of

RM0.01 each (sub-note b) — — — —Class C Non-Convertible Redeemable

Preference Shares of RM1.00 each (sub-note c) — — — —Class D Non-Convertible Redeemable

Preference Shares of RM1.00 each (sub-note c) — — — —

Issued and fully paid:Ordinary shares of RM1.00 each

At 1 January 3,397.6 3,397.6 3,391.5 3,391.5Exercise of share options 42.2 42.2 6.1 6.1

At 31 December 3,439.8 3,439.8 3,397.6 3,397.6

Special share of RM1.00 (sub-note a)At 1 January and 31 December — — — —

TOTAL ISSUED AND FULLY PAID-UPSHARE CAPITAL 3,439.8 3,439.8 3,397.6 3,397.6

(a) The Special Rights Redeemable Preference Share (Special Share) of RM1.00 would enable the Government throughthe Minister of Finance to ensure that certain major decisions affecting the operations of the Company are consistentwith the Government’s policy. The Special Shareholder, which may only be the Government or any representative orperson acting on its behalf, is entitled to receive notices of meetings but does not carry any right to vote at suchmeetings of the Company. However, the Special Shareholder is entitled to attend and speak at such meetings.

Certain matters, in particular, the alteration of the Articles of Association of the Company relating to the rights ofthe Special Shareholder, the dissolution of the Company, any substantial acquisitions and disposal of assets,amalgamation, merger and takeover, require the prior consent of the Special Shareholder.

The Special Shareholder has the right to require the Company to redeem the Special Share at par at any time. Ina distribution of capital in a winding up of the Company, the Special Shareholder is entitled to the repayment of thecapital paid-up on the Special Share in priority to any repayment of capital to any other member. The Special Sharedoes not confer any right to participate in the capital or profits of the Company.

11. SHARE CAPITAL (continued)(b) These comprise 1,000 Class A Redeemable Preference Shares (RPS) (TM RPS A) of RM0.01 each and 1,000 Class

B RPS (TM RPS B) of RM0.01 each, which were issued in 2003 to Rebung Utama Sdn Bhd, a special purpose entityof the Company, at a premium of RM0.99 each over the par value of RM0.01 each.

TM RPS A and TM RPS B rank pari-passu amongst themselves but below the Special Share and ahead of theordinary shares of the Company in a distribution of capital in the event of the winding up or liquidation of theCompany. TM RPS A and TM RPS B have been classified as liabilities.

The details of TM RPS A and TM RPS B are set out in note 15(a) to the financial statements.

On 20 July 2007, the Company redeemed these 1,000 TM RPS A and 1,000 TM RPS B as part of the exchange ofTM Islamic Stapled Income Securities with the existing Tekad Mercu Bonds as explained in note 14(g) to thefinancial statements.

(c) On 8 May 2007, the authorised share capital of the Company was increased to include 2,000 Class C Non-Convertible Redeemable Preference Shares (NCRPS) of RM1.00 each and 1,000 Class D NCRPS of RM1.00 each.

(d) During the year, the issued and fully paid-up share capital of the Company was increased by the issuance of42,152,800 ordinary shares of RM1.00 each for cash under ESOS 3 and PLES, detailed as follows:

Number of ordinary shares of RM1.00 each issued Exercise price per share

18,934,000 RM7.0913,000 RM8.022,170,000 RM9.3215,838,300 RM9.224,864,000 RM8.69333,500 RM10.24

These shares rank pari-passu in all respects with the existing issued ordinary shares of the Company.

(e) On 20 July 2007, the Company issued 2,000 Class C NCRPS (TM NCRPS C) and 925 Class D NCRPS (TM NCRPSD) at a premium of RM999 each over the par value of RM1.00 each. TM NCRPS C and TM NCRPS D rank pari-passu amongst themselves but below the Special Share and ahead of the ordinary shares of the Company in adistribution of capital in the event of the winding up or liquidation of the Company. TM NCRPS C and TM NCRPSD have been classified as liabilities.

The details of TM NCRPS C and TM NCRPS D are set out in note 14(g)(I) to the financial statements.






12. EMPLOYEES’ SHARE OPTION SCHEMETotal expense recognised arising from share-based payments amounted to RM7.7 million and RM2.5 million for theGroup and the Company respectively as disclosed in note 5(b) to the financial statements.

(a) Employees’ Share Option Scheme (ESOS) of the CompanyThe Company’s existing Employees’ Share Option Scheme (ESOS 3) was approved by the shareholders at anExtraordinary General Meeting held on 21 May 2002. ESOS 3 expired on 31 July 2007. Options to subscribe forordinary shares of RM1.00 each under ESOS 3 was granted in various phases, as follows:

Exercise Number ofScheme Grant date price (RM) Eligibility options granted

ESOS 3 1 August 2002 7.09 Executives and Non-Executives of the 259,014,000(phase 1) Company and its subsidiaries

20 May 2004 8.02 Non-Executives of the Company 48,000

ESOS 3 10 March 2005 9.32 Executives of the Company 3,365,000(phase 2) 6 September 2005 9.22 Executives and Non-Executives of the 19,439,000

Company and its subsidiaries

ESOS 3 18 December 2006 8.69 Executives and Non-Executives of the 5,470,000(phase 3) Company and its subsidiaries

On 6 September 2005, the Company also implemented a Performance Linked Employee Options Scheme (PLES) forSenior Management of the Company and its subsidiaries. The scheme is an extension of the existing ESOS 3 andhas expired on 31 July 2007.

The maximum number of PLES options granted and the vesting period is as follows:

Vesting Period/Maximum Options Granted

Performance Condition 6 September 2005 1 May 2006 24 April 2007

Performance for year:– 2004 5,991,200 — —– 2005 — 5,991,200 —– 2006 — — 5,991,200Aggregated performance for 2004-2006 — — 11,982,400

Total 5,991,200 5,991,200 17,973,600

Options granted under PLES are conditional grants and are based on the performance of the Group and individualsfor the respective years. Options under PLES have an exercise price of RM10.24. The number of options a granteemay exercise will be notified to the grantee through a letter of notification after the end of the respective years.Options to which the grantees are not qualified to exercise shall lapse, be null and void.

12. EMPLOYEES’ SHARE OPTION SCHEME (continued)(a) Employees’ Share Option Scheme (ESOS) of the Company (continued)

General features of ESOS 3 and PLES

(i) The eligibility for participation in ESOS is at the discretion of the Option Committee appointed by the Board ofDirectors.

(ii) The total number of shares to be offered shall not exceed 10.0% of the total issued and paid-up shares of theCompany.

(iii) No option shall be granted for less than 100 shares nor more than 1,200,000 shares unless so adjustedpursuant to item (v) below.

(iv) The subscription price of each RM1.00 share shall be the average of the middle market quotation of the sharesas shown in the daily official list issued by the Bursa Malaysia Securities Berhad for the 5 trading days precedingthe date of offer with a 10.0% discount, except for PLES options, which were granted without discount.

(v) In the event of any alteration in capital structure of the Company during the option period which expires on 31 July 2007, such corresponding alterations shall be made in:

(i) the number of new shares in relation to ESOS so far as unexercised;

(ii) and/or the subscription price.

Specific features of ESOS 3

(vi) Subject to item (v) above, an employee may exercise his options subject to the following limits:

(a) In respect of any options granted and remained unexercised prior to 17 May 2005, being the effective dateof the 2005 amendments to the ESOS by-law:

Number of options granted Percentage of options exercisable (%)

Year 1 Year 2 Year 3 Year 4 Year 5

Below 20,000 100 — — — —20,000 – 99,999 *40 30 **30 — —100,000 and above 20 20 20 20 20

* 40.0% or 20,000 options, whichever is higher** 30.0% or the remaining number of options unexercised

(b) In respect of options granted after 17 May 2005 (not inclusive of PLES options), the number of optionswhich a grantee may exercise in a relevant year shall be evenly distributed over the number of unexpiredyears of the scheme, as calculated on the date of acceptance of the option, save as determined otherwiseby the Option Committee.

The options granted do not confer any right to participate in any share issue of any other company.







The movement during the year in the number of options over the ordinary shares of RM1.00 each of the Companyis as follows:

Fair valueExercise At At at grant

Option Scheme Price 1 January Granted Exercised Forfeited Lapsed# 31 December date(ESOS 3) (RM) (’000) (’000) (’000) (’000) (’000) (’000) (RM)

2007Phase 1 7.09 22,803.0 — (18,934.0) — (3,869.0) — — *Phase 1 8.02 13.0 — (13.0) — — — — *Phase 2 9.32 3,092.0 — (2,170.0) — (922.0) — — *Phase 2 9.22 18,838.0 — (15,838.3) (63.0) (2,936.7) — 1.61Phase 3 8.69 5,143.0 — (4,864.0) (28.0) (251.0) — 1.07

Total 49,889.0 — (41,819.3) (91.0) (7,978.7) —

2006Phase 1 7.09 28,798.0 — (5,995.0) — — 22,803.0 — *Phase 1 8.02 14.0 — (1.0) — — 13.0 — *Phase 2 9.32 3,176.0 — (46.0) (38.0) — 3,092.0 — *Phase 2 9.22 19,356.5 — (97.5) (421.0) — 18,838.0 1.61Phase 3 8.69 — 5,470.0 — (327.0) — 5,143.0 1.07

Total 51,344.5 5,470.0 (6,139.5) (786.0) — 49,889.0

At 1 January At 31 December Fair valueExercise Not yet Not yet at grant

Option Scheme Price Vested vested Exercised Forfeited Lapsed # Vested vested date(PLES) (RM) (’000) (’000) (’000) (’000) (’000) (’000) (’000) (RM)

2007Performance

for:– 2004 10.24 1,602.2 — — — (1,602.2) — — —*– 2006 10.24 — 5,991.2 — — (5,991.2) — — 1.14Aggregate 10.24 — 11,982.4 (333.5) — (11,648.9) — — 1.14

Total 1,602.2 17,973.6** (333.5) — (19,242.3) — —


At 1 January At 31 December Fair valueExercise Not yet Not yet at grant

Option Scheme Price Vested vested Exercised Forfeited Lapsed # Vested vested date(PLES) (RM) (’000) (’000) (’000) (’000) (’000) (’000) (’000) (RM)

2006Performance

for:– 2004 10.24 1,629.0 — — (26.8) — 1,602.2 — —*– 2005 10.24 — 5,991.2 — (5,991.2) — — — 1.14– 2006 10.24 — 5,991.2 — — — — 5,991.2 1.14Aggregate 10.24 — 11,982.4 — — — — 11,982.4 1.14

Total 1,629.0 23,964.8 — (6,018.0) — 1,602.2 17,973.6

* FRS 2 not applicable for these tranches** 6,573,600 options were vested during the year# ESOS 3 has expired on 31 July 2007 and any unexercised option were deemed lapsed

Details relating to options exercised during the year are as follows:

Fair value ofshares at

exercise date Exercise price/Number of options exercised (’000)

Exercise date RM/share RM7.09 RM8.02 RM9.32 RM9.22 RM8.69 RM10.24

2007January 10.10 2,182.0 1.0 7.0 183.0 236.0 —February 10.40 3,167.0 3.0 168.0 1,501.0 1,390.2 —March 9.90 2,618.0 2.0 225.0 4,305.0 1,510.8 —April 10.45 1,566.0 2.0 105.0 1,102.1 362.1 —May 10.40 2,223.0 — 485.0 5,196.1 752.5 5.0June 10.50 2,325.0 — 357.0 1,385.5 262.1 —July 9.65 4,853.0 5.0 823.0 2,165.6 350.3 328.5

18,934.0 13.0 2,170.0 15,838.3 4,864.0 333.5







Fair value ofshares at

exercise date Exercise price/Number of options exercised (’000)

Exercise date RM/share RM7.09 RM8.02 RM9.32 RM9.22

2006January to May 9.50-9.95 2,292.0 — 42.0 41.5June to October 8.90-9.10 1,687.0 1.0 — —November to December 9.30-9.70 2,016.0 — 4.0 56.0

5,995.0 1.0 46.0 97.5

2007 2006RM million RM million

Ordinary share capital – at par 42.2 6.1Share premium 304.2 37.7

Proceeds received on exercise of share options 346.4 43.8

Fair value at exercise date of shares issued 427.7 58.0

The fair value of shares issued on the exercise of options is the mean market price at which the Company's sharewere traded on the Bursa Malaysia Securities Berhad on the day prior to the exercise of the options.

There were no new options granted in 2007. The fair values of options granted at the date of grant in which FRS 2applies, were determined using the Black Scholes Valuation model. The significant inputs into the model are asfollows:

ESOS 3Phase 2 Phase 3 PLES

Exercise price RM9.22 RM8.69 RM10.24Option life (number of days to expiry) 649 225 649Weighted average share price at grant date RM10.10 RM9.65 RM10.10Expected dividend yield 3.00% 3.00% 3.00%Risk free interest rates (Yield of Malaysian Government securities) 3.18% 3.21% 3.18%Expected volatility 23.27% 15.74% 23.27%TM share historical volatility period:From 24.10.2003 18.12.2004 24.10.2003To 14.10.2005 18.12.2006 14.10.2005

The volatility measured at the standard deviation of continuously compounded share return is based on statisticalanalysis of daily share prices over the last 2 years from the grant date.

12. EMPLOYEES’ SHARE OPTION SCHEME (continued)(b) ESOS of VADS Berhad (VADS)

The ESOS was approved by VADS’s shareholders at an Extraordinary General Meeting held on 28 January 2005.

The principal features of ESOS are as follows:

(i) The eligibility for participation in ESOS is at the discretion of the Option Committee appointed by the Board ofDirectors of VADS.

(ii) The total number of shares to be offered shall not exceed 15.0% of the total issued and paid-up shares of VADS.

(iii) No option shall be granted for less than 1,000 shares nor more than 500,000 shares unless so adjustedpursuant to item (vi) below.

(iv) The subscription price of each RM1.00 share shall be the average of the middle market quotation of the sharesas shown in the daily official list issued by the Bursa Malaysia Securities Berhad for the 5 trading dayspreceding the date of offer with a 10.0% discount.

(v) Subject to item (vi) below, an employee may exercise his options subject to the following limits:

Percentage of options exercisable (%)

Year 1 Year 2 Year 3 Year 4 Year 5

Number of options granted 20 20 20 20 20

(vi) In the event of any alteration in capital structure of VADS during the option period which expires on 31 March2010, such corresponding alterations shall be made in:

(a) the number of new shares in relation to ESOS so far as unexercised;

(b) and/or the subscription price.

These options granted do not confer any right to participate in any share issue of any other company.

On 25 October 2007, VADS’s existing ordinary shares of RM1.00 each was subdivided into 2 ordinary shares ofRM0.50 each following a share split exercise. Consequent from the share split, the number of options unexercised,the subscription price and the fair value at grant date are adjusted accordingly.






12. EMPLOYEES’ SHARE OPTION SCHEME (continued)(b) ESOS of VADS Berhad (VADS) (continued)

The movement during the year in the number of options over the ordinary shares of RM0.50 each of VADS, afterthe share split, is as follows:

Fair valueExercise At 25 At 31 at grant

Price October Granted Exercised Forfeited December dateGrant date (RM) (’000) (’000) (’000) (’000) (’000) (RM)

2007After share split14 April 2005 1.32 3,732.0 — (5.0) (51.0) 3,676.0 0.3131 August 2005 1.38 298.0 — — — 298.0 0.4330 November 2005 1.47 122.0 — (3.0) — 119.0 0.3719 January 2006 1.54 324.0 — (14.0) (40.0) 270.0 0.3228 April 2006 1.84 738.0 — (12.0) — 726.0 0.5128 July 2006 1.91 404.0 — (6.0) — 398.0 0.4420 October 2006 2.87 580.0 — (28.0) — 552.0 0.7026 January 2007 2.93 300.0 — (9.0) — 291.0 0.7920 April 2007 3.15 1,116.2 — (97.0) — 1,019.2 0.654 July 2007 3.03 736.0 — (115.0) — 621.0 1.741 November 2007 5.32 — 273.0 — — 273.0 1.93

Total 8,350.2 273.0 (289.0) (91.0) 8,243.2

The movement during the year in the number of options over the ordinary shares of RM1.00 each of VADS, beforethe share split, is as follows:


Price January Granted Exercised Forfeited October dateGrant date (RM) (’000) (’000) (’000) (’000) (’000) (RM)

2007Before share split14 April 2005 2.65 3,175.0 — (1,085.0) (224.0) 1,866.0 0.6231 August 2005 2.76 256.0 — (45.0) (62.0) 149.0 0.8630 November 2005 2.94 138.0 — (37.0) (40.0) 61.0 0.7419 January 2006 3.08 352.0 — (112.0) (78.0) 162.0 0.6328 April 2006 3.69 658.0 — (187.0) (102.0) 369.0 1.0228 July 2006 3.82 380.0 — (126.0) (52.0) 202.0 0.8820 October 2006 5.75 554.0 — (166.0) (98.0) 290.0 1.4126 January 2007 5.86 — 444.0 (162.0) (132.0) 150.0 1.5720 April 2007 6.30 — 654.0 (49.9) (46.0) 558.1 1.304 July 2007 6.07 — 444.0 (76.0) — 368.0 3.48

Total 5,513.0 1,542.0 (2,045.9) (834.0) 4,175.1

12. EMPLOYEES’ SHARE OPTION SCHEME (continued)(b) ESOS of VADS Berhad (VADS) (continued)


Price January Granted Exercised Forfeited December dateGrant date (RM) (’000) (’000) (’000) (’000) (’000) (RM)

200614 April 2005 2.65 4,761.0 — (1,242.0) (344.0) 3,175.0 0.6231 August 2005 2.76 400.0 — (104.0) (40.0) 256.0 0.8630 November 2005 2.94 220.0 — (82.0) — 138.0 0.7419 January 2006 3.08 — 800.0 (248.0) (200.0) 352.0 0.6328 April 2006 3.69 — 848.0 (136.0) (54.0) 658.0 1.0228 July 2006 3.82 — 504.0 (100.0) (24.0) 380.0 0.8820 October 2006 5.75 — 628.0 (18.0) (56.0) 554.0 1.41

Total 5,381.0 2,780.0 (1,930.0) (718.0) 5,513.0

The above unexercised options remain in force until 31 March 2010.

The fair values of options granted in which FRS 2 applies, were determined using the Black Scholes Valuationmodel. The significant inputs into the model are as follows:

Risk freeWeighted interest rates

Option life average (Yield of (number share Expected Malaysian VADS share historical

Exercise of days price at dividend Government Expected volatility periodPrice to expiry) grant date yield securities) volatility From To

RM1.32 1,812 RM2.84 3.50% 3.70% 26.00% 30.08.2002 14.04.2005RM1.38 1,673 RM3.38 3.50% 3.28% 26.00% 30.08.2002 31.08.2005RM1.47 1,581 RM3.28 3.50% 3.68% 26.00% 30.08.2002 30.11.2005RM1.54 1,533 RM3.42 3.50% 3.56% 20.59% 30.08.2002 19.01.2006RM1.84 1,434 RM4.42 3.50% 4.07% 22.20% 30.08.2002 28.04.2006RM1.91 1,343 RM4.26 3.50% 4.22% 23.08% 30.06.2003 28.07.2006RM2.87 1,259 RM6.60 3.50% 3.76% 24.04% 30.06.2003 20.10.2006RM2.93 1,161 RM6.85 3.50% 3.64% 23.88% 30.06.2003 26.01.2007RM3.15 1,077 RM6.80 3.50% 3.39% 23.70% 30.06.2003 20.04.2007RM3.03 1,002 RM6.70 3.50% 3.73% 28.10% 30.06.2003 04.07.2007RM5.32 882 RM6.70 3.50% 3.53% 33.30% 30.06.2003 01.11.2007

The volatility measured at the standard deviation of continuously compounded share return is based on statisticalanalysis of daily share prices over the last 2 to 4 years from the grant date.






12. EMPLOYEES’ SHARE OPTION SCHEME (continued)(c) ESOS of Dialog Telekom PLC (Dialog)

On 11 July 2005, the Board of Directors of Dialog resolved and issued 199,892,741 ordinary shares of Dialog at theInitial Public Offering (IPO) price of Sri Lanka Rupee (SLR)12 to an ESOS Trust, being 2.7% of the issued sharecapital of Dialog.

Of the total ESOS shares that were transferred to the ESOS Trust, 88,841,218 shares (44.4%) were granted at thepoint of the IPO with the exercise price equals to IPO price. The balance 111,051,523 shares (56.6%) together withthe forfeited portion were accounted as treasury shares of Dialog as at 31 December 2007 and shall be granted toemployees as an ongoing performance incentive mechanism in 4 further tranches.

The principal features of ESOS are as follows:

(i) The eligibility for participation in ESOS is at the discretion of the ESOS Committee appointed by the Board ofDirectors of Dialog.

(ii) Except the existing tranche, the exercise price of the ESOS shares will be based on the 5 days weightedaverage market price of Dialog's shares immediately preceding the offer date for options, with the ESOSCommittee having the discretion to set an exercise price up to 10.0% lower than that derived weighted averagemarket price.

(iii) Options are conditional on an employee satisfying the following:– has attained the age of 18 years;– is employed full-time by and on the payroll of a company within Dialog Group; and– has been in the employment of Dialog Group for a period of at least 1 year of continuous service prior to

and up to the offer date, including service during the probation period.

(iv) No options shall be granted for more than 8.0 million shares.

(v) An employee may exercise his options subject to the following limits:

Percentage of options exercisable (%)

Number of options granted Year 1 Year 2 Year 3

Support and Operative 100 — —Supervisory and Middle Management 50 50 —Management and Senior Management 50 30 20

12. EMPLOYEES’ SHARE OPTION SCHEME (continued)(c) ESOS of Dialog Telekom PLC (Dialog) (continued)

The movement during the year in the number of ESOS shares outstanding is as follows:


Price January Granted Exercised Forfeited* December date Grant date (SLR) (’000) (’000) (’000) (’000) (’000) (SLR)

200711 July 2005 12 48,735.0 — (10,853.0) (353.0) 37,529.0 4.4

200611 July 2005 12 87,725.0 — (38,341.0) (649.0) 48,735.0 4.4

* Options forfeited are allocated to the ESOS Trust for future reallocation

The fair values of options granted in which FRS 2 applies, were determined using the Black Scholes Valuationmodel. The significant inputs into the model are as follows:

Exercise price SLR12

Option life (number of days to expiry) 1,826

Weighted average share price at grant date SLR12

Expected dividend yield 2.10%

Risk free interest rates(Yield of treasury bond of Central Bank of Sri Lanka) 10.00%

Expected volatility 28.24%

The above volatility rate was derived after considering the patent and level of historical volatility of entities in thesame industry since Dialog does not have sufficient information on historical volatility as it was only listed on theColombo Stock Exchange in July 2005.

The volatility measured at the standard deviation of continuously compounded share return is based on statisticalanalysis of daily share prices of these entities over the last 2 years from the grant date.






13. OTHER RESERVESThe Group The Company

2007 2006 2007 2006RM RM RM RM

Retained profits 12,512.8 12,829.0 6,172.6 8,218.4ESOS reserve — 25.0 — 25.0Currency translation differences arising from

translation of:– subsidiaries (530.7) (304.7) — —– jointly controlled entities 100.2 18.6 — —– associates 17.9 3.7 — —

TOTAL OTHER RESERVES 12,100.2 12,571.6 6,172.6 8,243.4

Under the full dividend imputation system, subject to agreement with the Inland Revenue Board, the Company hassufficient tax credit under Section 108 of the Income Tax Act, 1967 and tax-exempt income under Section 8 of the IncomeTax (Amendment) Act, 1999 at 31 December 2007 to frank the payment of net dividends out of all (2006: all) its retainedprofits without incurring additional taxation.

The Malaysian Budget 2008 introduced a single tier company income tax system with effect from the year of assessment2008. Under the single tier system, the tax on a company’s profit is a final tax and the dividends distributed to itsshareholders would be exempted from tax. Unutilised Section 108 balances as at 31 December 2007 will be availableuntil such time the tax credit is fully utilised or upon expiry of the 6 years transitional period on 31 December 2013,whichever is earlier.

14. BORROWINGS2007 2006

Weighted WeightedAverage Long Short Average Long ShortRate of Term Term Total Rate of Term Term TotalFinance RM RM RM Finance RM RM RM

The Group

DOMESTICSecuredBorrowings from

financial institutions(sub-note a) — — — — 5.70% — 113.8 113.8

Borrowings under Islamic principles– Banking facilities

(sub-note a) 8.23% — 201.6 201.6 8.10% 210.3 400.0 610.3

8.23% — 201.6 201.6 7.72% 210.3 513.8 724.1

313



14. BORROWINGS (continued)2007 2006


The Group

DOMESTICUnsecuredRedeemable

Bonds(note 15(c)) — — — — 5.88% 3,000.0 — 3,000.0

Borrowings from financial institutions 4.93% 15.0 21.7 36.7 4.74% 10.0 50.2 60.2

Borrowings under Islamic principles– Banking

facilities 6.20% — 243.0 243.0 5.07% 243.0 207.9 450.9– TM Islamic

StapledIncome Securities(sub-note g) 4.34% 2,925.0 — 2,925.0 — — — —

Other borrowings 5.90% 6.9 — 6.9 — — — —

4.49% 2,946.9 264.7 3,211.6 5.76% 3,253.0 258.1 3,511.1

Total Domestic 4.71% 2,946.9 466.3 3,413.2 6.10% 3,463.3 771.9 4,235.2

FOREIGNSecuredBorrowings

from financial institutions(sub-note b) 9.70% 392.6 76.1 468.7 7.90% 498.0 301.4 799.4

Other borrowings(sub-note c) 1.97% 370.0 40.0 410.0 1.96% 200.9 12.0 212.9

Bank overdrafts(sub-note d &

note 33) — — — — 14.00% — 1.7 1.7

6.10% 762.6 116.1 878.7 6.66% 698.9 315.1 1,014.0






The Group

FOREIGNUnsecuredNotes and

Debentures(sub-note e) 6.96% 4,975.1 1,175.0 6,150.1 7.00% 6,013.6 — 6,013.6

Rated CumulativeRedeemable PreferenceShares (sub-note f) 18.43% 136.9 15.2 152.1 — — — —

Borrowings from financial institutions 7.91% 917.6 401.4 1,319.0 6.72% 98.3 712.7 811.0

Other borrowings 1.21% 8.1 1.1 9.2 1.26% 8.7 1.4 10.1Bank overdrafts

(note 33) 19.74% — 2.1 2.1 17.34% — 2.0 2.0

7.50% 6,037.7 1,594.8 7,632.5 6.96% 6,120.6 716.1 6,836.7

Total Foreign 7.35% 6,800.3 1,710.9 8,511.2 6.92% 6,819.5 1,031.2 7,850.7

TOTAL BORROWINGS 6.58% 9,747.2 2,177.2 11,924.4 6.63% 10,282.8 1,803.1 12,085.9

2007 2006

Domestic Foreign Total Domestic Foreign TotalRM RM RM RM RM RM

The Group's long term borrowingsare repayable as follows:After one year and up to

five years 21.9 3,079.7 3,101.6 463.3 3,078.2 3,541.5After five years and up to

ten years 2,000.0 2,729.3 4,729.3 2,000.0 2,680.4 4,680.4After ten years and up to

fifteen years 925.0 0.9 925.9 1,000.0 0.8 1,000.8After fifteen years — 990.4 990.4 — 1,060.1 1,060.1

2,946.9 6,800.3 9,747.2 3,463.3 6,819.5 10,282.8

315





The Company

DOMESTICUnsecuredBorrowings under

Islamic principles– Banking

facilities 6.20% — 243.0 243.0 5.16% 243.0 200.0 443.0– TM Islamic

Stapled Income Securities (sub-note g) 4.34% 2,925.0 — 2,925.0 — — — —

Total Domestic 4.49% 2,925.0 243.0 3,168.0 5.16% 243.0 200.0 443.0

FOREIGNUnsecuredNotes and

Debentures(sub-note e) 6.87% 1,979.9 — 1,979.9 7.80% 2,116.3 — 2,116.3

Borrowings from financial institutions — — — — 5.55% — 534.6 534.6

Other borrowings 1.21% 8.2 1.1 9.3 1.26% 8.7 1.4 10.1

Total Foreign 6.84% 1,988.1 1.1 1,989.2 7.32% 2,125.0 536.0 2,661.0

TOTAL BORROWINGS 5.39% 4,913.1 244.1 5,157.2 7.02% 2,368.0 736.0 3,104.0





Domestic Foreign Total Domestic Foreign TotalRM RM RM RM RM RM

The Company's long termborrowings are repayable asfollows:After one year and up to

five years — 995.1 995.1 243.0 1,062.0 1,305.0After five years and up to

ten years 2,000.0 1.7 2,001.7 — 2.1 2.1After ten years and up to

fifteen years 925.0 0.9 925.9 — 0.8 0.8After fifteen years — 990.4 990.4 — 1,060.1 1,060.1

2,925.0 1,988.1 4,913.1 243.0 2,125.0 2,368.0

The currency exposure profile of borrowings is as follows:


2007 2006 2007 2006RM RM RM RM

Ringgit Malaysia 3,413.2 4,235.2 3,168.0 443.0US Dollar 7,071.7 7,259.3 1,979.9 2,650.9Indonesian Rupiah 666.4 — — —Bangladesh Taka 432.6 322.7 — —Sri Lanka Rupee 202.3 188.8 — —Other currencies 138.2 79.9 9.3 10.1

11,924.4 12,085.9 5,157.2 3,104.0

14. BORROWINGS (continued)(a) Syndicated term loan facilities and Islamic Private Debt securities issued by Celcom (Malaysia) Berhad (Celcom), a

wholly owned subsidiary. The borrowings are secured by deed of assignment over Celcom's key bank collectionaccounts and designated bank accounts which requires Celcom to deposit a proportion of its cash flows intodesignated bank accounts from which funds can be utilised only for interest and principal repayments on theseborrowings. Only the syndicated term loan facilities have been fully paid in the current year.

Under the respective debt covenants, Celcom is required to comply with certain conditions which includes not to bein breach of certain agreed financial ratios summarised as follows:

– debt equity ratio of not more than 1.25;– debt over EBITDA ratio of not more than 2.5;– EBITDA over finance cost ratio of more than 5; and– finance service coverage ratio of more than 1.2.

(b) Secured by way of fixed charge on property, plant and equipment of subsidiaries (note 20 to the financialstatements).

(c) Consists of USD122.9 million (2006: USD60.0 million) supplier credit that bears 0% interest during the first 2 yearsand is repayable from 2007 to 2014. This supplier credit is secured by way of fixed charge on property, plant andequipment of TM International (Bangladesh) Limited (note 20 to the financial statements).

(d) The bank overdrafts for the previous year were secured by way of fixed charge over property, plant and equipmentof Dialog Telekom PLC and interests were payable at rates which varied according to the lenders' prevailing baselending rates. Interest rate during the previous year was 14.0% per annum (note 20 to the financial statements).

(e) Notes and Debentures consist of the following:The Group The Company

2007 2006 2007 2006RM RM RM RM

USD250.0 million 7.125% Notes due 2013(sub-note i) 817.0 868.0 — —

USD350.0 million 8.0% Notes due 2009(sub-note i & note 45(c)(ii)) 1,175.1 1,265.8 — —

USD300.0 million 8.0% Guaranteed Notesdue 2010 991.5 1,058.2 991.5 1,058.2

USD500.0 million 5.25% Guaranteed Notesdue 2014 1,652.5 1,763.5 — —

USD300.0 million 7.875% Debentures due 2025 988.4 1,058.1 988.4 1,058.1IDR1,500 billion 10.35% Notes due 2012

(sub-note ii) 525.6 — — —

6,150.1 6,013.6 1,979.9 2,116.3






14. BORROWINGS (continued)(e) Notes and Debentures consist of the following: (continued)

(i) Issued by Excelcomindo Finance Company BV, a wholly owned subsidiary of PT Excelcomindo Pratama Tbk (XL).XL is required to comply with certain conditions, such as limitations on asset sale and/or leasebacktransactions, and Consolidated Leverage Ratio not exceeding as follows:

Notes Consolidated Leverage Ratio

USD250.0 million 7.125% Notes – 5.0 to 1.0 prior to 27 January 2007– 4.5 to 1.0 thereafter

USD350.0 million 8.0% Notes – 5.0 to 1.0 prior to 27 January 2007– 4.5 to 1.0 from 27 January 2007 and prior to 27 January 2008– 4.0 to 1.0 from 27 January 2008 and thereafter

(ii) Issued by XL. XL is required to comply with certain conditions, such as limitations on asset sale and/orleaseback transactions, and XL should not get another debt which may cause its Debt to EBITDA Ratio toexceed 4.5 to 1.0.

(f) Consists of 5,000 million Rated Cumulative Redeemable Preference Shares (RCRPS) of SLR1 each issued by DialogTelekom PLC (Dialog) during the year, redeemable at par. The shares are mandatorily redeemable on 31 May 2012with redemption schedule as set out below:

Redemption Value per RCRPS2008 10%2009 15%2010 25%2011 25%2012 25%

The dividend is on cumulative basis and payable semi-annually, at the prevailing local base lending rate less adiscount of 0.9%. The RCRPS issued by Dialog have been classified as liabilities and accordingly, dividends on theseRCRPS are recognised in the Income Statement as finance cost.

(g) On 20 July 2007, the Company had, through itself and its wholly owned subsidiary, Hijrah Pertama Berhad (HPB),issued the TM Islamic Stapled Income Securities (TM ISIS) consisting of:

(a) (i) RM2.0 million Class C Non-Convertible Redeemable Preference Shares (NCRPS) (TM NCRPS C) consistingof 2,000 Class C NCRPS of RM1.00 each at a premium of RM999 issued by the Company at an issue priceof RM1,000 each;

(ii) Sukuk Ijarah Class A of nominal value RM1,998.0 million issued by HPB; and

(b) (i) RM925,000 Class D NCRPS (TM NCRPS D) consisting of 925 Class D NCRPS of RM1.00 each at a premiumof RM999 issued by the Company at an issue price of RM1,000 each;

(ii) Sukuk Ijarah Class B of nominal value RM924,075,000 issued by HPB.

Sukuk Ijarah Class A and B are collectively referred to as “Sukuk”.

14. BORROWINGS (continued)(g) The TM NCRPS are effectively linked to the Sukuk in that the TM NCRPS and the Sukuk are issued simultaneously

to the same parties and the periodic distribution obligations under the Sukuk are dependent on the payments madeunder the TM NCRPS. The outstanding amount of Sukuk are treated as borrowing by the Company as the Sukukare effectively obligations of the Company.

The issuance of the TM ISIS was made in exchange for the existing Tekad Mercu bonds (Exchange Offer). Holdersof RM2,925.0 million of the existing Tekad Mercu bonds accepted the Exchange Offer. The Company purchased theremaining RM75.0 million Tekad Mercu bonds which were cancelled subsequently. Refer to note 15(i) and 15(c) fordetails of Tekad Mercu bonds.

The TM ISIS are classified as debt instruments and hence are reported as liabilities. Consequently, dividend payableunder TM NCRPS and rental payable under Sukuk are reported as finance cost.

Salient terms of the above transactions are:

(I) TM NCRPSThe principle features of the TM NCRPS (which comprises Class C and Class D NCRPS respectively) aresummarised as follows:

(i) The NCRPS will not be convertible to ordinary shares of the Company.

(ii) The NCRPS are not transferable/tradable and will held by Primary Subscribers until redeemed by theCompany (anticipated to be concurrent with Sukuk maturity).

(iii) There will be no voting rights except with regards to the proposal to reduce the capital of the Company,sanctioning the disposal of the whole of the Company’s property, business and undertaking or where theproposition to be submitted to the meeting directly affects the rights and privileges of the NCRPS holdersor as provided for in the Companies Act, 1965.

(iv) The NCRPS will not be listed on any of the boards of Bursa Malaysia Securities Berhad.

(v) The NCRPS shall rank pari-passu amongst themselves but below the Special Share and ahead of theCompany’s ordinary shares in a distribution of capital in the event of the winding up or liquidation of theCompany.

(II) Sukuk IjarahThe Sukuk are issued in 4 classes and is for the purposes of financing the purchase by HPB of the beneficialownership of certain assets. The Sukuk comprise the following classes:

(i) Class A Sukuk comprising of Class A1 Sukuk and Class A2 Sukuk (collectively referred to as “Class ASukuk”)

(ii) Class B Sukuk comprising of Class B1 Sukuk and Class B2 Sukuk (collectively referred to as “Class BSukuk”)






14. BORROWINGS (continued)(g) (II) Sukuk Ijarah (continued)

The Class A Sukuk and Class B Sukuk shall represent undivided beneficial ownership in the relevant assetsand shall constitute direct, unconditional and unsecured trust obligations of HPB and shall at all times rankpari-passu, without discrimination, preference or priority amongst themselves.

Features of the Sukuk are summarised as follows:

(a) The Sukuk shall constitute trust obligations of HPB in relation to, and represent undivided beneficialownership in the assets.

(b) Class A2 Sukuk and Class B2 Sukuk are not transferable/tradable and will be held by Primary Subscribersuntil maturity of the Sukuk.

(c) The Sukuk will constitute, inter alia, the obligations of the Company.

(d) The obligations of the Company in respect of the Sukuk will constitute direct, unconditional and unsecuredobligations of the Company and shall at all times rank pari-passu, without discrimination, preference orpriority amongst themselves and at least pari-passu with all other present and future unsecured andunsubordinated obligations of the Company, subject to those preferred by law or the transactiondocuments.

(e) The Sukuk carry a rating of AAA by RAM Rating Services Berhad at the date of issue.

The respective tenure of the Sukuk are as follows:

Class Maturity Dates

A1 30 December 2013A2 30 December 2013B1 28 December 2018B2 28 December 2018

During the tenure of the TM ISIS, the Company can elect to either:

(a) Pay gross dividends, comprising of net dividend with the respective tax credits to investors and NominalRental payable to HPB; or

(b) Pay Full Rental to HPB, which in turn distributes the same as periodic distribution to investors who areholding Class A2 Sukuk and Class B2 Sukuk.

The Periodic Distribution Rate as in the TM ISIS of Class C NCRPS and Class D NCRPS which is linked toClass A Sukuk and Class B Sukuk is 6.20% and 5.25% per annum respectively payable semi-annually inarrears. The Periodic Distribution Rate for Class B Sukuk will be reset in December 2008 and December 2013.

Where the Company elects to pay dividend, HPB will only receive Nominal Rental under the lease agreementwhich it in turn would pay out to investors under Class A2 Sukuk and Class B2 Sukuk as nominal periodicdistribution. The nominal periodic distribution rate is 0.01% per annum.

321



15. PAYABLE TO SUBSIDIARIES(i) On 12 December 2003, the Company issued for cash 1,000 Class A Redeemable Preference Shares (RPS) (TM RPS

A) and 1,000 Class B RPS (TM RPS B) to Rebung Utama Sdn Bhd (RUSB), a special purpose entity of the Company,at a premium of RM0.99 each over the par value of RM0.01 each.

Subsequently, on 30 December 2003, the Company issued RM1,983.5 million nominal value 10-year redeemableunsecured bonds due 2013 (Tranche 1) and RM1,000.0 million nominal value 15-year redeemable unsecured bondsdue 2018 (Tranche 2) (collectively referred to as TM bonds) to RUSB.

As part of an overall cost efficient funding structure, the funds for the subscription of the Company’s RPS and bondswere raised by RUSB vide the issuance of RM2,987.0 million RPS (RUSB RPS) to Tekad Mercu Berhad (TekadMercu), another special purpose entity of the Company.

Tekad Mercu had, in turn, issued RM2,000.0 million nominal value 10-year redeemable unsecured bonds due 2013(Tranche 1) and RM1,000.0 million nominal value 15-year redeemable unsecured bonds due 2018 (Tranche 2)(collectively referred to as Tekad Mercu bonds) to investors on 30 December 2003 to finance the subscription of theRUSB RPS (sub-note c).

All TM RPS A, TM RPS B, TM bonds, RUSB RPS and Tekad Mercu bonds have been fully redeemed, purchased andcancelled during the year pursuant to the completion of the Exchange Offer as explained in note 14(g) to thefinancial statements.

(ii) On 22 September 2004, the Company’s wholly owned subsidiary, TM Global Incorporated (TM Global), a companyincorporated in the Federal Territory of Labuan, under the Offshore Companies Act, 1990, issued a 10-year USD500.0million Guaranteed Notes. The Notes carry an interest rate of 5.25% per annum payable semi-annually in arrearson 22 March and September commencing in March 2005. The Notes will mature on 22 September 2014. Proceedsfrom the transaction were utilised to refinance the Company’s maturing debt and general working capital. The Notesare unconditional and irrevocably guaranteed by the Company.

None of TM Global Notes have been redeemed, purchased or cancelled during the year.

Listed below are the effects and salient terms of the above transactions to the Company:

2007 2006RM RM

The Company

(i) Payable to a subsidiary company, RUSBTM RPS A of RM1,000 (sub-note a) — —TM RPS B of RM1,000 (sub-note a) — —10-year redeemable unsecured bonds due 2013 (Tranche 1) (sub-note b) — 1,983.515-year redeemable unsecured bonds due 2018 (Tranche 2) (sub-note b) — 1,000.0

(ii) Payable to a subsidiary company, TM Global Incorporated 1,652.5 1,763.5

1,652.5 4,747.0




15. PAYABLE TO SUBSIDIARIES (continued)(a) TM RPS A and TM RPS B

TM RPS A and TM RPS B issued by the Company to RUSB have been classified as liabilities and accordingly,dividends on these preference shares are recognised in the Income Statement as finance cost.

The salient terms of the RPS are as follows:

(i) The preference shares, 1,000 RPS A and 1,000 RPS B are both issued at RM0.01 par value and a premium ofRM0.99 each.

(ii) TM RPS A and TM RPS B rank pari-passu amongst themselves but below the Special Share and ahead of theordinary shares of the Company in a distribution of capital in the event of the winding up or liquidation of theCompany.

(iii) The non-cumulative dividends, when declared by the Board of Directors of the Company, are payable in arrearsat the end of every 6 months period commencing from the date of issue of the RPS of 12 December 2003, theamount of which will be at the discretion of the Directors.

(iv) The RPS is not convertible and shall not confer on the holder thereof any right to participate on a return inexcess of capital on liquidation, winding up or otherwise of the Company, other than on redemption, up to theredemption price of RM1.00 for each RPS A and RPS B.

(v) Both RPS A and RPS B do not have fixed maturity dates and may be redeemed in cash at the option of theCompany at any time, at a redemption price of RM1.00 per share.

(b) TM BondsThe principal features of the bonds issued by the Company to RUSB are as follows:

(i) Unless previously redeemed, purchased and cancelled, the bonds are redeemable by the Company on 30December 2013 and 28 December 2018 respectively at nominal amount together with accrued and unpaidinterest. The bonds may also be redeemed by the Company at any time after the issue date by privatearrangement with RUSB.

(ii) Payment of coupon on the bonds may either be:

(a) – interest of 6.25% per annum payable semi-annually in arrears on the Tranche 1 bonds, and– interest of 5.25% per annum payable semi-annually in arrears on the Tranche 2 bonds, with the option

to reset these rates after the fifth year; or

(b) – net dividends on both TM RPS A and TM RPS B, which shall be equal to the interest on Tranche 1and Tranche 2 of the bonds less any amounts in the Designated Accounts, being accounts designatedto capture all collections of dividends and tax refunds by the authorities, and

– a nominal interest of 0.01% per annum payable semi-annually.

(iii) The bonds will constitute direct, unconditional and unsecured obligations of the Company and will at all timesrank pari-passu, without discrimination, preference or priority amongst themselves and at least pari-passu withall other present and future unsecured and unsubordinated obligations of the Company, subject to thosepreferred by law or the transaction documents.

(iv) The bonds are not convertible, not transferable and not tradable.

15. PAYABLE TO SUBSIDIARIES (continued)(c) Tekad Mercu Bonds

The principle features of the bonds issued by Tekad Mercu are as follows:

(i) Unless previously redeemed, purchased and cancelled, the bonds are redeemable by Tekad Mercu on 30December 2013 and 28 December 2018 respectively at nominal amount together with accrued and unpaidinterest.

(ii) In respect of Tranche 2 only,

(a) Tekad Mercu has the right to redeem all of the outstanding Tekad Mercu bonds (Tranche 2) on the tenthand the twentieth coupon payment date (Optional Redemption Date) with advance notice to thebondholders at nominal amount together with accrued and unpaid interest (up to but excluding therelevant Optional Redemption Date) in respect thereof.

(b) If on the day falling 20 business days prior to any Optional Redemption Date, the rating of the Tekad Mercubonds (Tranche 2) shall be below AAA or its equivalent as confirmed by the Calculation Agent, then TekadMercu shall be obliged to redeem all outstanding Tekad Mercu bonds (Tranche 2) on the relevant OptionalRedemption Date. Redemption of the Tekad Mercu bonds (Tranche 2) shall be at their nominal valuetogether with all accrued interest (up to but excluding the relevant Optional Redemption Date) in respectthereof.

(iii) The bonds may also be purchased, in whole or in part, by the Company, at any time at any price in the openmarket or by private treaty.

(iv) Payment of coupon on the bondsInterest rate of 6.20% per annum payable semi-annually in arrears on the Tranche 1 bonds and interest rateof 5.25% per annum payable semi-annually in arrears on the Tranche 2 bonds with the option to reset theserates after the fifth year.

(v) The bonds will constitute direct, unconditional and unsecured obligations of Tekad Mercu and will at all timesrank pari-passu without discrimination, preference or priority amongst themselves and at least pari-passu withall other present and future unsecured and unsubordinated obligations of Tekad Mercu, subject to thosepreferred by law or the transaction documents.

(vi) The bonds are not convertible but transferable, subject to certain selling restrictions.

(vii) The Company has granted a Put Option in favour of the security trustee of the bonds for the benefit of theholders of the bonds. The Put Option will allow the holders of the bonds to have direct recourse on theCompany for the following circumstances:

(a) on a pre-agreed time frame, there is insufficient amounts in the relevant Designated Account to meetcoupon payments and/or principal redemption of the bonds on the relevant due date for payment;

(b) an event of default has been declared under the bonds; and

(c) an event of default has been declared under the Put Option.






16. HEDGING TRANSACTIONS(a) Long Dated Swap

Underlying LiabilityUSD300.0 million 7.875% Debentures due in 2025In 1998, the Company entered into a long dated swap, which will mature on 1 August 2025.

Hedging InstrumentThe Company made a payment of USD5.0 million and is obliged to pay fixed amounts of JPY209.9 million semi-annually on each 1 February and 1 August, up to and including 1 August 2025.

Prior to 1 February 2004, the counterparty was not obliged to agree to any request by the Company to terminatethe transaction. Commencing from 1 February 2004, the Company has the right to terminate the transaction at arate mutually agreed with the counterparty. However, the Company intends to hold the contract to maturity.

On 1 August 2025, the Company will receive RM750.0 million from the counterparty. These proceeds will be swappedfor USD300.0 million at a predetermined exchange rate of RM2.5 to USD1.0, which will be used for the repayment ofthe USD300.0 million 7.875% redeemable unsecured Debentures. The effect of this transaction is to effectively buildup a sinking fund with an assured value of USD300.0 million on 1 August 2025 for the repayment of the Debentures.

(b) Interest Rate Swap (IRS)Underlying LiabilityUSD300.0 million 8.0% Guaranteed Notes due in 2010In year 2000, the Company issued USD300.0 million 8.0% Guaranteed Notes due in 2010. The Notes are redeemablein full on 7 December 2010.

Hedging InstrumentOn 1 April 2004, the Company entered into an IRS agreement with a notional principal of USD150.0 million thatentitles it to receive interest at a fixed rate of 8.0% per annum and obliges it to pay interest at a floating rate of 6 months USD LIBOR-in-arrears plus 5.255%. The swap was due to mature on 7 December 2006.

The Company restructured twice on the existing USD150.0 million IRS into a range accrual swap. Under thisstructure, the Company will receive interest at a rate of 8.0% times N1/N2 (where N1 is the number of the dayswhen the reference floating rate, i.e. the 6 months USD LIBOR in this transaction, stays within a predeterminedrange, while N2 is the total number of days in the calculation period). Under the latest restructure, on 5 December2005, the Company will pay interest at a floating rate of 6 months USD LIBOR plus 2.35% for a new predeterminedrange. The restructured swap will mature on 7 December 2010.

16. HEDGING TRANSACTIONS (continued)(c) Interest Rate Swap (IRS)

Underlying LiabilityUSD300.0 million 7.875% Debentures due in 2025In 1998, the Company issued USD300.0 million 7.875% Debentures due in 2025.

Hedging InstrumentOn 2 April 2004, the Company entered into an IRS agreement with a notional principal of USD150.0 million thatentitles it to receive interest at a fixed rate of 7.875% per annum and obliges it to pay interest at a floating rate of6 months USD LIBOR-in-arrears plus 5.05%. The swap was due to mature on 1 August 2006.

The Company restructured twice on the existing USD150.0 million IRS into a range accrual swap. Under thisstructure, the Company will receive interest at a rate of 7.875% times N1/N2 (where N1 is the number of the dayswhen the reference floating rate, i.e. the 6 months USD LIBOR in this transaction, stays within a predeterminedrange, while N2 is the total number of days in the calculation period). Under the latest restructure, on 5 December2005, the Company will pay interest at a floating rate of 6 months USD LIBOR plus 2.24% for a new predeterminedrange. The restructured swap will mature on 1 August 2010.

On 9 July 2007, the Company entered into another IRS range accrual swap with trigger feature agreement for thebalance notional principal of USD150.0 million that entitles it to receive interest at a fixed rate of 7.875% timesN1/N2 (where N1 is the number of the days when the reference floating rate, i.e. the 6 months USD LIBOR in thistransaction, stays within a predetermined range, while N2 is the total number of days in the calculation period). Inexchange, the Company is obliged to pay interest at a floating rate of 6 months USD LIBOR plus 1.05%. Thistransaction will automatically terminate in whole, but not in part, on an Auto-Put Date, i.e. 1 August 2009, wherethe LIBOR rate fixes at or below the trigger level. The swap is due to mature on 1 August 2010.

(d) Cross-Currency Swap (CCS)Underlying LiabilityUSD100.0 million Term Loan due in 2010On 8 January 2007, PT Excelcomindo Pratama Tbk (XL) entered into a credit agreement with a financial institutionamounting to USD50.0 million. On 18 April 2007, XL signed the credit agreement amendment to increase the creditfacility to USD100.0 million. The loan will be based on a floating rate of interest at quarterly intervals of 3 monthsSIBOR plus 1.05% margin per annum. The loan will mature 36 months from each drawdown date.

Hedging InstrumentOn 18 April 2007, XL entered into a CCS contract with a financial institution. Based on the contract, XL would swap,at the final exchange date (termination date) on 16 April 2010, a total of IDR90.88 million for USD10.0 million. XLwill make quarterly payments in IDR on every 18 January, 18 April, 18 July and 18 October up to termination date,at the amount of USD10.0 million times fixed interest rate of 9.65% per annum with strike rate of IDR9,088 per USD,and will receive payment in USD amounting to USD10.0 million times floating rate of interest at quarterly intervalsof 3 months SIBOR plus 1.05%.






16. HEDGING TRANSACTIONS (continued)(e) Cross-Currency Swap (CCS)

Underlying LiabilityUSD50.0 million Term Loan due in 2010On 15 January 2007, XL entered into a credit agreement with a financial institution amounting to USD50.0 million.The loan will be based on a floating rate of interest at quarterly intervals of 3 months LIBOR plus 0.95% marginper annum. The loan will mature on 29 January 2010.

Hedging InstrumentOn 23 April 2007, XL entered into a CCS contract with a financial institution. Based on the contract, XL would swap,at the final exchange date (termination date) on 29 January 2010, a total of IDR225.0 million for USD25.0 million.XL will make quarterly payments in IDR on every 30 January, 30 April, 30 July and 30 October up to terminationdate, at the amount of USD25.0 million times fixed interest rate of 9.99% per annum with strike rate of IDR9,000per USD, and will receive payment in USD amounting to USD25.0 million times floating rate of interest at quarterlyintervals of 3 months LIBOR plus 0.95%.

On 10 May 2007, XL entered into another CCS contract with a financial institution. Based on the contract, XL wouldswap, at the final exchange date (termination date) on 29 January 2010, a total of IDR112.5 million for USD12.5million. XL will make quarterly payments in IDR on every 28 June, 28 September, 28 December and 28 March upto termination date, at the amount of USD12.5 million times fixed interest rate of 7.73% per annum with strike rateof IDR9,000 per USD, and will receive payment in USD amounting to USD12.5 million times floating rate of interestat quarterly intervals of 3 months LIBOR plus 0.95%.

(f) Cross-Currency Swap (CCS)Underlying LiabilityUSD50.0 million Term Loan due in 2010On 19 April 2007, XL signed a credit facility agreement with a financial institution amounting to USD50.0 million.The loan will be based on a floating rate of interest at quarterly intervals of 3 months LIBOR plus 1.00% marginper annum. The loan will mature 36 months from the first drawdown date.

Hedging InstrumentOn 26 April 2007, XL entered into a CCS contract with a financial institution. Based on the contract, XL would swap,at the final exchange date (termination date) on 26 April 2010, a total of IDR135.0 million for USD15.0 million. XLwill make quarterly payments in IDR on every 26 January, 26 April, 26 July and 26 October up to termination date,at the amount of USD15.0 million times fixed interest rate of 9.825% per annum with strike rate of IDR9,000 perUSD, and will receive payment in USD amounting to USD15.0 million times floating rate of interest at quarterlyintervals of 3 months LIBOR plus 1.00%.

On 9 May 2007, XL entered into another CCS contract with a financial institution. Based on the contract, XL wouldswap, at the final exchange date (termination date) on 26 April 2010, a total of IDR135.0 million for USD15.0 million.XL will make quarterly payments in IDR on every 26 January, 26 April, 26 July and 26 October up to terminationdate, at the amount of USD15.0 million times fixed interest rate of 8.20% per annum with strike rate of IDR9,000per USD, and will receive payment in USD amounting to USD15.0 million times floating rate of interest at quarterlyintervals of 3 months LIBOR plus 1.00%.

16. HEDGING TRANSACTIONS (continued)(g) Forward Foreign Currency Contracts

During the current year, XL entered into forward foreign currency contracts with financial institutions to hedge thepayment of long term loans in USD.

The details of forward foreign currency contracts are as follows:

Notional amountType of contracts (in USD Million) Strike rate (full amount)

Deliverable 175.0 USD1= IDR9,000Non-Deliverable 125.0 USD1= IDR9,000

Total 300.0

The premium on the forward foreign currency contracts will be paid semi-annually based on contracted rates.

On the deliverable contract, XL would swap, at the final exchange date, a total of IDR1,575.0 million for USD175.0million.

On the non-deliverable contract, XL would swap, at the final exchange date:

• If settlement rate at expiry time is less than IDR9,000, XL would pay the banks the USD notional amount timesthe excess of strike rate over settlement rate.

• If settlement rate at expiry time is more than IDR9,000, the banks would pay XL the USD notional amount timesthe excess of settlement rate over strike rate.

• If settlement rate at expiry time is equal to IDR9,000, no exchange payments between the banks and XL will berequired.

(h) Other foreign exchange transactionsXL regularly purchases USD currency to meet monthly obligations by using Spot (2 days settlement) or Tom (1 daysettlement) transactions. In addition to this regular USD purchase, XL entered into foreign currency forwardcontracts with 2 financial institutions for the period of May 2007 until December 2007.

The strike rates of foreign exchange forwards entered into in 2007 are as follows:

• USD1.0 million per month at IDR8,999

• USD1.0 million per month at IDR8,995

The terms and conditions for these contracts are as follows:

• If the spot rate is higher than IDR9,225, the contracts will cease to exist and no USD should be bought at therespective month.

• If the spot rate is between strike rate and IDR9,225, XL will buy USD1.0 million at the strike rate at therespective month.

• If the spot rate is below the strike rate, XL is obliged to buy USD2.0 million at the strike rate at the respectivemonth.






17. DEFERRED TAXDeferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets againstcurrent tax liabilities and when the deferred taxes relate to the same tax authority. The following amounts, determinedafter appropriate offsetting, are disclosed in the balance sheet:


2007 2006 2007 2006RM RM RM RM

Subject to income tax:Deferred tax assets 179.4 115.6 — —Deferred tax liabilities 2,313.2 2,261.9 1,411.8 1,434.0

TOTAL DEFERRED TAX 2,133.8 2,146.3 1,411.8 1,434.0

At 1 January 2,146.3 2,172.2 1,434.0 1,694.8Current year charged/(credited) to Income

Statement arising from:– property, plant and equipment (1.3) 395.0 (17.3) (129.4)– tax losses (11.6) 180.2 — —– provisions and others 134.8 (458.5) (4.9) (131.4)

121.9 116.7 (22.2) (260.8)– acquisition of subsidiaries — (120.6) — —– under accrual of deferred tax assets for

minority interests (97.1) — — —– disposal of a subsidiary (5.6) — — —– currency translation differences (31.7) (22.0) — —

At 31 December 2,133.8 2,146.3 1,411.8 1,434.0

The tax effect of deductible temporary differences, unutilised tax losses and unabsorbed capital/other tax allowances ofsubsidiaries for which no deferred tax asset is recognised in the balance sheet are as follows:

2007 2006The Group RM RM

Deductible temporary differences 11.8 45.1Unutilised tax losses 148.5 180.3Unabsorbed capital/other tax allowances 193.3 200.5

353.6 425.9

The benefits of these tax losses and credits will only be obtained if the relevant subsidiaries derive future assessableincome of a nature and amount sufficient for the benefits to be utilised.

329



17. DEFERRED TAX (continued)Breakdown of cumulative balances by each type of temporary difference:


2007 2006 2007 2006RM RM RM RM

(a) Deferred Tax AssetsProperty, plant and equipment 431.8 96.2 — —Tax losses 29.9 18.3 — —Provisions and others 608.2 731.1 370.2 365.3

1,069.9 845.6 370.2 365.3Offsetting (890.5) (730.0) (370.2) (365.3)

Total Deferred Tax Assets After Offsetting 179.4 115.6 — —

(b) Deferred Tax LiabilitiesProperty, plant and equipment 3,193.0 2,984.4 1,782.0 1,799.3Provisions and others 10.7 7.5 — —

3,203.7 2,991.9 1,782.0 1,799.3Offsetting (890.5) (730.0) (370.2) (365.3)

Total Deferred Tax Liabilities After Offsetting 2,313.2 2,261.9 1,411.8 1,434.0

18. PROVISION FOR LIABILITIES2007 2006

RM RM

The Group

At 1 January 64.6 65.0Current year provision 19.3 8.0Over accrual of provision in respect of prior year — (7.6)Accretion of interest 4.2 —

88.1 65.4Utilised during the year (0.9) (0.8)

At 31 December 87.2 64.6

The provision for liabilities relates to provision for dismantling costs of existing telecommunication network andequipment of subsidiaries.




19. INTANGIBLE ASSETSOther

Goodwill Licences Intangible* TotalRM RM RM RM

The Group

Net Book ValueAt 1 January 2007 6,826.1 233.0 — 7,059.1Additions — 0.6 2.3 2.9Additional interest in subsidiaries 295.1 — — 295.1Partial disposal of a subsidiary (3.8) — — (3.8)Amortisation — (23.7) (1.3) (25.0)Impairment (sub-note a) (23.8) — — (23.8)Currency translation differences (3.3) (21.1) — (24.4)Reclassified from equity (sub-note b) 180.8 — — 180.8

At 31 December 2007 7,271.1 188.8 1.0 7,460.9

Net Book ValueAt 1 January 2006 6,891.3 80.4 — 6,971.7Additions — 184.5 — 184.5Acquisition of subsidiaries (63.7) — — (63.7)Amortisation — (23.0) — (23.0)Currency translation differences (1.5) (8.9) — (10.4)

At 31 December 2006 6,826.1 233.0 — 7,059.1

At 31 December 2007Cost 7,339.6 238.1 2.3 7,580.0Accumulated amortisation — (49.3) (1.3) (50.6)Accumulated impairment (68.5) — — (68.5)

Net Book Value 7,271.1 188.8 1.0 7,460.9

At 31 December 2006Cost 6,870.8 258.6 — 7,129.4Accumulated amortisation — (25.6) — (25.6)Accumulated impairment (44.7) — — (44.7)

Net Book Value 6,826.1 233.0 — 7,059.1

331



19. INTANGIBLE ASSETS (continued)Other

Goodwill Licences Intangible* TotalRM RM RM RM

The Company

Net Book ValueAt 1 January 2007 — 43.6 — 43.6Amortisation — (3.9) — (3.9)

At 31 December 2007 — 39.7 — 39.7

Net Book ValueAt 1 January 2006 — 47.4 — 47.4Amortisation — (3.8) — (3.8)

At 31 December 2006 — 43.6 — 43.6

At 31 December 2007Cost — 50.0 — 50.0Accumulated amortisation — (10.3) — (10.3)

Net Book Value — 39.7 — 39.7

At 31 December 2006Cost — 50.0 — 50.0Accumulated amortisation — (6.4) — (6.4)

Net Book Value — 43.6 — 43.6

The remaining amortisation period of acquired licences ranged from 1 year to 9 years.

* Other intangible represents the fair value of sales contracts acquired by a subsidiary.

(a) Impairment tests for goodwillThe Group undertakes an annual test for impairment of its cash-generating units. Based on the impairment test, animpairment loss of RM23.8 million has been recorded in the Consolidated Income Statement for the goodwill arisingfrom acquisition of an overseas subsidiary. No impairment loss was required for the carrying amounts of the remaininggoodwill assessed as at 31 December 2007 as their recoverable amounts were in excess of their carrying amounts.




19. INTANGIBLE ASSETS (continued)(b) Reclassification of goodwill

In 2006, the Group had undertaken the following transactions with minority interests where the difference betweenthe consideration paid and the Group’s share of carrying value of net assets acquired had been treated as amovement in equity:

(i) The acquisition of 2.8% equity interest in PT Excelcomindo Pratama Tbk from AIF (Indonesia) Limited on 12 June 2006.

(ii) The acquisition of 49.0% equity interest in Telekom Malaysia International (Cambodia) Company Limited fromSamart Corporation Public Company Limited on 27 March 2006.

(iii) The acquisition of 20.0% equity interest in Celcom Timur (Sabah) Sdn Bhd from Hugold Success Sdn Bhd on24 November 2006.

Goodwill totalling RM180.8 million arising from the above transactions previously recorded in equity has now beenreclassified as intangible assets to reflect the Group’s accounting policy on transactions with minority interests.

Goodwill is allocated to the Group’s cash-generating units identified according to business segment and the country ofoperations.

The following cash-generating units, being the lowest level of asset for which there are separately identifiable cash flows,have carrying amounts of goodwill that are considered significant in comparison with the Group’s total goodwill:

2007 2006RM RM

CellularMalaysia 4,022.7 4,022.7Indonesia 3,121.2 2,722.9

7,143.9 6,745.6Cellular and OthersMultiple units without significant goodwill 151.0 80.5Impairment (23.8) —

7,271.1 6,826.1

The amount of goodwill initially recognised is dependent upon the allocation of the purchase price to the fair value ofidentifiable assets acquired and the liabilities assumed. The determination of the fair value of the assets and liabilitiesis based, to a considerable extent, on management’s judgement.

19. INTANGIBLE ASSETS (continued)(i) Key assumptions used in the value-in-use calculations

The recoverable amounts of the cash-generating units including goodwill in these tests are determined based onvalue-in-use calculations.

These value-in-use calculations apply a discounted cash flow model using cash flow projections based on forecastsand projections approved by management covering a five-year period for the cellular business in Malaysia and aten-year period for the cellular business in Indonesia. These forecasts and projections reflect management’sexpectation of revenue growth, operating costs and margins for each cash-generating unit based on past experience.Cash flows beyond the fifth year for the cellular business in Malaysia and tenth year for the cellular business inIndonesia are extrapolated using estimated terminal growth rates. These rates have been determined with regardsto projected growth rates for the respective markets in which the cash-generating units participate and are notexpected to exceed the long term average growth rates for those markets.

The value-in-use calculation for the Group's cash-generating unit in Indonesia reflects the low penetration of mobiletelecommunications in that country and the expectation of strong revenue growth throughout the ten-year plan.

Discount rates applied to the cash flow forecasts are derived from the cash-generating unit’s pre-tax weightedaverage cost of capital plus a reasonable risk premium at the date of the assessment of the respective cash-generating units.

The following assumptions have been applied in the value-in-use calculations:

2007 2006

Malaysia Indonesia Malaysia Indonesia% % % %

Pre-tax discount rate 14.5 16.3 13.1 18.5Terminal growth rate 1.5 3.0 1.5 4.0

(ii) Impact of possible change in key assumptionsChanging the assumptions selected by management, in particular the discount rate assumptions used in thediscounted cash flow model could significantly affect the results of the impairment test and consequently theGroup’s results. The Group’s review includes an impact assessment of changes in key assumptions. Based on thesensitivity analysis performed, management has concluded that no reasonable change in the base case keyassumptions would cause the carrying amounts of the cash-generating units to exceed their recoverable amounts.

If the following pre-tax discount rates are applied to the cash flow forecasts and projections of the Group’s cash-generating units, the carrying amounts of the cash-generating units including goodwill will equal the correspondingrecoverable values, assuming all other variables remain unchanged.

2007 2006

Malaysia Indonesia Malaysia Indonesia% % % %

Pre-tax discount rate 36.5 18.6 26.7 20.0






20. PROPERTY, PLANT AND EQUIPMENTTotal

Telecom- Movable Computer Capital Property,munication Plant and Support Land Work-In- Plant and

Network Equipment Systems (sub-note f) Buildings Progress EquipmentRM RM RM RM RM RM RM

The Group

Net Book ValueAt 1 January 2007 16,445.5 589.8 817.0 326.7 3,061.6 2,439.7 23,680.3Additions 1,716.8 157.5 79.0 11.7 17.9 4,083.4 6,066.3Assetisation 2,827.2 19.9 293.6 — 117.4 (3,258.1) —Disposals (24.4) (7.1) — — (14.6) — (46.1)Disposal of subsidiaries (67.4) (4.2) (1.9) (0.1) (7.4) (3.3) (84.3)Write off (2.9) (0.2) (0.2) — (0.3) (29.7) (33.3)Depreciation (3,224.2) (203.6) (341.9) — (235.1) — (4,004.8)Impairment (70.7) (2.0) (0.7) — — (12.5) (85.9)Reversal of impairment — — — — — 5.5 5.5Currency translation differences (421.3) (5.6) (3.4) (0.9) (4.5) (96.9) (532.6)Reclassified to prepaid lease

payments (note 21) — — — (0.7) — — (0.7)Reclassified as non-current

assets held for sale (note 29) — — — (7.9) (973.2) — (981.1)Reclassification (17.4) 38.7 (25.0) (16.3) 16.6 3.4 —

At 31 December 2007 17,161.2 583.2 816.5 312.5 1,978.4 3,131.5 23,983.3

At 31 December 2007Cost 46,952.9 2,520.2 4,347.7 323.1 3,636.1 3,190.0 60,970.0Accumulated depreciation (29,226.1) (1,929.8) (3,514.3) (0.9) (1,634.1) — (36,305.2)Accumulated impairment (565.6) (7.2) (16.9) (9.7) (23.6) (58.5) (681.5)

Net Book Value 17,161.2 583.2 816.5 312.5 1,978.4 3,131.5 23,983.3

335



20. PROPERTY, PLANT AND EQUIPMENT (continued)Total



The Group

Net Book ValueAt 1 January 2006 15,132.3 581.0 801.6 321.6 3,273.6 1,960.9 22,071.0Acquisition of subsidiaries 147.0 3.7 1.8 — — 3.8 156.3Additions 1,716.9 91.1 72.4 0.3 35.6 3,716.0 5,632.3Assetisation 2,740.1 47.6 389.6 3.5 63.0 (3,243.8) —Disposals (27.1) (0.9) — — (0.7) — (28.7)Write off (0.1) (0.3) (1.6) — — — (2.0)Depreciation (3,155.7) (150.7) (444.9) (0.1) (228.4) — (3,979.8)Impairment (3.5) — — — — (0.6) (4.1)Reversal of impairment — — — 3.9 — 3.5 7.4Currency translation differences (110.3) (13.3) (1.9) (1.4) (3.1) — (130.0)Reclassified to prepaid lease

payments (note 21) — — — (0.3) (21.0) (0.1) (21.4)Transferred from land held for

property development (note 23) — — — 3.3 — — 3.3Reclassified as non-current

assets held for sale (note 29) — — — — (24.0) — (24.0)Reclassification 5.9 31.6 — (4.1) (33.4) — —

At 31 December 2006 16,445.5 589.8 817.0 326.7 3,061.6 2,439.7 23,680.3

At 31 December 2006Cost 43,824.9 1,822.6 4,572.3 338.2 4,719.3 2,494.6 57,771.9Accumulated depreciation (26,728.5) (1,226.7) (3,738.0) (0.9) (1,622.2) — (33,316.3)Accumulated impairment (650.9) (6.1) (17.3) (10.6) (35.5) (54.9) (775.3)

Net Book Value 16,445.5 589.8 817.0 326.7 3,061.6 2,439.7 23,680.3




20. PROPERTY, PLANT AND EQUIPMENT (continued)Net book value of property, plant and equipment of certain subsidiaries pledged as security for borrowings (note 14(b),(c) and (d) to the financial statements):

2007 2006RM RM

Telecommunication network 1,500.5 1,838.2Movable plant and equipment 72.0 75.2Computer support systems 7.3 23.9Land 5.0 4.2Buildings 23.6 51.3

1,608.4 1,992.8

TotalTelecom- Movable Computer Capital Property,

munication Plant and Support Land Work-In- Plant andNetwork Equipment Systems (sub-note f) Buildings Progress Equipment

RM RM RM RM RM RM RM

The Company

Net Book ValueAt 1 January 2007 8,097.8 371.8 466.4 169.9 2,171.4 616.6 11,893.9Additions @ 14.7 52.2 63.8 — 3.9 1,519.4 1,654.0Assetisation 976.7 8.3 233.3 — 96.9 (1,315.2) —Disposals # (9.2) (10.6) — — (14.6) — (34.4)Write off (0.9) (0.2) (0.2) — (0.3) (29.7) (31.3)Depreciation (1,586.1) (125.2) (199.5) — (120.1) — (2,030.9)Impairment (9.9) — — — — — (9.9)Reclassified to prepaid lease


assets held for sale (note 29) — — — (7.9) (812.3) — (820.2)Reclassification (17.4) 42.4 (25.0) — — — —

At 31 December 2007 7,465.7 338.7 538.8 161.3 1,324.9 791.1 10,620.5

At 31 December 2007Cost 30,624.3 1,817.3 3,051.7 164.8 2,560.7 791.1 39,009.9Accumulated depreciation (22,932.9) (1,478.6) (2,512.9) (0.9) (1,235.8) — (28,161.1)Accumulated impairment (225.7) — — (2.6) — — (228.3)

Net Book Value 7,465.7 338.7 538.8 161.3 1,324.9 791.1 10,620.5

337



20. PROPERTY, PLANT AND EQUIPMENT (continued)Total



The Company

Net Book ValueAt 1 January 2006 8,481.0 339.6 430.1 175.2 2,258.4 797.2 12,481.5Additions @ 15.3 78.9 21.4 2.1 — 1,503.3 1,621.0Assetisation 1,292.5 31.3 311.7 — 48.4 (1,683.9) —Disposals — (0.1) — — — — (0.1)Write off — (0.2) (1.5) — — — (1.7)Depreciation (1,691.0) (77.7) (295.3) (0.1) (122.3) — (2,186.4)Reversal of impairment — — — 3.9 — — 3.9Reclassified to prepaid lease


assets held for sale (note 29) — — — — (24.0) — (24.0)Reclassification — — — (10.9) 10.9 — —

At 31 December 2006 8,097.8 371.8 466.4 169.9 2,171.4 616.6 11,893.9

At 31 December 2006Cost 30,073.4 1,201.8 3,321.8 173.4 3,503.8 616.6 38,890.8Accumulated depreciation (21,759.8) (830.0) (2,855.4) (0.9) (1,332.4) — (26,778.5)Accumulated impairment (215.8) — — (2.6) — — (218.4)

Net Book Value 8,097.8 371.8 466.4 169.9 2,171.4 616.6 11,893.9

@ Included in additions was RM59.4 million (2006: RM22.3 million) being telecommunication network assets, movableplant and equipment, computer support systems and buildings transferred from subsidiaries.

# Included in disposals for 2007 was RM8.6 million being telecommunication network assets, movable plant andequipment and computer support systems transferred to subsidiaries. There was no disposal to subsidiaries in 2006.

(a) Included in property, plant and equipment of the Group and the Company are fully depreciated assets which are stillin use costing RM21,205.5 million (2006: RM19,100.6 million) and RM17,004.3 million (2006: RM15,359.2 million)respectively.

(b) During the year, a wholly owned subsidiary, Celcom (Malaysia) Berhad (Celcom) recognised impairment lossesamounting to RM52.4 million due to asset buyback plans in which these assets have been written down to itsrecoverable amount.




20. PROPERTY, PLANT AND EQUIPMENT (continued)(c) During the year, Celcom reversed impairment losses amounting to RM5.5 million in relation to capital work-in-

progress which was previously impaired on long outstanding projects which have been completed.

(d) During the year, there has been a change in the expected pattern of consumption of future economic benefitsembodied in certain telecommunication network and equipment of Celcom due to asset replacement plans. Therevision was accounted for as a change in accounting estimates and had increased the current year depreciationcharge by RM63.7 million.

(e) On 11 January 2007, an overseas subsidiary, PT Excelcomindo Pratama Tbk (XL) received a notification letter fromthe Yogyakarta District Court regarding the execution of North Jakarta District Court Decision relating to anindividual claim over the ownership of the XL's land located in Yogyakarta that was purchased in 2002.

XL lodged a counter claim at the Yogyakarta District Court on the legality of this claim. The Yogyakarta District Courtsubsequently issued a ruling in favour of XL, reaffirming its rightful ownership to the land, and absolving previouscourt decisions which ruled otherwise.

On 27 June 2007, the North Jakarta District Court also issued a new ruling which nullified all and any executionrulings by the Yogyakarta District Court in respect of this matter. On 16 January 2008, Yogyakarta High Court issueda ruling which supported the Yogyakarta District Court ruling.

The Directors believe that this matter will not affect the daily operations of XL in Yogyakarta offices.

(f) Details of land are as follows:

Freehold Other TotalRM RM RM

The Group

Net Book ValueAt 1 January 2007 252.2 74.5 326.7Additions 11.7 — 11.7Disposal of a subsidiary (0.1) — (0.1)Currency translation differences (0.9) — (0.9)Reclassified to prepaid lease payments (note 21) — (0.7) (0.7)Reclassified as non-current assets held for sale (note 29) (7.9) — (7.9)Reclassified to property, plant and equipment (16.3) — (16.3)Reclassification 13.0 (13.0) —

At 31 December 2007 251.7 60.8 312.5

At 31 December 2007Cost 261.4 61.7 323.1Accumulated depreciation — (0.9) (0.9)Accumulated impairment (9.7) — (9.7)

Net Book Value 251.7 60.8 312.5

339



20. PROPERTY, PLANT AND EQUIPMENT (continued)Freehold Other Total

RM RM RM

The Group

Net Book ValueAt 1 January 2006 235.3 86.3 321.6Additions 0.3 — 0.3Assetisation 3.5 — 3.5Depreciation — (0.1) (0.1)Reversal of impairment 3.9 — 3.9Currency translation differences (1.4) — (1.4)Reclassified to prepaid lease payments (note 21) — (0.3) (0.3)Transferred from land held for property development

(note 23) 3.3 — 3.3Reclassified from/(to) buildings 6.8 (10.9) (4.1)Reclassification 0.5 (0.5) —

At 31 December 2006 252.2 74.5 326.7


Net Book Value 252.2 74.5 326.7

The Company

Net Book ValueAt 1 January 2007 95.4 74.5 169.9Reclassified to prepaid lease payments (note 21) — (0.7) (0.7)Reclassified as non-current assets held for sale (note 29) (7.9) — (7.9)Reclassification 13.0 (13.0) —

At 31 December 2007 100.5 60.8 161.3


Net Book Value 100.5 60.8 161.3




20. PROPERTY, PLANT AND EQUIPMENT (continued)Freehold Other Total

RM RM RM

The Company

Net Book ValueAt 1 January 2006 88.9 86.3 175.2Additions 2.1 — 2.1Depreciation — (0.1) (0.1)Reversal of impairment 3.9 — 3.9Reclassified to prepaid lease payments (note 21) — (0.3) (0.3)Reclassified to buildings — (10.9) (10.9)Reclassification 0.5 (0.5) —

At 31 December 2006 95.4 74.5 169.9


Net Book Value 95.4 74.5 169.9

The title deeds pertaining to other land have not yet been registered in the name of the Company and a subsidiary.Pending finalisation with the relevant authorities, these land have not been classified according to their tenure.

During the year, certain title deeds pertaining to other land have been registered and hence, the land has beenreclassified accordingly.

21. PREPAID LEASE PAYMENTSThe Group The Company

2007 2006 2007 2006RM RM RM RM

Net Book ValueAt 1 January 346.2 249.9 38.0 37.9Additions 113.7 106.0 15.2 —Disposals (0.1) (0.3) (0.1) —Amortisation (42.7) (34.7) (0.9) (0.2)Currency translation differences (23.5) 3.9 — —Reclassified from property, plant and

equipment (note 20) 0.7 21.4 0.7 0.3Reclassified as non-current assets held for sale

(note 29) (7.3) — — —

At 31 December 387.0 346.2 52.9 38.0

341



21. PREPAID LEASE PAYMENTS (continued)The Group The Company

2007 2006 2007 2006RM RM RM RM

At 31 DecemberCost 535.6 477.7 57.5 41.7Accumulated amortisation (132.3) (123.9) (4.6) (3.7)Accumulated impairment (16.3) (7.6) — —

Net Book Value 387.0 346.2 52.9 38.0

The prepaid lease rentals were payment for rightsto use the followings:

Long term leasehold land 65.7 82.0 41.2 32.3Short term leasehold land 321.3 264.2 11.7 5.7

At 31 December 387.0 346.2 52.9 38.0

The prepaid lease payments comprise upfront payments for long term leasehold land and short term leasehold landwhich were previously classified under property, plant and equipment.

22. INVESTMENT PROPERTY2007 2006

RM RM

The Company

Net Book ValueAt 1 January 179.8 191.4Depreciation (11.6) (11.6)Reclassified as non-current assets held for sale (note 29) (168.2) —

At 31 December — 179.8

At 31 DecemberCost 229.1 229.1Accumulated depreciation (60.9) (49.3)Reclassified as non-current assets held for sale (note 29) (168.2) —

Net Book Value — 179.8




22. INVESTMENT PROPERTY (continued)The fair value of the property in 2006 was estimated at RM180.0 million based on a valuation performed by anindependent professional valuer. The valuation was based on current price in an active market.

The office building which was classified as investment property is subsequently reclassified as non-current assets heldfor sale. Please refer to note 29 to the financial statements for details.

23. LAND HELD FOR PROPERTY DEVELOPMENT2007 2006

RM RM

The Group

Net Book ValueAt 1 January 168.4 170.7Transferred to property, plant and equipment (note 20) — (3.3)Transferred to land held for sale (3.0) (2.6)Reversal of impairment — 3.6

At 31 December 165.4 168.4

At 31 DecemberLand at cost 176.1 179.1Accumulated impairment (10.7) (10.7)

Net Book Value 165.4 168.4

343



24. SUBSIDIARIES2007 2006

Malaysia Overseas Total Malaysia Overseas TotalRM RM RM RM RM RM

The Company

Quoted investment, at cost 19.5 — 19.5 19.5 — 19.5Unquoted investments, at cost 1,121.0 22.0 1,143.0 1,116.8 37.1 1,153.9Allowance for diminution

in value — (13.2) (13.2) (9.0) — (9.0)Options granted to employees

of subsidiaries 17.7 — 17.7 17.0 — 17.0

1,158.2 8.8 1,167.0 1,144.3 37.1 1,181.4Unquoted investments, at

written down value (sub-note a) — — — — — —

Net investments 1,158.2 8.8 1,167.0 1,144.3 37.1 1,181.4

Amount owing by subsidiaries(sub-note b) 8,690.3 103.9 8,794.2 9,216.1 111.7 9,327.8

Allowance for loans and advances (562.3) — (562.3) (672.4) — (672.4)

Amount owing by subsidiaries after allowance (note 43(g)(i)) 8,128.0 103.9 8,231.9 8,543.7 111.7 8,655.4

TOTAL INTEREST IN SUBSIDIARIES 9,286.2 112.7 9,398.9 9,688.0 148.8 9,836.8

Market value of quoted investment 279.5 — 279.5 266.9 — 266.9

(a) Investments in certain subsidiaries have been written down to recoverable amount of RM1 each.

(b) The amount owing by subsidiaries represents shareholder loans and advances for working capital purposes. Theseloans and advances are unsecured and bear interest ranging from 0% to 8.1% (2006: 0% to 8.9%) and are principallywith no fixed repayment terms. However, the Company has indicated that it will not demand substantial repaymentwithin the next 12 months. Shareholder loans and advances provided to overseas subsidiaries are in US Dollar.

The Group's equity interest in the subsidiaries, their respective principal activities and countries of incorporation arelisted in note 50 to the financial statements.




25. JOINTLY CONTROLLED ENTITIES2007 2006


The Group

Share of net assets of jointlycontrolled entitiesQuoted investment (sub-note a) — 877.5 877.5 — — —Unquoted investment 146.9 — 146.9 175.5 632.0 807.5

TOTAL 146.9 877.5 1,024.4 175.5 632.0 807.5

Market value of quoted investment — 1,427.0 1,427.0 — — —

The Company

Unquoted investment, at cost 141.2 — 141.2 141.2 — 141.2

(a) During the year, a jointly controlled entity, Spice Communications Limited has completed its initial public offeringsand became listed on the Bombay Stock Exchange.

The Group's share of revenue and expenses of the jointly controlled entities is as follows:

2007 2006RM RM

Revenue 358.7 227.5Other income 167.6 6.7Expenses excluding tax (393.1) (281.4)Share of results of an associate (net of tax) 59.3 57.8

Profit before taxation 192.5 10.6Taxation (17.0) —

Profit after taxation 175.5 10.6

Included in other income and taxation above is the Group’s share of the gain arising from the disposal of towers duringthe year amounting to RM145.3 million and RM16.5 million respectively.

345



25. JOINTLY CONTROLLED ENTITIES (continued)The Group's share of assets and liabilities of the jointly controlled entities is as follows:

2007 2006RM RM

Non-current assets 1,876.0 1,807.8Current assets 169.8 203.8Current liabilities (148.3) (98.2)Non-current liabilities (873.1) (1,105.9)

Net assets 1,024.4 807.5

The Group’s share of contingent liabilities of a jointly controlled entity amounted to RM37.9 million (2006: RM Nil).

The Group's equity interest in the jointly controlled entities, their respective principal activities and countries ofincorporation are listed in note 51 to the financial statements.

26. ASSOCIATES2007 2006


The Group

Share of net assets of associates Quoted investments — 218.6 218.6 — 197.2 197.2Unquoted investments (sub-note a) 22.4 11.5 33.9 15.1 8.3 23.4

TOTAL 22.4 230.1 252.5 15.1 205.5 220.6

Market value of quotedinvestments — 378.1 378.1 — 361.5 361.5

The Company

Unquoted investment, at cost — — — 1.5 — 1.5Allowance for diminution in value — — — (1.5) — (1.5)

TOTAL — — — — — —

(a) During the year, the Group had disposed its entire 16.22% equity interest in mySPEED.com Sdn Bhd to MY E.G.Services Berhad for a total consideration of RM1.




26. ASSOCIATES (continued)The Group's share of revenue and profit of associates is as follows:

2007 2006RM RM

Revenue 781.4 537.8Profit after taxation 29.5 19.9

The Group's share of assets and liabilities of associates is as follows:

Non-current assets 269.7 250.7Current assets 355.1 350.5Current liabilities (239.9) (250.7)Non-current liabilities (132.4) (129.9)

Net assets 252.5 220.6

The Group has excluded the amount that would otherwise have been accounted for in respect of the current andcumulative year share of losses after taxation of associates amounting to RM# (2006: RM0.3 million) and RM2.2 million(2006: RM2.2 million) respectively from the financial statements as the carrying amount of these investments have beenfully eroded. The Group has no obligation to finance any further losses.

# Amount less than RM0.1 million

The Group's equity interest in the associates, their respective principal activities and countries of incorporation are listedin note 52 to the financial statements.

27. INVESTMENTSThe Group The Company

2007 2006 2007 2006RM RM RM RM

Investments in International SatelliteOrganisations, at cost 79.1 79.1 79.1 79.1

Allowance for diminution in value (77.7) (77.7) (77.7) (77.7)

1.4 1.4 1.4 1.4

Investments in quoted shares, at cost 250.3 251.9 250.3 251.9Allowance for diminution in value

(sub-note a) (155.0) (75.0) (155.0) (75.0)

95.3 176.9 95.3 176.9

Investments in unquoted shares, at cost 72.5 78.7 192.8 192.8Allowance for diminution in value (30.3) (30.3) (150.6) (150.6)

42.2 48.4 42.2 42.2

138.9 226.7 138.9 220.5Investments in unquoted shares, at written

down value (sub-note b) — — — —

TOTAL INVESTMENTS AFTER ALLOWANCE 138.9 226.7 138.9 220.5

Market value of quoted investments 102.8 159.7 102.8 159.7

(a) During the year, the Company has assessed the carrying value of its investment in quoted shares. Consequent fromthe assessment, an allowance for diminution in value of RM80.0 million was made.

(b) The following corporations in which the Group owns more than one half of the voting power, which, due topermanent loss of control or significant influence, have been accounted as investments and written down torecoverable amounts of RM1 each.

Held by the Company– Societe Des Telecommunications De Guinee

Held by Celcom Group– TRI Telecommunication Tanzania Limited– TRI Telecommunication Zanzibar Limited*– Tripoly Communication Technology Corporation Ltd

In view of the above, the financial statements of the respective companies have not been consolidated nor equityaccounted for. The Directors are of the view that the amounts would be insignificant to the Group results.

* On 13 March 2006, the Group through a subsidiary had obtained an order from the High Court of Zanzibar towind up the company.






28. LONG TERM RECEIVABLESThe Group The Company

2007 2006 2007 2006RM RM RM RM

Staff loans under Islamic principles 419.9 441.4 419.9 441.4Staff loans 89.5 120.1 88.2 119.0

Total staff loans (sub-note a) 509.4 561.5 508.1 560.4Other long term receivables (sub-note b) 67.8 66.8 67.8 66.8Allowance for other long term receivables (9.0) (7.4) (9.0) (7.4)

568.2 620.9 566.9 619.8Staff loans receivable within twelve months

included under other receivables (note 31) (56.7) (63.2) (55.8) (62.5)

TOTAL LONG TERM RECEIVABLES 511.5 557.7 511.1 557.3

(a) Staff loans comprise housing, vehicle, computer and club membership loans offered to employees with financingcost of 4.0% per annum on a reducing balance basis except for club membership loans which are free of financingcost. There is no single significant credit risk exposure as the amount is mainly receivable from individuals. Staffloans inclusive of financing cost are repayable in equal monthly instalments as follows:

(i) Housing loans – 25 years or upon employees attaining 55 years of age, whichever is earlier

(ii) Vehicle loans – maximum of 8 years for new cars and 6 years for second hand cars

(iii) Computer loans – 3 years

(b) Other long term receivables of the Company are in respect of education loans provided to undergraduates and areconvertible to scholarships if certain performance criteria are met. The loans are interest free and if not convertedto scholarship will be repayable over a period of not more than 8 years.

During the year, RM4.6 million (2006: RM3.9 million) was converted to scholarship and expensed off to the IncomeStatement.

349



29. NON-CURRENT ASSETS HELD FOR SALEOn 25 May 2007, the Company announced a proposal for an Islamic sale and leaseback transaction involving the issuanceof up to RM1,100.0 million Islamic Asset Backed Sukuk Ijarah (Sukuk) by a special purpose vehicle.

The sale and leaseback transaction involves the sale of 4 of the Company's property assets (Properties) with carryingvalue of RM988.4 million at 31 December 2007 to Menara ABS Berhad (MAB), a special purpose vehicle with the objectiveof implementing the transaction. The Properties identified are Menara TM, Menara Celcom, Cyberjaya Complex andWisma TM Taman Desa. Subsequent to the sale, the Properties will be leased back to the Company on a portfolio basis,under the Ijarah principle, for a lease term of up to 15 years.

The sale and leaseback will facilitate the issuance of 3 different classes of Sukuk in tranches by MAB. The funds to beraised from the issuance of such Sukuk will be utilised by MAB to pay the Company for the purchase of the Properties.

As discussed in note 2.1(ii) to the financial statements, the Directors considered the sale and subsequent leaseback atrue sale transaction with respect to the Properties and an operating lease with respect to the leaseback arrangement.The carrying value of the Properties involved was reclassified as non-current assets held for sale at the balance sheetdate as the criteria for reclassification was met.

The sale and leaseback was completed on 15 January 2008, which involved the issuance of RM1,000.0 million Sukuk by MAB.

2007 2006

Carrying Carryingamount Allocation Carrying amount Allocation Carrying

immediately of amount as immediately of amount asbefore remeasure- at 31 before remeasure- at 31

classification ment December classification ment DecemberRM RM RM RM RM RM

The Group

Land and buildings (note 20) 981.1 — 981.1 24.0 — 24.0Prepaid leasehold payments

(note 21) 7.3 — 7.3 — — —

988.4 — 988.4 24.0 — 24.0

The Company

Land and buildings (note 20) 820.2 — 820.2 24.0 — 24.0Investment property (note 22) 168.2 — 168.2 — — —

988.4 — 988.4 24.0 — 24.0




29. NON-CURRENT ASSETS HELD FOR SALE (continued)The above non-current assets held for sale are disclosed under unallocated corporate assets in note 40 to the financialstatements, Segmental Reporting.

In 2006, non-current asset held for sale comprised a 25 storey office building known as Wisma TM. The disposal ofWisma TM was completed in the current year.

30. INVENTORIESThe Group The Company

2007 2006 2007 2006RM RM RM RM

Cables and wires 38.6 39.1 38.6 39.1Network materials 49.5 33.8 31.0 19.0Telecommunication equipment 21.2 14.1 9.3 7.3Spares and others* 67.8 84.8 3.4 3.0Land held for sale 4.0 1.0 — —

TOTAL INVENTORIES 181.1 172.8 82.3 68.4

* Included in spares and others are trading inventories comprising SIM cards, prepaid cards, telephone sets and otherconsumables.

31. TRADE AND OTHER RECEIVABLESThe Group The Company

2007 2006 2007 2006RM RM RM RM

Receivables from telephone customers 2,659.0 2,639.8 1,766.1 1,522.1Receivables from non-telephone customers 2,160.9 1,805.1 1,524.9 1,073.1Receivables from subsidiaries — — 308.9 562.6

4,819.9 4,444.9 3,599.9 3,157.8Advance rental billings (330.4) (394.9) (334.6) (368.9)

4,489.5 4,050.0 3,265.3 2,788.9Allowance for doubtful debts (1,496.9) (1,557.0) (882.8) (763.2)

Total trade receivables after allowance 2,992.6 2,493.0 2,382.5 2,025.7

351



31. TRADE AND OTHER RECEIVABLES (continued)The Group The Company

2007 2006 2007 2006RM RM RM RM

Prepayments 227.5 246.0 52.8 29.0Tax recoverable 432.6 15.1 227.3 15.1Staff loans (note 28) 56.7 63.2 55.8 62.5Other receivables from subsidiaries — — 31.6 27.1Other receivables from associates 19.0 19.0 1.1 1.1Other receivables (sub-note a) 845.4 787.2 469.2 465.4Allowance for doubtful debts (175.2) (159.4) (127.8) (127.9)

Total other receivables after allowance 1,406.0 971.1 710.0 472.3

TOTAL TRADE AND OTHER RECEIVABLESAFTER ALLOWANCE 4,398.6 3,464.1 3,092.5 2,498.0

The currency exposure profile of trade andother receivables after allowance is as follows:

Ringgit Malaysia 2,857.8 2,079.2 2,234.8 1,694.6US Dollar 839.7 690.6 826.7 670.3Sri Lanka Rupee 245.6 166.2 — —Indonesian Rupiah 240.6 202.0 — —Bangladesh Taka 95.6 114.7 — —Special Drawing Rights 58.0 137.9 15.2 132.1Other currencies 61.3 73.5 15.8 1.0

4,398.6 3,464.1 3,092.5 2,498.0

The following table represents credit riskexposure of trade receivables, net ofallowances for doubtful debts and withouttaking into account any collateral taken:

Business 2,369.0 1,838.3 1,765.6 1,217.9Residential 623.6 654.7 308.0 245.2Subsidiaries — — 308.9 562.6

2,992.6 2,493.0 2,382.5 2,025.7




31. TRADE AND OTHER RECEIVABLES (continued)(a) Included in other receivables are amounts owing from a former subsidiary amounting to RM83.9 million (2006:

RM83.9 million) and RM70.0 million (2006: RM70.0 million) for the Group and the Company respectively as at 31December 2007, which has been fully provided for.

The Group and the Company are not exposed to major concentrations of credit risk due to the diversed customer base.In addition, credit risk is mitigated to a certain extent by cash deposits and bankers' guarantee obtained from customers.The Group and the Company consider the allowance for doubtful debts at balance sheet date to be adequate to coverthe potential financial loss.

Credit terms of trade receivables excluding advance rental billing range from 30 to 90 days (2006: 30 to 90 days).

Other receivables from associates are unsecured and interest free with no fixed terms of repayment.

32. SHORT TERM INVESTMENTSThe Group The Company

2007 2006 2007 2006RM RM RM RM

Shares quoted on the Bursa MalaysiaSecurities Berhad 177.6 125.3 175.9 123.6

Quoted fixed income securities 200.5 194.8 200.5 194.8

TOTAL SHORT TERM INVESTMENTS 378.1 320.1 376.4 318.4

Market value of quoted shares 177.6 125.3 175.9 123.6Market value of quoted fixed income securities 200.5 194.8 200.5 194.8

33. CASH AND BANK BALANCESThe Group The Company

2007 2006 2007 2006RM RM RM RM

Deposits with:Licensed banks 2,475.8 2,388.0 1,023.0 1,197.8Licensed finance companies 18.2 20.1 — —Other financial institutions 245.6 392.1 51.9 259.3

Deposits under Islamic principles 631.3 1,096.0 211.2 296.2

Total deposits 3,370.9 3,896.2 1,286.1 1,753.3Cash and bank balances 646.7 705.2 242.0 282.0Cash and bank balances under Islamic principles 154.2 79.0 — —

TOTAL CASH AND BANK BALANCES 4,171.8 4,680.4 1,528.1 2,035.3Less:

Bank overdrafts (note 14) (2.1) (3.7) — —Deposits pledged (76.8) (10.3) — —

TOTAL CASH AND CASH EQUIVALENTS ATEND OF THE YEAR 4,092.9 4,666.4 1,528.1 2,035.3

The currency exposure profile of cash andbank balances is as follows:

Ringgit Malaysia 3,150.6 3,537.8 1,292.3 1,510.3US Dollar 611.6 817.8 235.8 525.0Indonesian Rupiah 203.9 143.2 — —Sri Lanka Rupee 114.0 15.3 — —Bangladesh Taka 7.6 77.8 — —Other currencies 84.1 88.5 — —

4,171.8 4,680.4 1,528.1 2,035.3

Deposits of the Group included RM181.6 million (2006: RM377.3 million) being funds earmarked for principal and interestrepayments under terms of borrowings of Celcom as mentioned in note 14(a) to the financial statements. Cash and bankbalances of the Group included RM11.2 million (2006: RM11.2 million) of a subsidiary which is restricted due to ongoinglitigation.






33. CASH AND BANK BALANCES (continued)The deposits are placed mainly with a number of creditworthy financial institutions. There is no major concentration ofdeposits in any single financial institution. Deposits have maturity range from overnight to 360 days (2006: from overnightto 365 days) and from overnight to 112 days (2006: from overnight to 91 days) for the Group and the Companyrespectively. Bank balances are deposits held at call with banks.

The weighted average interest rate of deposits (excluding deposits under Islamic principles) as at 31 December 2007 is4.08% (2006: 4.14%) and 3.93% (2006: 3.85%) for the Group and the Company respectively.

34. TRADE AND OTHER PAYABLESThe Group The Company

2007 2006 2007 2006RM RM RM RM

Trade payables 4,058.7 3,683.7 1,365.8 1,344.5Accruals for Universal Service Provision 387.3 294.6 164.5 183.2Deferred revenue 550.0 386.6 62.7 —Finance cost payable 157.1 182.8 70.2 91.3Duties and other taxes payable 65.9 48.0 52.1 53.2Deposits and trust monies 65.8 42.1 41.2 20.9Payables to subsidiaries — — 339.8 212.1Other payables (sub-note a) 1,417.9 1,103.1 510.6 443.5

TOTAL TRADE AND OTHER PAYABLES 6,702.7 5,740.9 2,606.9 2,348.7

The currency exposure profile of trade andother payables is as follows:

Ringgit Malaysia 4,092.0 3,696.5 2,055.5 1,798.1US Dollar 1,421.6 970.9 487.0 399.4Indonesian Rupiah 526.1 445.4 — —Bangladesh Taka 249.5 160.3 — —Sri Lanka Rupee 203.8 165.7 — —Special Drawing Rights 112.5 178.5 58.5 147.8Other currencies 97.2 123.6 5.9 3.4

6,702.7 5,740.9 2,606.9 2,348.7

(a) Included in other payables is government grant of RM59.5 million (2006: RM27.2 million) for the Group and RM46.2million (2006: RM11.6 million) for the Company.

Credit terms of trade and other payables vary from 30 to 90 days (2006: from 30 to 180 days) depending on the termsof the contracts.

35. CUSTOMER DEPOSITSThe Group The Company

2007 2006 2007 2006RM RM RM RM

Telephone 559.0 559.4 558.9 559.4Cellular services 114.8 128.6 — —Data services 58.8 30.9 31.3 30.9

TOTAL CUSTOMER DEPOSITS 732.6 718.9 590.2 590.3

Telephone customer deposits are subjected to rebate at 5.0% per annum in accordance with Telephone Regulations, 1996.

36. CASH FLOWS FROM OPERATING ACTIVITIESThe Group The Company

2007 2006 2007 2006RM RM RM RM

Receipts from customers 17,065.1 16,180.9 6,866.5 6,897.0Payments to suppliers and employees (9,475.2) (8,893.4) (3,861.4) (3,632.9)Payment of compensation — (874.0) — —Payment of finance cost (887.7) (648.8) (469.9) (386.6)Payment of income taxes (net of tax refunds) (755.2) (530.9) (231.5) (284.8)

TOTAL CASH FLOWS FROM OPERATINGACTIVITIES 5,947.0 5,233.8 2,303.7 2,592.7






37. CASH FLOWS USED IN INVESTING ACTIVITIESThe Group The Company

2007 2006 2007 2006RM RM RM RM

Disposal of property, plant and equipment 45.1 41.4 29.2 11.8Purchase of property, plant and equipment (6,197.1) (5,592.7) (1,979.3) (1,699.1)Disposal of non-current assets held for sale 70.0 — 70.0 —Payment of intangible asset (telecommunication

and spectrum licence) (8.6) (192.5) (8.0) (8.0)Disposal of long term investments 9.4 157.3 2.2 1.7Disposal of short term investments 213.1 147.0 213.1 147.0Purchase of short term investments (205.2) (166.2) (205.2) (166.2)Disposal of subsidiaries (net of cash disposed) 51.7 — 83.0 —Partial disposal of a subsidiary 280.4 3.5 — —Acquisition of subsidiaries (net of cash acquired) — (39.4) — —Additional interest in subsidiaries (396.6) (265.4) — —Disposal of an associate 0.2 — 0.2 —Acquisition of an associate (2.5) (124.8) — —Investment in a jointly controlled entity — (659.4) — —Payments to subsidiaries — — (71.5) (30.6)Repayments from subsidiaries — — 956.1 1,043.1Advances to subsidiaries — — (482.2) (1,113.3)Advances from subsidiaries — — — 9.3Repayments of loans by employees 108.7 112.2 108.7 112.2Loans to employees (50.5) (52.2) (50.5) (51.3)Interest received 180.7 226.8 96.7 99.1Dividend received 22.5 7.2 298.5 112.4

TOTAL CASH FLOWS USED IN INVESTINGACTIVITIES (5,878.7) (6,397.2) (939.0) (1,531.9)

38. CASH FLOWS USED IN FINANCING ACTIVITIESThe Group The Company

2007 2006 2007 2006RM RM RM RM

Issue of share capital 346.4 43.8 346.4 43.8Issue of share capital to minority interests 83.2 20.7 — —Proceeds from borrowings 2,636.6 2,344.9 — —Repayments of borrowings (2,214.1) (1,875.7) (796.0) (246.9)Dividends paid to shareholders (1,402.4) (1,001.9) (1,402.4) (1,001.9)Dividends paid to minority interests (36.0) (33.6) — —

TOTAL CASH FLOWS USED IN FINANCINGACTIVITIES (586.3) (501.8) (1,852.0) (1,205.0)

39. SIGNIFICANT NON-CASH TRANSACTIONSSignificant non-cash transactions during the year are as follows:


2007 2006 2007 2006RM RM RM RM

(a) Contra settlements with a subsidiary betweenamount owing by subsidiaries and otherpayables — — 211.5 —

(b) Contra settlements with subsidiaries betweenreceivables and payables — — 157.9 105.2

(c) Conversion of amount owing into paid-upcapital of a subsidiary — — — 13.2

(d) Exchange of Tekad Mercu Bonds withTM Islamic Stapled Income Securities(note 14(g) & 15(i)) 2,925.0 — 2,983.5 —

(e) Purchase of business and business assets by a subsidiary satisfied by the issuance of shares — 12.8 — —

(f) Transfer of telecommunication network assets, movable plant and equipment, computer support systems and buildingsfrom subsidiaries — — 59.4 22.3

(g) Waiver of amount due from a subsidiary(trading and non-trading) — — 61.3 —






40. SEGMENTAL REPORTINGBy BusinessDuring the year, the Group reviewed and changed the grouping of segmental reporting information to reflect the changein the business structure. The comparatives have been restated to conform with the current year's presentation.

The Group is organised on a worldwide basis in 4 main business segments:

• Malaysia Business is a Strategic Business Unit (SBU) consolidating all domestic fixed line services. It comprises TMWholesale, TM Retail, TM Net Sdn Bhd, GITN Sdn Berhad, Telekom Sales and Services Sdn Bhd, Telekom Research& Development Sdn Bhd, Telekom Applied Business Sdn Bhd, Mobikom Sdn Bhd, Telekom Malaysia (UK) Limited,Telekom Malaysia (Hong Kong) Limited, Telekom Malaysia (S) Pte Ltd and Telekom Malaysia (USA) Inc. This isintended to align businesses with a common agenda and maximise synergies.

• Celcom is made up of Celcom (Malaysia) Berhad, a domestic subsidiary involved in the cellular business and its groupof companies.

• International Operations comprises all overseas operations of the Group except those companies that fall within theambit of Malaysia Business.

• TM Ventures is a SBU established to separately manage the large number of non-core businesses with the objectiveof rationalising and streamlining the non-core businesses in maximising the Group assets/entities’ value proposition,whilst growing the business that offers potentials.

Segment results represent segment operating revenue less segment expenses. Unallocated income includes interestincome, dividend income and gain or loss on disposal of investments. Unallocated costs represent corporate centreexpenses and net foreign exchange differences arising from revaluation of corporate borrowings. The accounting policiesused to derive reportable segment results are consistent with those as described in the Significant Accounting Policies.

Segment assets disclosed for each segment represent assets directly managed by each segment, primarily includeintangibles, property, plant and equipment, receivables, inventories and cash and bank balances. Unallocated corporateassets mainly include staff loans, other long term receivables, investments, deferred tax assets and property, plant andequipment of the Company’s training centre and office buildings.

Segment liabilities comprise operating liabilities and exclude borrowings, interest payable on borrowings, current taxliabilities, deferred tax liabilities and dividend payable.

Segment capital expenditure comprises additions to intangibles, property, plant and equipment, including additionsresulting from acquisition of subsidiaries as disclosed in note 19 and 20 to the financial statements.

Significant non-cash expenses comprise mainly allowances and unrealised foreign exchange losses (excluding net foreignexchange differences arising from revaluation of borrowings) as disclosed in note 5(b) to the financial statements.

40. SEGMENTAL REPORTING (continued)Malaysia International TMBusiness Celcom Operations Ventures Total

RM RM RM RM RM

Year Ended 31 December 2007Operating RevenueTotal operating revenue 7,643.2 5,127.0 4,987.2 1,265.7 19,023.1Inter-segment* (341.3) (161.9) (51.0) (626.0) (1,180.2)

External operating revenue 7,301.9 4,965.1 4,936.2 639.7 17,842.9

ResultsSegment results 1,431.4 1,345.7 790.7 53.3 3,621.1Unallocated income 446.9Corporate expenses (847.0)Foreign exchange gains 262.3

Operating profit before finance cost 3,483.3Finance income 203.9Finance cost (820.9)Jointly controlled entities– share of results (net of tax) — — 175.5 — 175.5– gain on dilution of equity interest — — 71.3 — 71.3Associates– share of results (net of tax) — 5.1 24.5 (0.1) 29.5

Profit before taxation 3,142.6Taxation 2.9 (344.2) (145.5) (24.2) (511.0)

Profit for the year 2,631.6

At 31 December 2007Segment assets 15,526.9 9,715.7 13,523.9 1,856.6 40,623.1Jointly controlled entities — — 1,024.4 — 1,024.4Associates — 22.0 230.2 0.3 252.5Unallocated corporate assets 2,321.3

Total assets 44,221.3

Segment liabilities 3,035.1 2,060.4 1,890.2 379.7 7,365.4Borrowings 11,924.4Unallocated liabilities 4,280.0

Total liabilities 23,569.8







RM RM RM RM RM

Year Ended 31 December 2007Other InformationCapital expenditure– additions during the year 1,634.5 753.2 3,885.5 91.1 6,364.3Depreciation and amortisation 2,085.1 854.6 933.0 157.1 4,029.8Write off of property, plant and equipment 31.5 — 1.8 — 33.3Impairment of property, plant and equipment 11.9 62.9 4.5 6.6 85.9Reversal of impairment of property,

plant and equipment — (5.5) — — (5.5)Significant non-cash expenses 324.1 68.2 185.5 36.1 613.9

Year Ended 31 December 2006Operating RevenueTotal operating revenue 7,495.9 4,528.6 4,165.4 989.4 17,179.3Inter-segment* (347.3) (104.6) (14.4) (313.8) (780.1)

External operating revenue 7,148.6 4,424.0 4,151.0 675.6 16,399.2

ResultsSegment results 1,344.8 1,132.7 1,212.2 64.8 3,754.5Unallocated income 155.5Corporate expenses (721.8)Foreign exchange gains 302.4

Operating profit before finance cost 3,490.6Finance income 234.0Finance cost (621.9)Jointly controlled entities– share of results (net of tax) — — 10.6 — 10.6Associates– share of results (net of tax) — (8.6) 28.5 — 19.9

Profit before taxation 3,133.2Taxation (116.1) (398.7) (296.8) (19.3) (830.9)

Profit for the year 2,302.3


RM RM RM RM RM

At 31 December 2006Segment assets 16,033.6 9,587.2 10,920.0 1,993.3 38,534.1Jointly controlled entities — — 807.5 — 807.5Associates — 14.5 205.6 0.5 220.6Unallocated corporate assets 2,281.3

Total assets 41,843.5

At 31 December 2006Segment liabilities 2,740.0 1,792.3 1,482.6 326.7 6,341.6Borrowings 12,085.9Unallocated liabilities 2,668.4

Total liabilities 21,095.9

Year Ended 31 December 2006Other InformationCapital expenditure– additions during the year 1,664.4 857.1 3,087.2 208.1 5,816.8– acquisition of subsidiaries — 146.6 (54.0) — 92.6Depreciation and amortisation 2,258.0 807.8 785.1 151.9 4,002.8Write off of property, plant and equipment 1.6 0.2 0.1 0.1 2.0Impairment of property, plant and equipment 0.1 0.5 3.5 — 4.1Reversal of impairment of property, plant

and equipment (3.9) (3.5) — — (7.4)Significant non-cash expenses 210.2 77.5 (113.4) 12.9 187.2

* Inter-segment operating revenue has been eliminated at the respective segment operating revenue. The inter-segment operating revenue was entered into in the normal course of business and at prices available to third partiesor at negotiated terms.






40. SEGMENTAL REPORTING (continued)By Geographical LocationThe Group operates in many countries as disclosed in note 50 to the financial statements. Accordingly, thesegmentisation of Group operation by geographical location is segmentised to Malaysia and overseas. The overseasoperation is further segregated into Indonesia and others as no other individual overseas country contributed more than10.0% of consolidated operating revenue or assets.

In presenting information for geographical segments of the Group, sales are based on the country in which thecustomers are located. Total assets and capital expenditure are determined based on where the assets are located.

Operating Revenue Total Assets Capital Expenditure

2007 2006 2007 2006 2007 2006RM RM RM RM RM RM

Malaysia 12,706.5 12,087.4 29,214.6 29,357.6 2,470.7 2,865.2Overseas– Indonesia 2,962.8 2,296.1 8,143.3 6,081.2 2,738.3 1,793.2– Others 2,173.6 2,015.7 3,265.2 3,095.3 1,155.3 1,251.0

17,842.9 16,399.2 40,623.1 38,534.1 6,364.3 5,909.4

Jointly controlled entities 1,024.4 807.5Associates 252.5 220.6Unallocated corporate assets 2,321.3 2,281.3

Total assets 44,221.3 41,843.5

41. CAPITAL AND OTHER COMMITMENTSThe Group The Company

2007 2006 2007 2006RM RM RM RM

(a) Property, plant and equipmentCommitments in respect of expenditure

approved and contracted for 3,832.1 3,817.2 1,181.7 1,594.3

Commitments in respect of expenditureapproved but not contracted for 921.5 1,226.7 — —

(b) Donation to Yayasan TelekomAmount approved and committed 49.1 62.4 49.1 62.4

363



41. CAPITAL AND OTHER COMMITMENTS (continued)The Company

2007 2006Future Future

minimum minimumlease lease

payments paymentsRM RM

(c) Non-cancellable operating lease commitmentsNot later than one year 54.9 52.4Later than one year and not later than five years 81.4 74.3

136.3 126.7

The above lease payments relate to the non-cancellable operating lease of a telecommunication tower from a whollyowned subsidiary.

(d) Other commitmentsOn 21 April 2006, a Deed of Undertaking was signed between Spice Communications Limited (Spice), the Company,TM International Berhad (TM International) and DBS Bank Ltd in connection with the provision of limited sponsorsupport for a USD215.0 million Indian Rupee facility and a USD50.0 million USD facility. Under the terms, TMInternational, failing which the Company, is required to make payment of any outstanding principal and/or interestunder the facilities to the lenders upon occurrence of a specified trigger event. TM International’s and the Company’sobligation on behalf of Spice give the Group the rights to exercise a call option under the terms of a shareholders’agreement to acquire additional shares in Spice from the existing shareholder, namely Modi Wellvest.




42. CONTINGENT LIABILITIES (UNSECURED)(a) On 6 October 2005, TM International (L) Limited (TMIL) had executed a blanket counter indemnity in favour of a

financial institution in Labuan for all facilities offered. As at 31 December 2007, the amount outstanding is USD26.5million (2006: USD16.6 million). A summary of the facilities offered by the financial institution is as follows:

(i) Issuance of USD10.0 million Standby Letter of Credit (SBLC) to a financial institution in Karachi on behalf ofTMIL on 6 October 2005 to counter guarantee a USD10.0 million SBLC to Pakistan Telecommunication Authority(PTA) on behalf of a subsidiary, Multinet Pakistan (Private) Limited (Multinet).

This SBLC was part of a requirement in awarding a long distance international licence to Multinet. The tenureof the SBLC is 3 years and is subject to an annual review.

(ii) Offering of an additional SBLC facility of up to USD33.0 million to TMIL on 18 December 2006, to counterguarantee a financial institution in Karachi for Bank Guarantee (BG) issuances on behalf of Multinet to TelenorPakistan (Private) Limited (Telenor).

Multinet and Telenor had entered into a 20 years Indefeasible Right of Use agreement which requires a BGfavouring Telenor to be issued by Multinet. A financial institution in Karachi has issued a BG to Telenor onbehalf of Multinet. The BG is to be issued in 3 tranches. As at 31 December 2007, a USD16.5 million (2006:USD6.6 million) SBLC was issued, being the first and second tranche. The tenure of the SBLC is 1 year and issubject to an annual review.

(b) On 11 August 2003, the Company jointly with Telekom Publications Sdn Bhd (now known as TM Info-Media Sdn Bhd)(TMIM), the Company's wholly owned subsidiary, instituted legal proçeedings against Buying Guide (M) Sdn Bhd(BGSB) relating to the infringement of TMIM's and the Company's copyright and passing off.

BGSB filed their defence and counterclaim on 15 October 2003 for RM114.3 million which was dismissed by theAssistant Registrar.

On 27 July 2004, BGSB filed their notice of appeal against the Assistant Registrar's decision which was dismissedon 8 April 2005 with cost. On 10 June 2005, TMIM and the Company filed their reply to BGSB’s statement of defenceand the Company's defence to BGSB's counterclaim.

The case was heard on 14 February 2007, 11 June 2007, 14 September 2007 and 5 November 2007 respectively, andTMIM and the Company had filed and served the tentative list of witness and tentative list of documents. The nexthearing is on 17 March 2008.

The Directors, are of the view that based on the available documents and the various discussions with the Companyand TMIM, the Company has a reasonable chance of success in its claim and defending BGSB's counterclaim.

42. CONTINGENT LIABILITIES (UNSECURED) (continued)(c) Bukit Lenang Development Sdn Bhd (BLDSB) had instituted legal proceeding against the Company, Tenaga Nasional

Berhad (TNB) and SAJ Holdings Sdn Bhd (SAJ Holdings) (collectively referred to as the “Parties and/or Defendants”)by way of a writ of summons dated 27 November 2004 and statement of claim dated 15 December 2004 in the HighCourt of Malaya at Kuala Lumpur.

BLDSB is seeking special damages for the sum of RM29.4 million and other damages and relief from the Partiesfor:

(i) wrongfully conspiring with the occupants on Mukim Plentong, Daerah Johor Bahru, Johor Darul Takzim (theLand) by facilitating the occupants with telecommunications, electricity and water services and illegallyassisting the occupants in their occupation with the obvious and foreseeable consequence of adversely affectingand seriously prejudicing BLDSB;

(ii) joint tortfeasor with the occupants in the commission of the wrongs committed by the occupants;

(iii) jointly and independently trespassing and continue to trespass the Land by reason of emplacement of thetelecommunication, electricity and water equipments to the occupants;

(iv) wrongfully and/or unconscionably derived and still deriving pecuniary benefits from its wrongful actions and thewrongful use of the Land and that the same amount to unjust enrichment of the law; and

(v) loss of opportunity in that the plaintiff has been wrongfully prevented from developing the Land and as suchhas not had the benefit of the full potential of the development and the advantageous economic circumstancesin the period immediately following the acquisition of the Land by the plaintiff.

On 23 January 2006, the Court granted an order in terms for the Company’s application to transfer this matter fromKuala Lumpur High Court to Johor Bahru High Court and as directed by the High Court, the Company filed itsstatement of defence in the Kuala Lumpur High Court on 21 February 2006.

On 10 November 2006, the plaintiff’s solicitors had served the Company with the unsealed notice to attend pre-trialcase management. However, the plaintiff’s solicitors have yet to serve the Company with the sealed copy of the saidnotice.

On 16 November 2007, the plaintiff’s solicitors had served the Company with an application to strike out theCompany's Statement of Defence. The said striking out application is fixed for hearing on 12 May 2008.

The Directors, based on legal advice, are of the view that the Company has a reasonably good chance of successin defending its case against BLDSB.






42. CONTINGENT LIABILITIES (UNSECURED) (continued)(d) Acres & Hectares Sdn Bhd (AHSB) had instituted legal proceeding against the Company by way of a writ of

summons dated 22 April 2005 and statement of claim dated 7 April 2005 in the High Court of Malaya at KualaLumpur.

In the said statement of claim, AHSB claimed that the Company was indebted to AHSB in the judgement sum ofRM2.9 million plus 8.0% interest per annum on the said sum from 29 November 2004 (Notice of Demand) until thedate of full settlement for consultancy works rendered to TM Facilities Sdn Bhd (TMF), a wholly owned subsidiaryof the Company in respect of the management and development of the Company’s land. Further, AHSB claimed fordamages in the sum of RM26.9 million plus 8.0% interest per annum on the said sum from date of the statementof claim until date of full settlement for alleged losses suffered by AHSB due to the Company’s failure to proceedwith the said project and cost.

On 15 June 2005, the Company filed its statement of defence disputing the appointment of AHSB as the Company’sconsultant in relation to the said project and put AHSB to strict proof thereof. In addition, the Company contendedthat the preliminary reports prepared by AHSB were part of the requirements to be fulfilled by AHSB prior to theselection of the appointment of a consultant to be approved by TMF Board of Directors.

On 7 July 2005, the Company filed an interlocutory application to strike out AHSB’s claim and the matter wasoriginally fixed for hearing on 29 September 2005. The Court heard the said application on 17 October 2005 andthen adjourned the said hearing to 22 December 2005.

On 22 December 2005, the Court directed the Company and AHSB to file their written submission on 6 January 2006and 20 January 2006 respectively and the decision was fixed on 10 February 2006. However, on 10 February 2006,the Court dismissed the Company’s application with costs on grounds that there were triable issues to be decidedbefore a full and proper hearing. Meanwhile, AHSB had served a notice to attend for pre-trial case management onthe Company and this notice is fixed for hearing on 6 March 2006.

On 6 March 2006, the Court had fixed this matter for hearing on 10 December 2007 to 12 December 2007 as thetrial date of this case. The Court has also directed the parties to file the necessary cause papers before the saidhearing dates. On 10 December 2007, the Court has postponed the case to 10 March 2008 for mention pending theoutcome of an application by AHSB’s solicitors to discharge themselves from representing AHSB in the case.

The Directors, based on legal advice, are of the view that the Company has a reasonably good chance of successin defending its case against AHSB.

42. CONTINGENT LIABILITIES (UNSECURED) (continued)(e) By a Joint Venture Agreement dated 13 September 1993 (JVA), Technology Resources Industries Berhad (TRI) and

VIP Engineering and Marketing Limited (VIPEM) agreed to establish TRI Telecommunications Tanzania Limited(Tritel) as a joint venture company, to provide telecommunications services in Tanzania.

On 10 December 2001, vide Civil Case No. 427 of 2001 (the Suit) VIPEM is claiming a sum of USD18.6 million fromTRI as its share of loss of profits for mismanagement of Tritel. TRI through its solicitors asserted that the Courthas no jurisdiction to hear the Suit because of the arbitration clause in the JVA and applied for a stay ofproceedings. The Court concurred with TRI’s contention and TRI then filed a petition to stay the proceedings pendingreference of the dispute to arbitration. Subsequently, on 17 July 2003 the Court adjourned the Suit sine die pendingcompletion of the liquidation of Tritel. In light of the winding up order made against Tritel, on 22 July 2003, TRI filedits claims of RM123.4 million with the liquidator of Tritel.

The Directors, based on legal opinion received, are of the view that on the allegations of mismanagement, unlessmore evidence can be produced, the allegations are rhetorical and unsubstantiated. In view of the winding upproceedings, there is also a possibility that VIPEM will not pursue its claim. Hence, no provision has been made inthe financial statements for the claim made by VIPEM.

(f) In 2005, Rego Multi-Trades Sdn Bhd (Rego), a wholly owned subsidiary of Celcom (Malaysia) Berhad (Celcom)commenced proceedings in the High Court against Aras Capital Sdn Bhd (Aras Capital) and Tan Sri Dato’ TajudinRamli (TSDTR) for amounts due to Rego pursuant to an investment agreement with Aras Capital and an indemnityletter given by TSDTR. The sum claimed in the proceedings is RM261.8 million as at 30 November 2004 togetherwith interests and costs. On 13 May 2005, TSDTR filed its defence and instituted a counterclaim against Rego, TRIand its directors to void and rescind the indemnity letter and also claim damages. Subsequently, Rego, TRI and itsdirectors filed their respective applications to strike out TSDTR’s counterclaim on 19 July 2005 but their respectiveapplications were dismissed by the Registrar on 18 May 2006. Rego, TRI and its directors then filed their respectiveappeals and the same are fixed for mention on 4 March 2008.

The Directors, based on legal advice received, are of the view that it has good prospects of succeeding on the claimand successfully defending the counterclaim if the same were to proceed to trial.

(g) On 24 November 2005 and 29 November 2005, Celcom was served with 2 Writs of Summons and Statement of Claimby MCAT GEN Sdn Bhd (MCAT). The claims instituted were for (i) libel based on certain alleged press releases madeby Celcom which appeared in the New Straits Times, Utusan Malaysia, Harian Metro and Berita Harian (First Suit)and (ii) breach of contract on an alleged Resellers Agreement between Celcom and MCAT (Second Suit).






42. CONTINGENT LIABILITIES (UNSECURED) (continued)(g) Subsequently on 13 December 2005, Celcom was served with a Writ of Summons and Statement of Claim by MCAT’s

directors, whereby the directors have pleaded a cause of action for libel against Celcom based on certain allegedpress releases which appeared in the New Straits Times, Utusan Malaysia, Harian Metro and Berita Harian. Thedirectors are seeking, amongst others, damages for libel totalling RM1.01 billion, aggravated and exemplarydamages, an injunction restraining Celcom from further publishing any similar defamatory words, a public apology,interests and costs (Third Suit).

In the First Suit, MCAT is seeking, amongst other remedies, damages for libel in the sum of RM1.0 billion, aggravatedand exemplary damages, an injunction restraining Celcom from further publishing any similar allegedly defamatorywords, a public apology, interests and costs. Celcom then filed a defence on the grounds that there was no concludedcontract between the parties and, furthermore, that its statements were published by third parties and, in any event,not defamatory of MCAT. It also instituted a counterclaim against MCAT for passing off its products and services asthose of Celcom’s, implying a trade association with Celcom when no such association exists and for misrepresentingitself as a reseller of its products and services, and filed an application to strike out MCAT’s claim.

In December 2006, at the Court’s direction, Celcom successfully applied to consolidate this action with the ThirdSuit, which MCAT appealed against. Subsequently MCAT has withdrawn the appeal with no order as to costs.

On 22 March 2007, Celcom’s striking out application was dismissed with costs and Celcom subsequently filed anappeal to the Judge in Chambers against the dismissal. On 29 January 2008, the High Court dismissed Celcom’sappeal. Celcom is presently considering whether to file a notice of appeal to the Court of Appeal. The notice ofappeal to the Court of Appeal must be filed within 30 days from 29 January 2008.

In respect of the Second Suit, MCAT is seeking, amongst other remedies, specific performance of the ResellerAgreement, damages in the sum of RM765.1 million and damages in lieu or in addition to specific performance.Celcom’s position is that it did not enter into the Reseller Agreement and there is no agreement between theparties. In 2006, MCAT unsuccessfully applied for an injunction to restrain Celcom from entering into a similaragreement with any other party that would be detrimental to MCAT’s alleged rights under the Reseller Agreementand from disclosing any confidential information to third parties.

Celcom applied to the High Court for security of costs and to strike out parts of MCAT’s statement of claim on thebasis that the statement did not satisfy the Court’s direction to furnish further and better particulars to Celcom.The High Court granted Celcom’s application for security for costs and MCAT has paid an aggregate of RM250,000into the Court. Celcom’s striking out application was however dismissed by the Court. The matter commenced totrial in June 2007 and hearings are scheduled to continue in May 2008.

42. CONTINGENT LIABILITIES (UNSECURED) (continued)(g) In respect of the Third Suit, the MCAT’s directors are seeking, amongst other remedies, an aggregate amount of

RM1.01 billion in damages, aggravated and exemplary damages, a retraction of the allegedly defamatory statementsand an injunction restraining Celcom from further publishing any similar allegedly defamatory words. Celcom filedits defence and striking out application on the same grounds as its defence in the First Suit. It also filed acounterclaim against Mohd Razi bin Adam for a breach of his employment contract with Celcom and his fiduciaryduties as an employee of Celcom prior to his joining MCAT as its chief executive officer. Celcom also applied for aninjunction to restrain him from disclosing confidential information acquired by him as an employee of Celcom.Celcom’s striking out application was allowed with costs on 12 November 2007. The MCAT’s directors have filed anappeal and no dates have been fixed. On 9 March 2007, Celcom successfully applied to consolidate this suit withthe First Suit. Consequently, this proceeding shall only be heard after the First Suit has been disposed off.

The Directors, based on legal advice received, are of the view that the crystallisation of liability from the 3 casesabove is remote.

(h) In June 2006, the Company, Telekom Enterprise Sdn Bhd (TESB), Celcom and TRI (TM Group) were served with adefence and counterclaim by TSDTR in connection with proceedings initiated against him by Pengurusan DanahartaNasional Berhad (Danaharta) and 2 others. The TM Group and the other 20 defendants were joined in theseproceedings via the counterclaim.

TSDTR is seeking from Celcom, TRI and 9 others jointly and/or severally the following relief in the counterclaim:

(i) the sum of RM6.2 billion (TRI shares at RM24.00 per share);

(ii) general damages to be assessed;

(iii) aggravated and exemplary damages to be assessed;

(iv) damages for conspiracy to be assessed;

(v) an Account of all sums paid under the Facility Agreement and/or to Danaharta by TSDTR including all suchsums received by Danaharta including as a result of the sale of the TRI shares and the Naluri shares;

(vi) an assessment of all sums due to be repaid by Danaharta to TSDTR as a result of overpayment by TSDTR toDanaharta;

(vii) an Order that Danaharta forthwith pays all sums adjudged to be paid to TSDTR under prayer (vi);

(viii) an Account of all dividends and/or payments received by the Company arising out of or in relation to the TRI(now Celcom) Shares;

(ix) an Order that the Company forthwith pays all sum adjudged to be paid to TSDTR under prayer (viii);

(x) damages for breach of contract against Danaharta to be assessed.






42. CONTINGENT LIABILITIES (UNSECURED) (continued)(h) In addition, TSDTR is also seeking, inter alia, from all the 24 Defendants to the counterclaim the following relief:

(i) the sum of RM7.2 billion;

(ii) damages for conspiracy to be assessed;

(iii) a declaration that the Vesting Certificates are illegal and ultra vires that the Danaharta Act and/orunconstitutional against the provisions of the Federal Constitution and/or against Public Policy and void;

(iv) a declaration that the Settlement Agreement is illegal and ultra vires the Danaharta Act and/or the FederalConstitution and is void and unenforceable pursuant to S.24 of the Contracts Act 1950 inter alia as beingagainst Public Policy;

(v) a declaration that all acts and deeds carried out and all agreements executed by Danaharta is illegal andunenforceable;

(vi) an order that all contracts, agreements, transfers, conveyances, dealings, acts or deeds whatsoever carried outand executed by Danaharta hereby declared as null and void and set aside;

(vii) all necessary and fit orders and directions as may be required to give full effect to the aforesaid declarationsand orders;

(viii) damages to be assessed;

(ix) aggravated and exemplary damages to be assessed;

(x) interest at the rate of 8.0% per annum on all sums adjudged to be paid by the respective Defendants to thecounterclaim to TSDTR from the date such loss and damage was incurred to the date of full payment;

(xi) costs.

In July 2006, the TM Group’s solicitors filed applications on behalf of the Company/TESB and Celcom/TRI respectivelyto strike out the counterclaim. Both applications were dismissed on 28 August 2007 with costs. The Company/TESBappeal against the dismissal is fixed for hearing on 16 July 2008 and Celcom/TRI appeal is fixed for hearing on 26September 2008.

TSDTR has also applied to re-amend the counterclaim to include 14 additional defendants, 11 of whom are present orformer directors/officers of the TM Group. This application is fixed for hearing on 14 March 2008. The TM Group isopposing it on the grounds it is, amongst others, frivolous and an abuse of the process of court.

The Directors, based on legal advice received, are of the view that the crystallisation of liability from the above is remote.

42. CONTINGENT LIABILITIES (UNSECURED) (continued)(i) In July 2006, Celcom was served with a Writ of Summons and Statement of Claim by the Plaintiff, Dato’ Saizo Abdul

Ghani (trading under the name and style of Airtime Telecommunication). The Plaintiff seeks against Celcom andKamsani bin Hj Ahmad (Kamsani), an employee of Celcom at the material time, general damages in the sum ofRM15.0 million for the alleged libel and breach of contract, a further sum of RM15.0 million in exemplary andaggravated damages for the alleged libel and an injunction to prevent Celcom and Kamsani from distributing orpublishing any letters or content similar thereto, interest and costs.

A Memorandum of Appearance and a Statement of Defence was filed on 7 July 2006 and 21 July 2006 respectivelyon behalf of Celcom and Kamsani (Defendants). On 28 August 2006, the Defendants filed a striking out applicationand on 17 May 2007, the Court dismissed the striking out application. Notice of appeal to the Judge in Chamberswas filed by the Defendants. Subsequently, on 13 September 2007, the Court allowed the Defendants’ appeal withcosts. On 11 October 2007, the Plaintiff filed a notice of appeal to the Court of Appeal against the whole of theCourt’s decision. No date has been fixed for the appeal.

The Directors, based on legal advice, are of the view that the Defendants have a reasonably good chance of successin defending the claims by the Plaintiff.

(j) On 6 July 2006, Celcom was served with a Writ of Summons and Statement of Claim by the Plaintiff, Asmawi binMuktar (trading under the name and style of GM Telecommunication & Trading). The Plaintiff seeks against Celcomand Kamsani, general damages in the sum of RM10.0 million for the alleged libel and breach of contract, a furthersum of RM9.0 million in exemplary and aggravated damages for the alleged libel and an injunction to preventCelcom and Kamsani from distributing or publishing any letters or content similar thereto, and interest and costs.

A Memorandum of Appearance and a Statement of Defence was filed on 7 July 2006 and 21 July 2006 respectivelyon behalf of Celcom and Kamsani (Defendants). On 28 August 2006, the Defendants filed a striking out applicationand on 22 February 2007, the Court dismissed the striking out application. Notice of appeal to the Judge inChambers was filed by the Defendants. On 17 September 2007, the Court dismissed the Defendants’ appeal withcosts. On 11 October 2007, the Defendants filed a notice of appeal to the Court of Appeal against the whole of theCourt’s decision. No date has been fixed for the appeal.

The Plaintiff has filed an application to amend its Writ of Summons and Statement of Claim and the said applicationis fixed for hearing on 26 February 2008.

The Directors, based on legal advice, are of the view that the Defendants have a reasonably good chance of successin defending the claims by the Plaintiff.






42. CONTINGENT LIABILITIES (UNSECURED) (continued)(k) TRI filed a claim against TSDTR, Bistamam Ramli and Dato’ Lim Kheng Yew (Defendants), being former directors of

TRI for the recovery of a total sum of RM55.8 million which was paid to the Defendants as compensation for lossof office and incentive payment and also the return of 2 luxury vehicles which were transferred to the first 2Defendants.

On 18 September 2006, TRI was served with a copy of the first and second Defendants’ Defence and Counterclaim.This matter is fixed for hearing on 2, 3, 4 and 5 March 2009.

The Directors have been advised that TRI has good prospect of success in respect of the claim.

(l) On 26 November 2007, the Company, Celcom and TESB (collectively referred to in this paragraph (l) as TM Group)had been served with a Writ of Summons and Statement of Claim in respect of a suit filed by Mohd Shuaib Ishak(MSI). MSI is seeking from the TM Group and 11 others (including the former and existing directors of TM Group)jointly and/or severally, inter alia, the following:

(i) a Declaration that the Sale and Purchase Agreement dated 28 October 2002 between Celcom and the Company(or TESB) for the acquisition by Celcom of the shares in TM Cellular Sdn Bhd, and all matters undertakenthereunder including but not limited to the issuance of shares by Celcom are illegal and void and of no effect;

(ii) a Declaration that all purchases of shares in Celcom made by TESB and/or the Company and/or parties actingin concert with them with effect from and including the date of the Notice of the Mandatory Offer dated 3 April2003 issued by Commerce International Merchant Bankers Berhad (now known as CIMB) are illegal and voidand of no effect;

(iii) all necessary and fit orders and directions as may be required to give effect to the aforesaid Declarations asthe Court deemed fit including but not limited to directions for the rescission of all transfers of shares ofCelcom made after the Notice of Mandatory Offer for shares in Celcom dated 3 April 2003;

(iv) that the Company by itself, its servants and agents be restrained from giving effect to or executing any of theproposals relating to the proposed demerger of the mobile and fixed line businesses of the TM Group; and

(v) various damages to be assessed.

The TM Group has as of 30 November 2007 obtained leave to enter conditional appearance and subsequently on 17 December 2007, TM Group filed the relevant applications to strike out the suit. All of the striking out applicationshave been fixed for mention on 15 May 2008.

The Directors, based on legal advice, are of the view that claims made by MSI are not sustainable and accordinglywill take steps to strike out the action.

(m) On 15 November 2007, PT Excelcomindo Pratama Tbk (XL) received a notice letter from KPPU (the Commission forFair Business Practices) concerning the investigation on potential cartelistic practices allegedly involving GSMoperators in Indonesia in relation to the perceived price SMS charges. If XL is found guilty of price fixing, based onArticle 47 of Law No. 5 of 1999 concerning Anti Monopolistic Practices and Unfair Business Competition (the AntiMonopoly Law), XL may be ordered to amend the agreement that forms the basis of existing prices and to paycertain fines and other sanctions as deemed enforceable by the Anti Monopoly Law.

The investigation is still in process and consequently, the Directors are of the view that the outcome cannot bedetermined reliably.

42. CONTINGENT LIABILITIES (UNSECURED) (continued)Apart from the above, the Directors are not aware of any other proceedings pending against the Company and/or itssubsidiaries or of any facts likely to give rise to any proceedings which might materially affect the position or businessof the Company and/or its subsidiaries.

There were no other contingent liabilities or material litigations or guarantees other than those arising in the ordinarycourse of the business of the Group and the Company and on these no material losses are anticipated.

43. SIGNIFICANT RELATED PARTY DISCLOSURESThe related party transactions of the Company comprise mainly transactions between the Company and its subsidiaries,jointly controlled entities and associates namely the following:

Celcom (Malaysia) Berhad Telekom Research & Development Sdn BhdDialog Telekom PLC Telekom Sales and Services Sdn BhdFiberail Sdn Bhd Telekom Smart School Sdn BhdGITN Sdn Berhad TMF Autolease Sdn BhdMeganet Communications Sdn Bhd TMF Services Sdn BhdMenara Kuala Lumpur Sdn Bhd TM Global IncorporatedMobileOne Limited* TM Info-Media Sdn BhdPT Excelcomindo Pratama Tbk TM International (Bangladesh) LimitedRebung Utama Sdn Bhd TM International (L) LimitedSunShare Investments Ltd# TM International BerhadTelekom Applied Business Sdn Bhd TM Net Sdn BhdTelekom Enterprise Sdn Bhd TM Payphone Sdn Bhd (now known as Pernec Paypoint Sdn Bhd)Telekom Malaysia (Hong Kong) Limited Universiti Telekom Sdn BhdTelekom Malaysia (S) Pte Ltd VADS BerhadTelekom Malaysia (UK) Limited VADS e-Services Sdn BhdTelekom Malaysia (USA) Inc VADS Solutions Sdn BhdTelekom Multi-Media Sdn Bhd

* An associate of the Company held through SunShare Investments Ltd# A jointly controlled entity of the Company

The related party transactions with associates also include transactions between Celcom (Malaysia) Berhad andMobileOne Limited and its associates, namely Sacofa Sdn Bhd and C-Mobile Sdn Bhd and between PT ExcelcomindoPratama Tbk and MobileOne Limited.

All related party transactions were entered into in the normal course of business and at prices available to third partiesor at negotiated terms.

Khazanah Nasional Berhad (Khazanah) is a major shareholder with 36.14% equity interest and is a related party of theCompany.






43. SIGNIFICANT RELATED PARTY DISCLOSURES (continued)Key management personnel are the persons who have authority and responsibility for planning, directing and controllingthe activities of the Company or the Group either directly or indirectly. Key management personnel of the Company arethe directors (executive and non-executive) of the Company and heads or senior management officers who report directlyto the Group Chief Executive Officer whereas the key management personnel of the Group also includes all GroupExecutive Committee members.

Whenever exist, related party transactions also includes transaction with entities that are controlled, jointly controlled orsignificantly influenced directly or indirectly by any key management personnel or their close family members.

In addition to related party transactions and balances mentioned elsewhere in the financial statements, set out beloware significant related party transactions and balances which were carried out on terms and conditions negotiatedamongst the related parties:


2007 2006 2007 2006RM RM RM RM

(a) Sales of goods and services– Subsidiaries

– telecommunication related services — — 469.9 947.2– lease/rental of buildings and vehicles — — 45.2 46.1– other income* — — 20.7 16.7– less waiver/allowance — — (61.1) (3.2)

– Associates– telecommunication related services 52.2 15.6 11.7 8.5

* Included management fees, royalties,charges for security, shared services, training and related activities.

(b) Dividend and interest income– Subsidiaries — — 257.4 150.4– Jointly controlled entity — — 71.2 —

(c) Purchases of goods and services– Subsidiaries

– telecommunication related services — — 578.0 273.1– lease/rental of buildings — — 52.4 52.4– maintenance of vehicles and buildings — — 186.2 —– other expenses — — 118.8 140.2

– Associates– telecommunication related services 46.0 21.2 10.3 3.1

43. SIGNIFICANT RELATED PARTY DISCLOSURES (continued)The Group The Company

2007 2006 2007 2006RM RM RM RM

(d) Finance cost– Subsidiaries — — 262.2 262.8

(e) Key management compensation– Short term employee benefits

– Fees 0.7 0.8 0.3 0.4– Salaries, allowances and bonus 9.1 6.6 7.3 5.1– Contribution to Employees Provident Fund

(EPF) 1.5 1.0 1.2 0.8– Estimated money value of benefits 0.7 0.4 0.4 0.2– Other staff benefits 0.6 0.2 0.5 0.2

– Share-based payment– ESOS expense 1.0 0.9 0.9 0.8

Included in key management compensationis the Directors’ remuneration (whetherexecutive or otherwise) as disclosed in note 5(b) to the financial statements

(f) Year-end balances arising fromsales/purchases of goods/services

(i) Receivables from related parties– Subsidiaries — — 340.5 589.7– Associates 33.8 11.9 18.5 8.2

(ii) Payables to related parties– Subsidiaries — — 339.8 212.1– Associates 21.1 7.0 5.8 3.0

The receivables from related parties above arise mainly from sale transactions and have credit terms of 30 to 90days. The receivables are unsecured and interest free.

The payables to related parties above arise mainly from purchase transactions and have credit terms of 30 to 90days. The payables are unsecured and interest free.






43. SIGNIFICANT RELATED PARTY DISCLOSURES (continued)The Group The Company

2007 2006 2007 2006RM RM RM RM

(g) Loans and advances extended torelated parties

(i) Loans and advances to subsidiariesAt 1 January — — 8,655.4 8,797.7Advanced during the year — — 482.2 1,113.3Repayments during the year — — (956.1) (1,043.1)Foreign exchange differences — — 24.8 (9.9)Transfer of property, plant and equipment — — 19.2 —Conversion of advances into

paid-up capital — — — (13.2)Adjustment — — — (65.9)Waiver/allowances — — (0.2) (131.5)Interest charged — — 6.6 8.0

At 31 December (note 24) — — 8,231.9 8,655.4

(ii) Advances to associatesAt 1 January 8.9 8.9 — 1.1Allowances (8.9) — — (1.1)

At 31 December — 8.9 — —

(iii) Loans to key management personnelof the CompanyAt 1 January — — 0.3 0.4Repayments during the year — — (0.1) (0.1)Interest charged — — # #Interest received — — # #

At 31 December — — 0.2 0.3

Total loans and advances torelated partiesAt 1 January 8.9 8.9 8,655.7 8,799.2Advanced during the year — — 482.2 1,113.3Repayments during the year — — (956.2) (1,043.2)Foreign exchange differences — — 24.8 (9.9)Transfer of property, plant and equipment — — 19.2 —Conversion of advances into

paid-up capital — — — (13.2)Adjustment — — — (65.9)Waiver/allowances (8.9) — (0.2) (132.6)Interest charged — — 6.6 8.0

At 31 December — 8.9 8,232.1 8,655.7

# Amount less than RM0.1 million

44. SIGNIFICANT EVENT DURING THE YEAROn 28 September 2007, the Company announced the proposed demerger of the Group to create 2 separate entities withdistinct business strategies and aspirations (Proposed Demerger) and the proposed listing of the entire issued and paid-up ordinary share capital of TM International Berhad (TM International) on the Main Board of Bursa Malaysia SecuritiesBerhad (Bursa Securities) (Proposed Listing).

The Company has further announced on 10 December 2007, that the Board of Directors has approved the final terms ofthe Proposed Demerger which comprises the proposed internal restructuring of the Group to group the assets for themobile and non-Malaysian businesses under TM International and the assets for the fixed line voice, data and broadbandbusinesses under the Company (which includes the transfer of the 3G Spectrum Assignment from the Company toCelcom (Malaysia) Berhad) (Proposed Internal Restructuring), and the proposed distribution by the Company to theEntitled Shareholders of the entire holding of and rights to ordinary shares of RM1.00 each in TM International (TMInternational Shares) (Proposed Distribution).

Accordingly, the Company had, on the same date, entered into a Demerger Agreement with its wholly owned subsidiaries,Telekom Enterprise Sdn Bhd, TM International, Celcom (Malaysia) Berhad and Celcom Transmission (M) Sdn Bhd to giveeffect to the Proposed Internal Restructuring. Following the Proposed Internal Restructuring, the Company proposes todistribute its entire holdings in and rights to TM International Shares to the entitled shareholders of the Company(Proposed Distribution). The entire issued and paid-up ordinary share capital of TM International is proposed to be listedon the Main Board of Bursa Securities.

On 10 December 2007, the Board of Directors also proposed the following:

(i) to obtain a shareholders’ mandate for the issuance of up to 10.0% of the share capital of TM International (ProposedShareholders' Mandate); and

(ii) to have in place an employees’ share option scheme for eligible employees and Executive Director(s) of the Group(Proposed Option Scheme).

The Board of Directors has also approved a payment of a special gross dividend of 65.0 sen per share less tax of 26.0%in respect of the year ended 31 December 2007, to the shareholders of the Company. The special net dividend of 48.1 sen per share amounting to RM1,654.5 million was paid on 31 January 2008.






44. SIGNIFICANT EVENT DURING THE YEAR (continued)The Proposals are subject to the following:

(i) approval of the Minister of Finance, Incorporated for the Proposed Internal Restructuring and Proposed Distribution,which was obtained on 22 January 2008;

(ii) approval of the Securities Commission (SC) and SC (on behalf of the Foreign Investment Committee (FIC)) for theProposed Demerger, Proposed Listing and issuance of TM International Shares pursuant to the ProposedShareholders’ Mandate, which was obtained on 30 January 2008 subject to certain conditions as stipulated in ourannouncement to Bursa Securities on 4 February 2008;

(iii) approval of Bursa Securities for the Proposed Listing, and listing of and quotation for the TM International Sharesto be issued pursuant to the Proposed Shareholders’ Mandate;

(iv) approval of the Malaysian Communications and Multimedia Commission for the transfer of the 3G SpectrumAssignment under the Proposed Internal Restructuring, which was obtained on 21 February 2008;

(v) approval of the Company’s shareholders, which will be sought at the Company's Extraordinary General Meeting(EGM) to be held on 6 March 2008;

(vi) approval of the Group’s creditors/lenders (where applicable) for the Proposed Demerger;

(vii) approval of the Group’s counterparties with respect to shareholders’ agreements and joint venture agreements(where applicable) for the Proposed Demerger; and

(viii) approvals/consents of any other relevant authorities, if required.

Further to the above, the Company is also seeking the shareholders’ approval at the EGM for the Employees ProvidentFund Board (EPF), the Company’s major shareholder to subscribe up to 30.0% of the number of new TM InternationalShares which may be made available and issued under the Proposed Shareholders’ Mandate.

Consequent to the Proposed Option Scheme, which is subject to the shareholders’ approval and approval of BursaSecurities for the listing of and quotation for the Company's Shares, the Company also proposes to grant options to Dato’Sri Abdul Wahid Omar, the Group Chief Executive Officer and Director, and an employee, Mohd Azizi Rosli, son of RosliMan, a Director of the Company (Proposed Grant of Options). The Proposed Grant of Options is subject to theshareholders’ approval at the forthcoming EGM.

Barring any unforeseen circumstances, the Proposals are expected to complete by end of the second quarter of 2008.The proposed issuance of TM International Shares under the Proposed Shareholders’ Mandate (if implemented) will beimplemented over the Mandate Period.

There were no other significant events during the year that have not been reflected in the audited financial statements.

45. SIGNIFICANT SUBSEQUENT EVENTS(a) Islamic Sale and Leaseback Transaction of RM1,000.0 million

On 2 January 2008, the Company entered into the conditional Sale and Purchase Agreements and Master IjarahAgreement with Menara ABS Berhad (MAB) as well as a Supplemental Agreement to the Sale and PurchaseAgreement for Menara Celcom dated 28 August 2007, in relation to the sale and leaseback transaction as mentionedin note 29 to the financial statements, for a total consideration of RM1,000.0 million.

The sale and leaseback that involved the issuance of RM1,000.0 million Islamic Asset Backed Sukuk Ijarah by MABwas completed on 15 January 2008. MAB accordingly issued 3 classes of Sukuk: Class A totalled RM345.0 million;Class B totalled RM155.0 million, while Class C totalled RM500.0 million. Rating Agency Malaysia Bhd has ratedClass A and B, with Class C being un-rated.

(b) Proposed Acquisition by TM International Berhad (TM International) and Indocel Holding Sdn Bhd (Indocel), bothwholly owned subsidiaries of the Company, from Khazanah Nasional Berhad (Khazanah) of Equity Interests inSunShare Investments Ltd (SunShare) and PT Excelcomindo Pratama Tbk (XL) (Proposed Acquisition)On 6 February 2008, TM International and Indocel had entered into a Sale and Purchase Agreement (SPA) withKhazanah (collectively referred to as the “Parties”) to acquire all of Khazanah’s equity interests in SunShare and XLfor an aggregate purchase consideration of RM1,580.0 million which will be satisfied through the issuance of newordinary shares of RM1.00 each in TM International under the Proposed Acquisition (Consideration Shares).

If the Proposed Demerger becomes unconditional in accordance with the terms and conditions of the DemergerAgreement, Khazanah’s equity interest in TM International after the Proposed Demerger would increase by morethan 2.0% from 34.75% to 37.81% (based on Khazanah’s shareholdings in the Company as at 31 January 2008adjusted for effects of the Proposed Option Scheme) as a result of the Proposed Acquisition. In accordance withSection 6, Part II of the Malaysian Code on Take-Overs and Mergers, 1998 (Code), Khazanah would then be requiredto carry out a mandatory take-over offer to acquire the remaining voting shares in TM International not held byKhazanah.

Consequently, on 15 February 2008, an application to the Securities Commission (SC) had been made for anexemption for Khazanah under Practice Note 2.9.1 of the Code, from the obligation to carry out a mandatory take-over offer to acquire the remaining voting shares in TM International not held by Khazanah pursuant to the issuanceof new TM International Shares under the Proposed Acquisition (Proposed Exemption). The SC had through its letterdated 18 February 2008, stated that it will consider the Proposed Exemption upon various conditions being met.

The Proposed Acquisition is subject to the following:

(i) approval of the SC;

(ii) approval of the SC (on behalf of the Foreign Investment Committee (FIC));

(iii) approval of Bursa Securities for the listing of and quotation for the Consideration Shares on the Main Boardof Bursa Securities in conjunction with the Proposed Listing (if applicable);

(iv) approval of the Company’s shareholders, which will be sought at the Company’s Extraordinary General Meeting(EGM) to be held on 6 March 2008;

(v) approval of the TM International Group’s creditors/lenders (where applicable); and

(vi) approvals/consents of any other relevant authorities.

Applications to the SC and SC (on behalf of the FIC) were made on 22 February 2008.






45. SIGNIFICANT SUBSEQUENT EVENTS (continued)(b) Proposed Acquisition by TM International Berhad (TM International) and Indocel Holding Sdn Bhd (Indocel), both

wholly owned subsidiaries of the Company, from Khazanah Nasional Berhad (Khazanah) of Equity Interests inSunShare Investments Ltd (SunShare) and PT Excelcomindo Pratama Tbk (XL) (Proposed Acquisition) (continued)In addition, the Proposed Acquisition is subject to the Proposed Exemption being approved by the SC and theCompany’s shareholders at the Company’s EGM.

Barring any unforeseen circumstances, the Proposed Acquisition is expected to be completed by the end of thesecond quarter of 2008.

(c) Other Significant Subsequent Events(i) On 4 February 2008, Celcom was served with a sealed Originating Summons (Summons) by Mohd Shuaib Ishak

(MSI) seeking leave to bring a derivative action in Celcom’s name under Section 181A(1) of the Companies Act1965 (the Proposed Action).

The Proposed Action is against, inter alia, the former and existing directors of Celcom and the Company forfailing to obtain the consent of DeTeAsia Holding GmbH (DeTeAsia) pursuant to the Amended and RestatedAgreement (ARSA) dated 4 April 2002 with DeTeAsia prior to Celcom entering into the Sale and PurchaseAgreement dated 28 October 2002 with the Company for the acquisition by Celcom of the shares in TM CellularSdn Bhd (now known as Celcom Mobile Sdn Bhd).

MSI alleges that the directors are liable for damages calculated by reference to the difference between the BuyOut Offer price of RM7.00 per Celcom’s share under the ARSA and the price of RM2.75 per Celcom’s shareunder the Mandatory General Offer undertaken by the Company through Telekom Enterprise Sdn Bhd inrespect of Celcom. The Summons has been fixed for hearing on 22 April 2008.

The Directors are advised by its solicitors that it has reasonably good prospects of resisting the Summons andwill take vigorous steps to defend the same.

(ii) On 25 January 2008, PT Excelcomindo Pratama Tbk (XL) through its wholly owned subsidiary, ExcelcomindoFinance Company BV bought back the USD350.0 million Bond at a price of 100.0% of nominal value.

(iii) On 18 January 2008, XL entered into a credit agreement amendment with a foreign bank as follows:

– to amend the availability period of an existing credit arrangement to 31 August 2008 and automaticallyextend for another 6 months period unless otherwise amended.

– to add bridging loans facility to retire existing USD bonds and/or other debt amounting to USD110.0 millionand a maximum of IDR1,000.0 billion (full amount), which can be drawdown in USD and IDR. The facility issubject to floating rate of interest at monthly intervals of Sertifikat Bank Indonesia (SBI) rate plus 1.10%margin per annum.

On 22 January 2008, XL made drawdown on this credit facility amounting to IDR1,000.0 billion (full amount).

45. SIGNIFICANT SUBSEQUENT EVENTS (continued)(c) Other Significant Subsequent Events (continued)

(iv) In January 2008, XL undertook further financing and hedging activities as follows:

– made drawdowns on credit facilities amounting to IDR600.0 billion (full amount) and USD50.0 million.

– entered into a credit facility agreement and made drawdown amounting to USD50.0 million whereby XL willpay a floating rate of interest at quarterly intervals of 3 months SIBOR plus 1.75% margin per annum. Theloan will mature 1 year from the first drawdown date.

– entered into a credit facility agreement of USD50.0 million whereby XL will pay a floating rate of interest atquarterly intervals of 3 months LIBOR plus 1.20% margin per annum. The loan will mature 1 year from thefirst drawdown date.

– withdrew a credit facility amounting to IDR700.0 billion (full amount).

– entered into a foreign currency contract to hedge the payment of quarterly interest of a long term loan inUSD amounting to USD97.5 million.

– terminated one of the forward foreign currency contracts amounting to USD25.0 million used to hedge thepayment of long term loan in USD.

There were no other material events subsequent to the end of the year that have not been reflected in the auditedfinancial statements.

46. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIESThe main risks arising from the Group’s financial assets and liabilities are foreign exchange, interest rate, credit andliquidity risk. The Group’s overall risk management seeks to minimise potential adverse effects of these risks on thefinancial performance of the Group.

The Group has established risk management policies, guidelines and control procedures to manage its exposure tofinancial risks. Hedging transactions are determined in the light of commercial commitments. Derivative financialinstruments are used only to hedge underlying commercial exposures and are not held for speculative purposes.

Foreign Exchange RiskThe foreign exchange risk of the Group predominantly arises from borrowings denominated in foreign currencies. TheGroup has long dated and cross-currency swaps that are primarily used to hedge selected long term foreign currencyborrowings to reduce the foreign currency exposures on these borrowings. The main currency exposure is US Dollar.

The Group also has subsidiaries and associates operating in foreign countries, which generate revenue and incur costsdenominated in foreign currencies. The main currency exposures are Sri Lanka Rupee, Bangladesh Taka and IndonesianRupiah.

The Group’s foreign exchange objective is to achieve the acceptable level of foreign exchange fluctuation on the Group’sassets and liabilities and manage the consequent impact to the Income Statement. To achieve this objective, the Grouptargets a composition of currencies based on assessment of the existing exposure and desirable currency profile. Toobtain this composition, the Group uses various types of hedging instruments such as cross-currency swaps as well asmaintaining funds in foreign currencies at appropriate levels to support operating cash flows requirement.






46. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)Interest Rate RiskThe Group has cash and bank balances and deposits placed with creditworthy licensed banks and financial institutions.The Group manages its interest rate risk by actively monitoring the yield curve trend and interest rate movement for thevarious investment classes.

The Group’s debts includes bank overdrafts, bank borrowings, bonds, notes and debentures. The Group’s interest raterisk objective is to manage the acceptable level of rate fluctuation on the interest expense. In order to achieve thisobjective, the Group targets a composition of fixed and floating debt based on assessment of its existing exposure anddesirable interest rate profile. To obtain this composition, the Group uses various types of hedging instruments such asinterest rate swaps and range accrual swaps.

Credit RiskFinancial assets that potentially subject the Group to concentrations of credit risk are primarily trade receivables, cashand bank balances, marketable securities and financial instruments used in hedging activities.

Due to the nature of the Group’s business, customers are mainly segregated into business and residential. The Grouphas no significant concentration of credit risk due to its diverse customer base. Credit risk is managed through theapplication of credit assessment and approval, credit limit and monitoring procedures. Where appropriate, the Groupobtains deposits or bank guarantees from customers.

The Group places its cash and cash equivalents and marketable securities with a number of creditworthy financialinstitutions. The Group’s policy limits the concentration of financial exposure to any single financial institution.

All hedging instruments are executed with creditworthy financial institutions with a view to limiting the credit riskexposure of the Group. The Group, however, is exposed to credit-related losses in the event of non-performance bycounterparties to financial derivative instruments, but does not expect any counterparties to fail to meet their obligations.

Liquidity RiskIn the management of liquidity and cash flow risk, the Group monitors and maintains a level of cash and cash equivalentsdeemed adequate by management to finance the Group’s operations and mitigate the effects of fluctuations in cashflows. Due to the dynamic nature of the underlying business, the Group aims at maintaining flexibility in funding bykeeping both committed and uncommitted credit lines available.

47. INTEREST RATE RISKThe table below summarises the Group's and the Company's exposure to interest rate risk. Included in the tables are theGroup's and the Company's financial assets and liabilities at carrying amounts, categorised by the earlier of repricing orcontractual maturity dates except for borrowings and amount due from subsidiaries with floating interest rates. These arerepriced within 1 year or less and have been shown to reflect the maturity dates. The off-balance-sheet gap representsthe net notional amounts of all interest rate sensitive derivative instruments. Sensitivity to interest rates arises frommismatches in the repricing dates, cash flows and other characteristics of assets and their corresponding liability funding.

383



47. INTEREST RATE RISK (continued)Maturing or repriced (whichever is earlier) Balances

More Total Non- under1 year or >1 - 2 >2 - 3 >3 - 4 >4 - 5 than interest interest Islamic

W.A.R.F.* less years years years years 5 years sensitive sensitive principles TotalRM RM RM RM RM RM RM RM RM RM

The Group

2007Financial AssetsInvestments — — — — — — — — 138.9 — 138.9Staff Loans and Other

Long Term Receivables– balances under Islamic

principles — — — — — — — — — 419.9 419.9– non-interest sensitive — — — — — — — — 60.1 — 60.1– fixed interest rate 4.00% 0.1 5.0 3.8 6.6 9.7 63.0 88.2 — — 88.2Trade and Other

Receivables (excludingshort term staff loans) — — — — — — — — 4,341.9 — 4,341.9

Short Term Investments– non-interest sensitive — — — — — — — — 177.6 — 177.6– fixed interest rate 4.83% 200.5 — — — — — 200.5 — — 200.5Cash and Bank Balances– balances under Islamic

principles — — — — — — — — — 785.5 785.5– non-interest sensitive — — — — — — — — 612.6 — 612.6– fixed interest rate 4.13% 2,773.7 — — — — — 2,773.7 — — 2,773.7

Total 2,974.3 5.0 3.8 6.6 9.7 63.0 3,062.4 5,331.1 1,205.4 9,598.9

Financial LiabilitiesBorrowings– balances under Islamic

principles — — — — — — — — — 3,369.6 3,369.6– non-interest sensitive — — — — — — — — 4.8 — 4.8– floating interest rate 5.67% 150.5 — 1,258.7 39.1 364.6 1,601.6 3,414.5 — — 3,414.5– fixed interest rate 8.10% 1,503.5 6.9 497.5 113.0 540.6 2,474.0 5,135.5 — — 5,135.5Customer Deposits — — — — — — — — 732.6 — 732.6Trade and Other Payables — — — — — — — — 6,702.7 — 6,702.7

Total 1,654.0 6.9 1,756.2 152.1 905.2 4,075.6 8,550.0 7,440.1 3,369.6 19,359.7




47. INTEREST RATE RISK (continued)Maturing or repriced (whichever is earlier)

More1 year or >1 - 2 >2 - 3 >3 - 4 >4 - 5 than

W.A.R.F.* less years years years years 5 yearsRM RM RM RM RM RM

The Group

On-balance-sheet interestsensitivity gap 1,320.3 (1.9) (1,752.4) (145.5) (895.5) (4,012.6)

Off-balance-sheet interestsensitivity gap — — — — — —

Total interest sensitivity gap 1,320.3 (1.9) (1,752.4) (145.5) (895.5) (4,012.6)

Maturing or repriced (whichever is earlier) BalancesMore Total Non- under

1 year or >1 - 2 >2 - 3 >3 - 4 >4 - 5 than interest interest IslamicW.A.R.F.* less years years years years 5 years sensitive sensitive principles Total

RM RM RM RM RM RM RM RM RM RM

The Group

2006Financial AssetsInvestments — — — — — — — — 226.7 — 226.7Staff Loans and Other



Receivables (excludingshort term staff loans)

– non-interest sensitive — — — — — — — — 3,350.2 — 3,350.2– floating interest rate 7.37% 50.7 — — — — — 50.7 — — 50.7Short Term Investments– non-interest sensitive — — — — — — — — 125.3 — 125.3– fixed interest rate 4.67% 194.8 — — — — — 194.8 — — 194.8Cash and Bank Balances– balances under Islamic

principles — — — — — — — — — 1,175.0 1,175.0– non-interest sensitive — — — — — — — — 705.2 — 705.2– fixed interest rate 4.14% 2,800.2 — — — — — 2,800.2 — — 2,800.2

Total 3,046.5 2.0 11.2 5.8 9.8 89.4 3,164.7 4,467.9 1,616.4 9,249.0

385






The Group

2006Financial LiabilitiesBorrowings– balances under Islamic

principles — — — — — — — — — 1,061.2 1,061.2– non-interest sensitive — — — — — — — — 5.0 — 5.0– floating interest rate 7.04% 724.9 5.5 — 611.2 127.2 972.1 2,440.9 — — 2,440.9– fixed interest rate 6.46% 409.5 119.1 1,329.7 529.1 25.9 6,165.5 8,578.8 — — 8,578.8Customer Deposits — — — — — — — — 718.9 — 718.9Trade and Other Payables — — — — — — — — 5,740.9 — 5,740.9

Total 1,134.4 124.6 1,329.7 1,140.3 153.1 7,137.6 11,019.7 6,464.8 1,061.2 18,545.7

On-balance-sheet interestsensitivity gap 1,912.1 (122.6) (1,318.5) (1,134.5) (143.3) (7,048.2)


Total interest sensitivitygap 1,912.1 (122.6) (1,318.5) (1,134.5) (143.3) (7,048.2)

* W.A.R.F. – Weighted Average Rate of Finance as at 31 December

The table below summarises the weighted average rate of finance as at 31 December by major currencies for each classof financial asset and liability:

2007 2006

USD RM USD RM

The Group

Financial AssetsStaff Loans — 4.00% — 4.00%Trade and Other Receivables

(excluding short term staff loans) — — 7.37% —Short Term Investments — 4.83% — 4.67%Cash and Bank Balances 4.75% 3.52% 4.90% 3.52%

Financial LiabilitiesBorrowings 6.28% 5.08% 6.47% 5.86%







The Company

2007Financial AssetsAmount Owing by

Subsidiaries, net ofallowances

– non-interest sensitive — — — — — — — — 8,090.0 — 8,090.0– floating interest rate 8.10% — — 31.2 — — — 31.2 — — 31.2– fixed interest rate 2.97% — 7.7 — — — 103.0 110.7 — — 110.7Investments — — — — — — — — 138.9 — 138.9Staff Loans and Other



Receivables (excludingshort term staff loans) — — — — — — — — 3,036.7 — 3,036.7

Short Term Investments– non-interest sensitive — — — — — — — — 175.9 — 175.9– fixed interest rate 4.83% 200.5 — — — — — 200.5 — — 200.5Cash and Bank Balances– balances under Islamic


Total 1,275.5 12.7 35.0 6.6 9.7 166.0 1,505.5 11,742.3 631.1 13,878.9

387






The Company


principles — — — — — — — — — 3,168.0 3,168.0– non-interest sensitive — — — — — — — — 4.8 — 4.8– floating interest rate 6.49% — — 495.8 — — 988.3 1,484.1 — — 1,484.1– fixed interest rate 7.88% — — 495.8 — — 4.5 500.3 — — 500.3Payable to Subsidiaries– fixed interest rate 5.25% — — — — — 1,652.5 1,652.5 — — 1,652.5Customer Deposits — — — — — — — — 590.2 — 590.2Trade and Other Payables — — — — — — — — 2,606.9 — 2,606.9

Total — — 991.6 — — 2,645.3 3,636.9 3,201.9 3,168.0 10,006.8

On-balance-sheet interestsensitivity gap 1,275.5 12.7 (956.6) 6.6 9.7 (2,479.3)


Total interest sensitivity gap 1,275.5 12.7 (956.6) 6.6 9.7 (2,479.3)







The Company

2006Financial AssetsAmount Owing by

Subsidiaries, net ofallowances

– non-interest sensitive — — — — — — — — 8,500.9 — 8,500.9– floating interest rate 8.87% — — 9.1 34.7 — — 43.8 — — 43.8– fixed interest rate 2.97% — — 7.7 — — 103.0 110.7 — — 110.7Investments — — — — — — — — 220.5 — 220.5Staff Loans and Other



Receivables (excludingshort term staff loans)

– non-interest sensitive — — — — — — — — 2,384.8 — 2,384.8– floating interest rate 7.37% 50.7 — — — — — 50.7 — — 50.7Short Term Investments– non-interest sensitive — — — — — — — — 123.6 — 123.6– fixed interest rate 4.67% 194.8 — — — — — 194.8 — — 194.8Cash and Bank Balances– balances under Islamic


Total 1,703.4 2.0 28.0 40.5 9.8 192.4 1,976.1 11,571.2 737.6 14,284.9

389






The Company


principles — — — — — — — — — 443.0 443.0– non-interest sensitive — — — — — — — — 5.0 — 5.0– floating interest rate 6.96% 534.6 — — 529.1 — 529.1 1,592.8 — — 1,592.8– fixed interest rate 7.87% — — — 529.1 — 534.1 1,063.2 — — 1,063.2Payable to Subsidiaries– fixed interest rate 5.67% — — — — — 4,747.0 4,747.0 — — 4,747.0Customer Deposits — — — — — — — — 590.3 — 590.3Trade and Other Payables — — — — — — — — 2,348.7 — 2,348.7

Total 534.6 — — 1,058.2 — 5,810.2 7,403.0 2,944.0 443.0 10,790.0

On-balance-sheet interestsensitivity gap 1,168.8 2.0 28.0 (1,017.7) 9.8 (5,617.8)


Total interest sensitivitygap 1,168.8 2.0 28.0 (1,017.7) 9.8 (5,617.8)

* W.A.R.F. - Weighted Average Rate of Finance as at 31 December




47. INTEREST RATE RISK (continued)The table below summarises the weighted average rate of finance as at 31 December by major currencies for each classof financial asset and liability:

2007 2006

USD RM USD RM

The Company

Financial AssetsAmount Owing by Subsidiaries, net of allowances 8.10% 2.97% 8.87% 2.97%Staff Loans — 4.00% — 4.00%Trade and Other Receivables

(excluding short term staff loans) — — 7.37% —Short Term Investments — 4.83% — 4.57%Cash and Bank Balances 5.33% 3.56% 5.31% 3.52%

Financial LiabilitiesBorrowings 6.86% — 7.35% —Payable to Subsidiaries 5.25% — 5.25% 5.91%

48. CREDIT RISKFor on-balance-sheet financial instruments, the main credit risk exposure has been disclosed elsewhere in the financialstatements.

Off-balance-sheet financial instrumentsThe Group and the Company are exposed to credit risk where the fair value of the contract is favourable, where thecounterparty is required to pay the Group or the Company in the event of contract termination. The following tablesummarises the favourable fair values of the contracts, indicating the credit risk exposure.


2007 2006 2007 2006

Contract Contract Contract Contractor notional or notional or notional or notional

principal Favourable principal Favourable principal Favourable principal Favourableamount fair value amount fair value amount fair value amount fair value


Long dated swap 988.4 208.6 1,058.1 201.0 988.4 208.6 1,058.1 201.0Cross-currency

swaps 257.0 7.1 — — — — — —Forward foreign

currency contracts 994.6 37.2 — — — — — —

Total 2,240.0 252.9 1,058.1 201.0 988.4 208.6 1,058.1 201.0

391



49. FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIESThe fair value of a financial instrument is assumed to be the amount at which the instrument could be exchanged orsettled between knowledgeable and willing parties in an arm's length transaction, other than in forced or liquidation sale.

Quoted market prices, when available, are used as the measure of fair values. However, for a significant portion of theGroup and the Company’s financial instruments, quoted market prices do not exist. For such financial instruments, fairvalues presented are estimates derived using the net present value or other valuation techniques. These techniques involveuncertainties and are significantly affected by the assumptions used and judgements made regarding risk characteristicsof various financial instruments, discount rates, estimates of future cash flows, future expected loss experience and otherfactors. Changes in assumptions could significantly affect these estimates and the resulting fair values.

(a) On-balance-sheetThe carrying amounts of the financial assets and liabilities of the Group and the Company at the balance sheet dateapproximated their fair values except as set out below:


2007 2006 2007 2006

Carrying Net Carrying Net Carrying Net Carrying Netamount fair value amount fair value amount fair value amount fair value


Financialassets

Investments 138.9 223.0 226.7 290.6 138.9 223.0 220.5 284.4Staff loans 89.5 72.2 119.0 110.0 88.2 70.9 119.0 110.0

Financialliabilities

Borrowings(excludingredeemablebonds) 8,554.8 8,558.3 8,024.7 8,255.5 1,989.2 2,036.6 2,661.0 2,821.4

Redeemablebonds/Payable tosubsidiaries — — 3,000.0 3,164.2 1,652.5 1,621.6 4,747.0 4,898.7

The above carrying amounts and net fair values of borrowings exclude swaps, which are disclosed in sub-note (b).




49. FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES (continued)(a) On-balance-sheet (continued)

Financial assetsThe fair value of publicly traded financial instruments is based on quoted market prices at the balance sheet date.In assessing the fair value of non-traded financial instruments, the Group uses a variety of methods and makesassumptions that are based on market conditions existing at each balance sheet date. Where allowances ofpermanent diminution in value or impairment, where applicable, is made in respect of any investment, the carryingamount net of allowance made is deemed to be a close approximation of its fair value.

The fair value of staff loans have been estimated by discounting the estimated future cash flows using the prevailingmarket rates for similar credit risks and remaining period to maturity. The fair value of staff loans is lower thancarrying amount at the balance sheet date as the Company and its subsidiaries charged interest rates on staff loansat below current market rates. The Directors consider the carrying amount fully recoverable as they do not intendto realise the financial asset via exchange with another counterparty but to hold it to contract maturity. Collateralsare taken for these loans and the Directors are of the opinion that the potential losses in the event of default willbe covered by the collateral values on individual loan basis.

For educational loans, amount owing by subsidiaries and associates and customer deposits which are mainlyinterest free and do not have fixed repayment terms, the carrying amounts recorded are anticipated to approximatetheir fair values at the balance sheet date.

Financial liabilitiesThe fair value of quoted bonds has been estimated using the respective quoted offer price. For unquoted borrowingswith fixed interest rate, the fair values have been estimated by discounting the estimated future cash flows usingthe prevailing market rates for similar credit risks and remaining period to maturity. For unquoted borrowings withfloating interest rate, the carrying values are generally reasonable estimates of their fair values.

The financial liabilities will be realised at their carrying values and not at their fair values as the Directors have nointention to settle these liabilities other than in accordance with their contractual obligations.

For all other short term on-balance-sheet financial instruments maturing within 1 year or are repayable on demand,the carrying values are assumed to approximate their fair values.

393



49. FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES (continued)(b) Off-balance-sheet

The financial derivative instruments are used to hedge foreign exchange and interest rate risks associated withcertain long term foreign currency borrowings. The contract notional principal amounts of the derivative and thecorresponding fair value adjustments are analysed as below:

2007 2006

Contract Contractor notional or notional

principal Net fair value principal Net fair valueamount Favourable Unfavourable amount Favourable Unfavourable

RM RM RM RM RM RM

The Group

Off-balance-sheet financial derivative instruments

Long dated swap 988.4 208.6 — 1,058.1 201.0 —Interest rate swaps 1,484.1 — (61.3) 1,058.1 — (55.0)Cross-currency swaps 257.0 7.1 — — — —Forward foreign

currency contracts 994.6 37.2 — — — —

The Company

Off-balance-sheet financial derivative instruments

Long dated swap 988.4 208.6 — 1,058.1 201.0 —Interest rate swaps 1,484.1 — (61.3) 1,058.1 — (55.0)

Fair values of financial derivative instruments are the present values of their future cash flows and are arrived atbased on valuations carried out by the Company’s bankers. Favourable fair value indicates amount receivable by theCompany if the contracts are terminated as at 31 December 2007 or vice versa.




50. LIST OF SUBSIDIARIES AS AT 31 DECEMBER 2007The subsidiaries are as follows:

Group’sEffective Interest Paid-up Capital

Name of Company 2007 2006 2007 2006 Principal ActivitiesMillion Million

Fiberail Sdn Bhd 54 54 RM15.8 RM15.8 Installation and maintenance of optic fibretelecommunication system in Malaysia andprovision of consultancy services in relation totelecommunications

GITN Sdn Berhad 100 100 RM50.0 RM50.0 Provision of managed network services andenhanced value added telecommunication andinformation technology services

Hijrah Pertama Berhad 100 — RM# RM– Special purpose entity(formerly known asHijrah PertamaSendirian Berhad)(formerly known asMalaysian LogisticsSdn Bhd)

Intelsec Sdn Bhd 100 100 RM3.0 RM3.0 Ceased operation

Mediatel (Malaysia) 100 100 RM# RM# Investment holdingSdn Bhd

Meganet — 70 RM– RM11.0 Provision of interactive multimedia communication Communications services and solutionSdn Bhd

Menara Kuala Lumpur 100 100 RM91.0 RM91.0 Management and operation of the telecom-Sdn Bhd munication and tourism tower of Menara Kuala

Lumpur

Mobikom Sdn Bhd 100 100 RM260.0 RM260.0 Provision/transmission of voice and data throughthe cellular system

Parkside Properties 100 100 RM0.1 RM0.1 DormantSdn Bhd

50. LIST OF SUBSIDIARIES AS AT 31 DECEMBER 2007 (continued)Group’s

Effective Interest Paid-up Capital


Rebung Utama Sdn Bhd 100 100 RM# RM# Special purpose entity

Tekad Mercu Berhad 100 100 RM# RM# Special purpose entity

Telekom Applied 100 100 RM1.6 RM1.6 Provision of software development and sale of Business Sdn Bhd software products

Telekom Consultancy 51 51 RM# RM# Ceased operationSdn Bhd

Telekom Enterprise 100 100 RM0.6 RM0.6 Investment holdingSdn Bhd

Telekom Malaysia-Africa 100 100 RM0.1 RM0.1 Investment holdingSdn Bhd

Telekom Malaysia 100 100 HKD18.5 HKD18.5 Provision of international telecommunication (Hong Kong) Limited** services

Telekom Malaysia (S) 100 100 SGD# SGD# Provision of international telecommunication Pte Ltd** services

Telekom Malaysia (UK) 100 100 STR# STR# Provision of international telecommunication Limited** services

Telekom Malaysia (USA) 100 100 USD3.5 USD3.5 Provision of international telecommunication Inc** services

Telekom Multi-Media 100 100 RM1.7 RM1.7 Investment holding and provision of interactive Sdn Bhd multimedia communication services and

solutions

Telekom Networks — 60 MKW– MKW350.0 Provision of telecommunication and related Malawi Limited** services in the Republic of Malawi

Telekom Payphone 100 100 RM9.0 RM9.0 Investment holdingSdn Bhd >









Telekom Research & 100 100 RM20.0 RM20.0 Provision of research and development activities Development Sdn Bhd in the areas of telecommunication and

multimedia, hi-tech applications and productsand services in related business

Telekom Sales and 100 100 RM14.5 RM14.5 Trading and rental of customer premises Services Sdn Bhd telecommunication equipment and provision of

management of customers care services

Telekom Technology 100 100 RM13.0 RM13.0 Ceased operationSdn Bhd

Telesafe Sdn Bhd > 100 100 RM4.0 RM4.0 Ceased operation

TM Cellular (Holdings) 100 100 RM0.1 RM0.1 DormantSdn Bhd

TM Global Incorporated 100 100 USD# USD# Investment holding

TM Facilities Sdn Bhd 100 100 RM2.3 RM2.3 Provision of facilities management services andproperty development activities

TM Info-Media Sdn Bhd 100 100 RM6.0 RM6.0 Provision of printing and publications services

TM International 100 100 USD# USD# Dormant(Cayman) Ltd

TM International Berhad 100 100 RM35.7 RM35.7 Investment holding and provision of telecom-munication and consultancy services on aninternational scale

TM Net Sdn Bhd 100 100 RM180.0 RM180.0 Content and application development for Internetservices

TM Payphone Sdn Bhd — 100 RM– RM65.0 Provision of national payphone network and (now known as Pernec related services

Paypoint Sdn Bhd)

Universiti Telekom 100 100 RM650.0 RM650.0 Managing and administering a private university Sdn Bhd known as Multimedia University




VADS Berhad 64.87 67.16 RM62.1 RM62.1 Provision of international and national managednetwork services for businesses andorganisations

Subsidiaries held through Telekom Enterprise Sdn Bhd

Celcom (Malaysia) Berhad 100 100 RM1,237.5 RM1,767.9 Provision of network capacity and services

Mobitel Sdn Bhd > 100 100 RM8.0 RM8.0 Dormant

Subsidiary held through Telekom Multi-Media Sdn Bhd

Telekom Smart School 51 51 RM15.0 RM15.0 Implementation of government smart school Sdn Bhd project, provision of multimedia education

systems and software, portal services andother related services

Subsidiary held through TM Info-Media Sdn Bhd

Cybermall Sdn Bhd 100 100 RM2.7 RM2.7 Ceased operation

Subsidiaries held through TM Facilities Sdn Bhd

TM Land Sdn Bhd 100 100 RM# RM# Property development activities

TMF Autolease Sdn Bhd 100 100 RM# RM# Provision of fleet management and services

TMF Services Sdn Bhd 100 100 RM# RM# Provision of facilities management services

Subsidiaries held through TM International Berhad

TM International (L) 100 100 USD78.4 USD78.4 Investment holdingLimited

Telekom Management 100 100 RM0.1 RM0.1 Provision of consultancy and engineering services Services Sdn Bhd in telecommunication and related area

TMI Mauritius Ltd## 100 100 USD# USD# Investment holding

G-Com Limited** 100 100 CED455.0 CED455.0 Investment holding

Telekom Malaysia 100 100 USD8.5 USD8.5 Provision of mobile telecommunication services International (Cambodia) in CambodiaCompany Limited









Subsidiary held through TMI Mauritius Ltd

TMI India Ltd ## 100 100 USD72.7 USD72.7 Investment holding

Subsidiaries held through TM International (L) Limited

Dialog Telekom PLC ## 84.81 89.62 SLR33,056.4^ SLR12,680.4^ Provision of mobile telecommunication services (formerly known as in Sri LankaDialog Telekom Limited)

TESS International Ltd 100 100 USD# USD# Dormant

TM International 70 70 BDT3,060.0 BDT3,060.0 Provision of mobile telecommunication services (Bangladesh) in BangladeshLimited**

TM International Lanka 100 100 SLR222.0^ SLR222.0^ Investment holding(Private) Limited##

Indocel Holding Sdn Bhd 100 100 RM0.1 RM0.1 Investment holding

Multinet Pakistan 89 78 PKR992.5 PKR992.5 Provision of cable television services, information (Private) Limited** technology (including software development),

telecommunication and multimedia services inPakistan

Subsidiary held through Indocel Holding Sdn Bhd

PT Excelcomindo 66.99 59.63 IDR709,000 IDR709,000 Provision of mobile telecommunication services Pratama Tbk## in Republic of Indonesia

Subsidiaries held through Dialog Telekom PLC

Dialog Broadband 84.81 89.62 SLR823.7^ SLR823.7^ Provision of infrastructure facilities for voice and Networks (Private) data communication systems, radio and television Limited broadcasting systems and mobile radio

communication systems and the provision oftelecommunication services in Sri Lanka




Subsidiaries held through Dialog Telekom PLC (continued)

Dialog Television (Private) 84.81 80.66 SLR#^ SLR#^ Provision of television broadcasting station and Limited television broadcasting network including cable (formerly known as and pay television transmissionAsset Media (Private)Limited) ##

Subsidiaries held through Dialog Television (Private) Limited

Communiq Broadband 84.81 80.66 SLR50.0^ SLR50.0^ Provision of information technology including Network (Private) data, content transmission services, audio visual Limited ## services and television programmes services

CBN Sat (Private) 84.81 80.66 SLR#^ SLR#^ Provisions of manufacturing, assembling, Limited ## importing and exporting of electronic consumer

products and audio visual goods

Subsidiaries held through PT Excelcomindo Pratama Tbk

Excel Phoneloan 66.99 59.63 EUR# EUR# Dormant818 BV

Excelcomindo Finance 66.99 59.63 EUR# EUR# Investment holdingCompany BV

GSM One (L) Limited 66.99 59.63 USD# USD# Dormant

GSM Two (L) Limited 66.99 59.63 USD# USD# Dormant

Subsidiary held through Universiti Telekom Sdn Bhd

Unitele Multimedia 100 100 RM1.0 RM1.0 Provision of training and related servicesSdn Bhd

Subsidiary held through Unitele Multimedia Sdn Bhd

MMU Creativista Sdn Bhd 100 100 RM# RM# Provision of digital video and film productionand post production services









Subsidiaries held through VADS Berhad

Meganet Communications 64.87 — RM11.0 RM– Provision of intelligent building and security Sdn Bhd systems integrated telecommunication and

technology solutions

VADS e-Services Sdn Bhd 64.87 67.16 RM1.0 RM1.0 Contact centre and related services

VADS Professional 64.87 67.16 RM# RM# Provision of personnel for contact centre servicesServices Sdn Bhd

VADS Solutions Sdn Bhd 64.87 67.16 RM1.5 RM1.5 Provision of system integration services

Subsidiary held through VADS e-Services Sdn Bhd

VADS Contact Centre 64.87 67.16 RM# RM# Provision of managed contact centre servicesServices Sdn Bhd

Subsidiaries held through Celcom (Malaysia) Berhad

Celcom Academy — 100 RM– RM# InactiveSdn Bhd+

Celcom Multimedia 100 100 RM# RM# Dormant(Malaysia) Sdn Bhd

Celcom Technology (M) 100 100 RM2.0 RM2.0 Provision of telecommunication value added Sdn Bhd services through cellular or other forms of

telecommunications network

Celcom Timur (Sabah) 80 80 RM7.0 RM7.0 Provision of fibre optic transmission networkSdn Bhd

Celcom Transmission 100 100 RM25.0 RM25.0 Provision of network transmission related services(M) Sdn Bhd

Celcom Trunk Radio 100 100 RM# RM# Ceased operation(M) Sdn Bhd

CT Paging Sdn Bhd++ 100 100 RM0.5 RM0.5 Provision of strategic and business development,management, administrative and supportservices and investment holding




Subsidiaries held through Celcom (Malaysia) Berhad (continued)

Technology Resources 100 100 RM# RM# Investment holdingIndustries Berhad

Celcom Mobile Sdn Bhd 100 100 RM1,565.0 RM1,565.0 Provision of mobile communication services,network services, application services andcontent

Alpha Canggih Sdn Bhd 100 100 RM# RM# Property investment

Subsidiary held through Celcom Transmission (M) Sdn Bhd

Fibrecomm Network 51 51 RM75.0 RM75.0 Provision of fibre optic transmission network (M) Sdn Bhd services

Subsidiaries held through Technology Resources Industries Berhad

Alpine Resources 100 100 RM2.5 RM2.5 InactiveSdn Bhd

Freemantle Holdings — 100 RM– RM13.5 Investment holding(M) Sdn Bhd+

Rego Multi-Trades 100 100 RM2.0 RM2.0 Dealing in marketable securitiesSdn Bhd

Technology Resources 100 100 RM# RM# InactiveManagement ServicesSdn Bhd

Technology Resources 100 100 RM# RM# Dormant(Nominees) Sdn Bhd

TR Components Sdn Bhd 100 100 RM# RM# Investment holding

TR International Limited** 100 100 HKD# HKD# Investment holding

Subsidiary held through TR Components Sdn Bhd

Aseania Plastics — 99 RM– RM0.3 InactiveSdn Bhd +






50. LIST OF SUBSIDIARIES AS AT 31 DECEMBER 2007 (continued)All subsidiaries are incorporated in Malaysia except the following:

Name of Company Place of Incorporation

CBN Sat (Private) Limited – Sri LankaCommuniq Broadband Network (Private) Limited – Sri LankaDialog Broadband Networks (Private) Limited – Sri LankaDialog Telekom PLC – Sri LankaDialog Television (Private) Limited – Sri LankaExcelcomindo Finance Company BV – NetherlandsExcel Phoneloan 818 BV – NetherlandsG-Com Limited – GhanaGSM One (L) Limited – Federal Territory, LabuanGSM Two (L) Limited – Federal Territory, LabuanMultinet Pakistan (Private) Limited – PakistanPT Excelcomindo Pratama Tbk – IndonesiaTelekom Malaysia (Hong Kong) Limited – Hong KongTelekom Malaysia (S) Pte Ltd – SingaporeTelekom Malaysia (UK) Limited – United KingdomTelekom Malaysia (USA) Inc – USATelekom Malaysia International (Cambodia) Company Limited – CambodiaTelekom Networks Malawi Limited – Republic of MalawiTESS International Ltd – Republic of MauritiusTM International (Bangladesh) Limited – BangladeshTM International (Cayman) Ltd – British West Indies, USATM International (L) Limited – Federal Territory, LabuanTM International Lanka (Private) Limited – Sri LankaTMI India Ltd – Republic of MauritiusTMI Mauritius Ltd – Republic of MauritiusTR International Limited – Hong Kong

# Amounts less than 0.1 million in their respective currency## Audited by a member firm of PricewaterhouseCoopers International Limited which is a separate and independent

legal entity from PricewaterhouseCoopers Malaysia** Audited by a firm other than member firm of PricewaterhouseCoopers International Limited> Undergoing members' voluntary winding up pursuant to Section 254(1) of the Companies Act, 1965 (CA) since

17 December 2007+ Dissolved during the year pursuant to members' voluntary winding up under Section 272(5) of the CA++ Inactive as at 31 December 2007^ Refers to stated capital. Pursuant to the new Companies Act, No. 7 of Sri Lanka, the concept of authorised and

paid-up share capital has been replaced with the concept of stated capital, effective from 3 May 2007. The statedcapital comprises the total amounts received in respect of the issue of shares. For accounting purposes, the sharepremium is also included and expenses relating to the issuance are deducted.

50. LIST OF SUBSIDIARIES AS AT 31 DECEMBER 2007 (continued)BDT Bangladesh TakaCED Ghanaian CediEUR Euro DollarHKD Hong Kong DollarIDR Indonesian RupiahMKW Malawi KwachaPKR Pakistani RupeeSGD Singapore DollarSLR Sri Lanka RupeeSTR Pound SterlingUSD US Dollar

During the year, the Group had disposed its entire 60.0% and 100.0% equity interest in Telekom Networks Malawi Limitedand TM Payphone Sdn Bhd respectively. Details as disclosed on note 3(II)(a) and (d) to the financial statements.

51. LIST OF JOINTLY CONTROLLED ENTITIES AS AT 31 DECEMBER 2007The jointly controlled entities are as follows:

Group’sEffective Interest

Name of Company 2007 2006 Principal Activities

SunShare Investments Ltd 51 51 Investment holding(sub-note a)

Jointly controlled entity held through TMI India Ltd

Spice Communications 39.2 49 Licensed mobile and cellular telecommunications service provider Limited in the state of Punjab and Karnataka in India


SunShare Investments Ltd – Federal Territory, LabuanSpice Communications Limited – India






51. LIST OF JOINTLY CONTROLLED ENTITIES AS AT 31 DECEMBER 2007 (continued)(a) The Group has an 80.0% interest in the ordinary shares of SunShare Investments Ltd (SunShare), a jointly controlled

entity incorporated in the Federal Territory of Labuan, which is an investment holding company. Notwithstanding theordinary shareholding, the economic benefit of the Group in SunShare is 51.0%.

In 2006, SunShare owned a 29.78% stake in an associate, MobileOne Limited (M1), a company incorporated inSingapore and listed on the Singapore Stock Exchange. M1 provides mobile and other related telecommunicationservices as well as development of mobile telecommunication products and services. During the year, the equityinterest has decreased to 29.69% following the issuance of shares under M1’s Employees’ Share Option Scheme.The dilution has no material effect to the results of the Group.

All jointly controlled entities have co-terminous financial year end with the Company.

52. LIST OF ASSOCIATES AS AT 31 DECEMBER 2007The associates are as follows:

Group’sEffective Interest


mySPEED.com Sdn Bhd — 16.22 Creating, implementing and operating e-business activities (sub-note a) including electronic commerce delivery services, multimedia

related activities and other computerised or electronic services

Sistem Iridium Malaysia 40 40 DormantSdn Bhd

Associates held through Telekom Multi-Media Sdn Bhd

Mahirnet Sdn Bhd 49 49 Development, management and marketing of educational productsoffered by local and overseas educational institutions electronically

Mutiara.Com Sdn Bhd 30 30 Provision of promotion of Internet-based communication services

Associates held through TM International Berhad

Samart Corporation Public 18.97 18.98 Design, implementation and installation of telecommunication Company Limited systems and the sale and distribution of telecommunication

equipment in Thailand

Samart I-Mobile Public 35.58 35.32 Mobile phone distributor accessories and bundled with content Company Limited and administration of the distribution channels for and (sub-note b) management of customer care and billing system of I900MHz

mobile phone

52. LIST OF ASSOCIATES AS AT 31 DECEMBER 2007 (continued)Group’s

Effective Interest


Associate held through TM International (L) Limited

Mobile Telecommunications 49 49 Planning, designing, installing, operating and maintaining a GSM Company of Esfahan cellular telecommunication network to customers in the province

of Esfahan, Iran

Associate held through Celcom (Malaysia) Berhad

Sacofa Sdn Bhd 20 20 Trade or business of a telecommunications infrastructure andservices company

Associate held through CT Paging Sdn Bhd

C-Mobile Sdn Bhd 67.15 — Setting up a distribution network of dealers and concept retailstores based on intellectual property rights owned by Celcom(Malaysia) Berhad

All associates are incorporated in Malaysia except the following:


Mobile Telecommunications Company of Esfahan – IranSamart Corporation Public Company Limited – ThailandSamart I-Mobile Public Company Limited – Thailand

All associates have co-terminous financial year end with the Company except for Mobile Telecommunications Companyof Esfahan with financial year end of 20 March.

(a) On 2 February 2007, the Company had entered into a share Sale and Purchase Agreement to sell its entire equityinterest of 16.22% in mySPEED.com Sdn Bhd to MY E.G. Services Berhad. The disposal was completed on 16 July 2007.

(b) TM International Berhad (TM International) held directly 24.42% equity interest in Samart I-Mobile Public CompanyLimited (SIM). TM International also held indirect equity interest in SIM of 11.16% (2006: 10.90%) by virtue of itsequity interest in Samart Corporation Public Company Limited.






53. CHANGES IN ACCOUNTING POLICIES AND RECLASSIFICATIONSThe comparative financial statements were restated to reflect the effects of changes in accounting policies during theyear as well as to conform with current year presentation as summarised below:

(a) Changes in accounting policies in the current yearThe following describes the impact of the new accounting standards adopted by the Group for the financial yearbeginning 1 January 2007 as listed in note 1(a) of the Significant Accounting Policies on the Basis of Preparation ofthe Financial Statements.

(i) Irrelevant or immaterial effect on financial statementsThe adoption of FRS 6, amendments to FRS 119, FRS 124, TR i-1 and TR i-2 did not result in significantchanges to the Group’s accounting policies. In summary:

• FRS 6, amendments to FRS 119, TR i-1 and TR i-2 are not relevant or material to the Group’s operations.

• FRS 124 has no material financial impact on the Group’s accounting policies. This standard affects theidentification of related parties and other similar related party disclosures. This standard requires thedisclosure of related party transactions and outstanding balances with other entities in a group. Intra-grouprelated party transactions and outstanding balances are eliminated in the preparation of consolidatedfinancial statements of the Group.

(ii) Reclassification of prior year comparativesPrior to 1 January 2007, lease of land and buildings held for own use was classified as property, plant andequipment and was stated at cost less accumulated depreciation and impairment loss.

FRS 117 requires that lease of land and buildings to be classified as operating or finance leases in the sameway as leases of other assets. The land and building elements of a lease of land and buildings are consideredseparately for the purposes of lease classification. Upfront payments of leasehold interests are allocatedbetween land and building elements in proportion to their relative fair values at the inception of the leases.

Consequent to the changes in accounting policies arising from the adoption of FRS 117, the Group hasreclassified upfront payments of leasehold land as prepaid lease payments. These payments are amortised ona straight line basis over the remaining lease period.

The Group has applied the new accounting policy with respect to leasehold land retrospectively. Consequently,certain comparatives within the Consolidated Balance Sheet as at 31 December 2006, Consolidated IncomeStatement for the year ended 31 December 2006 and Consolidated Cash Flow Statement for the year ended 31 December 2006 have been restated as set out in sub-note (c) below.

(b) ReclassificationsDuring the year, the Group had reviewed and changed the presentation of write offs and impairment of property,plant and equipment for the year ended 31 December 2006. These expenditure items which were previously includedin other operating costs are now presented with depreciation, impairment and amortisation to conform with currentyear presentation which better reflects the nature of expenses.

407



53. CHANGES IN ACCOUNTING POLICIES AND RECLASSIFICATIONS (continued)(c) Effects of changes in accounting policies and reclassifications

The effects of the changes in accounting policies and reclassifications as described in sub-note (a)(ii) and (b) aboveare illustrated below:

Effects ofchange in

As accountingpreviously policy Reclassi-

reported FRS 117 fications As restatedRM RM RM RM

The Group

Income statement for the year ended31 December 2006

Depreciation, impairment and amortisation (4,039.0) 34.7 2.8 (4,001.5)Other operating costs (9,048.1) (34.7) (2.8) (9,085.6)

Balance sheet as at 1 January 2006Property, plant and equipment 22,320.9 (249.9) — 22,071.0Prepaid lease payments — 249.9 — 249.9

Balance sheet as at 31 December 2006Property, plant and equipment 24,026.5 (346.2) — 23,680.3Prepaid lease payments — 346.2 — 346.2

Cash Flow Statement for the year ended31 December 2006

Purchase of property, plant and equipment (5,698.7) 106.0 — (5,592.7)Payments to suppliers and employees (8,787.4) (106.0) — (8,893.4)Cash flows used in investing activities (6,503.2) 106.0 — (6,397.2)Cash flows from operating activities 5,339.8 (106.0) — 5,233.8

The Company

Income statement for the year ended31 December 2006

Depreciation, impairment and amortisation (2,202.0) 0.2 2.2 (2,199.6)Other operating costs (3,951.7) (0.2) (2.2) (3,954.1)

Balance sheet as at 1 January 2006Property, plant and equipment 12,519.4 (37.9) — 12,481.5Prepaid lease payments — 37.9 — 37.9

Balance sheet as at 31 December 2006Property, plant and equipment 11,931.9 (38.0) — 11,893.9Prepaid lease payments — 38.0 — 38.0




53. CHANGES IN ACCOUNTING POLICIES AND RECLASSIFICATIONS (continued)(d) Other reclassifications

The presentation of operating revenue in note 4 to the financial statements has been changed and comparativesrestated in line with the change of grouping of segmental reporting information as mentioned in note 40 to thefinancial statements.

54. CURRENCYAll amounts are expressed in Ringgit Malaysia (RM).

55. APPROVAL OF FINANCIAL STATEMENTSThe financial statements have been approved for issuance in accordance with a resolution of the Board of Directors on26 February 2008.

PURSUANT TO SECTION 169(15) OF THE COMPANIES ACT, 1965


Statement byDirectors

StatutoryDeclaration


We, Tan Sri Dato’ Ir Muhammad Radzi Hj Mansor and Dato’ Sri Abdul Wahid Omar being two of the Directors of TelekomMalaysia Berhad, state that, in the opinion of the Directors, the financial statements on pages 261 to 408 are drawn up soas to exhibit a true and fair view of the state of affairs of the Group and the Company as at 31 December 2007 and of theresults and the cash flows of the Group and the Company for the year ended on that date in accordance with FinancialReporting Standards, the MASB approved accounting standards in Malaysia for Entities Other than Private Entities and theprovisions of the Companies Act, 1965.

In accordance with a resolution of the Board of Directors dated 26 February 2008.

TAN SRI DATO’ Ir MUHAMMAD RADZI HJ MANSOR DATO’ SRI ABDUL WAHID OMARChairman Group Chief Executive Officer

I, Datuk Bazlan bin Osman, being the Officer primarily responsible for the financial management of Telekom Malaysia Berhad,do solemnly and sincerely declare that to the best of my knowledge and belief, the financial statements set out on pages 261 to 408 are correct, and I make this solemn declaration conscientiously believing the same to be true and by virtue of theprovisions of the Statutory Declarations Act, 1960.

Subscribed and solemnly )declared at Kuala Lumpur )this 26 February 2008. ) DATUK BAZLAN BIN OSMAN

Before me:

T. THANAPALASINGAMCommissioner for OathsKuala Lumpur


Report of theAuditors

TO THE MEMBERS OF TELEKOM MALAYSIA BERHAD(COMPANY NO. 128740-P)


We have audited the financial statements set out on pages 261 to 408. These financial statements are the responsibility ofthe Company’s Directors. Our responsibility is to form an independent opinion, based on our audit, on the financial statementsand to report our opinion to you, as a body, in accordance with Section 174 of Companies Act, 1965 and for no other purpose.We do not assume responsibility to any other person for the content of this report.

We conducted our audit in accordance with approved Auditing Standards in Malaysia. Those standards require that we plan andperform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the Directors, as well asevaluating the overall financial statements presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion:

(a) the financial statements have been prepared in accordance with the provisions of the Companies Act, 1965 and FinancialReporting Standards, the MASB approved accounting standards in Malaysia for Entities Other than Private Entities so asto give a true and fair view of:

(i) the matters required by section 169 of the Companies Act, 1965 to be dealt with in the financial statements; and

(ii) the state of affairs of the Group and the Company as at 31 December 2007 and of the results and the cash flowsof the Group and the Company for the year ended on that date;

and

(b) the accounting and other records and the registers required by the Act to be kept by the Company and by the subsidiariesof which we have acted as auditors have been properly kept in accordance with the provisions of the Act.

The names of the subsidiaries of which we have not acted as auditors are indicated in note 50 to the financial statements.We have considered the financial statements of these subsidiaries and the auditors’ reports thereon.

We are satisfied that the financial statements of the subsidiaries that have been consolidated with the Company's financialstatements are in form and content appropriate and proper for the purposes of the preparation of the consolidated financialstatements and we have received satisfactory information and explanations required by us for those purposes.

The auditors' reports on the financial statements of the subsidiaries were not subject to any material qualification and didnot include any comment made under subsection (3) of section 174 of the Act.

PRICEWATERHOUSECOOPERS DATO’ AHMAD JOHAN BIN MOHAMMAD RASLAN(AF: 1146) [1867/09/08(J)]Chartered Accountants Partner

Kuala LumpurDate: 26 February 2008



GeneralInformation


1. Telekom Malaysia Berhad is a public limited liability company, incorporated and domiciled in Malaysia, and listed on themain board of the Bursa Malaysia Securities Berhad.

2. The address of the registered office of the Company is:

Level 51, North WingMenara TMJalan Pantai Baharu50672 Kuala Lumpur

3. The principal office and place of business of the Company is:

Menara TMJalan Pantai Baharu50672 Kuala Lumpur

4. The number of employees at the end of the year amounted to:

2007 2006

Group 36,242 35,824

Company 18,235 19,094

SHAREHOLDING STATISTICS 413

LIST OF TOP 41430 SHAREHOLDERS

AUTHORISED AND 416ISSUED SHARE CAPITAL

NET BOOK VALUE 418OF LAND & BUILDINGS

USAGE OF PROPERTIES 419

GROUP DIRECTORY 420

GLOSSARY 429

PROXY FORM

OtherInformation

AS AT 20 FEBRUARY 2008

Other Information

ShareholdingStatistics


ANALYSIS OF SHAREHOLDINGSShare CapitalAuthorised Share Capital : 5,000,003,021

Issued and Paid-up Capital : RM3,439,812,606 comprising of 3,439,809,680 ordinary shares of RM1 each, 1 (one) Special RightsRedeemable Preference Share (Special Share) of RM1, 2,000 Class C Non-Convertible RedeemablePreference Shares (NCRPS C) of RM1 each and 925 Class D Non-Convertible RedeemablePreference Shares (NCRPS D) of RM1 each

Voting Rights : One vote per ordinary share.The Special Share, NCRPS C & NCRPS D has no voting right other than those referred to in notes11(a) and 14(g)(I) respectively to the financial statements.

DISTRIBUTION OF SHAREHOLDINGSShareholders Shares

Malaysian Foreign Malaysian ForeignSize of Shareholdings No. % No. % No. % No. %

Less than 100 492 3.03 7 0.04 3,272 0.00 156 0.00100 – 1,000 6,156 37.87 219 1.35 5,275,166 0.15 160,262 0.001,001 – 10,000 7,465 45.92 315 1.94 24,789,523 0.72 1,218,472 0.0410,001 – 100,000 802 4.93 202 1.24 22,680,315 0.66 7,836,440 0.23100,001 – 170,398,253

(less than 5% of paid-up capital) 233 1.43 360 2.21 424,581,826 12.34 835,928,751 24.30170,398,253 and above 5 0.03 0 0.00 2,117,338,423 61.56 0 0.00

TOTAL 15,153 93.21 1,103 6.78 2,594,668,525 75.43 845,144,081 24.57

DIRECTORS’ DIRECT AND DEEMED INTERESTS IN THE COMPANY AND ITS RELATED CORPORATIONIn accordance with the Register of Directors’ Shareholdings, the directors’ direct and deemed interests in shares in theCompany and its related corporation are as follows:-

Telekom Malaysia Berhad VADS BerhadName of Directors Direct Indirect % Direct Indirect %

Tan Sri Dato’ Ir Muhammad RadziHj Mansor 122,000 — 0.003* 30,000 — 0.023*

Dato’ Sri Abdul Wahid Omar 250,000 — 0.007* — — —

Dato’ Ir Dr Abdul Rahim Daud 145,000 — 0.004* 30,000 — 0.023*

* negligible (less than 0.1%)

List ofTop 30Shareholders AS AT 20 FEBRUARY 2008

Other Information


No. Name Share Held Percentage (%)

1. Khazanah Nasional Berhad 988,817,541 28.75

2. Employees Provident Fund Board 325,013,050 9.45

3. Amanah Raya Nominees (Tempatan) Sdn Bhd 297,588,200 8.65Skim Amanah Saham Bumiputera

4. Khazanah Nasional Berhad 254,239,632 7.39Exempt An

5. Bank Negara Malaysia 251,680,000 7.32

6. HSBC Nominees (Asing) Sdn Bhd 156,184,300 4.54Exempt An for JPMorgan Chase Bank, National Association (U.S.A)

7. Lembaga Tabung Haji 80,093,036 2.33

8. HSBC Nominees (Asing) Sdn Bhd 50,342,232 1.46Exempt an for Morgan Stanley & Co. International PLC (IPB Client ACCT)

9. Kumpulan Wang Persaraan (Diperbadankan) 39,875,800 1.16

10. Amanah Raya Nominees (Tempatan) Sdn Bhd 37,615,100 1.09Amanah Saham Wawasan 2020

11. HSBC Nominees (Asing) Sdn Bhd 33,534,188 0.97TNTC for Saudi Arabian Monetary Agency

12. Amanah Raya Nominees (Tempatan) Sdn Bhd 31,395,000 0.91Amanah Saham Malaysia

13. HSBC Nominees (Asing) Sdn Bhd 24,431,500 0.71Exempt an for Morgan Stanley & Co Incorporated

14. Citigroup Nominees (Asing) Sdn Bhd 23,272,505 0.68GSI for Perry Partners Inter Inc

15. Valuecap Sdn Bhd 20,017,300 0.58

16. Cartaban Nominees (Asing) Sdn Bhd 16,456,000 0.48Investors Bank and Trust Company for Ishares Inc.

17. Citigroup Nominees (Asing) Sdn Bhd 15,579,087 0.45UBS AG

18. Permodalan Nasional Berhad 15,478,800 0.45

19. Citigroup Nominees (Asing) Sdn Bhd 15,212,400 0.44GSCO for Drawbridge Global Macro Master Fund Ltd

20. Malaysia Nominees (Tempatan) Sendirian Berhad 14,500,000 0.42Great Eastern Life Assurance (Malaysia) Berhad (Par 1)

21. HSBC Nominees (Asing) Sdn Bhd 14,090,693 0.41Morgan Stanley & Co. International PLC (Firm A/c)

List of Top 30 Shareholdersas at 20 February 2008


No. Name Share Held Percentage (%)

22. HSBC Nominees (Asing) Sdn Bhd 14,000,000 0.41BNY Brussels for JF Asean Fund

23. Citigroup Nominees (Tempatan) Sdn Bhd 13,672,300 0.40Exempt an for Prudential Fund Management Berhad

24. Citigroup Nominees (Asing) Sdn Bhd 12,752,245 0.37Goldman Sachs International

25. HSBC Nominees (Asing) Sdn Bhd 12,650,100 0.37Exempt an for the Hongkong and Shanghai Banking Corporation Limited(HBFS-I CLT Acct)

26. Citigroup Nominees (Asing) Sdn Bhd 12,514,100 0.36GSI for OZ Asia Master Fund, Ltd

27. Citigroup Nominees (Asing) Sdn Bhd 12,010,900 0.35Exempt an for American International Assurance Company Limited

28. HSBC Nominees (Asing) Sdn Bhd 11,129,924 0.32Exempt an for JP Morgan Chase Bank, National Association (UK)

29. Cartaban Nominees (Asing) Sdn Bhd 10,687,000 0.31Government of Singapore Investment Corporation Pte Ltdfor Government of Singapore (C)

30. HSBC Nominees (Asing) Sdn Bhd 10,515,889 0.31Exempt an for JPMorgan Chase Bank, National Association (U.A.E)

TOTAL 2,815,348,822 81.84

SUBSTANTIAL SHAREHOLDERS’ HOLDING 5% AND ABOVEAs per register of substantial shareholders

Shares Held Percentage (%)No. Name Direct Indirect Direct Indirect

1. Khazanah Nasional Berhad 1,243,057,173 — 36.14 —2. Employees Provident Fund Board 335,006,950 36,657,100* 9.74 0.113. Amanah Raya Nominees (Tempatan) Sdn Bhd 297,588,200 — 8.65 —

– Skim Amanah Saham Bumiputera4. Bank Negara Malaysia 251,680,000 — 7.32 —

TOTAL 2,127,332,323 36,657,100 61.85 0.11

* Employees Provident Fund Board (EPF) is deemed to have indirect interest by virtue of TM Shares managed by otherportfolio managers on behalf of EPF under Section 6A of the CA 1965.


Other Information

Authorised andIssued ShareCapital

1. AUTHORISED SHARE CAPITAL

The authorised share capital as at 20 February 2008 is RM5,000,003,021 divided into 5,000,000,000 ordinary shares of RM1.00each; One (1) Special Rights Redeemable Preference Share of RM1.00; 1,000 Class A Redeemable Preference Shares (RPS) ofRM0.01 each, 1,000 Class B RPS of RM0.01 each, 2,000 Class C Non-Convertible Redeemable Preference Shares (NCRPS) ofRM1.00 each and 1,000 Class D NCRPS of RM1.00 each. The changes in the authorised share capital are as follows:

Increase in Authorised Total AuthorisedDate Share Capital (RM) Type of Share Share Capital (RM)

12/10/1984 1,000,000.00 Ordinary shares 1,000,000.00

06/08/1984 4,999,000,000.00 Ordinary shares 5,000,000,000.00

11/09/1990 1.00 Special Share 5,000,000,001.00

31/03/2003 10.00 Class A RPS 5,000,000,011.00

31/03/2003 10.00 Class B RPS 5,000,000,021.00

08/05/2007 2,000.00 Class C NCRPS 5,000,000,021.00

08/05/2007 1,000.00 Class D NCRPS 5,000,003,021.00

2. ISSUED AND PAID-UP SHARE CAPITAL

The issued and paid-up capital as at 20 February 2008 is RM3,439,812,606.00 comprising 3,439,809,680 ordinary shares ofRM1.00 each; One (1) Special Rights Redeemable Preference Share of RM1.00; 2,000 Class C NCRPS of RM1.00 each and925 Class D NCRPS of RM1.00 each.

The changes in the issued and paid-up share capital are as follows on annual basis:-

No. of SharesDate Allotted Description Total (RM)

31/12/1984 2 Cash 2

31/12/1986 9,999,998 Cash 10,000,000

31/12/1987 490,000,000 Bonus issue on the basis of 49 ordinary shares for every 1 existing ordinary share held 500,000,000

11/09/1990 1,000,000,000 Bonus issue on the basis of 2 ordinary shares for every 1 existing ordinary shares held 1,500,000,000

11/09/1990 1 Special Rights Redeemable Preference Share 1,500,000,001

29/10/1990 – 31/12/1990 470,500,000 Issued pursuant to the exercise of options under the Employees Share Option Scheme (ESOS) 1,970,500,001

31/12/1992 9,249,000 Cash 1,979,749,001

Authorised and Issued Share Capital


No. of SharesDate Allotted Description Total (RM)

31/12/1993 6,067,000 Issued pursuant to the exercise of options under the ESOS 1,985,816,001




06/06/1997 10,920 Eurobond – Conversion of 4% Convertible Bonds Due 2004 1,999,090,921

20/06/1997 999,545,460 Bonus issue on the basis of one (1) ordinary shares for every two (2) existing ordinary shares held 2,998,636,381

31/12/1998 398,500 Issued pursuant to the exercise of options under the ESOS 2,999,034,881





01/01/2003 – 11/12/2003 71,503,000 Issued pursuant to the exercise of options under the ESOS 3,238,510,381

12/12/2003 1,000 Class A RPS of RM0.01 each 3,238,510,391

12/12/2003 1,000 Class B RPS of RM0.01 each 3,238,510,401






20/07/2007 (1,000) Redemption of Class A RPS of RM0.01 each 3,435,261,891

20/07/2007 (1,000) Redemption of Class B RPS of RM0.01 each 3,435,261,881

20/07/2007 2,000 Class C NCRPS of RM1.00 each 3,435,263,881

20/07/2007 925 Class D NCRPS of RM1.00 each 3,435,264,806


3,439,812,606

Net Book Value ofLand & Buildings AS AT 31 DECEMBER 2007

Other Information


Net Book Net BookFreehold Leasehold Other Land* Excepted Land** Value Value of

No. of Area No. of Area No. of Area No. of Area of Land BuildingsLocation Lots (’000 sq ft) Lots (’000 sq ft) Lots (’000 sq ft) Lots (’000 sq ft) RM (million) RM (million)

1. Federal Territorya. Kuala Lumpur 28 1,410 6 409 8 667 — — 109.6 1,451.7b. Labuan — — 2 443 4 427 — — — —

2. Selangor 13 10,280 22 25,040 5 324 78 15,473 195.4 554.3

3. Perlis — — 4 52 — — 11 595 0.5 3.6

4. Perak 5 61 17 679 5 297 109 7,938 5.9 76.3

5. Pulau Pinang 8 18 19 1,049 — — 32 7,366 7.9 62.3

6. Kedah 8 438 15 1,404 — — 37 2,432 8.8 83.1

7. Johor 11 148 27 1,325 16 538 103 11,145 9.7 106.8

8. Melaka 9 1,086 22 62,293 2 152 24 4,047 16.4 144.6

9. Negeri Sembilan 10 47,523 9 321 6 317 55 3,305 2.9 34.7

10. Terengganu — — 21 1,585 3 121 40 4,976 1.4 47.1

11. Kelantan — — 11 463 4 173 34 2,058 1.0 24.9

12. Pahang 4 80 45 2,095 16 664 72 4,412 8.2 89.2

13. Sabah — — 19 786 5 219 68 26,514 7.4 103.0

14. Sarawak 7 522 29 858 9 342 90 9,388 25.8 89.8

15. Sri Lanka 15 509 — — — — — — 11.8 43.4

16. Bangladesh 204 1,254 — — — — — — 5.0 23.5

17. Cambodia — — — — — — — — — 1.3

18. Indonesia — — 9,052 25,045 — — — — 297.0 12.0

TOTAL 322 63,329 9,320 123,847 83 4,241 753 99,649 714.7 2,951.6

No revaluation has been made on any of the land and buildings

* The title deeds pertaining to other land have not yet been registered in the name of the Company. Pending finalisation with the relevant authorities,the land have not been classified according to their tenure and land areas are based on estimation.

** Excepted land are lands situated outside the Federal Territory which are either alienated land, reserved land owned by the Federal Government or landoccupied, used, controlled and managed by the Federal Government for federal purposes (in Melaka, Pulau Pinang, Sabah and Sarawak) as set out inSection 3(2) of the Telecommunication Services (Successor Company) Act, 1985. The Government has agreed to lease these land to Telekom MalaysiaBerhad for a term of 60 years with an option to renew, under article 85 and 86 of the Federal Constitution.


Other Information

Usage ofProperties


Satellite/ Kedai TM/ Telecom-Submarine Primatel/ munication/

Transmission Office Stores/ Cable Business TourismLocation Exchanges Stations Buildings Residential Warehouses Stations Resort Centre University Tower

1. Federal Territorya. Kuala Lumpur 28 6 24 39 19 1 — — — 1b. Labuan 3 2 1 4 12 2 — — — —

2. Selangor 85 11 20 — 43 — — 3 1 —

3. Perlis 10 — — 2 1 — — 1 — —

4. Perak 68 22 32 81 44 — — 2 — —

5. Pulau Pinang 29 — 19 33 26 2 1 3 — —

6. Kedah 48 11 5 26 11 — 1 2 — 1

7. Johor 90 17 6 51 22 1 — 6 — —

8. Melaka 19 2 5 23 6 2 — 1 1 —

9. Negeri Sembilan 31 15 4 16 — 1 4 1 — —

10. Terengganu 33 17 5 15 6 2 — — — —

11. Kelantan 23 6 7 18 13 — — 1 — —

12. Pahang 45 34 15 49 19 3 4 1 — —

13. Sabah 45 33 21 22 22 2 1 3 — —

14. Sarawak 72 43 23 47 25 1 — 1 — —

15. Sri Lanka — 12 6 — — — — — — —

16. Bangladesh — 203 — — 1 — — — — —

17. Cambodia 1 — — — — — — — — —

18. Indonesia — — 11 — — — — — — —


Other Information

GroupDirectory

Head OfficeLevel 5 (South Wing), Menara TMJalan Pantai Baharu50672 Kuala LumpurTel : 03-2240 9494Fax : 03-2283 2415/03-7958 5533

Customer CareLevel 3, Menara TM Annex 1Jalan Pantai Baharu50672 Kuala LumpurTel : 100Fax : 03-7960 6020

Service Assurance CentreGround Floor, Bangunan IDCKompleks TM Cyberjaya3300 Lingkaran Usahawan 1 Timur63000 Cyberjaya, SelangorTel : 1-800-88-9947

HEAD OFFICELevel 51, North Wing, Menara TMJalan Pantai Baharu50672 Kuala Lumpur, MalaysiaTel : 03-2240 9494

: 101 Operator Assisted Calls (Domestic and International): 103 Directory Enquiry Services: 100 For Everything else TM

Fax : 03-2283 2415Website : www.tm.com.my

TM Regional Office (TMRO)UNITED KINGDOMTelekom Malaysia (UK) LimitedSt.Martin’s House16 St. Martin’s Le GrandLondon EC1A 4ENTel : +44 (0) 207 397 8579Fax : +44 (0) 207 397 8400

USATelekom Malaysia (USA) INC8320 Old Courthhouse RoadSuite 420, Vienna VA 22182Tel : +1 703 467 5962Fax : +1 703 467 5962

HONG KONGTelekom Malaysia (Hong Kong) LimitedRoom 1612, 16/FloorTower 1 Silvercord30 Canton Road, TsimshatsuiKowloon, Hong KongTel : +852 2992 0190Fax : +852 2992 0570

SINGAPORETelekom Malaysia (S) Pte Ltd1754 Bencoolen Street#07-05/06 – Burlington SquareSingapore 189650Tel : +65 6532 6369Fax : +65 6532 3742

MB Subsidiaries:GITN Sdn BhdHead OfficeLevel 31, Menara TMJalan Pantai Baharu50672 Kuala LumpurTel : 03-2245 0000Fax : 03-2240 0709

Network Operation Centre2nd Floor, TM IT Complex3300 Lingkaran Usahawan 1 Timur63000 Cyberjaya, SelangorTel : 1-300-88-2888Fax : 03-8319 4775

MALAYSIA BUSINESS

Group Directory


TM Applied Business Sdn BhdHead OfficeLevel 16, Menara 2, Faber TowerJalan Desa Bahagia, Taman DesaOff Jalan Klang Lama58100 Kuala LumpurTel : 03-7984 4989Fax : 03-7980 1605

Cyberjaya Office2nd Floor, TM IT Complex3300 Lingkaran Usahawan 1 Timur63000 Cyberjaya, SelangorTel : 03-8318 1706Fax : 03-8318 1721

TM Research & Development Sdn BhdHead OfficeIdea Tower, UPM-MTDCTechnology Incubation CentreLebuh Silikon43400 Serdang, SelangorTel : 03-8944 1820Fax : 03-8945 1591

Customer Service CentreMarketing & Business DevelopmentDivisionTM Research & DevelopmentIdea Tower, UPM – MTDCTechnology Incubation CentreLebuh Silikon43400 Serdang, SelangorTel : 03-8944 1820Fax : 03-8944 1246

TM Sales & Services Sdn BhdHead OfficeLevel 18, Menara Mutiara BangsarJalan Liku off Jalan Riong, Bangsar59100 Kuala LumpurTel : 03-2297 1200Fax : 03-2282 7799

TMpointKUALA LUMPURMuziumBangunan Muzium TMJalan Raja Chulan50200 Kuala Lumpur

Jalan TARNo. 374, Ground FloorWisma CS HolidayJalan Tuanku Abdul Rahman50100 Kuala Lumpur

Pandan IndahL1/O2, Ground FloorMenara MaxisegarJalan Pandan Indah 4/2Pandan Indah, 55100 Kuala Lumpur

Menara TMGround Floor, Menara TMJalan Pantai Baharu50672 Kuala Lumpur

BangsarNo. 8 & 10, Ground FloorJalan Telawi 5Bangsar Baru59100 Kuala Lumpur

SetapakIbusawat TM Setapak44, Persiaran Kuantan53200 Kuala Lumpur

KepongNo. 67, Jalan Metro Perdana Barat 1Taman Usahawan Kepong Utara52100 Kepong, Kuala Lumpur

Taman DesaGround Floor, Wisma TM Taman DesaJalan Desa Utama58100 Kuala Lumpur

SELANGORShah AlamBangunan TM Shah AlamPersiaran Damai, Seksyen 1140000 Shah Alam, Selangor

Ampang42, Jalan Mamanda 7Ampang Point68000 Ampang, Selangor

RawangLot 21, Jalan Maxwell48000 Rawang, Selangor

Kuala Kubu BahruBangunan TMJalan Dato’ Balai44000 Kuala Kubu Bahru, Selangor

Bukit RajaJalan Meru41050 Kelang, Selangor

BantingNo. 1-1-1A, Jalan Suasa 142700 Banting, Selangor

Kuala SelangorBangunan TM, Jalan Klinik45000 Kuala Selangor, Selangor

Sabak Bernam27, Jalan Raja Chulan45200 Sabak Bernam, Selangor

Port KlangNo. 57 & 59, Jalan Cungah42000 Port Klang, Selangor

Damansara UtamaNo. 91-93, Jalan SS 21/1ADamansara Utama47400 Petaling Jaya, Selangor


O t h e r I n f o r m a t i o n

Group Directory

Petaling JayaNo. 22 & 24, Jalan Yong Shook Lin46050 Petaling Jaya, Selangor

KajangNo. 37 & 38, Jalan Tun Abdul Aziz43000 Kajang, Selangor

CyberjayaGround Floor, TM IT Complex3300 Lingkaran Usahawan 1 Timur60000 Cyberjaya, Selangor

SerdangNo. 36, Jalan Dagang SB 4/2Taman Sungai Besi Indah43300 Seri Kembangan, Selangor

Kelana JayaUnit 109B Ground FloorKelana Park View TowerNo. 1 Jalan SS 6/247301 Kelana Jaya, Selangor

TaipanNo. 27 & 29, Jalan USJ 10/1A47620 Subang Jaya, Selangor

JOHORJohor BahruJalan Abdullah Ibrahim80672 Johor Bahru, Johor

Plaza PelangiUnit 1.19A, Ground Floor(Main Entrance)Plaza Pelangi Jalan Kuning80400 Johor Bahru, Johor

SkudaiGround Floor, Ibusawat TMBatu 91⁄2, Jalan Skudai81300 Skudai, Johor

Pontian1st Floor, Ibusawat TMJalan Alsagoff82000 Pontian, Johor

KluangNo. 1 & 2, Jalan Dato’ Teoh Siew Khor56000 Kluang, Johor

SegamatNo. 22, Jalan Sultan85000 Segamat, Johor

Batu Pahat39, Jalan Rahmat83000 Batu Pahat, Johor

MuarNo. 5-5 & 5-6, Ground FloorJalan Ibrahim84000 Muar, Johor

Kota TinggiNo. 2 & 4, Jalan IndahTaman Medan Indah81900 Kota Tinggi, Johor

KulaiLot 435, Jalan Kenanga 29/11Taman Indah Putra81100 Kulai, Johor

PelangiWisma TM PelangiJalan Sutera 3, Taman Sentosa80150 Johor Bahru, Johor

MersingLot 384, Jalan Ismail86800 Mersing, Johor

Yong PengNo. 18, Ground FloorJalan Bayan, Taman Semberong83700 Yong Peng, Johor

Pasir GudangNo. 23A, Ground FloorJalan Bandar Pusat Perdagangan81700 Pasir Gudang, Johor

NEGERI SEMBILANSerembanNo. 176 & 177, Ground FloorJalan Dato’ Bandar Tunggal70000 Seremban, Negeri Sembilan

Port DicksonNo. 25, Jalan MahajayaPD Center Point71000 Port Dickson, Negeri Sembilan

Kuala PilahJalan Bahau72000 Kuala Pilah, Negeri Sembilan

TampinJalan Besar73000 Tampin, Negeri Sembilan

MELAKAMelaka527 & 529A, Plaza MelakaJalan Gajah Berang75200 Melaka

Alor GajahBatu 141⁄2, Jalan Melaka Kendong78000 Alor Gajah, Melaka

Menara PertamGround Floor, Menara PertamJalan Batu Berendam BBP 2Taman Batu Berendam Putra75350 Melaka

KEDAH/PERLISKangarJalan Bukit LagiPekan Kangar01000 Kangar, Perlis

Alor StarKompleks KristalJalan Kolam Air05672 Alor Star, Kedah


Group Directory

Jitra19A, Jalan PJ 1Pekan Jitra 206000 Jitra, Kedah

LangkawiJalan Pandak Mayah 607000 Pekan KuahLangkawi, Kedah

Sungai PetaniBangunan TM, Jalan Petani08000 Sungai Petani, Kedah

KulimNo. 4 & 5, Jalan Tunku Asaad09000 Kulim, Kedah

PULAU PINANGBayan BaruNo. 68, Jalan Mahsuri11950 Bayan Baru, Pulau Pinang

Jalan BurmahJalan Burmah10150 Georgetown, Pulau Pinang

ButterworthWisma TM ButterworthGround Floor, Jalan Bagan Luar12000 Butterworth, Pulau Pinang

Bukit MertajamJalan Arumugam Pillai14000 Bukit Mertajam, Pulau Pinang

Sungai Bakap1282, Jalan Besar14200 Sungai Bakap, Pulau Pinang

PERAKIpoh WismaWisma TMJalan Sultan Idris Shah30672 Ipoh, Perak

Batu GajahBangunan TMJalan Dewangsa31000 Batu Gajah, Perak

Ipoh TasekJalan Sultan Azlan Shah Utara31400 Ipoh, Perak

KamparBangunan TMJalan Baru31900 Kampar, Perak

TaipingBangunan TMJalan Berek34672 Taiping, Perak

Teluk IntanBangunan TMJalan Jawa36672 Teluk Intan, Perak

Parit Buntar36, Persiaran PerwiraPusat Bandar34200 Parit Buntar, Perak

Kuala KangsarBangunan TMJalan Raja Chulan33000 Kuala Kangsar, Perak

GerikWisma Kosek, Jalan Takong Datoh33300 Gerik, Perak

Sungai SiputNo. 188, Jalan Besar31100 Sungai Siput, Perak

Sitiawan179 & 180, Taman Sitiawan Maju32000 Sitiawan, Perak

TapahBangunan TMJalan Stesyen35672 Tapah, Perak

Tanjung MalimNo. 27, Jalan CahayaTaman Anggerik Desa35900 Tanjung Malim, Perak

KELANTANKota BharuJalan Doktor15000 Kota Bharu, Kelantan

Pasir Mas606, Jalan Masjid Lama17000 Pasir Mas, Kelantan

Tanah Merah4088, Jalan Ismail Petra17500 Tanah Merah, Kelantan

Kuala KraiLot 1522Jalan Tengku Zainal Abidin18000 Kuala Krai, Kelantan

Pasir Puteh258B, Jalan Sekolah Laki-laki16800 Pasir Puteh, Kelantan


TERENGGANUKuala Terengganu1st Floor, Bangunan TMJalan Sultan Ismail20200 Kuala Terengganu, Terengganu

KemamanJalan Masjid, Chukai24000 Kemaman, Terengganu

DungunJalan Nibong23000 Dungun, Terengganu

JertehGround Floor, Lot 174Jalan Tuan Hitam22000 Jerteh, Terengganu

PAHANGKuantanG08 & G09, Ground FloorBangunan Mahkota SquareJalan Mahkota25000 Kuantan, Pahang

PekanNo. 87, Jalan Sultan Abdullah26600 Pekan, Pahang

MentakabJalan Tun Razak28400 Mentakab, Pahang

Bentong111, Bangunan Persatuan Bola SepakJalan Ah Peng28700 Bentong, Pahang

Kuala Lipis10, Jalan Bukit Bius27200 Kuala Lipis, Pahang

RaubJalan Kuala Lipis27600 Raub, Pahang

SARAWAKBatu LintangJalan Batu Lintang93200 Kuching, Sarawak

Padang MerdekaGround FloorBangunan Yayasan SarawakLot 2, Section 24 Jalan Barrack/Masjid93000 Kuching, Sarawak

PendingJalan Gedong93450 Pending, Sarawak

Sri AmanJalan Club95000 Sri Aman, Sarawak

MiriJalan Post98000 Miri, Sarawak

LimbangJalan Kubu98700 Limbang, Sarawak

LawasJalan Punang98850 Lawas, Sarawak

BintuluJalan Law Gek Soon97000 Bintulu, Sarawak

SibuPersiaran Brooke96000 Sibu, Sarawak

SarikeiJalan Berek96100 Sarikei, Sarawak

KapitJalan Kapit By Pass96800 Kapit, Sarawak

SABAHSadong JayaGround Floor, Lot 68 & 69, Block JSadong Jaya, Karamunsing88100 Kota Kinabalu, Sabah

Tanjung AruLot B3, B3A & B5, Ground FloorPlaza Tanjung AruJalan Mat Salleh, Tanjung Aru88100 Kota Kinabalu, Sabah

TawauTB 307, Block 35Fajar ComplexJalan Perbandaran91000 Tawau, Sabah

Lahad DatuGround Floor, MDLD 3307Fajar ComplexJalan Segama91100 Lahad Datu, Sabah

Sandakan6th Floor, Wisma Khoo Siak ChiewJalan Buli Sim Sim90000 Sandakan, Sabah

Mailing address:-Locked Bag 4490009 Sandakan, Sabah

KeningauCommercial CentreJalan Arusap, Off Jln MasakBlok B7, Lot 13 & 1489007 Keningau, Sabah

BeaufortChoong StreetP.O. Box 26989807 Beaufort, Sabah

KudatJalan Wan SiakP.O. Box 34089058 Kudat, Sabah


Group Directory


CELCOM (MALAYSIA) BERHADHEAD OFFICEMenara Celcom82, Jalan Raja Muda Abdul Aziz50300 Kuala LumpurTel : 03-2687 3838Fax : 03-2681 0421

CENTRAL REGIONAL OFFICEMenara Naluri, 161B, Jalan Ampang50450 Kuala LumpurTel : 03-2848 1201Fax : 03-2848 1202

WILAYAH PERSEKUTUANCheras Branch (Taman Segar)62, Jalan Manis 3Taman Segar, Cheras56100 Kuala Lumpur

Selayang BranchNo. 101, Jalan 2/3APusat Bandar Utara, Selayang68100 Kuala Lumpur

Jalan Ampang BranchLevel 1 & 2, Podium Block161B, Menara NaluriJalan Ampang50450 Kuala Lumpur

Pekeliling BranchPekeliling Business CentreGround Floor, Pharmacare BuildingLot 14 (129), Jalan Pahang BaratOff Jalan Pahang53000 Kuala Lumpur

Taman Tun Dr Ismail BranchNo AB 40, Jalan Tun Mohd FuadTaman Tun Dr Ismail60000 Kuala Lumpur

SELANGORPetaling Jaya BranchGround Floor, Menara PKNS PJNo. 17 Jalan Yong Shook Lin46050 Petaling JayaSelangor

Kajang BranchLot No 1, Taman Sri SagaJalan Sungai Chua43000 KajangSelangor

Bandar Baru Klang BranchNo. 1 Lorong Tiara 1ABandar Baru Klang41150 KlangSelangor

Shah Alam BranchNo 1Jalan Tengku Ampuan Zabedah B,9/B, Section 940000 Shah AlamSelangor

Port Klang Service CentreLot 1-3, Tingkat 1Hentian Pelabuhan Klang42000 KlangSelangor

KLIA Service CentreLot MTBAP NA 1Arrival Hall (Level 3)Main Terminal BuidingKL International Airport64000 SepangSelangor

NEGERI SEMBILANSeremban BranchLot 1520 & 1521, Ground FloorJalan Tun Dr Ismail70200 SerembanNegeri Sembilan

NORTHERN REGIONNorthern Regional Office8th Floor Bangunan KWSPJalan Sultan Ahmad Shah10000 PenangTel : 04-2421 902 / 010-4016 011Fax : 04-2288 903

PENANGPenang BranchGround & 1st Floor, Wisma CelcomNo. 245, Jalan Burmah10350 Penang

Seberang Jaya BranchNo. 31, Jalan Todak 4Bandar Seberang Jaya13700 Seberang PeraiPenang

Bayan Baru BranchNo. 29, Persiaran Mahsuri 1/3Sunway Tunas, Bayan Lepas11900, Penang

Bukit Mertajam BranchNo. 22, Tingkat Ciku 1, Taman Ciku14000 Bukit MertajamPenang

KEDAHAlor Star BranchLevel 2 & 3Menara Bina Darul Aman BerhadLebuhraya Darul Aman05100 Alor Star, Kedah

Sungai Petani BranchNo 23-D, Jalan Kampung Baru08000 Sungai PetaniKedah

Langkawi BranchNo. 53, Langkawi Mall, Jalan Kelibang07000 Kuah, LangkawiKedah

PERAKIpoh BranchNo. 2, Persiaran Greentown 3Greentown Business Centre30450 Ipoh, Perak

Teluk Intan Service CentreLot 12, Medan Sri IntanJalan Sekolah, 36000 Teluk IntanPerak

Group Directory


Taiping Service CentreNo. 430, Ground & 1st FloorJalan Kemunting, Taman Saujana34600 Kemunting, TaipingPerak

PERLISKangar Service CentreLot 1, Ground & 1st FloorTaman Simpang TigaPersiaran Jubli Emas01000 KangarPerlis

SOUTHERN REGIONSouthern Regional OfficeLot G1, 1st Floor, Bangunan AngNo. 1, Jalan Jeram, Taman Tasek80200 Johor Bahru, JohorTel : 07-2346 200Fax : 07-2373 631

JOHORJohor Bahru BranchLot G-1, Ground Floor, Bangunan AngNo. 1, Jalan Jeram, Taman Tasek80200 Johor BahruJohor

Taman Molek Branch1-3 Jalan Molek 1/9Taman Molek81100 Johor BahruJohor

Taman Pelangi Service CentreNo. 1, Jalan Kuning 2Taman Pelangi80400 Johor BahruJohor

Batu Pahat BranchNo. 22, Jalan Maju, Taman Maju83000 Batu PahatJohor

MELAKAMelaka BranchNo. 233, Taman Melaka Raya75000 Melaka

EASTERN REGIONEastern Regional OfficeNo. 7, Persiaran Sultan Abu BakarKawasan Perindustrian Ringan IM3Bandar Indera Mahkota25200 KuantanPahangTel : 09-5723 330Fax : 09-5732 019

PAHANGKuantan BranchA93 & A95Sri Dagangan Business CentreJalan Tun Ismail25000 KuantanPahang

Temerloh BranchNo. 62, Jalan Ahmad Shah 128000 TemerlohPahang

KELANTANKota Bharu BranchLot 825 & 826, Seksyen 27Jalan Seri Cemerlang15300, Kota BharuKelantan

Tanah Merah BranchBangunan Merdeka JayaJalan Taman Hiburan17500 Tanah MerahKelantan

TERENGGANUKuala Terengganu Branch6C & 6D, Jalan Air Jernih20300 Kuala TerengganuTerengganu

Kemaman BranchK 9709 & 9710Taman Chukai UtamaJalan Kubang Kurus24000 KemamanTerengganu

SABAH REGIONSabah Regional OfficeLot 2-7-1/2Level 7, Plaza Wawasan88000 Kota Kinabalu, SabahTel : 088-291 701Fax : 088-317 261

Kota Kinabalu BranchWawasan PlazaLevel 1 & 288000 Kota Kinabalu, Sabah

Damai BranchWisma CTF, Lot 4Block B, Damai Plaza Phase 3P. O. Box 2000588757 Damai Plaza LuyangKota Kinabalu, Sabah

Sandakan BranchLot 9 &10, Ground & Mezzanine FloorBlock B, Phase 2, Taman Grand View90000 Sandakan, Sabah

Labuan BranchGround to 2nd FloorLot 6, Jalan Anggerik87007 Wilayah Persekutuan Labuan

Tawau BranchTB 309, Ground to 3rd FloorBlock 36, Jalan St PatrickFajar Complex91000 Tawau, Sabah

SARAWAK REGIONSarawak Regional OfficeLevel 2, Wisma NAIMLot 2679, Block 10KCLD, Jalan Rock93200 Kuching, SarawakTel : 082-211 190/082-211 112Fax : 082-418 292/082-211 122

Central Park BranchGround Floor, No. 322, Lot 2734Central Park Commercial Centre3rd Mile, Jln Tun Ahmad Zaidi Adruce93150 Kuching, Sarawak


Group Directory


DIALOG TELEKOM PLC (DIALOG)No. 475, Union PlaceColombo 2Sri LankaTel : +94-11-267 8700Fax : +94-11-267 8703

TM INTERNATIONAL (BANGLADESH)LIMITED (TMIB)Brac Centre, 9th Floor75 Mohakhali Commercial AreaDhaka 1212BangladeshTel : +880-2-988 7149/50/51/52Fax : +880-2-988 5463

SAMART CORPORATION PUBLICCOMPANY LIMITED (SAMART)99/1 Moo 4 Software Park35th Floor, Chaengwattana RoadKlong Gluar, Pak-kredNonthaburi11120 ThailandTel : +66-2-502 6000Fax : +66-2-502 6043

TELEKOM MALAYSIA INTERNATIONAL(CAMBODIA) COMPANY LIMITED(TMIC)#56-58, Preah Norodom BlvdSangkat Chey ChumneahKhan Doun PenhPhnom PenhKingdom of CambodiaTel : +855-16-810 001/2/3Fax : +855-16-810 004,

+855-23-219 090

SOCIETE DES TELECOMMUNICATIONSDE GUINEE (SOTELGUI s.a.)B.P. 2066, ConakryRepublic of GuineaTel : +224-450 200Fax : +224-411 535

PT EXCELCOMINDO PRATAMA TBK(XL)GRHAXL, Jl. Mega Kuningan, Lot E4-7No. 1, Kawasan Mega KuninganJakarta 12950IndonesiaTel : +62-21-576 1881Fax : +62-21-575 61880

MULTINET PAKISTAN (PRIVATE)LIMITED (MULTINET)239, Staff Lines, Fatima Jinnah RoadKarachi 75530PakistanTel : +92-21-111-021 021Fax : +92-21-565 6480

SPICE COMMUNICATIONS LIMITED(SPICE)D-1, Sector-3, Noida-201 301UttarpradeshIndiaTel : +91-120-4363 600Fax : +91-120-5320 467

MOBILEONE LTD (M1)10 International Business Park609928 SingaporeTel : (65) 6895 1111Fax : (65) 6899 3200

MOBILE TELECOMMUNICATIONSCOMPANY OF ESFAHAN (MTCE)P.O. Box 81655-1446EsfahanIranTel : +98-311 324 040Fax : +98-311 324 0032

SAMART I-MOBILE PUBLIC COMPANYLIMITED (SIM)99/3 Moo 4 Software Park33rd Floor, Chaengwattana RoadKlong Gluar, Pak-kredNonthaburi11120 ThailandTel : +66-2-502 6000Fax : +66-2-502 6900

INTERNATIONAL SUBSIDIARIES & AFFILIATES

Kuching BranchWisma Lim Kim SoonLot 609, Block 195, Jalan Satok93400 Kuching, Sarawak

Jln DAAR BranchGround Floor, Lot 445Sub Lot 6, Seksyen 64, KTLDJln Dato Abang Abdul Rahim93450 Kuching, Sarawak

Miri BranchGround Floor & 3rd Floor, Lot 935Block 9, MCLD Jalan Asmara98000 Miri, Sarawak

Bintulu BranchGround – 3rd Floor, Lot 22Park City Commercial SquarePhase 3, Jln Tun Ahmad Zaidi97000 Bintulu, Sarawak

Sibu BranchNo. 44, Lot 1557, Jalan KeranjiOff Jalan Tuanku Osman96000 Sibu, Sarawak

Group Directory


TM VENTURES – SUBSIDIARIES & ITS ASSOCIATE/AFFILIATE COMPANYTM VENTURESLevel 11, South Wing, Menara TMJalan Pantai Baharu50672 Kuala LumpurTel : 03-2240 1355Fax : 03-7960 3359

TM FACILITIES SDN BHD6th Floor, Wisma TM Taman DesaJalan Desa Utama58100 Kuala LumpurTel : 03-7987 5400Fax : 03-7987 4303

TMF SERVICES SDN BHDLot 1, Persiaran Jubli PerakSection 17, 40000 Shah AlamTel : 03-5548 9400Fax : 03-5541 2141

TMF AUTOLEASE SDN BHDLot 1, Persiaran Jubli PerakSection 17, 40000 Shah AlamTel : 03-5548 9412Fax : 03-5510 0286

PROPERTY DEVELOPMENT11th Floor, Wisma TM Taman DesaJalan Desa Utama58100 Kuala LumpurTel : 03-7987 5040Fax : 03-7983 6390

MENARA KUALA LUMPUR SDN BHDNo. 2 Jalan PunchakOff Jalan P. Ramlee50250 Kuala LumpurTel : 03-2020 5421Fax : 03-2072 8409

TM INFO-MEDIA SDN BHD10th Floor, Menara DPersiaran MPAJJalan Pandan Utama, Pandan Indah55100 Kuala LumpurTel : 03-4292 1111/03-4289 1222Fax : 03-4291 9191

UNIVERSITI TELEKOM SDN BHDJalan Multimedia63000 CyberjayaSelangorTel : 03-8312 5018/5000Fax : 03-8312 5022

FIBERAIL SDN BHD7th Floor, Wisma TMJalan Desa UtamaPusat Bandar Taman Desa58100 Kuala LumpurTel : 03-7980 9696Fax : 03-7980 9900

VADS BERHAD15th Floor, Plaza VADSNo. 1, Jalan Tun Mohd FuadTaman Tun Dr Ismail60000 Kuala LumpurTel : 03-7712 8888Fax : 03-7728 2584

TELEKOM SMART SCHOOL SDN BHD45-8, Level 3, Block CPlaza DamansaraJalan Medan Setia 1Bukit Damansara50490 Kuala LumpurTel : 03-2092 5252Fax : 03-2093 4993

FIBRECOMM NETWORK (M) SDN BHDLevel 37, Menara TMJalan Pantai Baharu50672 Kuala LumpurTel : 03-2240 1843Fax : 03-2240 5001

ASSOCIATE/AFFILIATE COMPANY

MUTIARA.COM SDN BHD114-F, Bangunan JKPSBJalan Sungai Pinang10150 Pulau PinangTel : 04-281 1600/2600Fax : 04-281 8600

MEASAT GLOBAL BERHADLevel 39, Menara Maxis50088 Kuala LumpurTel : 03-8213 2188Fax : 03-8213 2233


Group Directory

Other Information

Glossary


3GThird Generation Mobile System. The generic term for the next generationof wireless mobile communications networksADSLAsymmetric Digital Subscriber Line, which is designed to deliver morebandwidth from the central office to the customer siteAPCNAsia Pacific Cable NetworkARPUAverage Revenue Per User. The average revenue generated per customerunit per monthARPMAverage Revenue Per MinuteATMAsynchronous Transfer Mode. A protocol for integrated transmission overa Broadband Integrated Services Digital NetworkBandwidthThe width of a communications channel. In digital communications,bandwidth is typically measured in bits per secondBroadbandAny circuit significantly faster than a dial-up phone lineBTSBase Transceiver StationCAGRCompounded Annual Growth RateCDMACode Division Multiple Access is a digital, spread spectrum, packet-basedaccess technique generally used in radio frequency systemsCJChina JapanCMCChikura-Miyazaki CableCRMCustomer Relationship ManagementCUCNChina-US Cable NetworkDMCSDumai-Malacca Cable SystemDSLDigital Subscriber LineEBITDAEarning Before Interest, Taxes, Depreciation and AmortisationESOSEmployee Share Option SchemeFLAGFibre Link Around the GlobeFLAG-ATLANTICFibre Link Around the Globe – AtlanticGLCGovernment-Linked Companies

GPRSGeneral Packet Radio Service. It is the always-on packet data service forGSM, which is the cell phone standard that is used by most countries inthe world. GPRS will be most useful for data applications such as mobileinternet, browsing and e-mailGroupTelekom Malaysia Berhad and its Local & International Subsidiaries/Associated Companies/AffiliatesGSMGlobal System for Mobile communications. It is the standard digital cellularphone service that is commonly used in Europe, Japan, Australia andelsewhere – a total of 85 countriesHSDPAHigh Speed Downlink Packet AccessHSUPAHigh Speed Uplink Packet AccessIBSSIndustrial Business Solution SeminarICTInformation and Communication TechnologyIDDInternational Direct Dialing. The capability to directly dial an overseasphone number from one’s own home or office telephoneIPInternet Protocol. A software that keeps track of the internet’s addressesfor different nodes, routes outgoing messages and recognises incomingmessagesIPLCInternational Private Leased CircuitIPVPNInternet Protocol Virtual Private Network. It is a private network for acorporation or an institution connecting any number of end points using acombination of private and public circuitsISDNIntegrated Services Digital Network. ISDN is a set of internationalstandards set by the ITU-T (International Telecommunications ServicesSector for a circuit-switched digital network that supports access to anytype of service (e.g. voice, data and video) over a single, integrated localloop from the customer premises to the network edgeISPInternet Service Provider. A vendor who provides access for customers(companies and private individuals) to the internet and the World Wide WebJUCNJapan-US Cable NetworkLANLocal Area Network. A communication network connecting personalcomputer workstations, printer, file servers and other devices inside abuilding


MBMalaysia Business. A Strategic Business Unit that consolidates all TM’sdomestic fixed services under a single leadership teamMbpsMillion bits per second, the speed of a telecommunications, networking orlocal area networking transmission facilityMCMCMalaysian Communications and Multimedia CommissionMDSCSMalaysia Domestic Submarine Cable SystemMMSMultimedia Messaging Service, a service that allows cell phone users tosend pictures, movie clips, cartoons and other graphic materials from onecell phone to anotherMNPMobile Number PortabilityMoUMinutes of UseMPLSMulti Protocol Label SwitchingMVNOMobile Virtual Network OperatorNIOSHNational Institute of Occupational Safety and HealthNPCNorth Pacific CableOpcoOperating CompanyOSHOccupational Safety and HealthOSHAOccupational Safety and Health AssociationPATAMIProfit after tax and minority interestPIPPerformance Improvement ProgrammeR-J-KRussia-Japan-KoreaROCEReturn on Capital EmployedSAT3-WASC-SAFESouth Atlantic 3-Western Africa Submarine Cable-South Asia Far EastSBUStrategic Business UnitSEA-ME-WESouth East Asia-Middle East-Western Europe Submarine Cable SystemSMESmall and Medium Enterprise

SMIDECSmall and Medium Industries Development CorporationSMSShort Message Service. A means to send or receive short messages to orfrom mobile telephonesSOHOSmall Office and Home OfficeTATTrans AtlanticTMTelekom Malaysia Berhad (Company No. 128740-P)TMRTM RetailTMWTM WholesaleTPCTrans Pacific CableTVHThailand, Vietnam, Hong KongUSFUnified Sales ForceVoIPVoice Over Internet Protocol. The technology used to transmit voiceconversations over a data network using the internet protocolVPNVirtual Private Network. With VPN an individual can lock into a distantcorporate local area network, server or corporate intranet over the internetVSATVery Small Aperture Terminal. A relatively small satellite antenna, typically1.5 to 3.0 metres in diameter used for satellite-based point-to-multipointdata communications applicationsVSSVoluntary Separation SchemeWANWide Area Network. A public voice or data network that extends beyond themetropolitan areaWCDMAWideband CDMA. A high speed 3G mobile wireless technology that worksby transmitting the input signals in a coded, spread spectrum mode overa range of frequenciesWi-FiWireless Fidelity. Wi-Fi runs in the 2.4GHz wireless range at speeds of upto 11 MbpsWiMAXWorldwide Interoperability For Microwave AccessWLLWireless Local Loop


Glossary

ProxyForm

I/We (NAME AS PER NRIC/PASSPORT/CERTIFICATE OF INCORPORATION IN CAPITAL LETTERS)

with (NEW NRIC NO.) (OLD NRIC NO.)

(PASSPORT NO.) (COMPANY NO.)

of(FULL ADDRESS)

being a Member/Members of TELEKOM MALAYSIA BERHAD hereby appoint

(NAME AS PER NRIC/PASSPORT IN CAPITAL LETTERS)

with (NEW NRIC NO.) (OLD NRIC NO.) (PASSPORT NO.)

of(FULL ADDRESS)

or failing him/her of(NAME AS PER NRIC/PASSPORT IN CAPITAL LETTERS)

with (NEW NRIC NO.) (OLD NRIC NO.) (PASSPORT NO.)

of(FULL ADDRESS)

or failing him/her, the Chairman of the Meeting, as my/our proxy/proxies to vote for me/us on my/our behalf at the Twenty-Third AnnualGeneral Meeting of Telekom Malaysia Berhad (128740-P) [Company] to be held at Multi Purpose Hall, Menara TM, Jalan Pantai Baharu,50672 Kuala Lumpur, Malaysia on Thursday, 17 April 2008 at 10:00 a.m. or at any adjournment thereof.

My/Our proxy/proxies is/are to vote as indicated below:(Please indicate with an “X” in the appropriate box against each resolution how you wish your proxy to vote. If no instruction is given, this form will be taken to authorise theproxy to vote at his/her discretion)

Signed this ____________________ day of ________________2008

_____________________________________________Signature(s)/Common Seal of Member(s)

TELEKOM MALAYSIA BERHAD(Company No. 128740-P)(Incorporated in Malaysia)

CDS* Account No. ofNo. of shares held Authorised Nominee

Resolutions For Against

1. To receive the Audited Financial Statements and Reports for the financial year ended 31 December 2007 – Ordinary Resolution 1

2. Declaration of a final gross dividend of 22 sen per share (less 26% Malaysian Income Tax) – Ordinary Resolution 2

3. Re-election of Datuk Zalekha Hassan pursuant to Article 98(2) – Ordinary Resolution 3

4. Re-election of Dato’ Ir Dr Abdul Rahim Daud pursuant to Article 103 – Ordinary Resolution 4

5. Re-election of YB Datuk Nur Jazlan Tan Sri Mohamed pursuant to Article 103 – Ordinary Resolution 5

6. Re-election of Dato’ Azman Mokhtar pursuant to Article 103 – Ordinary Resolution 6

7. Approval of payment of Directors’ fees – Ordinary Resolution 7

8. Re-appointment of Messrs. PricewaterhouseCoopers as Auditors of the Company and to authorise the Directors to fix their remuneration – Ordinary Resolution 8

9. Special Business:(i) Authority under Section 132D of the Companies Act, 1965 for the Directors to

issue shares – Ordinary Resolution 9

(ii) Proposed Shareholders’ Mandate – Ordinary Resolution 10

(iii) Proposed Amendments to the Articles of Association – Special Resolution

* Applicable to shares held through a nominee account

Notes:1. A Member entitled to attend and vote at the above Meeting is entitled to appoint a proxy to attend and vote in his/her stead. A proxy need not be a Member

of the Company and the provisions of Section 149(1)(b) of the Companies Act, 1965 shall not apply to the Company.

2. A Member shall not be entitled to appoint more than two (2) proxies to attend and vote at the Meeting provided that where a Member of the Company is anauthorised nominee as defined in accordance with the provisions of the Securities Industry (Central Depositories) Act, 1991, it may appoint at least one (1) proxybut not more than two (2) proxies in respect of each securities account it holds with ordinary shares in the Company standing to the credit of the said securitiesaccount.

3. Where a Member appoints two (2) proxies, the appointments shall be invalid unless the proportion of the holding to be represented by each proxy is specified.

4. This instrument appointing a proxy shall be in writing under the hand of the appointer or his attorney duly appointed under a power of attorney or if suchappointer is a corporation, either under its common seal or under the hand of an officer or attorney duly appointed under a power of attorney. If this ProxyForm is signed under the hand of an officer duly authorised, it should be accompanied by a statement reading “signed as authorised officer under anAuthorisation Document which is still in force, no notice of revocation have been received”. If this Proxy Form is signed under the attorney duly appointed undera power of attorney, it should be accompanied by a statement reading “signed under a Power of Attorney which is still in force, no notice of revocation havebeen received”. A copy of the Authorisation Document or the Power of Attorney, which should be valid in accordance with the laws of the jurisdiction in whichit was created and is exercised, should be enclosed with this Proxy Form.

5. A corporation which is a Member, may by resolution of its Directors or other governing body authorise such person as it thinks fit to act as its representativeat the Meeting, in accordance with Article 92 of the Company’s Articles of Association.

6. This instrument appointing the proxy together with the duly registered power of attorney referred to in Note 4 above, if any, must be deposited at the office ofthe Share Registrars, Tenaga Koperat Sdn Bhd, G-01 Ground Floor, Plaza Permata, Jalan Kampar, Off Jalan Tun Razak, 50400 Kuala Lumpur, Malaysia notless than 48 hours before the time appointed for holding the Meeting or any adjournment thereof, or, in the case of a poll, not less than 24 hours before thetime appointed for the taking of the poll.

1. Fold here

2. Fold here

3. Fold here

THE SHARE REGISTRARSTENAGA KOPERAT SDN BHDG-01 Ground Floor, Plaza PermataJalan Kampar, Off Jalan Tun Razak50400 Kuala LumpurMalaysia

AFFIXSTAMP

ar2007

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